LTC Bullet: Long-Term Care and the Social Compact

Friday, April 21, 2023

Seattle—

LTC Comment: When governments promise their citizens less risk through pay-as-you-go entitlement programs, they reduce the public’s sense of personal responsibility leaving people unprotected by either public programs or private savings when their ability to tax and borrow runs out. More after the ***news.***

*** AS THE CENTER FOR LONG-TERM CARE REFORM, founded April 1, 1998, begins its second quarter century we seek your support for our pursuit of public policy aimed to improve long-term care financing and service delivery in the United States. Over the years, we’ve had some success influencing federal policy (OBRA ’93 and DRA ’05) but much more remains to be done. Ask about those laws and our role in passing them. In the meantime, we’ve published dozens of state and federal level studies here; authored scores of articles here; delivered speeches all across the country for decades here; published to date 1,354 LTC Bullets (our now bi-weekly op-ed like columns, archived by date and topic here; and we’ve sent thousands of daily LTC Clippings to keep our members apprised of new events, reports, developments and potential professional vulnerabilities so they are ready for anything prospects or clients may hit them with. Most recently we are working with the Paragon Health Institute to clarify the long-term care problem (Long-Term Care: The Problem) so we can present a radically new, market-based approach to solve it (Long-Term Care: The Solution, due this fall.) Won’t you help us keep this noble mission vibrant and successful? To join the Center, support our efforts, become part of our team, and receive the benefits of membership, contact Damon at 206-283-7036 or Damon@centerltc.com. Or join and contribute online here. Thank you for your time and consideration. Let’s do this! ***

LTC BULLET: LONG-TERM CARE AND THE SOCIAL COMPACT

LTC Comment: America and Americans have strayed from the binding principles—balancing personal freedom and individual responsibility—that made the country great. No social issue illustrates this problem better than long-term care (LTC).

To need LTC is a high risk: seventy percent of people who reach age 65 will eventually develop severe need. Forty-eight percent will receive paid care averaging $138,000. Among those who need paid care, about half will require less than a year, and a little more than 10 percent will need five years or more at an average cost of $266,000.

Thus, LTC represents a high probability of significant cost, but a relatively small risk of ruinously high expense. That is precisely the condition for which private insurance is best suited. That is, to replace the small risk of catastrophic loss with the certainty of an affordable premium.

Yet, most people do not buy private insurance for LTC risk. Why?

Since its founding in 1965, Medicaid has paid for most catastrophically high LTC costs. Although it is ostensibly a means-tested public assistance program, Medicaid’s financial eligibility rules allow its LTC benefits recipients to retain substantial exempt assets and to have high incomes as long as their personal health and LTC expenses were comparably high.

By offsetting the public’s catastrophic LTC risk, Medicaid desensitized consumers to the need to plan, save, invest or insure when they were still young, healthy and affluent enough to do so. This “moral hazard” left most aging Americans, including the Greatest Generation, unprotected for LTC risk and dependent on Medicaid nursing home care.

As the dominant LTC funder, Medicaid paid too little to ensure access to quality care, created “institutional bias” by paying only for nursing homes, caused caregiver shortages due to low wages, crowded out private financing from insurance or home equity conversion, and left too great a direct caregiving burden on financially and emotionally stressed friends and families.

In other words, by attempting to solve the problem of financing LTC, Medicaid had the opposite effect of reducing the public’s perception of the risk resulting in too many people in need of LTC dependent on public welfare and too few prepared to pay privately for the type, quality and venue of care they prefer.

That is how Medicaid LTC violated the social compact. Instead of protecting their freedom to take care of themselves, Medicaid undercut their sense of personal responsibility leaving them dependent on a public welfare program unable to meet their needs.

LTC is only one example. Social Security and Medicare are two more programs that told citizens they are protected for income and health security in old age, but are now facing massive unfunded liabilities and the high probability of insolvency in the short term.

Government promises should never replace personal freedom and individual responsibility.

For full development of this argument and its conclusion, including citations to scholarly sources, read How to Fix Long-Term Care Financing (2017), Medicaid and Long-Term Care (2020), and Long-Term Care: The Problem (2022). Expect Long-Term Care: The Solution this fall.