Increasingly expensive long-term services and supports should prompt serious questions about how to meet the needs of the aging US population, say the authors of a new KFF report on senior care trends.
Monday’s report from the health policy research group highlighted rising costs across the senior care spectrum that already far outstrip the incomes and savings of vulnerable older adults.
The median cost of care for a private nursing home room in the US, for example, rose to $116,800 in 2023 — a roughly 5% increase since 2022.
Making matters worse, the report showed the ineffectiveness of existing safety nets such as long-term care insurance and reminded readers of the rapidly aging demographics in the US.
“The aging of the population raises difficult questions about how to address the challenges of coverage, affordability, financing, and workforce shortages to meet the needs of a growing population in need of LTSS,” wrote the two authors of the report: Priya Chidambaram, senior policy manager for KFF’s Program on Medicaid and the Uninsured, and Alice Burns, associate director of the program.
Chidambaram and Burns noted that the average income for Medicare beneficiaries was only $36,000 in 2023, with a median savings of $103,800. With Medicare rarely covering the costs of LTSS, a year or more of long-term care can quickly eat through both the income and savings of such a patient.
Even patients in a less expensive care setting, such as home care or assisted living, may have just as many expenses, the authors noted, since “many people may use multiple services simultaneously, so their total annual costs may be like those of nursing facility or round-the-clock care.”
Missing guardrails
One potential way consumers can safeguard against these costs has been long-term care insurance. But, the authors note, only a tiny fraction of people paying for this insurance are able to take advantage of its benefits.
Of the more than 7.1 million Americans paying long-term care insurance premiums in 2021, only 80,352 made claims, according to KFF.
While premiums for these policies average less than $2,000 each year, many people pay these premiums for years without yet needing long-term care.
“It is not uncommon for people to die without using benefits or to let their coverage lapse in response to rising premiums (or other factors) before they qualify for the benefits,” the authors noted.
Long-term care insurance is rarely covered by employers, and many policies do not protect the insured from inflation and place limits on care eligibility and lifetime payouts. The authors also noted the possibility of insurers going out of business by the time consumers need to use the insurance.
The inability of Medicare and insurance to cover LTSS costs had led to a large majority of LTSS expenses in both home-based and institutional settings being covered by Medicaid.
Medicaid covered 61% of all LTSS spending in the US in 2022, compared to the next largest source — out-of-pocket spending — at only 17%. That gap was much narrower in institutional settings, however, where Medicaid spending was $59 billion and out-of-pocket spending reached $48 billion.
The authors’ call for solutions to these spending trends was backed not just by the rapidly aging population, but by the outsized impact that LTSS expenses have in exacerbating racial and economic disparities.
The poorest 20% of Americans, for example, are the most likely to need expensive LTSS.
“Other research shows that among people ages 65 and older, those who are Black or Hispanic are much more likely to develop a moderate or severe LTSS than those who are White and have substantially lower financial resources to pay for LTSS,” the authors continued. “Racial and economic disparities among individuals experiencing LTSS needs may also have long-term intergenerational effects that can disproportionately affect people of color.”
