Who Pays? The Cost of Long-Term Care in the United States

Long-term care includes an array of services that help people with activities of daily living (ADLs), such as bathing, dressing, and eating. These services may include home health care, nursing home care, personal care, homemaker services, transportation, and other supports that allow older adults and people with disabilities to live safely and with dignity.  

Nearly 70% of older Americans will need long-term care at some point, but it is currently unaffordable for many people. Although costs can vary by location and provider, the average daily cost of a nursing home is $308, or about $9,240 per month, and the average daily cost of home care is about $198, or $5,940 per month for six hours of care per day. By comparison, the average social security benefit in 2026 is $2,071 per month. Even with other retirement savings, which an estimated 40% of Americans do not have, many middle-income Americans cannot afford to pay for long-term care.  

This affordability challenge reflects a broader pattern: Americans consistently report that health care costs are a major financial strain. Data from the West Health-Gallup Healthcare Affordability Index show that a significant share of adults struggle to afford needed care, with older adults and those with complex health needs facing the greatest burden. For individuals who require long-term care, these financial pressures are often magnified. 

Who Pays for What? 

There are a variety of payers for long-term services and supports, with a majority of spending coming from public sources. 

• Public programs in the U.S. plays a role in financing long-term services for older adults, though coverage varies significantly by program.

  • Medicaid is the largest payer of long-term care in the United States. Older adults who do not qualify for Medicaid often must use their life savings to pay for care, and in many cases end up “spending down” their assets to qualify for Medicaid coverage of long-term care, in addition to meeting functional eligibility criteria. In 2023, Medicaid long-term services and supports accounted for 33% of all Medicaid personal health care spending, or about $257 billion. 

  • Medicare is the largest payer for older adults’ general health care such as going to the doctor, hospital, and receiving prescription drugs. While there is short-term coverage for some LTSS services, such as home health or skilled nursing, it generally does not cover long-term care. 

  • The Programs of All-Inclusive Care for the Elderly (PACE) also covers long-term care services and is available to adults 55 and older who live in the service area of a PACE organization, need a nursing home-level of care, and are able to live safely in the community with help from PACE. Many recipients of the PACE program are dually-eligible for Medicare and Medicaid, but PACE organizations are not widely available in every community. 

  • The Older Americans Act provides some funding for long-term supports and services, including transportation, meals, homemaker services, and personal care, but the funding is limited and has not kept pace with the growing demand for these services. 

• Private payments require individuals to bear a significant share of health and long-term care costs, often filling gaps left by public coverage.

  • Out-of-pocket spending on nursing care and home health is rising sharply for older adults, as many people are caught off guard when they find out they need long-term care and that Medicare or another private insurance policy will not cover it. This leads many people to pay out of pocket until they deplete their assets and qualify for Medicaid.  The chart below shows the large increase in out-of-pocket spending on nursing care for adults 65 and older. 

  • Private insurance also covers general health care, like going to the doctor, but rarely covers long-term care. Few people have separate, private long-term care insurance policies. 

Recent cuts to Medicaid funding and demographic shifts to an older population are putting pressure on states to find practical ways to meet the needs of older adults in their communities. Some older adults may need nursing-home level care and assistance with several ADLs, while others only need support with instrumental activities of daily living, such as preparing meals, managing medications, or arranging transportation.  

State and Community Opportunities to Fund Long-Term Care

Following are examples of innovative state- and local-level programs that support older adults and their long-term care needs. 

• State-based, public long-term care insurance. Washington State is the first state to pass a public long-term care insurance program, the WA Cares Fund. WA Cares is funded through a 0.58% payroll tax that will provide an individual benefit of up to $36,500, adjusted over time for inflation. In general, an individual must contribute to the fund for 10 years to qualify for the full benefit, although there are some exceptions to qualify for benefits for those who have contributed less than 10 years or who were born before 1968. To receive benefits, an individual also must need help with at least three or more activities of daily living. The program is set to begin paying out benefits in July 2026. Because it is the first program of its kind, policy experts will be paying close attention to the program, how it operates, and if it can inform similar efforts in other states or nationally. 

• Local tax increases to support aging-related services. Another funding approach is local support for aging services through tax levies, most often funded through property taxes. Despite broad concerns about taxes, local measures supporting aging services tend to pass with bipartisan support. One study identified at least 380 local tax levy programs across the country that fund aging services. These programs often support services that fall under long-term care, such as personal care and homemaker services, transportation, and nutrition or meal services. The same study found that, of the 15 states with these levies, Ohio had 74 programs (generating $21,000 to $47 million in revenue), Michigan had 69 (generating $122,000 to $11 million), and Missouri had 55 (generating $16,000 to $2.5 million).  

While these state and local funding models show promise, they also raise important concerns. For programs funded through property taxes, disparities may emerge if wealthier counties can allocate more funding and resources to programs. Similarly, in Washington State’s program, a flat payroll tax may put added financial pressure on workers with low incomes.  

Despite concerns, these approaches may offer useful lessons for a larger, federal reform of long-term care financing in the United States. Although local tax levy programs follow local processes for tax reform, they suggest that funding aging services has bipartisan support across political and geographic lines. 

Conclusion

The current system for financing long-term care in the United States places significant financial strain on individuals and families while relying heavily on a patchwork of programs that were not designed to work together. State and local innovations offer valuable lessons, but piecemeal approaches alone are unlikely to meet the scale of the need. 

As the population ages and the demand for long-term care grows, policymakers will need to consider more comprehensive solutions that address affordability, access, and equity. Without such reforms, too many Americans will continue to face untenable choices between receiving needed care and maintaining their financial security.