under the recommendations would be limited in real terms to their current Medicaid contribution, they would also get some relief from the growing burden of financing care for the medically indigent. Those employers who do not now provide health insurance for their workers and the federal government would share the new costs. Newly insuring employers would face a total of about $27.5 billion in increased payroll costs, less than 4 percent of payroll after taxes, on average. For a single employer, the increase could not exceed a specified percentage of payroll. This is because the Commission's recommendation allowing employers to choose a public health insurance program would effectively cap an employer's risk. The new federal costs of guaranteeing universal coverage would be $24 billion-to support adequate coverage for nonworkers and affordable coverage for workers and employers. Some say we cannot afford universal coverage. The Commission believes that a decision not to make this investment would cost the country incomparably more: the disintegration of our health care system and the waste of our most precious resource, the health and human potential of our people. Improving Protection for People 65 and Over The above recommendations apply primarily to Americans under age 65. Nearly all elderly Americans receive their basic health insurance protection from Medicare. Nonetheless, gaps in Medicare protection expose the elderly to considerable financial risk. To address these gaps, the Commission recommends three actions, consistent with recommendations for younger Americans. 1. The Commission is concerned about protecting the elderly against excessive financial burdens in obtaining health coverage or health care. The Commission therefore recommends that Medicare, or the public plan that replaces Medicaid at the federal level, provide assistance with the Medicare premium, deductibles, and cost sharing to all elderly people with incomes below 200 percent of poverty and undertake strong outreach efforts to ensure participation. 2. Consistent with the insurance benefits provided to the under-65 population, the Commission recommends that Medicare be expanded to provide selected preventive services. Preventive services to be added include mammography and colorectal and prostate screening services. As with the under-65 population, other preventive services should be added when they are determined to be effective relative to costs. Without adequate public or private insurance, Americans who need long-term care are at risk of impoverishment. Who Needs Long-Term Care? Two-thirds of the long-term care population are elderly; the rest are under 65. The vast majority of people of all ages who need long-term care live in the community (see Figure 4). More than 5 million disabled elderly and over 3 million disabled younger people live at home (or in nonnursing residences). Nearly 2 million people live in nursing homes-1.5 million elderly and 0.2 million people under 65. During their lifetimes, 36 percent to 45 percent of persons reaching age 65 in 1990 are expected to spend time in a nursing home before they die. A minority of 65-year-olds (about one in five) can expect to receive a year or more of nursing home care. But many nursing home users do not end their days in nursing homes after long stays. Between 26 percent and 45 percent of nursing home stays last fewer than three months, and half these "short stayers" are able to return to their homes. More than 7 million spouses, adult children, other relatives, friends, and neighbors provided unpaid assistance to disabled elderly in 1984. Most of these caregivers are women. Four out of five caregivers average four hours a day, seven days a week. Many caregivers who make this extraordinary effort are vulnerable themselves. One-third are older people, have incomes below or near the poverty level, or are in poor health. More than one in 10 of all caregivers report leaving their jobs to provide care. Eligibility for Medicare is limited to people who are unable to leave their homes (homebound) and who require skilled or professional service. Most people who need long-term care do not need skilled services, so Medicare is of little help. And few states rely on Medicaid to provide substantial long-term care to disabled people living at home. As with other Medicaid benefits, states control service and spending by limiting amount, duration, and scope of services; payment rates for providers; and eligibility. And the special waiver programs serve very few. Two other major federal programs-the Social Services Block Grant program under Title XX of the Social Security Act and the Older Americans Actdo not carry stringent restrictions on eligibility, but provide only limited funding for in-home and community-based care. They are fixed-dollar allotments that states can use for many purposes besides long-term care. EARL DOTTER A few states are investing substantial resources of their own in designing innovative in-home and community services programs. These initiatives provide models for broader coverage of care for disabled people at home. They are, however, the exception rather than the norm in the nation's effort to provide home and community-based care. Unless frail elderly and disabled Americans need skilled care and qualify for Medicare, or are poor and in a generous state, they must depend on their own resources and on relatives and friends to provide care. Nursing Home Care-Despite the enormous efforts of disabled persons and their