As a gerontologist and a member of the Baby Boom generation, I think about what the state of long term care may be in seven years when I join the older-old, those above age 75. Most of us would prefer to remain in our own homes as long as possible, but ultimately many of us will need more supervised care in a residential setting. Most people don’t realize what various types of long term care cost, and many have not accumulated enough retirement savings to pay for all of the long term care they will need, especially given the extended lifespan that is now possible. In addition, there are a lot of misperceptions about the scope of long term care benefits available through Medicare.
Genworth Financial Insurance Company conducts an annual survey of long term care costs in the United States. In 2016, the national median annual cost of homemaker services in an individual’s private home came to $45,756. The median annual cost of assisted living was $43, 536, and the median annual cost of a semi-private room in a nursing home was $82,128. The median annual 2016 costs in Michigan were generally somewhat higher than the national median. Genworth is predicting a 34% increase in costs in ten years, and an 80% increase in twenty years.
Americans are not great retirement savers compared with other nations, but there are reasons for that omission. For the middle classes especially, wages have been stagnant since the 1970s, while the cost of living has increased. The cost of a college education is more than eight times greater than it was in the 1970s, while the Consumer Price Index rose approximately four times higher during the same period. Pensions, which guaranteed retirement income for life, have virtually disappeared. As a consequence, workers have lost one source of retirement income, since the pension replacements, the 401(k) or 403(b) plans, result primarily from employee savings, rather than employer contributions. Finally, the economic downturn, which began earlier in Michigan than in much of the rest of the country, eroded the savings of many unemployed mature workers.
Our family story is no different; we experienced layoffs in the 2000s, which used up our retirement savings, up to then. I paid off my student loans two years ago, and my husband just paid off his this year. We’re still paying on Parent PLUS loans for our son’s college education. We expect to keep working as long as possible, and we’re also working hard to stay healthy so that we can do so. But health is a result of past exposure and lifestyle, as well as present health practices, and we don’t know what lies ahead.
We do know that we can’t count on Medicare to cover our long term care expenses; it wasn’t designed for that. Medicare will pay for skilled care, such as rehabilitation services, at home or in a nursing home, for a limited period of time. It will also pay for hospice care. It does not pay for assistance with managing personal care or housekeeping or ongoing nursing support in any setting, except for the brief period in which skilled care is also needed. Each of us will have to manage those care expenses out of our retirement savings. But when we live longer than expected, or health care expenses are greater than anticipated, or when both spouses require custodial care, then income and retirement assets often prove insufficient, and people rely on Medicaid to pay for their care.
Medicaid pays for the health care costs of qualifying poor people of all ages. Low income older adults most often have Medicare coverage, and Medicaid helps them pay for the considerable out-of-pocket premiums, deductibles and coinsurance costs that Medicare does not cover, estimated to average between $1,700 to $3,000 per year. Those costs can escalate quickly with surgery or expensive long term medications. It also helps the low income elders receive care at home, rather than a nursing home, if they are lucky enough to qualify for a Medicaid waiver program. The Medicaid waiver program allows for case management, in-home services, and community-based services for low income ill or disabled persons who would otherwise require nursing home placement. In Michigan it’s called the MI Choice Waiver Program, and it’s about one third less costly than nursing home care.
But most areas have long waiting lists for Medicaid waiver services, and rural areas generally do not have sufficient supply of community-based services to keep people in their homes. At a cost of more than $82,000 a year, most people needing custodial care in a nursing home will run out of personal savings and assets in a relatively brief period of time. At that point more than half of nursing home residents apply for assistance from Medicaid. Because of Medicaid older adults worry less at night about where they may end up when the money runs out.
A fixed cap on federal Medicaid payments to states could remove that sense of security. With increasing health care costs, increasing numbers of older adults, lengthening lifespans, and a stagnant economy, states will have to reduce Medicaid spending considerably. What will we do with ill, disabled, and poor older people who no longer receive payment for their nursing home bills?
It is these thoughts that keep me exercising most days of the week, meditating daily, and keeping up my license and professional credentials. However, these are just stop gap measures, and I don’t feel nearly as secure.