Many older Americans who will need long-term care will not be able to afford insurance

Many older Americans who will need long-term care will not be able to afford insurance
Many older Americans who will need long-term care will not be able to afford insurance


About one in six Americans are now 65 or older, and as the average population ages, a majority of them are reaching retirement age in a precarious financial situation as the costs of personal care continue to rise. increase.

“Living a long time is something many of us want and could achieve,” said Jesse Slome, executive director of the American Association for Long-Term Care Insurance, an insurance education group. “But when we live a long time, the chances that we will need long-term care increase exponentially. But when you need this type of care, your options are limited.

Long-term care for seniors includes help with standing, eating, and showering, as well as medical support like physical therapy and speech therapy. The Department of Health and Human Services predicts that more than 56% of people who turn 65 will need some sort of long-term service. Medicare only covers short-term services, and Medicaid covers assistance for eligible individuals. Experts say those who aren’t eligible for government services often choose to rely on their spouse or children paying for services out of their own pocket.

Long-term care insurance, a very specialized and complex market, has traditionally been an option for those who are able to purchase an insurance policy, but it is far from the norm.

According to the association’s research, only 7.5 million people had an active plan in place in 2020, with participation rates generally declining year over year. The Census Bureau estimates that there are nearly 58 million adults age 65 or older in the United States, and that number is growing. HHS projects that more than one in five Americans will be 65 or older by 2040.

“The population of seniors who carry long-term care insurance is a healthier segment of the population and their longevity is likely different from that of the nation as a whole,” Slome said. “They tend to be informed about what they’re buying and they need to be able to afford it.”

These services have become more expensive, forcing some insurers to exit the market in recent years due to rising costs. A report released last week by credit rating agency AM Best found that claims for long-term care insurance in 2022 exceeded $13 billion, up from about $10 billion in 2021 and a jump of 20 % compared to pre-pandemic levels. Analysts attribute the rise to inflation driving up the costs of medical supplies, as well as staffing shortages in care facilities such as nursing homes.

“There is a need for education in the United States about the need to prepare for long-term care,” Jason Hopper, managing partner at AM Best, told CNN in a statement. “Programs such as Medicare offer limited benefits and this should be part of citizens’ retirement considerations when thinking about financial planning for retirement and beyond. It is at these stages that the acute need for a long-term care program will arise.

According to an analysis by the association, the typical annual premium for a 65-year-old costs between $1,700 and $7,225. For comparison, the median income of seniors in 2019 was just over $27,000.

Ramsey Alwin, president and CEO of the National Council on Aging, a nonprofit advocacy organization, said the surge in claims costs is not surprising and could increase premiums in the long run. “Our concern is that … it will become even more expensive for those who have had the modest resources to access long-term care insurance to be able to afford it,” she noted.

The cost of premiums depends on various factors, such as gender, weight, medications a person takes and mobility, according to Slome. “There are very strict health requirements and they get stricter and stricter as you get older,” he said, adding that insurance eligibility typically dips when people reach 70 years.

People living in low-income communities are at risk of experiencing many health problems, such as chronic diseases and nutritional deficiencies, due to higher levels of stress, unstable living conditions and lack of access to health care. healthy food and health care as they age, which means low-income earners who may not qualify for government services like Medicaid will likely face higher premiums if they try to take out a long-term care insurance policy.

In 2022, HHS estimated that “on average, an American reaching age 65… will incur $120,900 in future costs (long-term services and supports), measured in today’s dollars.” Nearly 40% of the cost will have to be paid out of pocket by their families, the department added.

Low-income seniors are also more likely to need long-term support, with HHS projecting that 63% of those with the nation’s lowest incomes will need at least some care. Nearly a third will need more than five years of care, the department found.

According to a report released by the Council earlier this year, 80% of households with older people are in such a precarious financial situation that they “would be unable to absorb a financial shock such as long-term services and supports.” .

“The self-sustaining retirement we currently have in place, where the cost of aging well falls squarely on everyone’s shoulders, is not working,” Alwin said. “Aging well should be a right, not a privilege based on factors beyond your control like gender, race, ethnicity, income and zip code. »

Some states have begun establishing their own long-term care services for residents. In 2019, Washington state enacted a law imposing a tax on all workers who pay into a state health care fund. Washington insured more than 155,000 people in 2021, representing more than half of the total lives insured during the year, according to the AM Best report.

“We need to take a fresh look at the role that government can play, and we need a multi-sector strategy that leverages and builds on the private sector,” Alwin said, stressing that the Washington fund is “very promising”.

Washington’s tax took effect this year. The fund will become active in 2026, at which time any resident eligible for care will be able to access up to $36,500 in lifetime benefits, adjusted for inflation. Pennsylvania, California and New York are among a dozen states that have considered similar programs.

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