Who pays the largest share of LTC expenses?

Approximately half (around 50%) of people who buy traditional long-term care insurance eventually file a claim and use their benefits.

Key Utilization Facts

• Claim Likelihood: Industry data shows that about 50% of policyholders who hold individual long-term care policies use them for claims lasting longer than one year.
• Claim Duration: About 15% of all claimants require care that lasts for more than five years.
• Care Starting Point: Most claims begin at home—roughly 71% of initial claims are for home care, while 16% start in a nursing home and 13% in an assisted living facility.

Market Context

• Low Overall Ownership: Only about 3% to 4% of U.S. adults (and roughly 3% of those over 50) actively hold stand-alone long-term care insurance, even though roughly 70% of adults turning 65 will need some form of long-term care in their lifetimes.
• Evolving Products: Due to past miscalculations in how many people would use policies, many traditional insurers left the market. Growth has shifted toward hybrid products, such as life insurance policies with chronic illness riders.

Suze Orman strongly advocates buying long-term care insurance to protect retirement savings from expensive eldercare costs.

Core Advice

• Protect your assets: Eldercare can cost $4,000 a month for home care and $8,000 or more for a nursing home. Medicare and health insurance cover very little of this long-term care.
• Learn from experience: Orman shares her personal story of paying over $1 million for her mother's late-life care because her mother never signed up for a policy. You can read more on The Case for Long-Term Care Insurance.
• Buy at the right time: She recommends looking into policies in your mid-to-late 50s when rates are lower and you are healthier.
• Affordability test: Only buy a policy if you can easily pay the ongoing costs, including a potential 40 percent increase in future premiums. Do not buy coverage if it hurts your basic retirement savings.

Types of Coverage

• Traditional policies: Work like health insurance, but premiums can rise over time.
• Hybrid policies: Combine life insurance or annuities with care coverage, though they usually require large upfront payments.
• Annuity alternatives: Fixed index annuities with care riders are an option if you do not qualify for traditional coverage.

The average monthly cost of long-term care in the United States ranges from $5,500 to over $10,700, depending heavily on the type of care required.

Monthly Costs by Type of Care

• Assisted Living Facility: Assisted living averages $6,200 per month for baseline custodial care and room.
• In-Home Care: A non-medical home health aide working roughly 44 hours a week averages about $6,673 per month.
• Nursing Home (Semi-Private Room): Skilled nursing facility care in a shared room averages $9,581 per month.
• Nursing Home (Private Room): A private room in a nursing home averages $10,798 per month.
• Adult Day Health Care: Part-time community-based care averages about $2,058 per month.

Key Factors Affecting Cost

• Location: Prices vary significantly by state. States in the Northeast and West Coast (like Alaska or New York) are much more expensive than South-Central states (like Louisiana or Texas).
• Level of Need: Specialized care, such as memory care or high-intensity private-duty nursing, adds significantly to base monthly expenses.
• Inflation: Long-term care costs historically rise by about 3% to 5% each year.

The two largest public funders and payers of long-term care (or long-term services and supports) in the United States are Medicaid and Medicare.

Overview of the Top Funders

• Medicaid: This joint federal-state program is the single largest overall payer of long-term care. It covers a large portion of paid long-term care expenditures, including nursing home care and home- and community-based services (HCBS). Eligibility usually requires meeting strict low-income and asset limits.
• Medicare: This federal program is the second-largest public payer. However, it generally only covers short-term, skilled nursing or rehabilitative care (up to 100 days) following a qualifying hospital stay. It does not cover long-term custodial or residential care.

(Note: Out-of-pocket or personal self-pay spending by individuals and families also accounts for a massive share of total non-tax-funded long-term care costs, but among public programs, Medicaid and Medicare lead by a wide margin.)

You do not completely lose your standard Social Security retirement or disability benefits when you move into a nursing home, but how your funds are handled depends on who pays for your care.

Standard Social Security and Medicare

• No loss of benefits: Your regular Social Security Retirement or Social Security Disability Insurance (SSDI) payments do not stop or decrease just because you live in a facility.
• Private pay: If you pay out-of-pocket or use private insurance, you keep your full check.
• Medicaid rules: If Medicaid pays for your nursing home care, most of your monthly income (including Social Security) must go toward the cost of your care.
• Personal needs allowance: You are allowed to keep a small amount of money each month, called a personal needs allowance, for personal items like clothing or haircuts.

Supplemental Security Income (SSI)

• Reduced payments: If you receive Supplemental Security Income (SSI) and Medicaid pays for more than half of your care, your SSI payment usually drops to $30 per month.
• Short-term stays: If your stay is expected to last 90 days or less and you need the money to maintain a permanent home, you can keep your full SSI benefit by filing the proper medical and living arrangement statements.