The 100-Year Life explores the opportunities longer life will provide, assuming individuals have sufficient financial resources to fund their longer lives. Many people save too little for their retirement, but the federal government’s two largest social insurance programs – Social Security and Medicare – keep millions of seniors out of poverty. The Social Security old-age benefit partially replaces lost wages, using a statutory retirement age as a proxy for being unable to work.Footnote 1 The federal Medicare program provides health insurance at subsidized rates to beneficiaries based on age, starting at age sixty-five.Footnote 2 In addition, the federal government provides grants to states for state-run Medicaid programs, which provide health insurance to impoverished Medicaid-eligible persons, including seniors.
This chapter addresses a frequently overlooked retirement expense – the cost of nonmedical custodial care. Most individuals aged sixty-five or older will require custodial care – Long-Term Care (LTC), also known as Long-Term Services and Supports (LTSS). LTC includes assistance with activities of daily living (ADLs), such as eating, bathing, dressing, getting in and out of a chair, walking, toileting, and continence; and instrumental activities of daily living (IADLs), such as grocery shopping, banking, bill paying, and filling prescriptions.
Most LTC is unpaid family care because most seniors and their families cannot afford the cost of paid LTC. Paid LTC is very expensive. For example, in 2021, the average annual cost of a year of LTC was:
$108,408 for a nursing home private room;
$94,896 for a nursing home semi-private room;
$54,000 for a one-bedroom apartment in an assisted living facility; and
$59,484 for forty-four hours per week of LTC in the senior’s home.Footnote 3
Medicare generally does not cover LTC, although many people assume it does.Footnote 4 State-run Medicaid programs provide significant LTC funding – but only to Medicaid-eligible persons with low income and almost no savings. Access to paid LTC currently is a patchwork crazy-quilt of public (federal, state, and local) and private funding mechanisms.
This chapter first explores the implications – for current and future seniors and their caregivers – of increased longevity and other trends on unpaid family LTC and on publicly funded and privately funded paid LTC. Second, this chapter surveys alternative means of accessing and funding LTC. Third, this chapter notes LTC trends, innovations, legal developments, and proposals that might improve the LTC outlook for seniors and their families.
14.1 Unpaid Family LTC
Ninety percent of seniors who need LTC receive unpaid care from members of their “family,” defined broadly.Footnote 5 Two-thirds rely exclusively on unpaid family care, and another quarter combine unpaid family care and paid care. In 2021, for example, 38 million family caregivers provided 36 billion hours of unpaid care.Footnote 6 The aggregate economic value of unpaid family LTC is enormous, both in absolute terms – about $600 billion in 2021 – and in relative terms – about 20 percent of US healthcare costs.Footnote 7
Family members often share caregiving duties. Spouses and adult children – generally daughters – provide most unpaid care. Spouses usually provide more hours of care per month than other types of caregivers. Women provide over 60 percent of unpaid care, although men provide more unpaid care today than in the past. Unpaid female caregivers average eighty-one hours per month of caregiving, while unpaid male caregivers average sixty-five hours per month. Seniors who require LTC often have unmet LTC needs if their caregivers’ availability to provide care is limited.
Multiple demographic trends may impact the future availability of unpaid family caregivers. The overwhelming majority of female caregivers under age sixty-five also work for pay, and the percentage of women who work outside the home is projected to increase. Also, women are projected to work to older ages in the future. Increasing participation in paid work may reduce the availability of family members for unpaid caregiving. Potentially offsetting these trends, remote work and improved technology might increase the availability of family members for unpaid caregiving.
Women also have increased their educational attainment and delayed having children, which may limit the scheduling flexibility of “sandwich-generation” caregivers (30 percent of family caregivers) to care for both their children and their parents. Also, fertility rates in the US have declined and the large Baby Boomer cohort is aging. By 2035, seniors aged sixty-five and older will outnumber youths aged eighteen and younger in the US for the first time. The caregiver support ratio, which compares adults in the prime caregiving age group (45–64) to seniors in the age group most likely to require LTC (eighty and over), will shrink going forward.Footnote 8
Rates of “gray” divorce have increased, although divorced seniors often find new partners. Among seniors aged seventy-five and older, two-thirds of men have a spouse or partner, compared to just one-third of women.Footnote 9 Unmarried seniors, especially unmarried white women, increasingly live alone. The number of “elder orphans” (seniors with no support network) is projected to increase in the future.
