Looming crisis of long-term care

Fortunately for the Republic, I do politics, not public policy. Sometimes, however, the sense of impending national crisis reaches out from the data and smacks an analyst in the face. So it was with two polls we conducted recently — both with our colleagues across the aisle at Public Opinion Strategies.

Together they paint a portrait of Americans woefully unprepared for the financial pressures they will face as they, and their parents, age.

Consider long-term care. About 60 percent of those over 65 will need at least some long-term care services during their lifetime, while over 40 percent will require a nursing home stay. The need will come as little surprise to most Americans, as 40 percent expect a close family member to require long-term care during the next 10 years.

Nevertheless, there are some shocks to come.

Despite clearheaded recognition of what lies ahead, 70 percent of Americans have done no planning whatsoever for long-term care. In fact, more than two-thirds of those who expect to need such care for a family member in the next five years have made no plans, and 81 percent have made no preparations for the financial demands they will be called upon to meet.

In part, Americans seriously underestimate the costs involved. On average, they estimate a year in a nursing home will cost $40,000. In 2006, the average cost for a semi-private room was 150 percent of the public’s estimate.

Perhaps more important, the public misunderstands who pays. An AARP survey found 59 percent of Americans over 45 years old believing that Medicare would pay for nursing home care, despite the fact that the Department of Health and Human Services clearly states that, “Medicare does not pay for what comprises the majority of long-term care services …” Still others believe their health insurance policy will pay for nursing home care. Wrong again.

Medicaid does pay for long-term care — by some accounts, two-thirds of nursing home residents are Medicaid beneficiaries, and the program is paying almost half the cost of long-term care in America. Despite the fact that it was never designed for that purpose, nearly one third of Medicaid dollars go to long-term care.

However, Medicaid itself only finances long-term care for those who are impoverished.

As 77 million baby boomers start to need nursing home care, they are going to suddenly find out they have no way to pay for it without giving up all of their assets, and the government is going to be hard-pressed to pay for their care through Medicaid once they become impoverished.

In the broader sphere of retirement security as well, too many Americans appear clueless.

With half the electorate lacking a pension, more than a third are planning to rely on Social Security and 401(k)s to finance their retirement.

It won’t work.

Financial experts say retirees need about 75 percent of their preretirement income, but Social Security will provide less than 40 percent. And the much-loved 401(k)? The median balance of 401(k) accounts for 2004 retirees was about $60,000 dollars —inadequate by any calculation.

Add to that the fact one in six voters has no retirement vehicle of any kind, and crisis is clearly visible on the horizon. It is easy to understand why 45 percent of the electorate is not confident they will be able to afford their normal expenses during retirement.

Tens of millions of Americans retiring but unable to afford it; millions in need of long-term care but without the resources to pay for it; too few planning for their futures — a looming disaster waiting to smack us all.

Mellman is president of The Mellman Group and has worked for Democratic candidates and causes since 1982. Current clients include the majority leaders of both the House and Senate.