Nuclear power is the most government-regulated industry in the country. The second most regulated is the Long-Term Care (LTC) industry. Being such a highly regulated industry, why doesn’t it deliver the benefits most people want?
When interviewed, most people say they want more home care, fewer nursing homes, lower costs, higher quality, and more choices and control.
The reality is that more people need long term care today and public programs are inadequate. “Free” care supplied by family members causes emotional and financial stress for the family.
Ask the “experts” what to do about the LTC situation and the answer is almost always more government. They envision a shiny brand-new government entitlement program that everyone must participate in through an additional payroll tax. If they can’t get a shiny new program then simply add long term care to Medicare they say.
The question is why are LTC services and financing so dysfunctional? The answer is that there is too much government involvement already! The majority of LTC in this country is paid for by Medicaid. Institutional bias is caused by Medicaid coverage rules, and the eligibility rules force out private financing. Medicaid’s low reimbursement rates go hand in hand with low quality care. There is the moral hazard of offering Medicaid coverage after LTC is required, discouraging people from planning ahead. Once on Medicaid the elderly are trapped on public assistance. Medicaid is causing the majority of issues we have now in the LTC sector, so how would a bigger, shinier, newer, government program be any better?
What if Medicaid stopped paying for LTC? What do you think the chances are that most people would be concerned about the 25% chance that they will need LTC in the future? They would do what they do now for other risks such as health, homeowner’s insurance, etc., and save, invest, and buy insurance to spread the risk of course. (On a sidenote, the federal government projects that Medicaid will be insolvent by 2026.)
For those without LTC insurance, many could use their home equity to fund for their care. When spending their own money, they would insist on home care instead of a nursing home. With roughly $8 trillion dollars in home equity available to use for LTC, imagine the access and quality improvements in the sector. That kind of money will grab the attention of many entrepreneurs that will discover better care options at a better price.
The perfect storm is nearly upon us. Our society is getting older, the wave of baby boomers is here. Medicaid is broke. The middle class needs a way to afford LTC in the near future. Getting Medicaid out of the LTC business is priority number one. Whether through legislation or insolvency, once Medicaid is out of the picture the private sector will step in and offer better care at a much better price. For the truly needy there will always be private charities and a vastly scaled-down version of government assistance funded by the savings of Medicaid’s exit.