The Unexpected Costs of Long-Term Care

The quality long-term care you need may come at the expense of others if you don't plan ahead.

May 11, 2014 at 1:00PM

In a 2013 poll by the U.S. Senate Commission on Long-Term Care, more than 65% of Americans said they have done little or no planning for the cost of care or other future living expenses. The problem here lies in who then carries the burden if strategies are not in place for the growing population of long-term care recipients.

An aging nation
With more than 12 million people across the country dependent on long-term care, it's no surprise that the cost of these services reached the $317 billion mark in 2011, according to the commission's report to Congress. What is surprising are the untallied costs of long-term care.

Based on research from AARP, more than $450 billion worth of care is provided by informal, unpaid caregivers annually. Nearly 42 million of these unpaid helpers were primary caregivers, while a total of 62 million people provided some sort of care during the year in 2009. Though it's hard to calculate the total amount of unpaid care given, the $450 billion figure is four times the amount of paid care by both public (Medicaid) and private sources.

The concept of caring for a loved one is not a new one: A Pew Research poll found that 75% of Americans thought of taking care of an aging parent in need as a responsibility. But with 71% of baby boomers having at least one parent alive and 29% of boomers providing some sort of financial support to a parent in the past year, the burden of providing care can be overwhelming.

The working costs of tender, loving care
In 2013, Genworth Financial conducted a "Beyond Dollars" survey of unpaid caregivers on various aspects of their support of a loved one. The survey found that one-third of the caregivers surveyed gave 30 or more hours of their time each week, while the average time devoted to caregiving was 21 hours per week.

Sixty-five percent of the people surveyed noted at least one impact to their work life:

Career-Related Costs of Care-giving | The Motley Fool | Data from Genworth Financial Beyond Dollars Survey.

A study by the Organisation for Economic Co-operation and Development (OECD) found that intensive caregiving is associated with a reduction in labor force attachment for caregivers of working age, as well as higher poverty rates.

And it's not just the caregivers who are being affected: A 2004 estimate of the cost to U.S. businesses for lost productivity, new-hire training, and other related expenses rose to over $34 billion. Though the estimate is a decade old, it serves as a keen reminder that the costs of providing care for a loved one extend beyond the immediate family.

The loss of work hours, promotions, and even jobs leads to reduced income. Nearly 60% of the "Beyond Dollars" survey respondents said they had to reduce their own spending, with the average caregiver providing $8,000 of financial support to their long-term care recipient.

More than dollars
Not only are the financial livelihoods of unpaid caregivers at stake, but so are their health and well-being.

The stress of caring for a loved one can take a serious toll. Nearly half of the "Beyond Dollars" survey respondents said they had experienced negative feelings like depression. The OECD's research also suggests that providing long-term care to a loved one can result in higher incidences of mental health issues.

In terms of family life, the picture doesn't get much rosier for informal caregivers. Problems with spouses (37%) and other family members (34%) were widely reported in the "Beyond Dollars" survey as well.

The future of caregiving
The first wave of baby boomers have already begun to turn 65. Almost 10,000 are doing so daily -- and this will continue for the next 16 years. As the nation's largest generation ages, the demand for long-term care is bound to increase. Data suggests that 69% of people over the age of 65 will require some form of long-term care in their lifetime.

Long-term Care Distribution By Length of Required Help | The Motley Fool | Data from Commission on Long-term Care.

But as the population ages, the number of caregivers will begin to decline due to aging and other factors like small family sizes. The following chart from AARP helps show how the average long-term care recipient will have fewer family members or friends to depend on for unpaid care:

Caregiver Support Ratio

Source: AARP.

The sharp decline in available caregivers will likely result in magnified stress for those who are providing help to loved ones. It may also result in a higher percentage of older people turning to paid care, even if they haven't planned on how to pay the ongoing costs.

Future planning
With few Americans taking the necessary steps to prepare for the often-inevitable expense of a long-term care requirement, the costs (financial or not) are being passed on to those left providing the care and support. Though the thought of needing long-term care may not be a pleasant topic for you our your loved ones, no retirement plan should be considered complete until the topic of ongoing costs of care are addressed.

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