As policymakers consider potential options to finance long-term care services and programs for the baby boom generation, Mark Merlis, of the Institute for Health Policy Solutions, explores the benefits and drawbacks of a number of private and public financing strategies. In his Commonwealth Fund-sponsored report Financing Long-Term Care in the 21st Century: The Public and Private Roles, Merlis focuses first on Medicaid, which serves as a safety net not only for the poor but also for middle-income people facing catastrophic long-term care costs.
The author notes that different states will see widely disparate increases in their elderly populations and in demand for long-term care services. One consequence, he predicts, may be pressure to federalize the Medicaid program or otherwise redistribute the long-term care burden among states.
Another option Merlis describes is pooling long-term care risks through greater reliance on private insurance. He explains, however, that most people are unlikely to buy long-term care insurance when they are younger and can most afford it, and that private coverage would not make a substantial dent in future public costs anyway. In addition, premiums do not vary by income-if growth of private coverage meant that fewer middle-income seniors relied on Medicaid, the result might be a dual system of care, with diminished quality for the population left relying on Medicaid.
An alternative, he suggests, might be a social insurance program, under which every American could make a fair contribution to a universal pool. This type of program could promote uniform quality standards and improved coordination between acute and long-term care services. One barrier to such a program, however, is cost. Given current concerns about Social Security and Medicare, policymakers might be reluctant to create another open-ended entitlement program.
Merlis suggests that a private sector role could be preserved under a system similar to Medicare, whereby beneficiaries choose between the public fee-for-service program and various private health plan options. Similar options could be made available under a social insurance system for long-term care, or Medicare plans themselves could administer the long-term care benefits. As in the current Medicare program, however, private long-term care plans under this model would not, like long-term care insurers, accumulate over time the funds ultimately used to pay benefits. Instead, they would receive government payments for furnishing and managing services.
Facts and Figures
The author notes that different states will see widely disparate increases in their elderly populations and in demand for long-term care services. One consequence, he predicts, may be pressure to federalize the Medicaid program or otherwise redistribute the long-term care burden among states.
Another option Merlis describes is pooling long-term care risks through greater reliance on private insurance. He explains, however, that most people are unlikely to buy long-term care insurance when they are younger and can most afford it, and that private coverage would not make a substantial dent in future public costs anyway. In addition, premiums do not vary by income-if growth of private coverage meant that fewer middle-income seniors relied on Medicaid, the result might be a dual system of care, with diminished quality for the population left relying on Medicaid.
An alternative, he suggests, might be a social insurance program, under which every American could make a fair contribution to a universal pool. This type of program could promote uniform quality standards and improved coordination between acute and long-term care services. One barrier to such a program, however, is cost. Given current concerns about Social Security and Medicare, policymakers might be reluctant to create another open-ended entitlement program.
Merlis suggests that a private sector role could be preserved under a system similar to Medicare, whereby beneficiaries choose between the public fee-for-service program and various private health plan options. Similar options could be made available under a social insurance system for long-term care, or Medicare plans themselves could administer the long-term care benefits. As in the current Medicare program, however, private long-term care plans under this model would not, like long-term care insurers, accumulate over time the funds ultimately used to pay benefits. Instead, they would receive government payments for furnishing and managing services.
Facts and Figures
- Approximately 80 percent of elderly people receiving long-term care live in the community. The vast majority are cared for by family members or by friends or neighbors.
- To qualify for Medicaid, the medically needy must first ""spend down"" their assets by paying for their long-term care until their assets have been reduced to the state's limit, usually $2,000.
- Thirty-six percent of people age 45 living in the community in 1995 can expect to enter a nursing home at some point in their lives.
