RALEIGH – North Carolina will face “insurmountable” budget problems linked to retiring baby boomers, if the state continues on its current course of long-term care public policy. That’s a key warning delivered in a new Policy Report prepared for the John Locke Foundation by the Center for Long-Term Care Reform.
Stephen A. Moses, CLTCR president, will offer details of the report during a noon presentation today in Raleigh. “Long-term care is the largest and fastest-growing portion of state Medicaid spending,” Moses said. “Federal Social Security and Medicare programs now help relieve pressure on Medicaid’s long-term care funding. But as aging baby boomers generate mounting pressures on Social Security and Medicare, that pressure will cause problems for the Medicaid budget unless the state changes course.”
North Carolina has largely neglected private financing alternatives that could supplement government sources, according to the report. “Private long-term care insurance could be a viable funding source for many North Carolinians,” said Joseph Coletti, JLF Fiscal Policy Analyst. “The General Assembly has reinstated a tax credit for this insurance. That’s a good first step, but generous public financing of long-term care is still a significant hurdle.”
The state also has done nothing to encourage private options involving home equity, the report explained. “Home equity is by far the largest repository of wealth seniors could tap to fund high-quality long-term care in the private market,” Moses said. “Encouraging the use of home equity conversion, including reverse mortgages, could help relieve the budgetary strain on Medicaid.”
Tax-financed Medicaid public spending covers the “vast majority” of formal, paid long-term care services in North Carolina and other states, according to the report. Tax dollars cover services for people well outside the category of low-income households.
“The federal government has tried for decades to discourage use of Medicaid long-term care benefits by people with substantial income and assets,” Moses said. “In spite of those efforts, Medicaid-funded nursing home care is readily available to North Carolinians with incomes as large as $4,125 per month, unlimited assets exempted from consideration by the program, or access to a Medicaid estate planning attorney.”
The report cites “exceptional” efforts within North Carolina’s Medicaid program to save money by funding and providing care in less expensive ways. That includes home- and community-based settings as alternatives to more costly nursing homes. “Unfortunately, those exceptional efforts have not reduced total long-term care expenditures by the state and counties,” Moses said.
Those changes might have produced unintended negative consequences, according to the report. “By providing government-financed long-term care to growing numbers of North Carolinians in more desirable, less restrictive home- and community-based settings, the state may have increased the public’s complacency about long-term care risks and costs, about the lack of planning for long-term care, and about public dependency on these services.”
The report recommends other changes to steer North Carolina’s policy back toward a less costly, more efficient course. Among them: implement successful standards and methods from other states to boost Medicaid estate recoveries by $60 million a year; implement provisions of the federal Deficit Reduction Act of 2005, which would help the state target Medicaid dollars to people with the lowest incomes; and use program savings to educate the public that long-term care is a personal responsibility, not a government entitlement.
“Long-term care has a long tail, meaning that insurers need to set aside premiums and invest reserves for decades in order to be able to pay future claims,” Moses said. “So it may already be too late to save the Medicaid safety net by redirecting long-term care financing in North Carolina from taxpayer-generated current revenues toward consumer-generated private savings and insurance. But the state should begin that process immediately.”
Moses will speak about the Policy Report, “Long-Term Care Financing in North Carolina: Good Intentions, Ambitious Efforts, Unintended Consequences,” at noon today at the John Locke Foundation office at 200 West Morgan Street, Raleigh. The report is available at the JLF web site. For more information, please contact Coletti at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].