According to a recent survey by the American Council of Life Insurers, a significant portion of middle-class households—approximately 39%—hold a widespread misconception that Medicare will cover long-term care expenses. This fundamental misunderstanding poses a substantial financial risk to retirees, as Medicare generally does not pay for the medical and nonmedical care associated with chronic illnesses or disabilities that constitute long-term care needs.
For households facing long-term care expenses, three primary funding mechanisms exist: Medicaid, private insurance, or self-funding. However, data suggests that many middle-class Americans may lack the financial resources to adequately self-fund these costs. The AARP Public Policy Institute reported in March that the affordability of long-term care has deteriorated for middle-income households, with nursing home care effectively becoming unaffordable across much of the country. Home care costs have increased 39% since 2021, outpacing the overall inflation rate.
While Medicare does not generally cover long-term care services, it provides limited assistance in specific situations. The program may cover up to 100 days of skilled nursing facility care following a qualifying hospital admission of at least three consecutive days. Medicare does not, however, cover ongoing nursing facility care, custodial care, or extended care that does not follow a qualifying hospitalization. Federal data indicates that approximately 70% of individuals turning 65 will need some form of long-term care services during their lifetime.
Medicaid, a separate federal program for low-income households, serves as the primary payer for nursing facility care among low-income populations. However, accessing Medicaid for long-term care requires households to deplete their financial resources first, and eligibility rules vary significantly by state. Financial experts recommend that individuals begin planning for long-term care expenses in their 50s or 60s, considering options such as purchasing insurance policies while younger to secure lower premiums. According to recent data, nursing home care costs approximately $315 daily on a national median basis.
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