Financing Long-Term Care (LTC) is a topic of great
interest at the federal, state and personal levels. The main difference between paying for LTC at the individual level as opposed to the government level is that ostriches might get lucky at the individual level - they might never need LTC. The ostrich strategy, while viable for the individual, has less likelihood of success in the case of a family concerned about the prospects for a husband and wife or for three or four parents. But at the government level, the law of large numbers applies - really large numbers in terms of exposed population, those who will need such care and the costs that will result.

There are many significant issues and they will effect most of us directly or indirectly in the long run.  Our aging population will continue to produce increasing numbers of people who need LTC. Currently, the only government program that covers a meaningful percentage of the cost of LTC is Medicaid, which is shared between federal and state governments. State Medicaid budgets are heavily burdened by LTC costs even though individuals cannot qualify for Medicaid without spending down their 'non-exempt' assets, committing their income, and re-paying the state from the value of their 'exempt' assets after their death. In other words, assets are only temporarily exempt.

To curb Medicaid costs, government squeezes LTC providers by providing inadequate reimbursement for caring for Medicaid recipients. Not surprisingly:
• LTC providers are going bankrupt and closing their doors in record numbers.
• Other LTC providers are opting not to become Medicaid-certified.
• Upward pressure is applied to private-pay prices as a result of cost-shifting.
• Medicaid recipients and their families complain about poor care.
• Medicaid recipients are frequently placed in facilities far from home.
• The problems of turn-over of LTC provider staff are exacerbated.

The potential cost is so great that it is hard to find politicians willing to talk about expanding government-paid LTC. Instead the government is attacking LTC problems on two fronts.

At the provider level, the government is trying to tackle quality care issues with tougher standards and increased paper-work requirements. Obviously, this can have some beneficial effects, but it also is expensive for providers, contributing to the undesirable impacts bulleted above.

At the tax-payer level, the Federal government is using a carrot-and-stick approach. 

The carrots include:
• Tax incentives for providing informal care for one's own family members.
• Tax incentives for buying long-term care insurance (LTCI; as opposed to LTC)
• Negotiating a group LTCI program for Federal employees, to be paid for entirely by the Federal employee (no government subsidy) and to be effective perhaps as soon as 2002

The above tactical carrots all support a strategy of moving our society away from an entitlement mentality and toward personal responsibility.

Along with the carrot, comes the stick. The stick consists of increasing efforts to stem Medicaid fraud, to foil re-positioning of assets aimed at avoiding Medicaid's grasp, and to recover costs from Medicaid recipient's estates. Unless Medicaid benefits are funneled solely to the needy, as intended by law, the government has no chance of being able to afford provider reimbursements sufficiently high to allow providers to give satisfactory care.

The Federal government is also planning a major
national campaign to educate the public about:
• the likely impact of LTC on individuals as recipients of care, as care-givers and as employers or fellow employees affected by a fellow worker's care-giver stress.
• how people can plan ahead so that LTC needs do not wreak tragedy on their family.

Kansas and Missouri have also implemented programs to encourage personal responsibility for eventual LTCI costs.

Claude Thau is a nationally-known LTCI expert, doing LTCI wholesaling (through Target Insurance Services) and LTCI consulting. Phone: 913.384.6300 or e-mail: cthau@targetins.com