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State senator says Minnesota must prepare for 'age wave'; Eken proposes extending Social Security tax on high earners

By Nathan Bowe / DL Newspapers

DETROIT LAKES, Minn. – Minnesotans are getting older, and the cost of caring for seniors and the disabled is going to rise fast.

The state needs to act now to get ahead of the coming “age wave” by providing a stable funding source to pay for care, said state Sen. Kent Eken, DFL-Twin Valley.

He proposes to pay for the increase by extending the Social Security payroll tax beyond the income limit of $117,000. The state would reap the additional tax for a Minnesota Social Security fund to pay for senior care and the disabled.

“The longer we wait, the worse it’s going to get,” he said. “We need a dedicated source of revenue. It’s harder to raise money for the general fund than for a specific dedicated fund: People will support a dedicated fund for seniors and people with handicaps.”

About six years ago, when he first proposed the measure in a state House bill, the House Fiscal Services Office estimated that it would raise about $900 million over a two-year period, Eken said.

It’s basically a flat tax, he said. “Our tax structure is regressive; as your income goes down, the amount you pay in taxes goes up. The Social Security (payroll) tax is one of the most regressive.”

The money would go toward long-term care in general, including waivered services, nursing home care and assisted living, Eken said.

The effort also would require greater efficiencies from the senior care and handicapped-care systems.

“We’re not going to fix it with revenue alone or efficiencies alone, we need both,” Eken said.

The population of Minnesotans age 85-plus is projected to increase more than 150 percent over the next three decades, from about 107,000 in 2010 to 274,000 in 2040.

The population of people age 65 and older with Alzheimer’s disease is projected to grow by 25 percent, from 88,000 in 2000 to 110,000 in 2025.

At the same time, the number of nursing facility beds continues to drop due to downsizing and closure – from 45,000 Medical Assistance-certified beds in 1995 to 30,500 in 2012.

That all adds up to a looming problem, according to the Long-Term Care Imperative – a collaboration of Aging Services of Minnesota and Care Providers of Minnesota, two of the state’s largest long-term care associations.

Health care spending essentially doubles when people hit the ages of 55 to 64, and rises by another third or so at age 65 and up.

Minnesota faces a fiscal trap, according to a report on Minnesota’s “New Normal” by Tom Stinson, former state economist, and Tom Gillaspy, former state demographer.

The issue is a long-term, structural one. Short-term solutions will not solve the problem, they say, so fundamental changes are necessary. They predict that:

E Revenue growth will slow, and efforts to increase it will be met with resistance.

E Spending pressures will increase, driven largely by issues of aging and health.

E State spending will shift its focus from education, infrastructure and higher education to care and support of the aging.

“This isn’t something we can afford to sweep under the rug anymore,” Eken said. “We can’t afford to have a head-in-the-sand attitude towards the tidal wave that’s coming – we need to get out ahead of the age wave.”

He said the state needs to launch an Apollo Project for long-term care.

“It will affect every area of the budget; it will take away from roads, bridges, education. We need our best, brightest minds on it, because we’re in uncharted waters,” he said. “These are demographic changes we haven’t seen in world history, and it will require some unique and innovative policies to really deal with it.”