Many Americans are looking to Medicaid to meet their long-term care needs, even though most know more about long-term care insurance than five years ago.
John Hancock Financial surveyed 1,000 people and found 60 percent believe they'll someday need long-term care. However, fewer have planned for the possibility in their own lives, and many said they'd rely on Medicaid despite admitting they did not understand how the program worked.
A majority of respondents answered seven out of 10 basic LTC quiz questions correctly compared to four out of 10 in 2006. Despite the increase in general LTC knowledge, fewer people today than in 2006 said they've made financial calculations for what they'll need in retirement (66 percent vs 72 percent). Of those who have calculated for retirement, only 41 percent included LTC needs in the equation, compared to 51 percent in 2006. Fewer still, 22 percent, said they've made plans specifically to finance potential LTC needs, compared to 31 percent in 2006.
"While it is encouraging to see an increase in general knowledge," said Marianne Harrison, president of John Hancock LTC Insurance, "the survey's overall results are a cause for concern because most consumers appear to be making long-term care plans by default, thinking they'll rely on government programs, which already are showing signs of strain."
Planning and LTC Insurance Seen Positively
A large majority of respondents, 82 percent, agreed that it is irresponsible not to plan for the cost of LTC needs. Among a number of options, LTC insurance was cited as the best way to plan by the greatest number of respondents (61 percent). Additionally, a number of the benefits of LTC insurance were seen as important by vast majorities – with some growing by more than 10 percent since 2006:
- LTC insurance helps individuals receive care where they choose (93 percent in 2011 from 79 percent in 2006)
- LTC insurance ensures one receives high quality nursing home care (93 percent in 2011 from 74 percent in 2006)
- LTC insurance ensures the individual is in control of overall care (92 percent in 2011 from 80 percent in 2006)
Although most respondents said they thought LTC insurance would be the best way to cover long-term care needs (61 percent), only 11 percent reported having purchased it. More than half of those who hadn't bought LTC insurance (53 percent) said they plan to cover their LTC costs by qualifying for Medicaid.
However, more detailed survey questions about Medicaid revealed a lack of knowledge about how the program worked and a feeling that it would be cut back in the future. By their own admission, few Americans understand how Medicaid works – less than a third (30 percent) reported being knowledgeable about it in general. When asked specific questions about Medicaid, almost four in 10 respondents (37 percent) incorrectly thought that Medicaid covered LTC services received at home and nearly half (46 percent) didn't know that people generally needed to spend down almost all their assets to qualify.
In addition, three-quarter of all respondents (75 percent) said they believed Medicaid would be cut back in the next decade, with 44 percent believing it would be cut back a lot.
Economy Seen Affecting LTC Insurance Purchase
Roughly one-third of respondents (32 percent) say they have been less likely to purchase long-term care insurance because of the economy. Consumers are more likely this year to say they agree that a long-term care policy is an extra cost they do not want to spend right now (92 percent vs. 80 percent in 2006) and that they simply cannot afford to pay for it (80 percent vs. 66 percent in 2006).
Americans Can't Afford Much Care
When asked how much they would be able to afford annually to pay for the cost of care (in today's dollars), the majority said between $1,000 and $14,000 (70 percent). Another one in five said they would be able to spend between $14,000 and $35,000 (20 percent). Very few feel they would be able to afford any more.
When given the approximate cost per year for a semi-private room in a nursing home, the majority of respondents said they do not think they could even afford to pay this amount for a full year (62 percent)
Lack of Planning May Cost Them High Quality Care They Desire
Not surprisingly, 96 percent of respondents expressed that if they ever needed care in a nursing home, it was important that they receive high quality care; 71 percent of respondents reported it was very important and 25 percent considered it somewhat important.
However, in the absence of buying LTC insurance, more than half (53 percent) said they planned to qualify for Medicaid, despite the fact only a quarter of respondents feel they'd receive care that was good or better on Medicaid.
"There is a disconnect between the care Americans would like to receive should they need it and the actions they would need to take to prepare for it," said Harrison. "Although the current economy may discourage individuals from planning ahead for their potential long-term care needs, the purchase of long-term care insurance can help ensure that they get the kind of care they would hope for in their future, while helping to protect their assets."