A National Long-term Care Program for the United States; A Caring Vision
Reprinted from JAMA. The Journal of the American Medical Association December 4, 1991, Volume 266 Copyright 1991, American Medical Association
The financing and delivery of long-term care (LTC) need substantial reform. Many cannot afford essential services; age restrictions often arbitrarily limit access for the nonelderly, although more than a third of those needing care are under 65 years old; Medicaid, the principal third-party payer for LTC, is biased toward nursing home care and discourages independent living; informal care provided by relatives and friends, the only assistance used by 70% of those needing LTC, is neither supported nor encouraged; and insurance coverage often excludes critically important services that fall outside narrow definitions of medically necessary care. We describe an LTC program designed as an integral component of the national health program advanced by Physicians for a National Health Program. Everyone would be covered for all medically and socially necessary services under a single public plan, federally mandated and funded but administered locally. An LTC payment board in each state would contract directly with providers through a network of local public agencies responsible for eligibility determination and care coordination. Nursing homes, home care agencies, and other institutional providers would be paid a global budget to cover all operating costs and would not bill on a per-patient basis. Alternatively, integrated provider organizations could receive a capitation fee to cover a broad range of LTC and acute care services. Individual practitioners could continue to be paid on a fee-for-service basis or could receive salaries from institutional providers. Support for innovation, training of LTC personnel, and monitoring of the quality of care would be greatly augmented. For-profit providers would be compensated for past investments and phased out. Our program would add between $18 billion and $23.5 billion annually to current spending on LTC. Polls indicate that a majority of Americans want such a program and are willing to pay earmarked taxes to support it. (JAMA. 1991; 266: 3023-3029)
AMERICAN medicine often cures but too rarely cares. Technical sophistication in therapy for acute illnesses coexists with neglect for many of the disabled. New hospitals that lie one-third empty house thousands of chronic-care patients because even the shabbiest nursing homes remain constantly full.1 If the fabric of our acute care is marred by the stain of the uninsured and underinsured, the cloth of our long-term care (LTC) is a threadbare and tattered renmant.
For millions with disabilities, the assistance that would enable independent living is unobtainable. Nursing homes offered as alternatives to the fortunate few with Medicaid or savings are often little more than warehouses. In the home, relatives and friends labor unaided, uncompensated and without respite. Geriatric training is woefully underfunded and carries little prestige.2 Hence, too few physicians are well equipped to address remediable medical problems that contribute to disability ,3,4 while many are called on to assume responsibility for care that has more to do with personal maintenance and hygiene than with more familiar medical terrain; even when they know what should be done, the needed resources are often unavailable. The experts in providing care-nurses, homemakers, social workers, and the like are locked in a hierarchy inappropriate for caring.
With the aging of the population and improved survival of disabled people of all ages, the need for a cogent LTC policy will become even more pressing. Yet policymakers have neglected LTC, for a number of reasons. (1) They have been unwilling to accept LTC as a federal responsibility in an era of cost containment. (2) Meeting routine living needs is a central feature of LTC, with biomedical issues often secondary .Hence, logic dictates that the system emphasize social services, not just medical ones, with social service and nursing personnel rather than physicians often coordinating care - a model that some physicians and policymakers may find threatening.5 And, (3) LTC needs are largely invisible to policymakers because the majority of services for disabled people - of any age - are provided by "informal" (unpaid) care givers, mainly female family members, neighbors, or friends.
Long-term care services are those health, social, housing, transportation, and other supportive services needed by persons with physical, mental, or cognitive limitations sufficient to compromise independent living. The United States has a complicated and overlapping array of financing and service programs for LTC. Financing for LTC is largely independent of financing for acute care and varies depending on whether the need is intermittent or continuous, short or long term, posthospital or unrelated to hospitalization.6-8 Private insurance companies have made only tentative efforts to market LTC insurance and currently insure less than 1% of Americans.9 Insurance for LTC is unaffordable to most who need it and rarely covers all necessary services.10-12 Thus, about half of LTC expenses are paid out-of-pocket, with most of the remainder paid by Medicaid.
