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Generation X Will Depend on Family and Government for Long-Term Care

This article was written by in Insurance. 12 comments.


According to a recent survey of 1,004 individuals born between 1960 and 1980, roughly Generation X, many expect their family or the government to provide care or funding for care as they age. Here are some of the more interesting statistics from the study, released by America’s Health Insurance Plans (AHIP), an association of health insurance providers with a mission to expand access to health care.

  • Among survey respondents who do not own long-term care insurance, 36% plan on relying on government assistance, like Medicaid, to finance their long-term care.
  • 55% of respondents within Generation X plan to rely on a family member for providing long-term care. 10% will rely on a visiting nurse and 9% believe they will live in an assisted-care facility.
  • 95% of Generation X do not own long-term care insurance, and over half of those who are not covered do not realize that health or disability insurance most likely does not cover long-term care.

Today, long-term care in a nursing home in the United States carries an average annual cost of over $70,000 (according to AHIP). I can only imagine that just like health care costs, this price tag will continue to climb faster than the rate of inflation.

I’m not currently covered by long-term care insurance, but I decided to take a look at what is offered at my current employer. They offer their own group long-term care insurance. They have four separate plans based on coverage level. The first level would cover nursing home care up to $100 per day or home care up to $75, with a lifetime maximum of $182,500. The level offering greatest coverage would cover nursing home care up to $250 or home care up to $188, with a maximum of $456,250. There are two intermediate levels of coverage, as well.

Based on AHIP’s annual cost of $70,000 of a nursing home, I decided to look into the $200 per day coverage. My first thought is inflation. If I need long-term care, it will most likely not be for forty or fifty years, maybe more. After five decades of inflation, I think the daily cost of long-term care is going to be much more than $200. I am surprised that something basic, coverage adjusted for inflation, is offered at an additional premium.

According to my company’s calculator, I would pay $22 per month starting now for coverage at $200 per day once I enter the assisted care facility. But if I want my coverage adjusted by 5% every year, the premium jumps to $81.20 per month. The projected lifetime premium payments jump from $13,992.00 to $51,643.20.

If the cost of long-term care rises at that same 5% annual rate for fifty years, I could be looking at a daily cost of over $2,000 a day! A $200 daily benefit won’t help much if that is the case. Why both with coverage that is not adjusted for inflation?

Do you have long-term care insurance? Or do you plan to rely on family or government?

You can download AHIP’s survey results here [ppt].

Updated December 20, 2011 and originally published February 13, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar The Weakonomist

As a member of generation Y, let me be the first to say we’re really looking forward to supporting this generation with raised taxes. Some of us are working so hard not to be a burdon on the children we’ll have, I’m sure we will have enough sitting around for gen X.

Good post though, interesting stars, I wonder if it scales.

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avatar Wayne

Yes, I have LTC and have had it for a couple of years already. Saw what could happen if one did not have it and decided to get it for piece of mind. I just turned 40 and people are shocked that I have it as they said this is something to get when you are older . I have a 5% yearly adjustment on it as well.
I pay about $65 month. I have this outside of employer who at the time did not offer it. One thing to keep in mind if you are considering signing for it at work, see if you are eligible to keep and continue coverage if you leave your employer.

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avatar velvet jones

I don’t have long-term insurance yet. I plan to look into it when I’m in my 40′s and possibly buy in my 50′s. Depending on the carrier, you can pay extra for a feature that will increase the benefit to inflation.

I’m a little leery of long-term insurance. It seems extremely picky about what it covers and what it won’t. The one from my employer only offers coverage for 3 years max, and won’t cover home care.

I’m still researching though. To be honest, with all the insurance we’re expected to (and being scared into) buy, how am I supposed to pay for the basics of living in the here and now?

“Weak”: I feel the same way about the Baby Boomer generation. Imagine how it feels to be sandwiched between two HUGE population groups. The first robs us to take care of themselves, the other is large enough to lobby that we be left on our own without government support that we also paid into. Talk about being on the shit end of the stick…

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avatar Kate

I’m hoping to drop dead of a stroke or freeze to death in my own home at an advanced age. I’m assuming I won’t luck on to a ticket for the “died peacefully in her sleep” train. The thought of assisted living makes my skin crawl. Care in my own home would be barely tolerable to me. I know the argument: you won’t think so when you’re old and frail. But I don’t think my life-long preference for happiness and well being (quality of life) over longevity (quantity of life) will desert me as the years wear on.

I’m with Velvet. There’s plenty of recrimination and blame to go around between generations. Gen X is definitely going to get the shaft from the Boomers. We’ll almost certainly be the first to be told that Social Security is no go, after paying into it longer than any subsequent generations. And plenty of us will be left to care for the Boomers who are losing their shirts right about now too.

Yes, Gen Y and later generations have been indebted by previous generations in selfish pursuit of instant gratification and their own convenience. But it’s not as though Gen X isn’t in that boat too. At least some of us are aware that the party was unsustainable. Not all of us played the real estate flipping game. Some of us carry no credit card debt, and saved up a decent down payment for our homes rather than rely on “creative financing” and mortgages that should never have been offered.

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avatar hetd200

Interesting article, but it should be noted that 1960-1980 is only rarely used to define Generation X. The mid-1960s is by far the most common beginning point for GenX.

Relevantly, as many nationally influential voices have repeatedly noted, Obama is part of Generation Jones, born 1954-1965, between the Boomers and Generation X. Google Generation Jones, and you’ll see it’s gotten a lot of media attention, and many top commentators from many top publications and networks (Washington Post, Time magazine, NBC, Newsweek, ABC, etc.) specifically use this term to describe Obama.

