Subscribe to this BlogThe coming long-term care crisis (and why personal finance can't solve every problem)
I've been a personal-finance journalist for over a decade, and what I'm about to say almost amounts to heresy in my line of work: Some of your most pressing financial questions just don't have any satisfying answers. There may not be much you can do.
Most financial advice sounds like something out of a how-to manual. Building a table with a dovetail joint? Go get a fine-tooth saw and sharp chisels. Want to shelter your retirement savings from future taxes? Put it in a Roth IRA. But there's a whole set of money problems that can't always be solved by finding (or buying) the right tool.
The best example of this: Paying for long-term care, whether it's for your aging parents or for yourself. In his new book Caring for Our Parents, the journalist and Urban Institute researcher Howard Gleckman makes a compelling argument that the cost of long-term care will be the next shoe to drop in America's ongoing health-care crisis.
This story is personal for Gleckman (who also edits an excellent blog on tax policy). In the course of just a few months, first his father-in-law and then his father fell ill. His family had shell out thousands of dollars to pay for just a few weeks of nursing-home care, and then battled with a Medicare managed-care insurance company that refused to pay $85 a day for his dad's at-home aide. Even little things were a struggle: For a time, the only way his father (who lived in a different state) could get to a doctor was to call an ambulance. "I was a journalist and my wife was a lawyer, [but] we were hit with this huge crisis and we didn't even know where to start," Gleckman told me recently.
That huge complexity is likely in your future, too. About 70% of seniors will eventually need some kind of long-term care, according to one study Gleckman cites, and most of that isn't covered by Medicare. (Long-term care isn't medicine and doctors—it's the people with strong backs who lift you out of bed and make sure you are eating.) A day in a nursing home runs an average of $180, and the rate keeps going up faster than inflation. After you burn through your lifetime of savings or home equity, the main safety net to pay for this is Medicaid, the government insurance program for the poor. With 77 million baby boomers hurtling towards retirement, that system is likely to come under major financial pressure.
This is where the "right tool" problem comes in. There is a product on the market that's supposed to solve this: long-term care insurance. But it's an answer with a lot of asterisks. A couple of years ago, MONEY's Amanda Gengler and I took a close look atLTC insurance and who it might be right for. Read it here.That story kept me up at night with worry about offering the right advice—the stakes of the decision to buy insurance can be very high, and the product is dauntingly complex.
Among the questions you'll have to tangle with: Are you buying enough coverage (or the right kind) to pay for unpredictable future costs? Will you be able to afford to keep paying the policy 10, 20, or even 40 years from now, especially if premiums rise? And these days, you'd have to add: Can you trust the financial strength of the insurance company?
Speaking very broadly, long-term care insurance can make sense if you'll have enough money to comfortably pay premiums for life, expect to have an estate worth preserving, and are willing to do a lot of careful research to make sure you get the right policy. In short, while today's private LTC insurance can work for some people, it's not going to be an affordable solution for most us. And so it also won't protect the younger taxpayers who are going to be on the hook for more and more of these costs in the coming decades.
Gleckman thinks we'll need to set up some kind of public or hybrid public-private insurance system, so that more Americans will be preparing in advance to pay for the cost of their own care. This insurance might pay just part of the costs, leaving plenty of room for private insurers to sell supplemental coverage. Ideally, Gleckman says, the insurance would be mandatory, so that, by spreading the cost among millions, the premiums could be kept low.
America is already facing a hefty bill for boomers' retirement and regular medical costs—can we really add long-term care to the government's menu of responsibilities? The truth is that cost is going to hit us whether we plan for it our not. And this is one problem we'll need to face as a society, not just as individuals.
—Pat Regnier
Post this article everywhere in plain sight of all. I have taken care of two parents, both of whom had LTC insurance. LTC insurance may not cover all costs, but it can also be used for care in a nursing home during rehab that is not fully covered by Medicare after a few weeks. It can be used for nursing home care payments for food and housing for those on hospice that cannot be cared for at home. But it is likely not to cover all situations. I took care of the parents at home as long as I could, but it takes more than one or a couple to cover 24 hour care. Those with dementia must be watched every second. Caregivers must sleep some time, and turning and lifting cannot be done in some cases without expensive equipment to prevent harm to the caregiver and the patient. The only ones who may be physically able and financially able to provide 24 hour care are GRANDCHILDREN, not children who themselves may be in their 70's and have medical conditions when their parents must be cared for. I found despite my parents' extensive planning and my own willingness to devote years to their care, there were no good solutions for us–only least intolerable ones. One parent, who had a progressive terminal condition, planned for suicide but a dramatic health crash took away the ability to do the act. It took 7 weeks in a nursing home without any meds before death came–and it was an excruciatingly painful process enacted at every step by an immensely strong will, with various staff trying to intervene even under hospice. In former days, we didn't expect to live past a certain age nor did we have interventions (medicines, surgeries) to help us live longer. Now it seems any decision NOT to intervene with whatever might possible help someone live more months is seen as immoral, if not illegal.
