A very scary report from the U.S. Centers for Medicare and Medicaid Services was published today in the journal Health Affairs. 

According to this report, even if healthcare reform falls by the wayside, federal and state programs will pay for more than half the cost of healthcare in the US by 2012.

Health care spending jumped to $2.5 trillion, or 17.3 percent of the economy in 2009, the report states. The annual increase in share of gross domestic product, from 16.2 percent in 2008, was the biggest since record keeping began in 1960.

President Obama’s budget director, Peter R. Orszag, told the House Ways and Means Committee yesterday that health care costs will fuel a growing budget deficit and “we cannot close the long-term fiscal shortfall” without bringing them under control. 

All health care spending will probably grow at an average annual rate of 6.1 percent from 2009 through 2019, which is 1.7 percentage points faster than the projected growth in the economy, as measured in gross domestic product, economists said.

 Even as the economy shrank because of the downturn, health care spending grew by 5.7 percent from 2008. Government health care spending grew nearly three times faster than private spending.

Driving much of the cost surge was Medicaid, the federal-state program for low-income people. It grew by nearly 10 percent last year. 

Many long-term care insurance specialists believe that lots of the increase in Medicaid spending is due to the relative ease with which ordinary middle-class people can artificially impoverish themselves down to Medicaid eligible income thresholds. Medicaid currently pays for approximately 50% of long-term care costs in the US. 

This is really scary stuff! If you’re over 55 and don’t own long-term care insurance, you have your head buried in the sand, which won’t help you much if you ever need care.

Sources: Associated Press and Bloomberg News

“The Centers for Medicare and Medicaid Services has ruled to cut payments to skilled nursing care by up to $16 billion over the next ten years, which could boost the sale of Long-Term Care Insurance by as much as 20 percent, says the American Association for Long-Term Care Insurance, an industry trade group.

Because 70 percent of nursing home budgets are eaten up by labor costs, the proposed Medicare cuts will likely affect the care seniors receive. “When these regulatory cuts are considered in addition to possible congressional Medicare cuts, nursing homes will have to face very difficult decisions, including the possibility of staff reductions,” said Bruce Yarwood, President of the American Health Care Association.

Yarwood noted that funding for Medicare and Medicaid are interdependent and that cuts to both programs could negatively impact care for seniors and employment for caregivers. Jesse Slome, executive director of the AALTCI, explained, “Everyone would like the government to pay but no one wants to pay more taxes. As more people recognize the importance of planning for the risk of needing long-term care, insurance will become an increasingly attractive and affordable option.”

The above blurb was taken from “Medicare cuts could lead to increased LTCI sales“, published in Senior Market Advisor, 9/11/09

The front page of today’s Houston Chronicle reports that Texas leads the nation in percentage of uninsured — 25.1 percent. In this case, leading the nation is a dubious honor. I know this is the truth because I talk with uninsured people frequently. Every month I attend at least 10 networking breakfasts, lunches, or dinners. I’m an insurance agent selling LTC, so I often ask people whether they have health insurance. The people admitting to me that they don’t have health insurance are more often than not highly educated, white-collar professionals. I meet a shockingly large number of them.

What’s the tie-in to long-term care insurance?  In all the debate about health care reform, there is no mention of government-paid long-term care. Many people believe that health care reform may cost more than estimated, and there is much concern about where the additional revenue will come from. The proposed health care reform states that the necessary changes will be partially paid by squeezing our government programs—Medicare and Medicaid—even tighter. Currently, these two programs pay for a the majority of our care costs. Tightening up eligibility to access Medicare and Medicaid paid long-term care  should be a relatively easy way to save lots of money.

Of course we already know that the government doesn’t pay for care. At least not the ongoing, custodial, non-restorative type of care that most people need. Because of this, care costs can swiftly bankrupt people, causing strife, discord, and even ill health to their families.

I helped underwrite a recently published report titled The Age Wave, the Ocean State, and Long-Term Care, written by Steve Moses, President of the Center for Long-Term Care Reform. The Ocean State Policy Research Institute (OSPRI) invited Steve to conduct the study, which was supported by corporate and individual donors like me.

The report is intended to identify the key issues surrounding Rhode Island’s unique “global Medicaid waiver”, which was granted by the Centers for Medicare and Medicaid Services (CMS). This waiver gives Rhode Island the latitude to experiment with policies not otherwise allowed under federal law in exchange for accepting a cap on federal Medicaid matching funds.

While the “global Medicaid waiver” obviously provides Rhode Island with a great opportunity for experimentation, it could also cause huge cost over-runs for the state’s already greatly indebted budget.

The report identifies the changes people want from the government, such as covering more home health care and less nursing home care. It then shows measures that can be taken to finance the desired changes without causing further debt. In fact, these measures could actually cause increases in revenue.

Please contact me if you are interested in seeing this report.