What is the current long-term care funding under Medicaid?
Medicaid currently covers about two-thirds of nursing home residents, but this payment system is already stretched to its limit and will only get worse. Current Medicaid reimbursement rates are just 72% of the amount paid by private insurance and fewer facilities are willing to take new Medicaid patients. Currently, Medicaid cannot increase its reimbursement to providers because both Federal and State governments are experiencing budget crises while at the same time looking for ways to reduce Medicaid spending. State governments currently spend about 15% of their budget on Medicaid with over 70% of that going towards long-term care.
However, even when Medicaid does cover patients’ long-term care needs, it comes at a very high price to the patients and their families. The typical Medicaid applicant’s spouse in 2005 will have to spend down to $19,020 in remaining assets to qualify for long-term care through Medicaid. In addition, there is a three-year lookback period to ensure that the applicant didn’t give their money away. These qualifications can be devastating to the patient, and especially difficult for a spouse who does not need long-term care, but is now subject to strict financial limitations. Even when Medicaid does cover patients, it barely covers the patients’ costs and may severely limit the type of facilities in which they are able to live.
What lies ahead for Medicaid and long-term care coverage?
While the situation currently seems bad for the Medicaid reimbursement system, this situation will intensify as long-term care costs are expected to increase at a rate significantly outpacing inflation for the next 25 to 50 years. This increase will put additional pressure on state and federal governments to sufficiently fund the Medicaid program. Often, the typical state budgeting mindset is that the budgets should only increase in pace with inflation, which could mean Medicaid programs will be severely under-funded. The result of this under-funding is likely meaning that Medicaid coverage will have to get worse. Lower benefits, tighter eligibility requirements, and a longer asset lookback period could all be consequences.
As a result, the hole in the typical American’s insurance safety net will grow.
What role do employers play in this crisis?
Employers are a natural candidate to help solve this funding crisis. Offering true group long-term care coverage will protect against employees having to financially devastate themselves in order to qualify for Medicaid. Currently, almost 60% of people have dental coverage, which is convenient for employees, but offers no meaningful protection against financial disaster. Long-term care coverage can be designed to cost less than dental coverage and offer a much more valuable benefit.
Many Americans mistakenly believe that their medical insurance or Medicare will cover their long-term care needs. This is simply not the case. The American employer is in a unique position to both help educate their employees about the risks they face without long-term care coverage as well as sponsoring a long-term care plan to ensure that their employees are covered.
Why is true group long-term care so important?
- Many Americans will have no way to pay for long-term care services when they are needed.
- Insurance for long-term care will not become widespread if only available on an individual basis, which means that the change will need to come first from employers.
- Group coverage needs to include employer contributions to make it affordable to employees and vesting to make it affordable to employers.