Many will need elder care financing, but few are prepared. Some solutions are emerging.

In a few weeks, a remarkable experiment in long-term care financing will launch in Washington state. 

On July 1, after a successful four-month pilot, the WA Cares Fund will begin paying up to $36,500 in lifetime benefits to help qualified Washington residents cover the high cost of long-term care.

If you know anything about long-term care, this is both a lot of money and — for many people — not quite enough. Nonetheless, the WA Cares Fund is a relatively streamlined, affordable model for a public insurance program, and a significant development at this critical moment. 

“The issue of long-term care financing has been vexing people and policymakers for more than 30 years,” says Marc Cohen, co-director of the LeadingAge LTSS Center @UMass Boston. 

What makes the WA Cares model important beyond Washington’s borders, Cohen notes, is that it provides a baseline solution that could be replicated in other states — at a time when answers to the long-term care crisis are desperately needed.

The Long-Term Care Conundrum

The long-term care crisis is a perplexing one for a number of reasons, which are worth unpacking.

1. The scope. Americans are living longer, as we know, and research shows that the vast majority — about 80 percent of adults — will need some type of long-term care as they get older, whether that’s help with daily activities such as bathing and getting dressed, full-time nursing home care or a combination. 
2. The cost. On average, a 65-year-old can expect to spend about $135,000 on long-term care during their lifetime, according to the Milliman Long-Term Care Index ($98,000 for men; $171,000 for women, who generally live longer). But these expenses vary widely, depending on the location and the type of care involved. 
3. The blind spot. Despite these two concerning factors, only a third of retirees said they were worried about long-term care costs, and ranked them lower than other retirement risks such as inflation or cuts to Social Security, according to a 2025 study by the Center for Retirement Research (CRR) at Boston College, “How Do Retirees Cope With Uninsured Medical and Long-Term Care Costs?” which surveyed people 65 and older with at least $100,000 in assets.

That’s not because respondents believed they were unlikely to need long-term care, says Gal Wettstein, associate director of health and insurance at CRR and a coauthor of the report, but because most people are still confused about what public insurance programs will cover. “A lot of people seem to think that Medicare covers long-term care, which it does not,” says Wettstein.

Equally mystifying was the finding that about 60 percent of those surveyed also said they believed they could go on Medicaid if necessary, even though they had substantial assets. “So, either most people are unaware of the fact that Medicaid will require them to spend down all their assets — or they are blithely willing to do so,” Wettstein says.

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Even so, the study found, only 15 percent of retirees ended up on Medicaid — a far cry from the 60 percent who had assumed that safety net was an option. 

Retirees pay a steep price for their lack of preparedness, the survey found. Even though more than two-thirds did not want or plan to tap home equity to pay for long-term care costs, 42 percent ended up having to do so at some point in retirement. 

On average, a 65-year-old can expect to spend about $135,000 on long-term care during their lifetime.

Private Insurance vs. Public Programs

Another confounding factor for this kind of financing is the steady decline of private long-term care insurance (LTCI), with the simultaneous rise of various government programs that attempt to patch holes in the system.

Traditional LTCI has struggled with high premiums and low adoption — less than 5 percent of people 50 and older hold LTCI policies. In part that’s due to the dramatic contraction in the LTCI market: In the 1990s, more than100 carriers offered these policies; today, fewer than 15 still do, according to Milliman.

The cost of these policies is high, and they vary widely depending on a person’s age, gender, location, overall health and the type of coverage. The average annual premium for a policy with a lifetime payout of $165,000, purchased by a single male at age 55, ranges from about $900 to $3,500; for a single woman at age 55, it’s $1,500 to $6,200; for a couple the combined cost for two policies ranges from $2,080 to $8,575 annually, according to the American Association for Long-Term Care Insurance.

In response, insurers have introduced new products that often take a hybrid approach, such as hybrid life insurance with LTC provisions and annuities that include LTC riders.

Meanwhile, even as the private LTC insurance market has waned, many states have stepped in with new laws that benefit caregivers, either through tax breaks or mandatory paid-leave policies (see box). A few have proposed programs, funded through a payroll tax, that would provide a baseline subsidy for long-term care expenses, but the WA Cares Fund is the first of its kind to launch.

“These public insurance programs are evolving, but they reflect a wake-up call underway among policymakers and older Americans alike.”

A Time-Tested Strategy

These new frameworks are intriguing because they rely on a pooled-risk model. Starting in 2023, Washington workers began automatically contributing a modest payroll tax of 0.58 percent into a common fund. (A worker who earns the median salary of about $63,200 contributes about $31 per month.) 

When the program starts paying benefits statewide on July 1, qualifying families can use that money to cover an array of expenses, from installing grab bars to paying a home health aide or to defray the cost of a care facility. In stark contrast to Medicaid, there are no caps on income or assets to access WA Cares funding. It’s considered a universal benefit; eligible workers who pay into the system can get these funds.

These public insurance programs are evolving, but they reflect a wake-up call underway among policymakers and older Americans alike: the realization that private savings alone may not be enough to provide a level of security as we age — but viable solutions are at hand.