Misperceptions Hamper Planning for Long-Term Care

Nearly half of middle-aged and older Americans believe something that isn't true. No, this story isn't about QAnon. It's about long-term care. Fully 47 percent of people aged 40 or older believe Medicare—the government's health insurance program for people aged 65-plus—covers long-term care services such as nursing homes, according to an AARP survey. Medicare does not cover these services. The misperception that Medicare does cover them may be why so few have made plans for long-term care needs as they age, suggests AARP.  

Only 40 percent of Americans aged 40-plus have set aside money for care in their future, the survey finds. An even smaller 28 percent have researched community-based services, 26 percent have researched in-home care options, and just 22 percent have purchased long-term care insurance.

With so few preparing for potential long-term care needs, what do middle-aged and older Americans think will happen if and when they need it?  Hey kids, listen up! The 64 percent majority want their family to help out—either doing all the heavy lifting or in combination with paid help. Here are the long-term care settings preferred by the 40-plus population...  

Preferred care setting if long-term care is needed

41% prefer a combination of family help and paid help at home

23% prefer only family help at home

17% prefer a nurse to provide care at home

11% prefer care in a residential apartment-like setting

  6% prefer care in a nursing home

Although 64 percent of middle-aged and older Americans want their family to help care for them, only 47 percent have discussed these preferences with their family. 

Source: AARP, Attitudes Toward Long-Term Care Amid Covid-19

Older Adults Who Become Disabled Have Less Wealth

When older Americans become disabled and need long-term care services and supports (LTSS), their wealth plummets. Long-term care insurance would help to conserve this wealth. Yet only 11 percent of people aged 65 or older have purchased a policy. An Urban Institute study examines whether policies to encourage more Americans to buy long-term care insurance would be successful.

Using Health and Retirement Study data, the Urban Institute's Richard W. Johnson tracked adults without disabilities from 1992 (when they were aged 51 to 59) until 2012 (when they were 71 to 79) to determine whether those who became disabled and in need of care during the time period differed in some way from those who remained disability free. He found big differences in wealth between the two groups. Among adults who developed disabilities, median household wealth was just $139,200 in 2012. Among those who remained disability free, median wealth was 61 percent higher at $224,600.

Older adults who became disabled over the 20-year time period had much less wealth than those who remained disability free—and the wealth gap existed years before they developed disabilities. Thus, adults at high risk of becoming disabled are at an economic disadvantage and unlikely to be able to afford long-term care insurance. Consequently, concludes Johnson, "proposed policies designed to encourage people to pre-fund future LTSS expenses may have limited impact because they will be unable to target those with the highest expenses."

Source: Urban Institute, Later-Life Household Wealth before and after Disability Onset

11% Have Private Long-Term Care Insurance

Only 11 percent of adults aged 65 or older have private, long-term care insurance, according to an Urban Institute analysis of Health and Retirement Study data. Even among older Americans with a net worth of $1 million or more, only 25 percent have insurance...

People aged 65-plus with private, long-term care insurance by net worth
Less than $50,000: 3%
$50,000 to $99,999: 4%
$100,000 to $499,999: 8%
$500,000 to $999,999: 20%
$1,000,000 or more: 25%

Source: Urban Institute, Who Is Covered by Private Long-Term Care Insurance?