The Long Term Care Perfect Storm

Two articles in the local paper last week reminded me again of how a number of forces are combining in the coming months and years to really make the long term care issue an acute problem for many Americans, creating a “perfect storm” to use a popular phrase of recent years.

 Here in New Jersey the budget deficit worsens.  Governor Christie will be announcing his state budget for the upcoming year and many are bracing for cuts in Medicaid programs, a trend that is occurring across the country.  The economic recession has reduced tax revenues in many states and caused a reduction in federal funding as well.  Remember that the federal and state governments contribute, on approximately a 50/50 basis, towards the cost of Medicaid programs.  What this means is that many states are cutting optional Medicaid programs and reducing the rate at which they reimburse providers.

 The second article talks about the first wave of Baby Boomers who are starting to turn 65 in 2011, and the fact that many are postponing their retirement plans for at least 4 years because of the recession.  In other words, they can’t afford to retire yet.  The article also notes that even before the latest economic downturn, Baby Boomers were unprepared for retirement which now typically lasts decades.  So, what do you think will happen as 77 million people retire over the next 20 years?  Many will enter an overburdened and underfunded long term care system.  More people and less money, a perfect storm.

 Knowing this storm is brewing, what can and should you do?  I am reminded of Aesop’s Fables, those stories we all learned as a child.  The particular one that is relevant here is “The Squirrel and the Grasshopper”.  The squirrel was busy in the summer gathering food and preparing for the coming winter.  Meanwhile the grasshopper was having a good time, not a care in the world.  When winter arrived he was unprepared and died of starvation.

 The same holds true for long term care planning.  Failing to plan while you are healthy may leave you unprepared when a crisis hits.  Ask yourself if you could afford a $125,000 per year additional expense (the average cost of nursing home care in New Jersey), or $250,000 for a married couple, without depleting your assets.  If the answer is “no” then it may be time to talk to your advisors, including a qualified elder law attorney, about putting a plan in place.  Better to be the squirrel rather than the grasshopper.

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