Few people are prepared to cover long-term health care costs

While many Americans will need long-term care as they grow older, few are prepared to pay for it.

Medicare, which provides health insurance to Americans over age 65, does not cover most long-term care services. And Medicaid—the main safety net for long-term care coverage—covers only those who are poor.

Federal estimates suggest that 70% of people age 65 and older will need long-term care before they die, but only 3% to 4% of Americans age 50 and older are paying for long-term care policies. according to insurance industry figures.

The high cost of premiums for those private long-term care policies puts it out of reach for most people.

Even some who have this type of insurance find that it does not provide enough to cover the costs of home health aides, assisted living facilities or nursing homes.

“People think long-term care insurance is for everyone — but it’s not,” said Jessie Slone, executive director of the American Association for Long-Term Care Insurance, an advocacy group. “It’s for a very small subset of individuals who plan and have some assets and retirement income that they can use to pay for it.”

To qualify, applicants must pass a health review. Slone said insurance companies have underwriting policies with “page after page” terms that will disqualify people from getting that coverage.

“If you live a long life, the chances that you will need care are substantial. So the question becomes who will provide that care and who will pay for it. For some, providing long-term care is an option.”

Prices vary, based on how old people are when they apply, how good their health is at the time, and how much coverage they want. “You should generally start looking at this in your 50s or 60s,” Slone said. “Because as you get older, you’ll have conditions that insurers will look at to determine that you’re more likely to need long-term care and not give you a policy.”

This coverage, if you can get it, doesn’t come cheap: In 2023, the average annual cost for a policy for a couple both age 55, taking an initial group of $165,000 increases by 3% compounded annually — ranged from a low of $5,018 to $14,695 a year, according to the association.

But compared to auto insurance — which most people may never use — long-term care insurance is a good investment for those who can afford it, Slone said. “Car insurance is the most expensive insurance you’ll ever pay because the chances of you getting into a car accident are pretty remote. But the chances of someone needing long-term care if they make it to 90 are pretty significant.”

Lori Smetanka, executive director of National Consumer Voice for Quality Long-Term Care, a national nonprofit advocacy group, sees it differently. She said the private long-term care insurance system has become a “bust” amid rising premiums and difficulty accessing benefits.

Consider the fact that the number of companies offering long-term care insurance is declining, while premiums are steadily increasing as the baby boomers age. “Most people have found it too expensive,” Smetanka said. “But at the same time, people are finding that it wasn’t covering what they needed.”

Last year, insurers paid a record of more than $14 billion to cover about 353,000 long-term care claims, according to industry figures. That compares with about $11.6 billion just three years ago.
Currently, there are about 7.5 million people in the U.S. age 65 and older with private long-term care insurance, according to industry data.

With that incentive, some states, including Washington and California, are looking at creating long-term care Social Security pools funded by payroll taxes and other funding sources. The effort is also being driven, in part, by the rising costs states bear for Medicaid long-term care coverage, which they share with the federal government.

“More and more states are coming to the conclusion that this is an underfunded system,” said Marc Cohen, a researcher and co-director of the LeadingAge LTSS Center at the University of Massachusetts in Boston. “There just aren’t enough dollars coming into the system — given the needs and demands of the growing senior population.”

So far, Washington is the only state trying to address the issue. A law passed by the state legislature in 2019 created a long-term care benefit program, which provides residents with up to $36,500 to pay for expenses such as care, wheelchair ramps, meal deliveries and home fees of elders.

Care Funds are covered by a payroll tax that deducts 0.58% from paychecks, but guarantees a lifetime benefit of $36,500 to those who have paid into the fund for 10 years.

Several other states are studying the issue. In California, a task force is looking at how to design a long-term care program, according to the National Conference of State Legislatures. Massachusetts, Illinois and Michigan are also weighing the costs versus benefits of creating a state long-term care benefits program.

But the issue of imposing new taxes to pay for long-term care insurance is controversial — and politically unpopular — at both the state and federal levels.

Washington’s long-term care insurance law is facing a repeal effort from a group backed by hedge fund executive Brian Heywood, which argues the system should be voluntary. Voters in November will decide whether to allow people to opt out, which supporters say would essentially kill the program.

“There are a lot of states looking to see what happens in Washington,” Cohen said. “If this billionaire who is funding this repeal effort wins, it will be a real blow.”

Cohen said efforts at the federal level to create a publicly funded insurance pool have not gained much traction. A long-term care program created by Congress through the CLASS Plan, which was tied to the Affordable Care Act, was voluntary. This law was repealed at the beginning of 2013.

“It was never raised before it was repealed,” he said. “With the dysfunction in Congress, we’re likely to see more action at the state level than at the federal level.”

Recent polls suggest there may be public support for the move. A poll by the National Council on Aging found that more than 90% of 1,000 women surveyed across party lines support the idea of ​​creating a government program to pay for the cost of long-term care.

“The level of support was significant and very bipartisan,” said Howard Bedlin, a long-term care expert with the council. “People keep talking about how Congress can’t find bipartisan support. Well, voters clearly do.

“Politicians are simply not giving these issues the attention they deserve.”