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Disabled Americans Facing Ruinous Costs of Long-Term Care Got No New Answers from a Blue-Ribbon Federal Commission Last Week. Where Do We Go from Here?

An oversized chair and an oversized hospital bed in the children's and women's maternity ward at the University of Alabama Hospital.

When medical tragedy strikes—a disabling stroke, progressive senile dementia, Huntington’s disease, and other catastrophic but not immediately fatal conditions—many young people and seniors mistakenly believe that long-term care costs, such as home-based health care or a nursing home, will be covered by Medicare or other insurance. Unfortunately, after exhausting short-term “post acute” care benefits (typically lasting 1-2 months), such disabled individuals are on their own.

The costs are ruinous to most of the 11 million Americans getting long term care, of whom roughly half are under 65 years old. According to this AARP estimator, for example, two years of nursing home care in the Washington DC area runs almost $200,000, and a full time home health aid would require $80,000.

How do people pay for it? A lucky few have the savings to pay out of pocket or are some of the 3 percent of people who can afford long term care insurance. But most everyone burns through their savings, goes broke, and ends up qualifying for Medicaid—a process euphemistically called “spending down.” At that point, Medicaid kicks in the money and as a result, today pays roughly two-thirds of all long-term care costs totaling over $200 billion yearly. This is a huge cost—almost four times the annual cost of Medicare’s prescription drug benefit.

This seems like an ideal object of a more robust private insurance market; however, this business is a loser for many insurers so many have headed for the exits. The Wall Street Journal reported that 5 of the 10 largest policy sellers have stopped selling policies since 2010, and the escalating premiums have led only 7 million American to maintain insurance. The number of insured is stagnant. Even for those with policies, benefits are regularly cut back and premiums continue to skyrocket.

This problem isn’t new. In 1988, Ronald Reagan and a Democratic Congress passed a tax to pay for long term care, but it was repealed within months. With the passage of the Affordable Care Act in 2010, a provision known as the CLASS Act allowed anyone to buy coverage (so-called “guaranteed issue”), at costs as low as $5 per month to reap $18,000 per year in benefits if needed. The program would be a go as long as it was projected to be self-sustaining for 75 years. Unfortunately, the numbers didn’t add up and the program was killed in 2011.

After the CLASS Act was decertified, a 15-member blue ribbon group, the Commission on Long-Term Care, was created to find solutions as part of the fiscal cliff deal and given 100 days to deliver answers after their first meeting. Their report was released last week, and depressingly, was endorsed by only two-thirds of the committee members. There was no consensus on how to finance the long-term care system.

This is understandable—there just is no easy way in which the massive costs of long-term care can be conjured. Ultimately, for now, Americans needing long-term care are left without further help.

Where does that leave us?

There are still many ideas worth exploring. First, is prevention: Can we keep at risk seniors from becoming disabled in the first place? Can we provide support services to younger disabled populations to live well in the community? As a major purchaser of services, the Centers for Medicare and Medicaid (CMS) has been supporting many initiatives to test new ideas. Pilot programs targeting better care coordination for Medicare populations following hospital discharge with functional limitations, perhaps with home visitation and care coordination, are being suggested to reach the goal of reducing nursing home admission in the first place. (This approach has been proposed by Harriet Komisar and Judy Feder of Georgetown University.)

Second is delivery reform. Why should nursing home care cost up to $100,000 per year in the first place? CMS is piloting innovative care programs for dual-eligibles (those on Medicaid and Medicare) getting long-term care, and the results should be interesting. This could include greater support on trying to serve people in their homes and communities, rather than in nursing homes, for example. (This is kind if the approach buttressed by the recent Brookings report, Bending the Curve.)

Third, additional federal financing of existing long-term care obligations (that is, a shift from Medicaid to an all-federal payor such as Medicare) might enhance federal oversight and promote better cost control, as experience in the health insurance market has shown. The infrastructure is there – supported by the Administration for Community Living (ACL) which funded Aging, Disability, and Resource Centers across the country to provide key information to people needing help with LTC issues.

Finally, enhanced funding of clinical and basic research directed at the biggest drivers of long-term care (that is, physical and cognitive disabilities, stroke, arthritis, and circulatory problems) may offer high return on investments.

In the meantime, absent any policy solutions, the federal government offers this resource to individually plan for long-term care costs. And if you’re considered buying personal long-term care insurance, this debate from the Wall Street Journal might interest you.

  • Dr. Barbara J. Gage is a nationally recognized expert in Medicare post-acute and long-term care payment and quality monitoring policies. She leads the performance measurement work at the Brookings Engelberg Center for Health Reform, including efforts for the Quality Alliance Steering Committee, the Long Term Quality Alliance, and performance measurement in the ACO-related work at Brookings. Dr. Gage has directed numerous national studies for CMS and Congress, including the Development of the Continuity Assessment and Record Evaluation (CARE) a standardized set of assessment items for use in the Medicare program, and numerous CMS efforts to develop quality measures for skilled nursing facilities, inpatient rehabilitation hospitals, and long term care hospitals. Dr. Gage also directed the Post Acute Care Payment Reform Demonstration which used the standardized CARE tool to examine patient outcomes and payment incentives associated with the range of acute and PAC services across an episode of care. Additionally, Dr. Gage has lead numerous studies to develop quality of care measures and examine payments and costs for these populations. Dr. Gage has also lead national studies of Medicare’s hospice and DME benefits, ACL’s (formerly AoA) community-based long-term care systems, and numerous studies of episodes of care, including the identification of related services, quality of care and outcomes, and payment impacts. Her work includes both qualitative and quantitative methods, including interviews, surveys, primary data collection and secondary analysis of claims data, primary data from studies, and survey and certification data.

  • Darshak Sanghavi is a fellow and managing director of the Engelberg Center for Health Care Reform, leading effort to enhance clinician involvement in health care delivery system and payment reform. Sanghavi is also associate professor of pediatrics and the former chief of pediatric cardiology and at the University of Massachusetts Medical School, where he directed clinical and research programs dedicated to children's heart defects. An award-winning medical educator, he also has worked in medical settings around the world and published dozens of scientific papers on topics ranging from the molecular biology of cell death to tuberculosis transmission patterns in Peruvian slums. A frequent guest on NBC's Today and past commentator for NPR's All Things Considered, Darshak is a contributing editor to Parents magazine and Slate's health care columnist, and often writes about health care for the New York Times, Boston Globe, and Washington Post.

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