Presently the elderly spend 18% of their income for medical care, with out-of-pocket costs rising twice as fast as Social Security payments. Medical expenses cost the average elder 4.5 months of his or her Social Security checks.13 The financial burden for LTC falls most heavily on disabled people without Medicaid coverage.14 To qualify for Medicaid, families must either be destitute or "spend down" their personal funds until they are impoverished. Furthermore, Medicaid is institutionally biased, funding nursing home care far more extensively than home - and community - based services.
Age restrictions on many LTC programs arbitrarily limit access, since about a third of the LTC population is not elderly.9,15,16 Seventy-eight percent of the disabled who receive Social security disability benefits, 14% of nursing home residents, and 34% of the non-institutionalized population reporting limitations in activity due to chronic conditions are under 65 years.17,18 Children constitute 5% of the severely disabled, yet generally are not eligible for LTC under public programs unless they are poor.
Informal services are vital to millions but are neither supported nor encouraged by current programs. More than 70% of those receiving LTC (3.2 million people) rely exclusively on unpaid care givers.19 Almost 22% use both formal and informal care, while 5% use only formal care.19-22 Of the more than 7 million informal care givers, three fourths are women, 35% are themselves over 65 years old, a third are in poor health, 10% have given up paid employment to assume the care of their loved one, and eight of 10 spend at least 4 hours every day providing care.9 Such personal devotion can never be replaced by the assistance of even the kindest of strangers. It must be valued and supported, not supplanted by formal care.
We believe that a government-financed program will be required in order to ensure adequate LTC for most Americans. At most 40%, and perhaps as few as 6%, of older Americans could afford private LTC insurance.9,10,23-25 The average nursing home costs of $20000 to $40 000 per year would bankrupt the majority of Americans within 3 years.26
There is growing recognition that the crisis in LTC, as in acute care, calls for bold and fundamental change. We pro-pose the incorporation of LTC into a publicly funded national health program (NHP). We borrow from the experience in the Canadian provinces of Manitoba and British Columbia,27 where LTC is part of the basic health care entitlement regardless of age or income.27 Case managers and specialists in needs assessment (largely nonphysicians) evaluate the need for LTC and authorize payment for services. This mechanism for directing appropriate services to those in need has allowed broad access to nursing home and community-based services without runaway inflation.
We also incorporate elements from several recent LTC proposals for the United States.9,10,14,24,28-30 Most of these, however, have three important flaws: (1) they focus primarily on the aged and would exclude the 40% to 51% of those who need LTC but are under the age of 65 years15,16; (2) while most would expand Medicare, they would provide a major role for private insurers, perpetuating fragmented and inefficient financing mechanisms; and (3) they exclude nurses and social workers from certifying and prescribing nonmedical LTC services, inappropriately burdening physicians with responsibilities that are often outside their areas of interest and expertise.
Our proposal is designed as a major component of the NHP proposed by Physicians for a National Health Program.31 The NHP would provide universal coverage for preventive, acute, and LTC services for all age groups through a public insurance program, pooling funds in existing public programs with new federal revenues raised through progressive taxation. This approach would improve access to the acute care that could ameliorate much disability, eliminate the costly substitution of acute care for LTC, prevent unnecessary nursing home placements, and provide a genuine safety net, both medical and financial, for people of all ages.
GOALS FOR LTC Nine principles are central to our proposal:
- Long-term care should be a right of all Americans, not a commodity available only to the wealthy and the destitute.
- Coverage should be universal, with access to services based on need rather than age, cause of disability, or income.
- Long-term care should provide a continuum of social and medical services aimed at maximizing functional independence.
- Medically and socially oriented LTC should be coordinated with acute inpatient and ambulatory care.
- The program should encourage the development of accessible, efficient, and innovative systems of health care delivery.
- The program should promote high-quality services and appropriate utilization, in the least restrictive environment possible.
