Medicare Is, After All, Health Insurance....

Jane Gross presents a decent case that elderly people would benefit from having long-term care insurance. She also suggests that Medicare would benefit from denying coverage for certain medical treatments and procedures based upon the age and medical condition of the beneficiary.

Yet Medicare, which pays for all of the above, does not, except in rare instances, pay for long-term care in a supervised, safe place for frail or demented old people, or for home aides to help with shopping, transportation, bathing and using the toilet.

Well, yeah, because Medicare is health insurance, not long-term care insurance.

When the Obama Administration attempted modest steps toward educating the elderly about their end-of-life medical choices, the political right went into propaganda overdrive, shrieking about "death panels" and health care choices being dictated by government bureaucrats. When the Obama Administration attempted to create a means of making available affordable long-term care insurance, it became clear that most people would not voluntarily buy it and that, as a consequence, it would be all-but-unaffordable to those who wanted it.

Nationwide, the median annual cost of a nursing home in 2010 was $75,000; room and board in an assisted living facility, with no additional help, was $37,500; and the most basic category of home health aide, who can perform no medical tasks, like the dispensing of medication, was $19 an hour. These expenses are left to the elderly (and their adult children) to pay for out of pocket until their pockets are all but empty.

Then they are eligible for Medicaid, the state-run safety net for the poor. While Medicare, a federal program, is financed by payroll taxes, and thus is an “earned” benefit, Medicaid is “charity,” in the minds of the formerly middle class who worked their whole lives and never imagined themselves destitute.

I'm not sure what to make of this. Medicare was not and is not intended to be long-term care insurance, even if people need long-term care insurance. Even if we could achieve significant savings through elimination of such health insurance benefits as feeding tubes, "Abdominal and gall bladder surgery and joint replacements, for those who rank poorly on a scale that measures frailty," and "Tight glycemic control for Type 2 diabetes" for those who will likely die before suffering serious complications from diabetes, as the author suggests, and even if we deny costly medical treatments and surgeries for those who might not benefit, we would not achieve savings sufficient to offer long-term care insurance as part of Medicare. Meanwhile, at least when you're indigent, Medicaid does provide long-term care coverage. I appreciate Gross's argument that people who spend down their assets and qualify for Medicare might perceive it as "charity", but even if we called it "Medicare" would it be any less of a charitable program? You would still have to pay for the new benefit out of the general fund.

In the case of my mother, who died at 88 in 2003, room and board in various assisted living communities, at $2,000 to $3,500 a month for seven years, was not paid for by Medicare. Yet neurosurgery, which I later learned was not expected to be effective in her case, was fully reimbursed, along with two weeks of in-patient care. Her stay of two years at a nursing home, at $14,000 a month (yes, $14,000) was also not paid for by Medicare. Nor were the additional home health aides she needed because of staffing issues. Or the electric wheelchair after strokes had paralyzed all but the finger that operated the joy stick. Or the gizmo with voice commands so she could tell the staff what she needed after her speech was gone.

She paid for the room. My brother and I paid for the private aides and bought her the chair and the “talking board.” What would her life have been like without the skilled care she required and the ability to get around her floor and communicate her needs? I shudder to think. But none of this was Medicare’s responsibility.

Yet Medicare would pay for “heroic” care for a woman who was dying of old age, not a disease that could be treated: Diagnostic tests. All manner of surgery. Expensive medications. Trips to the emergency room or the hospital — had she not refused all of them, in the last year of her life. So, in less than a decade, by my low-ball estimate, my mother spent $500,000 of her own money and uncalculated sums from her two children before winding up what she considered, with shame, “a welfare queen.”

The author warns us, "Alas, 70 percent of the elderly will need extended care before they die." But I'm not hearing a solution. Yes, we can improve the efficiency of Medicare and, if we can push back against Sarah Palin-style propaganda wars designed to frighten Medicare recipients, we can better allocate resources. But the idea that the savings could pay for meaningful long-term care insurance seems like wishful thinking. The author has been writing about these issues for a long time, yet while she shares the cost of Medicare and lets us know that future costs are "scary", she does not attach any projection of what her proposal to also cover long-term care would cost. Consider,

In 2003, Medicaid paid $83.8 billion dollars for long-term care services, roughly one-third of all Medicaid spending. 27.8 billion of these dollars were spent on community-based long-term care services.

