Freeing up an enormous nest egg
As with all research drawn from complex economic models, these findings have their caveats. To make the U.S.-Sweden comparison, Telyukova and Nakajima had to set aside other variables that could potentially explain the variations in spending habits. There could be cultural differences regarding attitudes towards money and aging, for instance, or differing preferences about leaving inheritances. As such, Telyukova cautioned against reaching the conclusion that, in the hypothetical presence of universal medical and long-term care, American retirees would behave exactly as Swedes do.
Nevertheless, Telyukova and several other economists interviewed by Remapping Debate agreed that the impact of health expenses on spending by the elderly is real and significant — and that it ought to form a part of policy discussions.
“Policies that affect the amount of medical expenditures that the elderly are exposed to will have effects on their savings,” said John Bailey Jones, an economist at the State University of New York at Albany who has contributed to research finding that health expenses go most of the way toward explaining why seniors hold on to their money. In other words, it is likely that American retirees would spend significantly more of their money if they didn’t have to worry about saving it for medical and long-term care — and this could have potentially large consequences for the American economy at large.
“Older people would spend a lot more of their money instead of saving it,” said Joelle Saad-Lessler, an economist at The New School. “And that would stimulate the economy.”
Fear of Falling
Setting aside for a moment the strictly economic benefits of public programs for medical and long-term care, there are profound questions about the human costs imposed when older people are plagued with the fear of not having enough put aside to pay for medical care if they fall ill, or, more broadly, the fear of outliving one’s savings. The picture is a depressing one: a dreary life of endless, penny-pinching preparation for a catastrophe that may or may not come.
Those whose work brings them into contact with the elderly — and the fears they commonly express — say the typical American retiree’s anxiety over spending is very real. Philip Muskin, chief of Consultation-Liaison Psychiatry at the Columbia University Medical Center, said he encounters it often. Muskin doesn’t call this fear a “disorder” (because, in most cases, the fear is perfectly rational), but, he told Remapping Debate, “It’s a palpable anxiety.”
“And it does limit people,” Muskin added. “If you’ve lived into your 70s and you’re reasonably healthy, you really shouldn’t be worrying about anything. You should be having a good time. You should be pursuing those things that perhaps hard work didn’t give you a chance to pursue.” But fear makes the elderly anything but carefree.
“One way you see it in elderly people is that they become incredibly phobic of falling,” Muskin said. Central to this fear, Muskin said, is that medical or nursing home care will drain any remaining assets. “They won’t go out, or they’ll go out in very limited ways. If there’s a raindrop anywhere in 100 miles they won’t go out, if it snows they won’t go out — because they’re terrified that if they fall, that’s the beginning of the end.”
Julia Sear, a clinical social worker in New York who has worked in gerontology for 20 years, told of a 91-year-old client with $300,000 in savings that she is terrified to touch. The client’s husband is dead, and she has no children to inherit her wealth. Nevertheless, “her anxiety level has gone up around this money, because she thinks, ‘There’s nobody who’s going to take care of me,’” Sear said.
Failing to make long-term care affordable
The unavailability of affordable long-term care insurance — which is not covered by Medicare — is the most important risk factor in causing seniors not to spend, according to the economists who have studied the matter. It is even more important than medical expenses, they say, because these are usually covered at least partly by insurance or government benefits.
Private long-term care insurance is a small and capricious market, said Joe Caldwell, director of Long-Term Services and Supports Policy for the National Council on Aging: only about 10 percent of Americans over 50 are currently insured, and their plans are prohibitively expensive for all but the wealthy and subject to sharp and sudden rises in premiums. Medicaid provides relief only insofar as it keeps those already poor from total destitution, stepping in to provide long-term care once a senior has less than about $2,000 in assets. With nursing home costs averaging around $70,000 a year, the expense can “wipe out most people’s assets within a year or two,” Caldwell said. “It’s not pretty.”
The Community Living Assistance Services and Supports (CLASS) Act, originally part of Obama’s health reform plan, would have created a voluntary public long-term care insurance program. After it was enacted, however, the Obama administration (via Health and Human Services) came to the conclusion that it was financially untenable, and that portion of the Affordable Care Act was defunded and later formally repealed by congress. But the CLASS act, Caldwell said, actually had several workable strategies to become financially feasible, many developed by Health and Human Services itself — strategies that Caldwell believes were ignored in the overall drive to compromise on the extent of the Affordable Care Act.
A congressionally mandated commission recently released a report describing the dire state of long-term care in the United States but, Caldwell said, offered no detailed financing solutions. “The biggest issue is that we as a country haven’t figured out a way to finance long-term care… especially one that doesn’t force you to become poor,” Caldwell said. “Most other industrialized countries have realized this is an issue and done something.”