The Obama Administration abandoned the Community Living Services and Supports (CLASS) Act last month. This public long-term care insurance program was slated to be the country’s first attempt at dealing with an aging Boomer population that is in denial about what it costs to grow old in America. That sense of denial, it would appear, is also shared by a growing proportion of our political leadership.
CLASS is gone, but the bottom line is that most Americans and their families do not have long-term care protection. Mortality has not changed. The cost of aging and its attendant disability have not changed. The fiscal situation and demographics of America’s aging have not changed. The only thing that has changed, now that CLASS is gone – is that we have stopped trying to do something about it – and that is a real disaster.
Why should people worry about protecting their families from long-term care costs? By the age of 65, people have a 50% chance of needing nursing home care at some point in their lives; half of those who make it to 80 will experience dementia. Almost all who live long will live with illness or disability for many months. And, many will age without the financial and social capital they need just to get by.
By 2035, the number of working age people available to care for seniors with disabilities is effectively cut in half. The numbers clearly show that Boomers now moving into old age did not have enough children to guarantee a steady stream of family caregivers. And as many of us have experienced, adults with aged parents often must keep working to keep our families afloat.
Why should the nation be in a hurry to cover Boomers with public long-term care insurance where premiums are paid by beneficiaries? Because the costs are going to be there, and we need to have a responsible and equitable way to pay for them. Government health care programs alone will comprise 10% of GDP by 2035. Medicaid will pay more than $750 billion for long-term care in 2035 – and that is just for people with virtually no income or assets. Medicare does not pay for long-term care. Expanding Medicare or Medicaid to pay for more long-term care from current taxes is improbable and imprudent. But encouraging the middle class to save for the risk of costs of disability in old age is prudent and plausible.
How big could the effect of an actuarially sound public long-term care insurance program be? While this is only one piece of solving the entitlement financing puzzle, its contribution could be considerable. If this initiative were to replace 4% of Medicaid long-term care costs for former middle class individuals who spend assets and become eligible, federal and state governments could save about $117 billion by 2035. Under a 4% displacement scenario, American families would recoup more than $1 trillion in costs in unpaid family caregiving by 2035. If it were really to catch on and 20% of Medicaid long-term services and support costs were displaced, federal and state governments would recoup more than $500 billion by 2035.
Instead of pretending that we do not have options in a budget-constrained environment, political leaders should look at other public long-term care insurance models – there are many. For example, a new public product could be offered in a national exchange in tandem with private long-term care insurance products or in the new medical insurance state exchanges. If federal and state exchanges are political non-starters, we could offer a public product through employers. If employer plans are not attractive, we might offer the choice for individuals to voluntarily elect that a portion of the Social Security taxes already taken out of their paychecks goes to pay a long-term care insurance premium. Further, we could offer the choice that an additional portion of one’s paycheck would pay a public long-term care insurance premium. Or people of moderate means could buy into Medicaid at retirement, avoiding spending down the rest of their assets. The options do not stop here.
Facts are stubborn things. We are aging and aging is expensive. We need a path to move through the decades without abandoning our elderly and disabled – one that that gets beyond an assumption that Medicaid is going to cover the long-term care bill for the middle class. America needs a system for aging well that works. The demise of CLASS only shows how hard it will be. The demise of CLASS is not a cause for celebration or mourning – it’s an urgent call for leadership.
Gloria Eldridge and Joanne Lynn work at Altarum Institute’s Center for Elder Care and Advanced Illness. The center researches and demonstrates new models to help an aging U.S. population live meaningfully and comfortably with serious chronic illnesses associated with advancing age, at a sustainable cost to our families and society.
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