The essence of planning for long term care

(cross posted at freeforall)

Dan Diamond (@ddiamond) alerted me to a Senate Special Committee on Aging hearing (The Future of Long Term Care: Saving Money by Serving Seniors), that will be webcast live today at 2pm via the committee homepage. I hope they manage to talk about practical solutions to the difficulties of providing long term care, and do not simply spend their time clucking about what they oppose.

I was guest lecturing on Long Term Care and the demise of the CLASS provisions of the ACA in Peter Ubel’s health policy class on Monday and someone asked, “what is the essence of planning for LTC?” My answer was that it entails planning for who will wipe your ass when and if you can no longer do it for yourself.

Now, that it not what the 20 year old’s in the class were dreaming about discussing when they came to Duke, and I get that. It is very easy to put off thinking about LTC until tomorrow.

Around 7 in 10 persons who attain age 65 will use some LTC. Of the users, about half will do so for less than a year, but around 1 in 10 will need such care for longer than 5 years. It is impossible to look at a room of 20 year olds and say who will need LTC among the subset who live to 65; and of course someone in that room could need it much sooner due to a catastrophic event. Almost no one has the assets to self finance a 5-10 year period of LTC use (~$1.5 Million max risk), so nearly every0ne is at risk of needing such care and not being able to afford it. If ever there was a risk profile that called for social insurance it is LTC. Instead we have a default system in which families do their best, availing themselves of an incomplete safety net, and when care needs become too great and assets are exhausted, Medicaid pays for them to live in a Nursing Home until they die (Medicaid pays for about half of the total national NH cost). We can do better.

A few links with many LTC details if you want more (they will still be here tomorrow):

Comments

  1. Barbara says

    Can we really do better? I don’t know. How do the Japanese do it? In my experience, most people have only the vaguest understanding of (a) the difference between Medicare and Medicaid (in terms of covered populations) and (b) what Medicare covers and what it doesn’t. Many people are really shocked when they find that Medicare, which is not a need tested program, does not cover LTC, but that LTC is covered only by Medicaid, which is need based. They are stunned that their inheritance will be spent down so that their parents can live out their last days in the relative discomfort of a nursing home. This low level of appreciation for the inner working of vital programs leads to basically insane assessments of one’s own interests. Somewhere between 60-80% of Medicaid expenditures (depending on the state) are made on behalf of frail elderly people in nursing homes, but Medicaid itself is perceived by the public as a program that assists young indigent populations — which it does — but they are a much healthier group with much lower expenditures per person. Thus, Medicaid rarely has the resources it needs to do a good job.

  2. Don Taylor says

    @Barbara
    in policy terms we definitely could do better. One problem in LTC policy discussion is that folks would say any proposal would be very expensive, which of course it would be. The implicit comparison being made by many is as compared to something that cost zero. However, the real counterfactual is very expensive. A social insurance based LTC program would pool risk better. A better model for USA would likely be a german based voucher scheme that allowed use of vouchers based on disability to be use to purchase market services. Alternatively, families could ‘cash out’ at a discount in a way that provides more options while defraying the burden on families of providing care. A broad based tax would be needed to finance this because everyone is at risk. Another, less grand idea I have advanced in the past is forced savings into private accounts aimed at the children of baby boomers…the $ could be used to care for our parents, and for other things (say purchase a house, pay for our kids to go to college). As with any policy issue, different people see different problems and it makes it hard to respond when everyone doesn’t agree on the problem(s)

    • H says

      Voucher based plans are just another way of saying low benefits used to provide profit to private providers. We have more than enough terrible nursing homes making money off bad care.

      The French have a better plan. Among other things, they build assisted living housing designed for the elderly above nursery and elementary schools. The residents are entitled to eat with the kids in the cafeteria for breakfast and lunch or in their own apartments.

      I visited one such residence near Toulouse and was most impressed by the grandparently way the elderly residents and the kids related. A great way to help the kids and the elderly.

  3. kathleen says

    Something that could be done immediately would be to make premium payments for LTC insurance tax-deductible without having to itemize deductions, on both state and federal taxes. This would ultimately save Medicaid spending by both state and feds. (Even if it were made a full tax “credit” instead of a deduction, Medicaid would probably save money.)