Family members are becoming caregivers at younger ages. About one-third of adults aged forty and younger and one-quarter of Millennials already provide unpaid care to family members.Footnote 10
Older Americans and their unpaid family caregivers will be more diverse in the future. Cultural differences in attitudes toward family responsibility and the care of seniors will create divergent patterns of unpaid and paid care. Some cultures have norms of providing unpaid care to seniors in the community. In such cultures, several generations of a family often live together, with younger generations sharing the care of elderly members of the family in the multigenerational home. Other cultures have norms of minimizing the burdens older generations impose on their adult children. Seniors from such cultures are more likely to seek out paid LTC.Footnote 11
Seniors of color, in particular Black seniors, are more likely to require LTC – and to require it at an earlier age – than white seniors. Appalling, persistent racial and socioeconomic health disparities, which are evident throughout the lifespan, increase and accelerate disadvantaged seniors’ need for LTC. Myriad environmental stressors (e.g., pollution, lead paint, food insecurity) and poverty contribute to such disparities. In addition, research over the past two decades establishes that pervasive, lifelong exposure to social and structural oppression and racism cause premature biological aging – weathering – of Black people regardless of their income or wealth.Footnote 12 Compared to white seniors, Black seniors are more likely to be disabled, to reside in a nursing home, and to receive substandard care.
Both rates of poverty and the likelihood a senior will need paid LTC increase with age. The need for LTC is highest in the eighty-and-older senior cohort, the fastest growing segment of seniors. Poverty rates for elderly women exceed that for elderly men. In the future, as longevity increases, more seniors are likely to require paid LTC and to qualify for Medicaid-funded LTC.
The potential negative effects of caregiving on family caregivers – in particular women – who provide unpaid LTC are underappreciated. Unpaid family caregiving entails significant – albeit hidden – costs. To provide care at home, family caregivers with paying jobs often must reduce their work hours and effort, or exit the paid labor market entirely, reducing employer-provided health insurance coverage and retirement plan contributions. These hidden costs “help explain the much higher poverty rates for older women relative to men.”Footnote 13
Family caregivers often incur substantial out-of-pocket costs to care for their family members. In 2016, the average annual out-of-pocket expenses for a family caregiver were $7,000 overall and 27 percent of the income of Millennial caregivers.Footnote 14 Family members who must pay these costs reduce their own income and retirement savings.
Family caregivers often experience stress and anxiety, especially when a dependent family member’s health deteriorates, and care becomes more complex. Seniors with multiple chronic medical conditions or with Alzheimer’s disease or related dementias (ADRD) require the most intensive caregiving. Over time, the stresses of caregiving can negatively impact the health of the caregiver. In addition, healthcare providers increasingly delegate to family members medical tasks that go beyond IADLs and ADLs, such as wound care and operating medical equipment (e.g., dialysis equipment).Footnote 15 Many caregivers are uncomfortable performing such tasks, yet perform them because no one else is available to help. Also, family caregivers generally receive little guidance about how to provide care. The need to complete frustrating administrative tasks, such as insurance paperwork, often adds to caregivers’ stress and anxiety. When seniors’ care needs exceed family caregivers’ capabilities, paid LTC becomes a necessity.
14.2 Paid LTC
Many Americans incorrectly assume that Medicare covers the cost of paid LTC for seniors. Medicare covers “medical” treatment – narrowly and clinically defined – but generally does not cover LTC. Nor does the federal government provide any other universal LTC benefit. State-run Medicaid programs (jointly funded by the federal government and states) provide LTC to seniors living in poverty. Strict legal rules, which vary from state to state, limit Medicaid eligibility to individuals with little income and very little wealth – in many states, not more than $2,000 of assets.
If a senior has too much wealth to qualify for Medicaid, but not enough to fund LTC, the senior must spend down her assets to qualify for Medicaid. The low asset threshold for Medicaid eligibility yokes the beneficial receipt of Medicaid-funded LTC to unintended financial risks created by Medicaid-mandated impoverishment. Notwithstanding the strict Medicaid eligibility requirements, Medicaid pays a significant percentage of aggregate US LTC costs.
