The reconciliation bill being prepared by congressional Democrats is so substantial that specific provisions as large as $400 billion in proposed extra funds for Medicaid’s long-term-care benefit have attracted little attention.
America faces widespread unmet long-term-care needs, largely concentrated among individuals who are already eligible for Medicaid. Improving the quality of benefits provided under the program is therefore a good use of federal funds.
However, the shortcomings of Medicaid’s long-term-care benefit owe much to the program’s resources being improperly targeted. Instead of being a safety net of last resort, the program has loose and inconsistent eligibility requirements, disincentivizing the purchase of private long-term-care insurance — which ought to bear the bulk of long-term-care costs. Policymakers should use the provision of additional funds to facilitate reforms that fix these deeper structural problems.
Long-term care refers to assistance with basic daily living tasks (such as bathing, dressing, cooking, and personal mobility) that healthy adults are typically able to perform for themselves, as opposed to medical treatment. Long-term-care needs exist on a spectrum of intensity from informal assistance with, say, groceries to 24-hour nursing care.
As Americans live longer into old age and disability, the nation’s long-term care needs are expected to increase. Seventy percent of seniors will develop severe long-term-care needs at some point — most often after reaching the age of 80. Close relatives such as spouses or adult children are the primary caregivers, providing an average of 17 hours per week of assistance. Today’s seniors are more likely to be divorced than those of a generation ago, and have fewer kids to look after them, especially as adult children are more likely to be employed full time or to live far away. The need for formal paid long-term care is therefore expected to increase significantly.
Long-term care in the United States is currently dominated by a single payer, Medicaid, which provided 52 percent of funds in 2018. Sixteen percent of formal long-term care is paid for out-of-pocket, and only 11 percent is financed through private insurance.
State Medicaid programs are required to provide long-term-care services to those with high cost needs and low levels of non-exempt financial assets. States are normally entitled to claim between $1 and $3 from the federal government for every $1 they spend on long-term care services for eligible Medicaid beneficiaries, so that the federal government bears between 50 percent to 75 percent of the cost.
Originally, Medicaid paid only for nursing-home care, but this has been broadened over recent decades to pay for beneficiaries to receive long-term-care services while remaining in their own homes. The shortcomings of nursing-home care have only been further highlighted by 650,000 cases and 130,000 deaths from COVID-19. Even prior to the pandemic, malnutrition, bad sores, and overmedication were widespread in nursing facilities, and infections caused the deaths of 380,000 residents every year.
Recipients typically prefer home-based care, as it allows them to continue living independently in their own homes. But, though it reduces the cost of aiding each, the attractiveness of in-home assistance tends to increase program costs overall by greatly increasing the number of beneficiaries claiming aid. To constrain these expenses, states can cap the number of Medicaid beneficiaries receiving home-based care, and over 800,000 otherwise eligible for assistance are currently on waiting lists. Seniors enrolled in Medicaid are more likely to have unmet LTC needs than those who are not.
Helping the ill and infirm perform their daily personal hygiene chores is often unpleasant, unglamorous, and thankless work, and tends to be poorly compensated. Personal-care aides earn an average of $13 per hour, typically without benefits — less than they could have earned by claiming last year’s Pandemic Unemployment Compensation. With many long-term care workers dropping out of work to look after their own kids, the shortage of staff has left some seniors without assistance for months.
Senator Bob Casey (D., Pa.) has therefore introduced the Better Care Better Jobs Act, with the objective of expanding funding for home-based care, and congressional Democratic leaders are expected to include its provisions in an upcoming reconciliation spending bill. The bill would increase the share of Medicaid expenditures borne by the federal government by 10 percentage points for state expansions of personal-care services, wage increases for personal-care aid, and enhanced assistance for family caregivers.
The proposal correctly identifies an important shortcoming and unmet need under current arrangements, and is well targeted in its attempt to improve the situation. It seeks to provide support for informal care, rather than to displace it. It does not simply expand federal assistance, but offers an incentive for states to focus their own resources and attention on improving home-based care. Furthermore, the flat structure of the expanded matching rate will do most to diminish the matching payments that the poorest states need to put up — steering more aid towards states that need it most.
As an incremental improvement to Medicaid’s support for long-term care, such an approach is reasonable. But it is likely to fall far short of adequately financing America’s broader long-term care needs. Medicaid’s waiting lists for long-term care are a consequence of the simple fact that a single payer will never have the resources needed to fill the near unlimited demand for free assistance with day-to-day personal services. This shortfall will become more and more severe as the number of Americans over the age of 85 is expected to soar from 6.7 million in 2020 to 18 million in 2050.
Rather than being well-defined as a safety-net of last resort, Medicaid’s long-term-care benefit too much resembles a universal entitlement which lacks the ability to purchase high-quality care across the board. To make the most progress in meeting personal-care needs, Medicaid’s long-term-care benefit must be reformed so that it is well-targeted and does not crowd out the purchase of private insurance by individuals who would be able to provide for their risk of needing long-term care.