Long-Term Cure for Health Care
Matthews, Merrill, Jr., Insight on the News
Gaining control of exploding federal expenditures for health care was one of the driving factors behind President Clinton's unsuccessful push for national health care reform. Ironically, the explosion is, in large part, a direct result of the perverse incentives in the health care marketplace created by the federal government. An example? Just look at long-term care.
Long-term care is the name given to that care delivered to those, primarily the elderly, who reside in nursing homes or receive home health care. About 43 percent of people who turn 65 can expect to spend some time in a nursing home at an annual cost of about $25,000 to $50,000. In 1992, Medicaid paid about 47 percent of these costs, while individuals paid about 43 percent out-of-pocket. Only about 1 percent was covered by private insurance.
Medicaid expenditures for long-term care have been increasing by about 15 percent annually since 1990, which partly explains why Medicaid spending is out of control. From a total Medicaid budget of $132 billion in 1993, nearly $42 billion -- almost one-third of the budget -- went to long-term care. Solving the long-term care problem won't solve all of Medicaid's problems, but it certainly would help.
Yet Washington seems dead set against it. Long-term care is one of those classic examples of the axiom whatever you tax you get less of, and "whatever you subsidize you get more of." What Washington is taxing and what it is subsidizing with regard to long-term care is just the reverse of what it should be doing.
Though the elderly population has more assets than any other segment of the population, nearly half of those entering a nursing home receive Medicaid assistance. Many people either "spend down" or hide their assets to qualify for the means-tested program knowing their stay in the nursing home will be subsidized by the federal government if they become "poor."
There is a private market for long-term care insurance, which covers nursing home care and home- and community-based care. But very few people purchase it, in part because it is a relatively new product (developed in the early 1980s) but also because most people who do not receive employer-provided health insurance forgo purchasing it privately -- there is no special tax break. …