- The financial risk should be spread across the entire population using a progressive financing system rather than compounding the misfortune of disability with the specter of financial ruin.
- The importance of "informal" care should be acknowledged, and support, financial and other, should be offered to assist rather than supplant home and community caregivers.
- Consumers should have a range of choices and options for LTC that are culturally appropriate.
Everyone would be covered for all medically and socially necessary services under a single public plan. Home- and community-based benefits would include nursing, therapy services, case management, meals, information and referral, in-home support (homemaker and attendant) services, respite, transportation services, adult day health, social day care, psychiatric day care, hospice, community mental health, and other related services. Residential services would include foster care, board and care, assisted living, and residential care facilities. Institutional care would include nursing homes, chronic care hospitals, and rehabilitation facilities. Drug and alcohol treatment, outpatient rehabilitation, and independent living programs would also be covered. In special circumstances, other services might be covered such as supported employment and training, financial management, legal services, protective services, senior companions, and payment for informal caregivers.
Preventive services would be covered in an effort to minimize avoidable deterioration in physical and mental functioning. The reluctance of some individuals to seek such preventive services requires sensitive outreach programs. Supportive housing environments, though essential for many who are frail and disabled, should be financed separately as part of housing rather than medical programs. Long-term care services would supplement and be integrated with the acute care services pro- vided by the NHP, such as medical, dental, and nursing care; drugs and medical devices; and preventive services.31
The public program, with a single, uniform benefit package, would consolidate all current federal and state pro- grams for LTC. At present, 80 federal programs finance LTC services, including Medicare, Medicaid, the Department of Veterans Affairs, the Older Americans Act, and Title XX Social Services.21 Other public programs finance LTC for the developmentally disabled, the mentally disabled, substance abusers, and crippled children. State disability insurance programs also finance some LTC. This multiplicity of programs leaves enormous gaps in both access and coverage, confuses consumers attempting to gain access to the system, and drives up administrative costs. Furthermore, the system is grossly out of balance, biased toward acute and institutional care and away from community-based health and social services. In contrast, the proposed LTC program would be comprehensive, administratively spare, and "user friendly."
Comprehensive coverage permits use of the most appropriate services and may prevent unnecessary hospitalization or institutional placement. Since most individuals needing LTC prefer to remain at home,24,26 services should pro- mote independent living and support informal caregivers, using nursing homes as the last resort rather than as the primary approach to LTC. Services must be culturally appropriate for special population groups including ethnic, cultural, and religious minorities; the oldest old; individuals who are mentally impaired or developmentally disabled; children; and young adults.
ADMINISTRATIVE STRUCTURE AND ELIGIBILITY FOR CARE
ADMINISTRATIVE STRUCTURE AND ELIGIBILITY FOR CARE
With a federal mandate, each state would set up an LTC system with a state LTC Planning and Payment Board and a network of local public LTC agencies. These local agencies would employ specialized panels of social workers, nurses, therapists, and physicians responsible for assessing individuals' LTC needs, service planning, care coordination, provider certification, and, in some cases, provision of services. These agencies would serve as the entry points to LTC within local communities, certify eligibility for specific services, and assign a case manager when appropriate.
The LTC Planning and Payment Board and the local LTC agencies in each state would pay for the full continuum of covered LTC services. Each state's LTC operating budget would be allocated to the local LTC agencies based on population, the number of elderly and disabled, the economic status of the population, case-mix, and cost of living. Each local LTC agency would apportion the available budget to cover the operating costs of approved providers in its community - although the actual payment apparatus would be centralized in the state's LTC Planning and Payment Board to avoid duplication of administrative functions.
