Summary
Long-term care financing is the 800-pound gorilla of social problems waiting just around the next bend in public policy. Even if we solve the unfunded liabilities of Social Security and Medicare, which we can't without radically changing those programs, Medicaid and long-term care await. Yet, President Obama's health care reform plans don't contemplate, much less solve the challenge of funding long-term care for the boomer generation even as the Age Wave is about to crest and crash.
Analysis
Will Health Reform Include Long-Term Care?
In a word: No.
In fact, major health reform, with or without LTC, is highly unlikely despite building momentum and fertile political conditions.
The main reasons are the imploding economy and ballooning expenditures of money we don't have and can't get without dire consequences.
Consider the money. Add up the continuing resolution to fund the rest of Fiscal '09 ($410 billion), the proposed Fiscal '10 budget ($3.6 trillion), a $634 billion "down payment" on health reform, the "stimulus" ($787 billion) and an alphabet soup of public and private bailouts (TARP, TALF, etc.). What do you get? Call it $10 trillion of money spent or obligated THAT WE DO NOT HAVE.
That amount is staggering and unprecedented in American history. But it's only 10 percent of the larger unfunded liabilities this country's committed to spend.
The infinite-horizon unfunded liability for Social Security is $16 trillion. Medicare's is $86 trillion. These programs have zero money in their "trust funds," which have already been borrowed and spent by the federal government.
Never mind Medicaid and long-term care. Medicaid doesn't even have a phony trust fund to hide its enormous unfunded spending commitments.
Now, what happens when you spend money you don't have?
Individuals can pay it back out of cash flow and/or borrow more money. Governments have a third option. They can print extra money.
Let's consider all three of the options available to government. What'll happen with each?
If politicians INCREASE TAXES enough to cover these hemorrhaging expenditures and promises, they will destroy the productive economy's ability to generate the profits to tax in the first place. That's an economic whirlpool.
If they BORROW the money, interest on the burgeoning debt will gradually crowd out the very spending they're borrowing to cover and international lenders will demand higher and higher rates of interest. That's a vicious circle.
If they PRINT more money to cover unfunded spending and liabilities, inflation will consume the value instead. That's "stagflation."
Clearly, the federal government has painted us into a fiscal corner from which there may be no collective escape. Individuals, especially the young, and the private sector will bear the burden of a long, slow return to financial stability.
By that I mean this: Because the government can't tax, borrow, or inflate its way out of this mess, they'll have nowhere else to turn but to ratchet down entitlement programs and other public spending.
Medicaid, ostensibly a welfare program, but always before a de facto entitlement, will no longer finance LTC for the middle class and affluent. The best we can hope is to save something for the poor.
Social Security and Medicare will be welfarized. It's already begun with means tests that tax or reduce Social Security benefits and drive up co-insurance for Medicare's Part B and Part D for higher income people.
When current health and LTC reform proposals hit the fiscal wall, government will pull back the traditional social insurance and welfare "safety net" little by little. As that happens, individuals and families will return to savings, private insurance and personal responsibility.
Maybe our Depression-era parents were right after all. Save, invest and insure, they warned. Don't count on anyone else, least of all the government, to bail you out.
