Americans are aging. Let’s make sure we can afford it.
By Nora Super
Jan 2, 2019
The good news? People are living longer than ever. Americans reaching age 65 today can expect to live, on average, until age 85 — and about one-quarter will live past 90. The bad news? While some will have decades of active, purposeful living, more than half will need a high degree of assistance with eating, bathing, or other routine daily activities.
The aging of the baby boomers will double the number of Americans needing long-term care to 27 million by 2050. A decline in the number of family caregivers and limited financial resources will make adequate care harder to find. Yet, despite the financial and emotional implications, hardly anyone is talking about this at the national level.
I’ve experienced firsthand the harrowing aspects of caring for an older relative. My dad was relatively healthy until he was diagnosed with Alzheimer’s disease at 76. Thus began my family’s odyssey into a world, shared by millions of middle-class Americans, of navigating the complex and expensive maze of long-term care. Bottom line: Our country sorely lacks safe, high-quality, affordable options. And unless we act soon, the problem will get worse.
The costs of formal long-term care are staggering. Because dementia is degenerative, my dad’s care needs increased over time. At first, we tried to care for him from long distance while he lived in an assisted-living facility. Then we moved him near my sister so she could check in on him regularly. Like so many working mothers, my sister was responsible for taking him to doctor’s appointments, shopping, and visiting him. When his needs became too great for assisted living, we placed him in a nursing home. For us, like so many other families, the decision was not an inexpensive one: In 2017, the cost of a nursing home stay averaged about $97,452 per year or well over twice an older (65 and up) middle-income family’s income.
The number of private insurers offering long-term care insurance has plummeted from slightly more than 100 in 2002 to about a dozen today.
Individuals and families pay 55 percent of long-term care costs out of pocket. Medicaid pays for nearly 40 percent of long-term care costs, primarily for low-income people or those who have spent down all their financial assets to qualify for coverage. Private long-term care insurance pays less than 5 percent. Luckily for us, my dad had a pension plan that covered most of his expenses. Today, pensions aren’t available to most Americans, and very few have saved sufficiently for retirement. A typical American aged 65–74 has financial assets of just $95,000 and only $81,000 in home equity.
Acquiring and maintaining financial assets can be particularly challenging for some demographic groups. The median wealth of black and Hispanic households is just one-eighth that of white households due to lifelong income disparities. Because a woman is much more likely than a man to take time out of the workforce to care for family members, she may earn a cumulative $1.06 million less by retirement than a man who worked continuously.
During the past few decades, policymakers have attempted to solve the vexing problem of long-term care. Most recently, the late senator Ted Kennedy championed the Community Living Assistance Services and Supports Act (CLASS), a voluntary, publicly administered long-term care insurance program. Enacted as part of the Affordable Care Act in 2010, CLASS was repealed in 2013 after the Obama administration concluded that it was financially unsustainable. Since then, a national dialogue to find a comprehensive solution has been practically nonexistent.
Meanwhile, the number of private insurers offering long-term care insurance has plummeted from slightly more than 100 in 2002 to about a dozen today. While some of this is due to consolidation, the larger force driving the exit is lack of profitability. Less than 0.5 percent of U.S. employers offer long-term care insurance.
Although there is no panacea for the long-term care crisis, a combination of public- and private-sector actions could make a big difference in the lives of millions of middle-class Americans.
1) Paid family leave.
The majority of caregivers are unpaid family members. More than 34 million Americans provide care to someone over the age of 50, and 61 percent of them juggle work and caregiving. Most say caregiving disrupts their work. The U.S. is one of the few developed countries without guaranteed paid leave to care for children or older relatives. This forces far too many family caregivers to leave the workforce.
2) Allow Medicare to cover home- and community-based services.
Many Americans mistakenly believe Medicare covers long-term care and don’t recognize the need for long-term care insurance until it is too late. But as the U.S. moves toward a more value-based healthcare system, health plans and hospitals have begun to cover some non-medical benefits, such as transportation and home-delivered meals which reduce Medicare expenditures while improving the health of older people. Congress moved in the right direction last year when it enacted the CHRONIC Care Act, which expanded the supplemental benefits Medicare Advantage plans offer to the chronically ill.
3) Expand private long-term care insurance options.
Fewer than 8 million people have private long-term care insurance policies — less than 10 percent of those estimated as being able to afford and qualify for a policy. Several bipartisan study panels have concluded that government should provide universal long-term care insurance protection against catastrophic risk. Yes, this would be expensive, but it is much more expensive to do nothing. Other options include tapping home equity to finance long-term care, providing new incentives for employers to offer long-term care insurance as a benefit, and modifying retirement savings plans to better protect against long-term care costs.
More than 34 million Americans provide care to someone over the age of 50, and 61 percent of them juggle work and caregiving.
The looming crisis in long-term care is not going away simply because we’ve been distracted by other issues. Without a better system for financing long-term care, millions of Americans — from caregivers to retirees — will struggle to lead healthy, secure lives. The middle class simply cannot afford to wait any longer for a fix to our broken system.
Nora Super serves as Director of Policy and Programs in the Milken Institute Center for the Future of Aging, whose mission is to improve lives and strengthen societies by promoting healthy, productive and purposeful aging.