LTC Bullet: Long-Term Care and Medicaid
Friday, July 12, 2019
LTC Comment: How has Medicaid financing affected long-term care? Some thoughts after the ***news.***
*** TWO LTC CLIPPINGS this week touch on long-term care as a political issue … or non-issue. Subscribe to LTC Clippings by contacting Damon at 206-283-7036 or email@example.com. We’ll scan all the published articles, speeches, reports and data to find what you most need to know. We’ll send them to you in neat little email nuggets like these, so you can spend more of your time doing what you do best, and less time searching online.
July/August, 2019, “The Strange Political Silence on Elder Care,” by Grace Gedye, Washington Monthly
Quote: “You might expect that a problem that affects so many people so profoundly would become a major political issue. Recent years have seen other issues, including ones that disproportionately affect women in their personal lives, become highly politically salient—from sexual harassment and pay equity to the push for universal pre-K education and improved access to child care. Yet even though American women today are politically organized and running for office in record numbers, elder care remains widely viewed as a purely personal matter. You could be a news junkie, following the 2020 race closely, and have heard nothing about it. Why is that? And could long-term care go from being a sleeper issue to one that boosts a candidate out of the 2020 pack?”
LTC Comment: Ain’t gonna happen. The false premise here is that politicians seek out sensitive controversial issues. Just the opposite is true. Nothing is more important politically than the impending collapse of the entitlement programs before or during the 2030s, just when the boomer generation arrives at their age of greatest need. Yet not a single question was asked on the subject during the Democrats’ circular-firing-squad debates last week. National somnolence on the LTC issue will prevail until the crisis occurs and that reckoning is nearer every day.
7/11/2019, “2020 Election: Analyzing the Sanders Plan for Long-Term Care,” by Chris Farrell, Next Avenue
Quote: “His new federal universal health insurance program would cover long-term care services and supports in homes and in communities for people of any age. Under the Sanders version of Medicare for All, Medicaid would continue covering institutional services, such as care in skilled nursing homes. … Of course, the big controversial question for Sanders is how he’d pay for his overhaul of the health care system, including long-term care. Sanders consistently says that most people would pay more in taxes to fund Medicare for All but would come out ahead overall after eliminating health insurance co-pays, out-of-pocket expenses and premiums. That claim has been met with skepticism by policy analysts crunching the numbers.”
LTC Comment: What a plan! Solve the mess created by government interference in the private LTC market by eliminating the private LTC market altogether.
LTC BULLET: LONG-TERM CARE AND MEDICAID
LTC Comment: Long-term care is the “poor relative” of social issues. Politicians don’t want to talk about it, as the first article above indicates. When one does, like Bernie Sanders in the second article, his wishful thinking is completely disconnected from financial reality.
When it comes to long-term care financing, the elephant in the room is Medicaid. Unless and until people come to grips with the effect previous government funding of long-term care, mostly through Medicaid, has had, there will be no hope of reforming long-term care services or financing for the better.
I’m working on a paper about the
impact of Medicaid financing on long-term care in the United States.
Following is the abstract. I’d welcome any comments, suggestions, or
Abstract: Medicaid is constantly in the news because of controversy over expanding the program under the Affordable Care Act. But the ACA, or “ObamaCare,” primarily addresses acute health care for young mothers, children and working age adults. While these groups comprise 77 percent of Medicaid recipients, they account for only 38 percent of the program’s expenditures. The remaining 23 percent of recipients are aged, blind or disabled and they account for 61 percent of Medicaid expenditures, mostly to pay for their long-term care. Medicaid funds more than half of all long-term care costs nationally and long-term care is the sleeping giant of America’s social problems. Yet, long-term care receives much less media and scholarly attention than health policy in general. Why?
Medicaid and long-term care have been inextricably linked since the program’s inception in 1965. The story of how Medicaid eligibility and funding influenced the markets for long-term care services and financing is fascinating. Step by step, government efforts to make critically needed extended health care available to people otherwise unable to afford it led to a long list of seemingly intractable problems. These include high costs, nursing home bias, access and quality problems, caregiver shortages, consumer indifference to long-term care risk, and the resultant failure of the public to plan, save, invest or insure privately for likely future long-term care costs.
The key to understanding how and why this happened is to comprehend and refute the fallacy of impoverishment. Conventional and scholarly wisdom hold that eligibility for Medicaid’s long-term care benefits requires impoverishment. This is objectively false. Financial eligibility for Medicaid is determined based on income and assets. Anyone with income below the cost of a nursing home, averaging $7,441 per month, hardly low-income, qualifies based on income. Countable assets are limited to $2,000, but most large assets are exempt, including home equity up to $585,000, and with no limit on value, IRA’s paying out periodically, one business including the capital and cash flow, one automobile, prepaid burial plans, home furnishings, personal belongings including heirlooms, and more. Medicaid planning attorneys help affluent clients with even more wealth qualify quickly and easily by means of special trusts, qualified annuities, planned gifting, etc.
If Medicaid is not the catastrophic poverty-maker it is commonly made out to be, what is it? Simply put, Medicaid has become a long-term care entitlement for middle-class and affluent families. Individuals can ignore the risk of future long-term care expenses, avoid premiums for private insurance, and then protect home equity and other wealth for heirs if such care is ever needed, shifting the cost of long-term care to taxpayers.
By making nursing home care virtually free in the mid-1960s, Medicaid locked institutional bias into the long-term care system, crowded out a privately financed market for the home care seniors prefer, and trapped the World War II generation in sterile, welfare-financed nursing facilities.
By reimbursing nursing homes less than the cost of providing the care, Medicaid guaranteed that America’s long-term care service delivery system would suffer from serious access and quality problems.
By underfunding most long-term care providers – leading to doubtful quality – Medicaid incentivized plaintiffs’ lawyers to launch giant tort liability lawsuits, extract massive financial penalties, and further undercut providers’ ability to offer quality care.
By making public financing of expensive long-term care available after the insurable event occurred, Medicaid discouraged early and responsible long-term care planning and crowded out the market for private long-term care insurance.
By compelling impoverished citizens to spend down what little income and savings they possessed in order to qualify for long-term care benefits, Medicaid discouraged accumulation and growth of savings among the poor, reducing their incentives to improve their stations in life.
By allowing affluent people to access subsidized long-term care benefits late in life, Medicaid encouraged accumulation and growth of savings among the rich who could pass their estates to their heirs whether they were stricken by high long-term care expenditures or not, contributing to inequality.
These conditions have prevailed for Medicaid’s 54 year history. They explain why America’s long-term care service delivery and financing system is so dysfunctional. The widespread fallacy of impoverishment sustains this status quo and explains why long-term care dominates Medicaid expenditures but remains impervious to reform.
This is the story I will tell with recommendations for reforms that would remove the perverse incentives causing the problems.