NCPA - National Center for Policy Analysis

Long-Term Care System in Crisis

February 15, 2013

The United States is not currently meeting the needs of the frail elderly and disabled populations, many of whom require help with activities of daily living including bathing, going to the restroom and dressing as well as cooking, housekeeping, transportation and managing finances. With 77 million baby boomers set to enter retirement, politicians need to make concerted efforts to ensure that long-term care (LTC) financing is sound, says Diane R. Calmus, a former research assistant at the Heritage Foundation.

  • Long-term care is used primarily by the disabled -- those who have a variety of physical and cognitive impairments -- and the frail elderly -- those older adults with any combination of chronic conditions.
  • Medicaid is the largest source of long-term care, which is becoming increasingly more expensive.
  • LTC costs have outpaced inflation since 2003, as the annual cost of a private room in a nursing home has risen to $90,520.
  • Because people do not plan well enough in advance for LTC care, 63 percent of LTC funding originates from government programs, of which taxes are the largest source, while private financing accounts for only 22 percent of LTC spending.

To solve the looming public sector LTC financing problems, policymakers must address the underlying problems.

  • Attempts by Medicaid and Medicare to recoup LTC expenses through restricted eligibility requirements and mandatory estate recovery account for only 0.61 percent of total Medicaid spending.
  • New trends in the marketplace are attempting to design new options for funding future LTC needs, including premium return riders which return premiums to policyholders if care is not needed.
  • New care settings are also being developed that transition LTC patients out of traditional nursing home settings into assisted living arrangements that allow patients to live semi-autonomously in an assisted living facility or in their own home.

The soon-to-retire baby boomers will live longer due to advances in medical technology and are more likely to need long term care than previous generations. Calmus calls for new innovative efforts to solve the LTC funding problems that will continue to plague already strained public resources.

Source: Diane Calmus, "The Long-Term Care Financing Crisis," Heritage Foundation, February 6, 2013.


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