The Finance Of Longevity

The Ballooning Costs Of Long Term Care

14 million people need long-term care today; By 2030 that will be 24 million

Excerpts from a groundbreaking study by Tara O’Neill Hayes and Sara Kurtovic of the American Action Forum. Reprinted with permission. Read the full report here.

An estimated 14 million people in the United States currently need long-term support services.[1] According to the Department of Health and Human Services (HHS), 7 in 10 seniors reaching 65 years old are now expected to need some type of long-term care (LTC) before the end of their life. By 2030, it is estimated that 24 million Americans will need LTC.[2]

LTC is not the long-term provision of medical care. Rather, LTC typically refers to assistance with activities of daily living (ADLs), which are routine activities people do every day to live. There are six basic ADLs: eating, bathing, getting dressed, toileting, transferring (moving from one place to another, such as from bed to chair), and continence. The ease with which individuals can perform these ADLs helps determine what type of LTC they may need. Individuals may need help with these activities from birth or after a physical or mental health decline, and they may need these services for the remainder of their life or only temporarily, such as while recovering from a medical incident. Of course, an individual may need long-term help with many other types of activities, too, such as meal preparation, bill payment, and household chores (sometimes referred to as instrumental activities of daily living, or IADLs); while these types of services are typically not considered health care services, a caregiver may assist with these activities, as well.

As the population ages, the need for care and the cost of providing that care will increase significantly. Men are likely to need LTC for an average of 2.2 years and women for 3.7 years, according to HHS’s Administration on Aging.[3] Unfortunately, private insurance for long-term care is hard to find, public insurance programs offer limited coverage or have restricted eligibility, and most people have not saved sufficiently for the cost of such care.

The Cost of Long-Term Care

The cost of LTC in 2018 reached an estimated $849 billion, according to data from the Kaiser Family Foundation (KFF) and the American Association of Retired Persons (AARP), when accounting for both paid services as well as the value of unpaid care, up from an estimated $725 billion in 2017.[4] Changing demographics and increasing rates of chronic conditions will drive up these costs over the next few decades. Health Affairs projects that 54 percent of seniors will not have sufficient financial resources to pay for LTC, even though many people pay nothing for their care, at least at the outset. Unpaid caregivers, typically a family member, provide an estimated 80 percent of care to individuals still living at home.[5] AARP estimated in 2014 that 43.5 million people had served as an unpaid caregiver at some point in the year.[6]

Supply and demand for LTC are moving in opposite directions. Demand for long-term care will grow as the population ages. By 2050, the number of people aged 85 or older will triple and the number of people using paid LTC services in any setting will nearly double from 14 million in 2018 to 27 million...

Supply and demand for LTC are moving in opposite directions. Demand for long-term care will grow as the population ages. By 2050, the number of people aged 85 or older will triple and the number of people using paid LTC services in any setting will nearly double from 14 million in 2018 to 27 million. The amount and complexity of care for each person will likely increase as well because of the increasing number of chronic conditions per individual.[7] People with three to four chronic conditions are three times as likely to need help with ADLs or IADLs as people with just one or two chronic conditions.[8] The increasing demand will strain the supply of caregivers due to the caregiver demographic relatively shrinking: The population aged 64 and younger will only increase by 12 percent during this period.[9] The number of people aged 45-64 for each person aged 80 or older will be reduced to three by 2050 (down from a ratio of 7:1 currently).[10]

Household Financial Burden

Most of the financial burden will fall on middle-income seniors—who are too wealthy to qualify for Medicaid but not wealthy enough to comfortably afford their expenses—and taxpayers. By 2029 there will be a projected 14.4 million middle-income seniors, 60 percent of whom will have mobility limitations and 20 percent of whom will have high health care and functional needs.

Medicare beneficiaries who live in LTC facilities spend significantly more out-of-pocket (OOP) than the average beneficiary, particularly if they do not receive Medicaid coverage: $41,782 spent OOP on LTC for beneficiaries living in a LTC facility without Medicaid and $19,632 for those with Medicaid coverage versus $1,014 OOP for a temporary stay in a LTC facility.[21] According to a study by Vanguard Research and Mercer Health and Benefits, 48 percent of people now 65 and older are expected to incur no LTC costs while 15 percent of individuals will likely incur more than $250,000 in costs.

Paying for Long-Term Care

Despite not being medical care, most LTC is paid for through our public health insurance programs, Medicare and Medicaid, with Medicaid being the largest financier of LTC benefits. Medicare’s coverage of LTC services is limited to certain types of care in certain circumstances. A small number of employers offer LTC insurance to their employees and a handful of private insurance companies offer plans for individuals to purchase.

The fact that non-medical care is primarily financed through our health insurance programs reflects the country’s long-standing failure to address the need for such care. The one time Congress passed a law to establish a public LTC insurance option—the CLASS Act included in the Affordable Care Act in 2010—it ultimately had to be repealed due to an inability to find any option to make the program fiscally sustainable and affordable to potential buyers. Thus, to date, the following options are the few choices available to finance LTC besides paying wholly out-of-pocket.

Read the full report here.