Tuesday, March 26, 2002
The Center's LTC Graduate Seminar is a unique opportunity to spend a full day
(9AM to 5PM) interacting with a leading authority on long-term care service
delivery and financing and a small group of experienced LTC professionals.
Register for The LTC Graduate Seminars to be conducted April 22 in
Baltimore, May 13 in Pittsburgh, and May 14 in Philadelphia by calling or
emailing Amy Marohn at 425-377-9500 or firstname.lastname@example.org.
Once you express interest in attending an LTC Graduate Seminar anywhere
in the country, Amy will keep you posted by email on dates and locations for
future sessions. For information on
the seminar's content, the instructor, the current schedule, and other details,
go to www.centerltc.org and click on
"The LTC Graduate Seminar" or jump directly to http://www.centerltc.com/ltc_grad_seminar.htm.
If we don't have an LTC Graduate Seminar scheduled near you yet, let us
know where you want us to come. Or,
get together 12 to 15 LTC professionals or senior advisors and we'll schedule a
special program just for your group and at your location. ***
Bullet: GAO on LTC:
New Testimony, Important but Flawed
Comment: Good news and bad news!
The good news is that an important public figure has raised the
visibility of long-term care financing as a critical social problem that must be
addressed. The bad news is that
Comptroller General of the United States David M. Walker's testimony before
Congress on financing long-term care for the baby boom said nothing new and
displayed a fundamental misunderstanding of the issue.
Excerpts and our comments follow:
"Long-Term Care: Aging Baby Boom Generation Will Increase Demand and
Burden on Federal and State Budgets", statement of David M. Walker,
Comptroller General of the United States before the Senate Special Committee on
Aging on March 21, 2002, GAO-02-544T, http://www.gao.gov/cgi-bin/getrpt?GAO-02-544T.
general, the aging of the baby boom generation will lead to a sharp growth in
federal entitlement spending that, absent meaningful reforms, will represent an
unsustainable burden on future generations. As the estimated 76 million baby
boomers born between 1946 and 1964 become elderly, Medicare, Medicaid, and
Social Security will nearly double as a share of the economy by 2035. We have
been able to sustain these entitlements in the past with low depression-era
birth rates and a large postwar workforce. However, absent substantive reform of
entitlement programs, a rapid escalation of federal spending for Social
Security, Medicare, and Medicaid beginning in less than 10 years from now is
virtually certain to overwhelm the rest of the federal budget. . . .
While these are important issues, a broader focus should also include
Medicaid, particularly as it involves financing long-term care."
suggest the future number of disabled elderly who cannot perform basic
activities of daily living without assistance may be double today's level. . . .
Long-term care spending from all public and private sources, which was
about $137 billion for persons of all ages in 2000, will increase dramatically
in the coming decades as the baby boom generation ages. Spending on long-term
care services just for the elderly is projected to increase at least
two-and-a-half times and could nearly quadruple in constant dollars to $379
billion by 2050, according to some estimates. Without fundamental financing
changes, Medicaid-which pays over one-third of long-term care expenditures for
the elderly-can be expected to remain one of the largest funding sources,
straining both federal and state governments."
Comment: Right on so far, but
here's where the confusion sets in.]
60 percent of expenditures for long-term care services are paid for by public
programs, primarily Medicaid and Medicare.
Individuals finance almost one-fourth of these expenditures out-of-pocket
and, less often, private insurers pay for long-term care. . . .
In 2000, Medicaid paid 45 percent (about $62 billion) of total long-term
care expenditures. . . . In 2000,
nursing home expenditures dominated Medicaid long-term care expenditures,
accounting for 57 percent of its long-term care spending. . . .
In 2000, nursing home expenditures dominated Medicaid long-term care
expenditures, accounting for 57 percent of its long-term care spending. . . .
Expenditures for Medicaid home-and community-based services grew ten-fold
from 1990 to 2000-from $1.2 billion to $12.0 billion."
significant long-term care financing sources include: • Individuals' out-of-pocket payments, the second largest
payer of long-term care services, accounted for 23 percent (about $31 billion)
of total expenditures in 2000. The
vast majority (80 percent) of these payments were used for nursing home care.
• Medicare spending accounted for 14 percent (about $19 billion) of
total long-term care expenditures in 2000.
While Medicare primarily covers acute care, it also pays for limited
stays in post-acute skilled nursing care facilities and home health care.
• Private insurance, which includes both traditional health insurance
and long-term care insurance, 3 accounted for 11 percent (about $15 billion) of
long-term care expenditures in 2000. Less
than 10 percent of the elderly and an even lower percentage of the near elderly
(those aged 55 to 64) have purchased long-term care insurance, although the
number of individuals purchasing long-term care insurance increased during the
1990s." (p. 5)
Comment: These statements are true,
but misleading, for two reasons. First,
over half of the expenditures that GAO reports as "out-of-pocket" are
really just contributions of Social Security and other income toward their cost
of care by people who are ALREADY ON MEDICAID.
