The nation is not prepared to deal with the jump in expenditures for long-term care that will come with the aging of the baby boom generation. Only a small part of that care is paid for privately (out-of-pocket or through private insurance). Most is financed through Medicaid, the program that is intended to ensure medical care for the indigent. This use of Medicaid comes at a high cost for individuals and society: the allotment of more than a third of the Medicaid budget to long-term care; a two-tier care system; and the commandeering of limited funds by middle- and high-income people through elaborate estate planning to circumvent eligibility requirements. These problems would be mitigated by replacing the welfare model with an insurance model--voluntary or compulsory private insurance, with subsidies through income-scaled tax credits to ensure affordability. An equitable and efficient system could be created with a blend of public money, private insurance, and other private saving, with a safety net for those in greatest need
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David M. Cutler & Louise Sheiner, 1994.
"Policy Options for Long-Term Care,"
NBER Chapters,
in: Studies in the Economics of Aging, pages 395-442
National Bureau of Economic Research, Inc.
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