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Financing Long-Term Care: Options for Policy

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  • Walter M. Cadette

Abstract

The nation is ill-prepared to finance the quantum jump in long-term care spending that is on its way as the baby boom ages. By default rather than by design, Medicaid has become the main source of funds for long-term care. But reliance on Medicaid has fostered the institutionalization of the disabled elderly, has given rise to a two-tier care system, and has yielded the bizarre outcome of use of limited welfare funds by middle- and even high-income Americans who have succeeded in sheltering assets from Medicaid's spend-down requirements. Insurance would be a greatly better answer to the nation's long-term care needs. But the market will remain small and underdeveloped as long as Americans can make easy claim on Medicaid. The paper puts forth a plan for universal long-term care insurance, supported by income-scaled tax credits, to replace Medicaid in its current role. That would make for "honest government"--one that not only does not fund inheritance protection but also genuinely protects those with greatest need.

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  • Walter M. Cadette, 1999. "Financing Long-Term Care: Options for Policy," Economics Working Paper Archive wp_283, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_283
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