"The federal budget is on an unsustainable path, primarily because of the rising cost of health care and the aging of the U.S. population."
-- Congressional Budget Office March, 2010
When you visit the CBO's Web site
, the quote above is the very first message to greet, displayed in a very prominent headline on the homepage. The chart below this dire warning is a graphical depiction of how sharply spending on Medicare and Medicaid will escalate above spending on Social Security and every other federal expenditure in the years to come.
The impact of the health care reform package signed into law by the President still has many unknowns. Like anything else, it has its positives and negatives, supporters and detractors, but one thing is certain: As a nation, we cannot continue down this path to certain calamity.
- Aging baby boomers (the "Silver Tsunami") will spark an explosion of demand on health care and long term care services and spending.
- Both the U.S. and world economies continue to confront challenges and a changing dynamic that will limit the ability of the U.S. government at the state and federal level to give everyone everything they need and want.
- Pressure on the individual to be able to maintain a reasonable standard of living in retirement and senior care is going to increase as government dollars and programs become more difficult to access.
The sweeping changes in the newly enacted health reform legislation come amidst much debate and political battle, but when you consider the demographic and economic realities over the next 10-20 years, what we have witnessed so far is only the warm up. When serious reform efforts turn to Social Security, Medicare and Medicaid, we will see a battle that will make us look back on the last two years of economic and political upheaval as "thegood old days".
An act to address the long term care funding crisis in our country was included As part of the recently passed healthcare reform bill signed into law by President Obama,. The Community Living Assistance Services and Support (CLASS) Act provides a voluntary long term care benefit for participants that elect to participate.
To participate, you must enroll through your company or a self-employed pension plan and pay a monthly premium for five years to qualify for the benefit in the future. CLASS will not be active for two more years, so the soonest someone will begin collecting the benefit is at least seven years from now. As with any new government program, there are still details to be worked out through regulation and comment periods which will happen over the next two years.
Some details about the program have emerged, making it clear that this is not going to be a magic bullet cure for the massive funding crisis impacting those seniors requiring long term care and their families. First of all, the benefit paid out will be in the range of $50-$75 per day, which falls far short of the actual costs of daily care (and those costs will continue to rise annually over the next seven years). Also, the benefit will be limited to the costs of at-home care and will not cover assisted living or nursing home care. Further issues around rolling over the benefit year to year, opt-in / opt-out penalties, and the effects of adverse selection will all prove a challenge for participants.
Although CLASS Act alone is not enough for an individual or our nation to deal with the massive costs of long term care, it is a positive first step for the government in acknowledging the hardships faced by Americans trying to meet these obligations. If nothing else, it will do much to educate people that they must prepare now for the financial challenges that lay ahead in their future.
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