A record number of Americans are crossing into retirement age and facing uncertainty about healthcare access and affordability. Making matters worse, both factors are getting worse. It’s not just a shortage of workers but skyrocketing disability claims and looming forecasts of rising dementia cases. And while some of these conversations are uncomfortable, the costs awaiting those unprepared are even more unsettling.

Thinking long-term: Americans wrongly assume that government healthcare plans like Medicare will cover the expense of nursing homes, group homes, or at-home care. And in the event that you, or somebody you love, need more hands-on care, the costs could drain your hard-earned savings. As a result, some Americans are paying into long-term care insurance (LTCI), a policy that offers a hedge against some of these big unknowns.

• Unlike disability insurance, LTCI exists to cover “medical, personal, and social expenses” for people who have prolonged illness or disability — whether from old age or other circumstances.
• LTCI policies look to offset some, or all, of the cost of care — assisted living facilities and in-home care exceed $5K/mo, while nursing home costs are encroaching on $9K/mo, per CareScout.

States Respond

Because of the rising long-term care costs, some states are mulling how to cover more Americans. In 2023, Washington became the first state to require compulsory enrollment in the state’s long-term care insurance program, WA Cares. At least seven other states are evaluating similar options — but they might not be a match for rising costs.

• In Washington, which has no state income tax, residents now pay 0.58% of their gross wages into WA Cares.
• However, to be eligible to collect from WA Cares, you have to be a state resident for at least three years — and the full benefit is just $36.5K, not enough to cover much care.

Forward-looking: States like California, Hawaii, and New York will likely be considering new payroll taxes for long-term care in the coming legislative term, even if most state policies are likely to offer bare-bones coverage. However, Americans could get their own LTCI coverage, which could allow them to be exempt from paying into state plans. For more information, check out resources from AARP.