Retirement & Financial Planning Report

The cost of long-term care now exceeds $400 billion a year and continues to grow, with the Medicaid and Medicare programs covering about two-thirds of the cost, but more than $61 billion paid out of pocket, according to the Congressional Research Service.

The report said that while the need for such long-term services “affects persons of all ages,” the probability increases with age. As the nation’s population aged 65 and older continues to increase in size, and individuals continue to live longer post-retirement, the demand is also expected to increase. In addition, advances in medical and supportive care may allow younger persons with disabilities to live longer,” it says.


The Medicaid program covers the largest share of the cost since its benefits include certain home health and personal care services, nursing facility care, and community-based services. However, that program pays only when an individual’s assets and income are below certain levels that federal employees and retirees generally are well above.

The Medicare program meanwhile covers some skilled nursing and home health services but only for purposes such as rehabilitation after an operation and are limited in duration, it says. Other programs such as those available through the VA bring the total covered by government programs to 71 percent.

Privately purchased LTC insurance and other funds such as philanthropic support account for about 15 percent, while about an equal share is left as out of pocket spending. Part of that goes to costs incurred even when Medicare and private insurance do pay—such as copayments for skilled nursing care under the former and waiting periods and copayments under the latter—and the rest is direct payment for the cost of care.

The drain of making direct payments may cause some people to “spend down their income and assets and thus meet the financial requirements for Medicaid eligibility,” it adds.

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FERS Retirement Guide 2022