No Longer Welfare? Minnesota Governor Opens Door to Expansion of Government-Financed Health Care.
Tim Pawlenty can know which way the wind is blowing as well as any politician. But are his policy solutions any better for the trouble?

Minnesota's governor once called the state's generous public healthcare programs (which go above and beyond Medicaid) "welfare." And that wasn't meant as a compliment.

Now he's all for it, apparently, calling for "universal coverage" through using the state's (sure to be temporary) budget surplus.

Powerlineblog says "Among the cynical adages that explain a lot about democratic politics is this one: 'Vote for your enemy -- he has no one to sell out to but you.' It's an adage that seems to apply more reliably to Republicans than to Democrats. In any event, however, our own Governor Tim Pawlenty is in the process of providing a case study in the merits of the adage."

This continues his history of tacking towards government manipulation of the economy, including his "Boston Tea Party" talk about prescription drug companies (2003); encouragement of violating U.S. law on importing prescription drugs and bringing price controls to the world's last important base of pharmaceutical discovery;(2004); get state government into the business of gambling (2004); and a ridiculous-on-its-face attempt to call a tax something other than a tax (2005); favoring the taxation of working stiffs for the bread and circuses of high-priced baseball (2005); and flip-flop on light rail, an ain't-that-cool feature that does little to ease traffic congestion.

Maybe the governor meant it the first time when he said "the era of small government is over," the protestation of his campaign manager.

Now only does Pawlenty call for "universal coverage"--which invariably leads to the visible foot of government stomping on commerce, if not outright government run programs--but he continues the assault on pharmaceutical advertising. I don't like commercials more than anyone else, but advertising is part and parcel of any market. Instead, the governor says that advertising will "create consumer-driven appetites for prescription medicines that do not yield wise decisions." Further, he calls for Congress to "negotiate" drug prices--a populist theme that is another step towards price control and stagnation.

Wise in whose eyes, governor?

Pawlenty is correct in his assessment that the world of American health care policy is sick. But his solution, which includes further restricting the role that consumers play in their own health care, is by nature going to blow up. Here's the final paragraph from a Star-Tribune article on Gov. Pawlenty's rush to embrace another chapter of active government:

"He also warned that the greatest challenge of establishing universal health coverage will be managing 'a modest and affordable benefit set' in a political environment."

"Modest and affordable" government programs? In Minnesota?

You may wipe off your keyboard now.

Note: Pawlenty isn't entirely wrong--there needs to be price transparency, and medical records are archaic--but the origins of these complaints lies with problems that will be exacerbated, not fixed, with increasing the state's role in health care.

Labels: Medicaid

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Forcing Granny Out of Her Nursing Home?
The WSJ (link for subscribers) reports that the Centers for Medicare and Medicaid Services, is encouraging states to get nursing home patients to go ... back home.

One reason for the move is the thought is that most people would prefer to be treated at home than in an institution. No doubt that's true. The other reason is that it's usually cheaper to treat someone at home. This is true as well, but from the numbers I saw (about a year ago) while part of a long-term care committee, the costs are still substantial. In other words, home care does give financial savings, but the costs are still substantial. If the state takes the per-person savings and adds more beneficiaries to Medicaid, the result is no lessening in overall demand.

Federal aid will come in two parts. The first is $1.75 billion in one-time grants to help states move people out of institutions. The second part will be ongoing, in the form of a higher matching rate for state funds spent on home care.

Labels: Medicaid

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Get Your Medicaid Information Here.
You think Social Security is a problem? Wait until you look at Medicare and Medicaid!

The National Center for Policy Analysis has opened the Medicaid Reform Service Center. it should be useful for lawmaker and citizen alike.

Labels: Medicaid

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LTC Insurance: A Modest Beginning.
Taxes, and tax credits, provide incentives. But how much incentive is enough?

If you read far into the literature on state finances, or health care, you'll find that the need for long-term care threatens to crowd out every other priority for government spending. Simply put, long-term care is expensive (running well over $50,000 a year for some services). The aging of the population means that more demand for long-term care (including but not limited to nursing homes) is going to rise, and the bulk of LTC spending is paid for by governments.

One way to avoid the budget disaster is for policy makers to do what they can to encourage the purchase of long-term care insurance. Various laws and policies (including a nursing home entitlement) mitigate against that. With premiums for such insurance amounting to thousands of dollars per year (perhaps per month--it's been a while since I have looked at the numbers) and a small industry of lawyers (who can help middle-class people eligible for Medicaid), it's little wonder that the LTC insurance market is stunted.

Offering a tax credit for long-term insurance could, in this light, be a useful means to shift some of the demand for LTC care payments out of the public sector.

Minnesota offers such a tax credit. But it's limited to $100 a year per individual.

That's not much of an incentive, is it?

Labels: Health care, Medicaid

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Social Programs Slashed? Not Quite.
USA Today has done a review of federal social spending, and finds that the time period of 2000 through 2005 has seen "the largest five-year expansion of the federal safety net since the Great Society created programs such as Medicare and Medicaid in the 1960s."

Why, how, and whether this is good are all questions for another time. But it certainly shows that social spending has not suffered under a nominally conservative government in Washington.

Meanwhile, states will need to find ways to impose some fiscal discipline on Medicaid. (Medicare is a national government program; Medicaid is actually 54 different programs run by the states. Washington DC kicks in some money and sets a floor upon which states can and do add more benefits and enrollees.)

Labels: Medicaid

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Something is Very Wrong Here ...
Children abandoned to the state they get institutional care?

From the Wichita Eagle:

Cutoff puts paying for high-needs kids on state
BY STEVE PAINTER
Eagle Topeka bureau

TOPEKA - Four years ago, Terry and Boyd Perry made one of the toughest decisions parents can make.

Unable to afford the care their autistic son, Eric, needed, they gave up custody to the state so that Medicaid -- a federal and state program that provides health care for low-income residents -- would cover his treatment.

The article then describes a federal-versus-state debate over which set of taxpayers will pay. Right now, the federal Centers for Medicare and Medicaid Services pays a residential facility $121.50 per patient per day. The boy's parents "pay [the state] $600 a month in child support to help cover his expenses."

Labels: Medicaid

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Dull But Serious
Medicaid versus Medicare: do you know the difference?

Both are facing dismal fiscal futures. And while the federal government is involved in both, states have little to do with Medicare, and much to do with Medicaid. An article in today's Wall Street Journal (link for subscribers) lays out the scene:

With Medicaid costs now consuming about 17% of state general-fund budgets, and rising at more than twice the rate of inflation, state governments are scouring the health program for savings to protect their bottom lines.


