Coming Soon to the USA: Extreme Makeover, Long-Term Care Edition

As the demand for assistance with daily activities and long-term care for millions of Americans grows everyday, the question of who should provide long-term care solutions stands at a crossroad.

What happens when a home improvement project goes haywire? A professional from the private sector—not the government—is called in to fix your leaky faucet. However, the social and economic challenge is that the foundation for that assistance is beyond the reach of a vast majority of individuals.

Not so long ago, Congress made a formal repeal of the Community Living Assistance Services and Supports (CLASS) Act that was part of the Obama Administration’s Affordable Care Act. The Act was thrown off the cliff….the fiscal cliff as part of the legislation that passed earlier this year.

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While the repeal may be more form over substance as the program was essentially moth-balled months ago, it represents the failure of a noble and needed concept. Saying that “CLASS has been dismissed” is a short-sighted, albeit appropriate, pun. The problem of voluntary, affordable long-term care insurance remains a shortfall in the arsenal to combat the consequences of an aging population.

In lieu of any concrete plan to replace or repair CLASS, the legislation that repealed CLASS calls for the creation of a new Congressional Long Term Care Commission that will study the issue. The report is supposed to be reported to Congress within six months after work begins.

The Congressional LTC Commission is reminiscent of the The National Commission on Fiscal Responsibility and Reform (often called Bowles-Simpson/Simpson-Bowles) that outlined policies to help improve the fiscal situation faced by the US. The Bowles-Simpson report provided some significant options to combat the fiscal challenges. Some of the ideas were well received, while others were not.

The Congressional LTC Commission report will likely fall into similar limbo with some groups supporting the findings and others challenging the accuracy and the viability of concepts in the report. It will spark more partisan politics over something all Americans should have access to, with disagreement not over whether it’s necessary, but by what means it will be implemented.

If the government cannot make an affordable, voluntary program work, the private sector should have the capacity to make a product that meets the needs of the marketplace. That is the basic construct of capitalism yet the marketplace has not risen to the challenge.

If the market does not create a viable product, Americans are left to treating their preparations for long-term care insurance as a self-insured, do it yourself (DIY) project. DIY projects notoriously end with a spouse demanding that a professional come in and do the work after a failed or multiple failed attempts. Most projects begin with a lot of good intentions, flair, and flutter before poor planning, lack of knowledge and experience, unforeseen surprises and unknown costs arise. These same symptoms of failed DIY projects plague long-term care and retirement planning.

Unfortunately when it comes to long-term care planning, DIY can be daunting. Questions arise such as:

  • Does the average American understand the needs, costs and availability?
  • Do they understand the costs associated with DIY vs. having a professional handle it?
  • Is it possible to do a portion and let a professional help with the rest?
  • What does the time horizon look like to plan for long-term care?

Statistics on unfinished home repair and renovation projects are not well tracked but based upon the number of disgruntled spouses and the plethora of reality television shows, the problem is common.

Some of the brightest minds have tackled the economics of long term care for both the private sector and for government. Despite their efforts, the actuarial economics are problematic at best. Living longer, increasing costs, the poor investment returns from the last few years represent major challenges to creating a safe, affordable and accessible product. The demand for this type of insurance product does exist and there is a clear need, yet there is no similar, private sector solution.

Many Americans have discounted the need for long-term care or have believed Medicaid or Medicare will cover it, but that’s simply not the case. Medicare covers a certain amount of short-term and rehabilitative care, while Medicaid covers long-term care only after an individual’s assets fall below a certain threshold. A spend-down strategy may be necessary, but it is both challenging for individuals and families and places a tremendous burden on government resources and taxpayers.

Let’s hope that the LTC Commission will not only be able to outline great solutions but have the influence to convince members of Congress and the American people that some type of government-sponsored long-term care insurance is both necessary and fiscally prudent. If not, given the poor planning of many future retirees and lack of retirement savings, the reality of treating long-term care as a DIY project is DOA. Set your DVRs in the not-so-distant future for extreme long-term care makeover.

Written by George Yedinak