Jeffrey R. Brown and Amy Finkelstein write,
At $135 billion annually, long-term care expenditures represent over 8.5 percent of total health expenditures for all ages, or roughly 1.2 percent of GDP... Private insurance reimburses only 4 percent of long-term care expenditures, while about one-third of expenditures are paid for out-of-pocket.
...Medicaid is quantitatively important in explaining the absence of private insurance. Indeed, we find that even if we “fix” whatever supply side problems may exist – and therefore offer comprehensive private policies at actuarially fair prices – at least two-thirds, and as much as 90 percent, of the wealth distribution still does not want to buy comprehensive insurance. This finding points to the important role played by Medicaid in fundamentally constraining demand for private long-term care insurance, even in the absence of any private market problems...changes to the Medicaid system are necessary, although not necessarily sufficient, to substantially increase demand for private long-term care insurance.
The problem is that the way that the Medicaid rules are written, a huge portion of private long-term insurance is effectively taxed away. For many people, to buy long-term care insurance is to protect the government, not yourself.
For Discussion. One commmenter on a previous post argued that Medicaid ought to be scrapped, with a negative income tax used instead to reach the indigent. How does the paper mentioned here reinforce that idea?
I wonder if they don't undercount private long-term care expenditures. Many elderly people are well enough to live at home but require regular in-home assistance with tasks like bathing, cooking, washing clothes, shopping, going for a walk, etc. -- things that younger family members might be able to do if they lived nearby and didn't work during the day. One might hire a retired or off-hours nurse or other credentialled caregiver for 8 hours a week at $15/hr -- about $500/month. This represents a huge but necessary monthly expense for many old people with moderate savings and income mostly from Social Security. And yet, it is probably the most cost-effective "long term care" imaginable. Medicare won't even touch this, and in-home care policies are considered a supreme luxury. How might private insurance address this while promoting the same kind of efficiency that has to exist in this niche now?
I don't think it's clear that the private insurance industry creates real market. The 35% administrative costs in our health care system, double the rest of the industrialized world is an indication of this.
Again if tax payers are rational buyers why would they start shifting their funds to a method that uses much more money for bureaucracy than the government run insurance systems? And if alleged advocates of free markets believed in markets why would they not wonder about these inefficiencies?
I remember Bill Buckeley commenting on it nearly 20 years ago, so why do few other conservatives address it?
I dislike ideologies which imitate communism by saying because the theory says this is better it must be, despite what the balance sheets say.
Someone in an earlier set of comments mentioned catastrophic insurance. Things may have changed in the last few years, but not that long ago many people found it a complex and difficult to get method. It sounds good on paper in some respects (though what happens to regular health insurance when the healthy leave?) but I have known people being told they can only get 80/20 coverage, not practical in an era of $100,000 bills and even recently many insurance agents didn't have the slightest idea of what it was.
Also most insurance policies remain affordable because they establish limits on payment. So Medicaid is there when people go beyond this. Also remember Medicaid pays the lowest rates, for this reason only a minority of institutions and doctors accept it. The total costs of private systems are likely to increase not only from the huge jump in administrative costs, but the jump in costs for various services.
I'm afraid that in terms of saved costs the only way to cut Medicaid is to imlement incremental and rational changes of poloicy such as support for home care through Medicare as suggested by the previous poster in this thread.
As for the administrator before proposing handing over control to a private (not market) system which not only costs twice as much for administration, but spends twice the percentage of GNP on health care as most industrial countries with lower life expectancies is exactly equivalent to Putin handing choice indistries to his cronies.
It is a remaint of communistic thinking and not appropiate for this country or century. Just because George Bush made his fortune by getting a city to build him a baseball park and give him land or Rumsfeld and Cheney landed nice jobs because of government connections doesn't mean that this kind of thing has suddenly become free enterprise.
Before you talk about tweaking the system to increase total costs by one third or more, as most previous posters have suggested, you need to figure out ways to make the existing system more efficient. This requires a lot of tweaking, possibly government action to break apart the various interests who benefit.
I am appalled by individuals who suggest that we give them a bigger share of the national economy. We simply can't afford it.