To date, efforts to bring about cost control have consisted of cutting enrollment, and cutting payments to health care providers. The first route has some merit, as increasing enrollment through liberal entitlement guidelines can squeeze out the demand for private sector insurance, leading to an increased demand for government payments. The second route, cutting payments to providers, makes those on the dole rather unattractive customers--not exactly a way to promote public health.

The WSJ article mentions the goings-on in Missouri, which has made it more difficult for people to qualify for Medicaid. It used to be that a 3 person family had to have a household income of no more than $12,067 to qualify. Now the number is $3,504. Such moves have been, and will be, politically unsustainable. Even most ardent advocates of small government would be appalled at such a move. The problem with Medicaid goes far beyond households with $13,000 incomes getting benefits. The whole logic of third-party control, evidenced not only in Medicaid but in corporate America, needs to change.

Even if you've never taken a dime of Medicaid money in your life, the fiscal challenges of the program (or rather, programs: each state does it differently) will affect you. Your level of taxes and what other programs are funded are affected by Medicaid. In addition, changes in the operation of Medicaid can ripple throughout the economy. The ideas being floated in a few states to use vouchers could further accelerate a move towards consumer-directed health care. The net result will be good: why should you lose or change your insurance when you move to a new job?

The largest problem with Medicaid is the fact that is has become an accepted case of middle-class welfare for people who need long-term care.

"Changes aimed at low-income individuals may not deal with the biggest driver of Medicaid costs: long-term care for a relatively small number of elderly and disabled beneficiaries. About 4% of Medicaid recipients account for half the program's expenditures, according to the Kaiser Family Foundation."


With the enormous cohort known as the baby boom entering the years of retirement and increased needs for care, the problem is going to get worse before it gets better.

Labels: Health care, Medicaid

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Retirement and Health Care Plans: At a Tipping Point Towards Individual Control?
The era of Big Employer and Big Daddy is coming to an end--or perhaps just ramping up.

Unless you are living in a cardboard box, you probably have some combination of the following: homeowners insurance, renters insurance, and auto insurance. And you most likely bought them in the private market, on your own, and not through a government program or an employer. Having such insurance is either can, in addition to being good financial sense, be a requirement of a third party in the private sector (the company, if any, that holds the loan on your house or car.) Government gets involved when you wish to drive that car on public roads, when it requires auto insurance. But it does not tell you where to buy that insurance, or (beyond what is usually a minimal amount) how much to buy.

If you have children, minor children, you may be stashing away some money for their college education--again, probably not through your employer, though perhaps through a voluntarily entered-into government program known as a 529 plan.

What do auto insurance, homeowners insurance, and saving for college have in common? Planning for possible expenses incurred in the future, which is for the most part undertaken by the individual.

Now think about the two fiscal timebombs that threaten the economy: retirement savings and health care.

Here we have the heavy involvement of government and private sector third parties. Call the first the Big Daddy approach, and the other the Big Employer approach.

In retirement planning, each worker must surrender one dollar out of 7 to a government-designed, managed, and run program that will run out of money within a decade or so. In health care, Medicare (old people) and Medicaid (poor and perhaps not so old people) threaten federal and state budgets.

One theme common to these programs, and problems: individual citizens have no say in what goes on. Your social security "account" is not your property, and its "tax Peter to cut a check to Paul's grandmother" model robs citizens of thousands of dollars that would come from true investment accounts. In health care, why should anyone in a government program be a smart consumer of health care? It isn't there money, after all. And without having control over the power of the purse, they often get poor quality. (Ask your doctor: would he prefer to be a Medicaid patient?)

But it isn't only government that separates people from responsibility, power, and potential rewards of individual planning for the future. World War II-era compensation policy works the same way. If government is

Because government can't "go broke" in the same way that corporations can and do, the unsustainable nature of the Bigs will cause changes in Big Employer long before it brings changes in Big Daddy.

Companies have already started dumping traditional pension plans ("defined benefit") in which the risk and rewards of planning for retirement rest with the employer. In "defined contribution" plans, such as 401(k)s, people choose how much of their compensation goes into retirement funding, and how that money will be invested--far different from defined benefit.

More recently, but still in its early stage, is a move towards consumer-directed health care. In the purest form of consumer-directed care (not in place in many places if at all), companies give the cash value of insurance to employees and say "Good luck, boys. Go find your own insurance." There are several obstacles in that path, including the federal tax code and government regulations of insurance plans.

All this comes to mind as I watch the changes afflicting this country's Big Employers from the World War II. "Organization Man" has long since left the psyche of the American worker, and his compensation policy--someone else plans for retirement and health care as well--is changing as well.

Thanks to the problem of moral hazard, employers are dumping pension obligations on you and me, federal taxpayers, in the form of the Pension Benefit Guarantee Corporation, through the bankruptcy code. And corporate health care plans, in which employees have little stake, are being scaled back.

Simply put, government and corporate policy have for a long time fostered a corporate cost structure (and government cost structure) that cannot be sustained any longer.

Steel companies got out of this structure through the bankruptcy court. Airlines are going through it now. Many people speculate that the "Big 3" (now Big 2) auto makers will go next. (Contracts between the UAW and GM, Ford, and Chrysler have long been the exemplar of Big Employer benefits.)

The Wall Street Journal has a fine article on the subject today (link for subscribers).

Excerpts:
A larger number of companies are closing pension plans to new hires or to younger workers, including Motorola Inc., Lockheed Martin Corp., Hewlett-Packard Co., Aon Corp. and NCR Corp. Many have, at the same time, expanded defined-contribution retirement plans, such as 401(k) plans. In such plans, employees themselves contribute to retirement investment pools -- often supplemented by employer contributions -- and elect how to invest these savings. Employees, not employers, bear the risk of inflation, sour markets or outliving their savings. Total assets in private-sector defined-contribution plans first exceeded those of defined-benefit plans in 1997.

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When they were very profitable, companies with stable, often unionized, work forces promised pensions. When markets turned, it became clear that some hadn't set aside enough money to fulfill those promises.


Detroit got away with this practice for years because of the near-lock that an oligopolistic industry had on the U.S. market. But the manufacture of automobiles is no something that the U.S. has an overwhelming advantage in, and consumers enjoy having the choices and quality available elsewhere.

The adjustments will be brutal.

Meanwhile, GM Chairman Rick Wagoner hints at an endorsement of socialized medicine, suggesting that Toyota and such have an advantage because they don't have to pay for health insurance. But this is self-serving verbiage. It's not just the Big 2 that compete against companies based in countries where the taxpayers as a whole assume the burden of health care for their employees. But the Big 2 were part of a small portion of U.S. companies that pursued an unsustainable labor policy for decades on end. (The Journal article makes no mention of this point, and gives great credence to Wagoner's remarks.)

