LTC Comment: A theme in all my presentations is that publicly financed LTC will die, but not with a bang. Rather a whimper.

Politicians and bureaucrats can’t raise taxes enough to solve the unfunded liabilities in Medicare and Social Security without impeding the productive economy’s ability to generate the profits to tax in the first place. They can’t cut benefits enough to solve the problem without unleashing voters’ outrage. But, sooner or later they have to do the equivalent of doubling payroll taxes or cutting benefits by half to keep the system going.

My conclusion is they’ll do neither, but will deal with the problem by means of a “thousand cuts.” They’ll gradually welfarize (means test) the social insurance programs (Medicare and Social Security) and they’ll gradually return Medicaid and Supplemental Security Income (de facto entitlements) to their original intent as welfare programs controlled by strict income and asset eligibility rules.

The process has already started. Workers on Social Security at age 62 lose benefits because of their earnings. Medicare Part B premiums are higher for people with higher incomes. Those are just the camel’s nose under the tent. Watch for more of the same as time goes by, budgets pinch, unfunded liabilities come due, and policy makers can’t solve the problems any other way.

Like the frog that jumps out of the pot when thrown into hot water, but cooks contentedly if you turn up the heat gradually, the middle class will slowly lose its Social Security, Medicare benefits and Medicaid LTC benefits to the poor. They’ll turn to home equity for LTC and once home equity is at risk, private LTC insurance will take off.