Banking, finance, and taxes

Long-Term Care Insurance Harder to Get, More Expensive as Care Costs Rise

Paul Ausick

Published: November 8, 2018 12:55 pm

Last Updated: January 11, 2020 3:11 pm

In 2004, the annual cost of care in an assisted living facility averaged $28,800 nationally. By 2018 that cost had ballooned to $48,000, an increase of 67% over the 15-year period. That represents an annual increase of 3.81%.

By 2033, 15 years from now, if costs rise at a somewhat slower annual rate of 3%, the annual cost of an assisted living facility will jump to $74,782, an increase of nearly 56%. The data were reported Thursday by Genworth Financial in its annual report on long-term care costs and trends. The report includes state-by-state costs for 2018 and future cost projections out to 2033 for various long-term care options.

Long-term care (LTC) insurance, once a popular way to provide the means to pay for long-term care such as assist living, nursing home and home care services, has declined in popularity as care costs have soared. LTC insurance premiums have risen to keep pace with costs, and many companies have abandoned the LTC insurance marketplace. Only about 10 companies still offer LTC policies, and those that have stayed in the market have been very choosy about who they will cover and that leaves many people out in the cold.

According to a report from the American Association for Long-Term Care Insurance, 20% of applicants under the age of 50 were denied LTC insurance coverage in 2017. Older Americans fared even worse: those between the ages of 50 and 59 were denied coverage 22% of the time, and 30% of those between the ages of 60 and 69 were denied coverage. These rates had all increased by 5% compared to rejection rates in 2013. For those between the ages of 70 and 79, coverage was declined 44% of the time in both 2013 and 2017.

Sales of LTC coverage fell to just below 70,000 individual policies in 2017, down from 750,000 policies sold in 2000. Insurers have begun offering so-called hybrid life-LTC insurance plans that dole out benefits based on accelerated or early payments of the death benefit. Last year about 260,000 of these hybrid policies were sold.

Even among the hybrid plans, however, premium costs have jumped, according to Forbes:

[N]ew premiums paid for these hybrid policies increased by over 18 percent, and about 25 percent of all new U.S. life insurance premiums paid went to policies that offer benefits for long-term care or chronic illness.

According to Genworth’s data, the three states where 2018 nursing home costs are highest are Alaska ($907 a day for a private room), Connecticut ($452) and Hawaii ($449). The three least expensive states are Oklahoma ($174) and Louisiana and Missouri ($182). The 2018 national median is $275 a day for a private room and $245 daily for a semi-private room.

Assisted living facilities cost the most in the District of Columbia ($9,266 a month), Alaska ($6,300) and New Jersey ($6,065). The least expensive locations are Missouri ($2,844), Arkansas ($3,037) and Georgia ($3,100). The national median is $4,000 a month.

Home health aides are most expensive in Hawaii ($30 an hour), Minnesota ($29) and Washington ($28). Aides are least expensive in Louisiana ($16) and Alabama and Mississippi ($17). The national median is $22 an hour.

The Genworth website includes data on all U.S. states, along with a calculator that projects costs out annually through 2033.