Long-term Health Care will Cripple Finances in Future

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US Congressional subcommittee told that future long-term health care costs will cripple both family and government finances unless advance planning done.

The rising cost of long-term health care and US demographics could cripple the US financially unless something is not done soon, this according to analysts testifying at a US House Energy and Commerce subcommittee on Health.

Douglas Holtz-Eakin, director of the Congressional Budget Office, told the committee the largest source of long-term care in the US is free care given by family or friends. This type of care is really not free, since people must take time away from work and family.

The second largest payer for long-term care is the Medicaid program for the poor, testified Medicare and Medicaid Administrator Mark McClellan. In 2004, Medicaid spent more than $100 billion -- more than a third of total program spending -- on long-term care services.

Medicaid is the medical welfare program and requires a spend down of assets before one qualifies. Medicare, health insurance for those 65+, will only pay for a few days of long-term care (a maximum of 100 days between Medicare and individuals Medicare Supplement).

Many lawmakers would like to make it harder for the elderly to shelter their assets as a way to have the government cover more of their nursing home expenses.

Most Medicaid long-term care spending goes for care in nursing homes, which is both more expensive and less desirable to beneficiaries than living in the community with help, McClellan said. "Medicaid's current system of covering long-term care is out of date, yet it is one of the largest and fastest-growing sources of funding for long-term care for the elderly and people with a disability. That is not a sustainable combination," he told the subcommittee.

"We are concerned that some individuals who seek nursing home care under Medicaid may be engaging in certain financial practices -- through their attorney and financial planners -- that are forcing the states and the federal government to absorb the medical costs of individuals for whom Medicaid was never intended to cover,' according to a letter signed by Reps. Joe Barton, R-Texas, and Ed Whitfield, R-Ky.

"Governors are continuing to tell us they can't afford the program as it's currently in place," said subcommittee chairman Nathan Deal, R-Ga.

"Medicaid was never intended to be a long-term care insurance policy for people of means," said Barry Maram, director of the Illinois Department of Public Aid, which runs the Medicaid program in Illinois. "Our concern is that people who deserve Medicaid get it."

Many states provide tax incentives to encourage the purchase of long-term care insurance. Many others are now considering tax incentives. The federal government has tax incentives in place and is considering adding additional incentives as well.

"We want to encourage people to use their resources to buy insurance to take care of their long-term care needs and accept responsibility for paying for those needs as they age," said Christine Bronson, director of Minnesota's Medicaid program.

Private long-term care insurance has become a product attracting the attention of those between 40 and 65 years of age since the cost is very reasonable at those ages and a person's health usually is much better. Health is important in order to obtain coverage.

Simple demographics explain why, said Holtz-Eakin. Between 2000 and 2050, the number of people over age 65 in the US is expected to grow by two-and-a-half times, he said. At the same time, the "oldest old," those over 85, who are most likely to require long-term care services, will triple, rising from about 1.5% of the US population to roughly 5% by 2050. 60% of those individuals who need long-term care services are over age 65.

“Long-term care insurance is a common sense solution for many people who want to protect assets, preserve future and current retirement savings and remain independent. A couple does not want to burden their family with care giving nor do they want to risk savings to pay for future care, “said Matt McCann, an Illinois based expert in long-term care insurance planning.

McCann says a well designed long-term care insurance plan is very affordable and can protect the family from future long-term care health costs which are not paid by health insurance or Medicare.

In 2020 the average cost of care will be around $300.00 per day, just about double today's cost. This type of cost, either today or in 15 years, would have a huge impact on a healthy spouse who may still have a lifespan of 10 to 25 years beyond that.

For state and federal governments, the purchasing of more long-term care insurance will help reduce soaring Medicaid costs, cut state expenditures by reducing the number of Medicaid applications needing evaluation, and lessen the need for estate recovery efforts. Public education programs are attempting to educate the public on the shrewdness of buying private long-term care insurance. Federal and state tax incentives are additional encouragement to common sense.

The Long-Term Care Consumer Awareness Campaign Project, jointly funded by the Centers for Medicare and Medicaid Services and the US Department of Health and Human Services, was undertaken as a pilot project in five states. The original intention was to bring the campaign nationwide, notes Hunter McKay, coordinator of the program for HHS.

The project consisted of consumer education campaigns in Arkansas, Idaho, Nevada, New Jersey and Virginia. In addition to HHS, it was backed by the Administration on Aging, the National Governor's Association and the National Conference of State Legislators.

“From a public policy perspective, increased planning for long term care is likely to increase private financing and may reduce the burden on public financing sources,” HHS said in announcing the awareness project. The campaign was backed by paid commercials and by publicity and public service announcements on TV and radio.

“Since the cost of insurance is so much less then the cost of care, this makes a lot of sense. Medical science keeps getting better. This increases the problem of long-term care since we all live longer. Planning now is a wise choice from a family stand point and a public policy stand point,” McCann said.

McCann has told members of Congress that everyone knows the money needed to pay for everyone's future long-term care needs does not exist. Since more and more people will require help with their activities of daily living either due to age, health or accident, the nation must have a plan to fund this care.

"Without planning, an individual family must pay out of pocket until they exhaust their savings. At that point, the government pays, which means the taxpayer. This is a financial disaster for both a family and the nation," McCann said.

McCann, and many others, suggest tax incentives and additional public awareness programming to overcome overall public denial about long-term care.

"People always think it won't happen to them, it happens to someone else. Many excuses exist ... all of them silly. People must plan now, before they retire and when their health is still good," he said.

McCann added that premiums for very affordable for those 40 to 70 if the plan is designed correctly. People should check with a specialist in long-term care insurance. For additional information he suggests the web site of the National LTC Information Center: http://www.ltcinformationcenter.org. Or his web site: http://www.McCannLTC.com.

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Matt Mccann
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