While modern medicine is helping us live longer, more active lives, most of us will still require long-term care at some point in our futures. If you think this is an issue only for senior citizens, think again. Much like retirement, Americans need to plan early and save for their nursing home or home-care options.
With the baby boomer generation set to retire, the U.S. is verging on a long-term care crisis. Millions who haven’t planned for this expensive stage in life are rapidly approaching it. Since Medicare doesn’t cover most long-term care, these costs can quickly bankrupt seniors whose assets preclude them from Medicaid coverage.
This has left many Americans with two unappetizing choices: to quickly burn through their savings paying for long-term care, or to hide their assets and get the government to pay for their care through Medicaid. The first is unfair to seniors who have worked hard to save for retirement. The second is unfair to taxpayers who don’t want to see skyrocketing Medicaid spending due to abuse in the system. (Indeed, hiding assets from Medicaid has become a “cottage industry” for many attorneys.)
We must recognize that seniors are gaming the Medicaid system because they are unprepared for the costs of long-term care. Essentially, Medicaid has become their long-term care policy. It is critically important, then, for Congress to enact reforms that motivate Americans to better prepare for this stage of life.
As Congress looks for solutions, we must take care not to create more problems. Entitlement spending has ballooned over the past decade, rapidly engulfing a growing portion of our federal budget. To make our long-term care system sustainable and affordable, Congress needs to pass market-based reforms and encourage individuals to take responsibility for their long-term care needs.
In the 2005 Deficit Reduction Act, Congress began addressing fraud and abuse in the Medicaid system. We changed the law to account for the equity of a senior’s home, making seniors with home equity above $750,000 ineligible for Medicaid funding. We also strengthened the “look-back” laws to prevent seniors from dumping assets to qualify for Medicaid — for example, selling their home to a family member for a dollar.
These changes help ensure Medicaid funds are available to those who truly need them. But there is more we can do. Further lowering the home equity exemption and extending the look-back laws from the current five years to eight or even 10 years would strengthen Medicaid for the intended low-income beneficiaries.
Congress must accompany Medicaid reform with meaningful incentives for purchasing long-term care coverage. Currently, only 5 percent of nursing home care is paid for by private insurance coverage. Clearly, this ratio is unsustainable in the long run, especially for the baby boomer generation. One of the most effective ways we can encourage individuals to purchase long-term care insurance is through the U.S. tax code. From past experience, we know financial incentives are effective motivators. Accordingly, if we offset some of the cost associated with long-term care coverage, more Americans will be likely to purchase policies.
There are several other reforms that will help Americans afford long-term care. The first is expanding health savings accounts, which are rapidly growing in popularity. Currently, individuals can use HSAs to pay for long-term care insurance premiums. If Congress makes it easier to get an HSA and expands the contribution limit, we can encourage more Americans to save money, tax-free, for use in purchasing long-term care policies.
Another important component is expanding the use of advance directives, like a medical power of attorney. Advance directives are an important way to ensure the proper wishes of our seniors are observed. In the previous Congress, I introduced a resolution calling attention to advance directives. Now, Congress can go further by encouraging seniors to plan ahead. We could achieve this by offering a break in Medicare Part B premiums for seniors who maintain an advance directive.
Will there be costs associated with these reforms? Yes, but as a physician, I like to use the old adage “an ounce of prevention is worth a pound of cure.” These reforms will save money in the long run because seniors will be less likely to rely on the government for their nursing home and home-care costs.
By reforming Medicaid and using incentives to encourage seniors to plan ahead, we can eliminate the choice between gaming the system and bankruptcy. And by using market-based solutions, we can satisfy both seniors and taxpayers with fiscally responsible ways to meet our nation’s long-term care needs.
As a society, we need to invest in “preventative care,” from managing diseases to preparing for our future medical needs. We can all agree that long-term care shouldn’t put our seniors in dire straits. By helping Americans plan ahead, we can deliver quality and affordable care to our elderly citizens.
Rep. Phil Gingrey (R-Ga.) is chairman of the Republican Healthcare Public Affairs Team and the health care reform subcommittee of the Republican Policy Committee.