We frequently hear about the rising costs of health care, and those associated with long-term care are no different. The AARP Public Policy Institute recently compared long-term care services costs with senior citizens' median income and found care simply unaffordable for middle-income families.

Study findings
Here are the key takeaways from AARP's nationwide study:

  • Private-pay nursing home costs in 2012 averaged 252% of median age 65-plus household income.
  • The cost of home health services averaged 88% of median age 65-plus household income.
  • Out-of-pocket spending represents the third largest source of payment for long-term care services, after Medicaid and Medicare.

Sadly, these figures aren't surprising given the rising cost of long-term care, which has increased nearly 6% annually for the past five years. According to Genworth's 2012 Annual Cost of Care Survey (link opens PDF file), the national average cost of a private room in a nursing home is approximately $80,000 annually. Meanwhile, an assisted-living facility stay will run you roughly $40,000 per year, and home health services cost approximately $19 per hour.

If you think you're excluded from needing to worry about a long-term care event, think again. According to the U.S. Department of Health and Human Services, 70% of people who reach age 65 will need long-term care services at some point in their lives. Long-term care is defined as needing assistance with at least two of six "activities of daily living," like bathing and dressing, over an extended period of time. Advances in medicine allow us to live longer but increase our need for care when we're old and worn out.

So where does this leave hardworking folks planning for retirement? How do individuals prepare to pay for these high costs?

Our alternatives
Currently, we have four options when facing a long-term care event. They include relying on family, spending down our assets, going on Medicaid (which occurs after we go through our assets), and buying long-term care insurance. But if you don't want to be a burden on family and if the idea of watching your nest egg circle the drain after forking over thousands of dollars monthly -- for possibly many years -- doesn't sound appealing, then long-term care insurance is worth a look.

But it's no small task sifting through insurers. Not all long-term care insurers are created equal. Some boast vast amounts of actuarial data gathered from decades of experience in the business. Tenure in the industry has helped insurers like Genworth Financial (NYSE:GNW) and Manulife Financial (NYSE:MFC) predict and mitigate risks. Considered conservative underwriters, these two insurers are frequently highly rated by consumers.

On the other hand, some insurers purposefully underpriced premiums to gain market share. But after they couldn't meet their claims-paying obligations, they were eventually forced to sell their policies to other insurers. Recently, MetLife (NYSE:MET), Prudential Financial (NYSE:PRU), and Unum Group (NYSE:UNM) stopped selling new individual policies.

Foolish bottom line
The likelihood of needing to cover hefty long-term-care expenses in retirement poses a significant challenge for households. If you're financially fortunate enough to afford long-term care insurance, consider it. Determine your best course of action and come up with a plan given your financial situation, goals, and priorities. With escalating long-term care costs, insurance may be your only option for affording care, even with its substantial price tag.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.