WASHINGTON, June 22 (UPI) -- The cost of providing long-term care already takes a big chunk out of Medicaid budgets and many states could find it unsustainable, health policy experts warn, if the 76 million baby boomers do not do a better job saving money to help pay for their own nursing home, assisted living or at-home care.
Government statistics show four out of 10 people who reach age 65 will at some point need long-term care and the average cost of one year in a nursing home is about $60,000.
"This often ruinous expense comes as a surprise to many seniors who mistakenly believe nursing home care is covered under Medicare," Sen. Larry Craig, chairman of the Senate Special Committee on Aging said during a hearing on long-term care Tuesday.
Seniors are spending down their assets and savings - or finding financial wizards who can legally shield that money for them -- so they qualify for Medicaid.
Long-term care costs are expected to be $135 billion in 2004, rising to $260 billion by 2025, at which time the government's share through Medicaid is expected to be $83 billion, said Michael O'Grady, assistant secretary of planning and evaluation at the Department of Health and Human Services.
He testified there is a "compelling need to focus scarce Medicaid dollars on those who need it the most."
Medicaid currently pays for about 35 percent of long-term care services, with self-pay at 33 percent and Medicare 25 percent. Private insurance and other sources together make up only 7 percent, O'Grady told committee members. He added if baby boomers can help finance their own long-term care, it would "greatly reduce the possibility of a crushing financial burden on their children and grandchildren."
Raymond Scheppach, executive director of the National Governors Association, said Medicaid's spending growth to accommodate long-term care and other health needs of the indigent is "biasing state budget decisions" so that Medicaid is "winning the contest for state dollars."
At a time when the nation also wants to focus on education, that means Medicaid spending accounts for about 21 percent of state budgets, with growth at 11 percent per year, compared to spending growth on secondary and higher education at about 3 percent.
"Medicaid is trumping education in state budgets," Scheppach said and predicted in the next few years Medicaid spending growth will remain at the 8 percent to 10 percent level while education will see spending growth of 2 percent to 4 percent.
The Bush administration is backing legislation by Craig, R-Idaho, Sen. Evan Bayh, D-Ind., and Sen. George Allen, R-Va., called the Long-Term Care Partnership Program Act of 2004. It's based on the Partnership for Long-Term Care program, which the Robert Wood Johnson Foundation helped develop. There are partnership programs in four states designed to help people use long-term care insurance to delay or prevent their reliance on Medicaid.
The legislation would allow people to buy long-term health insurance, which they would access when they need care. If plan benefits are used up, people qualify for Medicaid without first spending down all of their assets to become impoverished.
Such partnerships first were approved in 1987 and 12 states started planning. Language in the Omnibus Budget Reconciliation Act of 1993 effectively stopped the program but not before four states -- California, Connecticut, Indiana and New York -- got programs up and running.
"It provides us with critical assistance to manage the Medicaid budget," testified Melanie Bella, assistant secretary for Indiana's Family and Social Services.
Mark Meiners, national program director for the University of Maryland Center on Aging in College Park, said estimates are that by 2020 such public-private partnerships could result in a 7 percent savings for Medicaid along with encouraging baby boomers to purchase long-term care insurance to have more control over their future.
Indiana's program has two ways people can protect their assets from Medicaid: total coverage that protects all assets and a policy that protects assets up to the dollar value of the policy purchased.
That very foundation -- protecting assets from Medicaid -- is also one of the program's biggest areas of criticism and concern.
"We need to look at a variety of ways to encourage people to plan for their future," said Sen. Herb Kohl, D-Wis. "It's clear that partnerships could be one part of the solution to long-term care."
He cautioned, however, the programs must be scrutinized to ensure the wealthy don't take unfair advantage in shielding assets.
O'Grady said the partnership program focuses on moderate income people making $40,000 to $50,000 per year. The very low income actually do fall under Medicaid, he said, and are not holding the type of assets Kohl talked about. He added higher income people will self fund so the target is the moderate income worker -- that's where Medicaid spending spikes in terms of long-term care by income demographic.
The four states already engaged in partnership programs also provide Congress with the unusual advantage of seeing how a program works before actually passing legislation to allow it.
In Indiana, for example, of 26,000 people who have an active partnership policy, 187 have used the benefit at any time, 52 of those died and of the rest -- only 13 have exhausted benefits and moved into the Medicaid asset protection phase. For all four states, only 86 policy holders total have exhausted long-term care benefits and moved to Medicaid asset sheltering.
Legislation also is being proposed to allow purchasers of long-term care insurance to deduct at least some of the premiums -- which Indiana allows policy holders to do for state tax purposes.
Extending partnership programs nationwide also would make them more attractive to baby boomers who do not know where they are going to live when their retire.
Craig said 16 states have passed a joint memorial asking Congress to allow other states to begin partnership programs. President Bush has included it in his budget request to Congress.
Long-term care partnerships are just one part of Medicaid reform, experts and members of Congress agree, but it is a first step in what many on Capitol Hill had promised, following passage of Medicare reform, would be a major effort to deal with the entitlement program. Medicaid this year is to become the largest health entitlement in the United States -- with about $304 billion in spending expected -- for the first time passing Medicare.
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Ellen Beck is UPI's Health Policy Editor. E-mail [email protected]
