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In addition to the elderly, many of the long-term care users are younger persons with physical disabilities; persons with developmental disabilities; and persons with chronic diseases such as diabetes, emphysema, and AIDS. The increasing need for these services is creating significant budget concerns for Federal and State Governments, as well as straining family finances. Combined Medicare and Medicaid outlays have been growing dramatically. About 40 percent of long-term care costs’ are paid by the Federal/State Medicaid program. (Feder, Komisar, and Niefeld) Although the Medicare program accounts for only a small share of total expenditures, its share has been growing. Despite rising Government expenditures, out-of-pocket payments continue to be a large source of financing for long-term care. As a result, for many individuals who have chronic care needs, long-term care remains a catastrophic cost. Contemporarily, long-term care has become a topic of focus in the U.S. for several reasons. The clearest reason for its emergence is that people live longer than they used to. The population swell after the World Wars, the “baby-boom era,” along with a higher average life expectancy, thanks to advancements in modern medicine, have created a population of elderly people much larger than what the current system can now handle. Current numbers show substantial growth from the eighties, and estimates suggest that the demand for long term care among the elderly will more than double in the next thirty years. (Feder, Komisar, and Niefeld) This growth will exacerbate concerns about balancing institutional and noninstitutional care, assuring quality of care, and most importantly adopting and sustaining financing mechanisms that equitably and adequately protect the elderly who need long-term care. Medicare, the federal governments health insurance program, finances acute medical care for nearly all elderly Americans over the age of sixty-five. However, very few long-term care services are covered. Medicare finances long-term care only partially through it’s limited skilled nursing facility (SNF) and home health benefits. “Despite recent growth in spending on these benefits, much of the SNF and home-care paid for by Medicare remains short-term rehabilitative care, often related to a hospital stay or outpatient procedure. Medicare covers SNF care for up to 100 days following a hospital stay of at least three days. For homebound persons needing part-time skilled nursing care or therapy services, Medicare pays for home health care, including personal care services provided by home health aides.” (Feder, Komisar, and Niefeld) All that is not covered, the elderly are expected to cover with savings, private insurance policies, and financial support from family and friends. About 7 percent of long-term spending is financed by private insurance. This is a combination of health insurance and the relatively new long-term care insurance. Although the number of people buying private long-term care insurance is growing, as of the end of 1996 fewer than five million policies had been sold. (Coronel) The problem lies in the high premiums. Most elderly people are on a fixed income, and the cost of long-term care coverage is simply not affordable. This is where the real financial strain comes in. Next, personal savings and assistance from family and friends is expected to incur the financial burden. Out-of-pocket spending in 1998 covered about 26 percent of long-term care. (Feder, Komisar, and Niefeld). Once savings are nearly diminished, Medicaid then becomes an option. Medicaid is explicitly responsible for financing long-term care for persons with low incomes, including those who become poor as a result of spending on medical or long-term care. Federal rules entitle elderly and disabled persons to Medicaid benefits if their incomes and assets are low enough to qualify them for the federal Supplemental Security Income. Enacted in 2000, it is a cash assistance program for those with an income of no more than $532 per month, and nonhousing assets less than $2,000 for individuals. (Schneider, Fennel, and Keenan) Medicaid has become the primary source of financing long-term care, in 1998 it accounted for 40 percent of national nursing home and home-care expenditures. (Feder, Komisar, and Niefeld) Of the estimated twelve million people in the U.S. needing long-term care, about half are under the age of sixty-five. These include those with physical disabilities; persons with developmental disabilities; and persons with chronic diseases such as diabetes, emphysema, and AIDS. Medicare covers disabled persons under age sixty-five, however, only after they have received Social Security disability benefits for two years. “Only 33 percent of the home-dwelling population ages eighteen to sixty-four with long-term care needs have Medicare coverage. About half have either private health insurance (28 percent) or Medicaid (25 percent). Ten percent of the long-term care population in this age group is uninsured.” (Feder, Komisar, and Niefeld) The financial burden of a middle-income person needing long-term care is most often incurred by the person and their family. Stringent financial eligibility requirements, implemented on the state level, effectively exclude most middle-income persons from Medicaid and its essential benefits and potential pooled funding. Currently, U.S. long-term