For many years, long-term care (LTC) policy makers have tended to fall into two warring camps: those favoring expanded social insurance, and those wanting tighter Medicaid eligibility criteria to incentivize people to plan for and buy LTC insurance. Both sides have warned of looming financial catastrophe as the Baby Boomers move into retirement and more than double the population needing care. Disagreement has resulted in a policy stalemate.
The vanguard of the Boomer generation is less than 10 years away from beginning to drive up demand for LTC, and the country is unprepared to pay for it. It’s time that the policymakers stepped out of the old trenches. The war they’ve been fighting is largely obsolete.
Both progressives who supported the Community Living Assistance Services and Supports (CLASS) Act (a federal LTC insurance program quickly repealed after passage due to its financial instability), and those more inclined to market-based solutions tend to share a middle-to-upper-middle class perspective that has not been sensitive to major shifts in the economic strata below them. Many assume there is a stable American middle class that could either be sufficiently taxed to expand government programs or incentivized to pre-finance LTC of a variety and a quality level above a typical nursing home—which is what is now universally available to Americans through Medicaid after exhausting virtually all their assets.
Two developments now challenge this orthodoxy. The most obvious is the collapse of the market for LTC insurance, which Conservatives held out as the alternative for middle class reliance on Medicaid. More important, but until recently less understood, is the phenomenon economist Joseph Stiglitz calls the “hollowing out” of the American middle class. A growing body of research reveals trends including a long period of wage stagnation; significantly less likelihood of earning as much as one’s parents; and diminishing lifetime earnings for cohorts entering the workforce since the late 1960s.