Beyond BLS

Beyond BLS briefly summarizes articles, reports, working papers, and other works published outside BLS on broad topics of interest to MLR readers.

January 2024

Looking into the crystal ball: when should people consider long-term care?

Summary written by: John C. Roach

People in the United States are aging quickly, and much of this growth occurs among the 85 and older age group who rely the most on long-term healthcare. In their working paper, “Long-term care in the United States” (National Bureau of Economic Research, Working Paper 31881, November 2023), authors Jonathan Gruber and Kathleen M. McGarry analyze the long-term healthcare system in the United States.

The authors observe that our older population, who in many cases have the greatest need for long-term care, is often unable to afford this care because of limited resources. For most people, bearing most out-of-pocket costs and living on a fixed or reduced income make a long-term nursing home stay unfeasible. As for formal home care, Gruber and McGarry find that, on average, recipients receive 30 hours of care a week, for $35,000 annually. Alternatively, they find that nursing homes are the recipients’ only other option. Although they are less common and usually the least preferred, nursing homes are often essential when one needs 24-hour care.

Other findings reveal that in 2019, the average annual cost of a private nursing home room was $102,000. In 2018, approximately $171 billion was spent on nursing homes and $108 billion on home care costs. These figures do not include costs for informal home care. These informal caregivers are usually family members who provide care to both family and friends, typically without payment. The authors state that informal home care should be factored into the economy’s total cost of long-term healthcare.

Even though the cost of long-term healthcare is staggering, especially when the limited financial resources of the older population are considered, Gruber and McGarry determine that the U.S. government shoulders 63 percent of the total cost of healthcare through programs such as Medicaid and Medicare. In addition, out-of-pocket costs account for 19 percent and private insurance for 10 percent, respectively.

The authors conclude by noting that although other countries fund healthcare through dedicated taxes, the United States funds healthcare through government programs. These programs mostly target more general coverage and extend to long-term care only under certain circumstances. Gruber and McGarry speculate that the difficulty in affording long-term healthcare will likely increase as the U.S. population ages and that the need for such care will coincide with the older population’s inability to afford the costs.