The costs of long-term care: distribution and responsibility

Long-term care costs will result in financial hardship for millions of elderly Americans and their families. The growing number of elderly people has focused public attention on the catastrophic problem of coverage for long-term care. Social insurance is unlikely to emerge as a solution in the USA. One reason is that the expected total cost is viewed as an unmanageable burden by both Federal and State governments. To others, it is the uncertainty surrounding the projected costs. This paper reports on the results of a double-decrement life-table analysis, based on a national survey of the elderly taken in early 1977 and one year later, that estimated the distribution and total lifetime nursing-home costs of the elderly. Combining the probability of nursing-home entry and length of stay, a 65-year-old faces a 43% chance of entering a nursing home and spending about +11,000 (1980 dollars). The distribution of lifetime costs is however very skewed with 13% of the elderly consuming 90% of the resources. Thus, while the costs of nursing-home care can be catastrophic for an individual, spread across a group they are not unmanageable. Given the distribution of income and assets among the elderly, a sizeable proportion could readily afford the necessary premiums of different emerging insurance and delivery programmes. Alternative private and public models of long-term care must be evaluated in terms of the goals of a finance and delivery system for long-term care.