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Jonathan Gruber. Credit: House Oversight Committee

Life Health > Long-Term Care Planning

U.S. Long-Term Care Insurance Users Average $1.4M in Household Wealth: Study

By Allison Bell

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What You Need to Know

  • In 2018, an older household with long-term care insurance had an average annual income of $72,000.
  • Private insurers paid for 9% of U.S. nursing home care and 12% of U.S. home care that year.
  • The share of gross domestic product devoted to long-term care has a substantial global range.

Half of U.S. residents ages 65 and older who had private long-term care insurance in 2018 had total household wealth over $657,000.

These users averaged $1.4 million in household wealth.

For long-term care insurance users ages 85 and older, the median level of household wealth was $504,000 and the average level of wealth was $881,000. The wealth figures included the value of the insureds’ homes.

Jonathan Gruber, an MIT economist, and Kathleen McGarry, a Stony Brook University economist, put those long-term care insurance facts and more, based on data from the RAND-HRS and Health Retirement Study, in a new working paper about how the United States pays for long-term care for older Americans.

What it means: Top economists have sifted a huge batch of government-funded, researcher-managed survey data for information about the U.S. long-term care insurance market and other components of the long-term care system.

The paper could influence U.S. policymaking for decades to come, and it could be a source of old but authoritative data on the U.S. long-term care system for agents, advisors, insurers and other private-sector people and entities with an interest in the economics of aging.

The researchers: Gruber is best known for helping Massachusetts design its universal health insurance program, which served as a model for the major medical insurance provisions of the Affordable Care Act.

McGarry is a researcher who studies acute health care expenses and long-term care expenses at the end of life.

Gruber and McGarry have posted their working paper — an academic paper that has not yet gone through a full peer review process — on the website of the National Bureau of Economic Research, in front of the site’s paywall.

The Gruber-McGarry paper is meant to be a chapter in an upcoming book they have created, “Long-Term Care Around the World,” which is in press at the University of Chicago Press.

Gruber, McGarry and collaborators have posted many other chapters from the book on the NBER site in working paper format. The other chapters profile the long-term care finance programs in Canada, Denmark, England, Germany, Italy, Japan, the Netherlands, Singapore and Spain.

Gruber, McGarry and a third researcher, Charles Hanzel, note in the introduction that, in the countries included in the book, the share of gross domestic product devoted to long-term care ranges from 0.9%, in Spain, to 4%, in the Netherlands. It stands at 1.3% in the United States.

The share of GDP going toward long-term care in the United States “may be relatively low on the list, but it is larger than the share of U.S. GDP attributable to agriculture or car manufacturing,” according to the researchers.

The U.S. data: Gruber and McGarry based the U.S. long-term care system profile mainly on data from an offshoot of the University of Michigan’s Health and Retirement Study, which came to life in 1992.

The federally funded study interviews about 20,000 people ages 50 and older in two-year waves. The program managers try to follow each participant until the participant dies.

The RAND Center for the Study of Aging has created easier-to-use versions of the HRS datasets.

The big picture: Gruber and McGarry found that, in 2018, formal nursing home care cost $142 billion and served 1.1 million people.

Formal home health agency care cost $89 billion and served 4.1 million people.

One method for analyzing the informal care provided by friends, neighbors and family members valued it at about $86 billion. Another method valued it at $151 billion.

All forms of U.S. long-term care likely cost $317 billion to $382 billion in 2018, with public programs accounting for $165 billion of the spending and private payers and providers accounting for $152 billion to $217 billion, according to the researchers.

Private long-term care insurance: The researchers broke the U.S. long-term care insurance market down into two segments: U.S. residents ages 65 and older and U.S. residents ages 85 and older.

The researchers estimate, based on health expenditures data from the Centers for Medicare and Medicaid Services, that private insurers paid for 9% of U.S. nursing home care and 12% of U.S. home care in 2018.

In 2018, 7.7 million of the people in the 65-and-older group, or 15% of the people in that group, had long-term care insurance.

Although the long-term care insurance users had an average annual household income of $72,000, their median household income was $49,000, meaning that half had income over $49,000 and half had income income under $49,000.

People in the 65-and-over age group without long-term care insurance were less affluent.

The uninsured people had average annual household income of just $49,000, median household income of $33,000 and median total household wealth of just $239,000 including the value of homes.

Long-term care insurance users were healthier than the uninsured as well as more affluent, thanks to factors such as long-term care issuers’ underwriting efforts, the cost of long-term care insurance, and the tendency for people with long-term care insurance to be conscientious about their personal health as well as about their finances.

Only 11% of the long-term care insurance users needed help with common activities such as shopping and bathing. About 13% of the uninsured people needed help with common daily activities.

The same pattern held for people ages 85 and older, although that group tended to have a lower income, less household wealth and more health problems.

In the 85-and-over category, 26% of the long-term care insurance users and 33% of the uninsured people needed help with common daily activities.

Jonathan Gruber. Credit: House Oversight Committee

Allison Bell

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