Like it or not Medicaid has become a middle class nursing home financing system. Not out of greed, but out of necessity.

The last attempt Congress took at “reforming” the Medicaid rules, they simply came up with more complex rules and “kicked the can down the road.”

Our standard approach to political problem solving is part of the problem. Namely, too much “either-or” thinking, and not enough “and” thinking.

As an elder law attorney, I offer a solution so radical that many of my colleagues and clients will stand aghast. Scrap the Medicaid nursing home rules! The system is a mess. But let us “scrap intelligently.”

 The Current Nursing Home Payment System

Currently, a person looking at nursing home confinement has just a few options for payment.

One option is to whip out the check book and pay. As I will explain, that is not a viable option for most folks.

Another option is to rely on purchased long term care insurance coverage. Very few folks have that.

The final option is Medicaid.

According to Genworth (one of the larger and more reputable long term care insurance providers) the median 2015 nursing home costs can exceed $80,000 annually. The Wall Street Journal puts that number at $91,250. Also, the annual out-of-pocket costs for a family caregiver can be huge, not to mention a heavy burden in physical, mental and emotional pain. Altered work schedules, depression and stress can cost employers billions in lost productivity.

Over the past eight years, at least 10 of the top 20 long term care insurers have stopped selling to individuals. Those include MetLife, Unum, and Prudential. Currently, there are perhaps a dozen insurers in the business.

On the brighter side, some insurance companies are offering hybrid life/long term care policies, and perhaps those hold some promise.

The existing Medicaid-based system offers fairly comprehensive coverage for the poor, but for the middle class the problem with the current system is that they are – well – middle class. To become eligible, people must impoverish themselves. That comes easily enough after a year or two in a nursing home.

“Either” The Private Option –

Proposals to enhance private insurance would largely leave the current structure in place. That does little to relieve the current insurance underwriting standards and the fiscal pain of either privately paying or qualifying for Medicaid.

Also, if Medicare Advantage plans are any indication of the magic elixir of private insurance, we cannot be encouraged. Uncle Sam spends 20% more on each Medicare Advantage beneficiary and then complains the Medicare system is going broke.

“Or” The Universal Healthcare Option –

Simply replace the current welfare-based system with social insurance. The program could be managed as a new Medicare benefit or though a new independent, quasi-government entity.

While attractive to some, the loss of choice, the expense of another huge bureaucracy, possible rationing of care and dictating more rules and regulations is mind-boggling. Cup of “tea,” anyone?

The “And” Approach

Why not a hybrid public-private system?

Scrap or greatly limit Medicaid coverage. Grandfather-in those who are currently uninsurable. Allow private insurers to offer standardized long term care insurance coverage (similar to the way Medigap policies are offered – which makes comparison shopping easier).

To make private insurance more affordable and reduce the need for underwriting, require a mandatory beginning age and require insurers to accept all buyers without underwriting (again, similar to Medigap policies).

Make Medicaid a painful alternative for those who simply elected to skip the affordable premiums when they had their chance.

The Community Living Assistance Services and Support Act (the “CLASS Act”) signed by President Obama in March, 2011 contained a few of the features I outlined above, but was subsumed by the Affordable Care Act. The ACA contains no long term care features.

Any solution, it seems, must provide some mix of public and private financing to be politically and economically palatable.

This particular system is most definitely broken, so let’s fix it . . . intelligently.

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