The macro-economics of aging over the next 40 years do not look great: the first Baby Boomers reached the age of Social-Security eligibility 15 months ago, but the crest of this so-called ‘Silver Tsunami’ will not come until about 2030. It will not recede for another couple of decades. The issue is not the number of people so much as the economy’s ability/preparation to deal with the number. According to the Employee Benefit Research Institute, “The baseline 2010 Retirement Readiness Rating™ finds that nearly one-half (47.2 percent) of the oldest cohort (Early Baby Boomers) are simulated to be “at risk” of not having sufficient retirement resources to pay for “basic” retirement expenditures and uninsured health care costs. The percentage “at risk” drops for the Late Boomers (to 43.7 percent) but then increases slightly for Generation Xers to 44.5 percent.”
The combination of retiring Boomers with lengthening life expectancies with a general political trend to cut taxes for all while reducing services only to the poor has meant that the costs of long-term care are growing, while the will to adjust expectations or fund federal programs is shrinking. The FY2013 budget proposed by Senators Rand Paul (R-Kentucky), Jim DeMint (R-South Carolina), and Mike Lee (R-Utah) earlier this month has not much quelled fears of how Medicare will deal with the spread between long-living retired Boomers and the costs they will impose on an already stressed healthcare ‘system’.
To be brief, the general proposal eliminates the Departments of Commerce, Education (though it preserves Pell grants), Housing and Urban Development, and Energy (Nuclear research and weapons to are transferred to the Department of Defense, which raises some of my worse Orwellian fears, but never mind…). The Rand budget also privatizes the Transportation Security Agency (returning it to the status it was on September 11th, 2001 − no, wait…), repeals Obamacare and Dodd-Frank regulations, opens Arctic National Wildlife Refuge for oil and gas exploration, and permits the Keystone XL Pipeline project (no surprises these − for a supportive summation,Paul, DeMint, and Lee propose FY2013 Budget .
Specific to concerns for retirees, the plan introduces a progressive scale of Medicare payouts and means testing (the more income one had/has, the less Medicare benefit one receives). It also would put today’s Medicare into a larger market to compete (with with federal subsidies) with other providers., “The Ryan-Wyden plan says that for people who are now age 54 or younger, ‘we propose to strengthen Medicare by transitioning the current program toward a coverage-support plan with the choice of guaranteed coverage options − including traditional Medicare − on a Medicare exchange.’ But critics of the Ryan-Wyden plan argue that it would not really preserve traditional Medicare since it would create a marketplace where future retirees would need to purchase coverage of either traditional fee-for-service Medicare or another plan, and it would limit future program growth to the Gross Domestic Product growth rate plus 1 percent.”
Unfortunately, long-term care costs are growing faster than GDP plus one. Andrew Carle, a former senior living administrator and the founder and executive in residence of George Mason University’s seniors housing administration program, argues on SeniorHousingNews.com that changing technologies might trim costs, but not enough to get within that window: “Despite the possibility of using technology to cut costs, it’s not enough to constitute affordability. ‘There are fixed costs that you can’t do anything about,” he says. ‘There’s an opportunity to make things more affordable, but not actually affordable with technology.'”
Which means in the present economy that Senior-Care Facilities are struggling to pay bills as those in housing are not able to pay theirs.
Currently about 63% of nursing homes residents have their stays funded by Medicaid, says the American Health Care Association (AHCA), while about 45% of the total nursing home bill is paid by the program, according to AARP.
While Medicare doesn’t pay for long-term nursing home stays, it does primarily support about 13% of nursing home residents, but keeping in mind the shorter duration of coverage, it actually serves as a primary payer for 52% of residents who have been in a nursing home for less than 30 days, says AARP, and it paid for 17% of the nation’s total nursing home bill in 2005.
As the debates over budget cutting continue, Republicans are taking a notable political risk by posting cuts to a constituency that would largely vote for them. But the Rand budget is designed to ease in the changes only to those under 55, giving others a bit of time to rearrange their finances before retiring. Democrats want to challenge the Rand budget on a number of fronts, but they have yet to establish a budget since President Obama took office and they are not about to risk further losses by pressing for raising too many taxes to trim the federal deficit.
The prognostication does not look especially good for Medicare to continue to assist/subsidize long-term elder care. And without it, many in the industry wonder if affordable assisted-living care can even exist.