A typical 75-year-old person in good health has only a 6 percent chance of entering a nursing home in the next 5 years. For those in worse health, the probability ranges from 17 percent for major illness to 44 percent for cognitive impairment. Surprisingly, elderly people's expectations about entering a nursing home in the next 5 years are reasonably close to the actual probability of nursing home entry, according to a recent study which was supported in part by the Agency for Healthcare Research and Quality (HS09515). This contradicts the presumption that few elderly people purchase private long-term care insurance to cover nursing home care because they underestimate their probability of entering a nursing home.
Most of the factors that affect actual entry also had significant effects on expectations about entry. For example, elderly people with a low expected probability of living had the highest mean expectation about entering a nursing home; those with a high expected probability of living had the lowest mean expectation of entering a home. A clear trend also existed for health characteristics. Those with more risk factors had lower expectations of living than those with fewer risk factors. Also, it has been presumed that expectations about nursing home care would lead to changes in financial behavior. For example, individuals who expected to enter a nursing home might set up trusts or transfer assets to their children to qualify for Medicaid reimbursement by avoiding asset spend-down. However, in this study, financial assets did not affect expectations about nursing home entry.
Researchers led by Edward C. Norton, Ph.D., of the University of North Carolina, Chapel Hill, modeled expectations about entering a nursing home as a function of expectations about living beyond 10 years, expectations about leaving a bequest, health shocks, and other factors. They used data from the Study of Assets and Health Dynamics Among the Oldest Old and limited the sample to those who answered the following questions in both 1994 and 1996: their chance of moving to a nursing home in the next 5 years, the expectation that they would leave a financial inheritance, and their chance of living to be at least 100, 95, 90, 85, and 80.
More details are in "Expectations among the elderly about nursing home entry," by Richard C. Lindrooth, Ph.D., Thomas J. Hoerger, Ph.D., and Dr. Norton, in the December 2000 Health Services Research 35(5), pp. 1181-1202.