Sunday, September 16th, 2012
A study published this month in the Journal of General Internal Medicine found that Medicare recipients are spending tens of thousands of dollars out of pocket for medical care in the last five years of life. The average household spending was nearly $39,000, but 5 percent of Medicare recipients spent more than $139,000.
Medicare co-payments and deductibles are part of the cost. But what really drains senior finances are nursing home, assisted living and other long-term care. About 70 percent of those who live to be 65 will need such care eventually.
Most of us don’t realize that Medicare has strict limits and conditions on payments for long-term care. Right now, Medicare is paying only about 10 percent of the nation’s nursing home bills. One in four seniors, in their last five years of life, spend more than all of their assets combined except for their homes for long-term care.
Once assets are depleted, many seniors fall back on Medicaid. But shouldn’t there be a better way? Seniors are susceptible to many debilitating diseases, such as mesothelioma, which is most often diagnosed in people over 55 years of age. People work and save all their lives only to watch their life savings dry up when they need it most.
The late Senator Edward Kennedy advocated for public long-term care insurance, to be paid through payroll taxes. A provision for such insurance was added to the Affordable Care Act, also called “Obamacare.” This was the Community Living Assistance Services and Supports (CLASS) provision, a voluntary insurance option for employees.
Unfortunately, the Department of Health and Human Services determined the CLASS provision was unworkable as written. HHS believed that too few healthy people would sign up for the program to make it sustainable. For this reason, in 2011 the Obama Administration suspended CLASS.
CLASS still has support in Washington, and it’s not impossible that a revised law might go into effect someday. But as politicians are fighting over the future of Medicare and Medicaid, CLASS has been shoved to the back burner for now.
Howard Gleckman, a resident fellow at the Urban Institute, has some ideas about what a future CLASS Act might look like. But he thinks the possibilities are limited by America’s current political climate.
Gleckman points out that nearly every developed country on the planet has a universal program providing long-term care for all its senior citizens. The only exceptions, he says, are the United States and the United Kingdom. Some countries provide taxpayer-funded government benefits to pay for long-term care. In other countries the benefits are paid by private insurance companies in a subsidized, regulated marketplace, which is something like how Medicare Advantage works.
However, the recent bitter struggle over passage (and possible repeal) of “Obamacare” tells us that Congress simply isn’t going to pass a whole new entitlement bill anytime soon. Politicians in Washington are fighting tooth and nail over whether current programs can be kept as they are or cut back. They are no more going to pass a new entitlement than they can fly.
The only option for now, Gleckman says, is to provide incentives for people to buy long-term care insurance while they are young and healthy. That’s what the CLASS provision tried to do, but “its design was poor and its incentives were too weak,” Gleckman says. If CLASS is revived, the incentives must be “supercharged.”
To limit the cost of premiums, Gleckman suggests limiting the program to people who work at least 20 hours a week. People who join the program while still young will pay lower premiums than those who delay. He suggests including a variety of benefit options to choose from, including high deductible policies. Finally, people who don’t join the program at all might have to liquidate home equity before being eligible for Medicaid, which is not usually the case today.
It wouldn’t be perfect, but it would be a better system than we have now.