A team of policy experts has gamed out what they concede is an imperfect set of options for tackling how Americans pay for long-term care, a massively expensive problem that the Affordable Care Act failed to solve.
Long-term care insurance options are limited and expensive, leaving Medicaid as the last resort for those who burn through retirement savings to pay for care.
The new research, published by the journal Health Affairs, proposes three hypothetical long-term insurance plans and looks at their potential enrollment and affordability, depending on whether they are made voluntary or mandatory, and whether the insurance is subsidized.
The results are bleak, the authors admit, but the work is just a starting point. The broad proposals are intended as models for policymakers to work to debate and refine.
“Prior to this coming out, everybody working on this, including myself, was flying blind,” said Stuart Butler, a senior fellow at the Brookings Institution who is an expert in health economics and budgets.
The study makes broad projections for how the hypothetical plans might affect spending by Medicaid, private insurers and out-of-pocket costs for households. The results at least begin to quantify the trade-offs and potential hurdles to financing what can be catastrophically high costs for long-term care.
“We found no ideal solution to what has been a decadeslong policy challenge,” the authors wrote. “Policymakers will have to choose between imperfect options that achieve quite different goals.”
Lawmakers attempted and failed to fix the problem in the Affordable Care Act with a voluntary long-term care insurance program funded by payroll deductions. It never launched because the Obama administration ultimately conceded it was unsustainable.
The issue will only grow more pressing. The number of adults who need help with the daily necessities—using the bathroom and eating—is projected to rapidly increase, the authors said. The number who need the most help is projected to grow 140% to 15.1 million people by 2055.
That burden largely falls to families and to Medicaid. On average, the cost of the most intensive long-term care from age 65 until death is $138,000, the authors wrote. That includes help with two or more daily activities.
But that number is misleading. Nearly half of adults won't need such intensive help. For those who do, the average cost is $270,000. Medicaid will pay for another third of the cost for those ages 65 and older, the authors estimate.
The numbers also omit the value of unpaid work by family caregivers or account for unmet need. “There's a lot of hidden costs in long-term care today,” said Richard Johnson, director of the Urban Institute's Program on Retirement Policy and one of the paper's authors. “The vast majority of care is provided by unpaid family members. Many of them are stretched really thin.”
The authors found that voluntary insurance plans did little for those who need long-term care services the most, unless the insurance was subsidized. Even then, coverage would not expand much. Researchers estimated a gain of about 10 percentage points if insurance were voluntary and subsidized, still leaving roughly 80% of adults uninsured.
Also, voluntary insurance programs would struggle or fail because the demand from the highest-cost population would drive up premiums and dissuade healthier people from buying coverage. For that reason, the most comprehensive voluntary option “may not be viable,” the authors wrote.
But mandatory long-term care insurance would be costly. If a payroll tax was established to support such a program, as the authors proposed, employees would see an additional 0.6 to 1.35 percentage points of their pay withheld from their paychecks.
However, Medicaid would spend 40% less on long-term care services under mandatory plans with a comprehensive benefit.
But, Johnson acknowledged, significant “aversion to mandates” means requiring long-term care insurance would be difficult to achieve.