Meanwhile, the U.S. Congress is set to make things worse when it comes to retirement, by increasing the moral hazard:

"Congress currently is contemplating contentious legislation to force some companies, particularly financially weak ones, to put more money aside for defined-benefit pensions and to pay more to support the PBGC."

Labels: Health care, Medicaid, Pensions

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A Dent in Middle-Class Entitlements.
For a look at how government programs can be a moral hazard and crowd out private initiative, look no further than nursing home financing.

Medicaid is perhaps best known as the program for "welfare families," single or divorced mothers of small children. But the single largest category nationally (and in most if not all states) in dollar terms is the adult population that needs long-term care, or colloquially, nursing homes.

Not everyone will need such care in their lifetime. This suggests that it's an unpredictable event (much like the possibility of a man dying at, say, 52), so you'd think there might be a good market for insurance policies.

Not quite. There is a long-term care insurance industry, but it market penetration is rather small--under 10 percent, I believe. (There are lots of numbers I could dig out from the hard drive for this essay, but hey, Christmas is less than a week away and there's a lot of work to do before the end of the year.)

Why is long-term care insurance to infrequently used? One reason is the stumbling of the insurance industry; companies have made some mistakes along the way, leading to some bankruptcies and rather unpopular premium increases.

But a more fundamental reason for the paucity of long term care insurance coverage is the moral hazard: why pay for insurance for an event that government will pay for? That's what takes us back to Medicaid, which funds the majority (again, if you want statistics, look 'em up--perhaps in the archives of this blog) of LTC.

Government funds the majority of long-term care? Isn't Medicaid just a program for the poor? Well, yes and no. There are ways to become poor, such as shifting assets to one's children, and thus qualifying for Medicaid. It's easy to rationalize this move by saying "Hey, I've worked hard all my life, paid my taxes, and I deserve this." And of course, when everyone else is doing it, the rare individual who pays for his own care has little impact on the public fisc.

State government politicians, meanwhile, like to get the feds (that is, people who vote in other states) to pick up as much of the tab as possible. So the last couple of decades have seen a cat and mouse game between federal and state officials, as one rule change in DC is met with new accounting gimmicks in the states.

Today, the Wall Street Journal (link for subscribers) says that the Washington branch of the political family is thinking of changing the rules again.

Now Congress wants to make it harder for some people who do have assets to get Medicaid to pay their nursing-home bills. The changes, already approved by the House and now before the Senate, would:

- Force people who transfer assets to wait awhile before Medicaid will cover their nursing-home care.

- Bar a person with equity in a home of more than $500,000 from Medicaid coverage. States can raise the limit to $750,000. Currently, in most cases, a person can own a home of any value and still have their nursing-home bills covered.

- Require states to look for inappropriate asset transfers during the five years before a Medicaid application, instead of the current three years.

- Classify certain annuities as assets that trigger the waiting period; annuities sometimes are used to turn large assets into small, Medicaid-friendly payouts.


All good measures, with this goal: "The changes could force the elderly and their caretakers to manage their funds more cautiously, perhaps by encouraging people with means to buy long-term-care insurance or to use the equity in their homes to pay nursing-home bills."

There's no easy way out of the LTC mess. Though technology can help (in-home monitors and the like), good long-term care is by nature labor intensive, which means expensive. Thanks to advances in science and medicine, as well as rising incomes, people are living longer. That's all good.

Demographic and lifestyle patterns have been changing for decades, changes that signal an increasing reliance on paid help. Women, historically the providers of LTC to family members, are overwhelmingly in the paid workforce, often unable to do much to help. Children from a family scatter across the country, making it hard for family members to pitch in together to help mom and pop. So the use of paid help, whether inside a nursing home or out, funded by insurance or by taxpayers, has increased, and will continue to increase, especially given that the "old old" (over 80 years) group is the fastest growing part of the U.S. population.

The ideal solution might be the development of a strong, vigorous, widely-bought-into market for long-term care insurance. But getting there requires dealing with a knot of problems across several policy issues, including regular health insurance and the federal tax code.

By contrast, reforming k-12 education to promote achievement, cost containment, and consumer choice looks easy.

Labels: Health care, Medicaid

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Sunbelt Revolution in Medicaid.
First the people went to the sunbelt. Then the political power. Now, the political innovations.

Florida and South Carolina are leaders in reforming Medicaid, the program that threatens to eat the budgets of every state. Nina Owcharenko writes that "Florida and South Carolina are pursuing federal waivers so that they can bring the principles of choice, individual control, and competition into Medicaid."

Why these states? Among other reasons, they attract a large number of retirees, who often end up in nursing homes, in Medicaid, and that program's most costly recipients of taxpayer money. Most of the money-saving efforts work best outside the nursing home environment, but even those can free up money for other purposes.

Labels: Medicaid

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Vote for Me! I Expanded Welfare!
Does a pro-welfare stance win re-election campaigns? Some governors seem to think so. At least that's the argument that Merrill Matthews makes in an USA Today op-ed.

Matthews gives examples of a Democratic, Independent, and Republican governor who tout their expansion of Medicaid, the government-financed health care system.

"Ironically, for the past decade," he notes, "most governors have been trying to get people off the welfare rolls and into productive private-sector jobs. So why isn't the goal to get people off the Medicaid rolls and into private-sector insurance?"

Both welfare and Medicaid involve taxing some people go give to others. Yet Medicaid has avoided the stigma that propelled welfare into reform. (Welfare reform's effects have been oversold, but that's a story for another day).

As Matthews points out, welfare reform imposed a work requirement, as well as proceeded with a philosophy that people would make a transition to the private sector (in this case, work). But with Medicaid, there is not (yet) an expectation that people will transfer back to the private sector.

Of course, some people--the frail elderly who make up the bulk of Medicaid's expenses--cannot resume work. But there is still room within what we might some day call Medicaid reform, for private sector features. One way would be to convert money spent on Medicaid enrollees into cash payments that would then be used to purchase insurance in the private market, perhaps combined with a health savings account.

The welfare component would still be there--we are still talking about taxing some and giving to others, after all. But there are advantages--Matthews simply lacked the space to talk about them--of making the program more voucher-like.

Labels: Health care, Medicaid

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Will Medicaid Embrace Consumer Savings Accounts?
Market-oriented policy geeks call for Medicaid to use health savings accounts. The program would move in that direction under legislation introduced in Congress.

Writing in a newsletter of the Consumer Power Report of the group Consumers for Health Care Choices, David Hogberg explains the Medicaid Health Opportunity Account Act of 2005.