families to manage at home, nursing home care sometimes becomes inevitable. At this point, they face both emotional and financial devastation. Among elderly people with at least $3,000 in out-of-pocket spending annually, 83 percent of that spending goes for nursing home care. This fact reflects not only the absence until recently of private long-term care insurance (described below), but also the limits to public programs. Medicare covers nursing home care only as a limited extension of its health care coverage. It does not cover the extended personal care that is the bulk of nursing home service. Medicaid, on the other hand, provides almost 90 percent of the public financing for nursing home care and more than 40 percent of all nursing home revenues. But people receive Medicaid nursing home benefits only if they are, or have become, virtually destitute. In addition, Medicaid payment rates are so low in many areas that Medicaid patients-particularly those needing extensive care-may have problems finding care at all. The Emergence of Private Long-Term Care Insurance Private insurance to protect against financial losses from long-term care has only recently become available. Private insurers historically have been reluctant to offer such policies since it is so hard to predict the number of policyholders who will make claims and the cost of the services they will use. Although general health insurance entails similar risks, they are greater with long-term care. Services are harder to define, and there may be no need for care until decades after the policy is purchased. Insurers have nevertheless begun to offer long-term care policies, and their availability has grown rapidly. The number of policies sold since 1987 has more than doubled. This does not mean that insurers no longer 2 0 1990 People Needing Help with Activities of Daily Living 2030 *Projected 1990 2030 Nursing Home Users SOURCE: For 1990, Lewin/ICF estimates using the Brookings/ICF ance protection grows substantially, critical questions will remain: • How to protect the currently disabled population as private insurance expands, • How to ensure that the privately insured receive adequate protection and value for the dollar, and • How to protect the population that private insurance will inevitably leave out. Prospects for the Future Growth in the numbers of people likely to need long-term care makes improvements in the nation's financing of this care imperative for the well-being of all Americans. If disability rates remain what they are today, the number of elderly persons needing help with basic tasks is expected to double between 1990 and 2030-increasing from about 7 million to almost 14 million. The number of elderly requiring nursing home care will more than triple-rising from about 1.5 million to over 5 million (see Figure 5). And the use of high-technology and new medical breakthroughs may continue to extend the lives of disabled people of all ages. It is highly unlikely that service availability will keep up with these growing needs. Demographic trends predict that fewer family members will be available to care for their disabled relatives. The private marketplace seems unable to develop an adequate home care delivery system even for those who can pay. The two major public programs-Medicare and Medicaid-have structural limitations that prevent them from meeting the projected need. BLUEPRINT FOR LONG-TERM CARE REFORM The Commission concludes that federal action is essential to change the nation's fundamentally flawed approach to long-term care financing, and that such action should follow an insurance strategy (public or private or both). The Commission rejects the alternative of encouraging private savings to cover long-term care costs. Depending on private savings concentrates the financial burden of severe impairment-an expensive and largely unpredictable eventon the unlucky few who experience it, rather than spreading it among the many who are at risk of impairment. Failure to reform the system on an insurance basis is not only to abandon today's elderly and disabled but also to condemn growing numbers of Americans to inadequate access to care in the future. To prevent this outcome, the Commission unanimously adopted the following goal: The Pepper Commission is committed to the development of recommendations for public policies that give Americans of all ages access to coverage that provides them necessary longterm care and adequate financial protection; that will assure quality care and choice of setting and will control costs; that will provide the financing required to assure access; and that will support research to prevent the need for long-term care. The Commission explored a range of possible strategies to achieve this objective. One strategy would be to enhance government protection for the low-income population and promote adequate private insurance protection for the better-off. The Commission believes, however, that to build such a two-tiered system would be to repeat the nation's unfortunate experience in health care. Too many people would continue to face impoverishment or find themselves dependent on a welfare-based system, a system unable to ensure access to quality care. Another strategy would be to develop a comprehensive public insurance program for all long-term care services. The Commission believes that public or social insurance has considerable merit in guaranteeing adequate protection to all Americans, regardless of income. However, the Commission is concerned |