Long-term care costs rise as demand surges and worker shortages deepen

As the U.S. population ages, rising long-term care costs and workforce shortages threaten future access to essential support services.

Illustration by Boris SV

By Adila Ghina and Yuni Utomo

As the U.S. braces for an unprecedented surge in aging citizens, long-term care costs are rising at an alarming pace, and the workforce to provide that care is shrinking. Experts warn this dual crisis could leave millions of Americans unable to access or afford the care they will need to maintain their quality of life in old age.

Samir Shah, CEO of CareScout—a company that tracks and analyzes elder care pricing trends—sees the warning signs clearly. “Demand is rising at the same point that supply is decreasing, and both are happening at a very rapid pace,” Shah said, describing what lies ahead for the long-term care industry.

Demand soars as baby boomers enter late retirement

By 2026, the first wave of baby boomers will turn 80, a milestone age when personal care needs dramatically increase. The U.S. Census Bureau projects that the population of Americans aged 85 and older will nearly double to 11.8 million by 2035 and grow to 19 million by 2060. This growing demographic is at highest risk for chronic illness, mobility issues, and cognitive decline—all key drivers of long-term care needs.

Despite the looming need, few Americans are financially or emotionally prepared. According to a KFF survey, only 28 percent of near-retirement individuals have set aside money specifically for long-term care, and fewer than half have discussed their plans with family.

Compounding this issue is widespread misinformation. Nearly half of adults aged 65 or older incorrectly believe Medicare will cover long-term stays in nursing homes. In reality, Medicare only provides limited short-term coverage following hospitalization. Long-term support, especially non-medical care like bathing, meal prep, and dressing, falls outside its purview.

Costs outpacing inflation and affordability

The cost of long-term care services spiked significantly in 2024. According to CareScout’s data, the median monthly cost for assisted living reached $5,900, homemaker services rose to $6,292, and private nursing home rooms averaged $10,646 per month. These figures reflect annual increases of up to 10 percent—far exceeding the general inflation rate of 2.9 percent.

And the price hikes are expected to continue. The Trump-era immigration crackdown has hit the caregiving workforce hard, with immigrants comprising nearly 30 percent of long-term care workers. This labor shortage puts pressure on wages and limits provider capacity, further driving up costs.

Regions with more immigrant care workers tend to deliver higher-quality service, according to David Grabowski, a health policy professor at Harvard Medical School. “Without immigrant labor, the entire system would be under severe strain,” he said.

Insurance gaps leave millions vulnerable

Most Americans assume insurance will cover the bulk of long-term care needs. But Medicare offers only temporary assistance, and Medicaid—though a major payer for long-term care—only covers individuals with very limited income and assets.

“Most people have this misconception that Medicare covers long-term care when we know that it is Medicaid that is the primary payer,” said Priya Chidambaram, a senior policy manager at KFF. Even for Medicaid recipients, benefits vary, with home care receiving fewer supports than institutional care.

Commercial long-term care insurance remains a niche product. Introduced in the 1980s, it has declined in popularity due to high premiums and complex terms. Brian Gordon, president of Gordon Associates, a specialist insurance brokerage, recalls a time when over 125 insurers offered long-term care policies. “Now there might be a dozen options,” he said.

Hybrid insurance plans—combining life insurance with long-term care benefits—have gained traction. These policies allow the policyholder to draw against a death benefit while living, providing flexibility and reducing the fear of losing value if care is never needed.

Sample policies suggest that a 55-year-old couple could secure $5,000 per month in care benefits and up to $534,000 in shared coverage for 10 annual premiums of $16,500. However, these policies typically require passing a medical exam, making them less accessible for older or less healthy applicants.

Funding strategies: from self-financing to family support

For affluent households, self-funding care needs may be an option. Carolyn McClanahan, a physician and financial planner, advises clients in their 50s and 60s to begin planning early—evaluating their health, family support system, and desired living arrangements.

She recommends preparing for two to five years of care costs, depending on individual risk factors. “We want to make sure clients don’t jeopardize the financial security of a surviving spouse if one partner needs extensive care,” she said.

McClanahan also emphasizes liquidity. “You want at least five years’ worth of care expenses in accessible funds—cash or short-term bonds,” she said. Tax planning is also key, with Roth conversions and the use of Health Savings Accounts offering potential advantages.

Social Security, often overlooked, can also play a role in funding long-term care. Delaying benefits can increase monthly payments and provide a more stable income base later in life.

Yet for most, informal caregiving remains the norm. Children, spouses, and other family members provide 64 percent of all caregiving hours. But this often comes at a steep price—emotionally and financially.

A KFF study found that 56 percent of caregivers cut back on essentials like food and clothing, and one-third struggled to pay rent or utilities. Time spent caregiving can reduce lifetime earnings and Social Security benefits, compounding long-term financial strain.

“It’s felt at a moment in time, but it’s felt continuously for many, many years to come,” said Shah. “There’s a domino effect.”

A worsening worker crisis

The U.S. is also on track to experience a critical caregiver shortage. By 2032, an estimated 817,000 direct care roles will need to be filled—more than any other job sector, according to PHI, a nonprofit that tracks caregiving employment data.

Wages remain a key barrier. In 2023, direct care workers earned a median wage of $16.72 per hour—lower than other jobs requiring similar qualifications. Without immigration reform or significant wage hikes, the gap between caregiver supply and demand is likely to grow.

LeadingAge vice president Mollie Gurian warns that Medicaid cuts could further destabilize the system. Medicaid pays for 61 percent of all long-term care. “If Congress reduces funding, providers may cut services, increase private pay rates, or close down entirely,” she said.

A call to plan and act

The rising long-term care costs, coupled with a shrinking labor force and widespread public misconceptions, paint a sobering picture of the road ahead. For Americans approaching retirement, the message is clear: plan now, educate yourself on your options, and consider all funding strategies—whether through insurance, savings, or family support.

Without proactive steps, millions could find themselves or their loved ones without the care they need during the most vulnerable years of life.