The bill lets states set up "health opportunity accounts," much like Health Savings Accounts. The federal government would match state contributions to the accounts, up to $2,500 per adult and $1,000 per child. States could use these accounts for targeted populations, so it's unlikely that they would be applied to everyone in Medicaid.

Money in the accounts would be used only for health care expenses. But as an incentive to move beyond poverty, if the person who holds the HOA earns too much money to qualify for Medicaid, the funds can be used to purchase a health insurance, college classes, or job training.

Unfortunately, the bill also contains several measures that, as Hogberg puts it, "insulate health insurance providers from competition."

Labels: Health care, Medicaid

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SPN: Intellectual Property Rights and Real Property Rights
The Supreme Court's Kelo v. New London case may have ignited a coalition of two kinds of property rights advocates.

The State Policy Network's annual meeting included a panel called "The Bridge between Physical and Intellectual Property Rights." The panel was an interesting cast of characters. Depending on your perspective, it had all the right villains, including a representative from the pharmaceutical industry as the motion picture industry, the recording industry, as well as land owners.

The large number of panelists meant that each person gave a talk of only 5 minutes or so, not nearly enough to discuss interesting issues. Still, a few themes stood out.

Technology makes it easy to violate intellectual property rights cheaply and quickly.

The case for real estate property rights is more easily understood at the popular level than that for intellectual property. That's probably because most people own real estate, or aspire to it, while intellectual property is often the product of faceless corporations.

The Supreme Court recently issued two decisions that are in a juxtaposition. On the one hand, Kelo said that real estate property rights must give way to the whims of government planners. In the Grokster case, however, the Court upheld the value of intellectual property rights by declaring that companies that distribute technologies used to violate intellectual property rights may be liable to prosecution.

The difference between the two decisions, besides the kind of property at stake, is that the tradition of government-as-economic planner in real estate does not exist in intellectual property. Government has been more respectful of intellectual property than real property, though the recent Big Squeeze of Big Pharma by Big Medicaid may signal a new phase of government action on property rights.

The Institute for Justice has launched a vigorous campaign to persuade state and local governments to enact their own measures to limit the use of eminent domain for economic development purposes. (In fact, the Supreme Court invited states to do just that.)

By issuing its decision in Kelo, the Supremes may have done a favor for advocates of property rights. The ruling has prompted a coalition of two groupings that have had little to do with each other in the past to come together. If the new coalition is able to exert enough influence and pressure to strengthen all property rights, then creativity, health and medicine, and individual landowners will be better off.

Labels: Medicaid

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Quote of the Day.
"This doesn't lower costs; it just shifts the cost from government onto people. That doesn't solve anything." -- Sen. Chris Steineger, D-Kansas City.

Steineger was referring to promoting the private purchase of long-term care insurance and clamping down on Medicaid scheming, whereby wealthy individuals artificially impoverish themselves in order to get taxpayers to pick up the tab for their nursing home stays.

It "doesn't solve anything," ignores at least two simple questions: Is socialized medicine the best path as long as it applies to nursing home care, especially if it means that people of modest incomes subsidize those better off? And if you're an advocate of taxpayer-funded health care for the poor, why would you endorse rules and an ethic that winks and nods at efforts to game the system out of money that could be going to the truly poor?

Labels: Health care, Medicaid

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Medicaid Calls for "Tough Choices"
Here's one way of understanding the need for Medicaid reform: in the state of Kansas, Medicaid costs have gone up 12 percent per year, every year since 1991.

Some argue that states have budget problems because the things they buy, such as education and health care, are increasing at rates higher than inflation.

Overlooked, though, is the fact that when government buy its "big ticket" items, it is the single largest (health care) or dominant (education) purchaser. Therein lies the problem.

Labels: Medicaid

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Pound the Treadmill, Get a Discount.
The discounts-for-healthy-living model is finally moving to the public sector.

Life and health insurance companies typically give discounted premiums for non-smokers. Some health insurance companies provide discounts or subsidies for people who regularly hit the gym.

The public sector is picking up on this model. There's a proposal floating for Michigan's Medicaid program. Follow state requirements to quite smoking, keep doctor's appointments or lose weight, and enjoy reduced copay requirements (which are minimal to begin with) or expanded benefits.

Predictably, some folks play the class card. A spokesman for the "Michigan League for Human Services," writes the Detroit News, "said the plan is unfair because unhealthy behavior is a societal problem and this approach singles out the poor."

But people in the optional population of Medicaid--where the proposal would be applied--are already "singled out" by virtue of their relying on government funds. As the legislative author of the proposal points out, people on Medicaid smoke more and are in general more overweight than the general population. The plan, then, is a way to control cost increases, conceivably allowing for more people to enroll. At the least, the plan offers the idea of incentives to a population that has so far received services with nothing at stake.

Labels: Health care, Medicaid

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Medicaid: The Program that Ate All Others.
Budgeting is the classic economic problem: unlimited wants, limited resources. The growth of Medicaid will make this problem obvious to all in a few years.

Matthew Hisrich, of the Flint Hills Center for Public Policy, writes that Medicaid Could Swamp State Budget. Though the emphasis in the article is Kansas, the lessons apply elsewhere. An aging population, soaring health care costs, and a third-party payer system are elements of a perfect storm that will leave little room for anything else in state budgets.

One useful resource for ideas on fixing Medicaid's budget and service is the Center for Long-Term Care Financing.

Labels: Medicaid

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Another Social Security Reform Plan
Blogger Dan Morgan of NoSpeedBumps.com sent the PolicyGuy a plan he advocates, which might be called RSA+HSA+EFT.

As the alphabet soup nature of the plan indicates, it's a comprehensive, but ambitious proposal.

#1 ? Begin mandatory Retirement Savings Accounts (RSAs) and phase out Social Security

#2 ? Begin mandatory Health Savings Accounts (HSAs) and achieve universal health care coverage, phase out Medicare and Medicaid

#3 ? Implement a loophole-free Effective Flat Tax (EFT) that has a completely flat perceived rate

Give Morgan credit for seeing that our retirement system, health care financing system, and tax system have related problems.

On the other hand, trying to achieve something this comprehensive may doom the plan to deals and amendments that will make it unworkable.

Labels: Medicaid

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Where's Newt? Transforming Health Care.
Never one to tinker at the edges, Newt Gingrich hopes to change health care policy. The grandly-named Center for Health Transformation calls for "system-wide change" that includes "information-rich health savings accounts," "secure electronic health records" and "e-prescriptions," and increasing transparency in pricing for pharmaceuticals and medical services.

