Long-term care insurance: It's all about access

By Dan McGrath

Jester Financial Technologies


As the baby boomers age and advance towards retirement, how they plan financially for the future is rapidly changing. One of the larger changes taking place is an increasing need for long-term care insurance (LTCI) and decisions about how it will be best positioned.

Historically, LTCI has been thought of as an instrument to protect assets; it has been positioned as an investment vehicle that can create the time a retiree needs to restructure their investments so they can possibly qualify for Medicaid without losing their estate.

Today, that role has changed. LTCI now needs to be viewed as a negotiating chip for health care access, instead of just protection of assets. The reason is as simple as the relationship between supply and demand.

History has taught us that when there is a high demand with little supply, prices increase. In the case of LTC actually being received (the demand) versus the access to that care (supply), we are facing some hard truths; demand is vastly overwhelming supply.

Let’s take into account the demographics. There are just over 78 million baby boomers in the United States today, making up a segment of society that was born between the years 1946 and 1964. Recent figures estimate that roughly 10,000 of them will be retiring each day for the next 17 years.

Now, if we look at some LTC data, we will see that there are currently 16,100 nursing homes in the U.S., with just over 1.66 million beds available.1

The total population in LTC facilities as of 2010 was just over 1.38 million — this only leaves about 280,000 beds available for new patients throughout the country!1

Medicare estimates that in the year 2020, there will be another 12 million people who are going to need some form of LTCI . If they all need to enter an LTC facility, that’s one bed per every 43 people. 2

This places facilities that offer specialized care in a very unique position. They have a very limited number of beds available, combined with the knowledge that there will be a very large percentage of the population possibly needing those beds in the not-so-distant future. So, with so many people heading into retirement, and so few facilities available to assist them, why should any LTC facility accept them?

It is becoming evident that LTCI will no longer only be a part of an asset protection strategy; it will become that key bargaining chip in accessing care. Those that have LTC insurance will ultimately have the ability to negotiate with a nursing facility to simply receive care. Quite possibly, without it, the odds of getting that care may be as little as 1 in 12 million.

1 http://www.statehealthfacts.org

2 http://www.medicare.gov/longtermcare/static/home.asp