Long Term Care Misperceptions

A recent study by Prudential regarding long term care found that 71% of respondents were concerned about the possibility of needing long term care at some point in their futures.  At the same time, nearly two thirds of the respondents were not confident that they would be able to pay for long term care if they did need it.  The study was conducted last year, and involved 983 Americans, aged 30 or older, who had household incomes of at least $50,000.

As is the case with most things we worry about (or don’t), knowing someone who had needed long term care greatly increased the chance that respondents would be worried about their own future need for long term care.  And not surprisingly, people who know someone who has needed long term care are more likely to have purchased long term care insurance for themselves.

Long term care and long term care insurance are widely misunderstood, and the results of the Prudential study illustrate this point well.  Respondents tended to over-estimate the cost of a nursing home stay, but a significant number of them also thought that their private health insurance, Medicare, and/or Medicaid would cover any future long term care needs.  In reality, Medicaid is the only one of those three that truly covers long term care, but in order to qualify for coverage, a person has to have little in the way of personal assets.  People who want to preserve their assets and also cover the cost of future long term care definitely need more of a strategy than relying on Medicaid.

44% of respondents said that they didn’t have long term care because it was too expensive, but overall, respondents greatly over-estimated the cost of a long term care policy.  The average annual premium in 2009 was $2207, but respondents in the Prudential study estimated it to be $3900.  This misperception could be a factor keeping people from purchasing long term care insurance, despite their concerns about their ability to pay for future long term care needs.

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