From Medicaid To Medicare

Their plan is extremely ambitious and would require major changes in health, long-term care, and even housing finance policy. Depending on the details, it potentially would be costly, though the authors say it would be fully funded.

Some of the expense would be offset by lower Medicaid costs and perhaps though health care savings. But the plan also would require a new income surtax on older adults.

The plan is bold. Rather than trying to restore some of the major Medicaid cuts Congress enacted last year, the Brookings authors would completely restructure the US long-term care system.

Currently, it is built around Medicaid, which is run by the states under broad federal rules and funded both by the states and the federal government. Medicaid long-term care benefits are available only to people with very low incomes, few financial assets (though they may retain substantial home equity), and significant functional and cognitive limitations. Benefits vary widely by state.

By contrast, with very limited exceptions, original Medicare provides no long-term care benefits at all.

How It Would Work

The Brookings authors would turn that system on its head. Medicaid would provide both long-stay nursing home care and home care without waiting lists, a chronic problem in the existing system. Eligible Medicare beneficiaries would receive home-based care.

An individual would qualify for Medicare LTSS benefits if they required assistance with at least two activities of daily living such as bathing, eating, and toileting. They’d also trigger benefits if they were living with cognitive impairment from, for example, dementia.

Medicare would pay licensed providers directly for services such as home health and personal care, transportation, adult day services, and care coordination.

It would not pay family members or friends for their caregiving time. Presumably, Medicaid could continue to do so for those still on that program.

While the Medicare home care benefit would be universal, it would be based on a recipient’s level of need and ability to pay. All assets, including home equity, would be included when calculating wealth.

Like the social insurance system in France, for example, the program would be steeply means-tested though everyone would get at least some benefit.

For example, those with very low incomes and assets may pay nothing out-of-pocket, while those with the highest incomes may be required to pay as much as 90% of their care costs. Similarly, those with relatively low levels of need might receive 10 hours of assistance a week, while those with significant disabilities might get up to 60 hours.

What Would It Cost?

People might be able to purchase private long-term care insurance to fund any out-of-pocket costs. The authors also contemplate a new way to borrow against home equity.

Reverse mortgages currently make this possible but are complex and may come with stiff fees and thus have never been very popular.

The Brookings authors suggest an alternative called deferred payment agreements, which are common in the United Kingdom. In effect, the government lends money against home equity that homeowners, in turn, would use to cover their Medicare LTSS copayments. When the homeowner dies, the property would be sold and the loan repaid.

How much would this long-term care plan cost? The authors estimate between about $110 billion to $150 billion, depending on the benefit structure. Beneficiary copayments would cover $16 billion to $27 billion. Another chunk could be paid by the states, which would enjoy significant savings by shifting significant Medicaid LTSS costs to Medicare.

Thus, the annual net cost to taxpayers after beneficiary copayments, state payments, and other offsets would be roughly $40 billion to $70 billion, depending on the benefit structure.

The authors would fund that expense with an income tax surcharge for those age 55 or older.

Challenging Issues

Shifting long-term care to Medicare makes sense on many levels. One key benefit: The potential to better integrate medical care with supportive services. Better organized, holistic, care is critical. But a handful of good models have been hard to replicate.

And nobody should expect this care will be automatically less fragmented just because the payer is the same for medical treatment and long-term care. Just think about the inability of physicians and hospitals to coordinate with one another as they treat the same patient, even when they all are paid by Medicare.

The authors raise many complex and challenging issues.

For example, not paying family caregivers will save money but be extremely controversial, especially among younger people with disabilities.

Perhaps the most controversial idea is the income tax surcharge for those age 55 and older. Paying for reform such as this always will be the biggest challenge. But raising income taxes on just some households to pay for a new Medicare benefit may be especially fraught. I’ll explain why in a future column.

Still, the authors deserve great credit for putting out an ambitious and detailed long-term care plan. And for avoiding the trap of trying to patch a system that is irretrievably broken.