It isn’t news that needing  long-term care services can be brutal on your finances but a new study shows just how it can destroy your assets.   

Median household wealth for those who spend fewer than 30 days in a nursing home is about $108,000. But after 6 months, many nursing home residents are effectively broke, with median assets of barely $5,000. In other words, after 6 months in a nursing facility, half of all residents lose essentially all their wealth. This includes both their home equity and financial assets. 

The study was done by Sudipto Banerjee of the Employee Benefit Research Institute and based on data from the respected Health and Retirement Study, which tracks the health and finances of Americans over 50.

It is important to note that EBRI looked at all nursing home admissions, including short, skilled care stays. Medicare normally pays for the first 20 days and for part of the next 80 days for patients who are undergoing rehabilitation or post-acute care. But it does not pay for long-term care in a nursing facility (or at home).  In 2010, about 40 percent of the admissions in this study were for 30 days or less, Banerjee told me.

The EBRI study also looked at the effect of a nursing home stay on average, rather than median, wealth, though those estimates can be skewed by a small number of very high-net worth people. Still, the story is the roughly same:  Long-term care services suck the life out of your nest egg. After six months, nursing home residents will, on average, lose half their assets.   

Banerjee found that about one of out every seven (14 percent)  nursing home residents had private long-term care insurance in 2010. That’s up from 6.4  percent in 2000 but still a very low percentage. By contrast, this study found that about one-third of those admitted to nursing homes were covered by Medicaid, the joint state/federal health insurance program for the poor.

Other studies estimate that about 60 percent of all nursing home costs are paid by Medicaid, which overall spends about $120 billion a year on long-term care services (including both home care and nursing home stays).

The EBRI study also found an increase in long-term care insurance coverage for home care, although the number of insured remains small.  In 2010, about 14 percent of those getting paid assistance at home reported having long-term care insurance, up from about 9 percent in 2000.  

Interestingly, those who never enter a nursing home at all have signficantly more assets than those who do, with median wealth of about $174,000 compared to $102,000. 

This may be because nursing home entrants are, on average, older. But it may also be because by the time someone has entered a nursing facility, she has already spent much of her wealth on medical care or perhaps long-term supports and services at home.

At more than $200-a-day, long-term care in a nursing facility is expensive and we are not prepared, as families or as a society, to pay for it. The EBRI study shows the consequences of that lack of preparation.