Market Data 
- The growing population of older Americans is facing unaffordable long-term care.
- These costs will also burden many younger people caring for older relatives and kin.
- Government incentives and public insurance could help address care affordability, experts say.
As the population of older Americans balloons, the financial costs associated with aging are, too.
Many millennials and Gen Xers are facing a stark reality: their parents and grandparents don’t have the means to pay for long-term care — and they’ll need to help foot the bill, especially since government aid often doesn’t cover large parts of this care.
Many younger people end up leaving their jobs or working less in order to care for their aging family members — and that sacrifice can hurt them financially both today and in the future, including by shrinking their income and Social Security benefits, experts say.
“The bigger issue is you can create almost a cycle of poverty,” Marc Cohen, a professor of gerontology at the University of Massachusetts Boston, told Business Insider. “It’s not something that just sticks with one generation. The costs are borne communally.”
Unprepared for a predictable crisis
Much like other forms of care — from emergency rooms to daycares — the labor and facilities needed for long-term care don’t come cheap. A shortage of long-term care workers, coupled with inflation, has sent prices up in recent years. As the oldest members of the baby boomer generation near 80, the demand for these services is expected to rise sharply — putting upward pressure on costs.
Privately-provided long-term care — including assisted living communities and home healthcare — is largely out of reach for the broad middle class. Fewer than 15% of people 75 and over living alone in major US cities could afford to pay for assisted living or daily home health aide visits without dipping into their assets, per a 2023 report from Harvard Joint Center for Housing Studies.
“It’s the affordability issue, particularly in the middle market, that concerns us the most,” Lisa McCracken, head of research and analytics at the National Investment Center for Seniors Housing & Care told Business Insider.
Retirees and their families may not be able to rely on the government to help. Medicare, the government’s health insurance program for older people, doesn’t cover most long-term care, including assisted living, home healthcare, and nursing homes. Medicaid largely doesn’t cover assisted living and home healthcare, and there are often long waitlists for the nursing home care it does cover. Some assisted living residents have been evicted after they spent down their savings and were forced to rely on Medicaid.
“A lot of people thought, ‘Oh, well, doesn’t Medicare pay for this?’ and it does not,” Cohen said. “And so people find out late in life that they don’t have any protection against these costs.”
That’s what happened to Erika Gilles and her family. After Gilles’ 78-year-old mother, Karen Proctor, was hospitalized for her chronic kidney disease last year, she quickly realized her mother’s Medicare coverage wouldn’t be enough to cover her long-term care. Overnight, her mother went from living independently in the house she’s long owned to requiring dialysis treatment and constant care. But Gilles couldn’t purchase private long-term care insurance because of her mother’s pre-existing conditions.
Gilles, 57, found a group assisted living facility for her mother, who applied for a state subsidy to help cover the cost. If the subsidy doesn’t come through, Gilles is worried they’ll have to sell her mother’s house in Sun City, Arizona.
“It’s totally turned my life upside down. It’s absorbed all of my time,” Gilles said. “I don’t think I’m ever going to retire.”
It’s not just a boomer problem
Gen X, many of whom are sandwiched between caring for their aging parents and dependent children, has fallen behind in their financial savings. A study conducted by Nationwide showed that 56% of Gen Xers were financially supporting either their parents or their kids. About a fifth of Gen Xers taking care of a parent said they had a significant amount of debt, and a similar portion said they were unable to save for retirement, the study found.
The number of US adults who care for a spouse, older parent or relative, or child with special needs has grown from 43.5 million in 2015 to 53 million in 2021, per a report from the insurance provider Guardian.
A separate survey of 35- to 60-year-olds conducted by Carewell found that 75% of those taking care of both a parent and a child said they struggled to save for retirement, while 63% said they lived paycheck to paycheck. Meanwhile, adult caregivers provided around $600 billion worth of unpaid labor last year, noted a separate report from the AARP.
Brandon Goldstein, a financial planner at Prudential, said he frequently works with clients struggling to care for their parents as they get older. In some cases, his clients are experiencing financial stress as a result of caretaking and have been forced to cut back on saving.
Some of them may need to bank on their own children taking care of them in the future, he suggested, given how much they’ve sacrificed in their own retirement savings.
“Having to reduce what you put towards retirement is going to put you in a situation where you might not have assets now, and you could — I don’t want to call it a burden — but you might become this responsibility if you don’t have assets to cover a facility,” he told BI, adding that some may need to consider working for longer than they originally expected.
Ultimately, through ballooning Medicaid costs, taxpayers may be on the hook for the growing long-term care crisis. An increasing number of older people don’t have kids or spouses to take care of them as they age, and those that end up needing long-term care may have to rely on Medicaid. About a fifth of baby boomer women don’t have any children, and those who do have kids have fewer, on average, than previous generations.
A government-aided solution for long-term care?
Cohen argues that the private long-term insurance market is suffering from “a clear market failure” and policymakers need to step in to create a public option for middle-income people and their families.
McCracken said that in order to scale some of the most effective models of assisted living and other long-term care, private providers will need more government incentives and partnerships.
Cohen argued that public long-term care insurance would work well if most people paid into it because a relatively small number of older people require the most expensive care, like 24/7 nursing.
That option could resemble an earned benefit, like Social Security and Medicare, funded by a mandatory tax that people pay throughout their lives and collect when they retire. Rep. Tom Suozzi, a New York Democrat, has proposed legislation that would create a public insurance program for catastrophic long-term care funded by a payroll tax.
Some states have begun to address the issue. Washington State recently passed a 0.6% payroll tax to fund a new universal long-term care insurance program called WA Cares, which provides $36,500 in care per person, and will increase with inflation in future years.
Gilles said she wants to see the government or care providers figure out a way to lower costs.
“They’ve got to provide more support to families going through this,” she said. “They’ve got to either make it more affordable, or they need to provide more resources, or not make it so expensive so that it’s attainable for anybody at any income level.”
Are you or someone you care for struggling with long-term care costs? Email this reporter to share your story: [email protected].
