Sunday, December 12, 2010

Nursing Home Care: A Specific Failing of Our Health System

An excellent article in the NY Times today covers the topic of middle class families using spousal refusal to pay for nursing home care.  A few things stand out, first average care costs of over $100,000 a year.  Surely, there must be a market for more mid-range care, while some patients undoubtedly need this level I can't imagine that this need is universal.  There seems to be an opening for research on whether market failure is occurring, potentially because of programs like Medicaid and long term care insurance, of if there is something else going on, insurance costs leap to mind.

The second thing that jumps out at me is that this is a prime example of how our mixed system of health care creates market failures.  In this case, to qualify for Medicaid an individual can retain:
The federal government allows a healthy spouse to keep a house, a car, up to about $2,700 a month in income and up to about $110,000 in other resources. Anything above that must be spent on nursing care before Medicaid kicks in.
This system obviously discriminates heavily against savers.  Anyone that wanted to fully fund their retirement would be basically wiped out by costs of $100,000 a year or more.  If someone is unfortunate enough to have a loved one get a condition that requires long term care then trying to take responsibility and pay for it will rapidly deplete any savings they had, of course if they had been spending the money from the start they wouldn't have this problem.

I don't really see how this problem is solvable without universal coverage.  Conditions that result in this situation are rare enough, and private options such as long term care insurance uncertain enough (I've seen a number of articles on how these plans are constantly having problems and having to shut down, or make other changes), that it's unlikely someone could adequately prepare in advance.  With universal coverage this problem can be dealt with more effectively.  Either its paid for by universal premiums to insurance companies, which would then have a huge incentive to look at and press for reform at long term care facilities, or it is paid for universally through taxes.  As it is today, there is no good way to distribute costs, people that try to pay privately get wiped out and those that don't suffer these misfortunes resent having this paid for by the public purse rather than by the individual suffering the tragedy, who does have significant assets that could partially pay for the care.

At the end of the article a reform effort within the existing system is mentioned:

Lawyers within the New York State Bar Association who represent the elderly have proposed a compromise system. It would allow people to negotiate a payment plan with the state, in which they would pledge to pay a “fair share” of their spouses’ nursing home costs — perhaps half their assets — while keeping enough for their own living expenses, Mr. Krooks said. There are plans to try out a version of this system upstate.
 While better than what we have today, half of someone's assets seems high, especially when Medicare gives so much better coverage to people suffering from diseases requiring hospital care instead.  I continue to have the same thoughts on the subject I expressed earlier in my posts on medical care, we all run the risks of acquiring these conditions and very few of us possess the ability to pay for them, therefore the only way to pay for these conditions is through universal cost sharing.  Anything else will lead to perverse incentives, such as the byzantine bureaucratic process described in the article with suits, counter-suits, and settlement negotiations becoming an expected part of life for individuals who are likely undergoing some of the most traumatic times of their lives due to the conditions their loved ones are suffering from.

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