Misperceptions of long-term care wants and prices are trigger for concern.
Households approaching retirement face all kinds of dangers to their monetary safety. They could dwell longer than deliberate and deplete their assets; they might expertise unexpectedly excessive inflation; or they might obtain unusually poor returns on their investments. Equally consequential is the danger that households will face main bills to cowl medical and long-term care prices. My colleagues and I simply accomplished a examine based mostly on a brand new survey to find out the extent to which older adults perceive the dangers they face.
The main target of our concern was primarily the prices related to long-term care. In fact, medical dangers are extremely unsure and doubtlessly costly, however a lot of this threat is insured by Medicare (and Medicaid for these eligible for each packages).
Lengthy-term care dangers, in distinction, usually are not nicely insured. Solely 3 p.c of all U.S. adults or 15 p.c of these ages 65+ have long-term care insurance coverage, and Medicaid, the general public insurance coverage program focused at low-income people, is just not a practical possibility for many middle-income households.
But, 80 p.c of 65-year-olds will want long-term care in some unspecified time in the future over their remaining life (see Desk 1). And whereas the depth and length of those long-term care wants range considerably, about 40 p.c would require high-intensity look after greater than a 12 months.
Given the intensive wants and lack of insurance coverage, relations typically cowl the vast majority of care hours for individuals with low and average wants and complement the efforts with paid caregivers as wants improve. Paid LTC, nevertheless, could be very expensive – in 2023, the median annual prices have been $116,800 for a non-public room in a nursing house, $75,500 for house well being aides, and $64,200 for an assisted residing facility.
To take a look at households’ perceptions relating to healthcare dangers, Greenwald Analysis interviewed on-line 508 people ages 48-78 with no less than $100,000 in investable belongings in July 2024. The outcomes confirmed that medical and long-term care wants have been low on most respondents’ record of considerations (see Determine 1) – a discovering in keeping with different research.
Furthermore, solely 39 p.c of older households might appropriately estimate the price of a nursing house, 34 p.c for house care providers, and solely 15 p.c for assisted residing services (see Determine 2).
One cause that households have such large misperceptions about each the dangers and the prices of long-term care is that survey after survey has discovered that many mistakenly imagine that Medicare covers LTC. The newest instance from KKF reveals that 45 p.c of respondents ages 65+ assume that Medicare can pay for his or her LTC and one other 9 p.c assume that their prices might be coated by non-public medical insurance (see Desk 2).
Underestimating healthcare dangers – notably the dangers of long-term care wants – has actual prices. Households don’t buy long-term care insurance coverage nor save prematurely for such an occasion. As a substitute, they’re left on their very own with insufficient assets to navigate a really demanding, sophisticated, and expensive problem.