In an op-ed written for the Washington Post, Gingrich advocates splitting up the Medicaid and Medicare agency within the federal government into three different agencies, based on the different needs of the healthy poor, the disabled, and the elderly.

Here's his take on eldercare:

the legislation would create a program to serve the elderly that reintegrates the family back into their care. The current system, for example, prevents a daughter whose mother is in an assisted-living facility from contributing financially to her mother's care without losing all Medicaid coverage. This either-or mentality is anti-family and leaves the recipient with a lower quality of life.

The program should also integrate modern information technology systems, home diagnostic equipment, real-time monitoring and rapid health assistance when necessary. For example, a growing company called Living Independently has created the QuietCare home monitoring system, with motion detectors that actually learn an individual's daily habits and routines. The system regularly updates a caregiver on the person being cared for and immediately highlights any atypical patterns. Caregivers use this technology to provide unobtrusive monitoring of seniors in their homes while preserving individual privacy and freedom.

Don't count Newt out. With members such as Health South on board as well as a golden rolodex, the center will be worth watching.

Labels: Medicaid

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Health Care: The Latest in Medicaid Reform, Federal-Level.
Nina Owcharenko of The Heritage Foundation offers a quick review of where Medicaid's coming from, and what changes are needed.

For starters, Medicaid is part of the triad of entitlement programs (Social Security and Medicare being the others) that account for 44 percent of all federal spending today. Medicaid enrolls approximately 46 million persons, and is now a larger program than Medicare. From 2000 through 2003, it grew at 10 percent a year, an unsustainable rate.

The rest of the policy note describes Bush Administration proposals to change Medicaid. They include the latest in the cat-and-mouse between federal officials who distribute money from Washington and state administrators who game the system, and increased enforcement on asset transfers that allow the wealthy and middle class to make grandma, who would otherwise not qualify for taxpayer funding, appear to be a pauper.

Labels: Medicaid

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Health Care: More Choice for Medicaid Patients
Medicaid ill serves the taxpaying public, its enrollees, and the medical profession. So what should policy makers do? Make it more consumer friendly.

Says Devon M. Herrick,
A few years ago, for example, Arkansas, Florida and New Jersey began experimenting with what is referred to as cash and counseling. In this program, certain Medicaid recipients were offered the chance to control a portion of the dollars spent on their non-health care needs.

These experiments worked well because patients had greater choice over their providers, and the providers looked to the patients as customers, rather than to the state. Now, about half of the states have received waivers from the U.S. Department of Health and Human Services for similar demonstration projects.

Herrick is an adjunct scholar of the Flint Hills Center for Public Policy.

Labels: Medicaid

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Health Care: Promote Health By Depending on Cigarette Taxes?
Kathleen Sebelius, governor of Kansas, has suggested insuring more people by depending on cigarette taxes.

Though the state's Medicaid budget has increased 65 percent in the last five years, and Sebelius wants to add more, by increasing the cigarette tax by over 100 percent, to $1.29 a pack.

State Rep. Brenda Landwehr, who chairs the House Budget Subcommittee on Social Services, says "I think it would be unwise at this time to expand our Medicaid program.

I've already argued that a similar proposal for Oklahoma was an inferior way of expanding health insurance coverage. In a companion piece, Steve Anderson argued that the numbers in Governor Henry's plan didn't add up.

Labels: Health care, Medicaid

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Health: Who Pays for Long-Term Care?
Welfare isn't just for the stereotypical single mother with a poor education and minimal job prospects. It's also for middle-class individuals who turn to Medicaid to pay for long-term care in their old age. And it's slowly eating the budgets of states around the country.

So what should be done about it? Stephen Moses (Center for Long-Term Care Financing) and Josh Wiener (RTI International) debated the question last year in a forum available here. It's a "Crossfire" kind of format, with people talking on top of each other, and "inaudible" comments. Still, it's not a bad introduction to the question. And it has the benefit of offering two very different prescriptions.

Moses gives a brief "how we got here" introduction, and it seems that Wiener agrees with the diagnosis.

But the two men differ in their suggested outcomes: Moses thinks the market for long-term care insurance can be improved through various policy choices, including doing away with the current policy that lets people qualify for Medicaid (and its financing of long-term care) regardless of how much home equity a person has.

Weiner, by contrast, thinks that this is only a minor part of the solution. Further, he values the notion of "social insurance" implied in the welfare state, and thinks we ought to expand taxpayer funding of long-term care, even if it means adding another 4 percentage points to the payroll tax.

Here are two quotes that show some of the themes of the debate:

Moses: "The reality in this country is you can ignore the risk of long-term care, avoid the premiums for private insurance, wait until you get sick, and the government pays. It's been that way for forty years, and as a consequence, we have this nursing-home-based welfare-financed system that institutionalized our whole World War II generation unnecessarily. We need to change those incentives."

"For reasons that, frankly, escape me," he says, "if you are unlucky enough to get Alzheimer's disease, then you know, we are—our societal response is basically, you know, “Come back to us after you have impoverished yourself and then, you know, we'll provide you with some financing and some services.”

But, you know, the fundamental issue here, and I think you put your finger on it, is, is this really an issue where it's sort of up to the individual and their family? Or is this a societal concern that we as a society as a whole are going to sort of step forward and say that people who need these kinds of services are going to get them regardless."

Moderator Morton Kondrake tries to put an ideologically summary to the debate as thus: "we have here Sweden and Margaret Thatcher."

Labels: Health care, Medicaid

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Health Care: Medicaid is the "Monster in the Road."
Medicaid is the "Monster in the road," says Ohio's governor, Bob Taft.

He's right. And the reason it's a monster is that it's a government-funded program with no element of personal involvement or responsibility. Already nearly half of all medical spending is paid for by governments of one form or another.

The politics of changing Medicaid don't look encouraging. Most governors want more money out of Washington than they want flexibility, while the Bush Administration wants less money and more flexibility on the state level. Given where we're going, more money would not be a bad price to pay if states actually start making substantial, market-oriented reforms.

Labels: Medicaid

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Health Care: Medicaid Funding is Like Handing Out Credit Cards.
A fundamental problem with Medicaid is that it imposes little or no sense of fiscal cost on people enrolled in the program. You may spend your own money wisely, but the temptation to squander someone else's is great.

It's against that backdrop that the Illinois Policy Institute issues this warning:

Would you give your credit card to a perfect stranger?Absurd isn?t it? However, that is exactly how Illinois manages its Medicaid Program.

Unless we figure out how to fix it, Illinois will find itself exactly where you would expect to find yourself if you gave your Visa to a stranger.

