Cecily O'Connor
RedwoodAge.com

Chances are that most baby boomers will require some form of long-term care as they age, but how to go about funding that care is a national problem yet to be solved. 

Troubles could escalate between 2030 and 2050 when the baby boom generation reaches age 75 or older and needs more services. That's why the lag time between now and the next 22 years offers a chance to improve the long-term care system, according to a report compiled by RTI International for the National Investment Center for the Seniors Housing & Care Industry (NIC).

The "NIC Compendium Project: A Guide to Long-Term Care Projection and Simulation Models" analyzed all major studies and projection models to date on the issue of long-term care use and funding. It aims to help policymakers determine the best combination of public and private sector funding to pay for growing care needs among an aging boomer population. 

The Census Bureau projected in 2004 that the number of persons aged 85 and older - the age category with the highest rates of disability - will more than triple between 2000 and 2040, and will increase almost five times from 2000 to 2050. That's a concern, especially since many boomers tend to underestimate their risk of disability, whether it's cancer or diabetes that keeps them down for a time.  

"This issue on how we will fund future long-term care has huge implications for the seniors housing and care industry, and its leaders need to work closely with government and research communities to craft on-going, relevant research, especially in those areas that have been lacking in previous studies," said Anthony Mullen, a senior NIC fellow. 

So far, a wide range of financing reform options have been proposed, including tax incentives for private long-term care insurance, merging long-term care insurance with annuities, reverse mortgages, liberalizing Medicaid, restricting Medicaid, and developing a social insurance program for long-term care. 

Each proposal comes with pros and cons. For example, while home equity can be a logical vehicle to generate cash, the various restrictions, fees, and interest payments that come with a reverse mortgage could reduce the amount of money available for long-term care.

Part of Life
Long-term care covers a range of services and settings, including nursing homes, assisted living facilities, home health care, personal care, adult day care, and respite care. The demand for such care was among a number of data points that Joshua Wiener, a senior fellow and program director for Aging, Disability and Long-Term Care at RTI International, looked at to form the compendium. Weiner cited projections and simulation models from several key studies.

The need for long-term care is a part of life. Among those turning 65 now, nearly 70 percent will need some form of long-term care before they die, and 20 percent will need it for more than five years. This includes informal care, paid home care, nursing home care and assisted living facility care. In some cases, demand for these forms of care will double in the next 20-plus years. 

Much of that care will be driven by disability. It's expected that the number of older people with disabilities will grow from 10 million in 2000 to between 15.1 million and 24.6 million in 2040. 

Demand is only one part of the equation, however. The financial impact also can be significant at a time when costs for necessities like health care, gas and groceries are rising. As a result, the price of long-term care services will have a big impact on the level of expenditures.

One 1994 study found that total expenditures (in 1993 dollars) for older people were projected to be $134 billion in 2018 if prices increased 4.5 percent annually; $215 billion, if prices increased 6.5 percent annually. Since then, overall inflation has tended to the lower end of that range, but medical costs have grown much faster.

While problems the US pension system persist, the financial status of older people should improve over time. One report projected that the proportion of older people who would be extremely likely to use Medicaid to pay for a significant period of long-term care would decline to 29 percent in 2030 from 45 percent in 2000. 

Although the debate over long-term care financing reform is a moving target, it is primarily an argument over merits of private versus public sector approaches. And the differences over how much emphasis to put on each sector depend partly on values.

Some believe the primary responsibility for care of the elderly and younger people with disabilities belongs with individuals and families, and that government should act only as a payer of last resort for those unable to provide for themselves.

Key Questions
Overall, the review of projection and simulation models suggests that there are at least seven key questions that financing reform options should address:

• What will be the role of the public and private sectors? 

• Will government program eligibility be related to income and assets?

• What proportion of the population will have comprehensive coverage for long-term care?

• Will younger people with disabilities be covered?

• What will be the cost to government? What about the cost to people with disabilities using the services?

• How will costs be contained?

• How will the policy address personal preferences and changes in delivery of care over time?