As Americans live longer, more and more families are caring for older adults and facing tough financial circumstances that give rise to a bigger question: How will we as a nation care for a growing number of older people with complex needs once they can no longer take care of themselves? So far, there’s no good answer. With smaller families and half reporting no savings at all, many 60-year-olds just don’t have the resources to pay for the care they will need during the additional 23 years they are expected to live.
This threatens public financing systems like Medicaid, Medicare and Social Security will exhaust the finances of ordinary Americans. Wealthier families may have savings to provide in-home care or pay for a nursing home, but most middle- and lower-income households don’t. So they often have to impoverish themselves deliberately, spending down their assets simply so their loved one is poor enough to qualify for Medicaid, which is the only public program that covers long-term care.
Nationally, policymakers know about the growing challenge of resources for the aging but have largely been flummoxed by the math and politics in dealing with it.
As often happens with social policy, there is innovation emerging from the states to address the challenge – most significantly from the other Washington. Last month, Washington Gov. Jay Inslee signed a first-in-the-nation bill to help finance the long-term care needs of all the state’s residents. Washington state appears to be the first to find a way to make the math and the politics work, and its solution may provide a template for other states, and possibly the federal government, to follow.
New public policies are needed because the private market has failed. The long-term care insurance tends to be very expensive and has limited benefits. In 2016, of the 89 million people in the United States over age 55, only about 7 million were covered by long-term care policies. Far fewer people are buying new policies now than they used to. Fundamentally, people do not want to pay a lot now for a benefit they can access only later and may never use, and the fewer people who buy in, the more expensive premiums get.
To understand Washington state’s experiment, it helps to revisit what happened when the Obama administration tried to tackle long-term care financing. Provisions of a bill originally called the Community Living Assistance Services and Supports Act were incorporated into Obamacare. Championed by the late Sen. Ted Kennedy, CLASS aimed to finance long-term care benefits for working-age disabled populations as well as the elderly. However, its good intentions were done in by its voluntary design: Benefits would be paid only to those who had opted into a payroll tax to finance them.
As we’ve seen in the years since Obamacare went into effect, mandatory insurance is actuarially desirable and politically torturous. On the other hand, voluntary insurance while more politically palatable, is sustainable only with big public subsidies. The CLASS Act was neither mandatory nor subsidized, so its fiscal future was doomed; Obama administration officials pulled the plug only a year after its passage.