Thank you so much for this. Last week I resigned from an insurane company where I was focused on LTC planning. I'm acutly aware of the current and impending crisis but it seems the vast majority of people just can't/won't look at the issue until it is too late.
Experience in the business showed me younger people are often offended if you even suggest getting a policy when they are healthy and the premium's are low.
Older folks often simply can't pay the premium for the amount of coverage most experts agree on.
One of the hugest issues nobody seems to want to address is that so many people wait until they are in poor health to seek coverage and then are rejected by the insurance company. It is like waiting to get homeowners insurance after your house is already on fire…you won't get it.
I believe Gleckman is spot on. Having been in the business most people simply are unwiling to plan for it or pay for it and are in huge denial that it is quite likely to happen to them.
Having the best of intention to really help people in this area I threw in the towel because so many just don't want to hear it. I understand this, without a public or hybrid public-private adequate coverage is out of reach to the people most likely to now take it seriously…seniors and/or those that current have severe health issues.
I really hope we tackle this as a country and it becomes a part of our current helath care reform. It is beyond tragic to eyewitness (as I have) the devastation physically, emotionally, spiritually and financially to those needing LTC and those we often underestimate the toll on…thier loved ones.
Thanks for the article!
It is silly to save all your life in order to turn that savings over to a nursing home in the last year of your life, so that you can have the privilege of being treated like a prison inmate, by underpaid, overworked CNAs.
This is why cigarettes and alcohol are so important. Ideally, you want to check-out with a nice, quick, fatal heart attack while over-exerting yourself at a part-time job in your mid-seventies. No fuss… no muss.
As for health care… we all know single payer is the only way to go.
Like many of America's other problems, this one has "Made in Washington" written all over it.
The major issue here is lack of significant capital in the hands of the people who are soon to become seniors. If we had adequate capital, there wouldn't be a problem — we could just pay for the care we need.
And just why are American families so capital poor?
Washington has systematically taxed and obstructed the accumulation of capital by Americans for over 50 years. Negative consequences for saving and investing over the decades have produced a nation of consumers out of what was once a nation of savers.
The baby boom generation and its desires in old age are about to crash headlong into the results of the policies they tolerated.
Their only hope, which they repeatedly refuse to consider, is to cease taxing capital accumulation and take up taxing consumption instead.
It is going to require a train wreck for them to get the message. I don't think it is upon us yet — but check again in 2030 after Social Security, Medicare, and lifetime pensions have all gone bankrupt.
What sort of 'train wreck' might be possible? What would happen if the then working generation refused en mass to pay the taxes required to support their profligate elders?
The government would collapse. And then government promises to tax others to supply services to you would be shown to be the Ponzi scheme it has always been — a way for you to become impoverished.
Personally, I'm urging my grandchildren to do exactly this — prepare to reject paying the taxes voted upon them by the likes of my generation. [My 10 year old grandson, for example, can't vote. Why should he pay taxes 20 years from now when he didn't get to be heard on whether to pass the programs or not?]
it is called intergenerational theft. more such theft, organized by and through the government, is NOT the solution.
food for thought, eh?
The government uses the tax code to reward/punish behavior. Making the premiums totally deductible for LTC insurance would encourage more people to purchase coverage.
How many people on social security do you think can afford $4000 a year for LTC? They already pay $250 and up a month for medical and prescription coverage.
I'd advise you, Tony, better kill yourself now than wish each of us die. And we will continue to fight with the evitable as we do through our whole history. The time has come for war on aging itself. Google "Aubrey de Grey" and "SENS" to get some clue.
Tony – then go to Canada. If you're terminal, esp after a certain age, they don't allow procedures or RX to cure. My uncle died within 6 mos of diagnosed w/ throat cancer (put into hospice right away) and my aunt waited 4 mnonths to get into a cancer specialist for her Leukemia. She died within a year.
