This morning, I was on Diane Rehm’s NPR radio show talking about long-term care insurance. The other guests–former Social Security Administrator Ken Apfel, Families USA executive director Ron Pollack, and Kiplinger’s Personal Financec olumnist Kim Lankford–and I agreed on one thing: Private LTC insurance is an appropriate tool for some consumers, but it is not a realistic alternative for many others.
The challenge is figure out how we can provide good quality care for those millions of people who can’t afford private insurance, are medically ineligible for it, or just plain won’t buy it.
We shouldn’t kid ourselves, that is most people. And in a new study, the Employee Benefit Research Institute (EBRI) laid out just how unprepared many Americans are for even a healthy retirement, to say nothing of one tha includes significant acute medical problems and long-term care needs.
EBRI found that nearly half the time (44 percent) early and late Baby Boomers and Gen Xers (people born between 1948 and 1974), are likely to fall short of meeting their basic financial needs in retirement, including their nursing home or home health needs. Thanks to increased enrollment in 401(k)-type plans, that’s an improvement from the last time EBRI did this study a decade ago, but it shows just how serious this problem is.
Overall, the Boomers and G-Xers will need $4.3 trillion more to meet basic retirement needs than they are likely to have, according to EBRI’s Retirement Security Projection Model. The model simulates various lifepaths and figures the chances of retirees having enough money for the rest of their lives.
Not surprisingly, like many other studies of its kind EBRI finds that low income people are most likely to fall short. And the most at-risk are single women. For instance, among married early Boomers, each individual would need to add about $22,000 to their savings at age 65 to fill their expected financial deficit in retirement. But single women are likely to fall nearly $105,000 short.
EBRI figures that single men need to put aside an extra $32,000 at age 65 to support typical long-term care needs, while single women need to put away nearly $47,000.
Other studies come up with somewhat different estimates, but they all tell the same story. A very large number of us are woefully unprepared for retirement, including the likely need for some long-term care.
Insurance is the solution for some, more savings for others. But unless Americans begin to take their long-term care needs more seriously well before retirement they, and our country, are looking at a scary financial future.
It is scary to think about how unprepared we are for our long term care needs. With the economy how it is, how are we suppose to save for this? It’s an uphill battle that just keeps going.
I heard most of the broadcast, Howard, and my take-away was that few if any should participate in private long-care insurance programs.
In fact, investing in a policy sounded like playing Russian roulette with one’s retirement savings. Caller after emailer heard on the air described how the cost of premiums had risen exponentially over the course of decades, and how the terms of coverage had narrowed to include practically no reimbursement for care expenses. It is the same story as it has always been in the larger health-insurance industry, which is that no company is accountable to anyone or anything except its bottom line, often to the detriment of its subscribers.
Not one caller or emailer I heard on the broadcast described a positive experience. Each listener comment was more heartrending than the one before!
The only straw of hope the panel held out was a nationalized long-term care insurance program that would spread the expense of elder care across a wider pool of participants. But considering how hard it has been to sell many Americans on the most basic health-care reform legislation, I suspect we should not hold our collective breath waiting for that.
Ultimately, Howard, the national discourse on the care of our elders should not focus very much at all on long-term care insurance, at least until a nationalized option can somehow garner support from more Americans.
I gather that private insurers are more and more reluctant to offer LTC insurance.
Where do you see that market going?
As a 46-year old Gen-Xer who can afford LTC insurance, I am wondering whether it makes sense to invest in it now, while companies are still offering it.
I agree, this is a very serious problem our nation is facing. What are some solutions you could offer- and if someone were to buy LTC, what sort of plan would you recommend?