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Annual Report on Long-Term Care Insurance: 2021

Few Americans Well-Informed on Cost of Long-Term Care Insurance

· Updated: May 28, 2021

While the average person is well aware they'll probably need more medical care later in life compared to their younger years, there's an area many people may be overlooking: long-term care.

Long-term care services cover areas that are often not funded by Medicare or other private health coverage, and they often involve helping people meet personal care needs over an extended period of time.

While each plan has its own specific coverage and benefit limits, in general, long-term care (LTC) insurance helps pay for services related to a chronic illness, disability, or injury. This can include assistance related to the normal aging process, and it's more likely than not that the average person will require these services as they age.

As a follow-up on research we first conducted in 2020, we surveyed about 1,000 people 50 and older regarding their plans for purchasing long-term care insurance coverage.

  • About 40 percent of people have already purchased long-term care insurance or are planning to, which represents a slight decline from 2020.
  • Only one-in-three Americans were able to accurately predict the typical annual cost of an LTC insurance policy. More than half of Americans indicated LTC insurance plans aren't affordable, which is related to inaccurate assumptions about cost.
  • Despite hesitation around cost and affordability, only 25 percent of people feel LTC insurance is not a good value.

In a Year of Upheaval, Perceptions & Plans for Long-Term Care Insurance Don't Change Much

The percentage of people who said they had already or were planning to purchase an LTC insurance policy fell by a few percentage points over the course of 2020. However, the percentage of people who said they definitely would not buy an LTC policy did not change.

These findings could be considered surprising given the continued controversies surrounding care of older adults during the COVID-19 pandemic, especially those residing in nursing homes, as well as other huge societal swings in other areas that have been caused by the crisis. It's possible that this is because our 2021 installment was conducted amid increasingly speedy rollouts across the country of multiple COVID-19 vaccines, while the 2020 edition came in the early, confusing days of lockdowns in March 2020.

Purchasing plans by year
Plan 2020 2021
Already purchased 27% 22%
Plan to purchase 16% 18%
Don’t plan to purchase 39% 39%
Undecided 19% 21%

Combining those who have already or will purchase LTC coverage, this group outweighs those who won't buy LTC coverage, while another one-in-five respondents in 2021 said they hadn't made their minds up either way.

Similarly, fewer respondents this year rated LTC insurance as a necessity, and in later sections, we'll explore people's perceptions of what LTC insurance covers and how much it costs, which are major factors here.

While the percentage of people saying LTC is either “extremely” or “very” necessary did fall by a small percentage, only three percent of Americans said such coverage is “not at all necessary.”

Predicted Costs & Perceptions of Value

Deepening a finding from 2020, many Americans are ill-informed about the costs of LTC insurance, and this is no doubt driving their perceptions of affordability and value.

Many factors influence what a person can expect to pay per year for an LTC insurance policy. However, on average, this type of coverage costs less than $200 per month. According to the American Association for Long-Term Care Insurance, the average single 55-year-old man can expect to pay about $1,700 per year, while the average single 55-year-old woman will pay about $2,600.

In 2020, only about one-third of respondents pegged the annual premium cost for LTC coverage at $2,000-$3,000, and about one-in-five estimated the costs as being less than $1,000 per year.

Predicted annual LTC premium cost by year
Range 2020 2021
<$1,000 25% 20%
$1,000 16% 17%
$2,000 21% 17%
$3,000 16% 16%
$4,000 7% 8%
$5,000 5% 8%
>$5,000 10% 14%

When considering their own finances, more than half of respondents in 2021 said LTC coverage isn't affordable, which represents a slight increase from 2020.

LTC premium affordability rating by year
Rating 2020 2021
Affordable 17% 18%
Unaffordable 50% 52%
Not sure 33% 30%

Fewer than 25 percent of respondents this year said that LTC insurance coverage represents “extremely good” or “very good” value for the money, and this rate is nearly identical to what our 2020 survey found.

