The growing cost of long-term care (LTC) is fast becoming a problem we can no longer ignore. With millions of baby boomers now hitting retirement, state Medicaid budgets under pressure, and older working families ill prepared for the huge cost of nursing home care, LTC is shaping up to be a perfect storm.
More than 10 million Americans currently need assistance with daily living. About half of these are frail or disabled seniors and the other half are people younger than 65 years.
Nursing home costs now average about $75,000 a year for an individual, and assisted living typically costs around $40,000. LTC insurance is becoming hard to afford—and even to find, as private insurers pull out of the market. Younger Americans rarely think of protecting themselves and their assets with LTC insurance. The Affordable Care Act (ACA) did contain a provision, with the acronym CLASS (for Community Living Assistance Services and Supports), to create a voluntary government-sponsored LTC insurance program. But that program was deep-sixed when administration actuaries concluded that viable financing would require such high premiums that the program would encounter an insurance “death spiral” as rising premiums led to ever fewer but high-cost enrollees.
Heavy LTC costs and depleted personal savings have pushed more and more of the financing burden onto Medicaid, which in turn is straining state finances. Medicaid now accounts for 43% of total LTC spending, with Medicare covering just under one-quarter of costs through postacute coverage, according to a 2010 study by Deloitte. Long-term care already consumes about one-third of all Medicaid spending. Thanks to the demographic trends, future LTC costs threaten to cripple state budgets. According to the Deloitte study, the LTC “ticking time bomb” could push Medicaid up to more than 35% of state budgets by 2030, with half of that for LTC services. There is likely to be a cutback in federal funding for LTC rather than any expansion. So other strategies are needed to confront the need for care.
One strategy is to encourage more private savings and insurance in preparation for later needs. Many Americans wrongly believe their potential long-term nursing home costs will be covered by Medicare, so there needs to be improved information about the need for savings and insurance dedicated to LTC. There also needs to be an honest and open national conversation about the obligations of adult children for their parents’ housing and care needs. There might be a stronger, more stable market for insurance if LTC coverage were to become an integral part of health coverage. Concerns about nursing home costs will also spur current efforts to make it possible for greater numbers of elderly or disabled individuals to receive services at home rather than in an institution.
As Medicaid budget constraints tighten at the federal and state levels, it is important that states be given far more flexibility to redesign Medicaid to meet the different needs of the populations that receive acute or long-term care. Because the growing LTC challenge involves not just medical care and money but also social values, civil society institutions, and private planning, it will be particularly difficult to solve.
Source—heitage foundation, stuart butler