5 Reasons You Need a Long-Term Care Plan

Surviving to an old age is the dominant good-news story about aging. Improved medical care and better diet and exercise habits, particularly among higher-income seniors, are adding years to lives. This welcome trend, however, is running head-on into the harsh reality that even normally aging older Americans are likely to need expensive long-term care assistance. Few have money or plans for this likelihood.

Odds favor needing long-term care. Already, 1 in 7 people over age 65 needs in-home care, and nearly 40 percent of those older than 85 need some form of care, according to a recent fact sheet from the Urban Institute. Another 1.6 million seniors live in nursing homes, and half of them are 85 or older. As many as 70 percent of people who are now 65 will need long-term care at some point during their remaining lives. And the incidence of Alzheimer’s rises with age, with fully half of people 85 and older likely to suffer from the disease.

Care expenses are high and rising. Whether at home or in a nursing facility, long-term care costs have been steadily rising, and can top $100,000 a year for nursing care in an expensive market. As the economy slowly improves, demand for trained at-home caregivers is expected to drive these prices higher. Genworth Financial, a major seller of private long-term care insurance, sponsors a comprehensive annual survey of long-term care costs. It includes costs for nursing home and in-home care in more than 400 markets, and can provide an accurate idea of the scale of long-term costs you might face.

Family members are less likely to provide care. Aging baby boomers have smaller families than earlier generations, thus shrinking the potential supply of unpaid caregivers. Many working-age family members who have been unemployed will be returning to work as the economy recovers, making it less likely that they will be able to provide care for an older relative.

Consumers don’t have plans or money for long-term care. Every year, the Employee Benefit Research Institute sponsors a detailed look at the retirement confidence of U.S. workers and retirees. Among current workers, nearly 30 percent have less than $1,000 in savings, and another 25 percent have less than $25,000. Among both current workers and retirees, the level of confidence that they will be able to pay for their long-term care expenses is very low, and few have any plans for how to afford such care. Private long-term care insurance is owned by about 1 in 8 seniors aged 65 and older, but fewer than 9 percent of people between the ages of 55 and 64 own it. Among Americans earning more than $100,000 a year, fewer than 20 percent have long-term care policies. Even with such insurance, there can be substantial out-of-pocket care expenses.

Government will be forced to trim care benefits. All signs point to future cutbacks in government healthcare and entitlement programs. Medicaid has become the default provider of nursing home care to disabled Americans, many of whom have had to exhaust their wealth before qualifying as low-income recipients of program benefits. “Long-term care costs totaled $240 billion in the United States in 2009,” the Urban Institute fact sheet said. “Much of the costs were picked up by the federal and state governments, with Medicaid covering 43 percent and Medicare 24 percent.” Few experts expect governments to continue footing all of these bills, especially as the surging numbers of aging baby boomers trigger increased need for long-term care. The contested health reform law does include a new form of voluntary long-term care insurance that would be offered to employees where they work. However, this plan is not viewed as workable in its current form, and would not be of much use anyway to anyone already in their mid-50s or older.