The likelihood that a senior will enroll in Medicaid increases with the length of time the person requires paid LTC. The lower a senior’s lifetime earnings, the sooner they are likely to enroll in Medicaid. By the fifth year of requiring paid LTC, the vast majority of seniors – including the top 20 percent of all income earners – are enrolled in Medicaid.Footnote 16 The duration of needing LTC varies. Patients with ADRD often require many years of LTC. About 18 percent of women and 14 percent of all seniors require five or more years of LTC. On average, women need 3.7 years of LTC and men need 2.2 years of LTC. For seniors “with less education, lifetime earnings, and wealth,” both disability and the need for LTC “come earlier and last longer.”Footnote 17
14.2.1 Nursing Homes as the Default Delivery Site for Medicaid-Funded LTC
Skilled nursing homes always have been the default delivery site for Medicaid-funded LTC. At the creation of Medicare and Medicaid in 1965, both programs “adopted a medicalized model of care, prioritizing the use of licensed providers and institutions,” which made caregiving outside of licensed care facilities “invisible” and financially “unsupported.”Footnote 18 Nursing homes typically are large institutional medical facilities, more suited to deliver skilled medical care than LTC. Patients in nursing homes include post–acute-care (recently hospitalized) patients, for whose skilled nursing care the facility is reimbursed at a high Medicare rate; and LTC patients, for whose custodial care the facility is reimbursed at a low Medicaid rate.
Long-standing shortcomings of providing LTC in nursing homes include (1) poor infection control; (2) high staff turnover and chronic worker shortages; (3) neglect of patient needs and low quality of care, often due to understaffing; and (4) patients’ loss of privacy, agency, and control over their environment. The COVID-19 pandemic exacerbated these shortcomings.
The pandemic increased the chronic shortage of care workers and high staff turnover in nursing homes, both of which are associated with lower-quality patient care. This shortage has many causes. Nursing home-care workers (other than nurses) earn very low wages and often juggle jobs at multiple nursing homes, which increases infection risks. Care work in nursing homes was always a dangerous profession, due to infection risk and the physical demands of the job. COVID turned it into one of the most dangerous jobs in America. In addition, entrenched racial hierarchies are common in nursing homes. Managers generally are white, but care workers disproportionately are Black women and other women of color. Care workers express the feeling they are working on “the plantation,”Footnote 19 invoking the long history in our country of relegating Black workers to low-wage, dirty, domestic servant work.Footnote 20
Improving working conditions for care workers is essential as a matter of racial justice and to reduce the acute shortage of LTC workers. Reversing systemic racism in LTC work will require nursing homes and other healthcare organizations to provide higher pay and employee benefits to care workers; to promote Black frontline care workers and other workers of color to management and board positions; to recruit Black students for internships and management positions; and to empower care workers to direct more of their own care work.
Black care workers and other care workers of color also can organize their own LTC businesses. Bronx-based Cooperative Home Care Associates (CHCA) provides an example of a successful LTC business managed and owned by Black women and other women of color. Founded in 1985 by twelve care workers, CHCA now employs 2,300 care workers. It offers its employees free training, health insurance, a pension plan, union membership, regular work hours, and an hourly wage of $16. Employees also can elect to buy a share of stock in the business for $1,000, by paying $50 one time and $3.65 per week for five years. About half of CHCA employees own stock in the company. By improving working conditions and promoting its employees’ agency and economic dignity, CHCA achieved much lower employee turnover than most home-care providers. Lower turnover translates to better patient care. CHCA is a model for other minority-owned LTC businesses.
The pandemic also reinvigorated long-standing policy critiques of legal rules that make institutional nursing homes the default setting for Medicaid-funded LTC. In a 1992 case, Olmstead v. L.C., the US Supreme Court held that federal disability law prohibited states from forcing persons with mental illness to live in segregated, congregate-care facilities to receive medical treatment, if the care of the patients could be less intrusively integrated into their home community.Footnote 21 Olmstead supports an argument that persons who need LTC should not be forced into segregated, congregate nursing homes – the Medicaid default setting – but instead should have access to home- and community-based services (HCBS) if their care needs do not require them to be in a nursing home.
