Brace yourself: the cost of long-term care in America is skyrocketing, and most are unprepared for the financial hit.
According to Morningstar, the crisis in long-term supports and services (LTSS) is intensifying, driven by an aging population, spiraling costs, and a dire shortage of care workers, with no national funding solution in sight.
Let’s start with the numbers. The U.S. Census Bureau projects the population aged 85 and older will nearly double by 2035, ramping up demand for care.
Costs are already out of control. In 2024, some LTSS services saw price hikes as high as 10%, per CareScout data, while costs overall are rising at triple the rate of inflation due to supply shortages.
Who’s footing the bill? Medicare, which handles most medical needs, doesn’t cover daily living assistance like bathing or dressing, leaving many shocked at out-of-pocket expenses. KFF polling reveals a dangerous misconception: 23% of adults—and 45% of those over 65—wrongly assume Medicare will pay for nursing home care during long-term illness or disability.
The care industry is also bleeding workers. With a median hourly wage of just $16.72 in 2023, according to PHI, direct care jobs struggle to attract talent, and immigration policies may tighten the squeeze as 28% of the workforce are immigrants, per KFF.
Experts warn this labor gap could deepen with potential immigration crackdowns under the current administration. Meanwhile, PHI projects 817,000 new direct care jobs by 2032—the most of any U.S. job category.
Medicaid, covering 61% of LTSS per KFF, faces its threats. A House-passed bill proposing funding cuts could force providers to drop Medicaid patients, hike private rates, or shutter facilities entirely.
The financial fallout is stark. Morningstar research shows 41% of households may run out of retirement funds when LTSS costs are factored in, compared to just 26% without them.
Single women are especially vulnerable—52% are projected to fall short, as noted by Spencer Look of Morningstar, who said, “It’s well known that women live longer.” He added, “Single women tend to have less financial resources than those who are part of a couple.”
Planning is woefully inadequate. KFF data shows only 28% of near-retirees have saved for LTSS, and fewer than half of adults have even discussed care plans with loved ones.
Washington’s response has been lackluster. Proposals to expand LTSS via Medicaid or Medicare, or shift to home-based care, have stalled due to Republican resistance to new taxes, while the bipartisan Well-Being Insurance for Seniors to be at Home Act lacks funding consensus.
Some states are stepping up—Washington state’s Wa Cares Fund, funded by a 0.58% payroll tax, offers a model, while others tinker with Medicaid reforms or tax credits for private insurance. Private LTSS insurance, costing $16,000-$18,000 yearly and requiring medical exams, remains out of reach for many, though hybrid life-LTSS policies are emerging.
What can you do? Start by facing reality—43% of baby boomers will need LTSS, per Morningstar, so discuss options with family, explore state programs, and consider saving aggressively in tools like Health Savings Accounts, which may see expanded rules under a pending House budget bill.