Why is LTC A Pressing Issue?

Long-term care is an important concern for several reasons:

• The demographics of the baby boom lead to projections of a population explosion in the higher age groups. In 2000, approximately 34 million Americans, 12.6 percent of the population, were older than age 65. By 2030, that age group will have grown to over 70 million, more than 20 percent of the population. Further, the population at greatest risk of needing LTC, those 85 years old and older, is expected to grow in number from 4.3 million in 2000 to between 8.9 and 10.1 million in 2030.
• Medical advances, ironically, have helped to convert many critical short-term health problems into long-term health problems. New techniques and technology save the lives of heart attack and stroke victims, premature babies, and many other people whose diseases or injuries would have been fatal in the past. Yet, while modern medicine prevents death, it often cannot restore health. Particularly for older people, life-saving medical treatment often is the threshold to months or years of custodial care. And even without a major health "event," some people's health and strength deteriorate slowly and steadily. Those who think the need for long-term care "won't happen to me" stand on shaky ground; for example, at age 65, there is a 40 percent probability of staying in a nursing home sometime before death. More will need some type of support at home.
• Changes in family structure have made it less likely that long-term care can be provided at home by the patient's family. Few people enjoy the built-in support system of a large, local extended family to provide help with occasional nonmedical affairs, such as financial paperwork, meal preparation, or transportation, much less physical care or 24-hour supervision. And now, women, who were the traditional informal caregivers, regularly work outside the home for pay. Women who work outside the home, some 59.5 percent of women age 16 and over in 2003, cannot necessarily be counted on to care for their ailing parents, in-laws or husbands. Even if family members and friends are able to provide LTC, there are other costs to consider such as personal stress, the need to reduce or terminate employment, and out-of-pocket expenses for travel, supplies and babysitting for other dependents.
• The high charges for LTC services are surprising, if not shocking. Long-term care costs vary considerably depending on location, and are beyond the means of many Americans. (See Table 1.)

  Table 13–1: Privately Paid LTC Costs in Selected U.S. Cities, Mid-2004

  	Annual Cost of Nursing Home Confinement (semi-private rooms)	Annual Cost of Five Four-Hour Home Health Aid Visits/Week (at average hourly rate)
  Atlanta, GA	$49,275	$17,680
  Chicago, IL	$45,260	$16,640
  Dallas/Fort Worth, TX	$39,785	$16,640
  Milwaukee, WI	$63,510	$22,880
  New York City, NY	$109,865	$15,600
  Philadelphia, PA	$76,650	$18,720
  Phoenix, AZ	$51,465	$19,760
  San Francisco, CA	$74,825	$21,840
  Seattle, WA	$69,715	$21,840
  Based on daily and hourly data from the MetLife Market Survey of Nursing Home and Home Care Costs, September 2004.

• Existing medical coverage is inadequate to pay for long-term care. Government and private medical insurance programs cover nursing home care and home health care, but generally for limited time periods or as a response to an acute medical problem. Such benefits generally are capped. For example, Medicare covers up to 100 days in a skilled nursing facility per "benefit period" (effectively a service interval involving an illness or injury requiring hospitalization) and in very restricted circumstances, and Medicaid is only available to individuals below certain income thresholds and those who have "spent down their assets." Other coverages such as long-term disability insurance and pension plans are typically not structured to pay the significant out-of-pocket costs associated with purchased LTC services. Since most insurance plans provide little or no coverage for LTC expenses while traditional sources of LTC caregiving are contracting, individuals and families are exposed to a potentially huge financial risk.
• Low public awareness about the risks and costs of long-term care has been an ongoing concern for policymakers and industry experts. Unless someone's family or friends have had to address a long-term care situation, he or she is unlikely to recognize the amount of physical and emotional attention required, may underestimate actual LTC charges, and may believe that Medicare, Medigap or other insurance policies will cover the full cost of long-term care. In the past, surveys found that about half the population had the misconception that traditional insurance products would cover this care although this is now changing.
• Government help is limited. The 2002 offering by the federal government of a private, participant-paid group LTC insurance (LTCI) plan for its workforce, retirees and their families sent the message that government would not provide broad, publicly financed LTCI for all citizens. And it is unlikely that this will change in the foreseeable future because of the high cost of such programs.

Since most people cannot save enough money to cover ongoing LTC costs, private LTC insurance may serve as the only realistic option for people to pay for personal care and certain health care services if and when they are needed. More Americans are recognizing this need—from 1987 through 2001, almost 8.3 million LTC insurance policies had been sold.^[7] And at the end of 2003, over six million persons retained LTC coverage, almost one-third of whom were in group (typically employer-sponsored) plans.