A Perfect Storm: A situation that is bad or mismanaged in every way.
And it’s upon us. It has been developing for decades, going back to the Special Committee on Aging and Pepper Commission in August of 1989.
But today, we find the state of long-term care and the insurance that pays for custodial care in a state of disarray, with dozens of states attempting to design their own payment systems as Medicaid budgets continue to expand.
A perfect storm involves a number of circumstances that merge simultaneously. We have escalating care costs, a shortage of trained caregivers, and the four peak years of baby boomers turning 65 between now and 2027.
It’s the old supply-and-demand economics of Adam Smith. We have more demand than supply can accommodate, and as a result, costs have increased—quite substantially for some venues.
Let’s take a look at costs.
Genworth just published the most recent cost of care study this past week. The cost of care providers increased across all venues, driven by two factors – inflation and the shortage of skilled caregivers. Take a look: Cost of Long-Term Care by State | Cost of Care Report | Genworth
For example, home care costs increased 10% to a national median of $75,500 annually. And that’s not 24/7 care—that’s about six hours per day provided by trained, paid caregivers. According to the American Association for Long-Term Care Insurance, 73% of long-term care insurance claims begin at home. After all, it’s where we want to be if we need care.
Assisted living community rates increased by 1.4% to an annual national median cost of $64,200. And a private room in skilled nursing increased by 4.9% to $116,800 annually.
And then there is the peak!
Jason J. Fichtner, Executive Director of the Retirement Income Institute and Chief Economist at Bipartisan Policy Center, explains that 2024 is the start of the Peak 65® Zone, defined as the largest segment of Americans turning 65 in our country’s history.
For years, the projections have been that 10,000 baby boomers will turn 65 every day. Starting in 2024, that number will increase to 11,200 per day. What’s alarming is that a major portion of the Peakers do not have sufficient income, positioning them to outlive their savings.
Fichtner advises that the old three-legged financial model of pensions, personal savings, and Social Security is a thing of the past. Few employers offer pensions today, and he suggests that we need a new model that will provide for protected, sufficient income in retirement.
You can read more about the Peak here: Meeting the Challenge of America’s Peak 65 Moment – Protected Income
And then we get to trained caregivers …
They are in short supply. As a result, the most recent report from Caregiving in the U.S 2020 details that the number of family caregivers increased by 9.5 million from 2015 to 2020. (This report is published every five years.) Imagine what the number will be in 2025 with the impact of Peakers.
The study also reports that family caregivers are in worse health themselves.
From the report:
- Caregivers are us, with one out of every five American adults providing care each year—from all levels of society and backgrounds.
- Caregivers feel the push and pull of providing care on their time, their financial well-being, their health, their family, their work, and their own personal well-being.
- Unpaid caregivers are serving as a core piece of the health and LTSS systems, as well as the main source for long-term care for adults living at home and in the community.
- When it comes to looking forward, many caregivers are not preparing for their own or their care recipient’s future needs.
- Making plans for future care, such as instructions for handling financial matters, health care decisions, or living arrangements, is still not the norm among caregivers: just 44 percent report their recipient has these plans in place, and 45 percent of caregivers have their own future care plans in place.
Do you have a plan? For more details, here is the Executive Summary.