Long-Term Care Costs Are Exceeding Americans’ Income: What Should Federal Employees Do?

The current high cost of living is affecting many Americans. The strain of rising prices – everything from gasoline to groceries, housing and utilities, education, and long-term care costs – are some of the leading expenses which are an increasingly part of the financial pressure Americans are feeling.

According to the AARP Public Policy Institute, long-term care (LTC) costs increased significantly from 2019 to 2024, led by a nearly 50 percent increase in home health care and assisted living costs. LTC costs continue to increase with adult day care services rising 33 percent and nursing home costs increasing 25 percent while household income for individuals 65 and older increased 22 percent during the period 2019- 2024.

During the period May 2025 to May 2026, nursing home costs went up 4.6 percent and homecare LTC costs increased by 7.9 percent. Some 2021, homecare LTC cost inflation has risen 39 percent, compared to 27 percent inflation for general services and 26 percent for daycare and preschool costs.

Home Care Costs Are Rising Faster Than Inflation

For families struggling to afford LTC costs, the rapid rise in home care LTC costs is creating a new financial challenge. During 2025, the median hourly pay rate for home care was estimated at $35 per hour. With a 7.9 percent increase over the past year, that hourly pay rate amount has increased to $38 an hour during 2026. For an individual receiving 40 hours of home care each week, the $3 per hour increase translates into 40 hours per week times 52 weeks times $3 per hour equals $6,240 in additional annual home care costs during 2026.

A separate report estimates that the median annual cost of home care has risen to $51,480 for an individual receiving 30 hours of care per week. Note that $51,480 median annual cost is more than twice the average annual Social Security retirement benefit of $23,700. The 2025 annual increase of $6,240 (see previous paragraph) would consume about 27 percent of the average $23,700 Social Security annual retirement income. These statistics underscore the growing financial strains facing older Americans who rely on paid care for their LTC needs.

LTC Costs Vary by State and Household Dynamics

According to the Genworth/CareScout cost of LTC survey across the US, the cost of LTC ranged from about $26,000 a year for adult day care services to nearly $128,000 a year for a private nursing home room. To put those numbers into perspective, the median household gross income for adults age 65 and over is $60,000 per year. With a moderate level of home care such as 30 hours per week and a 2026 hourly cost of home care at $38 per hour, the result is an annual cost is $59,280. That means with respect to the annual cost of home care for one household member, the household median gross income will barely pay for only one household member.

About 60 percent of households in the US are headed by someone age 65 or older and include more than one person. This means that the financial strain of LTC often affects more than one household member who is receiving the LTC. When a large share of household income goes toward one person’s care, fewer resources may remain for a spouse or a partner. For example, if a married couple sets aside a sufficient amount of their assets in anticipation of both spouses’ LTC expenses but the first spouse who needs the LTC uses up most of the reserved assets, what will happen when the second spouse needs LTC?

LTC costs represent an underappreciated financial threat facing many Americans. This includes older adults and those adult children who may need to step in as caregivers for their parents. According to a recent analysis by the US Department of Health and Human Services, 56 percent of adults who turned 65 between 2023 and 2025 (born between 1958 and 1960) are expected to need LTC services and support during their lifetime. However, many individuals have no financial plan for how they will pay for future LTC costs. They mistakenly believe that Medicare will cover the cost of LTC, which is incorrect.

It is family caregivers who provide most LTC in the U.S. at a cost estimated to be more than $3 trillion in 2024. Many spouses, adult children and siblings reduce their work hours or leave their jobs to step into a caregiving role. They often have to sacrifice their income, their savings and their own retirement income in order to provide LTC for a family member. For the past 14 years, Congress has considered enacting a provision in the US Tax Code that would allow an adult caretaker to benefit from an IRS caretaker tax credit for the time spent as a caregiver for a family member. However, nothing has been enacted into law by Congress to date.

The rising cost of care has surged to the extent that most older Americans over 70 can absorb. The result is that older Americans have to devote an increasing larger share of their income to cover LTC costs. The squeeze affects middle income older adults the hardest. Their income is too high in order for them to qualify for Medicaid but their income is insufficient to comfortably keep pace with escalating LTC costs.