    I am of moderate means, but purchased LTC policy when I was 41 year old, because I knew that lightning can strike unexpectedly. Since I was younger then, the premium has remained under $100 per month, but a lot of people (who make a LOT more than I do) say they “can’t afford” such an expense. Not true; they prefer to spend that money on other things, and prefer to let the rest of us pay for their care when they need it.

    The first step is to reward those who are responsible, instead of the reverse.

  4. Dave Schutz says

    Semantics are sort of a problem in this whole area in my view. We say ‘Health Insurance’ and we are talking both about a mix of real insurance (rare events with huge consequences) and maintenance type effort (well baby visits, tooth cleaning). Long Term Care is sort of odd, mixed – some people will get to 90 wiping themselves successfully, then keel over. We all should be so lucky. Others will have lingering problems and need assistance from 70 on. If the event were actually rare, LTC insurance would be cheap. It’s expensive, because the maintenance type need is so frequent. It’s an unpleasant prospect, so it’s easy to think, I’ll be one of the lucky ones.

  5. Frank says

    I agree this is an important issue and is a concern, but could one make the argument that there is hope on the horizon? If more of this generation has 401(k) plans, and assuming most do not take early withdrawls, wouldn’t most individuals be able to afford this from the income they could live on from their 401(k)? What is the average per year cost of a nursing home?

    I could see nurses visiting someone a few times a day as a more sustainable option than nursing home care; over-head costs could be drastically reduced in this manner…

    Frank

    • says

      Nursing homes around here run about $100K/yr. A 401K that will cover that is some 401K.

      My mother in England fell and broke her hip at 89. She lived another four years. She could no longer climb the stairs to her bathroom or even get her Zimmer frame through the kitchen door. But she was able to stay in her house. Aides (not even nurses) paid by the NHS came three times a day: in the morning to get her out of bed, help her dress and make her breakfast; midday to get her dinner and set out a covered tray for her tea; in the evening to help her undress, empty her commode and get her into bed. My sister came once a week to do her shopping and friends came on Sundays to get her to church and back. If my sister and the church community hadn’t been available, though, she might have had to go into a nursing home. The aides were cheaper for the NHS than caring for her in a nursing home, which is why they were provided. The NHS pays for both and can weigh one cost against the other. In the US, even with the ACA, that wouldn’t be the case.

      • Ebenezer Scrooge says

        New York, at least, has something called home Medicaid, intended for just that purpose. It agrees with you and the Brits: it is often cheaper and easier to let somebody stay in their home with aides than to pay for a nursing home.

    • Don Taylor says

      @Frank
      recently priced skilled nursing home in Durham/Chapel Hill area and range ~$5,000-$8,000/month.

    • Anniecat says

      You’re assuming that the companies 401(k)s invest in manage the money responsibly and are honest with investors about their finances.

      Given all the evidence accumulated from 2008-present, why do you assume that?

  6. Ebenezer Scrooge says

    Of course, LTC is as cheap as it is only because of income inequality. Most LTCaregivers–if externalized out of the family–are low-wage types. This is yet another hidden subsidy to the (moderately) rich that our system is so good at providing.

  7. Frank says

    Thanks for the education above all!

    I think for maybe the upper-half of 401(k) savers, the costs would be manageable. But for the bottom half, and for those who have averaged 30 grand a year most of their lives, yeah, nursing home care would brutalize their savings.

    I know in Ohio they are making a big push to keep the elderly in their homes versus nursing homes, to reduce Medicaid expenditures.

    Frank

  8. Joyce says

    Over the past 25 years, most things in this world, like computers and cars and cell phones have improved dramatically. The same is true for long-term care insurance.
    Comparing long-term care policies from 20 years ago to today’s policies is kind of like trying to compare the Radio Shack TRS-80 to a MacBook or an iPad.
    For example, there are now two types of long-term care policies that can never have a rate increase. Here’s a brief explanation of them:
    http://bit.ly/Level-Premium-LTC-Insurance

    • H says

      If you believe this keep an eye out for the tooth fairy who will soon be bringing you a wallet filled with $100 bills which can never be spent empty.

      The (unspoken) business plan of many, if not all, LTC insurers is to collect premiums and deny claims. Very old, decrepit folks are not able to put up much of battle against these denials.

      In any event,the level premium policies appear to also be level benefits policies. In other words, your benefits can never increase to even come close to keeping up with inflation.

      Insurance policies are not computers and have not improved.