Long-Term Care: Who Needs It, What It Costs, and How Policy Can Help

Long-term care, the ongoing assistance that people with chronic illness, disability, or frailty need with activities of daily living, is the most significant uninsured financial risk facing most Americans. The costs of long-term care can be catastrophic: a year in a nursing home costs more than 90,000 dollars in many parts of the country, while home care can exceed several thousand dollars per month depending on intensity. Most Americans have no private insurance for these costs, Medicare covers only short-term skilled nursing and rehabilitation, and Medicaid covers long-term care only after individuals have exhausted most of their assets. The demographic trajectory of long-term care need is clear. The population aged 65 and older is growing rapidly as the baby boom generation ages, and the population aged 80 and older, who need long-term care at the highest rates, is growing even faster. An estimated 70 percent of people who turn 65 today will need some form of long-term care before they die. The projected demand for long-term care services will grow substantially over the coming decades, straining both public programs and families who currently provide most long-term care informally. Informal caregiving by family members and friends provides the vast majority of long-term care in the United States. Approximately 53 million Americans provide unpaid care to an adult or child with a health condition, disability, or age-related needs. This caregiving workforce, which is predominantly female, provides care that would be extraordinarily expensive to purchase in the formal market. Caregivers often experience significant health, economic, and social consequences from their caregiving responsibilities, including reduced employment, increased health problems, and social isolation. Medicaid is the default long-term care funder for people who have exhausted their own resources. Medicaid long-term care spending represents a substantial share of total Medicaid expenditures and a significant share of total nursing home revenue. The spend-down process, through which people must exhaust their financial resources to a very low level before becoming eligible for Medicaid long-term care coverage, creates significant hardship and has been controversial from both consumer and policy perspectives. Home and community-based services, which provide support that allows people to remain in their homes and communities rather than in institutions, are a priority in long-term care policy. Evidence on the preference of most people with care needs and their families is clear: most people prefer community-based care over institutional care. Research on outcomes documents that community-based care often produces comparable or better outcomes for beneficiaries at lower or comparable costs than institutional care for many populations. Medicaid has expanded coverage of HCBS through waivers and state plan options, and the balance between institutional and community-based care has shifted over time toward more community-based services. Long-term care workforce is among the most significant challenges facing the sector. Direct care workers, including home health aides, personal care aides, and certified nursing assistants, provide the hands-on care that people with long-term care needs depend on. These workers are predominantly women, disproportionately people of color, and earn very low wages with limited benefits, high rates of injury, and limited career advancement opportunities. Workforce turnover in the long-term care sector is very high, and shortages of direct care workers are pervasive. The wages and working conditions in long-term care make recruitment and retention extremely difficult. Private long-term care insurance was expected to grow into a significant funding mechanism but has instead contracted. Many insurers that sold long-term care policies in the 1990s and 2000s significantly underestimated the claims costs they would face and have raised premiums dramatically or exited the market. The combination of high premiums, product complexity, and the difficulty of insuring against very long-term care needs has limited the private market's role in long-term care finance. Policy reform proposals for long-term care include expanding Medicaid HCBS, creating new public long-term care insurance programs, supporting family caregivers through paid leave and tax credits, investing in the direct care workforce, and improving care quality through better oversight and staffing standards. The scale of the challenge is large enough that modest improvements to any single program element will not be sufficient. A comprehensive approach that addresses financing, workforce, and service delivery simultaneously is needed to meaningfully improve long-term care outcomes for the growing population that will need it.