The still-rising death toll of nursing home residents from the poorly controlled spread of the COVID-19 virus has reignited criticism of Medicaid’s care quality, payment adequacy, and even its existence. Over the years, the federal-state program created to provide healthcare for poor people during the Johnson administration has quietly evolved into de facto long-term care coverage for the middle class. Low state payment rates often result in low-quality care. More vigorous regulation might move the dial a bit. But it cannot alter the fundamental cost/quality economics.
Unfortunately, the long-standing argument that private long-term care insurance would adequately fill the gap left by gutting Medicaid coverage now could do much harm, both to older U.S. citizens and the country. If Medicaid coverage were withdrawn, very few more people would or could buy long-term care insurance.
A growing number of U.S. citizens simply don’t have the money to pre-fund long-term care. Before the pandemic, Brookings Institution researchers described 44% of all workers as “low-wage” with median hourly wages of $10.22 and median annual earnings about $18,000. The Urban Institute found the same percentage of both hourly and self-employed workers reported difficulty paying for basic needs such as housing, utilities, food, or medical care during 2019. Since these studies were done, tens of millions have lost their jobs. Almost half of U.S. citizens have nothing or just a few dollars in savings, even for emergency expenses.
Setting aside about 25% 401(k) or individual retirement account assets toward pre-financing the cost of long-term care, either through buying insurance for it or self-funding, could make a significant difference for only about the wealthiest 20% of workers, according to a study I did for the Society of Actuaries. And many people with means would choose not to put aside money for this purpose. U.S. citizens tend to have a blind spot when it comes to thinking about getting old and frail and needing help with basic functions like walking, going to the bathroom, washing, eating, or finding one’s way around.
On the supply side, the collapse of the market for long-term care insurance has weakened conservative arguments that it could fill-in much of what Medicaid covers today. The industry crumpled for reasons other than Medicaid’s presence as a payer of last resort after a person impoverishes herself (most nursing residents are women). Factors include inaccurate industry assumptions about lapse rates; inability or unwillingness to diversify the investment of premiums in a time of historically low bond interest rates; the growth of private-pay assisted living and other market developments; and consumer dislike for sudden price hikes after years of paying premiums, just to name a few.
It’s true that some wealthy people still take advantage of Medicaid, despite measures Congress has taken over the years to curtail Medicaid estate planning. More could be done to control this. However, a now-smaller and intensely stressed American middle class needs public coverage for long-term care more than ever. Medicaid now provides a low-grade form of universal coverage for long term care — something we can’t seem to achieve for health insurance. Universal long-term care coverage for the very old and disabled is a good thing, and we should build on that platform.
How? First, Medicaid rates should be raised to levels that cover the cost of high-quality care. This must include better infection control, which may mean more single rooms. Most Medicaid beneficiaries now must share rooms. Medicaid funding for community-based options to nursing homes, like assisted living and group homes, needs to be expanded to provide greater choice. Critics of all political stripes point out that Medicaid long-term care financing has a strong institutional bias. Partly the result of lobbying by the nursing home industry and public indifference to the needs of old, poor people, Medicaid covers room and board costs in nursing homes but not in newer, cheaper community-based options. The law also could be changed to allow elders on Medicaid to retain greater levels of assets and income to buy services they need instead of making them spend down to virtually zero. This could be financed by making it harder for the wealthy to qualify, imposing penalties if they cheat, or cutting tax breaks for the wealthiest.
Congress could improve Medicaid long-term care payment and quality by reinstating the Boren Amendment, which once required states to follow Medicare reimbursement principles. Of course, this would be very difficult politically since states lobbied hard to repeal it. States continue a drumbeat of complaints about how much Medicaid costs them, even though the federal government picks up most of the tab and allows them to cover, at rock bottom costs, elders who otherwise would have to live in a shelter or on the street.
Another option would be for the federal government to assume a greater financing role, but Congress already faces soaring national debt and demands for other policy priorities. National long-term care financing reform surely won’t happen now. Witness the Trump administration’s delegation of most of the responsibility for the COVID-19 nursing home policy to the states. It recommended, for example, that states make sure COVID-19 testing gets done in nursing homes rather than having CMS require it nationally. Washington’s failure to take the lead on testing can’t bode well for nursing home quality and mortality rates.
The bottom line: The current Medicaid regime is a mixture of bad and good. It often renders low quality nursing home care. But Medicaid does provide universal long-term care coverage, a rarity in American social policy. That’s a good thing. Medicaid needs to be upgraded, not gutted. Long-term care insurance and personal savings simply can’t fill the gap cutting Medicaid would leave.
Karl Polzer is founder of the Center on Capital & Social Equity (www.inequalityink.org).
