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Long-term care can be costly and is well over $100,000. However, financial advisors say many households are not ready to manage their expenses.
“We’re a great way to help you get started,” said Carolyn McClanahan, a Jacksonville, Florida-based physician and certified financial planner. “That’s a big problem.”
More than half of Americans, who are now 65 today, will develop disability severe enough to require long-term care, according to a 2022 report published by the U.S. Department of Health and Human Services and the Urban Research Institute. Such disorders may include cognitive or nervous system disorders such as dementia, Alzheimer’s or Parkinson’s disease, such as complications from stroke.
According to a report by HHS-urban, the average future cost of long-term care for someone who is now 65 today is around $122,400.
However, some people have needed care for many years, pushing lifetime costs to hundreds of thousands of dollars. The total “out of reach for many Americans” is written by authors Richard Johnson and Judith Day.
As the US population ages amid the rise in longevity, the number of people in need of care is expected to rise.
“That’s pretty clear [workers] “We are pleased to announce that Bridget Bearden, research and development strategist at the Employee Benefits Institute,” said Bridget Bearden, research and development strategist at the Employee Benefits Institute.
“So where does the money come from?” she added.
Long-term care costs can exceed $100,000
According to a report by HHS-urban, most people who need “relatively low” long-term care spend “relatively low” but will end up spending at least $100,000 out of their pocket for future care.
Costs vary widely from state to state and depending on the type of service.
Nationally, a home diagnostic aide costs around $6,300 a month and a private nursing home room for a typical nursing home, according to 2023 data from insurance company Genworth.
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Many households seem to know the potential costs of either themselves or their loved ones.
For example, a new poll by the Employee Benefits Institute found that at least one adult may need to provide long-term care in the future.
However, only 29% of these future caregivers (which may close out at least a portion of their future bills) estimated future care costs, EBRI found. Of those who went, 37% thought their price tag would be below $25,000 a year, the group said.
In the EBRI survey, 2,445 employees between the ages of 20 and 74 voted in the second half of 2024.
Many types of insurance often do not cover costs
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Experts said much of the funds for long-term care would likely be self-paying.
Health insurance generally does not cover long-term care services, while Medicare doesn’t cover most expenses, experts said.
For example, Medicare could partially cover the first 100 days of “skilled” care, said McClanahan, founder of Life Planning Partners and a member of CNBC’s Financial Advisors Council. This could be when a patient requires a nurse to help with rehabilitation or administer medication. For example, she said.
Where does the money come from?
Bridget Bearden
Research and development strategists at Employee Benefits Research Institute
But Medicare doesn’t cover “custody” care when it is necessary to help with daily activities such as bathing, dressing, toilet use and eating, McClanahan said. According to the HHS-City report, these basic everyday tasks constitute a large part of long-term care needs.
Medicaid is the biggest payer of long-term care costs today, Bearden said. But not everyone is qualified. Many of those who benefit from Medicaid come from low-income households, said Bearden of Every. To receive long-term care benefits, households may have to first exhaust a large chunk of financial assets.
“You basically need to be poor,” McClanahan said.
Republicans in Washington are weighing Medicaid as part of a massive tax package. If successful, it would be difficult for Americans to get long-term care Medicaid benefits, experts said.
Long-term care insurance considerations
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Few households have a particular hedge against long-term care risk, according to the Congressional Research Service.
In comparison, it is expected that more than 4 million baby boomers will retire from 2024 to 2027.
Washington has a public long-term care insurance program for residents, with other states including California, Massachusetts, Minnesota, New York and Pennsylvania running their own long-term care insurance programs.
Long-term care insurance makes the most sense for people at high risk of long-term care needs, McClanahan said. That could include people who are at high risk for dementia or have a long life in their family history, she said.
McClanahan recommends opting for hybrid insurance that combines life insurance with long-term care benefits. Traditional standalone policies are intended only for long-term care, but are generally expensive, she said.
She said too.
For example, the “refund” policy requires insureds to select from a list of preferred providers and submit receipts for a refund, McClanahan said. For some people, especially seniors, that may be difficult without assistance, she said.
McClanahan’s “compensation” policy generally allows insurers to write benefits checks as soon as the insured is eligible for assistance, allowing them to use the methods they think are appropriate. But profits are often lower than redemption policies, she said.
How to be proactive in long-term care planning
“The challenge with long-term care costs is that they are unpredictable,” McClanahan said. “You don’t always know when you’re sick and need care.”
The biggest mistake McClanahan sees people make in connection with long-term care is not thinking about long-term care needs or logistics, nor discussing with their families long before they need it.
For example, it may involve considering the following questions, McClanahan said:
Do you have a family that provides care? Do they provide financial support? Do I want to self-insurance? What is financial logistics? For example, who can help you pay your bills and make a claim? Have I introduced a good advance healthcare directive? For example, when I get sick, will my family keep me alive (adds long-term care costs) and move me to comfortable care and hospice? (This is often a cheap option if you don’t need 24-hour care, said McClanahan.) If I want to age in place, is my home set up for that? (For example, are there a lot of stairs? Are there small bathrooms that are difficult to operate pedestrians?) Can you still make your home aging-friendly? Are you willing to move to a new home or another state where there is a low cost of long-term care? Do I live in a countryside where long-term care may be difficult to access?
McClanahan said that being proactive can help families save money in the long term, as reactive decisions are often “more expensive.”
“If you think about it in advance through it, it keeps the decision more equal,” she said.
