By Leora Friedberg, Wenliang Hou, Wei Sun, and Anthony
Webb
Center for Retirement Research at Boston College,
November 2014, No. 14-18
Summary:
The annual cost of a semi-private room in a nursing home in 2012 was $81,030 and home health care
was $21 per hour. Who can afford that? A
recent study from the Center for Retirement Research puts that cost into perspective
and calls into question previous projections. Friedberg, Hou, Sun, and
Webb (2014) found that nursing home stays in the U.S. are actually pretty
brief: Eleven months for a single man and 17 months for a single woman. The
much-cited figure that "only 4 percent of people over 65 are in nursing homes"
should well be described as "the four percent fallacy."
According to their research, a longitudinal, or lifetime basis, the risk of
need for nursing home care is 44% for men and 58% for women.
Nursing home stays turn out to be a higher-probability but lower-cost event often thought. Only 13% of older Americans buy such coverage to protect their financial assets from nursing home costs, yet previous projections recommended 30-40% of older adults needed it. The difference is known as the “long-term care puzzle.” Although Friedberg et al. (2014) concede that purchasing long-term care insurance is rational for a small percentage of older people in order to protect assets, a large number of individuals have expressed an interest in buying a supplement policy, yet that option does not exist.
Article: http://crr.bc.edu/wp-content/uploads/2014/11/IB_14-18.pdf
Nursing home stays turn out to be a higher-probability but lower-cost event often thought. Only 13% of older Americans buy such coverage to protect their financial assets from nursing home costs, yet previous projections recommended 30-40% of older adults needed it. The difference is known as the “long-term care puzzle.” Although Friedberg et al. (2014) concede that purchasing long-term care insurance is rational for a small percentage of older people in order to protect assets, a large number of individuals have expressed an interest in buying a supplement policy, yet that option does not exist.
Article: http://crr.bc.edu/wp-content/uploads/2014/11/IB_14-18.pdf
