Aging Baby Boomers Raise The Risk Of A Long-Term Care Crisis In The United States
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It’s easy to feel pessimistic, if not apocalyptic, about the looming challenge of long-term care for the nearly 71 million baby boomers entering their golden years.
Consider some numbers:
- There are currently 14 million people receiving some form of long-term care. That number will double by 2050, according to estimates from the U.S. Centers for Medicare and Medicaid Services.
- About 70% of people over 65 will need some form of long-term care before they die, according to an analysis by the Urban Institute.
- The average annual cost of a private room in a retirement home was $ 102,000 in 2019, according to a survey by insurance company Genworth.
- Research by the Insured Retirement Institute found that 45% of baby boomers have no retirement savings and more than a quarter of those with less than $ 100,000.
“It’s a huge problem,” said Howard Gleckman, senior health care researcher at the Urban Institute. “Advances in technology and public health have made it possible for people to live longer in a state of fragility, and we have not developed a long-term care system to keep up with that.”
When the older baby boomers start turning 80 in 2025, there will be a growing wave of people who may need more supports and services, and the burden will be greater on their children. Most long-term care is provided by a spouse, children – daughters more often than sons – and other family members.
As the baby boom generation has fewer children than their parents, there are fewer caregivers to take on the burden ahead. This suggests a growing need for more expensive formal care, at home or in an institutional setting.
“Most long-term care needs arise when people are in their mid to late 80s,” said Gal Wettstein, senior research economist at the Center for Retirement Research at Boston College. “We’re not there yet with the baby boomers, but that’s the big concern.”
Based on data from the University of Michigan’s Long-Term Health and Retirement Study, the center estimates that 20% of Americans will not need any long-term care service before they die, about 55% will have low to moderate needs and 25% will have “the type of severe need that most people dread”.
He also estimates that 33% of retirees do not have the resources to meet even minimal LTC needs, and only a fifth could afford “serious” long-term care needs of four years or more.
As currently structured, public health payment systems are not well positioned to face the challenge ahead. The Medicare system generally does not pay for long term care services except for recovery from acute health problems.
The Medicaid system does, but it is only accessible to those who have no financial resources or who have completely exhausted them. Plus, it typically only pays for care in nursing homes – an extremely unpopular alternative for virtually everyone – and not nursing homes that cost $ 100,000 for a room.
There are many state-tested “Medicaid waiver” programs that aim to fund more popular and humane home and community care services, especially in California and Washington, but taxes fund them. are never popular.
“In this political climate, I don’t see a political answer to this problem on the horizon,” said certified financial planner David Yeske, founder and CEO of San Francisco-based financial advisory firm Yeske Buie. “It will be up to individuals and families to solve this problem.”
The solution is not private insurance.
Long-term care insurance companies abandoned the business or increased their premiums for years after mispricing them in the 1990s and the first decade of this century. The policies may still make sense to wealthier Americans who wish to cover themselves against severe LTC needs, but with much more stringent conditions on the length and amount of coverage, the number of LTC policies sold today. hui is only a tiny fraction of what it was 20 years ago.
“The reality is that care costs of $ 100,000 per year for any length of time will blow up almost any pension plan,” Yeske said. He speaks frequently with baby boomers and younger clients about long term care for themselves or their parents.
Yeske identifies likely costs and available resources, then evaluates alternatives for them. “Financial planning is helpful, but it’s not magic,” he said. “Ultimately, siblings and family will have to make tough decisions.”