Personal responsibility. I means that maybe you can't have a lake cabin, harleys, RV's, that cool car that reminds you of your youth – whatever. Obama (I'll bet the author voted for "change") wants you to need big government in your DAILY life. But a policy – check out New York Life …. bulletproof even after "the meltdown". Suck it up and do whats good for you and your family.
One of the biggest problems associated with the advances in health care is that we continue to delay the inevitable death. We, as individuals (not government – I don't want someone else making the decision), need to consider seriously about euthanasia after certain point in life. If you are 80 and trying live a few more years, what are you really achieving?
Suicide will probably be the answer for anyone without monetary assistance. There should be a government program to allow/assist old people to die with pride.
My mother was in a nursing home for 18 months before dying and exhausting all of her life savings. Her brother has been in an assisted living facility for 10+ years. These two events were reason enough for my husband and I to purchase LTC Insurance about 9 years ago. We have a very inclusive policy which costs $3900 yearly as my husband was "rated" for back surgeries. I don't understand why people balk at LTC Insurance when they have been paying car insurance for probably at least 50+ years. Do they realize that the chances of being admitted to a nursing home in their lifetime are upwards of 75%, certainly far greater than getting into a car accident! My gripe is why the Government does not allow folks who are responsible enough to purchase LTC Insurance to deduct the premiums from their income tax. We are the ones that will NOT be draining Medicaid dry so why not offer an incentive to us?
@ Chris Kratsch – you obviously don't understand the concept of insurance. The point is that you pay more than what you expect to recover, for protection from costs that you cannot afford to bear. Sure, most people get back less than what they pay, but the point is that you were covered if something catastrophic had happened. It's thinking like that which will soon bankrupt America under the weight of it's entitlement mentality.
I think you can expect to see more acts of suicide amongst elders…..if they are able to remember how to do it.
I'm not being flip. This is a looming crisis. How did we get away from "shared risk" to "for profit" with our health care?
This crisis will make SS and Medicare a walk in the park. LTCI is not the answer for probably 98% of us. Especially since the recent fall in asset prices. If there are very little in assest to protect you are better off using them to pay for care and apply for Medicaid. This requires early careful planning which is readily avaiable at many state agencies and Medicaid Planning attorneys. I know Medicaid may be a dirty word for many but realistically that's where the overwhelming majority of us will end up.
Money is only the first issue. manpower in healthcare is really the 800 lb gorilla in the room. You cite 77 million boomers will retire. healthcare is composed of mostly boomers- and they aren't being replaced now. Working in healthcare has become less attractive over time due to lower wages and higher work loads. Community services- in home care- suffer extremely high turn over rates due to low wages, poor training, and high stress. ever taken care of- feed, bathe, clothe, and keep safe- an elderly client who wears diapers, suffers from dementia and curses at you repeatedly ? Few can and do it for years on end. The ones that can will pick and choose their jobs and are very valuble to employers. This is my 16th year in community mental health. every year state facilities close, personal care homes close and it is harder to find caring, competent help with today's population. The vast majority of boomers will be treated in their homes and not in facilities. Your are right- we may not have the money to care for the boomers at the level they expect. We will not have the manpower. Americans will not do the work. As for immigration- well that's another article for another day.
Perhaps this crisis will drive our society to stop warehousing our elders in long term care facilities. Very small percentages of the elderly are in nursing homes in many industrialized countries. They are unheard of in less developed countries. It is too bad that our throw-away society extends all the way to mom and dad.
If we're to face this as a society and not as individuals, then we need to come to terms with a simple fact: the insurance industry is a racket that basically takes protection money and skims off the top. The insurance industry makes society's medical expenses higher, not lower. A very few individuals do recover more money in insurance claims than they pay out in premiums, but the vast majority are paying high premiums for low returns, not to mention the inconveniences that go along with following insurance company rules in order to make sure what claims they do make get paid.
In America today, the health care industry exists not as a human right, freely available to all (which it ought to be, in a first world country), but as a cash cow to be milked by business.
Christine — RE Iowa City, IA — they just announced yesterday that a BUNCH of white-collar jobs (Administrative and clerical) will be laid off at the University of Iowa Hospitals and Clinics. This has to have an impact on the unemployment there!