Did lack of $$ to pay for care have a role in these murders?

A tragic story in the January 16, 2012, issue of USA Today http://www.usatoday.com/news/nation/story/2012-01-15/ohio-woman-dies-murder-suicide/52584916/1) illustrates the extreme level of stress that family members can experience while caring for a loved one at home. 

“LOGAN, Ohio (AP) – A terminally ill woman has died days after her husband fatally shot their adult son and her two sisters in front of her at a southeastern Ohio home and then killed himself.

Authorities said the shootings last Monday in ruralLoganapparently stemmed from family tensions over the care of the cancer-stricken woman, 59-year-old Darlene Gilkey. She was not hurt in the shootings and was taken to a medical facility afterward. 

Her daughter-in-law, Heather Sowers, said Gilkey died Saturday, hours before the funeral for her 38-year-old son, Leroy Gilkey ofColumbus.”

The stress on unpaid family care givers has been documented in many studies. Stories like this cause me to wonder how much this family’s lack of finances and lack of access to respite care contributed to these murders. Don’t you think that if Ms. Gilkey owned long-term care insurance (LTCi), the care her policy would have paid for might have made a big qualitative difference for this family, and possibly averted this tragedy?

Bargaining with your child for long-term care

In a January 15 Sunday Review article in the New York Times, “Bargaining for a Child’s Love,” Hendrik Hartog stated that the image from the early 20th Century of adult children lovingly taking care of their parents during their decline has been somewhat romanticized.  Yes, the custom was for family members to provide long-term care for their parents, but since over half the US population died before age 65, the burden was often relatively brief.  But there were also either implicit or explicit bargains discussed – parents would pass on their homes and other assets to their family caregivers after their death.  These often informal promises could lead to family strife, however, after the parent’s death.  Hartog adds that “…of course what was at stake was never just an economic bargain between rational actors. Older people negotiated with the young to receive love, to be cared for with affection, not just self-interest.” 

He goes on, “Dependency and disability still confront us as facts of life. There is little happiness in the inevitable but unpredictable decline that awaits all of us. And many younger people still experience themselves as trapped by a sense of duty to care for older relatives.” 

Hartog argues that policy and bureaucratic supports such as social security, Medicare and Medicaid have softened the burden on today’s family members, but in a letter to the Editor on p. A20 in the January 19, 2012 New York Times (Caring for Elderly Parents) http://www.nytimes.com/2012/01/19/opinion/caring-for-elderly-parents.html?ref=todayspaper, Carole Levine cites dramatic statistics that many children provide long-term care for their parents with little or no assistance from government entities.  Citing Hartog’s claim “…that today middle-class family members don’t do the work of cleaning bedsheets, helping a parent into a bathtub, changing a diaper,” Levine counters that “in fact, according to the 2009 National Alliance for Caregiving national survey, this is exactly what at least 21 percent of the country’s 48 million caregivers do, as well as managing complex medications, arranging transportation, financial and legal affairs, and countless other tasks.” 

Levine correctly notes that “Most insurance, including Medicare, does not pay for this ‘custodial’ care,” and as I have pointed out many times in this blog, Medicaid provides funds only after families have depleted their own financial resources. 

Sadly, neither contributor mentioned LTCi as a wise and reasonable option that will provide funds to pay for long-term care and alleviate the family conflict and stress so accurately described.

So What If the Government Pays for Most LTC?

Thanks to my good friend and colleague Steve Moses, of the Center for Long-Term Care Reform for the following guest column. I am re-publishing his blog because it gives unusual insight and makes complicated information easy to understand.

“So What If the Government Pays for Most LTC?, 2010 Data Update”
Stephen A. Moses

Ever wonder why LTC insurance sales and market penetration are so discouraging?  Or why reverse mortgages are rarely used to pay for long-term care?  Or why LTC service providers are always struggling to survive financially and still provide quality care?  Read on.

