Long-term care: There's a better way
What should be done about long-term care?
There are some serious problems with the Democrats' CarePlus option.
First, it's a tax increase Hawai'i can't afford. Hawai'i residents already pay the fourth-highest state and local taxes in the country. CarePlus would increase that burden by $92 million a year. Research shows a direct relationship between a high tax burden and slow growth, and in the last decade, Hawai'i had the worst growth rate in the nation.
Second, CarePlus doesn't really help with nursing home costs. CarePlus yields only $70 a day for a year (and that after paying in for 10 years), while the average nursing home stay is 2.5 years at $150 a day.
Third, the CarePlus flat rate is regressive and unfair to the poor. It's also unfair to younger people, who should benefit both from low rates and from the good health that qualifies them for long-term-care insurance.
Finally, CarePlus fails to take on the real problems with the current long-term-care system. That system forces individuals into bankruptcy in order to qualify for Medicaid coverage of nursing home care. Nursing homes are places most people hope never to go. Caregivers turn to Medicaid and nursing homes out of desperation. And when they do, they discover that to qualify for Medicaid nursing home care, they must spend through the invalid's available resources.
There is an important exemption: patients can keep their own homes and still qualify for Medicaid. This exemption allows the middle class to qualify for Medicaid long-term care, while keeping their own homes to pass on to caregivers. The home exemption is why most people don't buy long-term-care insurance. Yet even though patients keep their homes under Medicaid, they are still forced into nursing homes, a poor alternative to receiving skilled care at home.
And from the state taxpayers' point of view, Medicaid presents an additional problem. The program requires the state to pay nearly half the nursing home care cost. Across the country, these Medicaid costs are bankrupting the states (in Hawai'i, the program already costs $115 million a year). Medicare, by contrast, is a 100 percent federal health insurance program for the elderly. We need a Medicare not Medicaid long-term-care program.
One proposed solution would work this way: The federal government would issue every Medicare participant a catastrophic health insurance policy to cover all long-term-care costs beyond a very high lifetime deductible. This would make the federal government the insurer of last resort. Such a Medicare catastrophic insurance program, manageable for the federal government because of the high deductible, would be financed through a Medicare payroll tax increase.
To cover costs until the Medicare deductible takes over, people would be encouraged to purchase private long-term-care insurance. Because such insurance would be used as the insured wished, it would go most likely for professional care at home.
The earlier in life one buys long-term-care insurance, the lower the level of lifetime payments, so the program would provide high incentives for people to buy insurance when they are young. The federal government would additionally provide front-loaded tax credits to encourage people of all ages to buy at the program's inception, which would help fund the program.
Besides these tax credit "carrots," there would be a big "stick": All employees declining to buy long-term-care insurance would have to sign a statement allowing the federal government to take their home if needed to pay for Medicaid-provided long-term care.
Such an insurance-based reform program would provide Hawai'i residents the in-home care they need for their later years, while keeping them out of Medicaid-financed nursing homes. Such a program would also save Hawai'i taxpayers not only the $92 million annually needed for CarePlus, but also the $115 million Hawai'i spends annually on Medicaid long-term care money the state could use instead for education.