What Should Federal Employees Do When It Comes to Paying for Future LTC?

Like other Americans, federal employees should be concerned with the high cost of LTC. All employees, including newly hired employees, those in mid-career, those within five years of retirement, and those employees who recently retired from federal service are encouraged to seriously think about the current and projected costs of LTC for themselves and other family members. This includes spouses, partners, parents and parents-in-law.

The obvious question then becomes: What are the options that federal employees have in order to pay future LTC costs? Their choices can be broken down to: (1) Purchasing LTC insurance either through the Federal Long-Term Care Insurance Program or from a private insurance company; or (2) Not purchasing a LTC insurance policy but instead “self-insuring” for their and their family’s future LTC needs. The first choice is discussed.

Federal Long-Term Care Insurance Program (FLTCIP)

Federal and postal service employees, retirees and annuitants, active and retired members of the uniformed services and their qualified relatives are eligible to apply for coverage under the Federal Long-Term Care Insurance Program (FLTCIP). Specifically, individuals in the following groups are eligible to apply:

‧ Federal Employees: (1) Federal employees in positions that convey eligibility for the FEHB program, whether or not they are actively enrolled; (2) Postal service employees in positions that convey eligibility for the FEHB program or the PSHB program, whether or not they are enrolled; or (3) Active members of the uniformed services who are on active duty or full-time National Guard duty for more than 30 days.

‧ Federal Retirees and Annuitants: (1) Federal or USPS annuitants; (2) Retired members of the uniformed services who are entitled to retirement pay; (3) Deferred annuitants; or (4) Separated employees with title to a deferred annuity, even if they are not receiving that annuity.

‧ Spouses of eligible employees and retirees. Former spouses are not eligible, even if the former spouse is receiving a portion of an annuity.

‧ Domestic partners (either same-sex or opposite sex) of eligible employees and retirees must submit a Declaration of Domestic Partnership form to the employee’s or retiree’s agency, annuity office or branch of service before applying.

‧ Adult children, 18 years and older, of living eligible employees and retirees. This includes adopted and stepchildren. Children or domestic partners are considered stepchildren.

‧ Parents, parent-in-law, and stepparents of living eligible employees. Parents, parent-in-law, and stepparents of retirees are not eligible.

The FLTCIP has been in existence since 2002. The program has not attracted as many employees, annuitants, uniformed service members and retirees, and family members as was hoped when the program was established nearly 25 years ago. Potential applicants to the FLTCIP should be aware of the following:

(1) Any applicant must fill out an application and medically qualify. There is medical underwriting with no guarantee of acceptance;
(2) Any applicant who qualifies for LTC insurance coverage pays the full amount of premiums with no federal government contribution toward the premium costs;
(3) For a number of those applicants who have been accepted into the FLTCIP, premium costs have risen over the past 25 years to the extent that the premiums are no longer affordable with many of these enrollees have been forced to withdraw from the program;
(4) OPM originally suspended applications for coverage under the FLTCIP for 24 months, effective December 19, 2022. This suspension was carried out in order to allow OPM and the FLTCIP insurance carrier (John Hancock Life and Health Insurance Company) to thoroughly assess benefit offerings and establish sustainable premium rates that reflect the cost of the benefits provided. OPM extended the original two-year suspension period expiring on December 19, 2024. The suspension will remain in effect for 24 months until December 24, 2026. This is unless OPM issues a subsequent notice to end or extend the suspension period. This means that while the extension is in effect, individuals not enrolled may not apply for coverage and current FLTCIP enrollers may not apply to increase their coverage. Current FLTCIP enrollees are not affected by the suspension. For those enrollees in a claim status, there will be no change in their coverage or the claim reimbursement status.

The alternative to the FLTCIP is individual LTC insurance. Federal employees and annuitants can apply for an individual LTC insurance policy offered by a life and health insurance company. There are about seven insurance companies that offer individual LTC insurance policies. But like the FLTCIP, individual applicants for individual LTC insurance must qualify and pay the entire premium cost. LTC premiums are pricey and will continue to increase in the future.

A future column will present alternative purchasing LTC insurance for federal employees and retirees in order to meet their and family’s LTC needs. These alternatives include other types of insurance and self-insuring.