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When alternative means of financing are considered, four characteristics of long- term care take on special importance. First, only a minority of the elderly have large long- term care expenses. On the average day, only 4.6 percent of the elderly are in nursing. Moreover, only between 35 and 50 percent of the elderly will spend any time in a nursing home before they die. Over 40 percent of all admissions to nursing homes are for 90 days or less. Because relatively few people face long stays that involve a large outlay of funds, long-term care lends itself to insurance and risk pooling, whereby many people contribute to a fund to cover the extraordinary expenses of the few.
Second, if people wait until retirement age to begin buying insurance or accumulating assets to pay for care, the premium payments or level of savings required is large. To reduce the cost, people should begin early in their working years to protect themselves against a risk that will not be significant for another thirty to fifty years. Human nature makes it difficult, however, to convince young and middle-aged workers, or their employers or unions, to pay for protection against a contingency that if it occurs at all lies in the remote future.