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Long-term Care - Part 1: The Risk

As Americans are living longer than they were in the past, they are also in greater need of long-term care (LTC). LTC refers to assistance with what are referred to as the activities of daily living (ADLs). These include eating, bathing, dressing, using the restroom, transferring (e.g., from a bed to a chair), and continence.

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Both the prevalence and cost of LTC are quite high. As of early 2020, 69% of 65 year-olds were estimated to need some type of LTC during the remainder of their lives, and over 50% will need formal LTC (i.e., someone is paid to provide the LTC). In 2021, the median cost of a private room in a nursing home was about $108,000 annually. Such statistics can be very alarming, to say the least, and aging individuals should consider how they address before they need LTC, both for their own benefit as well as for their loved ones.

In this post, the first in a series regarding LTC, the risk of LTC is discussed, including the types of LTC and their typical costs, who is in need of LTC, how long they need it, and the lifetime costs of LTC. Understanding these factors is critical in developing a plan for how one will deal with LTC.

Types of LTC

Broadly speaking, there are four types of LTC, listed below.

  1. Adult day care

  2. In-Home care

  3. Assisted living

  4. Nursing home

Adult day care centers provide help to those who need help with ADLs, supervision, and socialization with others. They usually provide meals, social activities, opportunities for exercise, and transportation to and from the center. These centers are helpful to augment the LTC that is otherwise provided by a family or friend caregiver and research indicates that both the recipients of care and their caregivers benefit from adult day care. Compared to the other types of LTC, adult day care centers are the most affordable by far. Their median monthly cost in 2021 was $1,690.

In-home care includes a broad array of services to help those in need of LTC at their own home. Some of these services include providing LTC, while others help with household tasks like laundry, house cleaning, and cooking. A home health aide, who is supplementing the LTC otherwise provided by a caregiver, working 44 hours per week had a median monthly cost in 2021 of $5,148.

Assisted living facilities provide LTC to those who cannot receive the help they need at home. The level of care they provide is not as extensive as that of a nursing home, and an assisted living facility's median monthly cost in 2021 was $4,500.

Nursing homes provide the most intensive level of LTC and, consequently, are the most expensive. The median monthly cost of a semi-private room in a nursing home in 2021 was $7,908.

Who is in Need of LTC?

Those who need LTC, as defined by an inability to perform two or more of the ADLs described above, are largely those aged 80 or above. Among those who had LTC insurance policies and filed a claim in 2021, only 8% were under age 70, and 30% were age 70-79. The remaining 62% were age 80 or older.

For How Long is LTC Needed?

According to the U.S. Department of Health and Human Services Administration on Aging, women need LTC for an average of 3.7 years, while men need it for an average of 2.2 years. This statistic includes all types of LTC.

Those who need LTC in an assisted living facility are there for a median of just 22 months, and 59% of them then move into a nursing home. Those who need LTC in a nursing home are there for only a median of 5 months. Women's stays in nursing homes are longer than men's at 8 vs. 3 months, on average.

Among those who have LTC insurance and need in-home LTC, only 32% recover to the point that they no longer need the care; 61% die. (Note that the remaining 7% exhausted their insurance's benefit.) Among those who need assisted living and nursing home care, even fewer recovered; 70% and 78% die, respectively, and the actual percentages who die are even higher since 17% and 25%, respectively, exhausted their insurance's benefit before either recovering or dying.

What are the Total Costs for LTC?

A study by Price Waterhouse Cooper in 2017 found that most of those who needed formal LTC did not spent colossal sums for it, though some did; see the graph below. On the contrary, more than a third spent under $50,000, and almost half spent under $100,000. While over 75% spent under $250,000, 7% spent over $500,000.

Keep in mind that the above figures are in year 2017 dollars. To put them in year 2022 dollars, they would need to be increased by about 22%.

Final Thoughts

When people think of LTC, they typically think of nursing homes, but most LTC is provided by other means. Most of those who need LTC receive it at an adult day care center and/or home or an assisted living facility, both of which are significantly less costly than are nursing homes. Though most need approximately 3 years of LTC, the median nursing home stay is only 5 months.

Very few people need LTC in their 60s or younger. Some need it in their 70s, but almost two-thirds of those who need it are age 80 or older. Also, women need LTC significantly longer than do men, on average.

The lifetime costs of LTC vary tremendously. A few spend very large sums for LTC, but many spend relatively little for it. About half of those who need formal LTC spent under $100,000 for it in 2017, but this naturally means that about half spent over $100,000 for it, and 7% spent over $500,000 for LTC.

Since LTC costs are highly variable, many might believe that LTC insurance would be a smart purchase, but this is dependent on many factors. The next post in this series will examine the pros and cons of LTC insurance.

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