Long-term care (LTC) encompasses a diverse array of services catering to the health, personal care, and social requirements of individuals who are chronically incapacitated, unwell, or frail. Based on the specific needs of the individual, long-term care may comprise nursing home care, assisted living, home health care, or adult day care.
Who Requires Long-Term Care?
The requirement for long-term care typically arises when a person becomes incapable of carrying out daily life activities (ADL), such as bathing, dressing, eating, toileting, continence, and mobility. A wide range of conditions, such as AIDS, spinal cord or head injuries, stroke, mental illness, Alzheimer’s disease, other forms of dementia, or physical frailty due to aging can trigger the need for long-term care. It’s important to note that although long-term care can become necessary at any age, it is primarily older individuals who will need such care.
Individuals with Disabilities by Age1
How Much Does Long-Term Care Cost?
Beyond the unpaid assistance offered by family and friends, the cost of long-term care can be substantial. The subsequent table details the national average costs for standard long-term care services (regional expenses can fluctuate considerably). A federal study anticipates that, on average, men will require 2.3 years of long-term support services, while women will necessitate about 3.2 years of similar care.2
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Covering Long-Term Care Costs – Personal Resources
Many long-term care expenses are often paid for from personal assets:
- Out-of-Pocket: Expenses covered using personal savings and investments..
- Reverse Mortgage: Some homeowners may be eligible for a reverse mortgage, enabling them to leverage their home equity while maintaining ownership.
- Accelerated Death Benefits: Certain life insurance policies offer “accelerated death benefits” (also referred to as a living benefit) if the insured is diagnosed with a terminal or chronic illness.
- Private Health Insurance: Some private health insurance policies may cover a limited duration of at-home or nursing home care, generally linked to a covered illness or injury.
- Long-Term Care Insurance: A type of private insurance specifically designed to finance long-term care services, be it at home or in an institution, either skilled or unskilled. The coverage varies across different policies.
Covering Long-Term Care Costs– Government Resources
Long-term care that is paid for by government comes from two primary sources:
- Medicare: A federal government-operated health insurance program that provides benefits to eligible individuals aged 65 and over, certain disabled individuals below age 65, and those with end-stage renal disease. Medicare Part A, Hospital, includes a limited provision for nursing home care.
- Medicaid: Medicaid is a welfare program co-funded by federal and state governments, aiming to deliver healthcare to the financially disadvantaged. Medicaid benefits eligibility is typically determined based on the individual’s income and assets, although eligibility norms may differ by state.
Historically, some people have tried to manipulate the system to qualify for Medicaid by giving away assets or selling them for less than their true worth. This strategy, often referred to as the “Medicaid spend-down”, has prompted legislative actions like the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). Among other constraints, OBRA ’93 ruled that asset transfers made within 36 months (or 60 months for certain trusts) prior to applying for Medicaid could result in a delay in benefit eligibility.
The Deficit Reduction Act of 2005 (DRA) introduced stricter measures to qualify for Medicaid by lengthening the “look-back” period for all gifts from 36 to 60 months. As per this law, the commencement of the ineligibility (or penalty) period was typically altered to the later of two dates: (1) the date the gift was given; or, (2) the date the individual would have normally been eligible to receive Medicaid benefits. This legislation also elaborated on certain “spousal impoverishment” regulations, simultaneously making it harder to use specific types of annuities to transfer assets for less than their actual market value.
1Source: U.S. Census Bureau, 2019 American Community Survey 1-Year Estimates, Sex by Age by Disability Status for the Civilian noninstitutionalized population, male and female, Table B18101.
2See “Long-Term Services and Supports for Older Americans: Risks and Financing, 2020,” Table 1. U.S Department of Health and Human Services, Office of Behavioral Health, Disability, and Aging Policy. January 2021.
