Staying in a nursing home is bad for your financial health. Very bad.
A recent analysis by the Employee Benefit Research Institute shows that receiving care in a nursing home drastically depletes assets. Using data from a health and retirement study that's sponsored by the National Institute on Aging and the
Social Security Administration, EBRI grouped individuals over age 65 into three segments: Individuals who spent less than 30 nights in a nursing home; those who spent 31 to 180 nights there; and those who spent more than 180 days in such a facility.
Median total household wealth for the group that spent less than a month in a nursing facility was $108,300. But the group that spent anywhere from a month to six months at a nursing home had a median total household wealth of $67,836. Wealth plummeted even more for those who spent more than six months at a home, plunging to $5,518, according to the EBRI study.
In most cases, Medicare doesn't cover the cost of a nursing home stay, requiring most individuals to pick up the tab themselves. This, in turn, depletes assets until a patient eventually becomes sufficiently impoverished to qualify for Medicaid. Indeed, about half of the individuals who ended up spending half a year at a nursing facility were covered by Medicaid.
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The value of financial assets exclusive of the primary residence also takes a dive. Median financial wealth for people who spend less than a month at a nursing home is $28,510, which declines to $12,562 for people who stay between a month and six months. Financial wealth hits $1,090 for people who spend more than six months at a facility.
The results of the study should make the case for long-term-care insurance. But EBRI researcher and study author Sudipto Banerjee noted that of, the individuals who went to a nursing home, only 14% had long-term-care insurance.
He also said that when studied over time, respondents become more likely to buy long-term-care coverage when they believe they have a higher probability of moving into a nursing facility. Even then, the number of people who actually buy the coverage remains low.
“In 2010, within the group which reported a 50% to 75% likelihood of moving into a nursing home in the next five years, approximately one in four report purchasing such insurance,” Mr. Banerjee wrote. “A possible explanation for this might be that LTCI is expensive.”
