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Should Long-Term Care Be an Entitlement?

Philip Moeller

The elderly have always needed help in their later years. It has come mainly from family members, and this continues to be the case. But today's family is far smaller and more likely to be geographically scattered than in the past. These trends are expected to become more pronounced. Add in rising numbers of older Americans and the outlook is for a nation increasingly unable to have the time or money to take care of its older citizens.

Obamacare recognized this problem. Led by efforts of the late Sen. Ted Kennedy, the law included an employer-based long-term care insurance program. Employees would have paid the premiums and the level of coverage was modest. But it would have added a layer of protection that does not exist for most people.

To get votes to pass the program, however, it was approved as a voluntary benefit and not as coverage everyone had to get. This universal aspect of insurance is crucial to health care reform. If only sicker people had to get health insurance, their costs would be very high. Healthy people would not feel the need to buy it and would not offset the expenses incurred by those most likely to use the product.

This problem, which carries the label of "adverse selection," is what plagued the new long-term care insurance program. It never got out of the gate--literally--and was abandoned by the Obama Administration as unworkable. To throw supporters a bone, a long-term care commission was created to develop recommendations. It has no budget or staff, which should tell you something about the lofty priority this topic enjoys.

[Read: The Financial Risks of Getting Older.]

One of the reasons for the low status of this subject is that providing long-term care can be very expensive. There isn't nearly enough money as it is for Medicare and Medicaid. And the latter program is already poised for an enormous expansion under health care reform. Affording a new type of health care benefit seems out of the question. The problem with this pragmatic view, however, is that the nation's bill for long-term care can't be swept under the rug or viewed as a private matter for families to manage the best they can.

Bruce Chernof is one of the 15 people appointed to the new commission, which has yet to meet. He is also the head of the SCAN Foundation in California, which funds research on aging and healthcare. SCAN has backed a series of eight research papers looking at long-term care. To say they provide a sobering read is an understatement.

The annual price tag for long-term care is now about $725 billion a year. More than 60 percent of that total, or $450 billion, takes the form of unpaid family care. But if you talk to anyone who has to provide care for an aging parent, it's all too apparent that the costs are real and so are the financial and emotional pressures that go with them.

And this still leaves a spending tab of nearly $275 billion real dollars each year. Roughly $200 billion of this comes from government programs, principally Medicaid. Families pay about $70 billion out of pocket--$63 billion in direct spending and $7 billion for private long-term care insurance premiums.

"The current private long-term care insurance market is effectively broken," one of the SCAN reports says. "Reasons for lack of uptake are many: lack of public understanding and interest, high monthly premiums, and underwriting standards that make it difficult for individuals to qualify for coverage."

Under current policies, Medicaid is the only mechanism available to handle the steep projected increase in care costs. It provides care mostly in nursing homes and other institutional settings, and only after patients have spent down much, if not all, of their wealth. Even as the provider of last resort, however, Medicaid is not equipped to fund what amounts to a blank check on future care costs.

[Read: Do You Have a Retirement Gap?]

Perhaps even more troubling than the magnitude of this quite predictable problem is that it is not recognized. "We really need to change public thinking and awareness on this issue," Chernof says. He cites a common shorthand for public thinking about long-term care, which he calls the "70-70-70" problem:

-- 70 percent of the people over age 65 will need some of long-term care during their remaining lives.

-- 70 percent of the public does not believe they will ever need such care.

-- 70 percent of the public thinks that if they did need such care, it is already covered by their Medicare insurance. Medicare covers only acute short-term care needs, not long-term care.

"This remains one of the primary problems today," he explains. "We have to develop ways to get people educated." And the best solution, he argues, is to create educational efforts linked to positive outcomes, not scary stories about being parked and forgotten in an underfunded nursing home.

"That scary model is what most people have in their mind," Chernof says, even though long-term care has long been moving toward being provided in home and community-based programs. "We need to develop this notion of aging with choice, dignity and independence, and that can move us off the old views."

Congress must be informed as well as the public. "While some politicians want to separate the discussions of entitlement reform and [long-term care] financing reform," one of the SCAN papers says, "the issues and their impact on government and personal spending are inextricably linked."

[See: States Where People Live the Longest.]

Any deeper look at Medicare and Medicaid spending quickly shows that much of their outlays are linked with long-term care needs for an aging society.

SCAN's white paper says we have five years to fashion workable solutions before the tide of baby boomers triggers what will amount to a finger-in-the-dike solution. "Without real policy solutions in place over the next three to five years," it says, "any future policy efforts to address [long-term care] needs, particularly with our aging population, would be focused on triaging the large holes created in Medicaid, Medicare, and personal savings rather than on planning for the growing demand for [long-term care]."

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