Retirement & Financial Planning Report

Many older persons don’t insure themselves against long-term care costs simply because they can’t afford the premiums, with the effect that lower-income individuals commonly get such care, if they need it, through the Medicaid program, according to a recent analysis.

Information presented by the Urban Institute to a federal commission on long-term care examined potential incentives for people to buy such insurance, which currently is purchased at relatively low rates despite the risk of very high costs for care in a nursing home or in other settings. In the federal government, for example, fewer than 10 percent of employees have any coverage through the Federal Long Term Care Insurance Program.


The analysis said that most older people who received Medicaid-financed nursing home care “had very little wealth long before they received care.” Only about a quarter had more than $100,000 in total household wealth 10 years before they were admitted to a nursing home, and only about 10 percent held more than $100,000 in nonhousing wealth.

“Consequently, it seems unlikely that efforts to promote individual savings for long-term care, such as by purchasing individual long-term care or setting aside funds in other savings vehicles, would move many people off Medicaid or reduce program costs because most Medicaid nursing home residents never had the means to save much,” the analysis said.

It estimated that that Medicaid covers 41 percent of the nation’s long-term care costs, costing taxpayers about $140 billion in 2010. The remainder comes from insurance policies or out of pocket payments.