The United States is currently experiencing its sharpest growth ever in older adults. Those over 65 now number approximately 57 million. Medicare statistics show that by 2050, that number will grow to over 80 million and a very large percentage of those will be in the 85+ category. That is the category that requires the most long-term care or, in government-speak, LTSS or long-term services and supports. Today, fewer than 10% of adults over 65 require LTSS. However, by age 90, that percentage will swell to over 50%.
Why should you care about these fine points of the Medicare statistics? Because LTSS can cost you a boat-load of money! In a new report issued by the Department of Health and Human Services, the figures are broken down: men who turn 65 in the next few years can expect to spend an average of $142,000 on long-term care needs (nursing and help with everyday functions like bathing, dressing, grooming, etc.). For women, that figure is $176,000. These figures are scary, but easy to understand when you factor in that men over 65 will require an average of 2.3 years of long-term care; women will require an average of 3.2 years.
Something that most Americans fail to understand is what Medicare and Medicaid cover. A shocking 56% of boomers mistakenly believe that Medicare will pay for long-term (sometimes called “custodial” care). They are sadly mistaken. Medicare was designed to cover medical care only. That means that if you need short-term care in a skilled nursing facility after a hospital stay, Medicare Part A will usually cover some of the cost for some part of your stay. It gets more complicated than that, but the point is that Medicare does not pay for the kind of long-term care included in the average cost figures above.
This misunderstanding about Medicare coverage may be why boomers don’t think long-term care is a high priority, especially as they move into their 60s and 70s. A 2019 Bankers Life study of middle-income boomers revealed the following:
· Just 18% of boomers report that planning for later life care is a high priority.
· 30% of boomers surveyed have less than $1,000 saved for a financial emergency.
· 74% of boomers are somewhat or very confident in their ability to manage their own and their spouse’s healthcare costs as they age, however, 79% of boomers have no money set aside specifically for their long-term care needs.
The upshot is that of the 1500 surveyed, nearly half of these middle-income boomers believe they will need care in later life, but almost 80% of them have no plan or savings toward it!
Some of this type of care takes place at assisted living facilities or residential care communities. These places are almost exclusively private pay. When a person’s financial resources have been exhausted, they can apply for Medicaid. If they qualify, they are most likely admitted to a skilled nursing facility because most assisted living facilities do not take Medicaid. Because of their hospital-like environment, close quarters (often two to a room), skilled nursing facilities are much less attractive or desirable. During early Covid surges, these are the places that were devastated by the rapidly-spreading virus and made the news on a daily basis because of the tremendous loss of staff and residents. Due to the lack of funds and/or the aversion to treatment in a nursing home, the most common place for care of those who need assistance is in the home, with care administered by family members for as long as the person requires it, often offset by whatever level of outside help can be afforded.
An interesting question to ask at this point is why there is so much misunderstanding about what Medicare pays for. The most likely reason is that most people don’t understand that Medicare was only set up to pay for “skilled” or “medical” care. The care that the vast majority of older people need is not “skilled.” In other words, one doesn’t need a license or special training to help someone dress or eat or take care of personal hygiene or groom themselves. Anyone can administer that kind of care. Sometimes it takes a strong person if lifting is required, but that is not a skill.
The best planning you can do for yourself is to save the money you will need for this kind of care (either in your own home or in a pleasant senior living community near your loved ones) or take out a long-term care insurance policy. Unless, of course, you are looking forward to having your daughter/son/niece/nephew/sibling leave their family or work in order to provide you the care you need.