Long-Term Care Costs: The U.S. Versus the Rest of the World

Takeaways

• The U.S. has no unified program for long-term care, so families piece together coverage from Medicaid, private insurance, and out-of-pocket spending.

• Most other countries have built dedicated long-term care systems, using approaches ranging from social insurance to means-tested safety nets.

• Unpaid family caregiving remains the backbone of long-term care in every country, including those with generous public systems.

• Planning ahead, including learning your state's Medicaid rules and options, is the best protection against the financial shock of long-term care.

Most of us will need help with everyday tasks later in our lives, such as bathing, dressing, cooking, and getting around. How that help gets paid, however, depends on where in the world you are.

Living a long life comes with a sobering statistic: most older adults will need some form of long-term care (LTC) before they die. LTC is different from the medical care most think of when considering services typically covered by health insurance. It might involve a home health aide who helps someone bathe and dress, an adult day program, or a room in a nursing home.

In the U.S. it is paid for differently compared to other countries. Around the world, other wealthy countries have built national systems to help cover long-term care costs. The United States has not.

Understanding how we pay for long-term care versus citizens of other countries can help with planning for the future.

How Americans Pay for Long-Term Care

In the United States, there is no single program that automatically pays for long-term care. Instead, families rely on a patchwork of sources:

• Medicare doesn’t cover it. Medicare, the federal health insurance available after 65, pays for doctors and hospital stays but not long-term care services. As such, it will not provide ongoing help with activities of daily living like bathing or eating. However, it should cover a short stay in a skilled nursing facility after a hospitalization.

• Medicaid pays for more than half of LTC, but only after you’ve spent down your savings. The joint state-federal program for people with low income is the largest single payer of long-term care in the U.S. But to qualify, most people must first spend nearly all of their savings. Typically, they must have less than $2,000 or $3,000 in countable assets, with the exact rules varying by state.

• Private long-term care insurance covers only a small slice. A relatively small share of Americans have private long-term care insurance. Policies have become more expensive and harder to find over the past decade. Even those with policies may find they do not fully cover the cost of care. 

• Families absorb the rest. Out-of-pocket spending and unpaid family caregiving fill in the gaps. Nursing home care can cost more than $100,000 a year. Family caregivers report spending roughly a quarter of their income, on average, on caregiving-related costs.

According to a 2023 Commonwealth Fund analysis, the U.S. spends less, as a percentage of their GDP, on long-term care than almost any other wealthy country — even though total U.S. health spending is far higher overall. The financial burden that remains falls hardest on women, as the largest demographic of unpaid caregivers.

How Other Countries Do It Differently

Most other high-income countries built long-term care systems decades ago. Plus, they spend more on LTC relative to the size of their economies than the U.S. does. Globally, four broad approaches are most common:

• Social insurance. Every worker pays into a dedicated fund, usually through payroll taxes, and becomes eligible for benefits regardless of income. Benefits may be capped and some out-of-pocket costs may apply. Germany, the Netherlands, Japan, and South Korea use this approach.

• Universal, comprehensive coverage. This single-payer approach is funded through general revenues and cost sharing and is administered by a government entity. Norway and Sweden use this system.

• Residual, or means-tested safety nets. This general revenue-funded system acts more as a safety net for those who can’t afford long-term care. To qualify, individuals must meet eligibility requirements and pass a means test that considers income, assets, or both. This type of system is funded through general revenues. The United Kingdom and New Zealand are examples of countries using this approach.

• Hybrid approach. A combination of two or more of the above approaches. For example, France has a fragmented system that varies from national, regional, and municipal levels. Income-adjusted universal coverage for those over 60 is typically combined with supplemental private insurance. This voluntary insurance is paid by the family, with prices increasing with income.

In Canada, long-term care is not considered an insured service under the Canada Health Act. The provinces and territories use universal financing from general revenues to fund it. LTC is generally needs- and means-tested, though availability within capped budgets depends on the province or territory. 

Residents in Australia must pass a needs-based test to qualify. The federal government covers the majority of the cost for those who are deemed to need it. In Switzerland, LTC costs are partially covered by compulsory health insurance. The rest is paid out-of-pocket.

Starting at age 30, workers in Singapore are automatically enrolled in CareShield Life, a mandatory long-term care insurance plan. Lower-income participants receive subsidized premiums and a separate means-tested cash grant available for caregiving costs.

No System Is Without Costs

More generous financing doesn’t necessarily mean long-term care is free or easily accessible in any country. Even in countries with strong public systems, roughly half of households report they cannot afford the formal long-term care they need. Unpaid family members, mostly women, still provide much of the hands-on care, often at a real cost to their own careers and finances. A more generous system reduces the financial shock but it doesn’t eliminate the caregiving burden.

What’s Changing in the U.S.

Some U.S. states are experimenting with their own approaches, since there’s no comprehensive federal program on the horizon. The most prominent is Washington State’s WA Cares Fund, the first program of its kind in the country.

Several others, including California, Michigan, New York, and Minnesota, have studied similar ideas. As of now none has enacted a program as comprehensive as Washington’s.

What This Means for You

Whatever your state does, planning ahead is the best protection against the financial shock long-term care can bring. A few starting points:

• Check whether your state has its own long-term care benefit, savings program, or caregiver support fund.

• Ask an elder law attorney or benefits counselor about Medicaid’s asset and income rules in your state well before you think you’ll need them. The rules and lookback periods are complex and state specific.

• If you’re considering private long-term care insurance, compare policies carefully. Buy earlier rather than later, since premiums rise and health-based denials become more likely with age.

• Talk with family members now about caregiving expectations and costs. Unpaid family care remains the backbone of long-term care in every country — including the ones with generous public systems.

• Look into your Area Agency on Aging or state Aging and Disability Resource Center. These resources can point you toward local, low-cost, or free supports you may not know exist.

Additional Reading

For additional reading on issues related to long-term care, check out the following articles:

• Discussing Long-Term Care With Older Adults in Your Life

• What a Good Long-Term Care Insurance Policy Should Include

• Long-Term Care Insurance Hybrid Policies

• The Costs of the Rising Cost of Long-Term Care

• Why Aren't More Older Adults Thinking About Long-Term Care?

• Don't Rely on Medicare or Medicaid for Your Long-Term Care