Can State Pensioners Pay for Future Medically Necessary Long-term Care?

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At some point many people find themselves needing help to care for themselves. For the elderly, nursing homes provide that help, either temporarily or on a long-term basis.


In 2014, there were 1.4 million individuals in nursing homes nation-wide, with 41,255 of them in Massachusetts. Nursing home residents accounted for 3.7 percent of citizens older than 64, and 13.3 percent of citizens older than 84 years of age. Those numbers will only increase given the Commonwealth’s aging population. While not every retiree will require long-term care, the many who do will likely find the cost to be financially out of reach.


For retired public employees, will their monthly pension checks cover the cost of a nursing home? Pioneer Institute’s MassOpenBooks allows the public to take a peek into the Commonwealth’s payroll, and the Massachusetts’ Retirement Calculator creates an estimate of how much a pensioned employee could receive if they retire in 2018.


Using this data, the Executive Office for Elder Affairs (EOEA) provides a pertinent case study for the retirement of its current employees. EOEA employees have an average annual income of $60,404. As they belong to Group 1 (administrators) employees, their pension estimates are as follows when accounting for the 2018 Cost of Living Adjustment:


Time Served (years) Monthly Allowance Annual Allowance
20 $2,549.33 $30,592.00
30 $3,807.75 $45,693.00
40 $4,059.43 $48,713.20


It is clear that should an EOEA retiree require a stay in a nursing home, his or her retirement income wouldn’t come close to covering the cost of long-term care in a nursing home.


The Commonwealth of Massachusetts Group Insurance Commission (GIC) covers 80 percent of any of their supported plans, leaving a relatively small payment for Medicare Advantage or Supplement plans. Their only option in 2018 for a Medicare Advantage plan is the Tufts Health Plan Medicare Preferred Plan, at $67.47 per month, per person. However, that plan will only cover the first 100 days in a nursing home. Assuming the 2018 state determined average daily cost of $354, this leaves a pensioner paying $93,810 for the remaining 265 days of the year, or $10,423 per month.


The same trend follows for any state department’s employees:

Looking at pensions currently paid to Commonwealth retirees, only 2017’s 288 top-paid retirees had a large enough distribution to cover the monthly $10,423 a monthly nursing home charge. That represents just 0.2 percent of current pensioners. The rest would be forced to sell their homes, rely heavily on family members, or reduce any other assets to less than $2,000 to get care through MassHealth. That means they would not be able to pass anything to their heirs, and if they tried to skirt the law and give away any assets beforehand they would be penalized by having their coverage suspended.


If the overwhelming majority of state employees cannot afford nursing home coverage, then who can? The median state employee makes less than the median Massachusetts income ($58,114 compared to $70,954), but they generally have better retirement plans and any gap wouldn’t be able to mitigate such extravagant costs  Even with Massachusetts recently applying for a Medicaid Waiver amendment in an attempt to manage costs, the state has much work to do to address the needs of public employees who, like so many private sector employees, will become dependent on the state due to long-term care expenses.


Kaila Webb is the Wellesley College’s Freedom Project Intern at the Pioneer Institute. She is double majoring in Environmental Studies and Chinese Language & Culture.