NCPA - National Center for Policy Analysis

CBO Cost Estimates For Long-Term Care

March 19, 1999

Overall demand for long-term care for the elderly will rise substantially between now and 2040, says the Congressional Budget Office, and along with demand, expenditures for nursing home and home health care will increase.

  • The largest purchaser of long-term care is the federal government, mainly through the Medicare and Medicaid programs, which accounted for just over $50 billion, or about 56 percent, of long-term care expenditures for the elderly in 1995.
  • Also, there are out-of-pocket expenditures by the elderly and their families -- which the CBO estimates will total $34.3 billion in 2000.
  • Additionally, the Department of Health and Human Services estimates that the value of donated care from family members and friends ranges from $45 billion to $94 billion per year.

On the basis of projections made by the Lewin Group and researchers at Duke University, CBO estimates that total inflation-adjusted expenditures for long-term care for the elderly will grow annually by 2.6 percent between 2000 and 2040.

  • Expenditures are projected to reach $207 billion in 2020 and $346 billion in 2040, in inflation-adjusted 2000 dollars.
  • This assumes that current trends in disability among the elderly will continue until 2040, with the proportion of the elderly that have functional disabilities -- and therefore require assistance -- continuing decline, on average, by 1.1 percent a year.
  • But if the projected elderly population for 2040 had the same disability rate as that projected for 2000, total long-term care expenditures would be $484 billion, about 40 percent higher.

The proportion of the population that is elderly, which was just under 13 percent in 1995, is projected to rise to 20 percent in 2040. More important, the population over age 85 -- the segment most likely to require long-term care -- will grow to over three times its current size by 2040.

Source: Stuart Hagen, et al., "Projections of Expenditures for Long-Term Care Services for the Elderly," March 1999, Congressional Budget Office, Washington, D.C.


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