Mr. Levey states, “Medicare, which is expected to provide health insurance to more than 50 million elderly and disabled Americans this year, is expected to start operating in the red in its largest fund in 2024, according to the annual assessment by the trustees charged with overseeing the programs.

And the Social Security trust fund, which will provide assistance to more than 45 million people in 2012, will be unable to fulfill its obligations in 2033, three years earlier than projected last year.”

Mr. Levey states that if nothing is done, deficits are likely to force major cuts in these programs.

He goes on to describe why nothing is being done about this looming catastrophe.  The basic reason is hyper-partisan posturing in both houses of Congress, resulting in stalemate. Democrats and Republicans each believe they have a better way to resolve the issues.

Meanwhile, we observe that these crises worsen every day.

If you still don’t own long-term care insurance, or if you haven’t made other concrete plans to fund your very likely need for long-term care, it is difficult to understand why. It’s obvious that you will not be able to rely on government assistance to cover the costs.

A similar approach is common in many states and Congress, much to the dismay of proponents of social programs for the needy.  Sadly, this means that there will be even less financial support for long-term care (LTC) financed by Medicaid for the least fortunate in our society. 

These cuts will be bad news indeed for anyone who has been counseled to “game the system” by spending down or sheltering their assets and then claiming indigent status to qualify for LTC covered by Medicaid. 

Responsible planning for their final years, including LTC insurance, will ensure that increasing numbers of Americans can avoid the emotional & physical stress that 70% of families will face as a loved one needs care.  And such planning will also greatly reduce the financial burden that so many families will face.

Shifting Medicaid funding from nursing homes to in-home care sounds great. Caregivers really like this idea. The whole notion of avoiding nursing home stays is very appealing.

Many policymakers cling to the notion that such a shift will save money, but this is far from the truth.

I quote the following from Steve Moses of the Center for Long-Term Care Reform:

When compared to an elderly population for whom traditionally available care is offered, recipients of expanded community-based services do not use significantly fewer days of nursing home care.[1]

 An increasingly large number of studies, including the results of a national channeling demonstration program, have shown that non-institutional services typically do not substitute for nursing home care, but, rather, represent additional services most often to new populations.[2] 

Although community-based LTC programs proved beneficial to both clients and informal caregivers in the LTC demonstrations, they did not prove budget neutral or cost effective.[3]

For Medicaid to afford quality home health care for all recipients it must have fewer recipients. By tightening eligibility, closing eligibility loopholes, preventing Medicaid planning, and enforcing estate recovery, the program can do a better job for fewer genuinely needy eligibles. When middle class and affluent people understand their savings and home equity are at risk for LTC, they will avoid Medicaid dependency by paying privately from savings, home equity conversion and private insurance.

Here are the footnotes:

[1] General Accounting Office, “The Elderly Should Benefit From Expanded Home Health Care But Increasing Those Services Will Not Insure Cost Reductions” (Dec. 7, 1982) p. 43, http://archive.gao.gov/f0102/120074.pdf.
[2] John F. Holahan and Joel W. Cohen, Medicaid: The Trade-off between Cost Containment and Access to Care, (Washington DC: The Urban Institute Press, 1986), p. 106.
[3] Kenneth G. Manton, “The Dynamics of Population Aging: Demography and Policy Analysis,” The Milbank Quarterly, vol. 69, no. 2, 1991, p. 322.

Mr. Holtz-Eakin is the former director of the Congressional Budget Office (CBO), and he really “gets it” about long-term care financing. He also added that one way to do this would be for the government to provide incentives for long-term care insurance purchase.

Mr. Holtz-Eakin’s beliefs resonate with me and every other (Long-Term Care insurance) LTCi specialist I know. We feel that even though Medicaid provides inferior care (as I often document in this blog), it is relatively easy for almost everyone to access. Therefore,  people are poorly motivated to plan responsibly for their long-term care. 

The National Association of Health Underwriters (NAHU), whose Long-Term Care Advisory Committee I serve on, wholeheartedly agrees with Mr. Holtz-Eakin.

These services, which are much less costly for families than skilled nursing facility stays, have been targeted by cash-strapped states.

Respite care often allows the elderly to delay or prevent being admitted to a nursing home.

These cuts will lead to more seniors being admitted to nursing homes. When people need long-term care and cannot afford to pay for it due to lack of responsible advance long-term care planning, they usually default to Medicaid. Each additional Medicaid long-term care recipient worsens budget shortfalls and crisis.

Unfortunately, incredibly, in this 112 page report and all the media coverage of it, no mention is made of how to fund care for those afflicted with Alzheimer’s!

Here’s a quote, “What we have is a vast welfare program grafted onto the rhetoric and psychology of a contributory pension. The result is entitlement. Unsurprisingly, AARP’s advertising slogan is “You’ve earned a say” on Social Security. The trouble is that contributions weren’t saved. They went to past beneficiaries. The $2.6 trillion in the Social Security trust fund at year-end 2010 sounds like a lot but equals slightly more than three years of benefits.”

63% of us are not confident we can pay for long-term care, yet only 17% of us own long-term care insurance (LTCi).

The survey states that most people do not understand how long-term care is paid for. People also overestimate LTCi’s cost and underestimate the probability they might need care.

If you are a consumer over the age of 40, and still don’t own LTCi, the report and my own personal experience indicate that you will be well served by taking the time to learn about long-term care and purchase LTCi now, while you can qualify and find affordable premiums!

I hope readers will take Ms. Stafford’s advice to heart. According to www.longtermcare.gov, the US Department of Health and Human Services site, at age 65, there is approximately a 70% chance any of us will need long-term care. I urge you to plan accordingly – NOW. Planning will ensure financial and emotional well-being for both you and your family.