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LTC Bullet:

How to Kill the Golden Goose

Thursday September 23, 1999


Today's (9/23/99) Detroit Free Press features an article by Julie Edgar on the growing popularity of assisted living titled, "Assisted Living: Seniors Strive for Luxury." You can find the article at

In addition to discussing the industry's explosive growth, the article focuses on attempts in Michigan to make assisted living affordable to more seniors by increasing the level of public support. Specifically, "[Michigan's] Long Term Care Workgroup, a 6-month-old task force led by Jim Haveman of the Department of Community Health, has recom-mended that more people be allowed to use Medicaid waivers to subsidize personal care services at assisted-living facilities." Also, the Area Agency on Aging in Oakland County "is lobbying the U.S. Department of Housing and Urban Development to free up Section 8 vouchers to subsidize rent in assisted living facilities."

These efforts in Michigan reflect a growing trend among senior advocates and well-meaning politicians to solve access and affordability problems with the seemingly simple solution of more public money. It is also a classic example of how pressure politics forces short term solutions that only create more problems down the road...when it's someone else's headache.

Yes, assisted living is a wonderful living option for seniors who need supervision, but don't need the services of a skilled nursing facility. Yes, assisted living should be an option for anyone who needs this type of care. But unless this nation reforms public policy to encourage people to plan ahead for their long-term care, opening the public coffers for assisted living will only derail what minimal progress has already been made to save our public programs for the truly needy.

Today, in the vast majority of states, Medicaid pays mostly for nursing home care. In order to receive care in assisted living or home settings, you need to pay out-of-pocket or plan ahead with long-term care insurance. To date, only a small percentage of seniors and almost no baby boomers have purchased insurance to ensure access to these more desirable levels of care.

Yet, as the benefits and amenities of assisted living and home care become widely known, more seniors and boomers will purchase long-term care insurance to secure these options for themselves. In fact, the Center for Long-Term Care Financing's white paper "The Myth of Unaffordability" urges long-term care insurance carriers to focus their marketing efforts on access to top-quality care at the appropriate level.

What happens if Medicaid begins to cover assisted living to any great extent? The demand for long-term care insurance will plummet. Why pay for insurance that cannot offer you anything different or better than what the public program offers? In addition, induced demand from people who have avoided Medicaid because of the nursing home connection may swamp the system.

Worse yet, Medicaid will eventually drag the assisted living industry down the same torturous path as it has done with the nursing home industry: low reimbursement (that often doesn't even cover the cost of providing care), mandated services, costly regulation, and oversight by politicians who crack down on care providers "to make America safe for seniors" without ever questioning the underlying reasons for the systemic problems.

Ironically, Medicaid officials are just doing their job. For example, it's no secret that regulators look for things to regulate. The issue is whether or not Medicaid should be involved in providing long-term care for the masses. Unfortunately, history is bound to repeat itself unless we learn from our mistakes.

Assisted living is too good a concept to screw up. Our public policy must encourage seniors to plan ahead to pay privately for their long-term care and to avoid Medicaid dependency. This, in turn, will allow a reinvigorated Medicaid program to offer quality assisted living to the small group of seniors who are truly needy. The quality of care will remain high precisely because the assisted living industry continues to be driven by market forces.

As Karen Wayne, President of the Assisted Living Federation of America states in the article, "We're...a private-pay industry, so if we don't keep people happy, we don't have customers." Compare this to the experience of the nursing home industry which has become a quasi-public utility with most of its beds filled with people on Medicaid who have no leverage to demand anything.

There is a role for Medicaid to play in the provision of assisted living. It should not be set in motion, however, until steps are taken to ensure that it will not co-opt the demand for private insurance and other vehicles for people to plan ahead for their care. Otherwise, well-meaning but short-sighted attempts to respond to pressure for better and cheaper care will kill the goose that is laying the golden eggs.

Comprehensive recommendations for long-term care public policy reform are featured in the Center for Long-Term Care Financing's new white paper, "The Myth of Unaffordabilty: How Most Americans Should, Could, and Would Buy Private Long-Term Care Insurance" [$34.95; free to media and lawmakers]. Contact us at 206-447-1340 or click here to order the report.