President Clinton's recent proposal to spend up to $6.2 billion to provide a $1,000 annual tax break for individuals or their families who need long-term medical care sounds like a helpful way to defray the costs of chronic and nursing home care.
In fact, the proposal, if passed, would take us in the wrong direction by encouraging people to wait until a loved one needs long-term care rather than insuring against the problem beforehand. While there is a need to help families meet the exploding costs of long-term care, there is a better way to do it.
In earlier days, families took care of their senior members, usually by putting them up in their homes, providing them with food and the daily care they needed.
But America has changed significantly in the past few decades. Families are more scattered than they used to be. And they are more broken. Moreover, seniors are living longer, making the decision to take in an elderly family member a much longer commitment than it used to be. And because medical science can keep us alive longer, incapacities, such as mental impairment, exacerbate the problems.
As a result, many Americans turn to nursing homes or assisted living centers to provide their loved ones with a safe, comfortable and caring environment. Currently, about 1.5 million Americans live in nursing homes or assisted living centers. Most are elderly, with the average age being 79, and 75 percent of those over age 65 are women.
The costs of caring for these people can be enormous, for "long-term care" encompasses a range of medical services such as rehabilitative care, skilled nursing home care, assisted living centers and home care for people with chronic medical conditions. On average, costs run about $136 per day, or $50,000 per year. How can middle-income families afford to spend $50,000 a year to put a loved one in a nursing home, considering the median family income in 1997 was $37,000, before taxes are taken out?
Obviously, most families can't. While a small percentage of families use Medicare and 24 percent pay for nursing home care out of private funds, 69 percent must turn to Medicaid, the federal-state health insurance program for low-income people. In other words, most families go on welfare to meet those nursing home costs.
In fact, estate planning intended to help middle- and upper-income families figure out how to hide grandma's assets so she will qualify as a poor person eligible for Medicaid has become a growth industry. But this type of gaming the system discourages responsible behavior by people who could prepare for the future.
Unfortunately, those who rely on Medicaid to pay for long-term care experience a number of problems. People who pay for nursing home care out of pocket or with a long-term care insurance policy (which pays for nursing home care) have a lot of options to choose from. Not so with Medicaid recipients. For example, there is often a nursing home waiting list of other Medicaid applicants before a senior can be admitted. That's because Medicaid underpays the nursing home for the care it provides, so many can only afford to have a limited number of Medicaid beds available. Medicaid restrictions also limit choices and may affect the quality of care.
President Clinton's proposal would offset some of the costs of long-term care by making available a $1,000 tax credit to be used against long term expenses. But his plan would only exacerbate current policy that encourages people to go unprepared for nursing home expenses and then turn to the government for help from Medicaid when the crisis arrives. If we are going to use the tax system for health care needs, let's use it to encourage people to purchase health insurance before they are faced with catastrophic medical costs.
If President Clinton really wants to address the problem of long-term care and is determined to spend some money toward that end, apply that tax credit money toward the purchase of long-term care insurance to encourage working families to protect themselves against future nursing home expenses.
Those costs would be offset by future savings in Medicaid as fewer and fewer middle-class families turn to Medicaid funding. A policy that encourages families to prepare for the future, rather than wait for a catastrophic event to occur, promotes the concept of responsibility that both Republicans and Democrats say should be the basis for public policy proposals.
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The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues.