Few Americans have long-term-care insurance. They face paying for long-term care out-of-pocket—the largest financial risk that most Americans face without the protection of an insurance policy to spread the potential burden of this uncertain need.

According to the American Health Care Association, in 1999, the average American man could expect to spend $56,895 on long-term care over his lifetime, and the average American woman more than double that—$124,370. The price of long-term care is increasing around 7 percent a year. A poll conducted by the National Academy of Social Insurance found that nearly three-quarters of baby boomers and seniors are concerned either a great deal or a fair amount about paying for long-term care. Seven in ten believe that government should do more to help people meet the costs of long-term care. (See Program Results on ID# 046880.)

It is not surprising that American public policy has shied away from addressing this financial problem. Any comprehensive solution that treats the wealthy and the poor equitably will be complex, potentially controversial and expensive to implement.

Instead of considering comprehensive solutions, by default, the nation has made the state-based Medicaid program the safety net for the financing of long-term care: for elderly who are poor or who become poor due to high out-of-pocket costs of long-term care, the Medicaid program pays for a range of community and institutional services.

This reliance on Medicaid has left middle-class elderly people at constant risk of becoming impoverished and has placed unsustainable financial burdens on state budgets. (See page "State Public/Private Partnerships Experiment with Long-Term-Care Insurance" for developments in the field of long-term-care insurance that may ameliorate this situation for the middle class.) As of federal fiscal year 2004, Medicaid represented 16.9 percent of all public expenditures in the typical state.

This Topic Summary synthesizes Program Results on the Robert Wood Johnson Foundation’s (RWJF) support for work on the financing of long-term care:

• Long-Term-Care Policy Reform—Transforming long-term care will require fundamental reform at the federal and state policy levels. RWJF supported a study panel that examined how federal policy can and should address the long-term-care needs of America’s elderly population. A second project summarized here provided funding for state policy officials to develop innovative programs to address specific needs within their states.
• Long-Term-Care Policy Research—Studies summarized here examined the costs of providing long-term care as well as federal and state policies for financing long-term-care services.
• Long-Term-Care Insurance—Long-term-care insurance can help individuals plan for and finance services when they become frail or disabled. RWJF’s $16-million Program to Promote Long-Term Care Insurance for the Elderly worked with eight states to develop public/private partnerships that provided long-term-care insurance—this model is now available under 2005 federal legislation to all 50 states. RWJF also supported a study of the effect of long-term-care insurance on the quality of care.
• Other Models for Long-Term-Care Financing—The Building Health Systems for People with Chronic Illness national program supported several projects that integrated acute and long-term care and their funding streams. Additionally, RWJF supported a project that promoted reverse mortgages as a method of financing long-term care.