RESEARCH General Health

ELDER CARE
Health-care expert proposes overhaul of long-term care financing

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

6/1/02

CHAMPAIGN, Ill. — As Americans live longer, they are more likely to develop age-related health problems that limit their ability to live independently. Some type of long-term care is needed, but financing such care can inflict a terrible punishment on families as the average cost of a nursing-home stay reaches $54,000 a year.

Richard L. Kaplan, a health-care expert at the University of Illinois at Urbana-Champaign, proposes a comprehensive restructuring of long-term care financing to tackle this growing problem. Under his plan, all nursing-home costs would be covered by Medicare, the government's health-care system for older Americans, while care in non-nursing-home settings would remain a private responsibility.

To help families pay for care outside of nursing homes -- such as assisted-living facilities and continuing-care retirement communities -- Kaplan proposes that private long-term care insurance be improved to make it more appealing.

Fewer than 10 percent of older Americans have long-term care insurance, Kaplan wrote in an article to be published in the University of Illinois Law Review. This is largely because such insurance "is expensive, confusing and of uncertain reliability." Shifting the cost of nursing-home care to Medicare -- financed by general tax revenues plus premiums paid by enrollees -- would reduce the cost of private premiums and make private insurance "more affordable and less off-putting to prospective buyers," he wrote.

He focuses his criticism on various Medicare restrictions that "no longer make sense" in the context of today's long-living American. He zeroes in, for example, on the distinction between physical and mental impairments. Medicare will pay for physical disabilities treated in a hospital or nursing unit, but will not pay for mental or cognitive impairments treated in nursing homes.

"This distinction is a trap for the unwary that is difficult to fathom and impossible to justify," Kaplan wrote. "Medicare pays for physical conditions that might have been prevented (such as emphysema), but does not pay for conditions (such as Alzheimer's) over which patients have no control."

Medicare's restrictions mean that elder Americans and their families face substantial financial exposure when they enter a nursing home. The only other government program, Medicaid, is not an answer for middle-class Americans because it "requires impoverishment" to satisfy its requirements for government aid. By restructuring Medicare and private care insurance, "families could protect themselves as they see fit, without facing the cruel prospect of destitution when a loved one enters a nursing home," Kaplan concluded.