6.4 How will the MediCaring Community initiative evolve with the increasing numbers of frail elders?
MediCaring will start with some pilot communities and can spread as communities take it up and eventually perhaps, most will. Examining the macroeconomics shows that the economy cannot support decades in which many parts of the country continue spending at the current rate.[193] Civic well-being also will not thrive if we allow decades of generating the anger and frustration that current practices engender.[194] So, the maturing MediCaring Community model would become the usual way to provide reliable and comprehensive services for frail elders and their families; and for many communities, that reform will carry us through more than a decade of learning and changing expectations.
6.4.1 The eventual need for additional funding for frail elderly people
Reforming services delivery and sharing savings in the manner described here will buy us time and teach us a great deal, and will generate new habits, standards, and understandings. However, tripling the number of frail elders in the first half of this century will leave the U.S. needing more funding for services for frail elders. But if we can restructure care to reduce per capita costs by one-third, which we believe to be possible with MediCaring Communities, the magnitude of the challenge will be reduced. While the timing will differ for different communities, in general the numbers of frail elders needing service will exceed the capacity of current spending at about the time that the Boomer generation hits their years at high risk for frailty, starting in about 2030.
MediCaring doesn’t address every aspect of the total financial challenge of an aging population. For example, MediCaring does not address the problem of people not saving for long-term care costs or purchasing long-term care insurance. But, right now the primary choice is “as is” with very high medical costs or “MediCaring Communities” with a lower medical bill and savings. Those savings will not cover all elder social supports for all people, but they will recover the costs of operating MediCaring Communities and meet many of the critical needs in the community.
A prudent person planning for retirement faces two enormous unknown elements: lifespan and long-term care. The costs per person per month with the person’s usual retirement lifestyle are fairly predictable, but not how long the person will live. Social Security and many pensions effectively insure for longer survival by continuing a stable monthly payout for as long as the person lives, so if these are the mainstays of support for the elderly person, that particular risk is mitigated for the individual. If, on the other hand, the person has investments and savings as his or her main retirement support, the risks associated with long survival are salient. Of course, many people have little private wealth and will quickly come to rely upon Social Security, low cost housing, and family support.
The financial issues associated with long survival in good health are quickly overshadowed by those associated with long survival in poor health. The average duration of needing someone’s help for activities of daily living, for a person at 65 years old, is estimated at 2.5 years for a woman and 1.5 for a man.[195] The costs of in-home half-time support or of residence in a nursing home come to over $100,000 per year, and few people have savings sufficient to keep paying these costs for many years. Paid care at home is more costly than nursing home care, once the person needs paid care more than about 8 hours per day.
Indeed, many Americans wrongly believe that Medicare will take care of most of the costs. However, fewer than half of new retirees have enough money in savings to keep up that rate of spending for one year.[196] The costs of long-term care vary many-fold from one person to the next, and the person who is healthy in mid-life has no way to predict where he or she will fall on the scale of long-term care costs in old age. The response to date has been mainly to avoid the topic entirely, as if we’ll somehow deal with it when we must. If we wait, however, the society’s options will be much more limited. If we act in the near future, we could have the MediCaring Communities reform mesh with a strategy for longer term financing so that, on average, the nation takes care of itself without major new investments or abandoning frail old people in need.
There still are many ways to deal with long-term disability in old age, but here are some prudent elements. First, it seems impossible for people in the middle of life to save enough to cover outlier costs.[197] Somehow, there will need to be a way to cover the costs for those who must live many years with serious disability in old age. This probably ends up having to be a federal backstop that provides coverage after a substantial period of front-end coverage in savings or insurance.[198],[199] In addition, a federal involvement can include a reallocation function to diminish the effects of disparities among regions of the country in wealth, prevalence of frail elders, and history of health care utilization.
At exactly what point to start coverage and whether that threshold should be the same for everyone or adjusted for wealth or income are debatable points, but the principle that the long-term care risks must have a backstop in order to enable citizens to be prudent planners is a strong one. At present, the backstop is to spend down to Medicaid and be abjectly poor and abjectly subject to the constraints of your state’s program. Without savings and income, some are relying on Medicaid for their first long-term care costs while others will pay for their own services for years before spending down. If the backstop were reliable and made sense, avoiding utter impoverishment might prove to be enough of a motivation to seek to provide for oneself well enough to cover costs at least up to that threshold.
If, for example, the threshold for outlier coverage were set for the average American at the equivalent of two years of full time supportive care (at home or in an institution), then the challenge for the individual becomes bracketed at a total risk of about $200,000 ($100,000 per year for two years). That still is a challenge, and many people won’t be able to save that in a lifetime, but with that as the upper bound, purchasing long-term care insurance in reasonably sized pools becomes quite plausible. Half of the people at risk will need no pay-out at all. The long-term care insurance market has been quite limited, for an array of reasons. However, having a federal stop-loss for individual coverage would make it possible to field a wide variety of appealing options. Some could take into account the commitments of family to provide a certain level of care (if they are still alive and capable). Some could blend long-term care insurance with other products, such as annuities. Some might test conditioning premiums on preferences for treatments and availability of support at home. If buying long-term care insurance became a standard part of the benefits package for workers, and a reasonable variety of products were offered at fair rates, many more people would undertake a combination of purchasing the coverage and saving current income in order to ensure that they are not impoverished by the usual range of long-term care needs.
With success in hand from experience with MediCaring Communities in the next decade, the funding for MediCaring Community services would gradually shift toward these private sources and the stop-loss federal insurance for very prolonged long-term care, but the clinical service delivery would be unchanged and the system would stay affordable, for individuals and communities.
6.4.2 The easing of pressures for building hospitals and nursing homes
In the average community, the onset of MediCaring and the rise in the affected population will just about balance, thereby averting what otherwise would have been a severe pressure to increase the current supply of hospital and nursing home beds. Rather than having to deal with these substantial capital investments, communities can focus on establishing the patterns that support frail elders at home longer and with more attention to frugality. On the other hand, the rising numbers of frail elders means that current supply of facilities and services generally will not need to be mothballed, even with a MediCaring approach. The increasing numbers will balance the reduced utilization per capita for a while, on average.
6.4.3 Equity across communities
Public spending on Medicare and Medicaid varies a great deal across communities, yielding very different contexts for financing at the start. As is evident in Table 6.2 on page 111, the Per Member Per Month (PMPM) savings prospects in Milwaukie, OR, and Williamsburg, VA, are dramatically lower than in Queens, NY. This mirrors the high per capita Medicare costs in New York City and the much lower average expenditures in rural Virginia and in Oregon, as well as the substantially more generous Medicaid support in New York.[200]
These differences have long and complicated histories and the pattern of expenditures has generated networks of supporting behaviors in the communities. Nevertheless, with MediCaring Communities depending upon the savings from Medicare, they may soon feel quite unfair. Sometime during the evolution of standards for MediCaring Communities, this inequity of opportunity for Medicare savings is likely to deserve close scrutiny and probably some redress.
[193] (National Research Council 2012)
[194] (Lynn 2015)
[195] (Favreault and Dey 2015)
[196] (United States Government Accountability Office, Most Households Approaching Retirement Have Low Savings 2015)
[197] (Favreault, Gleckman and Johnson 2015)
[198] (Favreault, Gleckman and Johnson 2015)
[199] (Hayes, et al. 2016)
[200] (The Dartmouth Atlas of Health Care 2016)
