Long-term care poses huge economic challenges to families and governments.
Providing long-term health care to a loved one with a disabling disease or a debilitating condition poses enormous challenges---physically, emotionally and financially. Long-term care takes a heavy financial toll on individuals requiring care and on their families. In some cases, long-term care has wiped out the savings of elderly Americans and their families. Further, it has strained the budgets of public health care programs.
Significance
In a summary prepared for the National Bureau of Economic Research, economist Amy Finkelstein called long-term care expenditures one of the greatest risks facing the elderly in the U.S. Expenditures for nursing homes, home health care and other long-term treatment accounted for 8.5 percent of all U.S. health care spending and about 1.2 percent of total gross domestic product in 2004.
Time Frame
Like other health care expenses, long-term care shows no sign of slowing down. Finkelstein reported projections that indicate long-term care expenditures will triple in the coming decades. The aging of the population is one major reason for this growth. A report on long-term care expenditures by the Organization of Economic Development and Cooperation (OECD) pointed out that an aging population will pressure health costs upward because health expenditures increase as people age. This suggests rising long-term care costs over time.
Considerations
Finkelstein further pointed out that less than 5 percent of long-term care expenses are paid by private insurance, while a third are paid out of pocket. She identified the limited market for long-term care insurance as a significant issue. The typical policy, according to Finkelstein, covers only about a third of expected long-term care expenses, leaving families to cover the rest.
Warning
The economic issues associated with long-term care are not limited to the potential for large nursing home bills to wipe out the life savings of retired individuals and their families. The issue affects government expenditures, as well. Finkelstein observed that long-term care consumes more than one-third of Medicaid expenditures. Medicaid is the joint federal-state health care coverage for the poor. However, Medicaid covers long-term care expenditures only for individuals who meet income tests. Often, people must exhaust their own resources before being eligible for Medicaid coverage.
Potential
Rising long-term care expenditures resulting from an aging population and rising health care costs could further burden Medicaid budgets, leading state and federal policy makers to cut budgets, hike taxes, or limit what expenditures the program will cover. The pressure on Medicaid budgets has prompted many policy makers to consider ways of stimulating the market for private long-term care insurance.
Tags: long-term care, health care, care expenditures, long-term care expenditures, aging population, care expenses