'It's A Huge Problem,' Experts Urge Gen Xers And Millennials To Plan For Long-Term Care

• The U.S. Department of Health and Human Services says that around 57% of Americans will need long-term care at some point
• Most households have grossly underestimated the potential cost of that long-term care, and aren't aware that they will have to pay out of pocket for much of it
• The total cost of long-term care can be significant, extending beyond $100,000

Long-term care costs can be significant, extending well beyond $100,000, but experts tell CNBC that most households aren't prepared to handle the expense.

"People don't plan for it in advance," certified financial planner Carolyn McClanahan told the network. "It's a huge problem."

A 2022 report by the U.S. Department of Health and Human Services and the Urban Institute says that 57% of Americans turning 65 will develop a disability that is serious enough to require long-term care. The average cost of this long-term care is $122,400, the report said.

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On average, families will pay for 37% of the total cost of this long-term care out of pocket, with the rest covered by insurance and public programs. 

"It's pretty clear [workers] don't have that amount of savings in retirement, that amount of savings in their checking or savings accounts, and the majority don't have long-term care insurance," Employee Benefit Research Institute strategist Bridget Bearden told CNBC. "So where is the money going to come from?"

Costs for long-term care vary widely, depending on where you live. However, data collected by Genworth and CareScout put the national average for a home health aide at $6,483 per month and $5,900 for a spot in an assisted living facility. 

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Still, many people grossly underestimate how much long-term care could potentially cost them. A recent Employee Benefit Research Institute report found that "a significant proportion of future caregivers had not estimated LTC costs," and those who had expected them to remain under $50,000. Additionally, the report found that 43% of future caregivers expected Medicare to cover the costs of long-term care, and 29% expected Medicaid to foot the bill.

Experts told CNBC that estimates like these are not realistic. Health insurance generally doesn't cover long-term care services, and Medicare only covers select aspects, they say.

McClanahan told CNBC that Medicare typically covers skilled care for up to 100 days, which covers things like rehab or medicine administration, but will not cover the custodial care required for daily activities like bathing and dressing. 

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As for Medicaid, the largest payer of long-term care costs, not everyone will qualify. Most people who are eligible for these benefits come from low-income households. "You basically have to be destitute" for Medicaid to kick in, she said.

"The challenge with long-term care costs is they're unpredictable," McClanahan told CNBC. "You don't always know when you'll get sick and need care." 

She advises Gen Xers and Millennials to begin planning for potential long-term care needs now. "When you think through it in advance, it keeps the decisions way more level-headed," she said.

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