Those Dratted Statistics Made Easier
By David Braze (TMF Pixy)
In the introductory article to our discussion of long-term care, I cited some of the statistics we commonly see regarding this issue. Today, we'll look at some of these data in detail to see how they may pertain to our lives. In particular, I want to see how we can determine the likelihood we will need nursing home care. If we can reach a reasonable conclusion on that, then we can also reach a reasonable conclusion regarding our need for long-term care insurance and what such a policy should contain.
One statistic I see often in the press is a statement to the effect that "the total number of people using long-term care or in nursing homes is expected to double between now and 2030." I really love that one above all others. And so do the insurance companies eager to get the elderly to buy their long-term care policies. This factoid just screams crisis, doesn't it? Run for the hills, folks, before we lose all our assets to the nursing home! Yet that projection should shock no one because it overlooks one equally important fact. The Census Bureau tells us the population of those aged 65 or older will also double between now and 2030. If the 65-and-over population will double, then what in tarnation is so all-fired surprising that the number of long-term care recipients or nursing home residents will also double? In my opinion this is a scare statistic of the worst kind, one seemingly made in an apparent attempt to instill a sense of impending doom within the elderly. True? Probably. Scary? Only if you don't understand the dynamics of a growing population. Of more importance to me is the likelihood of needing long-term care, and in particular nursing home care.
In its report "Midlife and Older Americans With Disabilities," the Public Policy Institute (PPI), a research group of AARP, indicates that in 1994 some 6.6 million (or about one in five) people age 65 or older received help with at least one Activity of Daily Living (ADL) or Instrumental Activity of Daily Living (IADL). The report indicates that while only four percent of the 65-or-older population resides in a nursing home at any point in time, the need for such care increases dramatically with age. Using data from the 1995 National Nursing Home Survey (NNHS), the report notes that 82% of admissions occurred when the resident was age 75 or older. It goes on to say that the average stay in a nursing home for those 65 or older is about 28 months, or 2.3 years, and notes the length of stay decreases with age. (Note: Length of stay was measured from age at entry to the date of the NNHS, so it does not reflect a stay through the date of discharge.) The PPI report also says:
"While estimates vary, one source places the lifetime risk of institutionalization for those reaching age 65 in 1990 at 43 percent -- 52 percent for women and 33 percent for men (Kemper and Murtaugh, 1991). However, research has shown that most nursing home admissions are of relatively short duration -- three of four are for less than one year (Liu et al., 1991)."
Please note the emphasis on the word "lifetime." That emphasis means from the date of birth to the date of death, not after one turns age 65. I stress that fact because far too often insurance companies and others omit that key word and simply say "At 65, the average person's chances of being admitted to a nursing home at some point in their future are more than four in 10." (Long Term Care Campaign) or "Recent studies report that two of every five people age 65 and over will enter a nursing home and stay an average of 2.5 years." (Life Insurance Selling, December 1995). That, Fools, simply is not true and distorts radically what the Kemper and Murtaugh study actually revealed.
In their article "Lifetime Use of Nursing Home Care" (New England Journal of Medicine, February 28, 1991), Kemper and Murtaugh reported the results of a study of some 16,000 people who had died in 1986. The study focused on the use of nursing homes by these decedents at any point in their lives to determine the duration of such stays. Using the age at death, the study reported those stays in a series of tables. The study revealed that 37% of those age 65 or older at death had spent some time in a nursing home during life. (Note: There's your two out of five.) Using that data, the authors then projected nursing home use for those who reached age 65 in 1990 as shown in this table:
Projected Use for Persons Who Reached Age 65 in 1990
Total Use % of Men % of Women % of Total
Any use 33 52 43
>= 3 mos 22 41 32
>= 1 yr 14 31 24
>= 5 yr 4 13 9
How can we use that data? Consider this: Using that table we can say that two out of every three men will not see the inside of a nursing home during their lives, but one of every two women will. One out of seven males will spend a year or more in an institution compared to one out of three females. And only one in twenty-five men will spend more than five years there versus one in eight women. We derive those odds by dividing "1" by the percentage shown in the table above. That gives us the number to insert for "X" in the statement "one out of X." Now that we have some odds, we can also consider two other things noted in the 1995 NNHS cited earlier. First, the vast majority of nursing home stays occur at age 75 or older. Second, at those ages the average stay is closer to two rather than three years, and seven out of ten residents are female. Further, we know the vast majority of female residents have no living spouse.
I interpret that data in my situation this way. If anyone needs long-term care coverage in the Pixy family, it's most likely Mrs. Pixy. Aside from my mother's disaster, no one else in my family has ever used or required a nursing home. Also, while my stepmother and father do have problems in some of the ADLs and IADLs, both have coped quite nicely without outside assistance to date, and they're both in their 90s. Therefore, the odds of my needing prolonged nursing home or long-term care seem small. As for my wife, the same pretty much applies to her. Still, based on the numbers already cited, of the two of us she will be the one most likely to need such care. Therefore, if anyone has a need for long-term care insurance in this family, she does. However, she's most likely to need it after age 75 and as a widow. Accordingly, she will probably have no "at home" spouse to worry about, and thus can consume her remaining assets to pay for such care with little guilt aside from a concern over leaving less to our kids. And my reaction to leaving a legacy? It would be nice, but given a lifetime need for my spouse, the kids' inheritance takes a distant back seat.
As I've said repeatedly in this series, each of us must muddle through this decision ourselves. This column gives you another way to look at the situation. The trick will be to take these numbers, evaluate your family history, and then make a decision for yourself. I hope I've made that task a little easier.
Next: Other Long-Term Care Sources »
Terms & Conditions
RSS Headlines
Fool UK