Get Your Free Long-Term Care Guide

Understanding Long-Term Care: What It Means and Why Planning Matters

Long-term care refers to a range of services and support that people may need when they can no longer manage daily activities on their own. According to the U.S. Department of Health and Human Services, about 70% of people over age 65 will need some form of long-term care during their lifetime. This can include assistance with bathing, dressing, eating, using the bathroom, or managing medications. Long-term care isn't the same as regular health care—it's about help with activities of daily living when someone has a chronic illness, disability, or advanced age.

Long-term care can take many forms. Some people receive care at home from family members or paid caregivers. Others move to assisted living facilities, where staff help with daily tasks but residents live more independently. Nursing homes provide 24-hour medical care for people with serious health needs. Adult day care centers offer daytime supervision and activities for people who live at home. Continuing care communities combine independent living, assisted living, and nursing care all in one place.

The cost of long-term care can be substantial. The Genworth Cost of Care Survey found that in 2023, the median cost of in-home care by an aide was about $63,540 per year, while a semi-private nursing home room averaged $108,405 per year. These costs vary significantly by location—care in New York City or the San Francisco Bay Area costs considerably more than in rural areas. Without planning, these expenses can quickly deplete savings and create financial stress for individuals and families.

Planning for long-term care ahead of time allows people to make thoughtful decisions about the type of care they prefer and how they want to pay for it. This might involve setting aside money, investigating insurance options, or documenting preferences about care. Understanding what long-term care is and why it matters is the first step toward making informed decisions about your future or a family member's future.

Practical Takeaway: Long-term care is a likely part of many people's lives. Starting to think about it early—even in your 50s or 60s—gives you more options and time to plan financially.

Types of Long-Term Care Settings and Services

Long-term care settings range from a person's own home to specialized medical facilities. Each setting offers different levels of care, privacy, and independence. Home care is the most common choice, with about 70% of people preferring to age in place in their own homes, according to AARP research. Home care can be provided by family members at no cost, or people can hire professional caregivers who assist with bathing, dressing, meal preparation, and household tasks. Home care allows people to remain in a familiar environment and maintain independence, but it can be tiring for family caregivers and may require significant out-of-pocket spending if professional help is needed.

Assisted living facilities serve people who need help with daily activities but don't require round-the-clock medical care. These communities typically offer private or semi-private apartments, and staff provide meals, housekeeping, medication reminders, and assistance with bathing and dressing. Many assisted living communities also organize social activities, transportation, and recreational programs. According to the American Senior Housing Association, there are over 28,000 assisted living communities in the United States, serving approximately 810,000 residents. Costs vary widely but generally range from $4,500 to $6,000 per month depending on location and services.

Nursing homes, also called skilled nursing facilities, provide medical care and supervision for people with serious health conditions. These facilities employ nurses, doctors, therapists, and aides available 24 hours a day. Residents may receive wound care, physical therapy, medication management, and monitoring for chronic diseases. Nursing homes are the most expensive setting, but they serve people with the greatest medical needs. Memory care units within nursing homes and assisted living facilities specialize in care for people with Alzheimer's disease or other types of dementia, with staff trained in behavior management and security measures to prevent residents from getting lost.

Adult day care centers offer supervision and activities during daytime hours for people living at home. These programs allow working family members to have peace of mind while caring for an aging parent or spouse. Continuing care retirement communities (CCRCs) are comprehensive settings that allow people to move between independent living, assisted living, and nursing care as their needs change, all within one community. Some people also use temporary respite care—short-term stays in a facility or professional in-home help—to give family caregivers a break.

Practical Takeaway: Different care settings suit different people and situations. Learning about these options helps you understand what might work for you or a loved one as needs change over time.

The Real Costs of Long-Term Care and How to Plan

Long-term care costs are one of the biggest financial shocks people face in retirement. The median annual cost of care varies dramatically by setting and location. According to 2023 data, a semi-private nursing home room costs a median of $108,405 per year nationally, while a private room averages $126,450 per year. Home health aide services cost about $63,540 per year for 44 hours per week of care. Adult day care centers average $23,100 per year. These are median figures—actual costs in major metropolitan areas can be 50% to 100% higher.

A major concern is how long care might be needed. Someone who enters a nursing home at age 75 might need care for 5, 10, or even 20 years depending on their health. Over a decade, nursing home care could cost more than $1 million. Most health insurance, including Medicare, doesn't cover long-term custodial care—the day-to-day help with bathing, dressing, and eating. Medicare covers skilled nursing care only after a hospital stay and only for a limited time. This means families often must pay out of pocket or rely on Medicaid, which requires spending down most assets first.

People plan for long-term care costs in several ways. Some save money in dedicated accounts or investment portfolios over many years. Others purchase long-term care insurance, which pays a daily or monthly benefit toward care costs if they need help with daily activities. Long-term care insurance premiums depend on age and health at the time of purchase—buying in your 50s or early 60s is generally more affordable than waiting until your 70s. Some people use life insurance policies that include long-term care riders, or annuities with long-term care benefits. Still others rely on Medicaid, a joint federal-state program that covers long-term care for people with limited income and assets. Medicaid planning may involve working with an elder law attorney to structure assets legally.

A basic approach to planning involves estimating your potential care costs, considering how long you might need care, and deciding how to fund it—through savings, insurance, family support, or some combination. Working with a financial advisor or elder law attorney can help you think through realistic scenarios and strategies.

Practical Takeaway: Long-term care is expensive and unpredictable in duration. Starting to think about how you might pay for it—whether through savings, insurance, or other means—well before you need care gives you more control over your options.

How Medicaid Covers Long-Term Care

Medicaid is the largest payer of long-term care in the United States. Unlike Medicare, which is a federal insurance program for people over 65, Medicaid is a joint federal-state program designed for people with low income and limited assets. According to the Kaiser Family Foundation, Medicaid pays for nearly 40% of all long-term care services in America. For many people without other resources, Medicaid is the main way they can afford nursing home or assisted living care.

To receive Medicaid coverage for long-term care, a person must meet income and asset limits set by their state. In most states, monthly income must be below $2,500 for a single person (though this varies by state and is adjusted annually). For assets, limits are typically $2,000 for a single person in countable resources—though a home, one vehicle, and personal belongings don't count toward this limit in most cases. The rules are complex, and each state sets its own limits and procedures.

One important concept in Medicaid planning is the "lookback period." If someone applies for Medicaid and has given away assets or sold assets below fair market value within a certain timeframe (typically five years), Medicaid may