What Does Long-Term Care Reform Mean for Younger Generations?

The Senate Finance Committee's May 20 letter outlining an affordable home care guarantee for American families identifies the right crisis—a “confusing” and “fragmented” long-term care system. They propose guaranteeing affordable homecare for Medicare beneficiaries, strengthening Medicaid home and community-based services, improving nursing home quality, and investing in the care workforce.

Notably, this isn’t the first Congressional effort to tackle the long-term care problem. Currently, the Well-Being Insurance for Seniors to be at Home Act, or WISH act, was introduced in 2021, then reintroduced in 2025.

This Act is a proposed federal insurance program that would provide approximately $4,000 per month to people who develop serious long-term care needs, after a waiting period of one to five years, depending on income. Our Center for Retirement & Policy Studies analyzed the effect of the WISH Act on Americans and found it could boost rates of retirement income adequacy by more than 30% for those who qualify.

But the problem of long-term care coverage is far from solved.

What Congress needs now is a warning: The benefit indexing mechanism in proposals like the WISH Act—in which the benefit provided increases over time at the rate of standard inflation—will, if left unaddressed, systematically fail the younger workers that the reform is designed to protect.

This warning comes directly from our modeling.

Through the Center’s Morningstar Model of US Retirement Outcomes, we simulate retirement-income adequacy across income levels, demographics, and generations.

When we remove long-term care costs entirely from our model, the share of households projected to run short of money in retirement drops from 41% to 26%. This is not a policy simulation; it’s a diagnostic test that isolates how much long-term care costs contribute to retirement insecurity. That 15-point gap represents the pure financial devastation that long-term care costs inflict on otherwise adequate retirement plans.

The distribution of costs among retirees is highly skewed. About half will need no paid formal care. But for those who do, the average cost from retirement through death is $242,373. This is a cost that often comes with no warning and can erase decades of saving in months.

Single women are the most exposed to this kind of risk. Because they live longer and often outlive their partners, they face higher rates of needing paid care and the sole responsibility for paying for it. More than half (52%) are projected to run out of money under current conditions.

Meanwhile, middle-income households are similarly exposed. They have enough savings to disqualify them from Medicaid but not enough to absorb catastrophic care costs without a shortfall. Lower-income households often run short regardless; higher-income households can absorb the hit. It’s the middle that gets hollowed out.

The WISH Act addresses this challenge directly by targeting the long, expensive care episodes that can destroy an individual’s retirement portfolio, rather than trying to cover all care costs for everyone.

The income-indexed waiting period is sensible design; instead of every retiree waiting the same amount of time before their long-term benefits start, the waiting period is shorter for lower-income individuals and longer for higher-income ones. This keeps the program fiscally manageable while ensuring that the households most financially vulnerable get help soonest.

When we model the WISH Act for Generation Z, millennial, and Generation X cohorts under a scenario where the WISH Act exists versus one where it doesn’t, the results are substantial. Among households in those cohorts that qualify for benefits, the aggregate retirement shortfall rate drops from 42% to 19%. For single women who qualify, it drops from 58% to 28%. For lower-middle-income Gen Z households, it falls from 61% to 25%.

The WISH Act’s fundamental flaw is assuming that long-term care costs inflate like general prices. Historically, care-sector inflation has outpaced standard price inflation by approximately 1.9% per year, driven by rising demand, persistent labor shortages, and the labor-intensive nature of care work itself.

Those pressures are not abating—direct-care worker demand is projected to increase 40% over the next decade, while median wages for that workforce sit just under $26,000 annually.

If the WISH Act benefit is indexed to standard price inflation rather than actual care-cost inflation, the real value of the benefit erodes over time. For older beneficiaries, the gap may be manageable. For younger workers, it’s a different story.

In our modeling, care-needing Gen Z households fare substantially worse when the WISH benefit is indexed to standard price inflation instead of care-cost inflation. Under the stronger indexing assumption, their projected shortfall rate is 49%.

Under Consumer Price Index, or CPI-style indexing, it rises to 56%, eroding much of the protection the program is intended to provide. The program would effectively deliver on its promise for today's retirees while quietly failing the generation that needs it to work across a full career of contributions.

In theory, this is fixable. Index the benefit to a long-term-care cost measure rather than general CPI. Congress could use a dedicated home-care cost index, a medical-care services index adjusted for direct-care labor costs, or a statutory formula that reflects both wage growth and care-sector price inflation.

But this fix requires Congress to come to an agreement, and it needs to be made now rather than corrected after the program has been designed around the wrong assumption.

The 90% of Americans who want to age at home deserve both a care system capable of supporting this goal and a financial backstop that remains adequate across their lifetimes. Fixing the indexing mechanism is what makes the promise real for the workers who are currently in their 20s, 30s, and 40s—the ones who will be counting on this program in 30 years.