A higher percentage of people are using nursing homes than in the past and such stays can seriously damage their personal finances, especially for those without long term care insurance, according to a report by the Employee Benefits Research Institute.
“A large number of seniors might require professional medical care at home or in institutions such as nursing homes. Medicare estimates that by 2020, 12 million older Americans will need some form of long-term care1—care that can be very expensive and, for the most part, not covered by Medicare,” it said.
The average cost of a stay in a nursing home now exceeds $75,000 on an annual basis, with costs much higher in some areas, and average costs rising by 4 percent per year over the last decade. Meanwhile, the percentage of persons age 65 or older who had spent at least some time in a nursing home in just the prior two years rose from 6 percent to 8.5 percent between 2000 and 2010 and continues to increase.
While long term care insurance is widely available, only about 14 percent of those in that age group have it (in the Federal Long Term Care Insurance Program, the overall rate among eligible persons is only around 5 percent; the rate is said to be higher among the older part of that population although specific figures have not been released).
Nursing home stays “have strong and statistically significant negative effects on every type of household asset holdings except higher-risk assets (such as stocks, bonds, and mutual funds). After respondents’ first entries into a nursing home, total household wealth fell steadily over a six-year period. By comparison, household wealth increased steadily over any six-year period for those who never entered a nursing home,” it said.
It added: “For nursing home entrants, median housing wealth falls to zero within six years after the initial nursing home entry.”