Long-term care plans for families do not usually reflect reality – Retirement Research Center

Medicaid is not an easy option for those starting at $100,000.

As part of an extended study on the risks of families approaching retirement, we have just completed a project focusing on risks associated with medical and long-term care costs.

It turns out that while medical risks are highly uncertain and can be expensive, many of these risks are insured by Medicare (and Medicaid for those eligible for both plans). By contrast, long-term care risks are not well insured. Of all adults in the United States, only 3% or 15% of the age group over 65 have long-term care insurance. One major finding is that there is little knowledge of the possibility of long-term care or the potential cost of that care.

The implication of families who underestimate their health care risks is that they may not be able to protect themselves well from these risks. Without proper insurance or resources, older families may have to make substantial adjustments or consider less favored options. The question is, how realistic are these contingency plans?

The analysis is based on the 2024 Greenwald Research online survey, which covers 508 individuals aged 48-78 with at least $100,000 in investable assets. The survey included a question of which contingency plans respondents would consider whether or not the cost of medical or long-term care could not be afforded. Then, use Health and Retirement Research – A nationally representative sample of people over 50 years of interviews every two years.

Interestingly, about 60% of respondents said they would consider using Medicaid, while only 30% said they would consider using their home equity or moving with their children (see Figure 1). However, many of these preferences may not be realistic.

Many older families who believe they can always return Medicaid may not realize that the program’s income and asset restrictions require poverty. In 2025, the monthly income limit for Medicaid eligibility over the age of 65 is usually about $2,800 ($5,600 for couples) and the asset limit is usually $2,000 ($3,000 for couples), but vary by state.

Among households with over $100,000 of investable assets, like the ones in our survey, there are few eligible for a standard income rule based on the standard income rules, as their Social Security benefits and determined benefits income will put them beyond the limit. Several states have special income rules for long-term care, with slightly higher restrictions. Even then, 70% of the families in our sample were not eligible. In fact, only 15% of households with only more than $100,000 in initial assets will actually end up under Medicaid (see Figure 2), while 60% of households believe spending on Medicaid is one of their options.

One of the most popular contingency options to raise funds for healthcare costs is to hit home equity. Less than one-third of families say they will consider it. However, in fact, more than 40% of people will take advantage of their home equity in retirement – ​​either obtain a second mortgage, apply for a home equity or other loan to the home, or downsize and move to a less valuable home (see Figure 3).

Finally, another unpopular option to manage healthcare needs among respondents is to move with children. Again, less than a third say they would consider this option. Interestingly, in the real world, only about one-quarter of our wealthy groups live with their children (see Figure 4). So, if the plan fails, this option does seem to be the least popular backup.

In short, the uninsured component of health care costs in retirement (especially those associated with long-term care) can be large, and older families do not have an accurate understanding of these risks. As a result, many people end up inadequate resources. When our survey participants (individuals with $100,000 or more investable assets) were asked how to deal with this situation, about 60% said they would spend eligible for Medicaid. Given the tight revenue and asset requirements for the program, this is not a reasonable option for most people. In fact, only 15% of the group are eligible for Medicaid. Respondents are less enthusiastic about tapping their home net worth, but in fact, many (more than 40%) do use home net worth as a source of support.