Medicaid, a 1960s-era program that was supposed to provide health care for poor women and kids, has become the biggest single payer of long-term care services -- more than $100 billion annually, or 43 percent of all home care and nursing facility costs.
Supporters insist that Medicaid is a valuable safety net for the poorest elderly and disabled. They are right, but what they don't say is that the program is hopelessly outdated, financially unsustainable and often defeats efforts to provide the best possible care to a medically fragile population.
If you are a middle-class senior and suffer a heart attack, Medicaid's sister program, Medicare, will pay tens of thousands of dollars to treat you in a hospital, provide follow-up care from your doctor and, if you have Part D drug coverage, even pay for your medications. If you need rehab after you are discharged from the hospital, Medicare will pay for that, too.
But what if you suffer from dementia? While there is very little that acute care can do for you, it is likely that you will need increasing levels of personal assistance like help eating or bathing. But Medicare won't pay for that.
So family members do what they can, and you draw down your own savings to hire aides. When you have spent nearly all of your financial assets (the government lets you keep just $2,000, some personal possessions and perhaps your house), you become eligible for Medicaid, which is run jointly by the federal government and the states.
Medicaid is only required to pay for nursing home care. While most states also provide assistance at home, they don't have to, and these programs are often woefully underfunded. And because Medicaid is among the states' biggest spending programs, it is also a huge target whenever the economy slumps and tax revenues sag -- like today. In recent months, California, New York, Illinois, Rhode Island, Florida and other states have all put Medicaid benefits on the block.
While states and the federal government struggle to update Medicaid though a maze of waiver programs and patches to an increasingly outdated law, their efforts are a little like trying to add disc breaks and an electronic ignition to a 1965 Plymouth. It is, in the end, still a 1965 Plymouth.
Not only are the frail elderly and disabled at the mercy of increasingly desperate governors and state legislators, but they have to jump though incredible hoops to get the care that is most appropriate for them.
For example, many frail elders suffer from multiple chronic conditions. More than almost anyone, their care needs to be carefully coordinated. Ideally, the medical system would make sure they could move seamlessly from acute care to long-term care, either at home or in a nursing facility.
But, with the exception of a handful of programs such as PACE, which combines adult day care with medical treatment, that almost never happens. As hard as it is for even one insurance company to coordinate care, think about what a challenge it is when your care is being paid for by two separate programs -- Medicare and Medicaid -- that rarely even communicate with one another.
Despite that tragic lack of coordination, Medicaid now spends nearly one-third of its total budget on long-term care services and half of its funds on medical and personal care combined for those frail elderly and adults with disabilities who are jointly eligible for Medicare and Medicaid.
That huge bill is a big reason why the long-term financial sustainability of Medicaid is at risk. The Congressional Budget Office projects that by mid-century, the federal government will be spending one out of every six tax dollars on Medicaid alone. Two-thirds of all federal revenues would be spent on Medicare and Medicaid combined. Realistically, that won't happen.
Is there an alternative to this unsustainable mess? There are several actually. We could transfer long-term care to Medicare, or sell universal private long-term care insurance through Medicare in much the same way we sell the Part D drug benefit today. Or we could create a national long-term care insurance program -- something like the CLASS Act that Sen. Edward Kennedy, D-Mass., has proposed. With premiums as low as $5 a month for those with very low incomes, the CLASS Act would make coverage accessible for even the poorest Americans.
However, its benefits would be modest -- not nearly enough, for example, to pay for nursing home care. So low-income seniors would still have to rely on Medicaid to pick up the difference. A better plan would create a special Medicare benefit to supplement insurance for those seniors who need extra financial help. That way, those elderly would get all of their care -- both acute and long-term -- through a single program.
None of these plans is perfect, but they are all better than the mess we have.