Who Will Provide Long-Term Health Care?
DiBella, Anne Marie, Risk Management
Who Will Provide Long-Term Health Care?
Upon retirement, millions of American workers are exposed to substantial economic insecurity in their senior years. Many workers are forced into early retirement because of poor health, technological advances or plant shutdowns, and as a result, are spending a relatively larger proportion of their adult lives in retirement and the income they receive may be insufficient to provide them with adequate long-term health care.
Few people want to contemplate the idea of having to provide for their own long-term health care beyond retirement. The fact that 90 percent of those over the age of 65 are presently forced to finance their own health care expenses, coupled with their increased life expectancy compared to previous generations, makes the issue all the more pressing.
The financing of long-term health care for the elderly has increased in importance due to several factors. First, as the baby-boom generation reaches maturity, a slower growing population is propelling the country into a period of potentially severe labor scarcity. Further aggravating this situation is the fact that these "baby-boomers" are having only about half as many children as their parents.
As the workforce dwindles, employers will need to recruit and retain more female employees. However, employers must also be aware of the fact that women are still primarily responsible for caring for elderly relatives and that the financial and emotional distress of caring for an aging relative can have a significant impact on a worker's performance. The need for time off during workdays can result in absenteeism, tardiness or the need to leave work early. In extreme cases, some workers are forced to leave the workplace permanently.
The result is a loss of experience for employers, as well as additional training costs. A study by the Philadelphia Geriatric Center found that 28 percent of the women that left the workforce in 1985 did so to care for elderly relatives or friends.
Legally required benefits, specifically Social Security, are primarily responsible for the continually increasing costs of employee benefits. The higher FICA tax expense is the result of mandated increases in the payroll tax, as well as higher wages earned by workers in a strong economy. FICA taxes paid by employers increased from 7.15 percent in 1987 to 7.51 percent in 1988, while the taxable wage base increased from $43,000 in 1987 to $45,000 in 1988.
In response to this situation, some of the government proposals to expand Medicare benefits to the elderly include eliminating the cap on the taxable wage base, at least for the Medicare portion of FICA. Currently, the Medicare portion of FICA is 1.45 percent, shared by employers and employees. If employers were required to pay their share of that percentage on all wages, they might see a substantial increase in their costs of legally required benefits, and higher paid employees would see a negative financial impact on their paychecks. In addition, the unstable financial position of the Medicare system is likely to exacerbate the situation as the federal government continues to push private industry toward more mandated benefits.
The aging population will have a tremendous impact on the future of long-term care in a number of other ways. According to current trends, in the year 2000 the percentage of people 55 years and older will represent one-fifth of the total population. However, by 2010 that percentage will dramatically increase to one-fourth of the population.
Even more striking is the increase in the number of people over the age of 85, who are the most likely to require nursing home care. This category is projected to be the fastest growing segment of the elderly population. Today, people 85 years old and over constitute 1 percent of the population, but this group is growing three or four times as fast as any other age group. …