Private Capacity to Finance Long Term Care. The Distribution of Income

03/01/1983

Table 1 presents some basic income statistics for the elderly disaggregated by family composition, age and income class and Table 2 shows the distribution of income by an even finer age breakdown. As discussed earlier, persons over 75 are likely to be more at risk in terms of facing chronic health problems. On average, they are concentrated in lower income categories than are their younger counterparts, with over three-fourths of all single-person households having income of less than $5,000 per year. Couples over 75 are better off, but also face higher expenses.

TABLE 1. Distribution of Income By Family Characteristics for Families with Head Aged 65 and Over
(1976 data)
Family
Characteristics
Income Class (1976 dollars)
Up to $5,000 $5,000 - 10,000 $10,000 - 15,000 $15,000 or above
HEAD AGED 65-74
Single Person Household
Percent of Families 64.5 25.8 5.8 3.9
Mean Income $2,959 $6,901 $12,079 $23,338
Mean Wages $155 $1,189 $2,758 $6,234
Wage as % of Income 5.3 17.2 22.8 26.7
Two Person Household
Percent of Families 18.8 40.8 19.2 21.2
Mean Income $3,675 $7,296 $12,334 $26,404
Mean Wages $207 $949 $3,339 $9,395
Wage as % of Income 5.6 13.0 27.1 35.6
HEAD AGED 75 OR ABOVE
Single Person Household
Percent of Famlies 76.5 17.3 3.2 3.0
Mean Income $2,830 $6,820 $12,025 $25,962
Mean Wages $34 $263 $888 $3,333
Wage as % of Income 1.2 3.9 7.4 12.8
Two Person Household
Percent of Families 29.1 44.3 13.5 13.1
Mean Income $3,652 $7,000 $12,027 $27,560
Mean Wages $63 $381 $1,047 $3,915
Wage as % of Income 1.7 5.4 8.7 14.2
SOURCE: Survey of Income and Education.

In every instance, the vast majority of income for the oldest families does not come from wages or salaries. Consequently, a deterioration in health status would not lower the financial resources as much as for those aged 65 through 74. Families with the greatest resources are, however, more susceptible to loss of earnings. More than one third of average incomes of couples aged 65 through 74 in the highest bracket comes from wages and salaries.

Persons living alone, who are more likely to require expensive institutional care if disabled, are concentrated in the lower income brackets. Less than 10 percent of the younger elderly individuals and just over 6 percent of those over 75 have incomes in excess of $10,000. From income alone, it appears that few of the elderly could privately finance either care at home or care in an institution.

As a first approximation of post-disability income, we could subtract earnings from total income. Since these are families with no more than two earners we would assume that the disabled person and the likely caregiver would leave the labor force if they have not already done so. Since many elderly do not participate in the labor force, it is somewhat deceptive to focus on the change in the mean income from this adjustment. Those who had no earnings will be unaffected, while those who had earnings will have income reductions much larger than the change in average income. Moreover, this adjustment would understate post-disability income for families with earners, since transfers would likely replace some of these lost earnings.

TABLE 2. Distribution of Income for Elderly Couples and Individuals by Age of Head
(1976 Data)
Income Level Age of Head
65-69 70-74 75-79 80-84 85 and Above
$2,500 and less 11.7% 12.3% 16.7% 22.1% 29.1%
$2,501 - 5,000 24.4 32.5 37.1 39.5 41.0
$5,001 - 10,000 33.3 34.5 29.6 27.1 20.3
$10,000 - 15,000 15.0 10.5 8.6 5.3 4.8
$15,001 and above 15.5 10.3 8.0 5.9 4.7
Total 100.0% 100.0% 100.0% 100.0% 100.0%
SOURCE: Survey of Income and Education.

Alternatively, this analysis could focus only on nonearners among the elderly. Since those still in the labor force are generally in good health, they are unlikely to be in need of long-term care in the near future.9 This distinction is most important for those under 75 (as shown in Table 3) since few persons remain in the labor force after that age. These younger non-earners have lower levels of income on average than the earners and their distribution is more concentrated in the under $10,000 income categories.

TABLE 3. Distribution of Income for Elderly Couples and Individuals Without Earnings By Age of Head
(1976 Data)
Income Level Age of Head
65-69 70-74 75-79 80-84 85 and Above
$2,500 and less 18.5% 15.5% 19.5% 24.5% 31.1%
$2,501 - 5,000 33.2 38.3 41.2 41.3 41.9
$5,001 - 10,000 33.4 32.7 27.9 25.9 20.0
$10,000 - 15,000 9.3 8.2 7.1 4.4 3.8
$15,001 and above 5.7 5.4 4.4 3.9 3.1
Total 100.0% 100.0% 100.0% 100.0% 100.0%
SOURCE: Survey of Income and Education.

Where feasible this analysis will focus on nonearners. In order to keep the various cell sizes large, however, some of the aggregate data presented will be based on all the 65 and over age group rather than just nonearners.

View full report

Preview
Download

"privcap.pdf" (pdf, 2.25Mb)

Note: Documents in PDF format require the Adobe Acrobat Reader®. If you experience problems with PDF documents, please download the latest version of the Reader®