LTC Bullet: Long-Term Care: The Solution (The Serial)

Friday, October 20, 2023


LTC Comment: Today we offer easy access to a must-read new study by Center president Steve Moses, after the ***news.***

*** APPEAL: The Center for Long-Term Care Reform, in partnership with the Paragon Health Institute, is embarking on a campaign to improve LTC services and financing. In “Long-Term Care: The Problem,” we explained what’s wrong and why. In “Long-Term Care: The Solution,” we discard the failed policies of the past and propose a radical new approach based on engaging vast sources of private wealth currently diverted from LTC funding. We will reach out to the media, brief federal and state policy and law makers, speak at conferences, and write for publication, all toward the end of achieving the policy goals in “Long-Term Care: The Solution.” Will you help us in this effort? Join the Center or contribute online here. Check out the Center’s “Membership Levels and Benefits” schedule here. Most corporate memberships include a briefing by Center president and “LTC Solution” author Stephen Moses. Call or write for more information: 206-283-7036;; LTC policy has floundered for too long. Let’s get this done! ***


LTC Comment: The Paragon Health Institute published “Long-Term Care: The Solution” last week. This new report is long and complicated, but important. So LTC Bullets will deliver it to you in bite-sized pieces over the next few weeks. Today, read “About the Author,” the “Executive Summary” and the “Abstract.” Next time, “What Did Not Work” and then a whole new approach to LTC financing that will unleash the potential of private financing, including insurance.

Excerpts from “Long-Term Care: The Solution
Stephen A. Moses
Center for Long-Term Care Reform

Steve Moses is president of the Center for Long-Term Care Reform. The center promotes universal access to top-quality long-term care by encouraging private financing as an alternative to Medicaid dependency for most Americans. Previously, Mr. Moses was president of the Center for Long-Term Care Financing (1998-2005), Director of Research for LTC, Inc. (1989-98), a senior analyst for the Inspector General of the U.S. Department of Health and Human Services (1987-89), a Medicaid state representative for the Health Care Financing Administration (1978-87), an HHS departmental management intern (1975-78), and a Peace Corps volunteer in Venezuela (1968-1970). He is widely recognized as an expert and innovator in the field of long-term care. 

What This Paper Covers
How to pay for aging Americans’ long-term care (LTC) is a difficult policy problem. This paper follows “Long-Term Care: The Problem,” in which I explained how well-intended government policy caused many of LTC’s problems. Too many people end up on Medicaid, which pays too little to ensure access to quality home care and causes excessive reliance on institutionalization and unpaid help from families and friends. In this paper, I propose reforms to reduce dependence on Medicaid and free up private financing to fix the LTC challenges.
What We Found
When people encounter high LTC costs later in life, they typically qualify more easily for Medicaid than commonly thought. This moral hazard discourages early LTC planning. The past policy approach of generous Medicaid LTC eligibility with estate recovery after death did not adequately promote proper planning, either through savings or insurance. Most Americans possess enough wealth to fund their average LTC needs, which is about two years of home-based services. If the average 65-year-old had $70,000 set aside for LTC, it would grow to meet that need after age 85, when LTC commonly occurs. Positive incentives to plan early and pay privately avoid the loss of freedom and high economic cost from compulsory, payroll-funded policies.
Why It Matters
With the aging of the baby boomers and an increasing percentage of the population living past 85, creating a sustainable LTC policy is crucial. If Medicaid did not pay for expensive LTC after care is needed, more consumers would prepare privately and avoid Medicaid dependency. Unless policy is changed and the incentive to avoid proper LTC planning is removed, the LTC system will fail, harming those who most need public support.
Policy Suggestions
Medicaid LTC should be restored as a safety net for indigent elderly people. Lawmakers should eliminate the ability to access publicly funded LTC while preserving wealth. This paper details seven options to empower younger and middle-age Americans to meet a new, publicized individual LTC planning responsibility. This would unleash wealth currently unused for LTC that remains locked in home equity, individual retirement accounts, life insurance, and estates and reorient the LTC system to cater to seniors’ desires to age in their homes rather than in institutions.

As explained in my previous work for the Paragon Health Institute, “Long-Term Care: The Problem,” public financing and regulation—principally through Medicaid—caused most of the problems with long-term care (LTC). Those problems include dubious access and quality, nursing home bias, too little home- and community-based care, inadequate provider revenue, reduced private financing from insurance, savings or home equity, caregiver shortages, excessive emotional and financial strain on family caregivers, and systemic racism. Ignoring this causal connection between Medicaid and LTC’s problems, many analysts recommend increasing the government’s role, including by means of a new compulsory payroll-financed social insurance program. But adding even more of the government funding and regulation that caused LTC’s problems would only make these problems worse.

The main components of a better solution are already in place. Personal, not public, responsibility for LTC is deeply rooted in American values, statutes, and policy. Medicaid is the largest LTC payor, but it is not a social insurance program like Medicare. Employees and employers do not contribute a payroll tax to finance it. Medicaid, rather, was intended as the payor of last resort for people who cannot live independently without LTC services and supports but lack sufficient personal funds to purchase them. For decades, federal policymakers of both parties tried to ensure that scarce Medicaid LTC resources went solely to the needy. They failed, leaving Medicaid, including state and federal budgets, financially overwhelmed and most people, regardless of their economic condition, using public assistance if they incur catastrophic LTC costs. The proper goal of public policy remains to target Medicaid benefits to the truly needy and to divert middle-class and affluent people to private financing alternatives. Achieving that goal would deliver a higher quality LTC system that meets patients’ needs and improves care both for those able to pay and for those who need a safety net. The key question remains: How can policymakers reconfigure LTC financing policy to ensure that scarce public resources reach only those most in need?

Congress should remove Medicaid as an end-of-life, wealth-preserving, fail-safe for the middle class and affluent. Medicaid should not reward people who neglect to plan responsibly for LTC by both paying for services and providing asset protection. New public policy should incentivize early planning for LTC that employs private wealth, including savings, home equity, life insurance, and a revitalized private LTC insurance market. Recent research documents lower risk of severe LTC expenses and indicates that consumers have more funds available to pay privately for LTC than previously believed. These facts suggest a way to revitalize the senior living market financially to the benefit of LTC consumers and providers alike. With more private LTC financing, fewer people will become dependent on Medicaid. Medicaid can then become a better payer of last resort than it is now. This paper explains how and why this new approach is plausible, practical, and preferable given current demographic and financial conditions.