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CBO: Medicaid Crowds Out Private LTC Savings

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A look at states with easy and tough Medicaid nursing home benefit requirements suggests that program rules really do affect residents’ retirement savings efforts.

Lina Walker, a researcher at the Congressional Budget Office, has presented an analysis supporting that conclusion in a CBO working paper.

Walker tried to assess the affects of access to Medicaid nursing home benefits on private savings by coming up with a theoretical model and comparing model predictions with actual results in states with loose eligibility rules and states with tough rules.

Private long term care insurers and producers long have argued that availability of government-sponsored benefits is discouraging many consumers who have the ability to pay for their own long term care from doing so.

The sources of the data needed to assess the effects of Medicaid nursing home benefits are incomplete, but a comparison of 3 “destination states” shows that retirement wealth is 33% lower for households in states where Medicaid nursing home benefits are easy to get, Walker estimates.

“The difference amounts to about $54,000 in retirement wealth,” Walker writes.

But Walker notes that the difference is less than the average household’s expected nursing home care costs.

In households that end up needing nursing home care, the typical nursing home care expense total is about $90,000, Walker writes.

A copy of the CBO report is on the Web at Document Link


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