By 2047 Long-Term Care Costs Could Reach $5.6 Trillion. Huge Consequences for American Families
Face it, there is a good chance you said, "It will never happen to me," in any discussion about long-term health care. For something many people think will never happen to them, the costs of long-term care services and supports continue to rise. The demand for long-term care services increases every year as well.
Due to an increase in life expectancy, the U.S. has a high senior population that is rapidly growing. According to the U.S. Census Bureau, 73 million adults in the U.S. were 65 or over in 2020, making up 16.5% of the total population. A rising prevalence of chronic diseases among the senior population with advances in medical science increases people's need for help with everyday living activities or supervision due to dementia. The Alzheimer's Association, for example, estimates that 6.5 million Americans aged 65 and older have dementia.
A CDC study shows that older populations' hypertension, dementia, and heart failure were the most common disorders. The study indicates that 55% of those 65 and older had multimorbidity - meaning they had more than one health problem being treated. The prevalence of mental conditions also increased with age, primarily because of the high number of older women affected by dementia.
People need long-term care services for various reasons, including chronic health issues, mobility problems, accidents, dementia, and frailty due to aging.
Long-Term Health Care Costs Rising
The national median average cost of one year for in-home care, figuring a 44-hour week, is $4,671 a month in 2022, according to LTC NEWS Cost of Care Calculator. The calculator shows current and future costs of long-term health care for in-home services, adult day care centers, assisted living facilities, and nursing homes nationwide.
According to the calculator, long-term health care costs will increase substantially every year. For example, the same amount of in-home care, based on the national average, is expected to run $9,092 monthly in 2047.
The costs vary depending on the type of care and location. Facility care is generally more expensive, although most long-term health care is delivered at home.
Unpaid Family Caregivers Add to the Problem
These numbers don't reflect the cost of unpaid family members who become caregivers because of a lack of Long-Term Care Insurance or personal funds to pay for personal care. The number of these informal caregivers now encompasses more than 53 million Americans.
Medicare (including supplements) and traditional health insurance will only pay for a small amount of skilled services. Most long-term health care is custodial - help with routine daily activities or supervision due to dementia. This custodial care is not covered by health insurance or Medicare. LTC Insurance will pay for all these services, but you must obtain coverage before an individual's health declines since these products are medically underwritten.
Long-Term Care Expenses to Swell
A recent study by PricewaterhouseCoopers (PwC) reports that the total cost of long-term care could swell to $5.6 Trillion by 2047. The "Formal Cost of Long-term Care Services" report estimates the current average lifetime cost of long-term care as $172,000 (in 2016 dollars) per person.
This number has increased substantially since that report. Public reports by the American Association for Long-Term Care Insurance show that in 2021 alone, the major companies paid over $12.3 Billion in claims. LTC Insurance generally covers all levels and types of long-term health care, including in-home care, adult day care, assisted living, memory care, and nursing home care.
These totals include all paid services but exclude unpaid informal care provided by family and friends.
PwC says aside from retirement planning for individuals, the number of people aged 70 and above in 2047 will be twice as large as today, growing from 33 million to 66 million. From a public policy perspective, these estimates indicate that the future cost of providing long-term care services may well be very high. In simple terms, the current cost of paid care is estimated at $2.8 trillion, growing to $5.6 trillion (in 2016 dollars).
Probability of a Claim Exceeding Each $50,000 Cost Band | |
Threshold | Probability |
$50,000 | 65% |
$100,000 | 52% |
$150,000 | 39% |
$200,000 | 30% |
$250,000 | 24% |
$300,000 | 19% |
$350,000 | 15% |
$400,000 | 12% |
$450,000 | 9% |
$500,000 | 7% |
$750,000 | 2% |
$1,000,000 | <1% |
A recent report by the American Association for Long-Term Care Insurance says the biggest claim exceeds $2.6 Million in benefits paid. Added longevity may increase the total costs of long-term health care services and supports in the future.
For most American families, the unpaid costs of care would dramatically impact savings and lifestyle. For some more extended events, it would be devastating to assets. The report shows women are more likely to exhaust benefits for their Long-Term Care Insurance than men. Sixteen percent of women outlive their benefits, compared with 9% of men.
Industry experts suggest this is why so many couples purchase "shared plans" which allow a spouse/partner to use the other's benefit pool if it is exhausted. Generally, if a spouse/partner dies, the unused benefits go to the other.
States Impacted Due to Rising Medicaid Expenses
Because of greater demand for long-term care services and pressure on the Medicaid program, the State of Washington has instituted a statewide long-term care plan. The plan, called "Washington Cares," pays $36,500 in long-term care expenses and is funded by a tax.
Dubbed the "LTC Tax," the state is taxing 100% of earned income to fund the program; however, those who own and maintain a qualified Long-Term Care Insurance policy are exempt from the tax. Several other states, including California and New York, are considering similar plans. Demand for Long-Term Care Insurance is increasing in those states.
Aging is a Real Problem and Has Consequences
Aging is a reality, and the need for long-term care services, palliative care, and hospice will rise yearly. The consequences on families are more than monetary. Lack of planning forces family members to quit jobs or try to juggle their careers and families with the needs of an older parent or loved one.
Planning for the costs and burdens of aging is best before retirement. Most people obtain LTC Insurance in their 50s. Several insurance companies offer traditional Long-Term Care Insurance, hybrid LTC policies (life or annuities with qualified riders for long-term care), and short-term cash indemnity plans. Underwriting rules and pricing vary dramatically between companies. To get accurate quotes and information, seek the help of a Long-Term Care Insurance specialist who works with top companies.
Long-Term Care Insurance is highly regulated by the states and the federal government. Insurance companies must file their products and pricing with each state's insurance division to get approval to market the product in that state.