When you or I purchase health insurance, or choose our employee benefits, we make decisions based on what services we need and how much we will pay. Medicaid enrollees use services as they wish with no ?costs? to consider. Even when seeking treatment for something as routine as a cold, a Medicaid enrollee can enter the ER and seek treatment on demand rather than be bothered with making a doctor?s appointment like everyone else. The result is that taxpayers are stuck paying for an expensive ER treatment, instead of a reasonable doctor?s visit ? and the difference is enormous.

Illinois? Medicaid program costs taxpayers $7 billion per year. Over $6 billion comes from the state?s general fund (nearly a quarter of the overall appropriation). That comes to about $570 per person or $2,300 for a family of four. Instances exist where a family can pay more for Medicaid than for their own insurance. For example, a state employee supporting a family of four pays about $2,000 per year for HMO coverage.

Illinois currently has 1.8 million Medicaid enrollees. One in seven Illinoisans are covered by the program. Two out of every three nursing home residents and one out of three children are covered. Elected officials seeking votes continue to expand the program ever further beyond the federal poverty line. For example, an Illinois family of six with an annual income of $50,000 is Medicaid eligible. Despite what Governor Blagojevich calls the worst financial crisis in the state?s history, Medicaid eligibility has been expanded in five of the last seven fiscal years, and this year the Governor vowed to expand the program to 200% above the poverty line.

As currently configured Medicaid is unsustainable. Since 1999 the program has grown at 8% per annum and, if present trends continue, the program will double in costs every nine years. It does not take an expert to determine that the current trend ends with bankruptcy. At some point Illinois will be forced to reform; it?s not a question of if but of when.

Illinois is not unique, of course. Most states operate in a similar fashion. But it's time for all to inject some principles of personal control and personal incentives (much like a health savings account) in its taxpayer-funded health care programs. Of course, it would also help if public officials could stop expanding government rolls, crowding out the market for private insurers.

Labels: Health care, Medicaid

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Health: Utah the Model for Medicaid Reform?
Since the former governor of Utah is now the cabinet official who oversees Medicaid, it may be worth looking at Utah's Medicaid system.

This New York Times article gives a brief overview:
Utah spreads out a lower, more basic level of care to more people, and reduces coverage for some traditional beneficiaries by imposing co-payments for services. And second, it relies on the generosity of doctors and hospitals to provide specialty services free of charge.

In the broad, Michael O. Leavitt, new HHS secretary, has it right:
"Wouldn't it be better to provide health insurance to more people, rather than comprehensive care to a smaller group Wouldn't it be better to give Chevies to everyone rather than Cadillacs to a few?"

A key part of any Medicaid reform is introducing people to the fact that health care is not free:
The plan is deliberately constructed with modest premiums and co-payment schedules, they say, to offer a lesson on how health insurance works to people who might never in their lives have carried a private policy.

But there is still a problem with the plan: it relies on generosity for catastrophic care. The ideal would be for people in the program to somehow obtain low-cost, high-deductible insurance policies (with accompanying health savings accounts) that would meet the gap. Together with the state's basic care package, people might actually have health insurance, rather than a package of prepaid health care services.

Labels: Health care, Medicaid

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Medicaid for Millionaires.
It happens all the time: a government program starts out with a well-sounding premise, only to see its perverse incentives bring unintended consequences.

Such is the case with Medicaid. What was menat to help the poor has turned into, as the Wall Street Journal says in an editorial, Medicaid for Millionaires.

Medicaid, a program allegedly for the poor, has taken over paying for much more. From 1968 until 2001, for example, it has gone from paying (roughly) one-quarter of all nursing home bills to one half.



And the numbers will most likely creep up unless some reforms come along. A cottage industry helps people pick up five achievements: avoid buying long-term care insurance (a cost savings); rely on the taxpayers to pick up the tab for long-term care (a cost savings); avoid drawing down one's personal assets (a wealth-preservation tool); transfer assets to family members (an estate-planning tool) and pretend to be poor (a miracle), all at the same time.

Policy makers should consider a number of reforms, including:

Encourage the purchase of long-term care insurance
Eliminate the home equity exclusion currently in place for Medicaid eligibility
Otherwise push people towards using reverse mortages to pay for their own care

Labels: Medicaid

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States to Feds: Catch Us If You Can.
The cynical view of federalism is that it's convenient for politicians at all level: there's always someone to shift the blame to.

That seems to be the case of Medicaid over the last few decades, with federal and state officials sparring over who should pay what, when, and how. Federal and state offices routinely play a game of cat and mouse, for example. States find ways to scam the federal government. The feds crack down. The states find new ways.

Says a Wall Street Journal news story, "When the nation's governors go to the White House on Monday, they are likely to deliver a blunt message to President Bush: Keep your hands off our Medicaid loopholes."

Carol Herrmann, with the State of Alabama, defends the practice, saying that states do "exactly what all of us do when we do our income taxes every year: We looked at the law and used the law to our advantage."

Here's how one scheme operates:

In one tactic, called intergovernmental transfers, government entities like county or city governments send money to the state that the state then uses to qualify for additional federal Medicaid payments. .... A county nursing home may submit a claim to a state, which the state sends on to the federal government to receive a matching payment. Then the state keeps some of the federal payment, rather than sending it back to the nursing home. In some cases, federal officials say, that federal payment may be recycled for another federal matching payment. The result: The federal government kicks in extra matching payments without comparable spending by the state or local government.

Does the term "Enron accounting" sound familiar?

Granted, Medicaid needs serious attention. But games like this merely delay inevitable reform, which requires not only political courage, but institutional creativity.

Labels: Medicaid

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Use Smart Spending Cuts; Don't Gut Tax Limitation Measures.
The bipartisan effort to weaken Colorado's Taxpayer Bill of Rights is wrong-headed. There are some ways to make smart cuts to the state's spending.

The Independence Institute and the Reason Public Policy Institute have together identified ways to alleviate the pressure on the state budget. Here's their (PDF) report, called "Priority Colorado."

Among the techniques (numbers are approximate or maximum estimate returns)

• sell assets ($150 million)
  
• return to core functions ($32 million)
  
• consolidate agencies ($219 million)
  
• sentencing reform ($41 million)
  
• Medicaid reform ($90 million)
  
• change education funding ($4 million)
  
• reform procurement practices ($30 million)
  
• competitive sourcing ($48 million)

Total savings: $347 million to $615 million.

Labels: Medicaid

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Health: States, Feds Spar Over Medicaid. Again.
HHS Secretary Mike Leavitt chides governors and legislatures in a speech on the "seven harmful habits of highly desperate states."

This put-down comes as the Bush Administration wants to encourage experimentation among states as a way to bring Medicaid costs (currently 22 percent of the average state's budget) under control. But most governor want simply to keep the cash flowing in, though the National Governors Association has said it wants reform.

