- The growing population of older Americans faces unaffordable long-term care.
- These costs will also burden many young people caring for older parents and relatives.
- Government incentives and public insurance could help improve the affordability of care, experts say.
As the population of older Americans increases, so do the financial costs associated with aging.
Many millennials and Generation X are faced with a harsh reality: their parents and grandparents I don’t have the means to pay for long-term care — and they’ll have to help foot the bill, especially since government assistance often doesn’t cover much of that care.
Many young people end up quitting their jobs or working less to care for aging family members – and this sacrifice can harm them financially now and in the future, including reducing their income and reducing their income. Social security benefitssay the experts.
“The biggest problem is that you can create almost a cycle of poverty,” Marc Cohen, a professor of gerontology at the University of Massachusetts Boston, told Business Insider. “It’s not something that’s limited to one generation. The costs are borne by the community.”
Unprepared for a predictable crisis
Just like other forms of care – from emergency rooms to daycares – the labor and facilities needed for long-term care aren’t cheap. The shortage of long-term care workers, coupled with inflation, has has driven up prices in recent years. As the oldest members of the baby boom generation approach 80, demand for these services is expected to increase sharply, putting upward pressure on costs.
Long-term care provided by the private sector – including assisted living communities and home health care – is largely out of reach for the entire middle class. Fewer than 15% of people 75 and older living alone in major U.S. cities could afford to pay for assisted living or daily home health care visits without dipping into their assets, according to a 2023 report from the Harvard Joint Center for Housing Studies.
“It’s the affordability issue, particularly in the middle market, that concerns us the most,” Lisa McCracken, head of research and analysis at the National Investment Center for Economic Affairs, told Business Insider. housing and care for the elderly.
Retirees and their families may not be able to count on government assistance. Medicare, the government health insurance program for the elderly, does not cover most long-term careincluding assisted living, home care and nursing homes. Medicaid largely does not cover assisted living services and home health care, and waiting lists are often long for the nursing home care it does cover. Some residents of assisted living facilities were expelled after spending their savings and being forced to rely on Medicaid.
“A lot of people have wondered, ‘Oh, well, doesn’t Medicare pay for that?’ and that’s not the case,” Cohen said. “So people find out late in life that they have no protection against these costs.”
This is what happened to Erika Gilles and her family. After Gilles’ mother, Karen Proctor, 78, was hospitalized with chronic kidney disease last year, she quickly realized that her mother’s Medicare coverage wouldn’t be enough to cover her long-term care. Overnight, her mother went from living independently in the home she had owned for a long time to receiving dialysis treatment and constant care. But Gilles was unable to get private long-term care insurance because of his mother’s pre-existing health problems.
Gilles, 57, found a collective assisted living facility for his mother, who applied for a state subsidy to help cover the costs. If the grant doesn’t arrive, Gilles fears they will be forced to sell his mother’s house in Sun City, Arizona.
“It completely turned my life upside down. It took up all my time,” Gilles said. “I don’t think I’ll ever retire.”
It’s not just a baby boomer problem
Generation Xmany of whom are stuck between caring for aging parents and dependent children, have fallen behind in their financial savings. A study carried out by Nationwide showed that 56% of Gen Xers financially supported their parents or children. About a fifth of Gen Xers who care for a parent reported having a significant amount of debtand a similar proportion said they were unable to save for retirement, the study found.
The number of American adults who care for a spouse, parent or older relative or child with special needs rose from 43.5 million in 2015 to 53 million in 2021, according to a report from insurance company Guardian.
A separate Carewell survey of people aged 35 to 60 found that 75% of those caring for both a parent and a child reported difficulty save for retirementwhile 63% reported living paycheck to paycheck. Meanwhile, adult caregivers provided about $600 billion in unpaid work last year, notes a separate AARP report.
Brandon Goldstein, a financial planner at Prudential, said he frequently works with clients who are struggling to care for their parents as they age. In some cases, its clients are experiencing financial hardship due to custody and have been forced to reduce their savings.
Some of them may have to rely on their own children to take care of them in the future, he suggested, given how much they have sacrificed in their own retirement savings.
“Having to reduce what you put into retirement is going to put you in a situation where you might not have any assets now, and you might — I don’t want to call it a burden — but you might become that liability if you do. “I don’t have the assets to cover a facility,” he told BI, adding that some might have to consider working longer than initially planned.
Ultimately, because of rising Medicaid costs, taxpayers could be left saddled with the growing long-term care crisis. A growing number of seniors don’t have children or a spouse to care for them as they age, and those who end up needing long-term care may have to rely on Medicaid. About a fifth of baby boomer women I don’t have childrenand those who have children have fewer on average than previous generations.
A government-subsidized solution for long-term care?
Cohen says the private long-term insurance market suffers from a “clear market failure” and that policymakers must step in to create a public option for middle-income people and their families.
McCracken said that to scale some of the most effective models of assisted living and other long-term care, private providers will need more government incentives and partnerships.
Cohen argued that public long-term care insurance would work well if most people paid into it because a relatively small number of elderly people need the most expensive care, such as 24/7 nursing care.
This option could look like an earned benefit, like Social Security and Medicare, funded by a mandatory tax that people pay throughout their lives and collect in retirement. Rep. Tom Suozzi, a New York Democrat, bill it would create a public insurance program for catastrophic long-term care, funded by a payroll tax.
Some states have begun to address the problem. Washington state recently passed a 0.6% payroll tax to fund a new universal long-term care insurance program called WA Cares, which provides $36,500 in care per person and will increase with inflation in the years to come.
Gilles said she wants to see the government or healthcare providers find a way to reduce costs.
“They need to provide more support to families going through this,” she said. “They need to either make it more affordable, or provide more resources, or not make it so expensive so that it’s accessible to everyone, regardless of their income level.”
Are you or someone you care for struggling with the costs of long-term care? Email this reporter to share your story: erelman@businessinsider.com.
