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Short-Term Solutions to Long-Term Care

Between 35% and 50% of people who reach age 65 will use a nursing home at some point in their remaining lives, a new report found.

If you were waiting for Uncle Sam to introduce an insurance program to help pay for long-term care, you need to look elsewhere. A new report can help you get started.

The Department of Health and Human Services said Friday that it had decided against implementing the Class Act, part of the Obama administration’s 2010 health-reform package. The program – Community Living Assistance Services and Supports – was designed to offer long-term care insurance to the public. But Health and Human Services officials indicated that premiums likely would have been too high to generate sufficient enrollment to support the program.

“I do not see a viable path forward for Class implementation at this time,” HHS Secretary Kathleen Sebelius said in a letter to congressional leaders.

Other options, of course, have long been available to help people with expenses associated with long-term care, including private insurance and Medicaid. If you’re considering how best to shield your family and nest egg from long-term care costs, start with a new study from the National Bureau of Economic Research: “Insuring Long Term Care in the U.S.”

The report focuses primarily on economics and policy: how the country might best grapple with the risk of long-term care expenditures. In doing so, however, the authors (Jeffrey Brown from the University of Illinois at Urbana-Champaign and Amy Finkelstein at the Massachusetts Institute of Technology) offer a good overview of how private insurance and Medicaid work (or don’t work, as the case may be) and explain how recent initiatives at the state level (specifically, long-term care “partnership” programs) are growing in importance.

The report begins with some sobering statistics: Between 35% and 50% of people who reach age 65 will use a nursing home at some point in their remaining lives. And of those who use a nursing home, 10% to 20% will live there more than five years. Despite these odds, only about 14% of individuals age 60-plus currently hold long-term care insurance.

If you assume – or hope – that Medicaid will act as your safety net in later life, the report indicates you might want to consider other plans. Given the “pressure on public budgets,” policymakers are searching for long-term care solutions, according to the study, that “rely on insuring a greater share of…risk through private markets.”


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.