American Families Will Face Crisis Without Understanding Long-Term Care Risk

Survey shows few people are “very or extremely confident” in their ability to pay for ongoing Long Term Health Care. Reason for people to include affordable Long-Term Care Insurance as part of their retirement plan.

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American Families Will Face Crisis Without Understanding Long-Term Care Risk
4 Min Read July 18th, 2015 Updated:October 24th, 2020
James Kelly

LTC News author focusing on long-term care and aging.

Surveys continue to suggest that many Americans do not fully understand the full impact of long-term health care. However, as more time goes by and feel have personal experience with family members, neighbors, and others, more people understand the consequences of longevity are real.

The Associated Press-NORC Center for Public Affairs Research poll says 53% of adults age 40 and above think that it is somewhat likely that they will require ongoing living assistance at some point in their lifetime. Nineteen percent believe it is very or extremely likely they will require long-term care services.

The risk of needing long-term health care increases with age. Health insurance, including Medicare, will not pay for most of this care, placing families into financial crisis or making family members become caregivers. 

American Families Unprepared for Costs and Burdens of Aging

The surveys show many American families are unprepared for the realities that come with aging. Trevor Tompson, who directs the AP-NORC Center, says the need for long-term care will only increase in the years ahead. He notes the large numbers of people who turn age 65 each year.

"With this expanding need comes a demand for ways to maintain high-quality services and to make financing such care manageable for families and governments alike," the AP national survey report notes.

Few people are prepared to pay for the costs of long-term care. The survey says only a third said they were "very or extremely confident" in their ability to pay for ongoing living assistance possibly needed in the future.

Costs for LTC Services Continue to Go Up

It is no wonder that respondents are concerned. Every year the cost of all types of long-term care services increases. The LTC NEWS Cost of Care Calculator says the national average of a nursing home is over $100,000 a year.

Other types of care costs are expensive and continue to rise as demand increases, and providers are attempting to keep up with demand. Most long-term care is at home, but as people's needs progress, more people move into assisted living and memory care facilities. 

The cost of long-term care services varies depending on the type of care and your location. You can learn about the current and future cost of care in your area by using the LTC NEWS Cost of Care Calculator by clicking here.

Twenty percent of people report that they are not aware that private health insurance, including Medicare, will not pay for most of this type of care. 

Many Family Members Provide Care for Loved Ones

Yet surveys show many Americans are currently providing care for a family member. A 2015 survey reported 40% of the respondents said they were providing long-term care for a family member. With demographics showing large numbers of Americans getting older, their family members will find themselves in the caregiver role unless these Generation X and Late-Boomers take action to limit the burdens on their families. 

Some Americans think they can self-fund future long-term care expenses. What does this actually mean? It means future long-term care expenses will be paid for through income and assets. This approach places the full responsibility for long-term care on their personal savings and income - or their family members. The outcome can be devastating on both the family and the finances. 

"Generally, when someone tells me they will self-fund future long-term care costs, they mean they don't think they will ever need care in the future. The denial of long-term care risk has devastating consequences on their families and their hard-earned savings," said Matt McCann, a leading expert on long-term care planning. 

Can You Self-Fund Long-Term Care?

There are ways to make self-fund easier. Hybrid Long-Term Care Insurance policies can take a single premium and turn it into a substantial amount of long-term care benefits when you need them. However, the policy also has a death benefit, so if you never need care, your family will receive the policy's death proceeds. Experts say you never risk any money, but you have to have enough to fund the single premium.

Partnership Long-Term Care Insurance policies are available in 45 states. These traditional insurance plans give the policyholder dollar-for-dollar asset protection. If you exhaust your long-term care benefits, you can shelter a portion of your estate equal to the policy's total payout of benefits. It features much smaller but annual premiums and generally does not come with a death benefit. 

In either case, you reduce your personal risk of assets and ease the stress and burden placed on family members. Long-Term Care Insurance is medically underwritten, so you must have reasonably good health to obtain coverage. 

Experts recommend obtaining coverage in your 40s or 50s when you can take advantage of your good health and much lower premiums. 


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About the Author

An LTC News author focusing on long-term care and aging.

LTC News Contributor James Kelly

James Kelly

Contributor since August 21st, 2017

Editor's Note

Be sure to seek the help of a qualified Long-Term Care Insurance specialist when reviewing options. The specialist will help you design an appropriate plan and then shop for the best coverage at the best value. 

Click here to find a specialist. Meanwhile, LTC NEWS offers many research tools to make it easier to learn about the available options. Click here to find the tools. 

Working with a Specialist is Essential 

A qualified Long-Term Care Insurance specialist will help you find the best coverage at the best value based on your age, health, family history, and financial goals and concerns. Be sure to discuss these items:

  1. Partnership – Most states offer special policies that provide dollar-for-dollar asset protection. The Long-Term Care Insurance Partnership Program might be one of the best-kept secrets in retirement planning. Make sure the specialist explains this program and how it might help you.
  2. Tax incentives – There are federal tax incentives available for some people. If you own your own business, be sure to ask.
  3. Health Savings Accounts – If you have an HSA you can use the pre-tax money in your account to pay for the premium.
  4. Asset-Based or Hybrid policies – These are life insurance or annuities with a rider for long-term care. Careful, only a handful are actually a long-term care benefit. However, one of these policies can provide you with the flexibility of both a long-term care benefit or a death benefit. They are expensive but can be paid with a single premium.
  5. Health and Family History - Make sure the specialist asks you detailed questions about your health, family history, and retirement plans. Underwritingcriteria vary with each insurance company. If they are not asking you detailed questions, then find another specialist.

Planning for the financial costs and burdens of aging is more than just about money. It is all about family and how your future need for extended care impacts your family. Without advance planning, your family will go through crisis management. They will either become caregivers or will end up managing your care while spending your money. Either way, this placing a huge amount of pressure and stress on them.

Be sure you start planning before your health changes. Every insurance company has different underwriting criteria. It is always best to start your research in your 40s or 50s, but a specialist can help you at most ages. 

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