This article in the Christian Science Monitor presents a few interesting stats about Medicaid:

• The "$120 billion states spend annually on Medicaid is already more than they spend for K-12 education."
• "While the elderly and nursing home residents make up only 6.5 million of the 50 million people Medicaid serves, they account for 42 percent of the program's $300 billion annual price tag."
• 70 percent of the elderly in nursing homes are in Medicaid.

You might get the impression that it's a fairly well program from this article. "While private health-insurance premiums went up more than 12 percent, Medicaid's annual spending per capita was up only 4.5 percent." Yet the first number reflects a (somewhat) free market in spending, while the latter number is comparatively low because states have employed various ways (cutting benefits or the rolls, mostly) to keep costs from going up even more. That doesn't mean that the program is doing well. Far from it. Significant reform is needed, not only for reasons of cost control, but to improve quality of patient care.

Labels: Health care, Medicaid

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Health Care: Washington Auditor Disclaims State's Medicaid Program.
Just how poorly managed is Medicaid, one of the country's biggest government-run health care programs? In Washington, the state's auditor has said in effect "We can't tell you the fiscal condition of the Medicaid system, but we know it's very bad."

Said the auditor's report: "we cannot conclude, based on documentation and other evidence we were provided, whether all of these costs were allowable or whether all clients were eligible for services given to them and all providers were eligible for payments made to them."

Labels: Medicaid

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More Medicaid Reform: Proposals in North Carolina, Kansas.
Medicaid is finally getting the attention it deserves as a policy challenge. The latest evidence: The John Locke Foundation offers several proposals for getting Medicaid costs under control.

One option: get a handle on enrollment. "If North Carolina’s percentage of residents enrolled in Medicaid (15 percent) fell over time to Virginia’s percentage (10 percent), that would represent a savings of $800 million in the state budget when fully implemented."

Another: limit services. "If, instead, North Carolina focused on matching Georgia’s more limited benefits package and reduced its cost per enrollee to Georgia’s average, that would represent a state-budget savings of $630 million."

The view from Kansas is just as bleak: "Right now, the program is the fastest growing portion of the Kansas budget, with the cost of state health care coverage for the poor rising 121 percent in the last five years," say my colleagues at the Flint Hills Center for Public Policy.

One way to make health coverage more affordable: follow the lead of Colorado, Florida, Montana, North Dakota and Utah and pull back on state mandates on private-sector insurance plans.

Labels: Health care, Medicaid

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Medicaid Reform: Good for the Public, Good for the Poor.
Today's lead editorial in the Wall Street Journal (subscription required) praises a Medicaid reform plan in Florida.

The plan, which requires a waiver from the federal Department of Health and Human Services, is a large step towards consumer-centered care. Participants get a risk-adjusted amount of money (meaning the sicker you are, the more money you get) which they can use for various forms of care or insurance (HMOs, for example). In other words, it actively involves the patient in selecting the treatment.

It also gives each person in the plan a financial incentive for smart shopping and healthy living. Patients who follow the recommendations of their doctors receive bonus money that can be used (through Flexible Spending Accounts) on eyeglasses or other expenses not normally covered in Medicaid.

And even better for those who are or can become healthy enough to rise to economic self-sufficiency, the money in the FSA belongs to the person who leaves Medicaid.

As the Journal notes, "This emphasis on personal responsibility will encourage healthy outcomes by providing incentives for patients to comply with their doctor's orders. And since a huge share of Medicaid budgets go to managing chronic conditions that often can be ameliorated by personal behavior, the potential to save money is enormous."

The plan may not be the model that every state follows, but clearly something must be done to both bring fiscal soundness to the system and improve the quality of care that people receive. Roughly one-quarter of Florida's budget goes to Medicaid, and similarly high figures can be found elsewhere. Nationally, states spend more money on Medicaid than they spend on K-12 education.

Labels: Health care, Medicaid

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10 Easy Reforms for Health Care.
John Goodman, president of the National Center for Policy Analysis, and long-time health care policy analyst, offers 10 easy reforms for health care.

Four of the ten involve health savings accounts (HSAs) or their ugly sister, flexible spending accounts (FSAs).
1. Encourage innovation in HSAs
2. Permit funds in FSAs to rollover from year to year.
3. Channel Medicaid funds into HSAs.
4. Change the rules for Roth IRAs to encourage their use for health care expense.

Three involve changes to employer based plans:
1. Use current Medicaid dollars to subsidize the purchase of employer-based plans.
2. Allow employers to include the cost of insurance plans in wage calculations for minimum wage purposes (this is an easy reform?)
3. Allow employers to purchase individual insurance plans for employees (currently, all employer-purchased plans must have group coverage).
4 and 5 Allow employers to substitute cash for insurance coverage, a choice that currently jeopardizes the tax status of an employer plan.

Labels: Health care, Medicaid

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Illinois Institute Calls for State-Based Health Care Reform.
The Illinois Policy Institute (to which I am an advisor) has a new report calling for health care reform, which they call "Promoting the Patient Power Paradigm."

The sheer numbers show that reform is necessary. Per-person spending tops $5,600 per person. That is not in itself a good or bad thing, but a number that large deserves some examination, in light of the old economic problem of limited resources and unlimited wants.

More serious for anyone concerned with state policy--which should include every taxpayer--is the soaring cost of taxpayer-provided health care. In Illinois, for example, Medicaid spending grew at an 8 percent annual clip during the last decade, far outpacing income growth. Whatever government program you are interested in, or whether you prefer tax cuts to spending growth, you're going to have to confront health care spending by state governments sooner or later.

Making the task of reform more difficult: while states can and should take action, much remains to be done at the level of the federal government.

Labels: Medicaid

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Medicaid Crisis Due in Part to Moral Hazard: Reverse Mortgages a Way Out.
One problem of public programs is that they run the risk of moral hazard, by which efforts to help somebody end up bringing negative consequences all around.

One such example of a moral hazard is long-term care. The desire that the elderly ill receive adequate care is a good one. But it has lead to a situation in which Medicaid, a state-federal program, pays a substantial portion of all nursing home care in the country.

The negative results are many: nursing home costs are soaring (arguably, because there is one party--the public purse--paying most of the tab), straining state finances. Seniors have difficulties getting into adequate homes, or even inadequate ones in some states. And countless dollars are spent in a cottage industry that enables middle class families to move and hide their assets around, shifting the cost of long-term care to "somebody else."

The National Council on Aging has just released a study on the use of reverse mortgages. In brief, it's a loan made against the build-up equity in a house. By the time many people need long-term care, their equity is substantial.

