Although the public sector
The ability of today’s health care system to provide high quality care to an aging society depends on the resources available to pay for these services.Although the public sector will bear much of the burden of health and long term care costs many of the required future resources will need to come from the elderly themselves, as is the case today.Unless public insurance systems become much more generous in coming years the elderly will bear the costs of many types of uncovered services.
Drugs and long term costs will top the list of uncovered services.
However, emerging elective procedures, perhaps in die area of gene therapy, and cutting edge diagnostic tools may not be uniformly covered by future insurance programs. Senator George Allen, R-Va. , introduced the Long-Term Care Act of 2005. The legislation, if passed, will make it possible for individuals to use money from their 401 (k) and 403 (b) plans to purchase long-term care in insurance with pretax dollars without penalty.
The Long-Term Care Act is similar to companion legislation introduced in the House by Rep. Lee Terry, R-Neb. It would allow individuals to use their Individual Retirement account (IRA) pretax dollars without penalty in addition to using their 401 (k) and 403 (b) plans. Allen’s proposal, cosponsored by Sen. Mel Martinez, R-Fla. , was referred to the Senate Judiciary Committee. The House bill was sent to the House Sub-Committee on Health just this past March. By the year 2030, Medicaid’s nursing home expenditures are expected to reach $130 billion per year.
Private long-term care insurance could reduce Medicaid’s future institutional care expenses by more than $40 billion each year, while giving those who are insured alternatives to nursing homes, such as home care, adult day care or foster care and assisted living. The costs of long-term care can be staggering and quickly exhaust even a modest estate. The magnitude of the cost for long-term care is potentially catastrophic to the average American with the median annual income of $52,000.
According to a recent market survey, nursing home stays average two and one-half years with an average yearly cost of $55,000 per year or a total of approximately $138,000. It is easy to see how such care could quickly deplete the asset of a household. Four out of 10 people living to age 65 and older will use a nursing home for long-term care and 21% of those will stay for 5 years longer. Many others will use home health care. Depending on the required level of skill, home health care may equal the cost of nursing home care. The Congressional Budget Office has projected long-term care costs will double from 2000 to 2020.
Further compounding the situation has been the diminished willingness of the federal and state governments to continue to absorb over fifty-seven percent of the long-term care costs through Medicare and Medicaid. Policy-makers have been seeking and choosing techniques that limit public responsibility and financial involvement in favor of transferring more and more costs back to the individual through the private system. A major policy goal is to change public opinion to view long-term care a particular risk and thus the responsibility of the individual rather than that of the government.
With such a shift in thinking long-term care insurance would be a component of retirement planning with emphasis on a private-sector solution rather than a public one. Facing the reality of financing long-term care may require a national crisis in which care becomes unavailable or unaffordable. Under such circumstance, there might be a heightened awareness of the need for clear public policy. Policy-makers will have to face the only feasible alternatives to the existing system: full public financing of long-term care funded by tax dollars or greater incentives for private long-term insurance both through group and individual plans.
These approaches are far from perfect by to leave the system as it is could mean long-term damage to the economy through the hugely inefficient diversion of money to pay for long term care that we see today. Reference: American Council of Life Insurance (1998). Who will pay for the Baby Boomers’ Long- Term Care Needs? Washington, D. C. : Cynthia E. Conrad & Ann Costello Beam, B. and J. McFadden (1998). Employee Benefits. Detroit: Dearborn. Bell, A. (2001) . “Group LTC Plans Jump 121% Last Year”. National Underwriter. (http://www. nunnews. com/zrchives/th_archive/2000/-105-01/1200118grouplte. asp).