Another Bubble

 

 

"My Dad would always say if you live long enough you will outlive your teeth and your money. He was right..."

There is another bubble coming. And this one is going to hurt. I have only recently become aware of how big and powerful this bubble is. And it is getting very little press. Least wise, not yet. And who is causing this bubble? We are. Just by growing old.

One of our former Governors would often joke about the benefits of dying young. He said (and I will paraphrase), if you die young, you not only make a better looking corpse, but chances are more people will come to your funeral. There is some truth in that joke. My Mother just passed away shy of her 97th birthday. She outlived most all of her friends and quite a few relatives. When we had the service, it ended up only for immediate family. If she had died 30 years earlier (which I am very glad she did not), I dare say her funeral would have been much different.

When my Dad passed away over 11 years ago, he left some money for Mom. I managed it for her, always abiding by her wishes. Things were going fine until Mom's health started to deteriorate. She needed to go from independent living into assisted living. At that point, her money started to "spend down". By the time she needed full care, her money was almost gone. A few months in full care brought her assets down to about zero. I needed to apply for county assistance. It was a hassle, but we finally got her on. And that is where she stayed until she died.

Earlier this weekend there was an article in the paper about the annual cost for living in a full care facility. It took your breath away. The average was about $91,000/year. Some areas in the state higher, some lower. If we live long enough, many on us will live in an assisted living or a full care facility. And most of us do not have long term care insurance. So once a person's assets are "spent down" to around $3,000, that person may go on county assistance (aka Medicaid). And that is where our next bubble lives.

My wife and I just applied for, and were finally accepted for long term care insurance. Since I am now 65, it turned out to be a real "stork dance" for me. It was one of the hardest and most frustrating things I have done in years. And it is horribly expensive. But should my wife or I need to go into assisted living or a full care facility, it will offer a modicum of financial protection for the family.

Here is where the math does not work out at all. There is a tidal wave of "Baby Boomers" coming to age. Every year due to medical advances, fewer people are dying young or suddenly. For example, congestive heart failure, once considered a death sentence, can now be managed with the right medication. So the "bubble" formula could look something like this: longer lives + better medicines + tidal wave of boomers + very few having long term care insurance = a catastrophe for the Medicaid Program.

Therefore, my feeling is simply this - every state needs to address this issue, and fast. Long term care insurance needs to be more available and much, much more affordable. To ignore this bubble will come at our own peril. And also for our kids.