Getting old in America

As Baby Boomers hit the retirement age, they are worrying about the potential costs and medical needs associated with growing old in America. With good reason. An estimated 70 percent of adults turning 65 next year will eventually need some level of long-term care and support services (LTSS) of some form. If they end up needing nursing home care, that now averages nearly $90,000 a year.

Public programs spend well over $100 billion annually on LTSS. But despite this public spending, older Americans requiring care typically must cover roughly half of the cost out-of-pocket—although the amount varies widely. Meanwhile, the additional unpaid family cost of caring for the aged is startling. According to a recent AARP research report, approximately 34 million family members and friends—mainly women—provided unpaid care to an older American last year.

Two developments are making the situation particularly challenging.

One is that Americans are becoming less prepared to handle the potentially catastrophic medical and other costs of care associated with aging. Annual sales of long-term care insurance (LTCI) are about one-third of what they were a decade ago, with both the number of insurers and the amount of coverage falling. With interest rates so low, and policyholders defying earlier actuarial assumptions about longevity and claims, insurers are pulling out of the market or hiking premiums—risking a “death spiral” of fewer sales forcing ever-higher premiums.

Another factor is the American pattern of overmedicalizing aging and not focusing on common-sense ways to prevent the elderly from getting injured. For example, Medicare will pay thousands of dollars to repair a fracture after a senior falls, but not the few dollars needed for apartment modifications to prevent those falls. Meanwhile, as physician-author Atul Gawande point outs, our health programs and attitudes toward aging lead many Americans to spend their final years in expensive care facilities—with questionable quality of life. Indeed, among the major industrialized (OECD) countries, America spends the most per person on public plus private medical care and the least on social services spending, which often helps prevent future health problems.

There is some good news. A range of organizations have been coming together in an effort to find common ground in addressing this challenge by looking at steps to increase financial protection while rethinking how we age. But, for the future cost of aging in America to become manageable, several things will have to happen:

1. More insurance protection. Too few Americans think of acquiring long-term care insurance (LTCI). Many believe Medicare covers LTSS—it doesn’t. So there needs to be more public education about the cost of aging and encouragement to plan for it. But it will be hard to craft strategies to make insurance more affordable. A recent analysis by the Urban Institute shows the difficulty of designing a voluntary LTSS insurance product with an affordable price that would provide much protection. It appears that a mandatory program—unlikely to be popular in Congress—would be needed to assure even limited protection. So there must be more discussion of ideas for insurance approaches. One possibility might be to add LTCI to regular health insurance and make it a standard option in Medicare Advantage plans, although that could be technically difficult to implement.
2. Creative approaches to aging at home. Not only do Americans say they would prefer to age in their own homes rather than in nursing homes, but evidence also indicates it would be a viable and less expensive option for many Americans. The expansion of the senior village movement, where networks of volunteers and professionals handle a variety of seniors’ needs, suggests that many Americans could age more happily and less expensively at home. Meanwhile a series of pilot programs in which doctors and nurses conduct old-fashioned home visits indicate Medicare could save billions of dollars in costly hospital admissions. Even for many very-ill seniors with multiple health conditions, there is evidence that providing home-based primary care for them could yield double-digit savings for Medicare and thus taxpayers.
3. More state experimentation. A good way to restore the proper balance of medical treatment and social services for aging Americans would be to give states more leeway to experiment with blending health, housing and social service funds in better ways to deliver LTSS services. States, cities and counties are the best levels of government to sponsor on-the-ground initiatives. But while the federal government does grant waivers from program rules for states to use health money creatively, it’s much harder to get waivers to mix health, housing, and other program funds. That needs to change if we are to address the challenges of aging.

In America we are far too inclined to resort to expensive medical technology, even for conditions—like aging—that can’t actually be cured. As we make our New Year’s resolutions, let’s recognize the problem and focus on better strategies for aging in America.