LTC Bullet:  Long-Term Care Needs Leadership Now

Thursday, January 31, 2002

Seattle--

***This Bullet is sponsored by Marilee Driscoll, who is writing "The Complete Idiot's Guide to Long Term Care Planning."  Marilee is a speaker and trainer on LTC and on seminar marketing.  Contribute to the book and learn more at www.MarileeDriscoll.com, or call toll-free at 1-866-MARILEE.  Thanks so much to Marilee Driscoll for her generous support of the Center and commitment to keeping LTC Bullets free to everyone.  Won't you help too?  Please go to http://www.centerltc.org/support/sponsor_bullets.htm to sponsor an LTC Bullet.  Find out how you can sponsor other Center activities (e.g., speeches, articles, conference exhibits) by contacting Amy Marohn at 425-467-6840 or amy@centerltc.org.***

The following editorial, authored by Center for LTC Financing Executive Director David Rosenfeld, focuses on the long-term care financing challenge in Washington State.  The details and theme, however, will likely resonate with you no matter where you live.  Nearly every state is struggling with significant fiscal pressures or even a budget shortfall.  Moreover, the Center’s analysis and recommendations to increase the number of private payers in order to save scarce public resources for the truly needy apply generally as well.  An edited version of this editorial appears in the current issue of the Puget Sound Business Journal available online at http://seattle.bcentral.com/seattle/stories/2002/01/28/editorial3.html.

Long-Term Care Needs Leadership Now

by David Rosenfeld, JD, MSW

In his current budget proposal, Gov. Gary Locke proposes cutting $35 million in nursing home payments to help offset our state's estimated $1.2 billion shortfall (Peter Neurath,“Nursing Homes Dispute State Use of Medicaid Funds,” Puget Sound Business Journal, January 11-17, 2002, p. 13.)  Mike Neeld, Executive Director of the Washington State Health Care Association, retorted in a recent Seattle Times article: "Should we eliminate meals? . . . Does the governor want to tell the public that a little squalor is OK for grandma?" (Rebecca Cook, "Budget Ax Strikes Prescription-Drug, Nursing-Home Aid," Seattle Times, December 20, 2001)  Of course not, but our current budget crisis is forcing some tough choices and long-term care will not escape unscathed.  The good news is that much of our overall long-term care financing problem--in Washington State and nationally--is self-inflicted:  the result of well-intentioned but ill-fated public policy for the past 35 years.  As is often said, the definition of insanity is doing the same thing over and over again and expecting a different result.  How we respond to the challenge of financing the growing demand for long-term care services is no exception.  We must therefore plot a new course in public policy if we ever hope to achieve the ultimate goal: universal access to top-quality long-term care for Washingtonians and all Americans.

What can Washington’s long-term care providers learn from this latest round of cost cutting?  Over-reliance on insufficient public reimbursement is a dangerous operating model, especially in tough economic times.  A recent BDO Seidman study shows that nursing homes in Washington lose an average of $11.96 every day on every Medicaid-funded resident, creating an annual shortfall of more than $61 million.  Why is this so devastating?  Seventy percent of Washington’s nursing home residents are on Medicaid.  And as long as Medicaid funds even $1 of a resident’s care, the nursing home receives the inadequate Medicaid rate.  Moreover, Medicaid’s failure to cover costs is also true for assisted living, adult family homes, home care providers, home health care providers, and adult day health providers.  Should we be surprised?  Not really.  Medicaid will never be able to fund high-quality care across the spectrum of care settings for the majority of our state’s citizens who require long-term care services.  Let’s not forget it was never intended to do so.  Medicaid is a means-tested public assistance program.  It is welfare.  The challenge now is to preserve Medicaid’s ability to deliver on its true mandate:  to fund long-term care services for the needy.

The solution?  Providers must attract more private payers (care recipients paying the full market rate out-of-pocket or with insurance) to offset low public reimbursement.  Yet, current incentives in our long-term care financing system make it nearly impossible to attract private payers.  There just aren’t enough of them to go around right now.  Again, no surprise.  Why bother saving, investing, or insuring to pay for long-term care when Medicaid’s generous eligibility rules allow virtually anyone to pass the cost of care onto taxpayers.  Most middle class seniors walk right onto Medicaid.  More affluent seniors can artificially impoverish themselves (i.e., transfer or shelter their assets) with the assistance of a professional Medicaid planning attorney.  No, most of your neighbors are not planning for Medicaid.  Widespread access to Medicaid-financed care, however, has anesthetized the public to the risk of long-term care and thus most people do nothing to prepare.  Less than 10 percent of seniors and virtually none of the Baby Boom generation have purchased long-term care insurance, for example.

The Center for Long-Term Care Financing’s “LTC Choice” framework for public policy reform is a worthy place to begin a dialogue on how best to grow the ranks of these critical private payers.  The core concepts of “LTC Choice” are presented in the Center’s white paper titled, “LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle” which is available to read online at www.centerltc.org. 

The goal of “LTC Choice” is to encourage as many people as possible to prepare financially for the risk of long-term care.  For those who do not plan ahead to pay privately, a new government-backed, privately administered loan program would empower seniors--many of whom are “house rich, cash poor”--to purchase appropriate and desirable care in the private marketplace for as long as possible.  Such an approach has many advantages over the current system’s requirement that you virtually impoverish yourself (either for real by spending-down your money on care or “artificially” with the help of a professional Medicaid planner) before receiving government assistance through Medicaid.  These advantages include:  a return of consumerism, payment of the full market rate for providers’ services, competition between providers to offer the best possible service for the lowest price, and long-term savings for government and taxpayers.  The biggest advantage of the "LTC Choice" approach, however, is the positive change in consumer planning behavior it will engender.  The vast majority of us will begin to save, invest or insure for long-term care in order to avoid the risk of depleting our estates (which are collateral for the loan program described above).  The number of private payers will increase dramatically along with the fortunes of the entire long-term care service delivery system.

With the correct public policy incentives in place, most Washingtonians will take responsibility for their long-term care and allow a reinvigorated Medicaid program to serve well the genuinely needy.  The resulting infusion of private dollars into long-term care service delivery system will empower our state’s care providers to invest in their services and facilities, attract and retain qualified staff, and most importantly, offer high-quality care at the most appropriate level to everyone. 

Time is of the essence.  Washingtonians age 85 and over have increased by 49% over the past 10 years and are the state’s second fastest growing population.  Over the same 10-year period, Washingtonians age 75-84 have increased by 33%.  Washington’s “dependency ratio” (the number of residents age 20-64 for every person 65 years of age or older), a useful approximation of how many workers will be available to support each retiree, will drop from 5.4 to less than 3 over the next 30 years.  Maybe most frightening of all, the first wave of 70 million Baby Boomers turns 65 in only a decade.  How much longer will we allow the situation to deteriorate for long-term care recipients, providers, and taxpayers before we act?  New long-term care public policy is needed now.  The time for leadership in Olympia [Washington’s capitol] has arrived.