14.2.2 Growth of HCBS as an Alternative to Nursing Home LTC
Years before the pandemic, concerns about poor infection control, chronic staffing shortages, and poor quality of care in many nursing homes led states to gradually begin offering HCBS as an alternative to nursing home LTC.Footnote 22 The default Medicaid setting for LTC continued to be nursing homes, but states applied for federal waivers that allowed them to experiment with offering HCBS to some, but not all, state Medicaid patients. HCBS is provided to seniors at “home” in a wide range of residential settings, including a single-family home or apartment and assisted living apartments.Footnote 23
Infection risks are lower in the HCBS setting, and seniors strongly prefer HCBS to nursing home care. As of 2020, patient demand for HCBS was so great that around 700,000 patients were on waiting lists to receive HCBS. The average wait time to receive HCBS was thirty months, although wait times varied widely between states. After the pandemic highlighted the need for additional HCBS, states and the federal government increased funding for HCBS. Proposed legislation would further increase funding for HCBS.
To date, however, state Medicaid HCBS programs are still operating under federal Medicaid waivers, meaning HCBS is not a universal mandatory Medicaid benefit. The hesitancy to make HCBS a universal Medicaid benefit stems from the immense cost of such an expansion. The cost per patient of providing LTC generally is lower in the home than in the nursing home setting.Footnote 24 The aggregate public cost of HCBS ultimately may be higher than that of nursing home LTC, however, because more patients want HCBS than nursing home LTC. As HCBS expands, patients only receiving unpaid family LTC may enroll for paid LTC through the HCBS program – converting some unpaid LTC into new government-funded paid LTC. LTC experts observe that the chief difficulty with expanding access to HCBS is containing public costs by structuring the benefits around the senior population that would go into a nursing home absent the provision of HCBS.Footnote 25
14.2.3 Programs of All-Inclusive Care for the Elderly
Over the past decade, various demonstration projects have shown promise to provide HCBS, while containing costs and providing noninstitutional LTC. For example, Programs of All-Inclusive Care for the Elderly (PACE) allow seniors who want to stay in their “home” (broadly construed) to combine traditional Medicare benefits and LTC in a managed care plan, using a team-care approach and a capitated (per enrollee) payment structure instead of a fee-for-service structure.Footnote 26 In addition to providing medical care, PACE “centers” provide adult day care, nutritious food, and recreational activities to seniors, along with transportation from the senior’s home to the center and back. PACE enrollees must be nursing home-eligible and live near a PACE center. Seniors who are eligible for both Medicare and Medicaid (dual-eligible) qualify for enrollment in PACE. Seniors who are enrolled in Medicare but ineligible for Medicaid can pay a premium to enroll in a PACE program. About 90 percent of PACE enrollees are dual-eligible. Over thirty states offer at least one PACE program.
14.2.4 Naturally Occurring Retirement Communities
Certain innovative HCBS programs are well suited for particular residential settings. For example, in dense urban areas, large rent-controlled apartment buildings with a high percentage of seniors, referred to as Naturally Occurring Retirement Communities (“NORCs”), can become a focal point for efficient delivery of HCBS. Paid LTC staff working in these buildings can assist seniors on site. Seniors in NORCs are, on average, in the low- to middle-income ranges, and about half are usually also eligible for Medicaid. NORCs are funded by a combination of government funding, philanthropic funding, and contributions from residents.Footnote 27
14.2.5 Medicare Advantage Plans
Since 2020, Medicare Advantage (MA) plans have been allowed to offer Special Supplemental Benefits for the Chronically Ill (“SSBCI”), with a primary focus on improving social determinants of health. The benefits available to patients with complex chronic conditions include pest control, indoor air quality, nonmedical transportation, meal delivery, produce and grocery delivery, and virtual visits to reduce social isolation.
