Nearly one in five Americans over age 65 cannot perform basic activities of daily living such as bathing, dressing, eating, or toileting without assistance. For those over age 85, that figure is nearly half. Friends and family can and do help, but still, about half of people who reach age 65 will use paid long-term care services and supports (LTSS) at some point. Most Americans don’t have enough income or savings to cover these expenses. The private long-term care insurance industry has never worked well, despite many creative efforts to fix it and encourage enrollment. The federal Medicare program only covers short-term home care after hospitalization, not long-term support. That leaves us with Medicaid. Medicaid provides a vital long-term care safety net for people who receive care primarily through Medicaid, but it’s not a good solution for most Medicare recipients because it doesn’t match the system that manages their care and pays providers. Moreover, Medicaid eligibility is limited to those with very low incomes and few assets, making it difficult for most seniors to qualify. It is long past time to add a universal home care program to Medicare itself.
Previous efforts in this direction have been thwarted. Some advocates call for a universal, open-ended benefit. Critics argue that a universal home care benefit would strain budgets. These tensions are ubiquitous in the design of social programs. An additional tension in designing programs to help people near the end of life is that public funds should be focused on expanding access to needed care rather than protecting people’s ability to leave large inheritances to their children. Designing a fiscally responsible universal benefit that achieves all of this is a difficult task, but we believe it is not impossible. In this article, we discuss design options for a Medicare home care benefit that can be increased or decreased depending on the priorities assigned to program generosity and financial feasibility.
Several features make universal home care benefits difficult to design.
The need for home care is based on measures of functioning, not clinical tests. Programs need simple, reliable methods to measure who needs care and how much care is needed. Most people report preferring care at home over nursing homes or other facilities. This is because, unlike medical care, which is often uncomfortable and painful, home care typically provides recipients with support, comfort, and some safety. One consequence of these preferences is that home care benefits are prone to overspending. Programs need to take measures to avoid overuse. Income alone is a poor indicator of how much Medicare recipients can afford to pay for home care. For example, recipients who live in rental housing may be relying on their income to purchase a home. Other recipients may have very large illiquid assets but limited income, making them ineligible for the Medicaid program and unable to pay for care. Program designs need to address the importance of assets in this population. Much of LTSS is provided through informal care. Recipients often prefer care provided by family members, but paying for informal care increases the potential for overspending, fraud, and exploitation of the elderly. According to KFF, state Medicaid programs currently cover home care costs for 4.2 million people, but eligibility and costs vary widely across the country. Medicaid continues to provide home- and community-based services for people who are not Medicare beneficiaries. A portion of this spending is reallocated by states to improve the quality of nursing home care and for home- and community-based services for people who don’t qualify for Medicaid. Federal share of Medicaid savings can be used to help pay for the new Medicare home care program.
None of these challenges are negligible, but none are fatal. As with any program, policymakers must compromise on these challenges to design a program that provides the greatest benefits within budgetary limits. Fortunately, the current state of financial protections for home care is very limited, and even a modest program that made conservative choices on these parameters would cost about $40 billion per year but would significantly improve the lives of many currently underserved people. Of course, more generosity would come at a higher cost and would provide greater benefits to more frail and vulnerable Medicare beneficiaries.
What would such a very conservatively designed universal program look like? Eligibility for the program would be limited to those who an independent clinical examiner determines are unable to perform two activities of daily living (e.g., bathing, toileting, and eating). This is a criterion that many state Medicaid programs already use, and it could be assessed annually during the initial implementation period to further develop and monitor uniformity of functional assessment over time. Second, the program would include cost-sharing that differs depending on people’s means. Medicare beneficiaries with high incomes and high assets would receive modest assistance from the program to cover some of the costs of home care. Those with fewer assets and lower incomes would pay much less. Third, beneficiaries’ contribution to the costs of care would vary depending on both current income and accumulated assets, but through cost-sharing rather than strict cutoffs. For example, we could allow all Medicare-eligible beneficiaries with incomes up to 150% of the poverty line ($22,600 in 2024) and assets up to $30,000 to be fully covered, with the costs above. Above that limit, individuals would still qualify, but would pay a cost-share from their own assets to defray taxpayer costs. Fourth, only care provided by formal caregivers associated with a home care agency would be covered. Support hours are determined on a need-to-know basis, but the provider agency would be subject to a population-based service-hour budget. The combination of resource-based copayments and population-level budgeting ensures that the costs of this program do not skyrocket. Finally, federal Medicaid costs saved by shifting home care benefits from Medicaid to Medicare would be used to defray the costs of the program.
The program we outline focuses benefits on the most vulnerable people who currently have the least eligibility and the least means to pay for services. But there are many others who could benefit from a new home care program. People with functional impairments who do not meet the two activities of daily living standard may also need assistance. Lower costs for middle-class people give them more resources to enjoy life to the fullest. The trade-off is simple: more people get more protection at the expense of higher costs for the federal budget. We cannot define where the line should be drawn (that is a job for Congress). But our analysis suggests that there are ways to add home care benefits to the Medicare program that are programmatically manageable and fiscally feasible.
