Most Americans Underestimate Cost of Long-Term Health Care, Study Says

Long-term care is in the news seemingly all the time, yet many people are unaware of the costs and the impact long-term health care can have on family and finances. Survey shows most Americans are unprepared for the consequences of aging.
Updated: August 2nd, 2022
James Kelly

Contributor

James Kelly

If you have a loved one receiving long-term health care services, you are keenly aware of the cost of care. Despite the amount of awareness of long-term care, most Americans underestimate the actual costs, according to the results of a new study.

HCG Secure and Actos Foundation partnered to survey 402 individuals between the ages of 40-64 around the expectations of long-term health care needs, costs, and preferences. 

When asked about what they thought the costs of long-term health care, they estimated, on average, $20,000 less than the actual average costs. When shown the costs of care, half of all respondents indicated they were 'not at all" prepared to cover those expenses.

Long-Term Health Care is Expensive - and Getting More So Over Time

The LTC NEWS Cost of Care Calculator shows the national median cost of in-home health care averaging $55,586 a year - $4,671 a month (based on a 44-hour week). Base assisted living costs average $4,149 a month. Although the least used type of long-term care, nursing home costs are the most expensive, averaging $8,854 a month.

Long-term health care costs vary depending on location and the required service type. Costs are rising rapidly due to inflation, increasing demand for care, and higher labor costs. You can find the current and future cost of long-term health care where you live, along with state-specific information, on LTC NEWS - LTC NEWS Cost of Care Calculator.

Most People Unprepared 

The study found that most people were unprepared for aging and declining health. The research shows that only one in ten owned a Long-Term Care Insurance policy. Only three in ten had a financial plan, will, or health care directive in place.  

There is a concerning disconnect between the wealth of research we have on the caregiver burden and the high costs of long-term services and supports. The cost for in-home and facility care have increased at a rate double that of inflation since 2004; in turn, individuals are increasingly looking to family members to either provide unpaid care or to help pay for needed services.

Tom Beauregard, CEO of HCG Secure. 

Traditional Health Insurance and Medicare Doesn't Pay for Most Long-Term Care

About half of people who reach age 65 will need long-term health care services, and those costs are not covered by health insurance, including Medicare and supplements outside a limited number of days of skilled care.

Medicaid will pay for long-term health care but only if the care recipient has little or no income and assets.

Even though traditional insurance products don't cover most long-term care and the government will only pay if you have little or no income and assets, few people have made any plans to address the costs and burdens of aging. 

Long-Term Care Insurance will provide comprehensive benefits for long-term health care. However, you cannot purchase a policy unless you have reasonably good health since LTC Insurance is medically underwritten. This means someone cannot buy a policy when they need care.

Getting Older Increases Risk of Needing Care

People require long-term health care due to declining health, mobility problems, dementia, and the frailty of aging. Most long-term care is help with daily living activities like eating, bathing, dressing, toilet use, and related hygiene. People with dementia, including Alzheimer's, also require supervision to maintain their safety. Some people need ongoing skilled services as well.

Long-term health care is not temporary nursing care when recovering from a surgery or an accident. It is also not end-of-life care. Most long-term health care is in-home care, not in a nursing home. Health and aging issues like dementia, stroke, Parkinson's disease, cardiovascular issues, and osteoarthritis are common reasons people require long-term care services and supports. However, you could be healthy but old and feeble and require 'stand-by' assistance with daily living activities. 

Most families are unprepared and will be forced to pay for long-term care services out of their income and assets - or their families, often a daughter or daughter-in-law, will become caregivers. Sometimes both. This places a tremendous burden on families and finances.

LTC Insurance Can Be an Affordable Way to Prepare

Long-Term Care Insurance is often considered expensive; for many people, it is very affordable. It depends on when you obtain coverage, the benefits you purchase, and your health. LTC Insurance is custom designed, and premiums vary over 100% between insurance companies.

An LTC NEWS survey of top companies illustrates the costs at different ages - How Much Does Long-Term Care Insurance Cost? 

Partnership LTC Insurance

Many financial advisors and general insurance agents are unaware of the Long-Term Care Insurance Partnership Program. A Partnership LTC policy offers dollar-for-dollar asset protection, referred to as 'asset disregard.' If you own one of these insurance policies and exhaust your benefits, you can legally shelter part of your estate based on the amount of benefits paid by the policy and still qualify for the Medicaid long-term care benefit. 

The partnership allows the policyholder to design a policy based on their asset level. So even a small policy can provide substantial asset protection. 

Awareness allows families to plan and include planning for long-term care as part of their overall retirement plan. 

Get Professional Help

Whether you are looking for professional care in any setting or looking to plan for your future long-term health care, LTC NEWS has tools and resources to help you in your research.

Find all the available resources here - Resources for Long-Term Care Planning

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