Spending for Long-Term Care Hits New Highs as More People Require Care

As America ages, the impact of Long-Term Care costs have a dramatic impact on both a family’s budget and government budgets. As more people age and require care advance plan is a necessary part of retirement planning.

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Spending for Long-Term Care Hits New Highs as More People Require Care
6 Min Read December 23rd, 2017 Updated:February 10th, 2020

The overall spending on long-term care services continues to grow. The cost of care at skilled nursing facilities and continuing care retirement communities (CCRCs) will top $270 billion in 2027, up from a projected $170.8 billion and $178.0 billion in 2018 and 2019, respectively. 

Officials from Centers for Medicare & Medicaid Services' Office of the Actuary, writing in the journal Health Affairs, credited the rise to regularly increasing prices for health care goods and services, as well as an aging America.

A 2016 study showed Americans spent nearly $163 billion on nursing care facilities and continuing care retirement communities. As more American's require long-term care services, more money is being spent on their extended care.

Many People Receive Care at Home

Many Americans are taken care of at home. $103 billion was spent on home health care in the United States in 2018, and this is increasing each year. By 2026 the cost of home health care should reach at least $173 billion, according to the Centers for Medicare & Medicaid Services.

Over $235 billion was spent on paid long-term care services and support in 2017. These costs will increase every year for decades to come. Friends and family members provided many more dollars in unpaid services. These costs have an adverse effect on retirement assets and lifestyle. Plus, the stress and burden placed on family members have many consequences, physically, emotionally, and financially. 

Long-Term Care Insurance Paid Families Over $11 Billion in 2019

The nation's leading Long-Term Care Insurance companies paid over $11 Billion in claim benefits to individuals in 2019, according to the most recent report from the American Association for Long-Term Care Insurance. 

These Long-Term Care Insurance benefits help American families pay for their choice of quality care either in their own homes or in a facility of their choice.

Americans Will Spend More in the Years Ahead for Long-Term Care Services

A report from Health Affairs also projects long-term care spending to continue to climb over the next decade, driven by the rapidly aging U.S. population. That report predicted that nursing facilities and CCRC spending would grow at an average rate of 5.2% per year until 2024, reaching $274 billion in total expenditures.

Most long-term care services are not paid by health insurance or Medicare. It becomes a family's responsibility to either provide care for their older family members, or they will pay for care out of savings until nothing is left. At that point, Medicaid will pay for those services. Fifty-seven percent of long-term care services end up being paid by Medicaid. This is not good for American families or the taxpayers who ultimately pay for these services. 

Many people save for a future successful retirement funding their employer's 401(k) accounts or funding other savings and investments. The loss of savings being spent to pay for long-term care costs has a dramatic impact on the lifestyle of the couple. Ultimately, it prevents many families from providing any inheritance to their children and grandchildren.

Caregiving is Hard on Family

The consequences of being a family caregiver are enormous. A recent AARP study says family caregivers have significant out-of-pocket expenses in addition to the impact on their time and their own health. Caring for an adult with dementia also resulted in higher out-of-pocket costs.

More than half of employed caregivers (56%) experience at least one work-related strain. This may take the form of working different hours, fewer/more hours, and taking time off (whether paid or unpaid).

As a result of the time spent s a caregiver, these family caregivers often must cut back on their family spending, which can undermine the family caregiver's future financial security. One in six caregivers reduced contributions to their retirement savings (16%), and roughly half have cut back on leisure spending (e.g., 45% cut back on eating out or vacations as a result of caregiving expenses).

Remember, family members have their own careers and family responsibilities in addition to the pressure of added responsibility of caring for an elder parent or in-law.

You can read the 2019 AARP Long-Term Care report by clicking here

Medicaid is Not the Answer

The quality of care with Medicaid is always a question as the reimbursement to caregivers and facilities is low. The staff to individual ratio must be higher due to the low reimbursement rates by Medicaid compared to private pay facilities. If you have savings you will want to avoid losing your savings because of long-term care expenses. 

Tax Incentives Available with Affordable LTC Insurance

Many people are unaware of tax incentives available toward to purchase of Long-Term Care Insurance. Also, as more people have Health Savings Accounts, the pre-tax money in these plans can be used toward the purchase of LTC insurance policies. Click here to read about the tax benefits of Long-Term Care Insurance. 

Since the federal Deficit Reduction Act of 2005 became law in early 2006, 45 states offer Partnership Long-Term Care Insurance policies that provide extra asset protection. A Partnership Long-Term Care Policy will provide additional dollar-for-dollar asset protection. This would allow a person who exhausts all the benefits from their qualified Long-Term Care Insurance policy to access Medicaid Long-Term Care benefits without the normally required spend-down of assets. https://www.LTCnews.com/articles/partnership-plans-provide-additional-asset-protection

Plan Before You Retire

Many financial advisors and experts recommend adding a Long-Term Care Insurance policy before retirement. An advance plan will address the financial costs and burdens of aging. The best time to plan, say the experts, is before you retire when you have better health. Many factors impact the premium including your age when you apply for coverage, your health, and family history. Long-Term Care Insurance is custom designed, so you decide the amount of benefits you wish to have in place.

Long-Term Care Insurance is a very affordable way to safeguard your savings and income and reduce the burdens that are created on family members when a loved one needs extended care. Since the chance of needing long-term care and support services is high, an advance plan will help you enjoy a successful retirement.

Premiums are intended to remain level. The partnership program requires inflation protection at most ages. Inflation benefits increase your benefits over time but not your premium. Many states have rate stability rules in force that make it very difficult for insurance companies to raise premiums in the future. 

The other advantage of purchasing a Long-Term Care policy when you are in your 40s or 50s is you might qualify for good health discounts that make the premium even lower. 

Don't forget, your health can change at any time, and the need for long-term care can happen at any age. People require extended care due to illness, accident, or the impact of aging.

Considering the increasing cost of long-term care services and the high likelihood of needing care, including a Long-Term Care Insurance policy to your retirement planning should add much peace-of-mind for you and your family.

LTC NEWS Cost of Care Calculator

The LTC NEWS cost of care calculator is an outstanding resource to start your research. You can discover both the current and future cost of care services where you live. Click here and find your location. https://www.ltcnews.com/resources/states

Be sure to find a qualified Long-Term Care Insurance specialist to help you shop for the best coverage at the best value. Specialists, unlike ost general insurance agents and financial advisors, understand how these policies are designed and underwritten. Premiums can vary over 100% between insurance companies for the same benefits. A specialist will find you the right plan based on your age and health.

Find a trusted Long-Term Care Insurance specialist by clicking here. 

Take control over your future and maintain your independence with an advance plan that includes affordable Long-Term Care Insurance. 


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About the Author

Linda Kople is a freelance writer with a personal family history in long-term care. She specializes in aging-related topics such as caregiving, health, and retirement planning. Her experiences and interests drive her to explore and write about the various aspects of aging and health issues.

LTC News Contributor Linda Kople

Linda Kople

Contributor since October 31st, 2017

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