Long-term services and supports (LTSS) are essential for individuals facing aging, chronic illnesses, or disabilities. These services encompass a wide spectrum of paid and unpaid assistance, addressing both activities of daily living (ADLs) like eating, bathing, and dressing, and instrumental activities of daily living (IADLs) such as meal preparation, medication management, and housekeeping. LTSS programs and services are delivered in various settings, ranging from nursing facilities to private homes, and can span from a few weeks to many years, depending on individual needs and healthcare coverage.
Millions of Americans rely on LTSS. Estimates from the Congressional Budget Office (CBO) indicate that over 6 million people utilize paid LTSS in home and community-based settings, while more than 2 million receive care in institutional settings. Furthermore, a significant, though unquantified, number benefit from unpaid LTSS provided by family, friends, and neighbors. While Medicare, the federal health insurance program for seniors and many disabled individuals, covers a broad range of healthcare services, it generally does not cover long-term care. Consequently, most individuals needing paid LTSS either pay out-of-pocket or rely on Medicaid for coverage. Medicaid programs are mandated to cover LTSS in nursing homes, but coverage for home and community-based services (HCBS) is largely optional and varies significantly by state, with complex eligibility criteria based on income, assets, and functional limitations.
Beyond financial concerns, the LTSS sector faces persistent workforce challenges, significantly worsened by the COVID-19 pandemic. As of January 2024, employment in most LTSS settings remained 4% below pre-pandemic levels. The Biden Administration has introduced rules aimed at strengthening the LTSS workforce and improving access to services, including new staffing requirements for nursing facilities and initiatives to increase direct care worker compensation through Medicaid. Many states have also responded by increasing payment rates for nursing facilities and HCBS providers to attract and retain staff.
1. The High Cost and Limited Insurance Coverage of Long-Term Care Services
Long-term care services represent a substantial financial burden for many Americans. Unlike typical healthcare services, a larger proportion of LTSS costs are paid directly by individuals, primarily because private health insurance generally excludes ongoing LTSS, and Medicare coverage is limited. The Department of Health and Human Services projects that an average 65-year-old today will face approximately $120,900 in future LTSS expenses, with families bearing over a third of these costs themselves.
In 2023, the median annual costs for various LTSS programs and services were considerable: $62,400 for homemaker services, $68,640 for home health aide care, $116,800 for a private nursing home room, and a staggering $288,288 for round-the-clock home health aide services. These figures significantly exceed the median income for Medicare beneficiaries (around $36,000 in 2023) and would rapidly deplete the median savings ($103,800). While nursing home care is often more expensive than some home-based services, it includes 24/7 monitoring and room and board. For individuals in residential settings, housing costs are separate from LTSS expenses. Assisted living facilities, with an average annual cost of $64,200, typically cover only room and board, with LTSS costs adding to the total. Many individuals may require multiple services concurrently, leading to annual costs comparable to nursing home or round-the-clock care.
2. Medicaid: A Major Payer for Long-Term Care, Predominantly for Home and Community-Based Services
Medicaid plays a pivotal role in financing LTSS in the United States. In 2022, over $400 billion was spent on LTSS nationwide, with the majority allocated to home and community-based services (HCBS), totaling $284 billion, while institutional LTSS, such as nursing facility care, accounted for $131 billion. Medicaid financed over half (61%) of the total US LTSS expenditure in 2022. Out-of-pocket spending represented 17%, and other public and private payers covered the remaining 21%.
3. Shifting Landscape: Prevalence of Home and Community-Based Services in Medicaid LTSS
Among the approximately 6 million individuals utilizing Medicaid LTSS in the U.S., the majority receive HCBS, and over half are under the age of 65. In 2021, three-quarters of the 5.7 million Medicaid LTSS recipients were enrolled in HCBS programs, reflecting a nationwide trend toward prioritizing community-based care. This shift is a result of initiatives aimed at expanding access to HCBS and addressing the historical “institutional bias” within Medicaid. Data analysis reveals a significant increase in HCBS spending within Medicaid LTSS, rising from a mere 10% in 1988 to 62% in 2020. While HCBS utilization surpasses institutional care nationally, some states, like Florida, still serve more individuals in nursing facilities and institutional settings than in community-based programs.
A significant portion (57%) of Medicaid LTSS beneficiaries are younger than 65. Specifically, 63% of HCBS users are under 65, compared to 30% of institutional LTSS users. Although LTSS is often associated with the elderly, many younger individuals require these services due to chronic illnesses or disabilities. Within the HCBS population, 14% are under 19, and 49% are between 19 and 64 years old. In contrast, over two-thirds of institutional LTSS users are 65 or older.
