$255.1 billion. That is the staggering amount Medicare and Medicaid paid in 2016 for long-term care. Home health care accounted for $92.4 billion; $162.7 billion for nursing home care and continuing care in retirement communities.
Based on 2013 data, Kaiser Family Foundation estimated that 51 percent of long-term care expenses are paid by Medicaid. Ultimately, the American taxpayer.
As astounding as the figure is, it is an incomplete picture of long-term care spending. An additional $8.65 billion in long-term care claims was paid by insurance carriers on behalf of 280,000 long-term care insurance beneficiaries. These paid expenses do not include the unpaid care provided by family members. It is difficult to estimate the value of unpaid care, but data reveals some insights. 54 percent of new LTCi claims are for home health care services. Much of home health care is provided by family. On average, caregivers contribute $10,000 to care expenses. Then there is the opportunity cost of caregiving due to lost wages for unpaid time-off to provide care.
Taking a look at who pays for long-term care gives a different perspective. For those who plan to rely on a combination of Medicare, Medicaid, and family help, it becomes clear, that others shoulder the cost of failing to plan for an inevitable situation for 70 percent of those 65 years and older. By 2050, a little more than 30 years, twenty percent of the population is expected to be 65 or older.
Now, let’s turn to the increasing cost of long-term care. Over the last seven years, the cost of care has risen. Reviewing the chart below, rates of change accelerate and decelerate, but continue to rise, year after year.
There is only one solution that will protect financial assets and provide inflation protection; long-term care insurance. In 2016, AHIP (America’s Health Insurance Plans) commissioned a study of satisfaction levels of long-term care claimants. In virtually every category, long-term care insurance beneficiaries say that LTCi made a significant difference in their lives and in the level of long-term care provided.
- 93 percent believe policy benefits are sufficient to cover cost of care
- 88 percent are satisfied with the amount of coverage purchased
- 75 percent say that without LTCi, they would receive less care
- 64 percent say that without LTCi, they would have to rely on family and friends for care
The most overwhelming evidence of the wisdom of purchasing long-term care insurance is the policy value. The per-person average total claims paid by insurance carriers participating in the survey is $118,986.
Conversely, the average long-term care expense for the general population is $140,000, $72,000 of which is paid for out-of-pocket.
The premium-paid to benefit-received ratio really tells the story. For every dollar in LTCi premium paid, $2.78 is paid in benefits. If only the stock market supplied similar returns.
Share this study with every client you talk to about long-term care insurance. Bundled with the facts about the macro-level costs of long-term care, and who carries the burden of failing to plan for long-term care expenses, it is difficult to find a valid objection.
DIS is your long-term care insurance expert. You can depend on us for assistance with product and carrier selection, policy design, and underwriting advice. Call us today for a quote or to learn more.