A tsunami is headed straight for America and is expected to hit early next year. This will not be a massive wall of water, but rather of people, elderly people, with needs and requirements that will be met partially by their own assets, but which also will require a huge infusion of public dollars.
Like a traditional tsunami this one was caused by events far away, and long ago, and for quite some time it has been way out beyond the horizon, gathering energy and headed for its final destination. Tidal waves don’t have names the way hurricanes do, but if it did we could call it Boomer, short for Baby Boomers.
Ron Winter
Assuming that the very first American Baby Boomers were conceived during riotous celebrations on Victory in Europe (VE) Day in May 1945, they will start turning 65 in ever increasing numbers beginning in March, 2011. Within two decades nearly 80 million Americans will be aged 65 or over. In Connecticut the elderly population is projected to increase by 40 percent in the next 15 years!
While many will be healthy, living on their own, and able to manage for themselves physically and financially, even a small percentage requiring Medicaid and other government subsidies will create an enormous financial drain on state and federal budgets.
If the Boomers average a relatively modest $2,000 per month in Social Security payments, they will control more than $1 trillion in cash assets annually – disposable income that will help them maintain a comfortable lifestyle, but which also will create an unprecedented tax burden on the still-working generations.
Considering that the elderly will have better health, nutrition and housing, this isn’t all depressing news. And there are some other bright spots to consider. With the cost of state government spiraling upward and some states teetering on the brink of bankruptcy Connecticut leaders have begun to seriously seek solutions. To that end the West Hartford, Connecticut, accounting, tax and business consulting firm Blum Shapiro was retained by The Connecticut Regional Institute for the 21st Century (CRI) to research and provide recommendations on possible savings for a wide range of issues including the long-term care system in Connecticut.
Blum Shapiro reviewed issues relating to Connecticut’s burgeoning elderly population and earlier this year issued a series of observations that could save the state nearly $1 billion annually. For starters, their report notes that Connecticut’s elderly population currently stands at about 365,000 people, with 200,000 of that number living in the community, making no demands on state or federal Medicaid.
Another 137,300 live in the community and receive government assistance, with just over 21,000 receiving Medicaid assistance. These 21,000 aid recipients cost the state and federal governments approximately $886 million annually. Finally, 27,000 state residents live in nursing homes with more than 18,000 receiving Medicaid.
That final number is of more than passing interest because even though only about 5 percent of the elderly population is nursing home based and drawing on Medicaid, that small percentage accounts for $1.6 Billion annually split evenly between state and federal expenditures. I don’t know how you work your tax budget but I have one pocket labeled STATE and another labeled FEDERAL from which taxes are taken and it doesn’t really matter which one the money comes from, at the end of the day it’s still gone.
The same report states that in the next 15 years Connecticut’s elderly population will increase by 40 percent – while in the same time frame the overall state population is projected to increase by only about 3 percent. More to the point, the population of working adults – who will be paying the bill – is expected to decrease by 5 percent! So, given that we now have 365,000 elderly – 40 percent of that is 146,000 more elderly residents on top of the existing 365,000 which totals – Holy Cow, more than 500,000 – a half-million elderly by 2025!
Connecticut’s current annual costs for both community-based and institutional elder care are just shy of $2.5 billion. Projecting the current costs forward the report states that in 2025 – with no change in the system – that $2.5 billion will increase to $5.8 billion. However, it also suggests that with a change in approach to offer more options to the elderly, and especially to a much larger percentage who are not-institutionalized even if they receive community-based care, the projected $5.8 billion can be decreased to $4.9 billion, a $900 million annual reduction in costs.
What the Blum Shapiro report suggests is not new but certainly emphasizes what some in the elder care field have been saying for years. Federal Medicaid rules are heavily weighted toward institutionalized care, but those costs are more than $6,000 per month, per recipient – $74,000 annually per recipient in Connecticut alone.
