CHICAGO (Reuters)—When Americans think about retirement planning, long-term care usually is a major blind spot – few of us want to contemplate the possibility of infirmity and dependency in old age. But we would do well to think about it now, as the Senate Republicans take a holiday weekend pause in their push to dismantle the Affordable Care Act.
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Roughly half of Americans now turning 65 will require some level of long-term care during retirement. And when professional care is required, it usually is paid for by Medicaid, which covers 62 percent of long-term care in the United States, according to the Kaiser Family Foundation (KFF).
That may surprise people who think of Medicaid as a social safety net for the poor. Indeed, the program is a critical lifeline for 35 million children and 27 million adults in low-income households.
But nursing home care is expensive, and 62 percent of near-retirement households have saved less than one year of annual income for retirement, according to the National Institute on Retirement Security.
When savings run out, Medicaid steps in – nearly two-thirds of its spending in 2014 went to the elderly and disabled, according to KFF. “Medicaid has been a critical safety net for 50 years for people who have depleted their life savings,” said Jean Accius, vice president of the AARP Public Policy Institute. “It is insurance for your mother or your father or eventually for yourself, because the price can be so high.”
The current national system of financing long-term care is a mess. Few households purchase commercial long-term care policies, and the market has experienced upheaval in recent years as underwriters stopped writing new policies or boosted premiums by double-digit rates.
Yet the Senate bill would take our already-dysfunctional system of long-term care and make it worse – much worse.
The Better Care Reconciliation Act (BCRA) proposes to reduce expected Medicaid outlays by $772 billion over 10 years. That would destabilize access not only to nursing home care but home and community-based services – an innovative approach to care that saves money, and has grown quickly in recent years.
Medicaid is administered by states, but funded jointly with the federal government. Currently, the federal contribution is open-ended. Under BCRA, starting in 2020 states could opt for a federal contribution subject to a per-enrollee cap or in the form of a block grant. The contribution would be based on the current amount sent to a state, and then adjusted annually for inflation.