Although the debate over Medicare reform has had significant public exposure, the proposed cuts in Medicaid have received little attention. Yet these cuts could seriously impact the lives of millions of elderly citizens and their families.
Medicare has done an admirable job of providing coverage for physician and hospital care, however, it does not provide for the custodial long term care services that so many elderly need. The responsibility for paying for these services rests on individuals and the Medicaid program. Of the $107.8 billion spent in 1993 on V nursing home and home care services, individuals paid $38.5 billion (36%) and Medicaid paid $43.7 billion (41%). Private long term care insurance accounted for less than 1% of these expenditures.
Sixty-four percent of people over 55 have incomes below $20,000, and their ability to pay directly for long term care services is limited. One visit from a home health aide can cost $50, and over the long term this expense can become unmanageable for persons with modest income. A year of nursing home care costs an average of $38,000, depleting the life savings of many middle class elders. Medicaid is the safety net many elders find they must rely on once they have exhausted their resources on formal care. The projected increased need for long term care that will come with the aging of the population combined with the proposed budget cuts in Medicaid are prompting the Federal government, individuals, and states to look for other means of covering long term care expenditures. One such alternative is long term care insurance.
Long term care insurance has the potential to decrease Medicaid expenditures through helping individuals avoid or delay exhausting their own resources on long term care services and becoming eligible for Medicaid coverage.