Expansion of next-generation programs that incorporate LTC – including PACE, NORCs, and MA plans – will facilitate data collection and reviews of their effectiveness and costs. For example, a stunning 2023 study concluded that MA plans received $75 billion in government overpayments, prompting calls for reform of the MA fee structure.Footnote 28
14.2.6 Older Americans Act Programs
In addition to federal grants to state-run Medicaid programs, the federal Older Americans Act (OAA) provides grants to states for programs supporting Americans aged sixty or older.Footnote 29 Seniors qualify for OAA benefits without regard to the Medicaid income or asset tests. OAA programs include meals delivered to the senior’s home (e.g., Meals on Wheels), congregate meals served in the community, caregiver supports, home care, adult day-care services, and assisted transportation. Local Agencies on Aging can provide information about OAA-funded programs offered to seniors in the community.
14.2.7 Aid and Attendance for Military Veterans and Their Spouses
A subset of seniors – military veterans and their surviving spouses – may qualify for another public source of LTC funding, referred to as Aid and Attendance, through the US Department of Veterans Affairs.Footnote 30 Veterans and their surviving spouses who qualify for a military pension benefit may be eligible for supplemental pension benefits if they are “medically rated” to require LTC (either “Aid and Attendance” or “housebound” care). Each type of pension and supplemental benefit has specific eligibility requirements (e.g., based on the length of active military service and whether the veteran died while on active duty). The veterans’ benefit program has a wealth test but allows much greater wealth than Medicaid.Footnote 31
14.2.8 Private LTC Insurance
Another potential LTC funding source – albeit private rather than public – is Long-Term Care Insurance (“LTCI”).Footnote 32 The nontrivial risk of needing catastrophically expensive LTC is exactly the type of risk against which consumers might insure. At the start of the twenty-first century, over 100 insurance companies sold stand-alone LTCI policies to consumers. Consumer purchases of LTCI were modest, however, in part because of the availability of Medicaid as the LTC payer of last resort.Footnote 33
Over time, the LTCI insurance market contracted sharply. Insurers discovered they initially underpriced LTCI premiums. State insurance regulations prevented insurers from prospectively correcting the mistakes through premium increases on existing policies, leading almost all insurers to exit the LTCI market. The few remaining insurers reduced their risks by significantly increasing premiums on new LTCI policies and declining to cover a high percentage of prospective purchasers with underlying health conditions. As the LTCI market contracted, many employers that previously offered LTCI as an employee benefit eliminated it from their employee benefit package. Currently only 7 million LTCI policies are in force in the US. Just 11 percent of seniors own LTCI policies, which paid about 8 percent of LTC costs in the US in 2016.
As the LTCI industry contracted, state insurance commissioners and regulators urged federal and state policymakers to adopt policies that might make LTCI more appealing to consumers and increase private, individual funding of LTC risk. Although state legislatures and the US Congress enacted legislation intended to encourage the purchase of LTCI, such incentives have not been particularly effective. Income tax deductions for LTCI premium payments – available only to a very small percentage of taxpayers – provide one example of an ineffective LTCI subsidy.
Long-Term Care Insurance Partnerships (“LTCIPs”) provide another example of legislation intended to increase LTCI purchases. LTCIPs allow state Medicaid eligibility without the usual extreme spend-down of assets if a consumer purchases qualified LTCI. For example, assume Diana purchases a qualified LTCI policy that covers $100,000 of LTC. If Diana later requires LTC, exhausts her $100,000 LTCI benefit, and subsequently applies for Medicaid, the state Medicaid asset limit for Diana is increased by $100,000. The younger and healthier a consumer is when she purchases LTCI, the lower the LTCI premiums will be.
Despite widespread adoption of LTCIP statutes by most states, the early consensus among researchers was that the adoption of LTCIPs failed to significantly increase the purchase of LTCI. A recent study found otherwise, however, partly because “the effect of LTCIP appears over time and the effect is mostly driven by partnerships set up after 2010,” which were not considered in earlier studies.Footnote 34 The new study concludes that the adoption of an LTCIP “increased the uptake of LTCI coverage by 1.64 percentage points[;] reduced Medicaid uptake by 1.46 percentage points[;]” and reduced federal Medicaid expenditures by $36 for each senior. Notwithstanding the continued availability of Medicaid as a payer of last resort, consumers purchased LTCI to protect their assets and increase their bequests. This study offers some hope for LTCIPs. In addition, LTCIPs could be combined with a mandatory state or federal social insurance program, funded by new taxes, with a tax opt-out for purchasers of LTCI.