America spent $143.1 billion on nursing facilities and Continuing Care Retirement Communities in 2010.  The percentage of these costs paid by Medicaid and Medicare has gone up over the past 40 years (from 26.8% in 1970 to 53.8% in 2010, up 27.0 % of the total) while out-of-pocket costs have declined (from 49.5% in 1970 to 28.3% in 2010, down 21.2% of the total).  Source:  http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf, Table 12.

SO WHAT?  Consumers’ liability for nursing home and CCRC costs has declined by 43% in the past four decades, while the share paid by Medicaid and Medicare has more than doubled. 

No wonder people are not as eager to buy LTC insurance as insurers would like them to be!  No wonder they don’t use home equity for LTC when Medicaid exempts most home equity.  No wonder nursing homes are struggling financially–their dependency on parsimonious government reimbursements is increasing while their more profitable private payers are disappearing. 

Unfortunately, these problems are even worse than the preceding data suggest.  Over half of the so-called “out-of-pocket” costs reported by CMS are really just contributions toward their cost of care by people already covered by Medicaid!  These are not out-of-pocket costs in terms of ASSET spend down, but rather only INCOME, most of which comes from Social Security benefits, another government program.  Thus, although Medicaid pays less than one-third the cost of nursing home care (31.5% of the dollars in 2010), it covers two-thirds of all nursing home residents.  Because people in nursing homes on Medicaid tend to be long-stayers, Medicaid pays something toward nearly 80 percent of all patient days. 

SO WHAT?  Medicaid pays in full or subsidizes almost four-fifths of all nursing home patient days.  If it pays even one dollar per month (with the rest contributed from the recipient’s income), the nursing home receives Medicaid’s dismally low reimbursement rate. 

No wonder the public is not as worried about nursing home costs as LTC insurers think they should be.  No wonder nursing homes are facing insolvency all around the United States when so much of their revenue comes from Medicaid, often at reimbursement rates less than the cost of providing the care.

Don’t be fooled by the 8.9% of nursing home costs that CMS reports as having been paid by “private health insurance” in 2010.  That category does not include private long-term care insurance.  (See category definitions here.)  No one knows how much LTC insurance pays toward nursing home care, because most LTCI policies pay beneficiaries, not nursing homes.  Thus, a large proportion of insurance payments for nursing home care gets reported as if it were “out-of-pocket” payments because private payers write the checks to the nursing home but are reimbursed by their LTC insurance policies.  This fact further inflates the out-of-pocket figure artificially.

How does all this affect assisted living facilities?  ALFs are 90% private pay and they cost an average of $41,724 per year (Source:  2011 MetLife survey at http://www.metlife.com/assets/cao/mmi/publications/studies/2011/mmi-market-survey-nursing-home-assisted-living-adult-day-services-costs.pdf).  Many people who could afford assisted living by spending down their illiquid wealth, especially home equity, choose instead to take advantage of Medicaid nursing home benefits.  Medicaid exempts one home and all contiguous property (up to $525,000 or $786,000 depending on the state), plus one business, and one automobile of unlimited value, plus many other non-countable assets, not to mention sophisticated asset sheltering and divestment techniques marketed by Medicaid planning attorneys.  Income rarely interferes with Medicaid nursing home eligibility unless such income exceeds the cost of private nursing home care. 

SO WHAT?  For most people, Medicaid nursing home benefits are easy to obtain without spending down assets significantly and Medicaid’s income contribution requirement is usually much less expensive than paying the full cost of assisted living. 

No wonder ALFs are struggling to attract enough private payers to be profitable.  No wonder people are not as eager to buy LTC insurance as insurers would like them to be.

The situation with home health care financing is very similar to nursing home financing.  According to CMS, America spent $70.2 billion on home health care in 2010.  Medicare (44.9%) and Medicaid (37.3%) paid 82.2% of this total and private insurance paid 6.4%.  Only 7.1% of home health care costs were paid out of pocket.  The remainder came from several small public and private financing sources.  Data source:  http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf, Table 4.

SO WHAT?  Only one out of every 14 dollars spent on home health care comes out of the pockets of patients and a large portion of that comes from the income (not assets) of people already on Medicaid.