4. The Substantial Financial Impact of LTSS on Medicaid Spending
Medicaid enrollees who utilize LTSS incur significantly higher Medicaid expenditures compared to those who do not. In 2021, per-person Medicaid spending for institutional care users was $53,666, and for HCBS users, it was $38,275. These figures are approximately eight times greater than the average Medicaid spending for enrollees not using LTSS ($5,372). This average for non-LTSS users is influenced by children, who constitute 40% of Medicaid enrollees and generally have lower per-person costs. However, even children using LTSS exhibit ten times higher spending compared to those not using LTSS ($30,933 versus $3,300). Individuals receiving Medicaid LTSS, although representing only 6% of total Medicaid enrollment, account for 34% of combined federal and state Medicaid spending, encompassing LTSS, managed care premiums, and other healthcare services. In 2021, Medicaid spending for the 5.7 million LTSS recipients totaled nearly $234 billion. The high per-person Medicaid spending for LTSS users reflects both the inherent costs of LTSS programs and the more complex healthcare needs of this population, leading to increased utilization of various medical services and medications.
5. Waiting Lists for Medicaid Home and Community-Based Services: A Barrier to Access
Home and community-based services (HCBS) waivers are crucial for states to offer a diverse range of LTSS benefits. While states are mandated to cover home health services, they have the option to include personal care and other services like private duty nursing within their Medicaid state plans. State plan benefits are generally accessible to all eligible Medicaid enrollees. HCBS waivers enable states to expand personal care benefits and offer additional services such as adult day care, supported employment, and non-medical transportation, but enrollment can be capped, leading to waiting lists when demand exceeds available slots. These waiting lists reflect state-specific choices regarding populations served, services offered, resource allocation, and workforce availability. A recent Medicaid access rule mandates states to report the number of individuals on “1915(c)” waivers starting in 2027.
A 2023 survey revealed over 692,000 individuals on waiting lists or interest lists for Medicaid HCBS programs. The majority of those on waiting lists have intellectual or developmental disabilities (I/DD), especially in states that don’t pre-screen for waiver eligibility. In states without pre-screening, 88% of waiting list individuals have I/DD, compared to 51% in states that do screen. Overall, people with I/DD constitute almost three-quarters (72%) of the total waiver waiting list population. Seniors and adults with physical disabilities represent one-quarter (25%), while a smaller percentage (3%) includes medically fragile children, individuals with traumatic brain or spinal cord injuries, mental illness, or HIV/AIDS. It is important to note that individuals on HCBS waiting lists are not representative of the broader Medicaid population or even the general HCBS user population. While most on waiting lists have I/DD, KFF data shows that individuals with I/DD comprise less than half of those actually served through 1915(c) waivers, the largest source of Medicaid HCBS spending.
6. Limited Uptake of Private Long-Term Care Insurance
Private long-term care insurance (LTCI) remains a niche market. In 2021, approximately 7.1 million people in the US paid premiums for private LTCI, encompassing standalone policies and hybrid products combining life insurance or annuities with LTCI coverage. In 2021, average LTCI premiums were $1,860 annually. While seemingly low compared to private health insurance premiums or LTSS costs, LTCI is purchased years before potential need, and most policyholders pay premiums for extended periods without claiming benefits. This contributes to the relatively low number of individuals filing LTCI claims – around 80,000 in 2021. (However, a cumulative 1.5 million individuals have filed LTCI claims since its inception). It’s not uncommon for policyholders to pass away without utilizing benefits or to lapse coverage due to rising premiums or other factors before qualifying for benefits. Hybrid products linking life insurance with LTCI aim to address some of these concerns, but standalone policies still dominated the market in 2021 (6.3 million).
Unlike private health insurance, employer-sponsored LTCI is uncommon. A KFF survey in 2023 indicated that only 25% of firms offering health benefits also offered LTCI, and only 39% of those contributed to coverage costs. LTCI policies often have limitations, including lack of inflation protection, restricted service eligibility, incomplete expense coverage, and lifetime limits. Some policies also lack non-forfeiture benefits, meaning individuals may lose all premiums paid if policies lapse, especially concerning for those who enroll when younger and face premium increases. Furthermore, insurer solvency risks exist.
7. Exacerbated Workforce Shortages in the LTSS Sector
The COVID-19 pandemic intensified pre-existing workforce shortages within the LTSS sector. While overall healthcare employment initially declined sharply at the pandemic’s onset and subsequently rebounded in most sectors, LTSS employment continued to decline well into 2021, and nursing facilities into early 2022. Recent analysis from the Peterson-KFF Health System Tracker reveals that the LTSS workforce (encompassing nursing and residential care) was 4% smaller in January 2024 compared to February 2020. The skilled nursing care setting experienced the most significant workforce reduction, remaining 9% below pre-pandemic levels. A 50-state survey of Medicaid HCBS programs revealed widespread workforce shortages across all states, particularly among direct support professionals, personal care attendants, nursing staff, and home health aides. Many states (43) also reported permanent HCBS provider closures in the past year, partly attributed to staffing shortages. These LTSS jobs are physically and emotionally demanding, and direct care workers frequently cite low wages that do not adequately reflect the work’s intensity.
