The Next Health-Care Crisis

Think Social Security, a pension and Medicare will provide a safe financial cushion for your golden years? Think again. The odds are you won’t have enough money to pay for the care you will need.

While the nation is torn apart by the controversy over Obamacare, designed to address the crisis of more than 50 million uninsured Americans (approximately 15 percent of the population) a larger crisis looms:

More than 16 percent of Americans are now over the age of 65, and almost two-thirds of them require some kind of long-term assistance — either in nursing homes or from home-health aides — and the costs of such care are going through the roof. While living longer is a blessing, it also increases the likelihood of ending up in a nursing home; half of all those over the age of 95 live in one. The average annual cost for a nursing home stay now runs to about $83,000.

Home-health care costs are lower, but they are not cheap; according to Metlife, the average cost of a home- health aide for four hours a day, five days a week, is $21,000 a year.

Meanwhile, the average annual social security payment for a retired worker is $14,760.

The long-term health-care crisis will only worsen. By the year 2030, 25 percent of Americans will be 65 years old or older, and they will live longer. That future aging population will cause the current $200 billion currently spent on long-term care to double or possibly treble.

Many are under the misconception that Medicare provides coverage for nursing home care. It doesn’t. Medicare provides for only 100 days of nursing home care, and only after discharge from a hospital. Those requiring long-term care beyond 100 days have to either pay out of pocket or be eligible for Medicaid. To be Medicaid-eligible requires having virtually no income and few assets. With a look-back period of five years, a person has to spend or transfer assets or place them under a trust before becoming eligible for Medicaid.

Even if many seniors find a way to become Medicaid-eligible, the Medicaid system is already buckling under the strain of providing healthcare to more than 45 million Americans, at a cost of $300 billion a year. Those costs will rise dramatically as Obamacare raises the income for eligibility. Given the rise in the aging population and the additional millions now eligible for Medicaid, there’s no way for states and the federal government to pay for it all.

Are there any viable options, then? One option for covering the costs of long-term care is paying individually for long-term care insurance. But only three percent of Americans have such insurance, and the premiums keep surging. The average cost for a long-term care insurance policy for a 60-year-old couple is $5,000, but many insurance companies are finding that that doesn’t cover costs, because most of those who buy insurance are the ones who will have costly long-term-care needs. Also, long-term health insurance falls short of full coverage; many policies will pay only $125 a day, or a bit more than half the $227-a-day cost of a nursing home bed.

What is needed is a hybrid approach. Congress should make long-term insurance affordable by encouraging more employers to offer it and more people to buy it. The more people who buy it, the lower the costs will be. The government could provide tax breaks for individuals who buy policies and for companies that subsidize the insurance for employees. If such incentives are put into place, long-term coverage would be cheaper and many more Americans would buy into the system.

In addition, for those who don’t have insurance and don’t need the 24-hour care of a nursing home, the government could reimburse a family member to provide care. This is done regularly in the UK, and would provide a higher level of care for a lower cost.

Another, more drastic, approach would be to take mandatory deduction from paychecks, as is done now for Medicare. However, no one wants to see another slice off their paycheck, and creating another government bureaucracy will mean that that slice will grow as time goes on. It’s unlikely that an unpopular Congress would contemplate passing another payroll deduction.

Members of Congress are aware of this demographic time bomb but, as usual, have been sitting on their hands. Currently a committee is weighing options, but it has to act soon. Obamacare was accused of throwing granny under the bus. That’s arguable. But what’s indisputable is that without a plan on long-term care, Congress is throwing granny into the poorhouse.