New Study Predicts LTC Costs and Odds

A recent Forbes article by Howard Gleckman announced the publication of a new study predicting the odds and costs of needing long-term care. Here’s a link to the new UE-ASPE (Urban Institute – Office of Assistant Secretary for Planning and Evaluation) Study.

Media and non-wonky people like me will find the survey difficult to interpret.  I will share what I feel readers should take away from this study.

The study interprets the incidence of paid care only!

The statistics in the new study predict a lower incidence of long-term care (LTC) need, and less financial exposure than we expected. But it only deals with Long-Term Services and Supports (LTSS), which is paid care, typically funded by savings and government (Medicare and Medicaid). Despite this limited scope and possible bias (I will not comment on that here), it gives compelling reasons to own long-term care insurance (LTCi).

Actuaries should be able to use this new information to more accurately price LTCi policies. Hopefully, this will cause increased competition in the LTCi marketplace.

The study estimates about half (52%) of Americans turning 65 today will require LTSS. Make note: LTSS consists of paid care only!

The study fails to properly acknowledge the extremely high, often catastrophic incidence of non-LTSS (informal, unpaid care, typically provided by family and friends) and the physical, emotional and phychological havoc it creates. Long-term care insurance (LTCi) pays a high percentage of this type of care.

Two out of three (66%) of older people with disabilities who receive LTSS at home get all their care exclusively from their family caregiver, mostly wives and daughters. Another quarter (26%) receives some combination of family care and paid help; only 9% receive paid help alone.

Many people who need LTC do not need LTSS. They have dementia or a chronic need for assistance with their Activities of Daily Living (ADL’s). This is precisely what LTCi pays for. Most of us do not own LTCi. People often make makes excuses and rationalize not purchasing LTCi, often with later regret. Spouses, children, and siblings (most of them women) become caregivers, not by choice, and often at great financial sacrifice.

Lost income and benefits over a caregiver’s lifetime is estimated to range from a total of $283,716 for men to $324,044 for women, or an average of $303,880.

There are additional flaws with the new study. I will not address them here. I just hope academics will use this new information well. I also hope that media will pause and research carefully before writing about this study.

In the LTCi industry we always say you should look through the windshield, not the rearview. This study uses historical information. With the increasing incidence of single adult households, the emergence of increasing numbers of “elder-orphans” (those without, at distance, or estranged from children) plus my anecdotal observations, even the best studies may prove to be inaccurate.