Whose Financial Burden Will You Become

The following is guest post from Amanda Dean of Silver Living. Many of us fear the notion of being elderly, infirm, and helpless. We are afraid to imagine we could be alone or reliant on others for care, often times not affordable. It is a future no one believes might befall them. Unfortunately, many Americans are not preparing for the possibility of needing long term care as elders. Yet many will. So, with no savings or plan in place the fear could easily become a reality. This is the crux of a financial crisis looming over the country. Previously, I discussed the problem America faces with an aging population and the lack of financial readiness (both personal and nation-wide) to support the coming need. What options are there to face this problem and create some stability for America’s future retirees?

Long Term Care Insurance

Private long term care insurance (LTCI) is a possibility for many who want to know they will have security as they age. But the market is struggling right now, partly due to not enough people buying in. It is a case where healthy people think they will never need it (or erroneously expect Medicare to cover it). Likewise, unhealthy people are using all of the assets in the system. Coupled with low returns on investments, the pool of money to pay out claims is dwindling. Many private companies are pulling out of the market or raising premiums to cover costs. It is becoming increasingly difficult for the middle class to afford coverage. People buying in early are faced with large rate hikes in the future.

In turn, coverage is less affordable for the elderly in need and less attractive for younger buyers who finance it. The notion that the current set up is viable is not belived by committee members of The Senior Care Action Network (SCAN). Federal programs are not prepared for the upcoming need and private insurance is not widespread enough. Additionally, the aging population does not have the personal savings and resources to cover expenses. What they could not agree on is a solution. Members did not reach a consus despite having several suggestions. Possibilities include enhancing private insurance to be more affordable and appealing, requiring companies to offer insurance and make employees purchase it, improving the incentives previously offered through tax credits, linking it to health insurance, or mandating LTCI purchase for a large portion of the population.

Class Act

Congress has made efforts to address this problem before. Thus far a viable solution has not emerged. The CLASS Act passed with the recent Affordable Care Act to offer Americans an option for affordable long term care insurance. However, the act was repealed in January after it was determined that making the program voluntary meant there was no way to guarantee its sustainability. If there wasn’t enough buy-in, there would not be a sufficient pool of money to pay out future claims. This is the same problem private companies are facing. Congress has now established a committee to study the looming crisis and make recommendations for potential solutions. This, of course, begs the question for many: is it really the government’s concern in the first place? The answer is the subject of much heated debate.

There are those who feel the government already spends too much on entitlement programs and it should be up to each individual to save for his own future. Americans are unprepared for their potential care needs. They feel it’s government’s responsibility to step in. Whichever view you take, it is painfully clear that many people are not ready for the possibility of needing long term care at some point in their retirement. Not everyone will need care or mobility products, the numbers tell us that a large percentage of those who will are not prepared. Their care will fall to someone else. If they are fortunate, there will be family members with adequate resources to step in. If they are not so fortunate…whose problem will that become?