The Long Term Care Time Bomb

America’s biggest demographic challenges might be posed not by the very young, but by the very old.

In 1900, according to the U.S. Census, just 122,000 Americans were age 85 and older. Today, it’s 6.1 million.

Americans 85-plus now account for about 13 percent of all Americans over age 65, and more than 1 in 4 seniors (26 percent) are now over age 80. By 2050, says the Robert Wood Johnson Foundation, the number of Americans over age 85 is expected to reach 19 million nationwide.

Millennials may continue to grab the demographic limelight – they’re now officially the largest generation in U.S. history – but the rapidly-growing cohort of very old Americans demands as much attention, if not much more concern. Particularly worrisome: The exploding cost of long-term care.

Here’s a simple but stunning fact: Public policy has made no provision to finance the growing long-term care needs of aging Americans in a fiscally sustainable way. In fact, a bipartisan commission convened by Congress in 2013 failed to agree on a viable solution to pay for Americans’ increasing long-term care needs. The result: A looming social and economic crisis that threatens both middle-class finances and well-being.

Source: Demographic Trends in the 20th Century, U.S. Census Bureau

According to the Congressionally-convened Commission on Long Term Care, more than two-thirds of Americans over age 65 will need long-term care at some point in their lives. This includes not just nursing care, but help with everyday activities such as bathing, preparing meals and taking medicines on time.

None of this help is cheap. Genworth’s 2014 Cost of Care survey found the median cost of assisted-living facilities to be $3,500 per month, while home health services cost a median of $45,188 per year, and the median price of nursing home care was $77,380. In some parts of the country, such as Washington, D.C., one year of nursing home care costs $107,128, while in Alaska, costs rise to as high as $237,250 annually.

Many Americans mistakenly believe these costs are covered by Medicare. In truth, Medicare pays in full only for the first 20 days of care and only part of the costs up to day 100. Unless patients are also poor enough to qualify for Medicaid – they’re on their own.

Few Americans, however, are equipped to shoulder the costs of their own long term care. According to the Commission on Long Term Care, only one in three older Americans had non-housing assets equal to one year’s cost of nursing home care ($70,000), while nearly half of households hold less than $10,000 in non-housing savings.

And while private long-term care insurance is available, it’s still relatively expensive and hardly top-of-mind among Americans’ financial priorities. According to the Robert Wood Johnson Foundation, fewer than 8 percent of Americans have long-term care insurance.

In the absence of other options, many older Americans are turning to family caregivers – and to Medicaid. The Commission on Long Term Care estimated that in 2009, 42 million caregivers nationwide were providing unpaid long-term care to family members. The vast majority of these caregivers are women, many of whom face enormous emotional and economic burdens as a result of these responsibilities. According to Genworth’s survey, 65 percent of caregivers report missing work, working less or having to change career paths altogether. One third say they provide 30 hours or more of care per week.

Medicaid has now become the nation’s largest de facto provider of long-term care, spending $140 billion on long-term care in 2012. Spending on long term care now accounts for as much as one-third of all Medicaid spending and nearly two-thirds of all spending on long-term care nationally.

But this reliance on Medicaid is not sustainable in the long term. For one thing, Medicaid is not intended to serve the middle class, and the program is already under enormous fiscal pressure, as is government spending on health care more generally.

Source: Commission on Long Term Care

The Commission on Long Term Care found that the share of state budgets spent on Medicaid grew from 14.8 percent in 2010 to a projected 19.6 percent in 2012. Overall, the Congressional Budget Office predicts that total federal spending on health care will account for 8 percent of U.S. GDP by 2040 (compared to 5.2 percent in 2015).

Few Americans like to think about the prospect of extreme old age and the burdens that come with it. But that’s all the more reason why policymakers must take the initiative to bring this challenge to the forefront.

No doubt many of the candidates running for president in 2016 will vie to be the champion of “middle class economics.” Solving the nation’s long-term care needs should be part of any true middle-class platform.