Study Finds That the Need for Long-Term Care Insurance May Be Overstated

A new study by Boston College's Center for Retirement Research indicates that purchasing long-term care insurance makes financial sense for fewer individuals than was previously believed.

The Center's study found that while previous research underestimated the probability that people would need nursing home care, prior research also overestimated the length of the average nursing home stay. According to the Center, nearly half of patients are in a nursing home for three months or less.

"In reality, many individuals return from institutional care to the community after short stays, even without an improvement in health status," the researchers write in an Issue Brief summarizing their findings.

The shorter average stays mean that Medicare would be more likely to cover the care, alleviating the need for long-term care insurance. (Depending on the circumstances, Medicare can cover up to 100 days of care in a skilled nursing facility; for details, click here.)  According to the Center, it makes sense for only the richest 20-30 percent of single individuals to buy long-term care insurance. Previous estimates were that it would be a rational choice for 30-40 percent of single individuals.  For the rest, it may make more sense to use Medicare and, if needed, spend down their assets to qualify for Medicaid.

"If nursing home care is a high-probability but relatively low-cost occurrence, models that treat it as a lower-probability, high-cost occurrence may overstate the value of insurance," the researchers write.

While the study looked only at single individuals, the Center says that forthcoming research will show that long-term care insurance makes even less sense for married couples, according to Bloomberg. 

Jesse Slome, director of the American Association for Long-Term Care Insurance, told McKnight's Long-Term Care News that the study used outdated information. "The LTC insurance market and the products have changed so significantly over the past few years that this report is little more than a nice exercise in walking down memory lane," Slome asserted. He also pointed out that many people use long-term care insurance for home care instead of nursing home care.

To read the study, click here. 

For the Issue Brief based on the study, click here.

For more about long-term care insurance, click here.