Long-Term Care: Winging It

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Americans have a very good chance of entering a long-term care facility. New research at the Center for Retirement Research, which sponsors this blog, finds that 44 percent of older men and 58 percent of older women will likely enter such a facility for at least a short stay.

Only 29 percent of adults age 40 and over, however, are “extremely” or “very” confident they’ll have enough resources to pay for such care, or for other types of care they may need in old age, according to a survey by the Associated Press-NORC Center for Public Affairs Research, an independent survey organization based at the University of Chicago.

The AP-NORC poll also revealed that people are poorly informed about how much care will cost if they need it.

They tend to underestimate how much nursing homes cost (about $6,900 a month) and overestimate the cost of a part-time aide coming to their home to help with personal care such as cooking or bathing (about $1,150 a month); their estimates about the cost of assisted living facilities (about $3,400 a month) were either too high or too low.

An additional complication, according to Jennifer Benz, NORC’s senior research scientist, is that “people don’t understand how the financing of long-term care works in the U.S.” The distinct roles of Medicare and Medicaid, in particular, caused great confusion.

Medicare is the federal insurance program that covers medical care for virtually all Americans 65 and older, but pays only for short stays in skilled nursing facilities. This coverage typically kicks in when an older person is recovering from an illness or a fall or hospital stay. Yet 42 percent of the adults surveyed believe that the program covers on-going care in a nursing home.

Medicaid is the federal-state medical insurance program for the indigent that also covers long-term care for the elderly who have depleted all but about $2,000 of their financial assets; the asset limits are higher for married couples. Medicaid is now the nation’s single largest source of long-term care funding.

As reported in last week’s blog post, the AP-NORC survey found that adults age 40 and over are more likely to plan for their funerals than for their long-term care.

But this isn’t necessarily a serious problem. The chances of winding up in a nursing home are high. But the stays aren’t necessarily long. The best option for many is to rely on Medicaid should they need nursing home care. For those 10 or more years away from retirement, planning when to retire and building their savings are far more important than planning for funerals – or for long-term care.