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Long-Term Care

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Long Term Care Insurance Demystified - 
Who Needs It, Who Doesn't and Why

(Page 5 of 5)

In addition, there is the issue of care quality, and of the effects of inflation on one's ability to maintain nursing home "private pay" status.  The above article assumes an inflation rate of 5%, although the inflation rate for nursing home care has at times been 16% per year.  If that rate continues, how soon will people spend down all their assets on nursing home care?

Will you have a choice?  Now we come to the real questions.  Can the people who are at risk, primarily single, elderly women, pay for the care they would choose?  Will they have the freedom to choose the setting and the type of care they will want to receive? ; It's pretty clear, based on income alone, few elderly singles can finance the cost of nursing home care.

Many elderly females have no pension plan based on their own work record and contributions, nor are they likely to inherit pensions from their husbands. Those who can count on pension benefits based on their own work record have very modest benefits because of the relatively low wages during their working years.

Although more women are now covered by pension plans, the benefits they receive will still be relative to the lower contributions made on their behalf, again because of the lower wage base during their working years.  Also, some reports still predict that only 10 percent of women will indeed inherit a pension benefit from their husbands.

Will things change in the future?  Currently, over 60 percent of the elderly rely on Social Security to provide more than one-half of their retirement income.  And roughly one out of four people over age 65 receive 90 percent or more of their income from Social Security. What about future retirees? Will they be as dependent on Social Security during their remaining years? With the shift away from true pension plans (defined benefit plans) to contribution-type plans (401K plans) funded largely with employee dollars, will the majority of employees exhibit the discipline required to create a significant retirement fund?  You tell me...

As of 1990, women who retired on Social Security received a benefit that was $11 per month less than the poverty level.  Obviously, there is little hope of their paying for nursing home care if they are dependent upon their monthly Social Security checks for a large percentage of their income.  Many of the current and future single, elderly women will have to look to other sources to pay for their nursing home care.  They will have to rely on 1) public programs (these are being tightened drastically), 2) family (a serious burden) or 3) private LTCi (converting an unknown risk into a manageable premium expense).

 

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