As American life expectancies increase and the country’s population continues to age, the number of citizens requiring long-term care is expected to rise dramatically in coming years.
A recent report commissioned by the U.S. Department of Health & Human Services and prepared by the Urban Institute predicts that the 65 and over population is expected to expand from roughly 57 million today to over 80 million by 2050.
Further, it projects that on average, those who need long-term care services and support will need them for an average of five years.
While five years is the average length of disability, a closer look at the figures reveals a substantial variation between individuals. A large share of the over-65 population, (44%) will have no significant needs. However, a majority (56%) are expected to have some needs, with about 10% expected to require less than a year of long-term care, but almost 22% expected to have needs that extend over at least five years.
“Those on the upper tail of the need distribution can expect long-term care needs to persist for many years with costs that can total hundreds of thousands of dollars,” the report states.
Some Americans purchase long-term care insurance, but these policies only cover expenses up to a specified amounts for set time periods. The fact is few Americans have, or can afford, such plans. In 2018, for example, only 276,000 people received benefits from long-term care insurance, and less than 6% of the population ages 50 and older held such plans, the researchers said.
Medicare vs. Medicaid
Many people have the misconception that Medicare pays for long-term care. As most financial advisors know, it does not. Medicaid pays for LTC care only after a person has spent down all resources and become impoverished.
Medicaid income limits vary across states. In most states, a single Medicaid recipient must have income of less than $2,382 per month and can possess up to $2,000 in savings and investments such as cash, stocks, bonds, certificates of deposit and other liquid assets, although some states allow somewhat greater amounts.
In New York, for example, a single applicant is allowed to retain $15,900 in liquid assets.
A Medicaid recipient can retain no more than $603,000 of equity in a home (as much as $906,000 in some states, and with no limit to the value in California). In addition, the person must live in the home, or if temporarily absent at the time he or she applies for Medicaid, have an intent to return. The person also is entitled to retain one car if it is used for personal transportation. All other assets must be spent down before the person is eligible for Medicaid.
Family Provides Most Care
Because most people get so little assistance, much of the burden of long-term care is provided at home by family members without compensation, the report notes. The value of the direct, unpaid care that families provide to older adults with severe disabilities is roughly comparable to the value of paid care. The researchers estimate that the value of care provided by family members averages about $77,500 across everyone in the 65 plus population, compared to $80,000 for paid care.
“This estimate is surely on the low end, as other work reveals that families deliver large amounts of unpaid care to people with less severe disabilities,” the report says. “When looking at those ever receiving unpaid care, the average is nearly $131,000 when expressed as present value.”
“As with paid care, the distributional of unpaid care is also skewed About 13 percent of the population receives family care in present value terms that would have a market value of $250,000 or more,” the researchers conclude.
While there are various definitions of long term care, the report uses the definition described in the federal Health Insurance Portability and Accountability Act (HIPPA), which is the need for assistance with at least two activities of daily life, such as bathing, dressing, or eating, or that requires substantial supervision for health and safety threats due to severe cognitive impairment for at least 90 days.
In assessing projected need, the authors used total accrued days, rather than years over which care was spread. Thus, a person needing continuous care for two days a week over three years (a total of 312 days) would be considered to need less than one year of care.
Jonas Gryder is a freelance writer.