Reports Caution about Lack of Knowledge, Preparedness for Long-Term Care Costs

A pair of reports has cautioned about widespread lack of knowledge and preparedness for long-term care, with the result of under-estimating both to chances of needing such care and what it will cost.

“About 80 percent of retirees will require some LTC, with a quarter requiring high-intensity care for more than two years,” says a report from the Center for Retirement Research at Boston College, and “very little of this care is covered by insurance – only about 4 percent.”

“The lack of insurance for formal care is troubling, given that the cost of care is extremely high: the average cost of a semi-private room in a nursing home in the United States is over $100,000 per year, as of 2023,” it says.

Because of that high cost, an arising need for long-term care has a larger impact than other health-related cost shocks, such as a medical condition that substantially increases out of pocket costs for that type of care. In a review of past studies, it said that medical cost shocks “seem to be borne by individuals without severely impacting their retirement trajectories” while “LTC shocks lead to drawdown of home equity; reduction in bequest expectations; and, above all, increased reliance on Medicaid.”

“However, Medicaid eligibility requires the household to be impoverished. Thus, Medicaid is a safety net, but not an effective form of insurance, since its deductible is virtually the entirety of a household’s assets,” it adds.

The other report, based on a survey conducted by the Employee Benefit Research Institute said that only four in 10 workers believe they will ever need long-term care—half of the number who actually will—with rest split between those who are unsure and those who say they are sure they will not need it. “Workers with personal experience receiving care, with a disability, or who have filed a short-term disability claim are significantly more likely to believe they will need LTC in the future,” it said.

In contrast, six-tenths said they have provided or are currently are providing some care to aging parents or others and 73 percent said they have someone in the family who they expect will need such care. “These future caregivers are uncertain about the duration, cost and funding sources for care, with many mistakenly believing Medicare will cover a large share of long-term care expenses,” a summary said.

Other findings included that of those who have estimated potential long-term care costs, “many underestimated the cost,” with the most common estimate of $50,000 a year—again about half of the actual figure. More than four-tenths said they thought Medicare would cover the costs  nearly a third said they expected Medicare would cover the costs.

It added that “even among those anticipating LTC needs, enrollment remains low” in employer-offered long-term care insurance programs. New enrollments have been suspended since late 2022 in the Federal Long-Term Care Insurance Program for federal employees and retirees, a suspension that is to continue at least until late 2026.