The next few years are going to determine how you will spend the most vulnerable years of your life, and who’s going to pay for it. Pandemic excluded, the odds that you’ll live to an advanced old age have increased. But living longer doesn’t necessarily mean better quality of life. More than 40% of Americans over age 85 have Alzheimer’s disease and 70% of 65-year-olds are projected to need long-term care at some point.
The sad reality is that as people live longer, many will need long-term care. The pandemic exposed the poor quality of many care facilities, making it all the more clear that the status quo isn’t sustainable. All developed countries are grappling with aging populations that will force them to decide how best to manage and finance the care of their elderly. The U.S. Congress is debating the question now as it grapples with President Joe Biden’s spending plan.
Will it be the federal government assuming responsibility for universal care? State governments doling it out to the most needy? Or will families retain more control through wider access to private market insurance?
In the U.K., Prime Minister Boris Johnson has proposed a major overhaul to the country’s social care system financed with a 1.25% tax increase on Britons. The tax increase is getting pushback, but at least it’s an honest acknowledgement of the costs involved and that everyone will need to pay.
In the U.S., long-term care—by which I mean non-medical care for individuals living with disabling conditions—isn’t covered by Medicare. It’s designed as a last resort for impoverished retirees provided through each state’s Medicaid program. Since long-term care is expensive and most people don’t have private long-term-care insurance, Medicaid shoulders more than 50% of the costs of caring for America’s disabled and elderly; private insurance covers just 11%.
To qualify for Medicaid, beneficiaries must prove they don’t have enough wealth to pay for care themselves. This creates an incentive for middle-class retirees to spend or give away their assets so they don’t exceed state limits. According to one study between 1998 to 2008, almost 10% of retirees had to do this to gain Medicaid coverage.
Most of that care is through institutions such as nursing homes. Even if a family prefers home care, there are few options, and long wait lists for home health services.
Biden’s original Build Back Better plan offered a solution to this problem. It included $400 billion to expand access to home health workers through state Medicaid programs. The money would be well spent on long-term care, as that will help the most vulnerable and needy members of society who are falling through the cracks of Medicaid.
It’s certainly a better use of government money than other provisions in the budget that mostly benefit the upper middle class, like reinstating state and local tax deductions for income taxes, or endless subsidies for electric cars. But the provision already is getting pared back as lawmakers balance competing interests in the reconciliation process.
Even if it passed in full, the extra money is only a stopgap solution. Expanding Medicaid programs isn’t entirely bad, but it also gives states an incentive to loosen the asset requirements for qualification, drawing more people into the program and raising reliance on Medicaid when the opposite should be happening. It’s another step toward crowding out an already thin and expensive private insurance market that would otherwise be a viable option for many middle class Americans who’d prefer private insurance.