FUNDING CRISIS IN ELDER CARE

Stuart H. Shapiro

is a resident of Bala Cynwyd, president and CEO of the Pennsylvania Health Care Association in Harrisburg, and former health commissioner for Philadelphia.

Pennsylvania and the entire United States are rapidly heading into a fiscal tsunami.

Our country's key retirement pillars - Social Security, Medicare and Medicaid - are crumbling. And while President Bush, congressional leaders and presidential candidates propose sweeping changes to our failing health insurance system, no one has yet addressed a greater national crisis, involving an even more staggering amount of money.

Simply put, we have no means of paying for the long-term-care needs of the nation's 77 million baby boomers, who begin turning 65 in four years. We expect somebody to pay it, and believe vaguely that it will be paid - but, in fact, we have not planned for it, individually or as a community. It is thus our nation's greatest unfunded mandate.

A report in the Congressional Quarterly said nearly 70 percent of those turning 65 this year will eventually require long-term care. A recent poll found that 85 percent of Americans believe, mistakenly, that if they need long-term care, that need will be fully met by Medicare, Medicaid, or their existing health insurance. Likewise, most Americans, and indeed most lawmakers, would be surprised to learn that seniors' long-term-health-care needs exceed what Social Security can provide. There's a gap, and we have not thought through the best way to fill it.

For Pennsylvania, this is especially troublesome. We rank third among states in the percentage of population over age 65 and fourth in percentage of population over 85.

One aspect of Gov. Rendell's "Prescription for Pennsylvania" - a bold, innovative plan unveiled in January - calls for expanding choices for home- and community-based care for elderly and disabled residents. And indeed, every senior citizen should have the right to receive care in the most appropriate setting - but what's appropriate at 67 might not be at 87.

The governor's plan is based partly on the belief that care provided at home or in the community is not only more comfortable, but also less expensive than nursing-home care, hence allowing the commonwealth to reduce long-term-care costs under Medicaid.

It hasn't worked out that way so far in Pennsylvania. While the number of people receiving care at home nearly doubled between 2002 and 2007, the state's nursing-home population remained constant. Most people assume that the expansion in home and community services was due to growth in the over-65 population, but according to census data, the number of seniors here actually decreased during those years.

In effect, Pennsylvania has created a new "entitlement" to long-term care that costs more, not less. And we're not alone. Several states have experienced skyrocketing demand for it, with some placing limits on it as they try to figure out the best way to plan for a burgeoning elderly population. Their message has rightly been: Don't expand entitlements until funding for existing programs is in place.

To grapple with this veritable demographic and fiscal tidal wave, it is now time for state and federal governments gradually to shift their role from being the major payer for long-term care to helping people plan and save for their own long-term-care needs.

What we need now is a fourth pillar to stabilize our retirement-program foundation and, in doing so, provide a true safety net for the elderly. But this should not - and cannot - be just another costly government-funded mandate.

We need to lay greater stress on the individual's responsibility for his or her own care, with special attention to planning. Moreover, federal and state governments must work cooperatively to expand - vastly expand - the long-term-insurance marketplace. We need policies that enable compounding interest and time itself to work for us, not against us.

Above all, we need a greater sense of urgency in Washington and state capitals across America. President Bush should convene a bipartisan national commission on long-term-care reform - similar in stature and scope to the landmark 1983 National Commission on Social Security Reform established by President Ronald Reagan. That commission was the last time our nation seized the opportunity to address, in true bipartisan fashion, the fiscal shortcomings of a key retirement pillar.

A successful National Commission on Long-Term-Care Reform has real potential to help the next president and the new Congress not only carve out a historic niche of bipartisan cooperation - something voters clearly desire - but also stimulate a new, vigorous debate to be carried into the 2008 presidential campaign. The next president could then have a clear, legitimate mandate to implement needed market-based and governmental reforms.

If such a commission is convened, nothing should be off the table. Superficial labels of conservative and liberal must be left at the door. Among ideas that could be considered:

Allow people to deduct purchase of long-term-care insurance "above the line" on their state and/or federal tax forms - that is, deduct it directly from their total income before taxes, in most cases decreasing their tax bill.

Allow people to deduct their long-term-care insurance premiums under cafeteria plans and flexible-spending arrangements along with child care, health care, dental care, life insurance and disability; currently, they can't.

Establish a new voluntary federal program, similar to Social Security, in which payroll deductions are deposited in a personal long-term-care savings account.

Provide limited tax credits to those (with incomes below a certain level) who provide services to family members with long-term-care needs.

Allow individuals to access their life insurance for long-term care in the form of an accelerated death benefit. In 2001, 69 percent of American families had some form of life insurance, and now it may make some sense to convert at least a portion of this life insurance to long-term-care insurance.

Let every American have access to a program, currently available only for federal employees, that allows purchase of long-term-care insurance at significantly reduced group rates.

Establish a new "Part E for Medicare" that would require the federal government to accept responsibility for all long-term-care services for "dually eligible" seniors (those on both Medicare and Medicaid). Although Part E would be primarily funded by the federal government, it would begin to stabilize the long-term-care system, while market-based solutions begin to take hold.

Engage a "reverse mortgage" concept - a loan seniors could take out against the equity value of their homes - to help pay for long-term-care insurance and services.

Develop methods to help Americans take more control of their economic and health-care futures. The private sector must drive this change. A demographic wave is cresting. Bipartisan reform of decades-old programs - designed in a different era to solve fundamentally different historical challenges - is not an option, but a necessity.

We should all insist that Republican and Democratic presidential aspirants not sidestep or ignore this domestic priority any longer. We can no longer defer action.

For "Prescription for Pennsylvania," from the Governor's Office of Health Care Reform, go to http://go.philly.com/pascript

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