care policy has serious shortcomings, and the consequences of these shortcomings will only increase as the population of those in need of these services grows. Policymakers continue to face an array of complex policy problems regarding the balance between nursing home and home care, assurance of quality care, integrating acute and long-term care, and affordable access. Medicare and Medicaid policy resembles a fiscal tug-of-war, rather than a concerted effort to address people’s needs. Current public policy falls far short of assuring insurance protection. Meaningful insurance protection for long-term care requires far more expansive public protections than what is now available. My policy focus will involve expanding insurance to cover the cost of long-term care. “Theoretically, there is little rationale for failing to finance long-term care as we finance acute care, relying on insurance to spread its risk. Typically, we rely on insurance to deal with costs that are potentially catastrophic and unpredictable. Long-term care satisfies both criteria.” (Feder, Komisar, and Niefeld) Purchasing extensive personal care, at home as well as in nursing homes, is a catastrophic expense. Further, the probability that a given person will need long-term care is uncertain. “For example, although 39 percent at age sixty-five are likely to use some nursing home care before they die, almost half will require less than a year of care, while about a fifth will require five years or more.” (Murtaugh, 211) “It is often assumed that the need for long-term care is an inevitable part of aging and that saving is therefore the right strategy to address it. With costs so varied and unpredictable, savings will be inadequate and inefficient.” (Eckholm, 40) Insurance makes more sense. The U.S. long-term care system, however, does not provide insurance against the risk of long-term care costs. The private insurance market is small, and Medicare explicitly limits coverage for long-term care. Medicaid provides support that is critical to persons who need long-term care, but that support is available only after all other resources have been exhausted. Thus, even with Medicaid, risks are concentrated, not spread. Recently, supportive public policies, “mainly subsidies through the tax system, have given hope that the private insurance market could spread the risk of long-term care costs, thereby reaching a much larger portion of the population and greatly reducing burdens on the public sector.” (Feder, Komisar, and Niefeld) Recent estimates by the American Council of Life insurance are that private insurance could grow to finance 29 percent of nursing home costs in 2030, ten times their estimate of 3 percent today. Although private insurance seems like a viable option to address the future of long-term care, several policy issues still need to be resolved before it is widely utilized. The first issue involves reforming the market for private long-term care insurance. Current market practices make policies unavailable to those most likely to need long-term care. Benefits cover only a portion of the costs of care and are not guaranteed to keep pace with rising costs or changing practices of care. Also unaccounted for is, the possibility of unanticipated premium increases (even with policies that promise the same premium for the life of the policy). (Benjamin) These features of private insurance, which reflect insurers’ incentives to limit risk, create a barrier to risk spreading that is also apparent in the private individual health insurance market. The nation’s continued dissatisfaction with this market should generate skepticism about following a similar path for Long-term care. The second issue is one of equity. Will tax support for private insurance represent an equitable use of public resources? “It is thought that tax subsidies are far more likely to reach persons already able to purchase long-term care insurance, rather than those who cannot afford it.” (Feder, Komisar, and Niefeld) Analysis by the Congressional Budget Office seems to back this belief. However, proponents of tax subsidies for private insurance argue that the need for public investment would be even greater in the absence of support for private insurance. In practice, advocacy of subsidies for private insurance is more likely to obscure the need to strengthen direct public support. The result would be to target resources to the economically advantaged while leaving the disadvantaged at risk. A last option is expanded social insurance. This is seen as an alternative to public support for private insurance. Medicare could be expanded to include long-term care, entitling all, regardless of income to some insurance protection should they become impaired. This may sound good, but is not feasible. Despite the nation’s prosperity and underlying wealth, our willingness to redistribute resources to reflect the aging of the population seems to be highly unlikely. In conclusion, better support for the economically disadvantaged has to be a priority in future policy. Private long-term care insurance must be available to all, whether tax subsidized or federally backed; long-term care coverage must be equitably distributed. We now expect people to impoverish themselves completely before providing them assistance with long-term care, and that system seems excessively harsh. Bibliography: Word Count: 1739
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