This is critical because, if Medicaid pays even one dollar toward the
cost of a resident's care, the nursing home receives Medicaid's low
reimbursement rate for that resident, even if the resident pays the remainder
"out of pocket." Low
Medicaid reimbursement rates are driving nursing homes into bankruptcy across
the U.S. and impeding their ability to provide access to quality care.
Second, the percentage of LTC costs funded by Medicaid and Medicare is
not static. It's been going up
steadily for a decade (by at least 10 percentage points), while the percentage
financed out of pocket has gone down just as steadily by at least 10 percentage
points in the same time period. Put
these facts together and you find the real reason private LTC insurance is such
a small factor in financing long-term care:
the vast majority of all expenditures for formal LTC services in the
United States (upwards of 90 percent) are paid directly by Medicaid and Medicare
or indirectly by Social Security and other income (NOT ASSETS).
Personal assets have not been and are not now significantly at risk for
LTC spend-down. Inasmuch as people
only buy insurance against actual risk, private LTC insurance has remained a
relatively undersold financial planning product. Until policy makers realize how and why public financing of
LTC crowds out the market for private LTC insurance, nothing will change and
America's LTC service delivery and financing system will continue to spiral
downward. For extensive evidence to
support this conclusion, see the Center for Long-Term Care Financing's three
major reports in .pdf format at www.centerltc.org: "LTC Choice," "The Myth of
Unaffordability," and "The LTC Triathlon."]
is unclear what effect continued growth in [government-] paid home care,
assisted living facilities, or other care alternatives may have on future
expenditures. Any increase in the availability of home care may reduce the
average cost per disabled person, but the effect could be offset if there is an
increase in the use of paid home care by persons currently not receiving these
services." (p. 14)
Comment: This "woodwork
factor" is only one possible outcome of greater government financing of
home care and assisted living. Two
additional outcomes, even greater in potential significance, are the effect on
Medicaid estate planning and long-term care insurance.
If the government starts paying for levels of LTC that people want, i.e.
home care and assisted living, instead of paying only for nursing home care
which people don't want, expect the market for Medicaid estate planning
(artificial impoverishment to qualify for Medicaid) to explode and the market
for private long-term care insurance (individuals taking personal responsibility
for LTC risk) to collapse.]
long-term care insurance has been viewed as a possible means of reducing
catastrophic financial risk for the elderly needing long-term care and relieving
some of the financial burden currently falling on public long-term care
programs. Increases in private
insurance may lower public expenditures but raise spending overall because
insurance increases individuals' financial resources when they become disabled
and allows the purchase of additional services." (p. 14)
Comment: The criticism of private
LTC insurance implied in this statement is actually a benefit.
Unlike government financing of LTC which is constantly struggling to
contain costs, private insurance allows individuals and their families to
protect fully for the real risk of LTC by purchasing the level of protection
they prefer. The more people have
private LTC insurance, the fewer rely on Medicaid and the more resources
Medicaid has to spend on the genuinely needy.
In other words, it is not a bad thing to increase spending on long-term
care. Such increases are critical
to providing access to quality care at the appropriate level when the aging baby
boom generation needs help. Private
financing and insurance permit such increases, while government financing--as
the Comptroller General's testimony confirms--is now and will remain forever
severely constrained by fiscal and political considerations.]
many baby boomers continue to assume they will never need such coverage or
mistakenly believe that Medicare or their own private health insurance will
provide comprehensive coverage for the services they need.
If private long-term care insurance is expected to play a larger role in
financing future generations' long-term care needs, consumers need to be better
informed about the costs of long-term care, the likelihood that they may need
these services, and the limits of coverage through public programs and private
health insurance." (pps.
Comment: Actually, the public is
not nearly as uninformed or stupid as this quote assumes. Most people don't know who pays for long-term care, nor do
they care, because they know somebody must pay.
They don't see Alzheimer's patients dying in the streets.
Someone takes care of them, the public figures.
Of course, as explained above, the truth is that the government DOES PAY
for the vast majority of formal, professional LTC services provided in the
United States either directly through Medicaid and Medicare or indirectly
through the Social Security income contributed by Medicaid recipients toward
their cost of care. The bitter
irony is that the public understands LTC financing subconsciously better than
many bureaucrats and other "experts" understand it consciously.
The tragedy is that the very same government programs that have
anesthetized the public to the risk of long-term care, are failing now to
provide adequate reimbursement and are driving our service delivery system into