Will Your Senior Clients Be Harmed When Obamacare Is Repealed?
The short answer is “yes”, unless every one of them is high net worth. For those who are very wealthy, there will be no effect as they will pay out of pocket. However for any client who lives long enough to spend down everything and to get low on funds the effect will be palpable. Though neither party is talking about what happens to seniors of modest means with the repeal of the Affordable Care Act here’s the hidden truth.
Low income seniors who could not afford the high cost of long term care had no choice when they ran out of money except a nursing home. Until Congress passed legislation called Community First Choice (CFC), that is. This is a bipartisan supported program that is optional for states. It gives seniors and disabled people a choice to remain at home and supports family caregivers. If a state adopts CFC, it receives extra federal funding (6%) to pay for personal attendant services. This funding is critical. States who want CFC must make the initial investment in home and community-based services before they see savings over the long run.
According to the National Council on Aging, eight states have adopted it so far and at least four more are applying for it or are considering applying. With our growing senior population it is right to give elders a choice of not having to go to a nursing home, a fate many dread and fear.
Even though care at home is normally cheaper and better than nursing home care, there is still a bias in our Federal law that compels states to pay for nursing home care, but not home care. It makes no sense. The CFC is an effort to eliminate the bias in the law favoring nursing home care and promote doing what is better for our elders: allowing them a way to pay for home care using family to provide it with financial support.
Repealing the ACA will de-fund this successful CFC program.
The Republican Platform states: “Our aging population must have access to safe and affordable care. Because most seniors desire to age at home, we will make homecare a priority in public policy and will implement programs to protect against elder abuse.”
Really? If this is a priority, how has a helpful program for seniors been ignored in the dialog about the necessity repeal Obamacare? And what about the millions of people ages 55-64 who need health insurance and can’t afford it? Expanded Medicaid and subsidies help them now. Those programs are on the chopping block in the oncoming rush to “cut government spending”.
The elder and disabled adults who need Community First Choice funding and all community based efforts to keep them out of nursing homes are not marching in the streets. They need total care or help to maintain themselves at home. They are not in the news. They are a population without a voice except by aging organizations who fought for CFC in the first place. Any client who spends a fortune on long term care over years and depletes her assets could end up needing Medicaid. Those are the most at risk folks. No matter how skilled you are no one can make money last forever for those who are less than high net worth.
Do not be fooled into thinking that those who relish the idea of quickly trashing Obamacare really are concerned about what happens to low income seniors. These seniors comprise a significant part of our population. The elders with modest means and modest savings who need long term care can’t pay for it. They are the ones being forced to go to a place they don’t want to be.
The Money Follows the Person Program, which assists states in making home and community-based services more widely available expired in October 2016. If Congress is throwing out all things related to the Affordable Care Act, what are the chances of renewing this program?
If you have aging clients who might live long enough to run out of funds, this will directly affect what happens with them. If you are planning for them for lifelong financial safety, consider that much of what formerly was in place to keep them out of nursing homes will likely be gone should they live to be 100 and are no longer wealthy. Be sure to keep in mind that nursing homes are about three times the cost of staying at home with care in place there.
Top Picks in Asset Allocation
Written b: John Bilton, Head of Global Multi-Asset Strategy, Multi-Asset Solutions
As global growth broadens out and the reflation theme gains traction, the outlook brightens for risky assets
Four times a year, our Multi-Asset Solutions team holds a two-day-long Strategy Summit where senior portfolio managers and strategists discuss the economic and market outlook. After a rigorous examination of a wide range of quantitative and qualitative measures and some spirited debate, the team establishes key themes and determines its current views on asset allocation. Those views will be reflected across multi-asset portfolios managed by the team.
From our most recent summit, held in early March, here are key themes and their macro and asset class implications:
Key themes and their implications
Asset allocation views
For the first time in seven years, we see growing evidence that we may get a more familiar end to this business cycle. After feeling our way through a brave new world of negative rates and “lower for longer,” we’re dusting off the late-cycle playbook and familiarizing ourselves once again with the old normal. That is not to say that we see an imminent lurch toward the tail end of the cycle and the inevitable events that follow. Crucially, with growth broadening out and policy tightening only glacially, we see a gradual transition to late cycle and a steady rise in yields that, recent price action suggests, should not scare the horses in the equity markets.
If it all sounds a bit too Goldilocks, it’s worth reflecting that, in the end, this is what policymakers are paid to deliver. While there are persistent event risks in Europe and the policies of the Trump administration remain rather fluid, the underlying pace of economic growth is reassuring and the trajectory of U.S. rate hikes is relatively accommodative by any reasonable measure. So even if stock markets, which have performed robustly so far this year, are perhaps due a pause, our conviction is firming that risk asset markets can continue to deliver throughout 2017.
Economic data so far this year have surprised to the upside in both their level and their breadth. Forward-looking indicators suggest that this period of trend-like global growth can persist through 2017, and risks are more skewed to the upside. The U.S. economy’s mid-cycle phase will likely morph toward late cycle during the year, but there are few signs yet of the late-cycle exuberance that tends to precede a recession. This is keeping the Federal Reserve (Fed) rather restrained, and with three rate hikes on the cards for this year and three more in 2018, it remains plausible that this cycle could set records for its length.
Our asset allocation reflects a growing confidence that economic momentum will broaden out further over the year. We increase conviction in our equity overweight (OW), and while equities may be due a period of consolidation, we see stock markets performing well over 2017. We remain OW U.S. and emerging market equity, and increase our OW to Japanese stocks, which have attractive earnings momentum; we also upgrade Asia Pacific ex-Japan equity to OW given the better data from China. European equity, while cheap, is exposed to risks around the French election, so for now we keep our neutral stance. UK stocks are our sole underweight (UW), as we expect support from the weak pound to be increasingly dominated by the economic challenges of Brexit. On balance, diversification broadly across regions is our favored way to reflect an equity OW in today’s more upbeat global environment.
With Fed hikes on the horizon, we are hardening our UW stance on duration, but, to be clear, we think that fears of a sharp rise in yields are wide of the mark. Instead, a grind higher in global yields, roughly in line with forwards, reasonably reflects the gradually shifting policy environment. In these circumstances, we expect credit to outperform duration, and although high valuations across credit markets are prompting a greater tone of caution, we maintain our OW to credit.
For the U.S. dollar, the offsetting forces of rising U.S. rates and better global growth probably leave the greenback range-bound. Event risks in Europe could see the dollar rise modestly in the short term, but repeating the sharp and broad-based rally of 2014-15 looks unlikely. A more stable dollar and trend-like global growth create a benign backdrop for emerging markets and commodities alike, leading us to close our EM debt UW and maintain a neutral on the commodity complex.
Our portfolio reflects a world of better growth that is progressing toward later cycle. The biggest threats to this would be a sharp rise in the dollar or a political crisis in Europe, while a further increase in corporate confidence or bigger-than-expected fiscal stimulus are upside risks. As we move toward a more “normal” late-cycle phase than we dared hope for a year back, fears over excessive policy tightening snuffing out the cycle will grow. But after several years of coaxing the economy back to health, the Fed, in its current form, will be nothing if not measured..
Learn how to effectively allocate your client’s portfolio here.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co and its affiliates worldwide. Copyright 2017 JPMorgan Chase & Co. All rights reserved.
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