Many Americans significantly underestimate the financial burden of caregiving for themselves or their loved ones when they can no longer perform essential daily activities such as cooking, cleaning, bathing, and other necessary tasks. This lack of awareness can lead to inadequate preparation for the inevitable costs associated with long-term care.
According to a recent study conducted by the nonprofit Employee Benefit Research Institute (EBRI), 80% of U.S. workers anticipating future caregiving responsibilities estimate the yearly expenses to be less than $100,000. This statistic reveals a concerning gap between expectation and reality in the context of long-term care.
Approximately 60% of survey participants believed that annual costs would remain below $50,000, with the most prevalent estimate (24%) falling between $11,000 and $24,999. Such misconceptions can lead to severe financial strain for families who find themselves unprepared for the high costs of care.
In reality, the average cost of long-term care is around $121,000 for less than a year of care, as reported by the U.S. Department of Health and Human Services (HHS). This figure reflects the expenses associated with paid long-term care services for typical Americans aged 65 or older, highlighting the stark contrast between perceived and actual costs.
Research indicates that around 56% of older Americans will require some form of long-term care for an average duration of 3.1 years, with the majority of that care being provided unpaid by family or friends. Most significant costs arise during an average period of nearly 10 months when professional services are needed, which can be a financial shock for families.
The EBRI survey, which measured long-term care preparedness and awareness, reveals a troubling trend regarding the readiness of U.S. workers for potential caregiving scenarios. Conducted in late 2024, the survey gathered insights from nearly 2,500 U.S. workers aged 20 to 74, shedding light on the widespread unpreparedness.
“These future caregivers are uncertain about the duration, cost, and funding sources for care,” stated Bridget Bearden, a research and development strategist at EBRI, in a statement. She noted that many individuals mistakenly believe that Medicare will cover a significant portion of long-term care expenses, which is not the case.
Understanding the Financial Responsibility for Long-Term Care
Americans face not only challenges in accurately estimating the costs associated with long-term care but also confusion regarding who is financially responsible for these expenses. This confusion can lead to significant financial strain when care is needed.
When EBRI asked participants about who they believed pays for long-term care, the most common response (43%) indicated Medicare as the primary payer. An additional 15% of respondents expressed uncertainty about the funding sources for long-term care.
However, it is crucial to clarify that Medicare, the federal health insurance program covering around 61 million Americans aged 65 and older, does not typically cover the costs for long-term care services. This misconception can lead to a false sense of security regarding financial preparedness for aging.
The findings from EBRI’s survey echo a persistent misunderstanding about the true financial responsibility for long-term care. For instance, a 2023 survey by the Kaiser Family Foundation (KFF) found that 41% of respondents mistakenly believed that Medicare primarily funds long-term care costs, highlighting the need for better public education on this topic.
In reality, it is Medicaid, the state-federal healthcare program designed for low-income individuals and families, that covers the majority of long-term care expenses. Unlike Medicare, which is available to most individuals upon reaching age 65 or qualifying for disability, Medicaid eligibility is determined by strict income and asset criteria established by each state.
For the majority of states, an individual’s maximum annual income from all sources—including Social Security benefits and retirement distributions—must be approximately $35,000, although some states impose even lower limits. Additionally, asset limits play a critical role in determining Medicaid eligibility, typically capped at around ,000. While a primary residence and vehicle are usually excluded, other assets like bank accounts and retirement accounts may disqualify individuals from receiving assistance.
Despite Medicaid’s significant role in financing long-term care, it covers only 43% of the average $120,900 cost, as per the HHS report. Alarmingly, only 18% of individuals with long-term care expenses actually qualify for and receive aid from the program, leaving many without the necessary support.
“Average long-term care costs can be out of reach for many Americans,” the authors of the HHS report stated, emphasizing the financial risks associated with aging.
Even with the availability of private insurance and government benefits for those who meet the qualifications, the HHS estimates that the average out-of-pocket costs for long-term care still amount to approximately $44,800 per person. This financial burden places older adults at significant risk, potentially leading to substantial out-of-pocket expenses and an increased reliance on unpaid support from family members.
Latest Insights and Resources for Financial Planning in Long-Term Care
Explore the Best Long-Term Care Insurance Companies for May 2025 to secure adequate coverage.
Discover that Americans spent a staggering $100 billion on prescription drugs in 2024 and learn why this year could see even higher expenses.
Understand how workers are losing over $4 billion annually in unspent FSA money, highlighting the importance of financial literacy and proactive planning.
