By Sam Gutterman
There has been little political discussion at the federal level concerning how to meet the needs for long-term care. Should I be surprised? The simple answer is “no.”
Nevertheless, it is a challenging and complex issue that will be even more critical over the next decade.
It is hard enough to hold a serious discussion regarding the financial future of Social Security, the third rail of U.S. politics. Naturally, few politicians want to be blamed for reducing scheduled benefits or increasing taxes—the gloomy alternatives if no action or no source of additional revenue is found in the next decade. Indeed, there is no easy answer—it is far easier to kick this financial can down the road, set up a commission, or simply ignore it until the very last moment.
It is even harder to focus attention on addressing the upcoming increase in the cost of meeting the long-term care needs of older people (and yes, even some at younger ages). You mostly get blank stares that tell you that that will be important, but we have other higher-priority problems that we must address now.
Why the silence? Why the delay in addressing these issues? The increasing need for long-term services has been anticipated for decades. While serving on a 1990 federal technical panel on Social Security and Medicare, it became apparent to me that the long-term care chickens will start coming home to roost around the mid-2030s when baby boomers begin to need long-term care that often commences around age 85. However, a decade seems far away—the long-term federal budget window only reaches 10 years into the future. Interestingly, that is also about when the Social Security trust funds are projected to be depleted.
So, we have a confluence of two fundamental changes that need to be addressed before the mid-2030s: a sudden increase in the need for long-term care as the boomers age and Social Security trust fund approaches depletion.
The underlying method of financing Social Security (partially prefunded over the past few decades) and Medicaid (the primary financial source of long-term care for low-income people) uses a pay-as-you-go approach. Will the upcoming generations provide the resources needed to carry their share of the financial burden and support these social programs, as previous generations have?
Long-term care needs and their increased costs will continue to grow because there will be fewer family caregivers, partly due to low fertility rates and an insufficient number of paid caregivers, combined with the desire to avoid institutional care.
Our period total fertility rate has been at a below-replacement rate (about 2.1 children per woman) for 48 out of the last 50 years. Fortunately, immigrants have come to the rescue—without them, the working-age and care-giving population will surely decline. However, this source may not meet these demands because of political pressure. And even anticipated future rates of immigration will not be sufficient to avoid the funding problems.
Indeed, population aging and its associated costs will soon be upon us.
We need to get our political leaders to start thinking, discussing, and ultimately acting on these impending demographic and financial calamities. Why the reluctance? Many of their constituents will undoubtedly feel the pain if no action is taken. Despite this, the foot-dragging is primarily due to the lack of simple, cheap, or financially sound and empathetic solutions.
I do not have all the answers to these strategically essential issues. But there are some glimmers of hope on the horizon. Certain states are piloting innovative long-term care approaches, including public-private partnerships. More and different forms of home care will evolve, helped by technological wizardry. Open and honest discussion is needed. If governments continue to ignore these issues, they will only become more difficult to resolve.
The adverse effects of population aging will be increasingly apparent, especially evident because of the continued aging of the baby boom generation and our continuing low level of fertility. As actuaries and citizens, we must present objective information about these issues. We have been told that lies and exaggerations repeated enough times will be perceived as being true—let’s repeat the demographic and financial facts over and over so that serious discussion occurs.