Challenges of Long-Term Care

The Biden administration recently proposed $400 billion (reduced to $150 billion) in new funding to support home-care workers as part of the Build Back Better plan. But in a recent article in National Affairs, “The Long-Term Care Challenge,” Professor Robert Saldin* argues that this proposal does not go far enough to meet the burgeoning need for long-term care (LTC). Saldin asserts that Americans’ “woeful ignorance” of their own eventual need for LTC insurance, together with worsening demographic trends, has created a need for a “universal national program to mitigate the catastrophic [LTC] costs that drain state budgets and impoverish middle-class Americans.”

Saldin begins by outlining the well-known demographic trends that are exacerbating the already grim state of LTCi in America. About 60 percent of those who require LTC are over the age of 65, and those individuals receive 80 percent of national LTC spending. These trends are set to worsen over time, he says, requiring systemic reform to avoid “significant constraints on America’s dynamism and vitality.” For example, Saldin notes that some estimates suggest that by 2030 24 million people will required LTC, up from 14 million now.

Beyond the demographic need for such a program, the article notes the two different types of costs associated with LTC. First, in 2017, “41 million unpaid caregivers provided 34 billion hours of care.” Such unpaid caregiving can “interfere with caregivers’ ability to hold a job or relocate for better career opportunities,” increasing financial vulnerability for those individuals and society at large. Current estimates show that 53 million family members provide an average of 24 hours of care per week, and spend an average of $7,000 out-of-pocket annually towards LTC expenses. Saldin argues that this type of unpaid labor presents “tradeoffs [that] constitute a significant constraint on economic freedom and dynamism in the United States.”

Second, there are the substantial financial costs of paying for LTC, either through a home health aide or LTC facility, which force many middle-class families to pay down “a lifetime of responsible saving” in short order. Eventually, 52 percent of these costs fall to Medicaid, amounting to $129 billion in 2018.

Compounding these issues is individuals’ adverse selection in the private LTC market, meaning that the population most interested in coverage is “far more likely to already need care,” and making a non-mandatory program “untenable.” As a result, private LTC policies can be expensive for certain demographics, with monthly premiums averaging $216. The author also characterizes Medicaid as imposing an “implicit tax on private insurance insofar as having another source of financing extends the time it takes for a person to qualify for government assistance,” further discouraging participation in private LTC coverage.

These problems, the author argues, make the rationale for requiring LTC coverage even more persuasive than for general health care insurance. The significant cost and widespread ignorance of eventual need for LTC make it less likely that people with no immediate need will pay into LTC programs, necessitating government intervention. The author proposes a mandatory national LTC program, which would continue to prioritize home- and community-based services (HCBS) over institutionalized settings, and would be geared towards providing LTC for the elderly, rather than disabled younger people. While a Biden administration proposal to boost caregiver pay and empower states to expands HCBS through Medicaid offers some progress, the author argues that a true solution to what ails LTC in the United States must go further, addressing the lack of widespread awareness of and attention to the high likelihood that each of us will eventually need some form of long-term care.  Although the current political climate would suggest such solution may be untenable, Saldin sees Republican support of expanding the Child Tax Credit as a potential signal of Republican support of a public LTC program.

Read the full article on the National Affairs website.

* Robert P. Saldin is a professor of political science and director of the Mansfield Center’s Ethics and Public Affairs Program at the University of Montana. He is also a senior fellow at the Niskanen Center. He is a frequent contributor to publications such as The Washington Post, The Journal of Politics, The Atlantic and The New York Times.  

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About the Author: Luke Dodge

Luke Dodge assists clients seeking solutions related to insurance matters. He was a 2020 Summer Associate at Faegre Drinker, and during that time Luke assisted with litigation matters, drafting dispositive motions and helping research nuanced issues for insurers. He also contributed to a large entertainment non-profit’s revision of its Paid Family Leave policy.

About the Author: Christopher F. Petillo

Chris’s insurance litigation experience includes coverage and extra-contractual disputes in state and federal courts across the country, involving life, long-term care, annuity, and property and casualty policies. Substantively, Chris’s litigation focuses on life insurance pricing issues such as cost of insurance, fraud (including rescissions), broker misconduct, lapse and reinstatement, civil RICO, and claims disputes. Visit Christopher's full bio on the Faegre Drinker website.

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