It’s a vicious cycle. When fewer people buy long-term-care insurance, those who do tend to be in need of the most expensive care, which makes the insurance even more expensive and excludes more buyers.
There is an argument to be made that long-term care should be provided by our government universally. But as the population ages, our taxes will need to cover more people with expensive needs, especially if more people get care at home. Unless we devote substantial resources (and forgo investment in other parts of the economy), there will still be wait lists and people shuttled into poor-quality institutions. Before we go all in on government provided care, ask yourself if you want to spend your most vulnerable years at a government-run institution, or burdening your children as you languish on a wait list.
The pandemic exposed the need for developed countries to address long-term care in an urgent time frame. Even if the current budget provisions pass, it expands an entitlement that will only get more expensive. It doesn’t solve the root of the problem: an overreliance on Medicaid for long-term care.
If Medicaid is expanded, it should be accompanied by more stringent asset limits as part of larger reform. This would keep Medicaid for what it was meant to be: help for the neediest.
For everyone else, long-term-care insurance needs to become a viable option. There is an incentive to buy private insurance because it offers better care and gives families more choices. But most people don’t buy it because it’s so expensive. Premiums are high because of Medicaid. But they also reflect that long-term care is inherently expensive for companies to insure because many people who buy insurance will need it. The market could be improved by pairing long-term care with life insurance or reverse mortgages and making all premiums tax deductible.
Long-term care will only become a bigger expense for many families. If the government tries to turn this incrementally into a universal benefit through Medicaid, it will be expensive and lead to worse options for the people who need care. Instead we must reform Medicaid, give it adequate funding and grow the private market.
Allison Schrager is a Bloomberg Opinion columnist. She is a senior fellow at the Manhattan Institute and author of An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk. She is also a Bloomberg Opinion columnist.