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Distribution of lifetime nursing home use and of out‐of‐pocket spending

  1. Susann Rohweddera,c
  1. aRAND Corporation, Santa Monica, CA 90407;
  2. bNational Bureau of Economic Research, Cambridge, MA 02138;
  3. cNetwork for Studies on Pension, Aging, and Retirement, Tilburg University, 5000 LE Tilburg, The Netherlands;
  4. dDepartment of Applied Economics, Hautes études Commerciales de Montréal, Montréal, QC H3T 2A7, Canada
  1. Edited by James M. Poterba, Massachusetts Institute of Technology, Cambridge, MA, and approved July 13, 2017 (received for review January 12, 2017)


Although it is important to know the annual costs and use of nursing homes, for individuals and households, it is also important to know expected lifetime costs and use of nursing homes; that is, how much they will use nursing homes and how much might spend over their lifetimes. They need this information in deciding how much to save and whether to purchase insurance that will pay for nursing home use. By following individuals over many years as they progress to advanced old age, we estimated how many days individuals will spend in nursing homes and how much they will spend out-of-pocket.


Reliable estimates of the lifetime risk of using a nursing home and the associated out-of-pocket costs are important for the saving decisions by individuals and families, and for the purchase of long-term care insurance. We used data on up to 18 y of nursing home use and out-of-pocket costs drawn from the Health and Retirement Study, a longitudinal household survey representative of the older US population. We accumulated the use and spending by individuals over many years, and we developed and used an individual-level matching method to account for use before and after the observation period. In addition, for forecasting, we estimated a dynamic parametric model of nursing home use and spending. We found that 56% of persons aged 57–61 will stay at least one night in a nursing home during their lifetimes, but only 32% of the cohort will pay anything out of pocket. Averaged over all persons, total out‐of‐pocket expenditures looking forward from age 57 were approximately $7,300, discounted at 3% per year. However, the 95th percentile of spending was almost $47,000. We conclude that the percentage of people ever staying in nursing homes is substantially higher than previous estimates, at least partly due to an increase in nursing home episodes of short duration. Average lifetime out‐of‐pocket costs may be affordable, but some people will incur much higher costs.


  • ?1To whom correspondence should be addressed. Email: mhurd{at}rand.org.

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