Each institutional provider, eg, community agency, nursing home, home care agency, or social service organization, would negotiate a global operating budget with the local LTC agency. The budget would be based on past expenditures, financial and clinical performance, utilization, and projected changes in services, wages, and other related factors. Alternatively, institutional providers could contract to provide comprehensive LTC services (or integrated LTC and acute care services) on a capitated basis. No part of the operating budget or capitation fee could be used for expansion, profit, marketing, or major capital purchases or leases. Capital expenditures for new, expanded, or updated LTC facilities and programs would be allocated based on explicit health planning goals separately from operating budgets by the state LTC agency. For-profit providers would be paid a fixed return on existing equity, and new for-profit investment would be proscribed. As Physicians for a National Health program has previously proposed,31 physicians could be paid on a fee-for-service basis, or receive salaries from institutional providers. Physicians and other providers would be prohibited from referring patients to facilities or services in which they held a proprietary interest. Providers participating in the public program would be required to accept the public payments as payment in full and would not be allowed to charge patients directly for any covered service. Federal and state budget allocations for LTC services would be separate from those for acute care, as in Canada.
Coverage would extend to anyone, regardless of age or income, needing assistance with one or more activity of daily living (ADL) or instrumental activity of daily living (IADL). (ADLs are basic self-maintenance activities [ie, bathing, dressing, going to the toilet, getting outside, walking, transferring from bed to chair, or eating]; IADLs relate to a person's ability to be independent [cooking, cleaning, shopping, taking medications, doing laundry, making telephone calls, or managing money].) High-risk patients not strictly meeting this definition would be eligible for services needed to prevent worsening disability and subsequent costly institutional care. Local panels would have the flexibility, within their defined budgets, to authorize a wide range of services, taking into account such social factors as the availability of informal care.
When case management or care co- ordination is needed, the local agencies would assume these tasks or delegate them to appropriate providers, eg, capitated providers offering comprehensive services. Not all those needing LTC require case management.32 Case managers and care coordinators would work with the client, family, and other care givers to assess adequacy and appropriateness of services, promote efficiency, and respond to changing needs. Progressive decline in function characterizes many chronic illnesses, while full recovery is possible in others. Thus, change in need is a nearly universal aspect of LTC and mandates frequent reevaluation and flexibility. In all cases, programs should encourage independence and minimize professional intrusion into daily life.
A universal need-based entitlement to LTC would replace the current irrational patchwork of public and private programs, each with its own eligibility criteria, by age, cause of disability, and income. All income groups would be covered without means testing, which is cumbersome and costly to administer , may increase costs in the long run by causing people to postpone needed care, creates a stigma against recipients, and narrows the base of political support for the program.28 There are scant data on how to set simple eligibility standards that ensure coverage for all in need, while excluding those for whom LTC services are a luxury rather than a necessity. We have chosen an inclusive general criterion (one ADL or IADL) and have left fine tuning to local agencies able to individualize decisions.
In all, approximately 3.9% of the population (9.3 million people in 1985) would be eligible for covered LTC services. An estimated 3.6% (7.6 million persons) of the total noninstitutionalized population need assistance with ADLs or IADLs,15 including only .8% of those aged 65 to 69 years but 46% of those aged 85 years and over.15 Another 1.5 million people are in nursing homes and residential care facilities,17 and 200,000 people are in psychiatric and long-stay hospitals.33
UTILIZATION AND COST CONTROLS
Removing financial barriers to LTC will increase demand for formal services. Long-term care insurance could legitimately result in a 20% increase in nursing home utilization and a 50% to 100% increase in use of community and home health care by the elderly.9,24 Increases in utilization might be expected to level off after about 3 years, as occurred in Saskatchewan's LTC program.27
Our program would be financed entirely by tax revenues, without premiums, deductibles, copayments, or co-insurance. However, people permanently residing in residential care would use part of their basic Social Security or Supplemental Security Income to contribute to "hotel" costs. Although other cost-sharing methods raise revenues and discourage utilization, these regressive financing mechanisms disproportionately burden the poor and the sick and reduce the use of preventive and other essential services.28,34,35
Although we eschew financial barriers to care, utilization controls are essential since many LTC services (eg, "meals on wheels," homemakers) are desirable to people without disabilities. Several states' Medicaid programs have demonstrated that screening and utilization controls can both control costs and improve care by preventing unnecessary institutionalization, coordinating services, and ensuring the use of the most appropriate care.35,36
The local LTC agencies, each with a defined catchment area and budget, would apportion the finite resources for LTC among those in need. These local agencies, serving as the single point of entry for LTC service authorization, would work with clients and care givers to select and coordinate appropriate services from a comprehensive listing of providers. This approach relies on enforceable overall budgetary ceilings to contain costs. The local agencies would have strong incentives to support more cost-effective informal providers and community-based services that might forestall institutionalization.
