Posted by
John R. LaPlante on Friday, July 28, 2006 12:12:17 PM
Even baby boomers age, and that’s setting up for some tremendous fiscal problems for public programs and taxpayers. Will governments make the right adjustments, or will they keep on the same path, like a boat that keeps taking on water?
Most of the expenses in long-term care are paid for by governments: 42 percent for Medicaid; 20 percent for Medicare, according to this (PDF) fact sheet from the Kaiser Family Foundation. For nursing home—one element of long-term care—Medicaid pays slightly higher, 43 percent, while Medicare (strictly a federal program) pays 14 percent. Currently, Medicaid pays $93 billion per year in long-term care, two-thirds of which is spent on institutional care.
For the most part, states determine who qualifies for taxpayer-funded long-term care. Some are more lenient than others.
One of the problems with Medicaid funding of long-term care is moral hazard. Middle and upper-class families can and sometimes do make no arrangement for financing LTC, arguing “I paid my taxes, why should my kid’s inheritance be wiped out because I need to enter a nursing home?” That’s understandable from an individual standpoint, and any one person’s refusal to take Medicaid won’t benefit the rest of us as a whole anyway. So a small industry of Medicaid planners is available to help people game the system, and qualify for payment. Steven Moses provides a quick overview of the problem.
Several members of the State Policy Network have come up with ideas for addressing the Medicaid challenge. One thing that states need to do a better job of is “estate recovery,” which is simply making sure that people who have the means to pay for their care do so, rather than hide their assets.
The Flint Hills Center for Public Policy’s Estate Recovery Primer (warning: large PDF) is one place to start for a look at this issue.