March 1, 2006 – With Americans living longer, the risks of needing long-term care is increasing. A new study says senior citizens currently turning 65 face an average of three years of need for LTC some time before they die, with one in five expected to need five years of care or more. Much of the care will be provided by family members. Though half of today's retirees will incur no out-of-pocket expenses for LTC, 1 percent will need more than $250,000 of their own money set aside and invested at age 65 to pay for their future care.

Long-Term Crisis

Only 1 in 4 U.S. Adults Think They Can Pay for Long-Term Care

41% Confident they do not have enough money, 33% Unsure

Feb. 1, 2006 - Only a quarter (26%) of U.S. adults think they have or will have saved enough money to finance their own potential long-term care needs as they age. Fully 41 percent do not think they will have enough money to cover their expenses as they age and 33 percent are not sure. These findings are in a new Wall Street Journal Online/Harris Interactive Personal Finance Poll. Read more...

Read the Four-Part Series on Long-Term Care

• Facing the Long-Term (Care) Nightmare: Part 1

• Don’t Rely On Medicaid For Long-Term Care: Part 2

• Bridging the Long-Term Care Gap: Part 3

• Understanding Long Term Care Insurance: Part 4

Read more on

• Money Matters & Insurance and

• Guarding Your Wealth for Seniors

This analysis by Peter Kemper (Pennsylvania State University), Harriet L. Komisar (Georgetown University), and Lisa Alecxih (Lewin Group), examines the LTC needs, use and cost of care 65-year-olds face over the rest of their lives. It is published in the winter issue of INQUIRY, "Long-Term Care Over an Uncertain Future: What Can Current Retirees Expect?,"

The authors estimated lifetime outcomes, basing need for LTC - facility care, formal home care services and informal care provided at home by family members - on a moderate level of disability in activities of daily living (ADLs) such as bathing and getting to the toilet, and in instrumental activities of daily living (IADLS) such as shopping, preparing meals and managing money.

Perhaps most important are the study's insights about the LTC experiences that individuals - and their families - can expect.

● Sixty-five percent of all people 65 will spend some time at home needing LTC;
● 30 percent will receive care at home for more than two years; and
● 11 percent will get it for more than five years.

Nearly a quarter of retirees will rely on informal care provided by family members at home for at least two years. Projections about facility care show that 35 percent of people age 65 will use nursing home care, with 5 percent of 65-year-olds spending more than five years in nursing facilities.

Spending on LTC will be substantial, with much of it the private responsibility of families.

The amount of money in today's dollars that would have to be set aside and invested at age 65 to cover future LTC expenditures is estimated to be $47,000.

Government programs will cover 53 percent of these total LTC expenses, but private LTC insurance is projected to cover only 2 percent. Thus, 45 percent of LTC bills will be paid out of pocket.

While on average people would have to invest $21,000 at age 65 to pay their future LTC bills, individuals will experience very different futures: half of 65-year-olds will incur no out-of-pocket costs, yet an investment of $100,000 at age 65 will not be enough to cover all out-of-pocket LTC costs for 6 percent of retirees.

"It is the wide variation in the projected need for LTC that poses a challenge for both individuals and policymakers," the authors wrote.

Although they acknowledge constraints to policy changes, they discuss options for better spreading the financial risk through private and public insurance. For instance, Medicaid coverage could be expanded incrementally through higher financial eligibility limits or by expanding home and community-based care as benefits.

While the risks to families of having to provide informal care for extended periods cannot be spread through insurance, the authors note options for easing the burden of caregiving, such as insurance with home care benefits to provide family caregivers respite or supplementary assistance and paying family members for the care they provide.

"Policy debate typically focuses only on income security and acute care - and the corresponding Social Security and Medicare programs," said Peter Kemper, lead author of the study.

"Policymakers should not ignore the third risk that retirees face - that of needing LTC. Long-term care risk is substantial, and under current Medicare and Medicaid policy, much of it is the uninsured private responsibility of individuals who pay for care and of families who care for their relatives."

INQUIRY, the journal of health care organization, provision, and financing, is a peer-reviewed scholarly publication. Now in its 42nd year, it is published quarterly by Excellus Health Plan, Inc. Press releases and article abstracts are available on the Inquiry Web site at www.inquiryjournal.org.

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