Who can have unmet long-term care wants?
We have just completed the third study in our three-part series on the needs and resources of long-term care. This topic is very important as many young professionals and retirees are very concerned that they may need costly care later in life.
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Fear of addiction can make them reluctant to spend their 401 (k) balances and deprive themselves of necessities as they age.
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To summarize it. The first study looked at the likelihood that a 65-year-old would develop minimal, moderate, and severe needs, taking into account both the intensity and duration of care required. The results show that around a fifth of 65-year-olds never need long-term care and around a quarter will have serious needs, while the rest are somewhere in between (see first stacked bar in Figure 1).
The second study estimated the proportion of retirees who had the resources – either informal family care or financial support – to meet possible minimal, moderate, or severe care needs. The results showed that more than a third of retirees will not even have the means for the most minimal care, while a fifth will be able to afford care for more serious needs when needed (see second stacked bar in Figure 1).
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The final study combines the results of the two previous analyzes to determine the proportion of people who are predicted to have insufficient resources for their specific care needs. The left column in Table 1 shows the distribution of 65-year-olds according to their predicted lifelong maximum need for care (study no. 1). The top line shows the distribution of 65-year-olds according to the highest level of care they can afford from private funds (Study No. 2). The last column shows the percentage of people with insufficient resources to cover their specific level of care – the sum of the shaded numbers in each row (Study # 3).
Overall, the results show that around 60% of people with moderate or severe needs do not have the family or financial resources to meet those needs. Fortunately, Medicaid – a joint state program – provides some support for these individuals (see Figure 2). Without Medicaid, 16% of 65-year-olds will have severe care needs that they cannot fully cover with private funds. After taking Medicaid into account (for both those who qualify directly and those who spend less), that percentage drops to 11%. Likewise, 21% of 65-year-olds will have moderate need for care that they cannot fully afford; However, Medicaid is reducing this percentage to 14%.
Unsurprisingly, Medicaid helps those with fewer resources the most. For people with less than one high school diploma, Medicaid halves the undercut percentage by almost half, while for those with university degrees – many of whom are not entitled to benefits – this has little effect (see Figure 3 ).
The bottom line is that most Americans can meet most of their long-term care needs with Medicaid added to family and financial resources. Participants in 401 (k) plans should be a little more optimistic than using their credits to meet their retirement consumption.