INNOVATION IN THE PROVISION OF LTC
Broad changes in the provision of LTC are essential.37 The current system is fragmented among many acute care in- patient, ambulatory, and LTC providers. This fragmentation creates higher costs through the duplication of bureaucracy and the failure to achieve administrative economies of scale. More important, the lack of coordination compromises the quality of care. A unified financing system would foster the integration, or at least coordination, of acute care and LTC - an essential step, since virtually everyone needing LTC also needs acute care. Financing the full continuum of care from a common source might also enable a more rational targeting of resources, with emphasis on preventive services, early intervention, vigorous rehabilitation, and restorative care. Expanded community-based services would allow earlier discharge for many hospitalized patients and might forestall hospitalization for many others.
The goal of the national LTC program would be to support and assist informal caregivers, not to replace them. However, informal care givers should not be expected to undertake an overwhelming burden of care and would be offered predictable respite care and other supportive services, such as counseling, training, and support groups.
The program would encourage the provision of LTC by multidisciplinary teams of social workers, nurses, therapists, physicians, attendants, transportation workers, and other providers. Collegial relationships and teamwork should be the rule, with leadership from nurses and social workers as well as from an expanded cadre of well-trained geriatricians, rather than the traditional hierarchical relationships between physicians and nonphysicians.38
The availability of capitated funding would foster organizations providing consolidated and comprehensive LTC and acute care services. Two LTC demonstrations that have employed such a model are the social health maintenance organizations and the On Lok Senior Health Service in San Francisco, Calif. Both provide a full range of acute, ambulatory, and LTC services with a capitated financing system.39,40
Although such coordinated care may be optimal,41 individual providers could continue to operate on a contractual or fee-for-service basis. In some cases, family members or other informal caregivers could be approved as providers. However, in these situations responsibility for case management and care coordination would ordinarily rest with the local LTC agency.
Innovation would be supported by earmarked extra funding that the state LTC boards would award to local agencies offering the most promising proposals. While each local agency would be required to provide a standard set of ser- vices with uniform eligibility criteria and reimbursement rates, this supplemental funding would encourage state and local agencies to develop services beyond the basic level and to seek and reward innovation. This is particularly important for improving services to different age groups, disability categories, and cultural and racial minorities.
Finally, missteps are inevitable in the course of the major reform we envision. Funding for ongoing evaluation is essential to rapidly disclose problems and allow their timely correction. Particular attention should be focused on key policy questions where current expert opinion has not been fully tested by rigorous research. In what situations does case management improve outcomes or efficiency? What organizational framework best ensures appropriate attention to both medical and social needs? What, if any, preventive measures minimize deterioration in mental or physical function? Are categories such as ADLs and IADLs optimal for targeting care?
QUALITY OF CARE
No other segment of the health care system has as many documented quality of care problems as the nursing home industry , and concern is growing about the quality of home care.42-44 As many as one third of all nursing homes are operating below the minimum federal standards.45 Monitoring the quality of LTC has been hindered by variability in state regulatory programs and the lack of well-validated regulatory standards and procedures.46
Each LTC provider (including home care agencies) would be required to meet uniform national quality standards in order to be paid by the NHP. These standards would include structural measures (eg, staffing levels, educational requirements), process measures (eg, individualized planning and provision of care), and outcome measures (eg, changes in functional or mental status, incontinence, mortality, and hospital admission rates). Earmarked funds from the federal LTC budget would support urgently needed research to validate and improve these standards and to develop new approaches to quality assurance.
