The cost of long-term care in the U.S. is outpacing the income and savings of older adults
Despite increases in assets among middle-class Americans in recent years, 80 percent of older adults would be unable to afford two years of long-term care, according to data from the National Council on Aging.
A new report shows that eight in 10 Americans are unprepared to cover the cost of long-term care, like living at a nursing facility.
Marc Cohen is a professor at the University of Massachusetts who studies the financial well-being of older adults and is a co-author of the February report.
“As Americans turn age 65 and start to retire, a question arises about whether or not [they] have enough resources to ensure that they can live comfortably during their retirement,” Cohen said. “And there are a couple of things that we found from this report.”
Above all, they found this issue is pervasive.
Half of all Americans 65 and older will require long-term services, like a nursing facility or at-home care, in their lifetimes.
Yet many won’t have a way to afford it.
“The vast majority of Americans, if they had a need for long-term services and supports, would not be able to afford more than two years in the nursing home, if they had a significant health issue, or they lost income due to divorce or widowhood,” Cohen said.
A significant blow to a household’s income or assets — what’s defined by experts as a "financial shock" — can threaten the financial security of older adults.
Over two decades, a quarter of U.S. adults 50 and older will experience such a financial shock that will undercut at least 75 percent of their net wealth, according to the report.
Cohen said the cost of long-term care in itself can be considered a shock.
The latest data from 2018 shows that the average yearly cost for nursing home care is more than $100,000. The average cost of a home health care aide was nearly $40,000 for one year, according to the report.
Cohen says that middle-income Americans are particularly vulnerable due to a lack of affordable care options. And for those earning too much to qualify for Medicaid — but not enough to cover the growing cost of care — there are few options.
More often than not, Cohen said family members often step in to help absorb the financial shock of long-term care.
“One could argue, ‘Well, shouldn't families provide that care?’ " Cohen asked. “But there is a tremendous amount of time and effort, and, frankly, strain associated with family caregiving.”
In many cases, he said, caregivers are forced to leave the workforce or prematurely dip into their retirement savings to help older family members afford long-term support and services.
Cohen said this financial burden on younger generations creates a negative cyclical effect by making this group less prepared for a financial shock in their own retirement.
Experts agree that solutions for affordable elder care fall into two camps: increasing the income and assets of older Americans or reducing the cost of long-term care.
Personally, Cohen believes that subsidizing the cost of care is a more realistic approach.
“There's a private insurance market that provides private insurance for long-term care, but those policies are pretty much out of the financial reach of middle-income Americans.”
To fill this gap in care, Cohen said some states have considered an employer-provided social insurance program for long-term care that’s modeled off Social Security.
Beyond public policy and federal programs, Cohen said the best strategy for a household can start with financial planning.
"It's almost as if people are hoping that none of these things happen to them, that they won't have a major health event, they won't have a long-term care need. They're going to live with their spouse well into their 80s or 90s — but hope is not a strategy."
Gabriella Paul covers the stories of people living paycheck to paycheck in the greater Tampa Bay region for WUSF. She's also a Report for America corps member. Here’s how you can share your story with her.