BOSTON (MarketWatch) — The CLASS Act is dead, and that’s going to create problems not just for the seven in 10 seniors who eventually will need help with eating, dressing and bathing, but for their unpaid family caregivers and whole lot of other Americans as well.
The Community Living Assistance Services and Supports (CLASS) program, a part of the health-reform law, established a national, voluntary insurance program for purchasing community living services. It was designed to expand options for people who require long-term help. But in mid-October, the Obama administration shut down the program, saying it was not financially feasible.
This week, a panel of long-term-care experts tried to answer the now-what questions raised in the wake of that decision. Among them: What can those who were likely to benefit from the CLASS Act do now to pay for their current or anticipated long-term-care needs? How can the country deliver and finance long-term-care for its rapidly aging population? What role will providers play as Medicare and Medicaid payments are cut?
These are legitimate questions that must be addressed sooner rather than later, said Howard Gleckman, a resident fellow at the Urban Institute, author of “Caring for Our Parents,” and the moderator of UI’s panel discussion, “Long-term care in an era of shrinking government.”
“We are in an era of real funding constraint by the government that will get worse long before it ever gets better,” said Gleckman in an interview prior to the panel discussion. “The question is: ‘Why don’t we confront it?’” Watch a video of the discussion here.
It’s hard to imagine things getting worse. According to the Urban Institute, relatives of the aging struggle to balance their elder-care duties with employment and other family responsibilities, and the care they provide equates to some $375 billion a year. The MetLife Mature Market Institute said in June that caregiving costs Americans an estimated $3 trillion in lost wages, pension and Social Security benefits. Read more on the MetLife site.
What’s more, the cost of long-term-care itself is not trivial. Nursing homes cost on average $87,235 annually, according to a 2011 MetLife study. One year in an assisted-living facility is now $41,724. Adult day services are $70 per day, and home health aides cost $21 per hour.
At the moment, the options for paying for long-term care are limited. Medicare doesn’t cover all that much and just 12% of adults age 65 or older have private insurance, according to the Urban Institute. As a result, many families pay out of pocket until they exhaust their resources and turn to Medicaid.
Care already being rationed
What can be done? To some, the answer is: not much. “The CLASS Act is a goner,” Gleckman said. “The Medicaid safety net is getting more tattered as time goes on. People are still not saving, so people — as individuals or as families — are not prepared for this. Nobody is buying private long-term-care insurance.”
Meanwhile, “Medicaid is getting shredded in states,” he said. “It’s getting cut even more by the feds as part of the whole deficit-reduction process. We don’t know how, but we know it’s going to get cut. So what are we left with? What are we going to do? There’s no good answer.”
But there are plenty of suggestions about how Americans can fund long-term-care costs. For instance, the U.S. could put in place a universal health insurance program not unlike those that exist in just about every other country save the U.S. and the U.K. “But that’s not going to happen in this country any time soon,” said Gleckman.
Or we could put in place more tax incentives that encourage people to buy private insurance. “But the evidence is that those don’t do very much either,” Gleckman said. And people aren’t likely to save more on their own.
So, is the answer to start rationing long-term care? “The dirty little secret…is that we do that already,” Gleckman said. He said health-care professionals often find elderly Americans dead in their house for a week or more.
“The people I really worry about are not really poor people. If you are poor enough you are going to get Medicaid,” he said. “It’s not a great safety net. It probably means that you’ll be in a nursing home that you might not want to be in, but at least you are in the system and you are going to get some care. Rich people can, of course, take care of themselves,” he said.
He worries about working-class people. “They don’t have any insurance. They don’t have any savings. One of them gets sick, the other one has to take care of them for as long as they can, and then one of the spouses dies and what happens? So we are already rationing care,” Gleckman said. “We are already saying to those people, ‘You are out of luck. You are on your own.’ If you’ve got family members who can take care of you, maybe they’ll do it. But basically good luck.”
The vast majority of Americans aren’t facing the issue of long-term care being rationed. “Most people are in that position where they aren’t poor enough to be eligible for Medicaid and they are not rich enough to self-insure,” Gleckman said. “So they just have to scramble and do what they can.”
Extended family, social networks can help
Social networks and extended family are a first line of defense, but that’s only part of the answer. It’s not as if friends and family members will become health-care providers. “Your neighbor isn’t going to change your diaper,” Gleckman said.
But you can use existing social networks and structures to provide some types of assistance, such as those offered by senior villages like Beacon Hill Village. “There will be an increasingly large role for that, and an increasingly large role for non-profits who are going to be called upon to provide many more of the services that municipal government used to, such as transportation,” Gleckman said.
The problem, however, is that existing social networks can’t handle more intense long-term care, such as what’s needed to care for a person with dementia. “You need certain skills to do that work, and most people don’t have them,” Gleckman said. “Where are you going to get the financial resources to pay for that?”
CLASS would have addressed the needs of working-class Americans. “It would have begun to transition us from a welfare-based Medicaid system to an insurance-based system, which I think is a lot better for all concerned,” he said. “The problem was that CLASS was very badly designed, and it was not going to succeed the way it was designed. It was the right idea [but] badly executed.”
CLASS is not likely to return. Lawmakers have no desire to address the issues of long-term-care financing anytime soon. “This issue will just go back in the closet where it had been for many years,” he said, “and I don’t know what will get it out of the closet again.”
No politician seemingly has any vision for solving the long-term-care problem. But ignoring it doesn’t mean we avoid the cost. “We can kick the can down the road, but we can’t make the problem go away,” Gleckman said.
Yung-Ping (Bing) Chen, a fellow at the Gerontology Institute and professor emeritus at the University of Massachusetts-Boston, has an idea to solve the long-term-care financing problem that some say has merit.
According to Chen, the solution might require a combination of social insurance, private insurance, personal payment and public assistance. Under his proposal, a portion of one’s Social Security contribution would be earmarked to pay for long-term care, with a commensurate reduction in Social Security if you had to use those funds to pay for long-term-care costs. His paper, “Future of Long-Term-Care Funding,” will be published later this year by the Society of Actuaries.
Gleckman also said it’s possible the U.S. could adopt a system similar to that used in France, whereby taxpayers could increase the amount paid into Social Security to pay for long-term-care costs.
Another way to address long-term-care costs using the existing social-insurance system would be to redesign the Social Security benefit so that it pays less during the early retirement years and more later.
Running out of time
The U.S. does have a little leeway. “Those of us who are baby boomers aren’t likely to need this care for another 15 or 20 years,” Gleckman said. “On the other hand, we can’t keep saying that we have time. At some point, it is too late.
“If the solution is savings, we really ought to get going. And it’s probably past too late for most baby boomers,” he said. “The likelihood of being able to pay for retirement if it includes long-term care is pretty grim.”
On the other hand, Gleckman said the chances of not being able to purchase long-term-care insurance after one turns 60 are high. “It’s starting to get too late for boomers to buy private insurance.”
“We are running out of time,” he said. “If we are going to do a national insurance program, you need to get going on that…We keep talking about what we don’t want to do. We don’t want to do CLASS. We don’t want to do Medicaid. So, what do we want to do?”
That’s a good question.
Robert Powell has been a journalist covering personal finance issues for more than 20 years, writing and editing for publications such as The Wall Street Journal, the Financial Times, and Mutual Fund Market News.