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Baby Boomers Are Creating a Massive Health-Care Budget Crisis. Here's Why.

long-term care, medicaid, attorney

A Gallup poll recently found that 74% of US adults plan to work in some form or another past the age of 65. Some will work out of necessity to earn more money because of increased longevity, health care costs, and reduced Social Security payouts, while others will leave their career and strike out in a different direction often pursuing a lifelong dream or spending time and energy in volunteer work and/or philanthropy causes. Whatever the senior individual’s pursuit, it is clear that new patterns have emerged in the past 10 years and it will have a huge effect on individual US states.

Baby boomers want to "age in place" and are committed to staying vital, fit, and independent for as long as possible. They want to die in their own homes, not in a hospital or facility. A record high 64 million Americans are now living in multi-generational homes which makes aging in place more possible (link).

Why does this demographic and economic shift put a strain on state budgets? The answer is twofold. On the one hand, there is an increase in healthcare burdens that are being paid for by the state. On the other hand, remittances from tax revenues decline, since Seniors tend to have exemptions for a number of different taxes. Even sales taxes are affected. According to the Bureau of Labor Statistics, seniors tend to spend less money than their younger counterparts.

Even the states that are best rated for aging, ranked by overall health, senior unemployment, life expectancy and nursing home quality, are challenged because of health care costs. Rising health care costs have been taking a large portion of each state’s government budget and will most likely continue to do so.

Health care costs are also hitting baby boomers hard. There is a trend in people aged 50 to 65 having more incidence of disability, obesity, and diabetes thus increasing their need for medical care and services. In August of 2017 Fidelity Investments estimated that the average 65-year-old couple retiring in 2018 will need $275,000 to cover health care costs alone over the remainder of their lives. That is a 6% increase from the previous year and with no substantive health care pricing reform on the policy horizon that amount will continue to increase.

To navigate these troubled waters, advanced planning for healthcare costs is becoming an essential element of good estate planning. No longer is a will enough to deal with the unknowns of the future. A comprehensive plan - customized to a Senior's particular needs - is often needed.

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