Urban Legends Haunt Long-Term Care Decisions

Published June 1, 2001

According to the American Opinions on Reforming Medicaid survey, conducted in August 1995, 72 percent of Americans cannot afford to pay the high cost of long-term health care (LTC) without financial assistance. Our current reliance on Medicaid to finance LTC propels people towards dependence on government and personal impoverishment.

Medicaid cannot long withstand the coming tidal wave of aging citizens. Unless there is a fundamental shift in the direction of a long-term care system based predominately on private-sector insurance, Medicaid and other government-funded entitlement programs will result in skyrocketing spending, increased taxation, and further rationing of health care services.

LTC insurance is a sensible, free-market alternative that can ease the fiscal burden on state and federal governments while allowing a level of freedom not found in restrictive government plans.

Seventy-six percent of respondents to the Reforming Medicaid survey also said they want government to move away from the current Medicaid financing program to one grounded in private long-term care insurance. Yet, the survey also noted few Americans understand what LTC options exist. Given that knowledge gap, it is no wonder LTC urban legends exist.

Urban Legend #1 — Don’t need it!

Seventy-six percent of Americans believe they will have no need for nursing home care, assisted living programs, home-based or community-based care, or any other LTC service.

The facts, however, show otherwise: Two out of five Americans will need some LTC services some time in their life. One in five Americans over the age of 50 will need LTC services during the next 12 months.

The U.S. Census Bureau reports the over-85 population is the fastest growing age group . . . and one out of four of them already lives in a nursing home.

Last year, about seven million men and women over the age of 65 needed long-term care. By 2005, the number will increase to nine million.

Urban Legend #2 — Can’t afford it!

Some interest groups and vocal advocates for increased or total government funding for long-term care incorrectly insist that most Americans cannot afford LTC insurance.

Insurance buying patterns tell a different story. A majority of LTC insurance buyers have annual incomes less than $35,000, and one-third of those buyers had assets valued at less than $30,000. Those figures would suggest LTC insurance is a viable option for retiring middle-class seniors, particularly when balanced against the high costs incurred by someone without financial protection.

Nursing home LTC can average around $46,000 a year, with East and West Coast facilities reporting twice that amount. While in-home LTC is less expensive, bringing in an aide to help with dressing, bathing, feeding, meal preparation, and similar chores can easily top $12,000 a year. Those figures do not reflect the emotional or physical cost of the family caregiver or the added cost of skilled aid, like physical therapists.

Government bureaucrats promising an LTC government entitlement program are merely pandering to seniors. Real reform would allow a 100 percent tax deduction for all qualified LTC insurance premiums and tax-free distribution of 100 percent of all benefits. Increasing Medicare or Medicaid benefits to cover LTC is no answer: Doing so would merely redistribute private wealth from one social group to another.

Urban Legend #3 — Not a good value

Advocates for government funding claim LTC insurance is not worth the cost of premiums. That position raises the following questions:

  • Is the cost worth the freedom of choice for quality care?
  • Is the cost worth being free from personal debt?
  • Is the cost worth knowing your family will not be financially or emotionally burdened with your care?
  • Is the cost worth being free of government rationing experienced in Medicare and Medicaid?
  • Is the cost worth avoiding further dependence on government?

Urban Legend #4 — Medicare will pay for it

Reliable studies show most people fail to prepare for the long-term care event because they mistakenly believe Medicare or their own health insurance will pay for care. This knowledge gap gives consumers a false sense of security.

According to the Health Care Financing Administration, two out of three nursing home residents—about one million people—rely on government welfare to pay for their care.

Medicare has restrictive limits that cover post-hospital skilled nursing and rehabilitation care for a maximum of 100 days for each illness. For the first 20 days, Medicare pays the full cost of care . . . but for the next 80 days the patient must make substantial coinsurance payments. The 2001 co-pay is $99.00 a day from the 21st day to the 100th day.

The average length of stay in a skilled facility is reportedly one year, after which there is no Medicare benefit in any other level of care such as custodial or intermediate care. Most long term-stays are at the custodial or intermediate care level.

Medicaid is welfare and as such requires forces a patient to declare a state of impoverishment before being eligible for benefits. Private individual and group health insurance plans do not cover LTC costs.

Urban Legend # 5 — LTC is for old people

The need for LTC is not limited to senior citizens. While seniors represent the majority of LTC patients, younger patients can also require long-term care: for such severe and unexpected illnesses as AIDS or cancer, for example, or to rehabilitate from motor vehicle or other accidents. According to data reported by the Employee Benefits Research Institute in July 1995, nearly 40 percent of the 12.8 million people who need help with everyday living activities are between the ages of 18 and 64.

Urban Legends Aside

LTC is a two-fold issue and must be addressed that way.

First, there is the consumer knowledge gap, a threat to the financial well-being of everyone who mistakenly thinks long-term care is a luxury rather than a necessity in the twenty-first century.

Second, there is the notion that government can effectively address the potential cost and administrative complexities of a program vastly more expensive than Medicare. To believe the federal government can or should operate such a program is a step towards a health-care socialism that would rob all senior citizens of the independence they cherish.