Each LTC organization and agency would be required to establish a quality assurance program meeting national standards and a quality assurance committee with representatives of each category of service provider (eg, social workers, homemakers, nurses, physicians, and so forth), clients and their family members or other care givers, and community representatives. The committee would meet regularly to review quality of care and to resolve problems and disputes, with unresolved issues reported to the public regulatory system discussed below.
All regulatory activities of the current licensing and certification agencies, peer review organizations, Medicare inspection of care, and other agencies that monitor LTC would be combined into a single program. This unified monitoring system would enforce regulations and have the power to sanction and decertify providers. This program would be administered at the federal and state levels, with input from the local LTC agencies and provider quality assurance committees. Consumer complaint systems and telephone hotlines for quality concerns would be mandated. The regulatory agency would be required to employ sufficient staff to conduct periodic surveys of each provider and to investigate complaints in a timely fashion. Providers would be required to disclose financial data and other management information such as staff turnover rates, incident rates, and patient outcome data.
Improving the training, wages, and morale of LTC workers is also crucial to improving the quality of care. Long-term care workers currently earn 15% to 45% less than comparable hospital employees (US Department of Health and Human Services, Division of Nursing, unpublished data, 1988), and 20% of nursing home workers have no health insurance.47 Nursing homes are not currently required to provide around-the-clock registered nursing care, few have specialized staff such as geriatric nurse practitioners, and aides are often inadequately trained. Many home care agencies have no professional staff or consultants. Wages in LTC organizations receiving payment from the NHP would be regulated to achieve parity with the acute care sector, with funding for this increase phased in over 5 years.
Funding would also be allocated for training and inservice education of LTC professionals, paraprofessionals, and informal caregivers. Formal providers would be required to meet minimum training and competency standards. Augmented training is particularly important for nurses and physicians, who often lack experience in working with the frail elderly, the disabled, and the mentally impaired and in working with multidisciplinary teams to develop community services. The development of a cadre of physicians and nurses with special training in gerontology and geriatrics is essential. These professionals would play key clinical and managerial roles in integrating LTC for the elderly with acute care, as in Great Britain and other countries.48
Consumer choice would be explicitly fostered by the national LTC program. Each individual eligible for LTC services would choose among the certified providers in her or his area. Individuals would select a primary provider organization and/or individual care provider, including a primary care physician, and could switch providers if they desired. An independent ombudsman would resolve consumer grievances over provider choice. Consumers and/or their delegated representatives would be encouraged to assume control over decisions regarding their care and would be given assurance that durable power of attorney and living will provisions would be honored.
COSTS AND FINANCING
Estimates of current expenditures for LTC are imprecise because of the diversity of payment sources. In 1990 an estimated $54.5 billion was spent for nursing homes, $14.1 billion for equipment and appliances, and $10.6 billion for home health services.49 In addition, about 10% ($25 billion) of total hospital costs were spent on psychiatric, rehabilitative, and chronic care services.49 Thus, the total LTC expenditures were at least $104 billion in 1990 (16% of total health spending), excluding informal LTC services. Public programs, primarily Medicaid, currently finance about half of formal LTC. Medicaid pays for 48% of nursing home care, Medicare for 2%, and other public payers for 3%.50 Private insurance covers less than 2% of nursing home costs, while consumers pay 45% directly out-of-pocket.50-53 Consumers pay out-of-pocket for 40% of home services in the United States.54
Our program would replace almost all of the $52 billion (all figures in 1990 dollars) currently spent each year on private LTC insurance and out-of-pocket costs with public expenditures. Additional funding would be needed, particularly in the first few years, to pay for the increased utilization of LTC for previously unmet needs. The expected utilization increases of 20% for nursing homes and 50% to 100% for home health care9,24 would cost between $16 billion and $21.5 billion annually.
Further funding would be needed to improve quality through increased training, wages, and staffing levels. However, some of these costs would be offset by reduced administrative costs and improved program efficiency. Additional savings may result from reductions in disability and inappropriate hospitalizations. Precise estimates of these costs and savings are impossible. For our estimates, we assume that the net increase needed for the quality improvement measures (after subtracting potential administrative and other savings) amounts to $2 billion per year.
