Elderly Care

Elderly Care

Written by: Allison Rokus

As the Baby Boomer generation is reaching retirement age, concerns regarding their financial well being are arising.  For the entire second half of the 20th century, the baby boomers were clearly the largest generation in America. When they were children being supported by parents, or members of the workforce, this was not an issue. However, as they are becoming dependents once again, their retirement preparations clearly have not been sufficient.  Studies show that 70% of elderly people will now need at least three years of full-time care in their lifetime (Bowser).

Furthermore, 21% of married Social Security recipients and 43% of single Social Security recipients age over 65 years depend on Social Security for 90% or more of their income (NCOA). However, Social Security was intended to supplement an income or a retirement fund, not replace it.  Many elderly people have found that their Social Security benefits alone are not enough for them to live a comfortable lifestyle. The current solution has been to spend all of their retirement and savings to the point that they can qualify as poor enough to receive Medicaid, which will pay for a bed and a full-time care facility while Medicare will not. This becomes a problem, because Medicaid was not intended to be used by all elderly people. It was intended for the poor, and these people were not expected to become so poor. Now, it becomes an issue for Medicaid, as Medicaid is a means-tested program meaning that it is intended for people already in poverty who have demonstrated need, not people quintessentially trying to become poor. With their 401(k)s, IRAs, and a variety of other long-term investments, elderly people are expected to be prepared for retirement. That leaves economists with the question of what went wrong.  One large factor is that elderly people are living much longer than expected. When they entered the workforce at age 20, the life expectancy for males was only 66 years old (Berkeley).  Now, that life expectancy has increased by 14 years to 86 years old (Social Security Administration).

If this change in life expectancy was not accounted for and an elderly person spent an average amount of money per year per year of about $55,000, they would be over one million dollars short of the money they expected to need (US Bureau of Labor Statistics). This does not account for long-term illnesses or other unexpected costs, which are high in this demographic. With their retirement now imminent, it is imperative that a solution is quickly found.

This video is pretty dramatic, but is has a quality explanation of why seniors retirement resources are becoming so depleted.

Many experts find the best solution to be long-term care insurance. Part of the reason that long-term care insurance has not been widely effective in the past is that the risk for all recipients is so high. Because 70% of elderly people will need three or more years of care, this makes him very high risk to be insured. If auto insurance companies knew that 70% of people would get into accidents they would not issue as many policies.  Also, the current long term care insurance policies that do exist are not being bought or have not been bought by the elderly. This seems to show a lack of demand. However, when interviewed, most elderly people indicated that they would buy such a policy. This then becomes a market failure, as there is a good that is demanded, but not supplied by the current market, even though the resources needed to create such a product are available.  The best solution currently seems to be a reform in long-term care insurance that would help the elderly to receive long-term care without having to deplete their life savings. By working with healthcare providers to develop policies that work and are effective, insurance providers could potentially receive more customers, more revenue, and a great benefit to society that cannot afford to support so many elderly people in their current behaviors.  

Works Cited

Bowser, Betty Ann. "Why Long-Term Care for U.S. Seniors Is Headed for ‘Crisis’." PBS. PBS, 20 Mar. 2013. Web. 10 Jan. 2017.

"CONSUMER EXPENDITURES--2015." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 30 Aug. 2016. Web. 10 Jan. 2017.

Donnelly, Laura. "Elderly Care Crisis Looms as Ministers Accused of Living 'in Fantasy World'." The Telegraph. Telegraph Media Group, 11 Oct. 2016. Web. 10 Jan. 2017.

"Life Expectancy in the USA, 1900-98." Life Expectancy in the USA, 1900-98. Berkeley, n.d. Web. 10 Jan. 2017.

NCOA. "Poverty Facts About the Elderly." NCOA. National Council on Aging, 20 Dec. 2016. Web. 10 Jan. 2017.

"Sans Everything." The Economist. The Economist Newspaper, 01 Oct. 2016. Web. 10 Jan. 2017.

"Social Security." Calculators: Life Expectancy. N.p., n.d. Web. 10 Jan. 2017.

Sodha, Sonia. "Underfunded and Overstretched – the Crisis in Care for the Elderly." The Observer. Guardian News and Media, 10 Dec. 2016. Web. 10 Jan. 2017.

"What's Behind America's Elder Care Crisis." Stanford Graduate School of Business. Stanford, n.d. Web. 10 Jan. 2017.

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