Beyond the paid workforce, millions of unpaid family caregivers provide essential care for older adults and individuals with disabilities. In 2021, approximately 38 million family caregivers provided an average of 18 hours of care per week. Family caregivers often experience high stress levels, balancing caregiving with work and other responsibilities, and face financial insecurity due to lost income. While driven by love and duty, many family caregivers provide care due to lack of access to paid services or are providing more care than they are equipped to handle.
8. Declining Hours of Care in Nursing Facilities
Staffing adequacy in nursing homes has been a long-standing concern. The high COVID-19 mortality rates in nursing facilities underscored the severe consequences of insufficient staffing. Between July 2015 and July 2023, average care hours per nursing facility resident decreased by 9%, from 4.13 to 3.77 hours. Although the decline was consistent throughout the period, a brief increase occurred in 2021, reflecting a sharper decrease in resident numbers compared to staff hours between 2020 and 2021. Concurrently, both the average number of deficiencies and the proportion of facilities with serious deficiencies increased, potentially linked to reduced staffing levels.
On April 22, 2024, the Centers for Medicare and Medicaid Services (CMS) finalized a rule establishing new minimum nurse staffing levels for nursing facilities. The rule mandates at least 3.48 nursing care hours per resident day, phased in by 2026 for urban and 2027 for rural facilities. By 2027/2029 (urban/rural), 0.55 hours must be from a registered nurse and 2.45 hours from a nurse aide. The remaining 0.48 hours can be provided by any nurse staff type, including LPNs. The rule also requires 24/7 registered nurse presence, strengthens staffing assessments and enforcement, mandates reporting on Medicaid payments for institutional LTSS, and allocates $75 million for nurse aide training. KFF estimates suggest that only 19% of nursing facilities currently meet the new minimum staffing hour requirements.
9. State Initiatives to Enhance Home-Based Care Payment Rates
States are actively addressing workforce shortages in HCBS programs. A KFF survey revealed that all responding states have implemented strategies to tackle these shortages. The most common approach (48 states) is increasing payment rates for HCBS providers. However, even with these increases, most states with time-based payment rates for personal care providers still pay under $20 per hour. While some states have made payment rate increases permanent, others reported temporary increases for at least some worker categories. Other strategies include developing or expanding worker education and training programs (42 states) and offering recruitment and retention incentives (41 states). Less common strategies include raising the state minimum wage (20 states) and offering paid sick leave (19 states). States are also exploring other initiatives like job seeker-employer platforms, social media campaigns, and targeted outreach. Another survey indicated that most states increased payment rates for both nursing facilities and HCBS in 2023 and 2024.
The Biden Administration has also taken federal action to increase direct care workforce payment rates. A final rule on Medicaid access mandates states to demonstrate adequate HCBS payment rates to ensure a sufficient workforce and that at least 80% of total payments for specific HCBS are allocated to direct care worker compensation. Similarly, the nursing facility staffing rule requires state Medicaid agencies to report the proportion of institutional LTSS Medicaid payments directed to direct care worker and support staff compensation.
10. Growing Demand for Long-Term Care Services due to an Aging Population
Demographic trends indicate a significant increase in the older adult population, driving future LTSS demand. KFF data projects that the percentage of the US population aged 65 and older will rise from 17% in 2020 (56 million) to nearly 25% in 2060 (95 million). The proportion of older adults in their 80s, 90s, and beyond will also increase. By 2060, it’s projected that one in twenty Americans will be 85 or older, a group with the highest likelihood of needing and utilizing LTSS. Advances in assistive and medical technologies, enabling greater independence and longevity for individuals with disabilities, coupled with the aging baby boomer generation, will likely further escalate LTSS needs in the coming decades. An HHS report found that after age 65, over half of individuals will eventually require assistance with at least two ADLs, over half will utilize some form of paid LTSS, and over a third will need nursing home care. LTSS needs and utilization are anticipated to be highest among individuals with lower lifetime earnings, who have fewer financial resources to cover these costs. Research also indicates that Black and Hispanic older adults are more prone to developing moderate to severe LTSS needs compared to White older adults and possess considerably fewer financial resources to afford care. Racial and economic disparities in LTSS access and affordability may have long-lasting intergenerational consequences, disproportionately affecting communities of color. The aging population presents significant challenges concerning LTSS coverage, affordability, financing, and workforce capacity to meet the escalating needs.
In conclusion, analyzing the types of programs and services available for long-term care populations reveals a complex landscape characterized by high costs, significant reliance on public funding (especially Medicaid), a growing emphasis on home and community-based care, persistent workforce shortages, and increasing future demand driven by demographic shifts. Addressing these challenges will require comprehensive policy solutions focused on improving access, affordability, workforce development, and sustainable financing mechanisms to ensure that all individuals needing long-term care can receive the support they require.