No wonder the public does not feel the sense of urgency about this risk that long-term care insurers think they should

Bottom line, people only buy insurance against real financial risk.  As long as they can ignore the risk, avoid the premiums, and get government to pay for their long-term care when and if such care is needed, they will remain in “denial” about the need for LTC insurance.  As long as Medicaid and Medicare are paying for a huge proportion of all nursing home and home health care costs while out-of-pocket expenditures remain only nominal, nursing homes and home health agencies will remain starved for financial oxygen. 

The solution is simple.  Target Medicaid financing of long-term care to the needy and use the savings to fund education and tax incentives to encourage the public to plan early to be able to pay privately for long-term care.  For ideas and recommendations on how to implement this solution, see www.centerltc.com.

Note especially:

“Medi-Cal Long-Term Care:  Safety Net or Hammock?” at http://www.pacificresearch.org/docLib/20110104_LongTermCare_final(2).pdf;

“Doing LTC RIght” at http://www.centerltc.com/pubs/Doing_LTC_RIght.pdf;

“The LTC Graduate Seminar Transcript” at http://www.centerltc.com/members/LTCGradSemTranscription.pdf (requires password, contact smoses@centerltc.com);

“Aging America’s Achilles’ Heel:  Medicaid Long-Term Care” at http://www.centerltc.com/AgingAmericasAchillesHeel.pdf; and

“The Realist’s Guide to Medicaid and Long-Term Care” at http://www.centerltc.org/realistsguide.pdf.

In the Deficit Reduction Act of 2005, Congress took some small steps toward addressing these problems.  A cap was placed on Medicaid’s home equity exemption and several of the more egregious Medicaid planning abuses were ended.  But much more remains to be done.  With the Age Wave starting to crest and threatening to crash over the next two decades, we can only hope it isn’t too late already.

Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington.  The Center’s mission is to ensure quality long-term care for all Americans.  Steve Moses writes, speaks and consults throughout the United States on long-term care policy.  He is the author of the study “Aging America’s Achilles’ Heel: Medicaid Long-Term Care,” published by the Cato Institute (www.cato.org).  Learn more at www.centerltc.com or email smoses@centerltc.com.

“I don’t want to be a burden on my children.”

A recent article (“Aging and Broke, More Lean on Family,” Wall Street Journal, Dec. 31, 2011) by E.S. Browning documents a disturbing trend among boomers and their parents.  And if Americans continue to avoid responsible planning for their long-term care, boomers and their CHILDREN will be confronted with an even more pervasive problem. Increasing numbers of aging boomers will live with their children or receive financial aid from them.

Browning reported that “Thirty-nine percent of adults with parents 65 and older reported giving parents financial aid in the past year, according to a September Pew Research Center survey. Some parents may have trouble acknowledging it: 10% of parents 65 and older reported receiving aid. …In 1900, 57% of adults 65 and older lived with relatives, according to Pew Research. Because of Social Security, Medicare and improving health and wealth, that rate declined to 17% by 1990, Pew says. Now it is up to 20%.”

As the boomers continue to age, this percentage is extremely likely to increase, and the result will be growing levels of emotional, physical and financial stress among family members.  Long-term Care Insurance provides dignity and choice and helps families avoid this kind of crisis.

Medicaid outlook bleak for providers in 2012

A new report by Eljay LLC (A Report on Shortfalls in Medicaid Funding for Nursing Home Care, © 2011 Eljay, LLC. All rights reserved), on behalf of the American Health Care Association, states that the unprecedented state of budget deficits will result in historically low Medicaid nursing home reimbursements. Because of this, the report projects nursing homes will average a $19.55 shortfall, per patient, per day in 2011, up from $16.54/day in 2009.

Many nursing facilities have counted on profitability from Medicare patients to offset the profit they lose on Medicaid patients. In 2012, Medicare payments to nursing homes will be scaled back, effectively eliminating this “profitability patch.”

Recent LTCQueen blogs have predicted that the quality of government financed long-term care would diminish; here’s evidence that it will, sooner than many are willing to admit. These tragic circumstances make long-term care insurance ownership more compelling than ever.