Introduction to Public Sector Strategies
The role of the public sector in financing long-term care in the United States urgently needs reexamination. One reason is that public sector spending for long-term care is already large and likely to expand rapidly as the population demanding long-term care and eligible for medicaid increases. According to our model projections, if no substantial changes are made in current policies, medicaid spending will triple in real terms by 2016-20.
While the income and assets of the elderly will grow over the next several decades, the cost of long-term care is expected to grow even faster. Hence the proportion of bills paid by medicaid is projected to increase. The percent of nursing home expenses paid by medicaid is estimated to rise in the base case from about 43 percent in 1986-90 to 47 percent by 2016-20. 1
Although a substantial potential market exists for private financing mechanisms, especially private long-term care insurance, the growth of private financing is unlikely to reduce the growth of public spending appreciably. Even with favorable assumptions about who would buy insurance or participate in other private financing schemes, medicaid spending will continue to grow rapidly. Lower- and lower-middle- income people simply cannot afford to finance long-term care without some public contribution.
Moreover, more direct methods of holding down medicaid spending--putting a cap on medicaid, converting the program to block grants to contain future spending, or increasing the legal responsibilities