Study Finds Rising
Long-Term Care Costs, Demographics Will Make "Aging in Place" Harder
Than Boomers Think
Washington, D.C.
(April 26, 2000) - A new study by the American Council of Life Insurers (ACLI) finds
that the chances they'll end their lives in a nursing home are far higher than
most Baby Boomers imagine - and that middle income families are at the greatest
risk.
"Middle income
Baby Boomers will find that to successfully age 'in place' - that is, in their
homes or in the home-like setting of an assisted living facility - they will
have to use their retirement savings to pay for increasingly expensive
long-term care services," says Barbara Stucki, Ph.D., primary author of
the ACLI study Can Aging Baby Boomers Avoid the Nursing Home?
"Without private long-term care insurance, many will face potentially
catastrophic costs that could lead to impoverishment and the need to use
Medicaid-funded nursing home care."
ACLI's new study
projects that the costs of long-term care services will more than quadruple by
2030:
Can Aging Baby
Boomers Avoid the Nursing Home? projects that by 2030, total national expenditures
for home- and community-based long-term care will more than quadruple, from $41
billion today to $193 billion. ACLI's companion study Who Will Pay for the
Baby Boomers' Long-Term Care Needs? projects that total national
expenditures for nursing home care could reach $330 billion - equal to today's
entire Social Security budget.
These findings
"illustrate the importance of taking personal responsibility for your
financial future and for your future long-term care needs," Stucki said.
"We found that about half of long-term care policyholders currently
receiving benefits report they would have to move to a nursing home without
their insurance benefits. And more than 70 percent report that their long-term
care insurance policy pays all of the costs of the services they need. And that
goes a long way toward reducing the financial and emotional burden on family
caregivers."
Significantly, the
new ACLI study found that when they retire, Boomers will have less family
caregiving support to rely on. They typically have had fewer children than
previous generations and one in five Boomer women have no children at all. High
divorce rates among Boomers are likely to take a toll as well, because divorced
parents are less likely to receive caregiving assistance from their adult
children than widowed parents.
"Without
adequate family support, older Americans' need for paid long-term care services
increases the risk that they will impoverish themselves while living in the
community," Stucki said. "Those costs can be prohibitive. When they
run out of funds, middle income elders must turn to government programs, which
primarily provide institutional nursing home care. A long-term care insurance
policy can help ensure those caregiving costs don't deprive you of the ability
to decide where and how you will live your final years.
"Because
government programs are biased toward nursing home care, if you rely on
government help, the nursing home is where you're likely to end up,"
Stucki said. "That's ironic, given that one government study says half of
the people in nursing homes don't need that kind of intensive care, and could
have maintained their independence if they received long-term care services at
home."
While the financial
benefits to individual policyholders are obvious, the benefits to government -
and future taxpayers - of wider purchase of private long-term care insurance
are substantial, the new ACLI study shows. Medicaid's annual nursing home
expenditures are projected to skyrocket from today's $29 billion to $134
billion by 2030 - an increase of 360 percent. ACLI's research indicates that by
paying policyholders' nursing home costs - and by keeping policyholders out of
nursing homes by paying for home- and community-based services, private
long-term care insurance could reduce Medicaid's institutional care
expenditures by $40 billion a year, or about 30 percent.
In addition, the
ACLI study found that wider purchase of long-term care insurance could increase
general tax revenues by $8 billion per year, because of the number of family
caregivers who would remain at work. Today, 31 percent of caregivers quit work
to care for an older person; nearly two-thirds have to cut back their work
schedules; more than a quarter take leaves of absence, and 10 percent turn down
promotions because of their caregiving responsibilities. It costs the typical
working caregiver about $109 per day in lost wages and health benefits to
provide full-time care at home - which is almost as much as the cost of nursing
home care.
"When the
youngest Boomers reach age 65 in 2030, the nation's elderly population will
double to 70 million and the number of severely impaired elders at risk of
needing nursing home care could double to six million," Stucki said.
"Because Baby Boomers are expected to live longer than any preceding
generation, the likelihood that they will need nursing home and other long-term
care services will only increase. The duration of those impairments is also
likely to increase as life expectancy rises, as will the risk of outliving
one's retirement assets.
"At greatest
risk for nursing home placement will be middle income elders unable to afford
long-term care services that promote aging in place - that is, in the home or
the community," Stucki said. "Aging Baby Boomers who plan ahead for
their long-term care needs can potentially postpone or avoid institutionalization.
Private long-term care insurance can ensure choice, dignity and security for
middle income Americans who want to age in place."
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The American Council of Life
Insurers is a Washington, D.C.-based trade association. Its nearly 500
companies offer life insurance, annuities, pensions, long-term care
insurance, disability income insurance and other retirement and financial
protection products. ACLI member companies have 88 percent of the long-term
care insurance in force in the United States. |
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