"Caring for Our Parents": My New Book on Long-Term Care
I am not just a tax wonk. For the past couple of years, when I wasn’t blogging on TaxVox, I was writing a book on long-term care. Caring for Our Parents critiques what is a completely irrational system for delivering and paying for these services. I had the great fortune of being able to tell this story through the eyes of both those who are receiving assistance and their families.
About 10 million Americans need this care, and as many as 40 million of us help family members and friends—either the frail elderly or those with disabilities. Long-term care is hugely expensive. On average, a year in a nursing home costs $75,000 and home health aides cost $19 per hour. In 2007, we spent $230 billion on paid assistance. But that pales in comparison with the economic value of informal care provided by family members, which AARP estimates at $375 billion.
The system is a mess. Most Americans pay for this care out of pocket until they run out of money, then they turn to Medicaid, the state/federal program that was supposed to provide medical care for poor mothers with children.
Today, Medicaid pays more than 40 percent of long-term care costs–more than $100 billion, or one-third of all Medicaid dollars. And as the Baby Boomers age, this program’s costs will double, with the federal share alone rising from about 1.5 percent of GDP to more than 3 percent by mid-century, according to the CBO.
Only about 7 million Americans have private long-term care insurance. But policies are too expensive and too complicated for most consumers. Besides, Jeff Brown and Amy Finkelstein conclude, many decide not to buy private insurance because Medicaid will cover their catastrophic long-term care costs for free.
Government has taken a number of steps to make private insurance more attractive. More than 30 states have adopted tax incentives to encourage people to buy policies. But, like most of these subsidies, there is little evidence they accomplish much. (I’ll blog in more detail on this subject another day).
Delivery is just as much of a mess. Nearly everyone wants to be cared for at home. But few family members have the time and skills to assist loved ones. And while Medicaid is beginning to provide benefits for people being cared for at home, most frail elderly still have to be in a nursing home to get assistance.
This is a painful story. But, while researching the book, I got the chance to meet some extraordinary people: Michelle Barrett, who gave up her career as an Air Force pilot to help care for her dad. And Peggy Ingles who, after being paralyzed in a horse-riding accident, fought with incredible tenacity to both restore some movement in her limbs and build a support system that allows her to live in an apartment rather than a nursing home.
It is possible, though not easy, to fix much of this without adding to the deficit. And some lawmakers want to include long-term care reform in the effort to remake our health care system. It remains to be seen if they succeed, but for the sake of all those I met over the past two years, I hope they do.
Thanks for the post! I think that there is no right or wrong answer on this. Whatever the situation and whether you have enough funds to take care of your parents or not, you make sure that the solution is a good one and that it is one that can fulfill all your parent’s needs. After all this will be their home. While I was looking for assisted living for my parents in the Allentown, PA, area I came across a website http://www.devonhouseassistedliving.com/index.htm that offers an assisted living facility and provides a free tour of the facility.
“It's just too costly to be covered from the family's pockets.”
Ultimately everything comes from family's pockets. Every nickel of tax revenue, every dime of business revenue.
So if it is too expensive for family budgets, it is just too expensive. Gotta find a way to cut the cost, unpleasant as that is.
Long term care must be included in the health care system reform. It's just too costly to be covered from the family's pockets. I was raised with the strong concept of respect for the elders. Let's respect them by providing a good long term caring system.
Marriage help adviser
The only way to possibly do this is to try again to tie it to normal retiree health care. Assume an expanded Business Income Tax, payable regardless of ownership type and inclusive of payroll – with the BIT absorbing Disability Insurance, non-Old Age Survivors Insurance, Unemployment Insurance and Medicare Taxes (both employer and employee).
One way to get employers to either purchase LTC insurance for retirees or self-insure is to allow them to credit these costs on their BIT, provided that they pay as generously as the government program, with a cap at the percentage of the tax attributable to Medicare and senior Medicaid spending. The government would decide who is considered a retiree – so that companies would have no incentive to shed people in advance of retirement. The government would ding the longest term employer, who would have to cover that person to get the deduction.
This is about the only way I can think of to really go after these costs.
At the risk of getting into this dispute, my take is that while private long-term care insurance certainly has its problems, I have never seen a case where a claim was not paid because a carrier went broke. There has been a lot of consolidation in recent years, and many carriers have abandoned the LTCi business, but in almost every case I know, their books of business have been transferred to other companies. That may not be great, especially if the new carrier raises rates or is a stickler when it comes to paying claims. But customers do still have coverage.
The only exception I know is that in Pennsylvania, a state trust recently took over the LTCi business of Conseco.This is worrisome, and the financial health of many other carriers remains precarious. However, so far, at least, I know of no case where a customer claim went unpaid because a carrier failed. I'd be interested to know if there are cases.
Are there ironclad guarantees, nope! Are there ironclad guarantees in anything in life, nope. LTC worked for my family. Currently policies are available with 5.00% compound interest cost of living increases to offset inflation, yep they cost. Perhaps carriers should consider offering higher protection rates, yep they would cost more too. What is more feasible for most, saving a million dollars or paying a $2,600.00 annual LTC premium?
I haven't bought a LTC insurance policy because those policies do not protect against high inflation, something that is more likely over the coming decades than is the need for LTC! Moreover, no policy protects against bankruptcy of the insurer, which is not a remote possibility. As a general rule, it's a very bad idea to pay up front for a service to be delivered many years later. The other party, whether business or government or an individual, will look for any way to avoid paying or to devalue what they deliver.
The only solid protection against LTC costs is savings, a million dollars or more of savings. Or you can do it the old-fashioned way by raising children you can rely on. Insurance can never be the answer, and government-paid care will never be affordable or adequate.
I posted yesterday on your USA Today piece, “What about long-term care?” Passionate issue too many, the comments went on and on. I am interested in your book. I am in the business of LTC, I believe in it while keeping a very keen eye on carrier behaviors. I don't trust the government to run this program and believe the health care industry will simply place it's fangs into another cash cow. I'll watch for your book and add you to my Blog Roll. Thanks!