Another LTCI development is that insurers have created hybrid insurance products that blend LTC coverage with other popular forms of coverage, such as life insurance or annuities. The hybrid products generally do not qualify as LTCI, for purposes of state LTCIP programs.
Policymakers disagree about whether LTC should be privately funded through the individual purchase of LTCI, or publicly funded through premiums or payroll taxes for a state or federal LTC social insurance program. Although the availability of Medicaid-funded LTC discourages the purchase of private LTCI, repealing Medicaid-funded LTC would be deeply unpopular with Americans. In addition, private individual LTCI still would be too costly for millions of Americans. State or federal LTC social insurance proposals, which would reduce the need for Medicaid-funded LTC, seem more politically plausible, but only if the funding mechanism for the proposal does not turn the political tide against it. Allowing an opt-out for purchasers of private LTCI would reduce the public cost of the social insurance program.
14.3 Public LTC Social Insurance Developments and Proposals
14.3.1 State LTC Social Insurance Program Developments
Some state legislatures have considered making LTC benefits available to all state residents, including those ineligible for Medicaid. In 2019, the state of Washington enacted the country’s first state LTC social insurance program.Footnote 35 Washington’s Long-Term Services and Supports Trust Program (now called the Washington Cares Fund) is the first universal state social insurance program covering LTC. The Washington program is funded by a new 0.58 percent ($58 per $10,000 of wages) payroll tax on wages, which the state began to collect on July 1, 2023. A payroll tax opt-out is available for those who previously purchased their own private LTCI. The state LTC benefits of up to $36,500 can fund in-home care (including care by family members), home modifications, transportation, food delivery, caregiver training, and respite care. Hawaii also provides LTC to residents but funds the care out of general revenue instead of pairing social insurance LTC benefits with a dedicated tax. Other states also are considering LTC proposals.Footnote 36
14.3.2 Federal LTC Social Insurance Program Proposals
Experts in LTC have long argued for a universal federal LTC social insurance program, but repeated congressional attempts to create such a program have failed. For example, in 2010, as part of the Affordable Care Act, Congress enacted the Community and Living Assistance Services and Supports (CLASS) Act, a federally subsidized voluntary LTC insurance program with no eligibility exclusions. The CLASS Act was soon repealed, however, due to concerns about the financial viability of the program. The decade since its repeal has been a time of transition for LTC programs. Although traditional Medicare continues to exclude LTC, MA plans and PACE-managed care plans with LTC benefits are available to seniors in some but not all geographic areas.
Senior care experts and policymakers continue to advocate for a universal federal LTC program. Situating an LTC funding program at the federal level would eliminate LTC eligibility variation between states and could relax draconian state asset tests. Expanding LTC eligibility would, in turn, increase the costs of the LTC program.
Health economists have modeled the distributional effects and costs of a new federal social insurance program for LTC. Low- and middle-income Americans would disproportionately benefit. Many seniors and their families would replace unpaid family LTC with new paid, federally funded LTC. The projected ten-year costs of the new LTC are in the trillions – ranging from 5.7 to 8.1 trillion, depending on how LTC eligibility is defined.
The costs of a new LTC social insurance program could be reduced by making LTC available only to seniors who cannot perform three or more ADLs. Costs also could be lower if medical science discovers ways to reduce or defer the onset of diseases that produce the highest LTC costs. For example, ADRD risk might be reduced through exercise and diet.Footnote 37 In addition, just delaying ADRD onset could reduce projected LTC spending significantly.Footnote 38 Even with such medical breakthroughs, however, the cost of new federally funded LTC services would be enormous.
From a political perspective, long-simmering concerns about the solvency of the existing Medicare trust fund – much less the funding of new universal LTC benefits – provide a difficult fiscal backdrop for enacting a federal LTC program. On the other hand, the COVID pandemic highlighted the significance of the care economy in the US and created political momentum to improve LTC, increase access to paid LTC at home, and expand public funding for paid LTC.
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