There simply is no way that level of expenditure can be sustained with the coming flood of elderly residents. In 2005 a broad philosophical statement enacted in Connecticut statutes to guide policy and budget decisions said that the state’s long-term care plan and policy must provide individuals with options so they can obtain this care in the least restrictive, appropriate setting.
If we are going to both provide care for the elderly and simultaneously not break the bank, it seems obvious that options aren’t just desirable, they are required. Thus far the observations in the Blum Shapiro report are just that, observations – and recommendations. But the time for talk and analysis is fast ending.
There is little that we can do when a tsunami approaches. The best defense is adequate warning that gives us time to head to the high ground. We have been warned. It’s time to head for the high ground, and there is no time to waste.
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Excellent and realistic description of the coming tsunami and the financial crisis it will leave in it’s wake. A crisis that will affect not only state and federal governments, but individuals, too. Medicare does not pay for personal care, it only covers medical intervention. Providing care in the home is feasible and less costly, but requires families to pull together and plan ahead. At $20/hr for a caregiver a couple of days a week ($350), another $75/day for a senior daycare program, say 3 days a week, and family care nights and weekends, it might cost $2,500 a month; the senior’s social security could cover much of that. Hopefully, there will be dividends from investments to help with the remainder. As long as you don’t need nighttime care provided by a hired caregiver, staying at home is far less costly than an assisted living or nursing home. Nighttime care is usually not needed, or if it is, it generally isn’t needed for a lengthly period of time; and, yes, it can be provided in the home. There is a book recommended by the president of the American Geriatric Society, Dad’s Home Alone, Caring For Your Elderly Parent, by Gail Alcorn McGonigle that gives details, delivered with humorus stories, on how you can care for your loved one. It’s available on Amazon.com
I dont know where Ron Winter gets his facts, but the average SS monthly payment is $1100.00 a month. For a lot of people this is there only income. Thats $275.00 a week for all expenses, housing , food ect. Very few middle class and lower have been fortunate enough to be able to have spare money to invest, and because of the economic downturn a lot that had invested, lost most of there money, and there houses. Until the government does more to get regular jobs started, not high tech or top administrative jobs, then this country is going to continue to stay in the red as far as social programs go.
The current average of $1100, if that is accurate, refers only to the cash payments, not the full SS benefits including Medicare and Medicaid. And my column refers to the Baby Boomer generation, not to the current SS recipients, many of whom, like my mother, paid into the system from its first year of existence, contributing significantly less than the Boomers’ pay-in.
Also, many Boomers are expected to delay retirement until age 70 when they can receive the maximum SS cash payout, again not counting Medicare. Thus the full impact of the Boomer generation on Social Security will not begin for another five years. And by then you will have significantly fewer payments to pre-Boomers, meaning their impact on the average will be minimal.
According to a 2003 Congressional Budget Office report:
“The Social Security, Medicare, and Medicaid programs partially replace retirees’ working-age incomes and finance a large share of their health care expenses. Those programs are mainly funded on a pay-as-you-go basis through taxes on workers’ wages and salaries. In the past 40 years, spending for Social Security and Medicare (the two programs that focus most heavily on the elderly) has risen from 2.5 percent of the nation’s gross domestic product to 6.9 percent.
Today’s retirees are heavily dependent on benefits from those programs. Overall, Social Security payments make up about 40 percent of the total income of people ages 65 and over. However, about two-thirds of those people receive at least half of their income from Social Security, and one-third receive at least 90 percent. Annual Social Security benefits are projected to average $10,740 this year.”
Remember that report was written in 2003. It also says:
“As the baby-boom generation grows older, the number of people in the United States ages 65 and over is expected to roughly double by 2030. Moreover, that age group is forecast to grow from about 13 percent of the total population in 2000 to 20 percent in 2030 and to remain above 20 percent for at least several decades thereafter.”
That’s where I get my figures. And if the monthly cash outlay today averages $1100, based on pay-ins that go all the way back to the Great Depression and World War II, it is not at all far-fetched to project that once the impact of wages in the 70s, 80s, 90s and this decade become the baseline for payouts, the average will shoot upwards dramatically.