For years, federal and state governments have shied away from the problem of providing long-term care for ailing seniors – and for good reason.
While mounting costs of Social Security, prescription drugs and federal health care programs get a lot of attention, the staggering costs of providing community based social services and nursing home facilities and in-home care to seniors are draining the savings of average Americans and posing frightening long-term fiscal challenges for government officials.
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“Responsibility for long-term service support is shared among seniors and people with disabilities themselves, family, friends, and volunteer care-givers; communities, state, and federal government,” Alice Rivlin, the former Congressional Budget Office Director and an expert on long-term elder care, testified recently before a House committee. “This shared-responsibility system is severely stressed, and will become increasingly unable to cope as the numbers needing care increase.”
Moreover, the rapid growth in this spending is forcing policy makers to make tough budget choices between Medicaid and other spending for the elderly and education and other investments in young people, Rivlin added.
Any way you look at it, the budgetary challenges are daunting:
About 12 million older Americans are currently in need of long-term services and support and about 70 percent of people 65 and older will need the intense care at some point in their lives, according to studies. Many of these people have trouble performing routine activities on a daily basis, such as bathing and dressing, managing their medication and cleaning their homes, apartments or assisted living quarters.
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Regardless of setting, the cost of services can be significant – and prohibitive for many state and federal policymakers.
In 2014, for instance, the average annual cost for a home health aide was about $45,800, according to a study by the Bipartisan Policy Center. The cost for community-based adult day-care centers was on average $16,900 per year. And the average annual cost to live in a nursing facility was roughly $87,600.
The year before, the nation spent about $310 billion to compensate long-term care providers, with Medicaid providing about $123 billion of that total.
From a more global perspective, spending on long-term care for seniors by the federal government, states, families and individuals for those 65 and older will increase from 1.3 percent of the Gross Domestic Product in 2010 to three percent of GDP in 2050, according to the Congressional Budget Office. While some private health insurers provide long-term care policies to meet those future costs, the premiums are often astronomical and out of the grasp of middle income and even wealthier families.
There are other more human dimensions to this story. Many seniors are receiving unpaid care from family members and friends, who often must take time off from work or leave their jobs altogether to provide long-term care to a friend or loved one. Besides the physical toll that providing care to the elderly can take on family members or friends, they often have to dip into their own savings and retirement accounts to cover living expenses.
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“Growing burdens fall on families, often daughters and daughters-in-law, who must manage daily conflicts between earning a living, caring for children, and meeting the needs of elderly or disabled relatives,” Rivlin said.
And while there is only sketchy data about the cost of the unpaid care, one estimate pegs the total economic value of the unpaid caregiving at about $470 billion a year.
There have been many efforts the federal and state level to address the growing cost of long-term services and support (LTSS)– especially with more and more baby boomers retiring and living longer.
Perhaps the most notable effort was the Community Living Assistance Services and Supports Act, sponsored by the late Sen. Edward M. Kennedy (D-MA) to provide a long-term care insurance option for workers as part of the 2010 Affordable Care Act. That provision would have created a national insurance trust of sorts with daily cash benefits about $50 to $75 a day, depending on the level of disability.
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However, Republican congressional leaders howled that the insurance provision was tantamount to another costly entitlement program, like Medicare or Medicaid, and they convinced President Obama that the program was unworkable. Congress repealed Kennedy’s measure in January 2013.
Then in September 2013, a 15-member bipartisan commission created by Congress to address the surging need for long-term health care released a series of recommendations. However, the proposals were relatively modest and fell well short of a new national insurance plan that Kennedy had envisioned. Moreover, the commission members couldn’t agree on how to pay for even the far less ambitious proposals. The recommendations were ultimately shelved.
“Recently, however, a growing consensus has emerged around a set of incremental steps, which, if taken together could greatly improve the availability and affordability of long-term services and supports to America’s most vulnerable populations and take some of the burden off families and Medicaid in a fiscally responsible way,” Rivlin said during her testimony before the House Energy and Commerce Subcommittee on Health.
Among the proposals, developed by Rivlin and other members of a Bipartisan Policy Center taskforce, are the following:
- Increasing available and affordable private long-term care insurance. Sales of private policies have faltered largely because of increased consumer costs and risks for insurers. Policymakers must act to financially prop up and stabilize this marketplace and make it more “accessible to more Americans. The problem now is that insurance carriers find it difficult to price a product that will be used far in the future and they fear losing money if customers live and use services for a long time. Meanwhile, consumers are reluctant to pay huge premiums for services way in the future that they might not ultimate need -- or live long enough to claim.
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- Establishing a lower-cost, limited-benefit product called “retirement LTCI,” for roughly half of Americans aged 65 and over who will experience a high level of need. This product would be less risky for carriers. It would cover long-term care for a limited period of two to four years, with a substantial deductible and waiting period before benefits could be claimed. The new policies would provide inflation protection, which would help to guarantee that benefits keep pace with the rising costs of care.
- Designing a federal long-term care insurance option for those with “catastrophic” costs. One of the biggest challenges for carriers is trying to predict coverage costs far in the future, especially when some policyholders will end up having extremely large costs for a long period. A government-backed program designed to cover truly catastrophic long-term care spending might overcome insurers’ reluctance and reduce the cost of private long-term care coverage.
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- Streamlining Medicaid home and community-based care options to encourage more effective care in lower-cost settings. Congress has been aggressive in encouraging state Medicaid programs to shift the settings for care from institutions to home and community-based facilities. However, many states continue to face a complex and time-consuming federal waiver process and multiple state options. “Home and community-based options should be simplified into a single streamlined state plan amendment process,” according to Rivlin.