Here's a brief description of the report's findings, from the NCOA website:
Of the nearly 28 million American households age 62 and older, NCOA has found that almost half (48 percent), or about 13.2 million, are good candidates for a reverse mortgage. The amount that these older households could receive from a reverse mortgage is substantial ? on average $72,128. These funds can go a long way to pay for help at home and for retrofitting the home to make it safer and more comfortable. For some, they could be used to purchase long-term care insurance if they qualify. In total, an estimated $953 billion could be available from reverse mortgages for immediate long-term care needs and to promote aging in place.

Some policy changes within Medicaid are called for. So is a way out of the disincentive that even the civic-minded individual faces: each person who foregoes using the public fisc. and going self-pay will have no significant effect on the public treasury, but a significant effect on his own.

Labels: Medicaid

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How Much Does that Health Care Cost You?
Citing the January/February 2005 edition of Health Affairs, the Wall Street Journal notes the following data bites about health care spending:

- Out of pocket expense went up 7.6 percent in 2003.
- One quarter of out-of-pocket expense are for prescription drugs. (That is one reason, perhaps the leading one, for the demand for cheap drugs.)
- Total health care spending in 2003 was $1.7 trillion, or $5,670 per person. (Consider that figure next time you think you are underpaid. Are you counting the value of any employer-paid insurance premiums?)
- Spending growth in Medicaid was 12.1 percent in 2002, and 7.1 percent in 2003. The similar numbers for Medicare were 7.6 percent and 5.7 percent.
- Insurance premiums rose 10.7 percent in 2002, and 9.3 percent in 2003.

Rising spending is not in itself a problem. As the country gets wealthier, it's natural to want to spend more on personal well-being.

On the other hand, some of it is the result of the price illusion, in which it's easy to say "Somebody else is paying for it." But as the example of employer-paid insurance premiums demonstrate, you pay for it one way or another.

Labels: Health care, Medicaid

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Medicaid: Go Back to Cash.
My colleague at the Flint Hills Center, Matt Hisrich, writes to the Hutchinson (Kansas) news about the plight of Medicaid.

Though the numbers he uses are specific to Kansas, the problem exists in various forms at all states. Likewise, part of the solution--increased consumer participation in the management of health care dollars--applies to all states as well. "Medicaid," he writes, "is actuarially bankrupt, producing low-quality care and falling victim of fraud and abuse." It's also unsustainable in its current form. One alternative: Give people cash and help them buy appropriate services or insurance policies.

Labels: Health care, Medicaid

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Medicaid Expenses Rising; Reform Required.
When it comes to domestic political affairs, Social Security, Medicare, and education get a lot of ink. Less visible, but more important, is Medicaid, a federal-state health program that covers some of the poor, as well as pays for most nursing home stays of the elderly.

Medicaid hasn't got a lot of press, but the National Center for Policy Analysis (NCPA) points out today that it's going to get a lot more in the future. It better. Whether you care about welfare programs, K-12 education, higher-education, job training programs, or cutting back on the size and scope of government, you're going to have to pay attention to Medicaid.

Why? As the NCPA says, "Medicaid costs exceeded elementary and secondary education costs in states’ 2004 budgets." That's the first year that this program--which goes by different names and faces in the states--took more out of the public purse than K-12 education, traditionally the single largest budget item.

Unfortunately, much of the policy attention paid to Medicaid has sought to address its problems in one of three ways: squeezing more money out of health care providers, limiting the number of people enrolled in the program, or cutting back on the services covered.

But Medicaid suffers the traditional problem of all government health care programs: it's not a rational system. As the American Legislative Exchange Council has put it, Medicaid is a system of perverse incentives. Even if you wanted to, it would be hard to come up with a system that more poorly services taxpayers, patients, and physicians.

Labels: Medicaid

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Veterans’ Woes Illustrate Problem With Government Health Care
If you think nationalized health care is a good thing, look at the sorry state of Medicaid. Or the VA health care system, which I discuss in my latest essay for the Mackinac Center.

Labels: Medicaid

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If You Want Health Insurance for the Poor, Don't Expand Medicaid as We Know It
One fourth of the Texas population is without health insurance. The status-quo solution is to pour more money into Medicaid, and shuffle the uninsured (some poor, some not poor) into that program.

But that's an unsustainable and inferior path, says Chris Patterson. As structured, Medicaid threatens the budget of Texas, and every other state. Currently it is the #1 or #2 spending category for each state, consuming 26 percent of the state budget in the case of Texas.

A better path than putting more people into an unreformed Medicaid program would involve seeking federal permission to expand the use of vouchers within Medicaid, so that people can set up Health Savings Accounts and purchase insurance in the private market.

Labels: Health care, Medicaid

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Medicaid Nursing Home Payments, the Middle Class Welfare Program
Few situations in health care illustrate the perverse incentives and consequences of our health care financing system than nursing home care.

For a variety of reasons (some legitimate, others not), insurance to cover long-term care is expensive. Given the fact that government (Medicaid) will pick up the tab, most people don't buy the insurance. (Come to think of it, this activity, which suppresses demand, may be one reason why rates are so high.)

Few people are willing to cough up their life savings to make out-of-pocket payments for nursing home expenses, and few boomer parents are willing to see their inheritance spent on mom's stay at Shady Rest Skilled Nursing Facility--especially when they see other families getting their stays covered at the taxpayers' expense.

Now, there's Medicaid, but that's a program for the poor and even destitute, and most people who enter nursing homes are not destitute. So what to do? Engage the services of a small industry of lawyers whose practice is engaged in hiding or shifting assets in order to qualify an elderly person for nursing home coverage. It's good business for them, and of a certain financial advantage to the families. After all, if your own sacrifice for the good of the public fisc. is going to be overwhelmed by everyone else dipping into the public pool, why sacrifice yourself?

Yet this scenario presents plenty of problems not only for the public purse, but for those who engage in this asset-shifting.

Few people are more tireless in their efforts to find a way out of this morass than the principals and staff behind the Center for Long-Term Care Financing. Here's an excerpt from one of their weekly newsletters.

"Is it a legitimate function of Medicaid to pay for long-term care so that people can buy more expensive homes, cars and funerals? At whose expense? Taxpayers? Yes. But private-pay residents in nursing homes have to pony up half again as much as Medicaid for their care. That's called cost shifting. People who also pay LTC insurance premiums are thus triply taxed while the clients of Medicaid planners skate. ... As we've said before, as long as people can ignore the risk of long-term care, avoid the premiums for private insurance, and pass the cost of care to Medicaid, most won't buy insurance and Medicaid will continue its precipitous decline."

Labels: Health care, Medicaid

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