Insuring Americans for long-term care: Challenges and limitations of voluntary insurance
Under our current system, the financing options available to most individuals who need long-term services and supports (LTSS) are limited to Medicaid, personal savings and unpaid family caregivers. Medicare does not pay for long-term services and only between 7 and 9 million Americans have private long-term care insurance. Many older adults pay for LTSS (averaging $81,000 per year in a nursing home) out of their income and personal savings until they are poor enough to qualify for Medicaid, a means-tested welfare program. In an effort to avoid exhausting their resources and relying on Medicaid, others depend on unpaid family support or go without needed services.
Among current sources of spending on LTSS, Medicaid is by far the largest payer, funding just over 62 percent ($131.4 billion in 2011) of LTSS expenditures. Our reliance on Medicaid to fund LTSS raises concerns about whether we can reasonably expect this program to continue in its dominant financing role when the baby-boom generation moves into the later part of old age (the first baby boomers will turn 80 in 2026). Without any change in the system, this demographic shift will produce rapid increases in Medicaid spending. It is not clear if the state and federal tax revenues that fund Medicaid will be sufficient, at their current levels, to cover the spending growth.