When the subject of long-term care (LTC) comes up, advisors need to be able to discuss with clients the likelihood of needing such care and its potential duration. These discussions feed into decisions about whether to purchase LTC insurance. In this February 2020 article (and APViewpoint conversation), Allan Roth got the discussion going in terms of both the probabilities of needing care and an evaluation of insurance options. Recently I have analyzed additional data that improves our understanding of LTC needs and informs the decision-making about insurance.

The primary data that Roth used for projecting LTC needs was based on a study of nursing home utilization. In the APViewpoint discussion that followed I, and one other participant, noted that it would be useful to have data that included LTC utilization in the broader context including both home care and assisted living. Using my actuarial affiliations I was able to find actuarial data on claims and other studies of projected LTC needs, primarily from the Society of Actuaries (SOA). The SOA conducts peer-reviewed studies of LTC claims every three years or so, including data from most of the LTC insurance carriers in the U.S.

Estimating LTC needs

Unfortunately there is no single source that provides official statistics on the utilization of LTC services or how much care retirees need, so it’s necessary to examine a variety of sources. These include surveys of the elderly population, such as the recurring Health and Retirement Survey (HRS), claims data from LTC insurers consolidated by the Society of Actuaries, and projection models developed by researchers.

The chart below compares estimates of long-term care needs from the following sources:

2005 study from Kemper, Komisar, and Aecxih that used modeling to project both nursing home use and overall lifetime LTC needs.

2017 RAND study by Hurd, Michaud, and Rohwedder that used HRS data to estimate lifetime nursing home use for retirement-age individuals. (I’ve interpolated the results in the RAND study to match durations for the other studies.) The RAND study was the primary source used by Allan Roth.