Overall, a total of $70 to $75.5 billion in new tax revenues ($380 to $410 per adult) would be needed to finance our program. Of this total, $52 billion represents money that is currently spent privately that would be shifted onto the public ledger. In effect, a broad-based tax would replace payments by the chronically ill. Because LTC has been seriously underfunded, $18 to $23.5 billion in truly new spending ($100 to $130 per adult) would be needed to expand care and improve its quality. Since almost every family will use such services at some point, this seems a reasonable price for financial protection and improved services for the disabled and aged.
These revenues could be raised from several sources, including the Social Security system, general taxes, and estate taxes. Expanding Social Security payroll taxes that currently fund Medicare would build upon the existing tax system and ensure a broad tax base. For example, a 1% increase in payroll taxes for both employers and employees would raise about $50 billion.10 Increasing the earned income tax credit for lower-income workers to lower their payroll tax and removing the current ceiling on Social Security taxes would generate about $49 billion in additional revenue, while making such taxes less regressive.10,28 Federal estate taxes are another logical source of funds for LTC and would have little negative impact on low-income groups. A 10% surcharge on gifts and estates above $200,000 would raise $2 to $4 billion,9,10 and taxing capital gains at death would raise about $5.5 billion.10
Our proposed LTC program would be integrated with the NHP, creating a single comprehensive and universal public program for acute care and LTC .The program would be federally mandated and funded but administered at the state and local levels. A single state board would contract directly with providers through a network of local public agencies responsible for LTC eligibility determination and for case management and/or care coordination. All payment would be channeled through the single payment agency in each state.
Single-source payment is key to controlling costs, streamlining administration, and minimizing inequalities in care.31,55 Private insurance duplicating the public program would be eliminated in order to decrease administrative costs, prevent insurers from electing to cover only the healthiest (hence leaving only the most difficult and expensive tasks for the public sector), and guard against the emergence of two-class care.30,56
Prospective global budgeting for nursing homes and community-based services would simplify administration and virtually eliminate billing and eligibility determination. Prohibiting the use of operating funds for capital purchases or profit would minimize financial incentives both for skimping on care (as under the current per-diem nursing home payment system) and for excessive intervention (as under the fee-for-service payments received by many home care providers). The separate appropriation of capital funds would facilitate rational health planning.
Current capital spending largely determines future operating costs, as well as the distribution of facilities and programs. Combining operating and capital payments, as under the existing reimbursement system, allows prosperous providers to expand and modernize, whereas impoverished ones cannot, regardless of their quality or the needs of the population they serve. The NHP would replace this implicit mechanism for distributing capital with an explicit one. Capital funds would be allocated on the basis of a comprehensive planning process, with the involvement of health planners, community members, and providers. Priority would be given to underserved regions and populations and to the development of home- and community-based services, to correct the current bias toward institutional care. While funds for sheltered and supportive housing are more appropriately part of a housing rather than a medical care program, coordination in planning of housing and LTC is essential.
Issues of profit-making are particularly problematic in LTC, where 75% of the nursing homes and a growing proportion of home care agencies are pro- prietary.17 There is ample documentation of LTC providers' skimping on basic services and staffing in order to maximize profits.46,57 As previously proposed,31 the NHP would pay owners of for-profit providers a reasonable fixed rate of return on existing equity. Since virtually all new capital investment would be funded by the NHP, it would not be included in calculating return on equity. The proprietary sector would gradually shrink because new for-profit investment would be proscribed.
We advocate fully public financing of LTC for four reasons: (1) single-source public funding facilitates cost containment through administrative streamlining and the ability to set and enforce an overall budget; (2) financial risk is spread across the entire population (who are all ultimately at risk for needing services) rather than falling only on the disabled and elderly; (3) few people today are covered by private LTC insurance, and there is little reason to believe that widespread private coverage is practicable; and (4) there is a need for clear public accountability.
