Attorneys Offer Prescription for Long-Term Care Dilemma

Getting old and feeble is no one’s idea of a good time. Being old, feeble and too poor to pay for decent help can be a living nightmare. Yet millions of Americans may be headed for just such a fate, especially if the current long-term care system isn’t changed.

A group of attorneys who specialize in aging-related issues has proposed a radical solution: making long-term care part of the Medicare system. Instead of merely expanding the government-provided health insurance system to cover prescriptions, as presidential candidate Al Gore has proposed, these advocates want a guaranteed pool of money to pay for home health care, nursing home stays, adult day care services and assisted living, among other costs.

This pool of money, $200,000 per American, would be paid for by a payroll tax similar to the ones that finance Medicare and Social Security. Revenue from estate and gift taxes would also be dedicated to help cover the cost. To be eligible, people must be 65 or disabled and must have paid into the system for roughly 10 years.

The coverage as proposed by the National Academy of Elder Law Attorneys would kick in after a $10,000 deductible. Medicare would pay for 80% of the cost of long-term care after that deductible. Once the $200,000 was spent, people would have to use their own assets or private insurance to pay for care, or apply for government aid to the poor.

To be sure, the idea is a long shot. The attorneys haven’t come up with an estimate of how much this plan would cost the nation, let alone how much would have to come out of your paycheck to pay for it. They expect that somewhere around 60% of the population will need long-term care at some point in their lives, but how long they’ll need it and what kind of care is hard to guess.

If you figure that nursing home care alone costs Americans more than $65 billion a year, and that Medicare already costs $233 billion, you can figure that paying for the attorneys’ plan probably would take another 1% or so out of your paycheck. And that could be politically untenable.

Younger workers are already grumbling about the 6.2% of their incomes they contribute to Social Security benefits and the 1.45% levy that pays for Medicare. Add to that the fact that Social Security and Medicare currently face a huge deficit when baby boomers retire, and the long-term care proposal’s prospects dim further.

The attorneys are dead serious about the need to address the issue, however. Even if long-term care reform doesn’t fly in this election year, they figure it may contribute to an important discussion about overhauling a system that is inefficient, expensive and, in their words, “disease discriminatory.”

The time is right, said Laury Gelardi, the academy’s executive director.

“The baby boomers have more parents than they have children,” Gelardi said. “They are going to be worried about how to care for” their aging, long-lived relatives.

Unless you or someone you love has wrestled with the issues of long-term care, you may not be aware of the problems faced by the elderly when they are no longer able to care for themselves.

Traditional health insurance and Medicare are designed to cover acute, rather than chronic, diseases. Health insurance and Medicare don’t typically cover nursing home costs or the kind of basic assistance with daily living that many people will need as they get older.

In other words, if you have cancer and need chemotherapy, your health insurance or Medicare will pay. If you have arthritis and need help getting dressed, or if you have Alzheimer’s and need someone to make sure you don’t wander off and hurt yourself, you’re pretty much on your own financially.

There are two major exceptions to this rule. If you’re poor, you may qualify for Medicaid, known as Medi-Cal in California, which does pay for “custodial” care and indeed pays about half the nursing home bills in this country. Medicaid outlays for long-term care were $56.1 billion in 1997, more than double the amount of a decade earlier.

As discussed in previous columns, there is already a growing business in so-called “Medicaid planning,” in which attorneys and others advise people on how to transfer assets and in some cases artificially impoverish themselves to qualify for government help. Many of those involved justify their activities, saying the failures of the current system make it essential for them to protect their hard-earned assets this way.

The other exception is if you have purchased long-term care insurance from a private insurer. In fact, with long-term care insurance you can often opt to get help in your home, rather than having to move to a nursing facility. Unfortunately, you must be in good health to get the insurance; by the time most people realize they need it, it’s too late.

Long-term care isn’t cheap. Care in your own home can cost $100 to $300 a day or more. Nursing home stays nationally average $140 a day, or $51,000 a year. In urban areas like Los Angeles and New York, nursing homes can cost $70,000 a year or more.

The academy believes the situation will grow far worse as the baby boom generation ages. Longer life expectancies will mean more people living with chronic health problems. While the wealthy will be able to pay for care directly and the poor will qualify for Medicaid, the vast middle class will be faced with the prospect of draining their resources to pay for care, perhaps only to end up impoverished and a further strain on the Medicaid system, or on their families.

The attorneys also note that the current Medicaid system favors institutional care--putting people in nursing homes rather than paying for the less restrictive, home-based care that most people would prefer and that is sometimes less expensive.

Given the problems already faced by the Social Security system, it’s questionable whether such a dramatic expansion of its benefits would be feasible.

On the other hand, more people are getting firsthand knowledge of the current system’s deficiencies--whether because they need help themselves or they’re trying to care for elderly parents. That could make the idea of yet another payroll tax more palatable.

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Liz Pulliam Weston is a personal finance writer for The Times and a graduate of the personal financial planning certificate program at UC Irvine. Questions can be sent to her at liz.pulliam@latimes.com or mailed to her in care of Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries. For past Money Talk questions and answers, visit The Times’ Web site at https://www.latimes.com/moneytalk.

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Long-term Care in the U.S.

Longer life expectancies mean more Americans will face chronic health problems that require long-term care, according to the U.S. Census Bureau and experts on aging. Yet most don’t have the assets or insurance required to pay for long-term home care or an extended nursing home stay.

Average life expectancy for a 40-year-old: 78.7 years

Average life expectancy for a 65-year-old: 82.7 years

Percentage of those now aged 65 who are expected to survive to age 90: 25%

Percentage of those over 85 who need help with basic living activities (1): 50%

Average annual cost of a nursing home nationwide: $51,000 ($140 a day)

Average annual cost of a nursing home in urban areas: $73,000 ($200 a day)

Average length of stay: 2.3 years

Percent who stay five years or more: 21%

Percent of Americans who are expected to need long-term care: 50% to 60%

Percentage of Americans who have ever purchased a long-term care policy: 6%

Percentage of nursing home residents who exhaust their resources to pay for care: 50%

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(1) Activities include dressing, using the toilet, preparing meals and housekeeping.

Sources: U.S. Census Bureau, National Center for Health Statistics, Health Insurance Assn. of America, New England Journal of Medicine