June 28, 2005

Long Term Care Becomes Focus of Medicaid Reform

Health care, and particularly Medicaid, has become a focal point of politics as its portion of the federal budget has increased. The New York Times recently published an article here detailing a number of reforms to make on the system to help keep the budget from spiraling out of control. Specifically, law and policy makers have began to target long term care as an area that offers the most potential for reform.

Long term care accounts for nearly a quarter of Medicaid's $321 billion that is budgeted for this year, making it an attractive target for reform. Add to that the fact that nearly 78 million baby boomers will be entering into the demographic needing long term care, and you can see why governors, Congress and the President have all decided to focus on reforming the system.

Under the current system, Medicaid pays for approximately two-thirds of the nation's 1.6 million nursing home residents, many of whom are not the impoverished individuals the program was intended to cover. A number of proposals that are likely to be enacted are just quick fixes to stem the program growth from going out of control. These proposals include:
- extending the lookback period from 3 to 5 years, preventing individuals from dumping assets right before they go into long term care;
- requiring reverse mortgages on family homes to pay for nursing home costs;
- having states place liens on homes after residents die to reimburse the state for medical costs;
- encouraging long term care insurance by offering tax benefits; and
- closing loopholes allowing the elderly to protect certain assets.

All these changes would have just a modest impact on the overall cost of nursing home care, which is likely to see the number of residents enrolled triple by 2050.