Future Long-Term Care Needs of Seniors

Long Term Care

With Americans living longer, they face risks of needing long-term care (LTC) as they age. According to a new study led by a Penn State researcher, individuals currently turning age 65 face an average of three years of need for long-term care some time before they die, with one in five expected to need five years of care or more. Much of the care will be provided by family members. Though half of today's retirees will incur no out-of-pocket expenses for long-term care, 1 percent will need more than $250,000 of their own money set aside and invested at age 65 to pay for their future care.

The analysis, "Long-Term Care Over an Uncertain Future: What Can Current Retirees Expect?," by Peter Kemper, professor of health policy and administration at Penn State, along with Harriet L. Komisar of Georgetown University and Lisa Alecxih of Lewin Group, examines the long-term care needs, use and cost of care 65-year-olds face over the rest of their lives in the winter issue of the journal Inquiry.

The authors used a microsimulation model to estimate lifetime outcomes, basing need for LTC - facility care, formal home-care services and informal care provided at home by family members - on a moderate level of disability in activities of daily living (ADLs) such as bathing and getting to the toilet, and in instrumental activities of daily living (IADLS) such as shopping, preparing meals and managing money.

Perhaps most important are the study's insights about the long-term care experiences that individuals and their families can expect. Sixty-five percent of all people age 65 will spend some time at home needing long-term care; 30 percent will receive care at home for more than two years; and 11 percent will get it for more than five years.

Nearly a quarter of retirees will rely on informal care provided by family members at home for at least two years. Projections about facility care show that 35 percent of people age 65 will use nursing-home care, with 5 percent of 65-year-olds spending more than five years in nursing facilities.

Spending on long-term care will be substantial, with much of it the private responsibility of families. The amount of money in today's dollars that would have to be set aside and invested at age 65 to cover future LTC expenditures is estimated to be $47,000. Government programs will cover 53 percent of these total LTC expenses, but private LTC insurance is projected to cover only 2 percent. Thus, 45 percent of LTC bills will be paid out-of-pocket.

While on average people would have to invest $21,000 at age 65 to pay their future LTC bills, individuals will experience very different futures: half of 65-year-olds will incur no out-of-pocket costs, yet an investment of $100,000 at age 65 will not be enough to cover all out-of-pocket long-term care costs for 6 percent of retirees.

"It is the wide variation in the projected need for long-term care that poses a challenge for both individuals and policymakers," the authors wrote. Although they acknowledge constraints to policy changes, they discuss options for better spreading the financial risk through private and public insurance.

For instance, Medicaid coverage could be expanded incrementally through higher financial eligibility limits or by expanding home- and community-based care as benefits. While the risks to families of having to provide informal care for extended periods cannot be spread through insurance, the authors note options for easing the burden of caregiving, such as insurance with home-care benefits to provide family caregivers respite or supplementary assistance and paying family members for the care they provide.

"Policy debate typically focuses only on income security and acute care - and the corresponding Social Security and Medicare programs," said Kemper, lead author of the study. "Policymakers should not ignore the third risk that retirees face - that of needing long-term care. Long-term care risk is substantial, and under current Medicare and Medicaid policy, much of it is the uninsured private responsibility of individuals who pay for care and of families who care for their relatives."