What you need to know
As Baby Boomers continue to live longer than previous generations, demand for long-term care for Seniors is increasing. What is long-term care, how much does it cost, and who pays for it?
- What options are there for providing long-term care to Senior Americans?
- How much do these options cost?
- Who pays for long-term care?
What is Long-Term Care?
Long-Term Care Facilities (LTCF) provide medical and personal care to seniors that is more difficult to provide or can’t be provided at home or within their communities. The Centers for Disease Control recognizes four types of LTCF: inpatient rehabilitation facilities, long-term care hospitals, certified nursing homes, and residential care communities. In all, about 2.5 million Americans are currently in LTCFs.
These facilities address different needs. People in rehabilitation facilities are there for short stays as part of their recovery from medical procedures (e.g., knee replacement). People in nursing homes or residential communities are generally permanent residents. Nursing homes provide higher levels of care compared to residential care facilities.
Trends in Senior Population
The American population is getting older. The number of Medicare recipients, which includes most persons aged 65+ and some permanently disabled persons, increased by over 30%, from 52.4 million in 2013 to 68.3 million in 2024. The number is expected to approach 80 million by 2030.
Cost of Care
The central issue of long-term care is cost. According to the federal Center for Medicare and Medicaid Services, the average annual cost of a private room in a skilled nursing home in 2024 was $127,750 or about $2 trillion total for the 2.5 million Americans currently in LTCFs. The federal government’s share, paid through the Medicare and Medicaid programs, is about $100 billion annually.
Only about 10% of long-term care costs are paid by private insurance policies, as few Americans hold these policies. Most residents of LTCFs pay out-of-pocket until their assets are depleted and they qualify for Medicaid, which assumes the costs.
Total long-term costs are expected to rise annually by about 50% over the next decade to about $3 trillion. This figure is about 8% of predicted GDP (GDP is a measure of the size of the U. S. economy). The federal government’s share of spending will double to almost $200 billion annually.
Alternatives to LTC
The Centers for Disease Control collects data on two alternatives to LTCFs: home health agencies and adult day services. Nearly 3 million seniors utilized home health agencies in 2020, along with 237,000 using adult day services (compared with roughly 2.5 million in all categories of LTCF).
Home health care provides flexibility for seniors who want to remain in their primary residence but don’t need the level of care provided by an LTCF. Similarly, adult day care centers provide many social and care benefits of LTCFs during normal working hours.
In theory, increased use of home health care would reduce long-term care costs if individuals who would otherwise enter an LTCF opted instead to remain at home. However, there are several issues. One is that home health care is itself expensive: in 2024, the average annual cost of full-time (44 hours per week) home health services was $77,792.
The second concern is that in some states, Medicare and Medicaid provide limited subsidies for home health care, meaning people receiving these services need private insurance or pay out of pocket. If federal subsidies were increased, many additional seniors (who are not otherwise planning a move to an LTCF) might apply for these services, reducing the savings from keeping a smaller number of people out of LTCFs.
Takeaway
The number of seniors in America is increasing, and life expectancies are also increasing. This combination is sharply increasing the demand for LTCFs.
Long-term care is expensive. Medicaid and Medicare remain the primary means for Americans to pay for these services. Relatively few Americans have private long-term care insurance.
Home health care is cheaper than long-term care, but it is unclear whether increasing its use (particularly with subsidies) will reduce the need or costs of long-term care.
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Further reading
Love, R. (2023). How to mitigate the looming senior care crisis. Forbes Magazine. Available at https://tinyurl.com/mvwdnddf.
Roscoe, A. (2025). Caregiving is taking a toll on the mental health of millions of Americans. National Public Radio. Available at https://tinyurl.com/3srfyvyh.
Sources
Administration for Community Living. (2025). What is Long-term care? Available at https://tinyurl.com/3hja84wt, accessed 3/12/25.
Care Scout. (2025). Cost of Long Term Care. Available at https://tinyurl.com/yjc2pbx8, accessed 3/14/25.
Centers for Disease Control and Prevention. (2024). Data from the 2020 National Post-acute and Long-term Care Survey. Available at https://tinyurl.com/27enudfw, accessed 3/12/25.
Centers for Medicare and Medicaid Services. (2025). Summary statistics on beneficiary enrollment. Available at https://tinyurl.com/3sef2vup, accessed 3/7/25.
Centers for Medicare and Medicaid Services. (2024). National Health Expenditure Data: Projections. Available at https://tinyurl.com/5dv9ku9r, accessed 3/17/25.
Federal Reserve Bank of St. Louis. (2023). Population ages 65 and above for the United States. Available at https://tinyurl.com/mr2krjh4, accessed 3/13/25.
Kaiser Family Foundation. (2024). A look at nursing facility characteristics. Available at https://tinyurl.com/6vsvxh9c, accessed on 3/12/25.
Miller, K.E.M., P. Chatterjee, R.M. Werner. (2023). Trends in Supply of Nursing Home Beds, 2011-2019. JAMA Network Open. 2023;6(3):e230640. Available at https://tinyurl.com/2uxcu96c.
Contributors
John Arnold (Intern) Is a sophomore at Binghamton University majoring in Political Science and Economics
Robert Holahan (Content Lead) is Associate Professor of Political Science and Faculty-in-Residence of the Dickinson Research Team (DiRT) at Binghamton University (SUNY). He holds a PhD in Political Science from Indiana University where his advisor was Nobel Laureate Elinor Ostrom. His research focuses on natural resource policy, particularly in domestic oil and gas production, but also extends into international environmental policy. He was PI on a National Science Foundation grant that utilized a 3000-person mail-based survey, several internet-based surveys, and a series of laboratory economics experiments to better understand Americans’ perspectives on energy production issues like oil drilling and wind farm development.
William Bianco is Professor of Political Science at Indiana University and Founding Director of the Indiana Political Analytics Workshop. He received his PhD from the University of Rochester. His teaching focuses on first-year students and the Introduction to American Government class, emphasizing quantitative literacy. He is the co-author of American Politics Today, an introductory textbook published by W. W. Norton now in its 8th edition, and authored a second textbook, American Politics: Strategy and Choice. His research program is on American politics, including Trust: Representatives and Constituents and numerous articles. He was also the PI or Co-PI for seven National Science Foundation grants and a current grant from the Russell Sage Foundation on the sources of inequalities in federal COVID assistance programs. His op-eds have been published in the Washington Post, the Indianapolis Star, Newsday, and other venues.
