Private Insurance Companies Don’t Care About the Elderly
Long-term care is a vital part of any health system. And the only way to fund it is through Medicare for All.
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Progressives have increasingly coalesced around a single-payer, Medicare-for-All system as the goal for American health care. And there is one piece of our healthcare system where single-payer is the especially obvious solution: long-term care.
Long-term care encompasses everything from nursing homes to home health aides to rehabilitation for injuries or disabilities. It includes all forms of care that people need when they can no longer care for themselves due to old age, chronic illness, or disability. Thirteen million people in the United States require long-term care. About 60 percent are seniors; the rest are younger people with disabilities.
Long-term care is extremely expensive. The United States spends upward of $330 billion each year on long-term care, accounting for around 14 percent of total national healthcare expenses. The median cost of staying in a nursing home is over $90,000 per year. A home health aide typically costs at least $45,000 each year.
Our current system for paying for long-term care is deeply inadequate. While Medicare funds most other healthcare costs for seniors, it does not cover long-term care (except for short stints following hospitalization). The primary public payer for long-term care services is Medicaid, which covers over 50 percent of all long-term care costs. But like the rest of Medicaid, this benefit is means-tested for people without disabilities and only pays for long-term care for people whose assets and income fall below a certain threshold (the exact dollar amounts vary state by state).
Few people have private long-term care insurance to make up the difference. Private insurance funds only 8 percent of total national spending on long-term care. This means most people who are not poor must pay for long-term care out of pocket until they become poor. Middle-income people are forced to “spend down” their assets and drum up enough medical bills to qualify for Medicaid. Once a person has drained his or her assets on medical bills, Medicaid kicks in as a sort of ultra-catastrophic coverage, going into effect only once people have impoverished themselves by exhausting their savings paying for their care.
Why Single-Payer Long-Term Care Is a No-Brainer
There is a better, more humane way to fund long-term care. The federal government should assume the other half of long-term care spending that is not currently covered by Medicaid. This could be administered through modified versions of Medicaid, Medicare, or through a new standalone social insurance program, funded by increased payroll or income taxes.
Most recent progressive health reform proposals haven’t adequately addressed long-term care. Senator Bernie Sanders’s Medicare for All Act of 2017 would have the states administer guaranteed long-term care only for low-income individuals. And the Center for American Progress’s Medicare Extra for All plan includes only a placeholder for a forthcoming separate long-term care agenda.
There are four good reasons why single-payer is the clear solution for our long-term care system.
1. The private market for long-term care insurance is dysfunctional.
Unlike health care generally, private insurance plays a negligible role in funding long-term care. That’s because the market for this type of insurance is highly dysfunctional.
Long-term care policies can be exorbitantly expensive. The average individual premium costs over $2,400 per year — and significantly more for older people with a greater chance of needing care soon. Policies have also proven hard to accurately price. Many insurers initially underestimated the costs of long-term care, and have spent years playing catch-up by raising premiums. This forces beneficiaries to choose between stomaching perpetually rising premiums or else dropping coverage.
Because it’s a small unstable market, long-term care insurance has started to look like a bad risk to insurers. The market is shrinking among both sellers and buyers, according to a 2016 report by the National Association of Insurance Commissioners: “After more than two decades of rapid growth, the LTCI industry has undergone significant contraction, both in terms of sales as well as insurers participating in the market.”
Those insurers that remain have been charging higher premiums for worse coverage, making long-term care coverage less attractive to potential enrollees. Only about 89,000 people purchased long-term care coverage in 2016 — a fraction of the 750,000 people who purchased policies at the market’s peak in 2002.
Government should step in to correct this market failure. Few people carry private long-term care insurance, and fewer still have any attachment to their policy or its (often still prospective) benefits. In short, there are few obstacles within the status quo private market for long-term care insurance standing in the way of a universal government-run plan.
2. It’s extremely difficult for people to plan ahead for their long-term care needs.
Even when people do have long-term care insurance, the benefits are typically time-limited. This mean that enrollees must attempt to estimate exactly how long they will need long-term care years in advance when purchasing coverage, a nearly impossible task.
Social insurance is the obvious fix. It is also hard for people to estimate how much money and medical care they will need during old age. That’s why the US enacted Medicare and Social Security, which each guard against people outliving their savings. In fact, polling suggests that most Americans wrongly assume that Medicare will cover their long-term care.
The absence of general long-term care coverage within Medicare’s benefits package is a glaring gap in our old-age income and health security programs. Universal government coverage for long-term care would close this gap. A whopping 70 percent of Americans over age forty want a government-run program to provide long-term care coverage. This would spare people the impossible task of attempting to calculate how much of their income they need to set aside in case they someday require long-term care.
3. Most other developed countries guarantee universal coverage for long-term care.
The United States is an outlier on the international stage. Many other wealthy countries have created government programs for providing long-term care to everyone. Some countries — such as Norway, Sweden, Denmark, and Finland — finance long-term care out of general revenues collected through taxation. In Sweden, for example, elder care is financed out of national and local taxes, providing coverage for both nursing homes and around-the-clock home-based assistance.
Other countries — such as Germany, Japan, and the Netherlands — use a dedicated payroll tax to fund a separate social insurance program for long-term care. For many years, Germany’s long-term care system resembled that of the United States: a means-tested public program primarily for the poor, and out-of-pocket financing for everyone else. But in 1994, Germany enacted reforms that brought long-term care in line with its system for universal healthcare coverage, creating a new social insurance program to cover all long-term care. The program is funded by a payroll tax set at 1.7 percent of salary, split between each employee and employer.
Either way, citizens in peer countries around the world have the security of knowing that their governments will provide them with comprehensive long-term care coverage in old age or disability, with minimal out-of-pocket costs. Adopting a similar system would bring the United States in line with the rest of the developed world.
4. Attempts at incremental reform in the US have failed.
The United States has tried incremental reform to fix our long-term care system. That effort proved too unworkable to even get off the ground.
The Affordable Care Act, passed into law in 2010, included the Community Living Assistance Services and Supports Act (“CLASS Act”). The CLASS Act would have created a public option for long-term care insurance. Individuals could buy into this government-run insurance plan to pay out benefits in case they needed long-term care in the future.
But signing up was voluntary — there was no individual mandate requiring everyone to purchase coverage. For a type of care that few people think about until it’s imminent in their lives, it seemed highly likely that CLASS would wind up insuring a small group of unhealthy people that expected to use a lot of long-term care services in the near future. This would have made the program too financially unstable to maintain.
The Obama White House ultimately determined that there was no way around this problem, and that CLASS’s design would forever be financially unstable. The administration therefore decided not to even attempt to implement CLASS.
There is one obvious fix here: automatically enroll everyone in a public option for long-term care, and fund it through increased taxes. A universal program would achieve what CLASS lacked: the broadest possible risk pool to keep the program financially solvent. The nature of long-term care makes incrementalism impracticable. Only a universal program can work.