The Future Financing of Long-Term Care for Older Persons

Summary

This chapter examines the current system of financing for long-term care focusing on the people served, the services supported, and the features of the major financing sources: Medicaid and impaired consumers. The Medicaid program was never intended to be a welfare program for middle- class elderly who face high long-term-care costs. But Medicaid reforms that “crack down” on family responsibility and asset transfers avoid the underlying problem of the catastrophic costs of long-term care. Alternative financing mechanisms are needed, and the most promising of those proposed is long-term care insurance—a mechanism which allows the elderly to pool their risk and funds. The government has an interest in creating such insurance since it could greatly reduce Medicaid spending. Insurance initiatives are likely to come from the private sector, but the government could play constructive roles in encouraging and shaping their development.