The demand for long-term care services will explode as the population ages and more people live longer with chronic conditions. Who will pay for these services and how will they be delivered?
In 2010, 40 million Americans were age 65 or older. By 2050 that number is expected to jump to 88 million. Among these older citizens, only three in 10 will never receive long-term care services. The majority will get such care—though not necessarily in a nursing home or assisted living facility. The current definition of long-term care includes services provided in the home by family members or paid caregivers. Adult day-care is also considered a form of long-term care.
The cost will be huge. In addition to the increase in the number of people over 65, the number of people 85 and older is also predicted to jump dramatically. This is the “frail elderly” group most likely to need long-term care. In 2010 there were 5.5 million of these older people, but by 2050 there will likely be 19 million.
These demographic shifts raise two questions. How will the nation decide to pay for that care? Will it be given in different ways and settings?
The total U.S. long-term care spending is substantial. That total reached $210.9 billion in 2011, about 1.4 percent of the gross domestic product. But even if it doubles, that U.S. spending is predicted to be in line with long-term care costs in other developed nations, such as the United Kingdom, Germany and Japan, or between 2.5 percent and 3 percent of gross domestic product.
In the U.S., while the government pays most of the cost through Medicaid, patients and their families contribute a substantial amount as well. Few people purchase private long-term care policies, many mistakenly believe that such care is covered under their general policies or by Medicare. Others find policies too expensive, or decide the benefits they offer are too limited to be worth the cost. One result is that of total U.S. long-term care spending in 2011, $45.5 billion or 21.5 percent was paid directly by patients or their families, most often by patients’ spouses or adult daughters.
The high cost of nursing home and assisted living care is already leading families to look for other options. An average nursing home stay is about $84,000 a year. Assisted living care costs about $42,000 annually. But even home care is expensive at about $20 an hour. A year’s care can equal 88 percent of household income for older adults.
Medicaid paid 62.3 percent of the total U.S. cost of long-term care in 2011, or $131.4 billion. To reduce that cost, state and federal officials are trying to shift care to community or home-based services. In one analysis of spending in 2007, Medicaid recipients who got long-term care in institutions cost the program $53,593 per year. Medicaid’s cost for patients getting community-based services was less than half that amount, or $20,764 annually per patient. Congress in January 2013 established a 15-member Commission on Long-Term Care to search for better ways to provide and pay for care. The Affordable Care Act calls for making $4.3 billion available for demonstration programs aimed at moving nursing home residents back to their homes and communities. The results are not yet in, but these programs could be a positive development.