• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • GUEST POST: Medicaid’s Looming Long-Term Care Crisis

    Scott J. Ferrell/Congressional Quarterly/Newscom

    Scott J. Ferrell/Congressional Quarterly/Newscom

    As we work to rein in wasteful spending and improve retirement security, our nation cannot afford to overlook Medicaid’s long-term care financing crisis.

    We’re completely unprepared for the coming “age wave.” More than 15 million Americans will be 85 years or older in 2040. While seven in 10 seniors will need some type of long-term care (LTC) during their lives, only one in 10 has private LTC insurance coverage. Almost 14 million seniors could suffer from Alzheimer’s in 2040, and the annual rate for a private nursing home room continues climbing, reaching $81,030 in 2012.

    Research shows many Americans mistakenly believe they have LTC coverage through Medicare when they do not. The misinformation puts their retirement plans at risk. Without change, millions of middle-class baby boomers will turn to a welfare program, Medicaid, to finance these needs.

    The authors of Obamacare pretended to solve Medicaid’s LTC financing problems by creating the Community Living Assistance and Support Services (CLASS) program, a national entitlement, promising a daily cash benefit to disabled Americans. The program failed because liberals promised the impossible: a self-funded, fiscally sound program that prohibits underwriting without forcing healthy Americans to participate. As it fell apart, Senator Tom Harkin (D-IA) criticized CLASS because “it’s voluntary.”

    Less supportive Democrat Senators called it a “Ponzi scheme.” And the Congressional Budget Office (CBO) warned it would “inevitably add to future deficits (on a cash basis) by more than it reduces deficits in the near term, even though the premiums would be set to ensure solvency of the program.”

    Aggressive congressional oversight forced Department of Health and Human Services (HHS) Secretary Kathleen Sebelius to concede the program was unsustainable and admit she lacked legal authority to rewrite the program. HHS attorneys warned CLASS could leave some enrollees “worse off” or unable to “recoup their paid premiums” once it failed due to legal challenges.

    The Secretary stopped implementation, but she defied commonsense by urging Congress to keep the budget-busting program on the books. When Senate Democrats finally agreed to repeal CLASS, they replaced it with a flawed commission and tasked its Democrat-appointed majority with producing a plan in September. Congress should reject any recommendations for CLASS 2.0. We can’t afford a new mandatory, publicly funded LTC entitlement.

    Instead, lawmakers should listen to the Government Accountability Office and better inform middle-class baby boomers of their probable need for LTC and the fact Medicare won’t cover it. This gives patients and caregivers time to plan ahead. Unfortunately, the Obama Administration refuses to improve its taxpayer-funded efforts to increase Americans’ awareness of this problem and has rejected calls to work with state governors to expand private LTC coverage. Liberal advocacy groups have long opposed this approach, preferring to force Americans to pay into a new federal program. Like CLASS, it would collapse under empty promises years before a shrinking group of American workers struggles to fund Medicare and service interest on the debt in 2040.

    CLASS and the commission are distractions. We won’t solve our LTC problem without reforming Medicaid, our nation’s default LTC program. Medicaid LTC spending has grown at an annual rate of 6.5 percent since 1995. According to the CBO, federal spending in this area will top $1.1 trillion annually in 2021.

    States also struggle as increased Medicaid spending crowds out other budget priorities, and they blame federal rules, allowing individuals with substantial assets to enroll in this welfare program. In a letter to Congress, the state of Virginia writes “the federal government should give states greater flexibility to consider assets when determining eligibility for LTC coverage through the Medicaid program.” The state of Wisconsin agrees this will “help ensure the long-term sustainability of such programs for their residents in most need of government assistance.” Federal rules force states to disregard more than a half million dollars in home equity and the entire amount of other valuable assets during enrollment.

    Making matters worse, the 2010 law prohibits states from tightening loopholes that allow welfare abuse. Virginia provides an example of a Medicaid applicant who purchased a $900,000 annuity, naming his wife the beneficiary of $89,000 per month. Obamacare forces Virginia to ignore this income when deciding eligibility.

    Why should Medicaid allow middle-income and upper-income Americans to have their LTC financed by taxpayers so they can pass inheritances along to their children? Since 2000, seniors’ home equity grew by 50 percent, reaching $3.2 trillion in 2013. Easy access to welfare is unsustainable, and it creates no incentive to protect assets with LTC insurance or to use a home-equity conversion for LTC needs. Tighter restrictions won’t force seniors out of their homes, and federal law helps them appropriately protect these assets from Medicaid estate recovery through a program Congress expanded in 2005.

    To protect Medicaid for poor Americans, we recently introduced the Medicaid Program Integrity Act. The bill would give states the option to reduce the Medicaid home equity exemption as low as $50,000. It would also eliminate Obamacare’s Maintenance of Effort rules, preventing states from closing loopholes allowing Medicaid abuse.

    Congress should reject CLASS 2.0, encourage personal responsibility, and protect Medicaid for those it was intended to protect. Ultimately, this will give middle-class Americans greater choice, independence, and control over the long-term care services they need in a setting of their choice.

    Posted in Featured, Obamacare [slideshow_deploy]

    Comments are closed.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.