What To Do About Medicaid’s Long-Term Care Benefit?

There seems to be a growing consensus among policymakers that there is something very wrong with Medicaid’s long-term care benefit for frail older adults and younger people with disabilities. But there is deep disagreement about what to do about the program’s long-term services and supports benefit, called LTSS.

President Trump and many congressional Republicans believe Medicaid LTSS is inefficient and riddled with fraud. And they have taken multiple steps to slash the assistance, which is available only for those with few financial assets and a significant need for personal care and other help. But most seem uninterested in finding an alternative.

Democrats, by contrast, are split among three possible solutions. Some want to enhance the Medicaid benefit for home-based long-term care. Others prefer to shift home and community-based care, or HCBS, from Medicaid to Medicare. Yet a third group, which has the support of a few Republicans, would replace much of the Medicaid benefit with a universal, public long-term care insurance program.

None of these ideas are new. Here is a valuable review of the many reform plans that have been proposed in recent years. Nearly all either enhance Medicaid LTSS or largely replace it with a social insurance-like program.

Each of three most recent ideas comes with their own pros and cons. Here is a quick look them.

Cutting Medicaid

Trump’s agenda seems hardest to justify. Last year’s big budget bill will slash Medicaid spending for all enrollees by nearly $1 trillion over the next decade and impose new paperwork requirements aimed at making it harder to enroll and stay eligible.

Now, in the name of cracking down on fraud, the Administration is moving to cut Medicaid benefits even more deeply, including for HCBS services.

Directly or indirectly, these steps will further shred an already porous Medicaid safety net for six million vulnerable older adults and younger people with disabilities. The White House has yet to say how these people would receive care absent Medicaid assistance. This is especially a challenge for the many with physical or cognitive limitations who have no family to care for them.

Expanding Medicaid HCBS

Representatives Debbie Dingell (D-MI), Jan Schakowsky (D-IL), and others believe the solution is to strengthen Medicaid LTSS, especially for those receiving care in the community. Last week, they introduced two bills, Home and Community-Based Services (HCBS) Access Act and the Long-Term Care Workforce Support Act intended to shore up the Medicaid safety net.

The titles are pretty self-explanatory. While the bill texts are not yet available, the first one reportedly would make HCBS a mandatory benefit under Medicaid and shift the cost of that assistance to the federal government. The measures also would enhance opportunities for direct care workers.

Currently, Medicaid costs are shared by the states and feds and while nursing home care is a required benefit, home-based care is not. Dingell and Schakowsky would guarantee access to Medicaid home-based care and make the federal government responsible for all HCBS costs.

This would not only reverse the cuts made by last summer’s budget bill, it would substantially increase spending for Medicaid HCBS. In effect, it would require Congress to abandon the Medicaid policy it created last year, and then add billions of dollars more to a program it just cut.

By building on the existing Medicaid model, Congress would not have to create an entirely new federal long-term care benefit.

However, the Medicaid program is politically unstable, as we learned last year. Expanding it would add substantially to the federal budget deficit. And it is constrained by many rules intended to prevent fraud and hold down costs but limit the kinds of care that is available to those who need it.

It also leaves unanswered an important policy question: If the federal government is going to pay all the costs of HCBS, why should the benefits vary by state? And if they don’t, why should the program remain in Medicaid at all?

Replacing Medicaid HCBS With Medicare

Another alternative, recently proposed by a group of experts affiliated with the Brookings Institution, also would make HCBS a fully federal benefit, but primarily as part of Medicare, not Medicaid.

It would maintain a Medicaid LTSS benefit for nursing home care and for those ineligible for the new Medicare home care benefit. But, mostly, federal responsibility for long-term care would move to Medicare.

The advantages to this shift: Medicare appears to have more public and political support than Medicaid. The plan is intended to be self-funded, thus would not add to federal deficits. And while the amount of its home care benefit would be tied to a beneficiary’s income and assets, everyone who is medically eligible would get at least some assistance. Thus, this model would look more like a social insurance program than welfare-like Medicaid.

Public Long-Term Care Insurance

The third alternative would create a public long-term care insurance program. Washington State already has created one, which is funded with a modest payroll tax. It will pay the first $36,500 in LTSS benefits starting in July.

In Congress, Representative Tom Suozzi (D-NY) is developing his own universal public insurance benefit, called the WISH Act. Unlike the Washington State program, it would provide an unlimited catastrophic benefit, though not until after people have paid for their own care for a set period of time. That could be, say, a year for low-income people and three years for those with higher incomes.

An earlier version of the bill also was funded with a payroll tax. While the measure now is being revised, the sponsors intend it to be fully funded without relying on general revenues. (Full disclosure: I participate in a group that advises Suozzi on technical aspects of his bill).

It also could provide a cash benefit, which would give people maximum flexibility in how they use their assistance, without being constrained by Medicaid or even Medicare rules.

Depending on their design, the Medicare model and a catastrophic insurance program could substantially lower Medicaid LTSS costs.

There are endless variations on these ideas, both on the benefits they provide and the way they are funded. But in the end, policymakers will have to decide among four basic LTSS models: Medicaid; Medicare; public insurance; or leaving older adults, people with disabilities, and their families to fend for themselves.