Long-Term Care Spending Continues to Rise

You may not think about long-term care every day, many people never think about it until aloved one has a age or health event, but the cost of aging could reshape your retirement faster than you expect. As Americans live longer, the need for extended care is rising sharply, and so is the financial pressure on families just like yours.

According to the Centers for Medicare & Medicaid Services (CMS), long-term care spending for nursing homes and continuing care retirement communities (CCRCs) is projected to exceed $270 billion within the next few years. More broadly, total spending on long-term services and supports (LTSS) across all care settings now exceeds $450 billion annually and continues to rise.

Researchers published in Health Affairs attribute this growth to:

• Rising labor and healthcare costs
• Increased longevity
• Greater demand for both home- and facility-based care

According to the U.S. Department of Health and Human Services, about 56% of Americans will require long-term services and supports that meet the federal definition of needing help with daily activities or cognitive supervision.

The aging of the population will continue to drive demand for long-term services and supports, contributing to sustained growth in health care spending.” — CMS Office of the Actuary, National Health Expenditure Projections

More Care Is Delivered at Home

Most long-term care today is delivered outside institutional settings. That means most long-term care is delivered at home. Since most people will prefer aging at home this is a good thing, yet many people are unprepared. When the need for extended care happens, due to a chronic illness, accident, mobility issue, dementia, or frailty, most families fidn themselves in a crisis. 

Spending on home health and home care now exceeds $200 billion annually, reflecting both rising costs and strong consumer preference for aging in place.

Older adults increasingly choose to:

• Remain at home
• Maintain independence
• Delay or avoid facility-based care

Spending for Extended Care Will Continue to Grow

Total paid long-term care services already exceed $450 billion annually, and projections show continued growth for decades.

At the same time:

• More than 63 million Americans now provide unpaid caregiving
• The economic value of unpaid care is estimated in the hundreds of billions annually

This creates significant challenges for families, including:

• Lost income and reduced retirement savings
• Emotional and physical strain
• Increased financial pressure

Long-Term Care Insurance Benefits Are Increasing

Long-Term Care Insurance continues to help families manage the rising cost of care.

According to industry data:

• Insurers paid over $16.8 billion in long-term care benefits in 2024
• Benefits are  tax-free
• Coverage can be used for:
  • Home care
  • Assisted living
  • Memory care
  • Nursing homes

These benefits allow you to maintain control over care decisions while helping safeguard your savings.

Medicare Does Not Cover Long-Term Care

One of the most common misconceptions involves Medicare.

Medicare covers:

• Short-term skilled care
• Up to 100 days under strict conditions

Medicare does not cover:

• Custodial care
• Ongoing supervision
• Long-term assistance with daily living activities

Even time spent in a hospital does not guarantee coverage. If you are classified under observation status, those days may not count toward Medicare’s three-day requirement for skilled nursing care.

Without planning, you may need to:

• Pay out of pocket
• Rely on family caregivers
• Spend down assets to qualify for Medicaid

Medicaid Is a Safety Net—But With Trade-Offs

Medicaid plays a major role in long-term care funding but is designed as a safety net.

To qualify:

• You must meet strict income and asset requirements
• Many individuals must spend down savings

While Medicaid provides essential coverage:

• Provider reimbursement rates are lower
• Care options and facility choices may be more limited

Planning ahead helps preserve your independence and expand your choices.

Financial Impact on Retirement

Many people build retirement savings through:

• 401(k) plans
• IRAs
• Personal investments

However, long-term care costs can quickly erode these savings.

Without a plan:

• Couples may lose a substantial portion of assets
• Income streams may be disrupted
• Legacy goals may be reduced or lost

Caregiving Takes a Toll on Families

Family caregiving has significant personal and financial consequences.

Research from AARP shows:

• More than half of working caregivers experience job-related strain
• Many reduce work hours or leave the workforce
• One in six caregivers reduces retirement contributions

Caregiving can also lead to:

• Emotional stress
• Physical health challenges
• Strained family relationships

Tax Advantages and Partnership Programs

Planning ahead offers financial advantages.

• Qualified Long-Term Care Insurance premiums may be tax-deductible, based on age and IRS limits
• Health Savings Account (HSA) funds can be used tax-free for eligible premiums

Most states also participate in Long-Term Care Insurance Partnership programs expanded under the Deficit Reduction Act of 2005.

These programs provide:

• Dollar-for-dollar asset protection
• Access to Medicaid without full asset depletion

Plan Before Retirement

Most experts recommend planning before retirement.

When you plan early:

• You are more likely to qualify for coverage
• Premiums are lower
• More options are available

Key factors that affect premiums include:

• Age
• Health
• Family history

Modern policies are flexible and can:

• Grow benefits over time
• Provide care in multiple settings
• Help safeguard income and assets

Protect Your Independence With a Plan

Long-Term Care Insurance allows you to:

• Choose where you receive care
• Reduce the burden on family
• Help safeguard your financial future

It gives your family the ability to focus on being family—not caregivers.

Use the LTC News Cost of Care Calculator

The LTC News Cost of Care Calculator helps you understand the real cost of care where you live.

You can:

• View current and projected costs
• Compare care options
• Build a realistic plan

LTC News regularly surveys care providers nationwide using real retail pricing and claims data, making it one of the most accurate planning tools available.

👉 https://www.ltcnews.com/long-term-care/cost-of-care-calculator

Planning Eases Burden

You cannot stop aging—but you can prepare for it. A plan that includes Long-Term Care Insurance helps you:

• Maintain independence
• Protect your retirement savings
• Reduce the burden on your family

The real question is not whether you will need care—but how you will pay for it when you do. Be sure to seek a professional Long-Term Care Insurance specialist to help you shop and find the most affordable options based on your age and health. 

👉 Compare Long-Term Care Insurance Companies and Products