LTC value for money rating by year
Rating 2020 2021
Extremely good value 9% 8%
Very good value 17% 16%
Somewhat good value 31% 31%
Not a good value 14% 19%
Not at all a good value 7% 6%
Not sure 22% 20%

Among respondents who rated LTC coverage as affordable, 55 percent said they thought a plan would cost less than $2,000 per year. Conversely, nearly 40 percent of those who said LTC plans aren't affordable estimated an annual cost of more than $4,000.

Top Reasons Driving Long-Term Care Purchases

The most commonly cited reason for people to have purchased or to be planning to purchase LTC coverage was ensuring they would not present a burden to their family members in the event that they need extended care.

Planners felt this need more acutely, with 68 percent of who hadn't yet gotten LTC coverage citing this as one of their three biggest factors for deciding they will purchase coverage.

This was also the top answer for those who already have coverage, but the rate falls to 58 percent for that group, as they cite other factors at higher rates, including protecting retirement savings and getting better coverage than what's offered by their medical insurance.

Biggest factors influencing LTC coverage purchase
Factor Already purchased Planning to purchase
Protecting retirement savings 48% 39%
Tax deductions 24% 20%
Better coverage than health plan 29% 21%
Benefits health plan doesn’t cover 47% 50%
Preventing burden on family 58% 68%
Lower rates while still healthy 26% 27%
Other 3% 2%

The potential benefits they were most looking forward to also varied for policy owners and planned purchasers, though there were a few areas in which they aligned. For example, the importance of coverage for in-home services like skilled nursing care or physical therapy was cited at a similar rate.

On average, about 21 percent of those who have already purchased an LTC plan cited among the most important benefits skilled nursing care, personal aides, physical therapy, and occupational therapy offered inside their home. The rate for planners was nearly identical (20 percent).

Other notable differences included Alzheimer's care benefits, which planners valued more (22 percent vs. 15 percent), home modifications (16 percent for planners, only eight percent for purchasers), and dental care (13 percent for purchasers and seven percent for planners).

Among those planning to purchase LTC coverage this year compared to last year, the rate at which they indicated in-home care services were important remained steady at an average of 21 percent.

So, we don't yet know if this is a consistent level of support for in-home services or if the continued rollout of the COVID-19 vaccine will make people even more comfortable having care providers inside their homes. Our first installment was conducted in the early days of 2020 lockdowns in many states.

Why Is Long-Term Care Coverage Important?

Many of the services covered by LTC insurance plans are not covered by Medicare, Medicaid, or other private medical insurance plans. In fact, receiving better coverage or benefits medical plans don't include was a key purchase factor for at least one-third of people who have bought this coverage already, according to our survey.

The U.S. Department of Health and Human Services estimates that more than half of people (52 percent) who turned 65 between 2015 and 2019 will need long-term care services at some point in their lives. Almost 14 percent of people in the age group will require this care for at least five years.

Women are more likely than men to require these services, which is likely related to their longer average lifespans. About 58 percent of women will require long-term care compared with 47 percent of men.

Whether care is provided in-home or at a nursing care facility, it doesn't come cheap. Our recent analysis found that the average annual cost for a semi-private room at a nursing facility is more than $93,000.

The majority of the costs of formal long-term care services, meaning services performed by a paid individual and not a family member or friend, are direct expenses incurred by families. In fact, according to HHS data, a 65-year-old who requires long-term care services for the remainder of their life can expect to spend nearly $150,000 personally or through private insurance coverage.

Conclusion

More than half of people 65 and older will, at some point in their lives, need care that may not be covered by Medicare, Medicaid, or private medical insurance plans. Depending on the extent of their chronic illness, disability, or other needs, the potential cost could be far more than the average family can bear.

Considering that the average person can expect to spend about $180 per month to cover many if not all of these services, the fact that so few people who are at or near retirement have purchased plans should remain a concern.

Methodology

To understand U.S. adults' perceptions of the value of long-term care insurance coverage and their plans for purchasing policies for themselves, we surveyed 1,015 people at least 50 years of age.

Our survey was conducted online in March 2021 and has a margin of error of +/- 4 percentage points.