If we are to be frightened that "there are 47 million Medicare beneficiaries, costing a half trillion dollars a year", and that "In 2050, the population on Medicare will number 89 million", what of this:

The aging of the population, especially those 85+—the most in need of long-term care—is expected to result in a tripling of long-term care expenditures, projected to climb from $115 billion in 1997 to $346 billion (adjusted for inflation) annually in 2040.

You cannot pay for that by trimming the fat from Medicare. If people want Medicare to include long-term care coverage, contributions will need to be raised significantly.

Long-Term Care vs. Medical Costs

Nicholas Kristof relates the story of a friend who divorced her husband in order to avoid having to contribute to his long-term care costs.

If M.’s husband required long-term care, the costs would be catastrophic even for a middle-class family with savings.

Eventually, after the expenses whittled away their combined assets, her husband could go on Medicaid — but by then their children’s nest egg would be gone, along with her 401(k) plan. She would face a bleak retirement with neither her husband nor her savings.

A complicating factor was that this was a second marriage. M.’s first husband had died, leaving an inheritance that he had intended for their children. She and her second husband had a prenuptial agreement, but that would not protect her assets from his medical expenses.

It should be noted that although we treat long-term care costs in many ways as medical costs, they're a somewhat different creature. Absent Medicare or Medicaid coverage, long-term care is generally not covered by even the goldest of gold-plated health insurance. Instead, it's separately insured as (surprise!) "long-term care insurance".

My wife was recently offered the opportunity to buy long-term care coverage as a benefit at work. The price was reasonable, due to her age, but coverage was not available for anybody else in the family. The limits on raising premiums were big enough to drive a truck through - with the cost of insurance also jumping considerably at various age thresholds. It was nice of her employer to make the effort, but it wasn't a good deal for her. As with any choice not to carry insurance, we're playing the odds.

Kristof's friend and her husband made two mistakes, the first of which may have been consistent with the odds at the time the decision was made: they chose not to obtain long-term care insurance, and they chose not to engage in estate planning that would have involved both protecting separate assets and intended inheritances, as well as preparing for possible disability and Medicaid eligibility. Kristof is arguing that, as a rule, society should pick up the cost of long-term care. And that can be part of the current debate - whether long-term care should be included as a basic benefit in health insurance plans. But as it stands, if you don't insure for long-term care, you can expect to pay for a good portion of it - and the trend is for states to be more aggressive in pursuing the assets of people receiving Medicaid benefits, not less so.

But let's not forget, somebody is paying for long-term care. If it's not the recipient of the care, or that person's family, then it's the taxpayer. It's not at all unreasonable as a public policy for the taxpayers to say, "You need to contribute significantly to your own costs of care before we step in." It's possible to increase the exemptions for long-term care, such that the effect on somebody like M. is less pronounced, but why should a taxpayer in effect subsidize her children's inheritance - paying for her husband's care so that her kids can inherit more money?

It should also be remembered that we're talking about more than long-term care for the elderly. We're talking about any recipient of Medicaid or government disability benefits, at any age. There are young people who don't marry because, as one or both of them are disabled, they would have their benefits cut as a result of their combined marital income. There are parents who either don't leave money to disabled children, or who construct special needs trusts that control how the money can be used, in order to keep the inheritance from being taken by the state as reimbursement for the cost of Medicaid. An argument can be made in each of these contexts that the care or benefits should be provided without respect for need, but again there's a countervailing argument that people who can afford to pay for their own care should do so before asking the taxpayer to take over.

The current situation does create absurd outcomes. People do marry in a church but without getting a marriage license, while others live together as spouses, living lives every bit as committed as those in "real" marriage but flying under the government radar. Some, like M., are divorced "in name only", continuing to live with and care for their spouse. But here's something to remember - as long as we impose any income or asset threshold on government benefits, the same "unfairness" will continue to exist. If we raise the threshold we reduce the number of people who are asked to pay for part or all of their own care, or to experience a reduction in their benefits due to their total household income, but we increase the burden on the taxpayer.

If Kristof is trying to make the argument that 100% of long-term care costs should be paid out of tax revenues, it's a perfectly legitimate argument to make - but he doesn't quite come out and say that. I suspect he would concede that some people are wealthy enough that they should pay at least part of that cost. I don't personally see any way to provide universal long-term care insurance, with no means testing, without a significant increase in tax revenues or deficit spending.

If your goal is to stay with the spouse you love, while still protecting your separate assets and preserving inheritances you intended for children from a prior marriage, consult a good estate planning lawyer. (Kristof's tale suggests that when M. married her husband she had considerably more money than him, hence the prenuptial agreement that protects her in divorce but not in his illness. A prenuptial agreement is not an estate plan.)