Health Care Reform and Long-Term Care
By: Brian O'Connell

The U.K. is studying a proposal that would “nationalize” long-term nursing home care, and the U.S. may not be far behind. Here’s the deal behind the proposal that could lead the U.S. down a path where long-term care, including the country’s approximately 77 million Baby Boomers, is mandatory.

While mandatory long-term care isn’t exactly on the country’s doorstep, it is on the horizon. The Urban Institute estimates that 10 million Americans needs help in their sunset years maintaining their quality of life, often for simple things like getting dressed and going to the bathroom.

But the cost for long-term care might induce sticker shock on even the most jaded health care analyst – or the wealthiest senior citizen. Nursing home care costs average about $75,000, according to the Urban Institute, while home health aides cost around $20 per hour.

Given the rough-and-tumble economy, and the crater it has left in the retirement portfolios of millions of senior citizens, the number of Americans who can afford their own long-term care should dwindle. While Medicare and Medicaid are expected to pick up some of the load, the public health organization’s balance sheet is being recorded in redder numbers than ever. Government estimates show that sometime between 2030 and 2040, mandatory spending on Medicaid, Medicare and Social Security will exceed the tax revenues used to pay for these mega-social services mandates.

In addition, Medicaid was never designed to shoulder the burden of the nation’s senior citizens, and was created primarily to help poor families gain access to decent health care services. But now, according to U.S. Government estimates, 33% of all Medicaid spending goes to nursing home care.

Right now, the U.S. has a patchwork, public/private system for dealing with long-term care insurance. Medicaid and Medicare do cover limited long-term care (mostly in nursing homes, but with some home-based care services) and many private insurance plans do offer long-term care coverage. But that coverage can be pricey. The Urban Institute says that good long-term care coverage can cost a 65-year-old approximately $3,000 annually. Currently, only seven million Americans out of the 250 million Americans who do have health coverage, have long-term care insurance.

That’s why under the health care reform proposals on the table in Washington, mandatory long-term care is among the items at the top of the list. Already, a Senate proposal includes a provision where the U.S. Government will provide long-term care insurance, most likely managed through Medicare.

But President Obama and national health care advocates will also look outside the U.S. for some ideas on long-term care. Germany has had mandatory long-term care coverage for 10 years and the United Kingdom, through its National Health Service, is getting closer to establishing the same. In the U.K., the government already pays for a good chunk of its senior citizens long-term care needs, but does so in partnership with private insurers -- the bulk of the costs covered are through private insurance, right up to the policy limit. Anything above and beyond that comes from public funding.

A public/private long-term care strategy may well find its way into any health care reform legislation coming out of Washington. With higher public health care costs and more Americans likely looking for long-term care, the demand for it will undoubtedly be present.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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