Public insurance programs are far more efficient than private plans. Administration consumes 5% of total Medicaid spending24 and only 2% of the Medicare budget. In contrast, in 1986 Blue Cross/Blue Shield and self-insured plans had overhead of 8%, prepaid plans averaged 11.7%, and commercial insurers averaged 18.9%.52 Many Medicare supplemental policies (medigap insurance) have notoriously low payout ratios, 60% or less.58 Payout rates for private LTC insurance are low10 and virtually unregulated. According to the General Accounting Office, of the 33 states with minimum payout ratios for general health insurance, most do not report benefit and premium data separately for LTC insurance, only 20 states even monitor payout ratios, and 12 states have established minimum LTC insurance payout ratios.13
The multiplicity of public and private insurers in the United States results in exorbitant administrative costs. Health insurance overhead alone costs $106 per capita in the United States (0.66% of gross national product) compared with $15 per capita (0.11% of gross national product) in Canada.59 Additional unnecessary administrative costs accrue to providers who must determine eligibility, attribute costs and charges to individual patients and insurers, and send and collect bills for myriad insurers and individual patients.60 Overall, administration accounts for almost one fourth of US health spending, but only 11% in Canada.60
Finally, public opinion strongly supports public financing of LTC. Eighty-seven percent of Americans consider the absence of LTC financing a crisis, the majority prefer public over private funding, federal administration is favored over private insurance programs by a 3 to 2 margin, and two thirds believe that private insurance companies would undermine quality of care because of their emphasis on profits.26 While respondents want a federally financed program, they support the administration of such a pro- gram at the state level.26
The oft-stated view that the public wants LTC coverage but is unwilling to pay for it is inaccurate.61 The 1987 poll conducted by the American Asso ciation of Retired Persons and the Villers Foundation found that 86% of the sample supported government action for a universal LTC program that would finance care for all income groups, and not just the poor. Overall, 75% would agree to increased taxes for LTC.26 A 1988 Harris poll reached virtually identical conclusions.62
In summary, we recommend that LTC be incorporated into a publicly financed NHP. We urge that a comprehensive public model be adopted as a single mandatory plan for the entire population and that new public revenues be combined with existing public program dollars. This approach would ensure universal access, comprehensive benefits, improved quality, and greater cost control. Most important, the financial costs would be spread across the entire population rather than borne by the disabled themselves. Our nation has the resources to provide better care for the disabled and elderly, and it has a responsibility to develop a reasonable system of LTC. The public supports this type of approach. Health and human services professionals and the makers of public policy need the vision and courage to implement such a system.
The reader is referred to the May 15, 1991, issue, which was dedicated to caring for the uninsured and underinsured.
This proposal was drafted by a 17-member Working Group, then reviewed and endorsed by 415 other physicians and other health professionals from virtually every state and medical specialty. Members of the Working Group were Charlene Harrington, RN, PhD, San Francisco, Calif; Christine Cassel, MD, Chicago, III; Carroll L. Estes, PhD, San Francisco, Calif; Steffie Woolhandler, MD, MPH, Cambridge, Mass; and David U. Himmelstein, MD, Cambridge, Mass, cochairs; and William H. Barker, MD, Rochester, NY; Kenneth R. Barney, MD, Cambridge, Mass; Thomas Bodenheimer, MD, San Francisco, Calif; David Carrell, PhD, San Francisco, Calif; Kenneth B. Frisof, MD, Cleveland, Ohio; Judith B. Kaplan, MS, Cambridge, Mass; Peter D. Mott, MD, Rochester, NY; Robert J. Newcomer, PhD, San Francisco, Calif; David C. Parish, MD, MPH, Macon, Ga; James H. Sanders, Jr, MD, Brevard, NC; Lillian Rabinowitz, Berkeley, Calif; and Howard Waitzkin, MD, PhD, Anaheim, Calif.
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- Source Book of Health Insurance Data: Up- date. Washington, DC: Health Insurance Association of America; 1988.
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