Great op-ed on Obama as the first Generation Jones President in USA TODAY a couple of weeks ago:
http://www.usatoday.com/printedition/news/20090127/column27_st.art.htm

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avatar Luke Landes ♦127,470 (Platinum)

hetd: Interesting, this is the first I’ve heard of “Generation Jones.” The author of the USA Today article claims to have invented the term. Time will tell if it catches on… but 11 years is hardly a generation. I agree these terms are quite nebulous, and I understand the need for people who feel that they don’t fit in with the stereotypes assigned to the more popular designations to come up with something else.

If you disagree with the label, ignore it; just look at the statistics as “people born between 1960 and 1980″ rather than “Generation X.”

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avatar Yana

We don’t have long term care insurance, but have seen several cases of people who’ve needed the care. First my aunt, who died in 2000. She and my uncle did not have medical insurance or long term care insurance, and he paid for her costs for 2 years until her death – about $100,000 just for the room and board. Her roommate, who was in her 70s at the time and is still there, had been wiped out of her home and $78,000 savings. She then was eligible for MediCal/Medicare. I wonder if any insurance would continue to pay for that long.

My mother bought long term care insurance when she was in her late 70s, and it provided 80%-100% coverage, but I don’t know for how long they would pay. I think it is significant that she got the coverage after having been diagnosed with breast cancer, which she survived. I don’t know what she paid, but she wouldn’t have bought it unless she believed she would be on the winning end of the deal.

I don’t know whether we would ever purchase such insurance, but based on my mother’s example, I think one should do it at an advanced age if possible. I don’t know about the companies or policies in general, but I do know that if you have health insurance and go to the doctor, you are required to sign a form saying you will pay for your care if your insurance does not. The patient is required to pay insurance premiums, but the insurance company is not even required to pay the coverage it is selling. And of course, they don’t, if it means they will not profit.

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avatar Rassah

I always look at insurance as something to cover you if/while you have no money to cover it yourself. Since I’m only 30, and don’t expect to pay for long-term care any time soon, I am considering just putting in about $80 a month into my own investment fund, and hoping to have enough to cover whatever I’ll need when I am older. This is, of course, in addition to the other investments/savings I’m already making. Quickie math: $80/m for 35 years is $85k at %6 and $227k at %10. I’m hoping that will be enough, and I’m hoping to retire sufficiently wealthy as to no longer need insurance. Ditto for life insurance. Need it now, but won’t need it once I actualy have the money equaling the coverage amount.

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avatar Mr. GoTo

I bought a LTC policy for my wife and for me last month. It includes compound inflation protection. If you don’t get inflation protection, don’t waste your money.

If you are counting on the government to take care of you, be prepared to have most of your assets drained away first.

If your state has a LTC partnership agreement, you can keep more of your assets before going on Medicaid, up to the amount of LTC benefits received. That helps. However, your LTC policy must have compound inflation protection to qualify.

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avatar T

I’ve given LTC insurance quite a bit of thought lately.

My concern is that it’s a HUGE amount of trust to put into a company. Normally, even in the insurance world, you’re putting money in for a guarantee in the present time – and if that company overreaches itself, as long as it’s not the exact time you need it (which is a risk), you can always jump ship and change to a new company for the future.

But in this case, you’re trusting that company to stay solvent and in business for – what, 60 years, perhaps (speaking as a 30-year-old who hopes to make it to 90!)? And if it doesn’t, you’ve now lost the entire investment you were counting on.

Plus, as people above have mentioned, it’s really hard to be sure they’re going to in the end cover what you actually need. I’ve been thinking about it a lot lately because I’ve been helping multiple family members deal with these issues… and so far, it hasn’t mattered at all who had LTC insurance; noone’s insurance really covered anything they needed, so everyone has been in the same boat. Those who felt their insurance should have paid have tried to fight it, but it’s awfully hard to do, particularly when you need to start fighting just at the point your health is collapsing enough that you have to move to a LTC facility to begin with.

So, basically – if I thought it would really work, I would buy it in a heartbeat – LTC is what I worry about most in terms of long term financial planning. But, as things stand, I’m not sold; instead, I feel like I should be (1) saving as much as I can now in vehicles I have control over so that I can cover it myself as best I can, and (2) working to pay into the system appropriately and voting in such a way to maintain a functional public system of elder-care (which I do support – I don’t think we’ll ever reach the point where we’re comfortable saying “I’m sorry, but if you screwed it up 50 years ago, we’re just going to have to leave your 80-year-old self in the streets… tough luck!” – and as long as we’re not willing to do that, we might as well accept it and try to make the program we have to deal with it as functional as possible).

If people do have experience with this type of insurance working as advertised, and feel like there are good reasons to trust it will continue to do so, though, I’d love to hear them – I want to believe!

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avatar thomas

Great comment Kate.

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avatar wonder

I am 44 and just got a quote with auto-owners in Ohio and it is $2100 per year for $150 per day, 5% inflation adjustment, 90 day waiting period, 6 years of coverage. The current medicaid bed rate here is $172. Be sure to check the companys rating. Hard decision as I do not how to otherwise protect my assets (advice?). Would like to know what companies others are getting these cheap quotes from, as I compared 2 companies and not much difference. Call a nursing home and get the daily rate in your state. GREAT TOPIC – let’s keep it going as I am trying to decide this right now! THANKS

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