Takeaways
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Long-term care is common and expensive — and for many families, a few years of paid care can erase decades of savings.
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Medicare coverage is limited, and Medicaid often requires “spending down” — leaving many middle-class households exposed until they’re near poverty-level assets.
- Planning ahead can reduce the financial shock — by learning what programs do (and don’t) cover and exploring options like long-term care insurance and state-specific Medicaid planning.
For most Americans, the plan goes something like this: work hard, save diligently, pay off the house, and pass something on to the kids. This quiet promise at the heart of the American Dream is that a lifetime of effort can translate into security for you and the next generation.
A study published by the Roosevelt Institute in April suggests that for most Americans, that promise is being broken — not by bad luck or poor choices, but by the crushing, largely unseen cost of long-term care.
The report lays out a stark picture: The long-term care system in the United States isn’t just failing older Americans in their final years but systematically draining the wealth of middle- and lower-income families and making it nearly impossible for the next generation to get a financial foothold.
What Is Long-Term Care and Why Does It Cost So Much?
Long-term care refers to the ongoing help people need when they can no longer fully care for themselves. It can encompass home health aides, adult day care programs, assisted living facilities, and nursing homes.
Over half of Americans aged 65 will need long-term services and supports in their lifetime, and one in five of those adults will need care for more than five years. This is not a fringe issue; it is, statistically speaking, a near-universal part of aging in America — and the costs are staggering.
In 2025, the national annual median cost of in-home, long-term care was about $80,000. The annual cost of community and assisted living ranged from $25,000 to $74,000, and nursing home care was between $115,000 and $129,000 per year.
Meanwhile, the median household income for Americans aged 65 and older is approximately $57,000 — meaning a single year in a nursing home can cost more than twice what a typical senior household earns in a year.
Why are prices so high? Over the past two decades, long-term care costs have risen sharply as the over-65 population has grown rapidly.
Demand for long-term care services is increasing as American adults age, but the industry has long had problems attracting and retaining workers. Long-term care workers often face low pay and poor working conditions, with 36 percent living at or near the poverty line, which makes recruiting and retaining staff difficult. When demand outpaces supply, prices rise — and have been rising for years.
Why the System Leaves the American Middle Class Exposed
You might assume that government programs like Medicare and Medicaid would provide a safety net. However, the reality is far more complicated and far less generous than most people realize.
Medicare, the federal health insurance program for adults 65 and older, provides only short-term skilled nursing or rehabilitation care after a qualifying hospital stay. It does not cover ongoing assistance with daily activities like using the bathroom, eating, or getting in and out of bed. For the millions of Americans who need help with these basic tasks for months or years, Medicare offers essentially nothing.
Medicaid does cover long-term care but only after a family has nearly run out of money. To access Medicaid long-term care, adults must fall below income and asset thresholds that vary by state. As of mid-2025, monthly income limits range between $967 and $2,901 for a single individual and asset ceilings are generally around $2,000 in most states. In other words, a person must spend down their savings to near-poverty levels before the government steps in to help.
This leaves many middle-class Americans in a difficult position. They have too much money to qualify for Medicaid, but nowhere near enough to comfortably afford years of private care. After the onset of care needs, middle-class individuals face permanent wealth reductions to just 42 percent of their original levels and lower-income individuals realize reductions to just 11 percent of their original levels. However, the top quartile of earners eventually recover 94 percent of their assets.
Even families who consider themselves financially comfortable are not immune. Among upper-middle-class couples with lifetime earnings over $4.75 million, nearly half will spend down their assets paying for long-term care and eventually enroll in Medicaid if they require long-term care for five years or more.
The Ripple Effect on the Next Generation
Much has been made in recent years about the so-called “Great Wealth Transfer,” the enormous sum of money that Baby Boomers are expected to pass down to their children and grandchildren. The Roosevelt Institute’s findings puncture that narrative for most families.
The spend-down process required to qualify for Medicaid leaves little to be passed on to younger generations. This interrupts the potential for building generational wealth after what is often a lifetime of work and saving, perpetuating cycles of wealth inequality.
The consequences ripple outward in another way, too: through the unpaid labor of family caregivers, who are overwhelmingly women. In 2021 alone, unpaid caregivers provided an estimated $600 billion in economic value, often at the expense of their own career growth and retirement savings.
When someone steps back from their career to care for an aging parent, sacrificing promotions, raises, and retirement contributions, the long-term financial cost to them and their family can be enormous. So, the care crisis doesn’t just affect the person receiving care — it spreads.
Long-term care is not just an individual health issue; it is also a structural driver of wealth inequality. By maintaining a system that depends on unpaid family caregiving, provides public support only after families have nearly exhausted their savings, and allows private, profit-driven companies to capture rising care costs, the U.S. effectively penalizes aging.
What Families Can Do
While systemic change is needed, there are practical steps that families can take to reduce their exposure:
- Plan early, before a crisis hits. Long-term care insurance exists specifically to cover these costs and is most affordable when purchased in your 50s, before health conditions make premiums prohibitive or coverage unavailable. Hybrid life insurance policies that include long-term care riders are another option worth exploring with a financial advisor.
- Have the hard family conversation. Discussing aging, care preferences, and finances before a health crisis is uncomfortable but is far less painful than making those decisions under pressure. Who will provide care? Where will funding come from?
- Understand what Medicare actually covers. Many families are blindsided when they discover how little Medicare pays for custodial care. Knowing the limits in advance allows you to plan accordingly rather than scramble when a crisis arrives.
- Learn the Medicaid rules in your state. Medicaid planning rules vary by state. An elder law attorney can help family members understand what assets are protected (a primary home, for instance, often is) and how to plan ahead within legal boundaries.
- Don’t assume the “Great Wealth Transfer” will apply to you. If your parents haven’t accounted for long-term care in their financial planning, a significant portion, or all, of what you expected to inherit may go toward care costs. Adjusting your own savings strategy accordingly is prudent.
A System That Needs Reform
Individual planning can only go so far. The Roosevelt Institute’s report is ultimately a call to recognize long-term care as a systemic policy failure, not a series of individual misfortunes.
The result of the current system is a force shaping who gets to grow old with security and who bears the financial cost of care. Wealthier Americans can absorb the costs and recover; most others cannot.
Other wealthy nations have approached this problem differently, such as through public long-term care insurance programs, stronger workforce investment, and universal coverage models. The U.S. has long treated elder care as a private responsibility. The Roosevelt Institute’s data show the price that ordinary Americans pay for that choice: a lifetime of savings wiped out, and a next generation left with less of a foundation than it might otherwise have had.
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