More than 70 percent of the informal caregivers of long-term care in the United States are women.What is long-term care?
Long-term care encompasses a wide range of medical, personal and social services to assist people who are unable to care for themselves. These services include assistance for personal tasks, such as eating and bathing, as well as broader social services, such as shopping and managing money.
What's the problem?
The delivery and financing of long-term care in the United States is uncoordinated and fragmented. People must use up their life savings to pay for services before they are eligible for any public assistance. As a result, many Americans are left destitute and dependent on welfare programs. Reforms to the long-term care system seek to protect people against this financial devastation and loss of security that can follow from unexpected long-term care costs.
How do we pay for long-term care now?
Most long-term care is provided at home by unpaid family members and friends. Providing this care can be emotionally and financially difficult, forcing families to make extraordinary sacrifices to meet the needs of a family member. In addition, almost half (45 percent) of all the money spent on paid long-term care came from private sources.
Public assistance for long-term care is piecemeal and unstructured. Medicare, the public insurance program for the elderly and the disabled, does not cover nursing home costs and provides only limited support for home and community-based services. The majority of public funding for long-term care is provided by Medicaid, a public health program for the poor, which covers only the costs of nursing home care.
The reliance on Medicaid for public financing of long-term care encourages the use of institutional care rather than community-based and home health care services, which most long-term care recipients prefer. More significantly, Medicaid is only available to the poor, forcing individuals to use up all of their own resources before they are eligible for any public financial assistance.
What's in store for the future?
As the baby boom generation ages, the number of Americans aged 65 and older will more than double - from 31 million in 1989 to more than 68 million by 2050. More importantly, the number of Americans over the age of 85, the group with the highest disability rates, could account for up to 25 percent of the elderly population by 2050.
In addition, a decrease in birth rates over the. past 30 years means that in the future there will be fewer people to provide the informal care that today's elderly Americans rely on. The result will be a ballooning of public and private spending to meet the long-term care needs of our population.
Can private insurance help?
Private insurance for long-term care covered only 3 percent of the elderly in 1991. A major factor behind this low number is the cost of long-term care policies. The Health Insurance Association of America reports that the best policies have average annual premiums of $658 if purchased at age 50, $1,395 if purchased at age 65, with premiums rising to as much as $4,199 if purchased at age 79.
In addition, because 20 years could pass between the time someone buys coverage and the time they use it, insurers have been wary about issuing too many policies that would expose them to uncertain and potentially large financial liabilities. Moreover, to protect themselves, insurers typically limit the benefits of long-term care policies, leaving policy holders responsible for considerable portions of their care.
In an effort to expand the use of private insurance for long-term care, policy makers are considering ways to reduce the cost for consumers as well as the financial risk to insurers of long-term care policies. Nonetheless, experts anticipate that even with reform, long-term care insurance will remain affordable to only a limited number of Americans.
Should Medicaid play a larger role?
Medicaid now acts as a safety net for those without the financial means or family support for their long-term health care needs. Sonic policy makers have proposed expanding Medicaid to cover more people and pay for additional long-term care services. Possible changes include: expanding the services covered by Medicaid to include more home health care services.; increasing the assets that individuals can retain and still be eligible for Medicaid; and increasing the amount paid by Medicaid for long-term care services.
But opponents of an expanded Medicaid system for long-term care point out that a welfare-based system carries a stigma for recipients. Moreover, this approach could exacerbate a two-tiered system of services - higher paying private patients versus Medicaid recipients - affecting issues of quality and access.
What does "back-end" versus "front-end" reform mean?
Creating a social insurance program, like Medicare, where all Americans pay into the program and everybody is guaranteed long-term care protection without first depleting their own financial resources, is another option for our long-tern care system. This approach recognizes that the need for long-term care is a natural risk of growing old and spreads the costs of this risk among everyone, rather than putting it solely on the shoulders of those who require care. The terms "back-end" and "front-end" refer to the different types of coverage available under such a strategy.
A "back-end" approach to coverage provides government assistance after individuals have paid for some of their long-term needs themselves. Most of the costs of home health care services would be covered, but coverage for nursing home costs would be available only for stays that last longer than two years. The goal is to encourage private insurance to cover shorter stays and make public resources available for the truly catastrophic costs of long stays in a nursing home - hence the term "back-end." However, if the insurance market does not respond with affordable policies covering needed services, many people could still face out-of-pocket costs of up to $60,000 before becoming eligible for government benefits.
Alternatively, a "front-end" approach would help people with the initial costs of long-term care. A "front-end" strategy would cover the costs of home health care services and the initial three to six months of a nursing home visit. Since more than half of nursing home residents stay less than six months, this approach would cover most nursing home patients. However, people with long nursing home stays would still face potentially catastrophic costs.
A final option would provide comprehensive publicly financed long-term care coverage. All nursing home and home care services would be covered. While this approach is appealing for its broad range of covered services, it also carries the highest price tag for taxpayers.
How much will it cost to improve the long-term care system?
Experts estimate that Medicaid expansion could cost taxpayers at least $4 billion a year. A program that would make all Americans eligible for protection without first spending all of their own Financial resources could range between $26-52 billion a year.
Whatever the choice, the solution will not be easy or inexpensive. But without reform, the problems of our current system of financing and delivering long-term care will become even more acute. It is important that citizens participate in this debate to assure that reforms meet their needs. Keep informed and let your elected representative know that the problems of our long-term care system are serious and need their attention.
Jennifer A. Baratz
February 1993
April 1993
Presidents Message [Crossroads] (Arlene Ellis)