Financing Long-Term Services and Supports for Individuals with Disabilities and Older Adults by Tracy A. Lustig

Author:Tracy A. Lustig
Language: eng
Format: epub
Publisher: The National Academies Press
Published: 2013-02-09T00:00:00+00:00

SOCIAL INSURANCE

Lee Goldberg National Academy of Social Insurance

The demand for LTSS will rise in coming decades, but not much spare capacity exists in informal sources of long-term care. Most families continue to need two wage earners, said Goldberg. Record numbers of people are living alone—28 percent of households consist of a single person— which increases the demands on caregivers. And changes in state Medicaid programs are expected to put extra demands on informal care as people avoid going into institutions and opt for HCBS, where the absence of 24-hour care requires that family members make up the difference.

The government funds long-term services and supports for those with low incomes in addition to subsidizing LTSS indirectly through the tax code. But Medicaid, which is the de facto governmental system for long-term care, is a safety net program. The United States lacks a universally available insurance-based approach that would spread the financial risk of aging and living with a chronic illness or disability.

The Rationale for Social Insurance

Social insurance mimics private insurance, but it can also serve broader societal goals. According to Goldberg, social insurance is flexible in that it can change in order to address unforeseen developments, whereas private contracts tend to be overly specific and rigid. However, social insurance needs to be universal in order to avoid adverse selection, the situation in which only those who will need the insurance are enrolled in the program. Either a governmental mandate or strong economic incentives, as in Medicare Part B, can compel participation, suggested Goldberg. With universal participation, he said, the government does not displace private insurance, and premiums are not tied to an individual’s risk.

Goldberg stated that social insurance is compatible with private insurance. With Social Security, the financial services industry has prospered as people have sought ways to supplement their income over the course of their lives. Medigap is another example of the compatibility between social insurance and private insurance, he said. France has one of the highest rates of private long-term care insurance despite a strong social insurance program with an HCBS benefit and a cash benefit. Many governments rely on mandatory social insurance not just for LTSS but also for pensions, Goldberg said, whereas the United States continues to rely on means-tested programs and tax expenditures.

According to Goldberg, pooling risk and spreading the cost of care over a large number of people is efficient and increases community resources because people can save for the average cost of LTSS rather than for the maximum potential cost. It also has a moral justification. The English philosopher John Rawls described a just society as one in which the rules are established before anyone knows where they will be in that society. When operating behind this “veil of ignorance,” a well-run insurance program is the most just system, Goldberg said.

Types of Benefits

Social insurance benefits fall into two categories. A defined set of benefits, as is provided by Medicare, can help ensure the availability of complex services that require clinical knowledge and advanced technology. This is the indemnity model familiar from health insurance.

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