Everything that is wrong with long-term care (LTC) services and financing today has its roots in well-intentioned public policy decisions made many years ago that went terribly awry.
It started with the addition of Medicaid to the Social Security Act in 1965. The Act authorized Medicaid to provide LTC to individuals “whose income and resources are insufficient to meet the costs of necessary medical services … .”
This open-ended mandate to fund LTC for everyone who cannot afford it set the stage for everything that followed in six critical policy areas.
Policy area #1: Eligibility
Under the law everyone who cannot afford LTC would be eligible for Medicaid. But what does it mean to be unable to afford LTC? Objective criteria were needed. A reasonable principle would have been “help the neediest first.”
Instead, Medicaid financial eligibility rules allow high-income people to qualify if their private medical or LTC expenses are commensurately high as they usually are for elders in need of high-cost LTC. High-asset people also qualify if they hold their wealth in exempt forms, such as home equity, a business, a vehicle, an IRA in payout status, prepaid burial expenses, etc. Countable assets are easily sheltered by using them to purchase exempt resources.
By trying to do too much for too many, Medicaid became overloaded with recipients who could, should and would have planned for LTC and paid privately otherwise.
Policy area #2: Payment
By choosing to make Medicaid LTC eligibility available to so many people, the program raised another key question. How much could it pay LTC providers?
A reasonable principle would have been to “pay market rates.” Financial markets supply price data that help providers decide what kinds of LTC to offer and how much of each. Markets help consumers choose among options based on their preferences and budgets.
But Medicaid, the dominant LTC payer, does not pay market rates. It pays, on average, 70% of private-pay rates. Thus, Medicaid distorts the market signals needed for providers and consumers to make good economic choices.
The result has been decades of institutional bias, insufficient home and community-based services (HCBS), disappearing private-pay revenue, sub-market Medicaid payment rates, impaired access and quality, and excess dependency on over-stressed families to provide care the manipulated market failed to deliver.
Policy area #3: Coverage
By making so many people eligible and by paying often less than the cost of care, Medicaid had to make tough decisions about what kind of care to offer. A reasonable principle would have been: “pay for the care people prefer.” That would be HCBS.
However, given its eligibility (generous) and payment (stingy) policies, Medicaid could afford to offer only the type of care people wanted least: nursing homes. From 1965 until 1981, institutional care was all the program supplied. Medicaid has tried to rebalance to HCBS ever since, but it still leaves almost 700,000 people on waiting lists for the home care they prefer.
Medicaid’s inadequate payment rates cause widespread caregiver shortages that impair the private-pay home care market as well. Bottom line, today’s LTC market provides less of the kind of care people prefer because of distortions created by long-entrenched Medicaid policies.
Policy area #4: Quality
A reasonable policy principle would be: “pay for quality care.” But Medicaid’s decision to cover so many people forced it to pay too little to ensure quality care.
LTC providers receiving less than cost for most of their customers, residents or patients can hardly be faulted for struggling to provide the low-cost care of uncertain quality that the government is willing to fund. Providers are unfairly disvalued when Medicaid imposes unreasonable and uncompensated staffing mandates as now.
Policy area #5: Regulation
Having opted for Medicaid not to pay enough to ensure quality care, policymakers sought to achieve at least minimally adequate care through regulation. The results have been poor.
Instead of pursuing a reasonable principle — “minimize regulation consistent with safety” — Medicaid LTC regulations, controls and inspections proliferated with diminishing returns. In the end, “you get what you pay for” applies to Medicaid LTC services as it does to everything else. Disappointing results were inevitable.
Policy Area #6: Demographics
A reasonable principle for Medicaid would be to “prioritize the aging and disabled.” Instead, the Affordable Care Act “created a new eligibility category for Medicaid—able-bodied, working-age adults—with a much higher federal reimbursement percentage for these enrollees.”
Again, as Medicaid tries to do too much for too many it ends up doing too little for the most vulnerable.
To fix America’s LTC market, all of these bad policies need to be changed. Don’t cover the affluent; help the neediest first. Don’t short-change providers; pay market rates.
By covering fewer people at market rates, Medicaid will be able to pay for the home care people prefer. The reformed program can also afford to pay for quality care and minimize regulation consistent with safety while prioritizing the aging and disabled. All that’s needed is to acknowledge the policy mistakes made for so long, reverse them, and implement better policies.
For a plan to achieve those objectives, read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution” and watch this “virtual LTC event” featuring age-wave visionary Ken Dychtwald and leading LTC researchers. To find vast sums of private funds to pay for LTC, check out Medicaid’s $100+ Billion Leak.
Stephen Moses is president of the Center for Long-Term Care Reform, a visiting fellow at the Paragon Health Institute and the author of “Long-Term Care: The Problem” and “Long-Term Care: The Solution.”
The opinions expressed in McKnight’s Long-Term Care News guest submissions are the author’s and are not necessarily those of McKnight’s Long-Term Care News or its editors.
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