Although the health care debate this election year is focused primarily on coverage for physician and hospital services, the growing cost of long-term care (LTC) is fast becoming a problem we can no longer ignore. With millions of baby boomers now hitting retirement, state Medicaid budgets under pressure, and older working families ill prepared for the huge cost of nursing home care, LTC is shaping up to be a perfect storm.
Stuart Butler, PhD
One reason for concern is the future surge in the need for LTC services. More than 10 million Americans currently need assistance with daily living. About half of these are frail or disabled seniors and the other half are people younger than 65 years who have disabilities. The demand for costly care will increase sharply as the baby boom generation ages.
Because such care is expensive, it can rapidly exhaust the savings of even prudent households. Nursing home costs now average about $75 000 a year for an individual, and assisted living typically costs around $40 000. This presents a dilemma: it is difficult or impossible for most working families to save enough for a long spell of care with such costs.
Moreover, LTC insurance is becoming hard to afford—and even to find, as private insurers pull out of the market. In part, this development is because low interest rates make it hard for insurers to build up reserves to cover benefits, forcing them to raise premiums, which discourages potential buyers. In addition, younger Americans rarely think of protecting themselves and their assets with LTC insurance. The Affordable Care Act (ACA) did contain a provision, with the acronym CLASS (for Community Living Assistance Services and Supports), to create a voluntary government-sponsored LTC insurance program. But that program was deep-sixed when administration actuaries concluded that viable financing would require such high premiums that the program would encounter an insurance “death spiral” as rising premiums led to ever fewer but high-cost enrollees.
Not surprisingly, heavy LTC costs and depleted personal savings have pushed more and more of the financing burden onto Medicaid, which in turn is straining state finances. Medicaid now accounts for 43% of total LTC spending, with Medicare covering just under one-quarter of costs through postacute coverage, according to a 2010 study by Deloitte. Long-term care already consumes about one-third of all Medicaid spending. Thanks to the demographic trends, future LTC costs threaten to cripple state budgets. According to the Deloitte study, the LTC “ticking time bomb” could push Medicaid up to more than 35% of state budgets by 2030, with half of that for LTC services. That’s unsustainable.
What can be done?
With dangerously high federal deficits, plus the ACA’s inducements to states to expand Medicaid coverage for working-age households, there is likely to be a cutback in federal funding for LTC rather than any expansion. So other strategies are needed to confront the need for care.
One strategy is to encourage more private savings and insurance in preparation for later needs. That will not be easy and will require education and a cultural shift as much as an increase in household financial capacity. Many Americans wrongly believe their potential long-term nursing home costs will be covered by Medicare, so there needs to be improved information about the need for savings and insurance dedicated to LTC. There also needs to be an honest and open national conversation about the obligations of adult children for their parents’ housing and care needs.
There might be a stronger, more stable market for insurance if LTC coverage were to become an integral part of health coverage. That is likely to develop, under either the ACA or rival proposals to reform health insurance, as health insurance becomes less connected with the place of employment and longer-term renewable contracts for health insurance become more common. That development could make it prudent business practice for insurers to integrate at least home-based LTC into their policies for working households and for their Medicare plans.
Concerns about nursing home costs will also spur current efforts to make it possible for greater numbers of elderly or disabled individuals to receive services at home rather than in an institution. For that strategy to be successful, health professionals, states, and the federal government need to reexamine scope-of-practice rules and Medicare payment regulations so that in-home Medicare beneficiaries can receive customized services and the appropriate personnel are adequately paid. There will be greater success on that front if health professionals and government regulators work more closely with neighborhood organizations, such as the growing “urban village” movement, that are seeking to make it easier for seniors to remain in their homes.
Finally, as Medicaid budget constraints tighten at the federal and state levels, it is important that states be given far more flexibility to redesign Medicaid to meet the different needs of the populations that receive acute or long-term care. As I’ve argued before in the JAMA Forum, that means retaining goals, protections, and measurable outcomes for the states but allowing more flexibility for states to integrate different programs and private or nonprofit services to achieve better LTC assistance at lower cost.
Because the growing LTC challenge involves not just medical care and money but also social values, civil society institutions, and private planning, it will be particularly difficult to solve. So while the policy focus for now is on the ACA and Medicare, it is essential that we begin to devote serious and increasing attention to the issue.
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