(Bloomberg View) — My grandmother spent the last years of her life in a nursing home, and I like to think that my grandfather would have been proud to know that she paid her own way until she died. In a long life of seven-day-a-week work, he held one principle above all the others: “Make sure Lettie is taken care of.” And he did. When she died at 101, she was one of the rare nursing home patients who manages a multi-year stay entirely on private pay.
That nursing home stay ate most of what he’d spent a lifetime piling up, of course. And most people do not accumulate those sort of assets; my grandparents combined some good luck with ferocious hard work, talent and extremely modest tastes, enabling a small-town small business to generate enough money to pay the bills for extended end-of-life care. With an average annual cost in the high tens of thousands, a single year in a nursing home will exhaust the financial assets of most families. That’s when those patients go on Medicaid.
So when I learned that Republicans had finally passed their very own Rube Goldberg health care contraption, which includes changing the Medicaid payment formula to a fixed per-beneficiary sum rather than the open-ended entitlement it is now, I wondered: “What happens to nursing home reimbursements?”
No per-capita grant is going to cover fantastically expensive nursing home care. And nursing home care is not some rare expense that can be easily absorbed in the general pool; it accounts for about a third of annual Medicaid spending. Since I really doubt that states are going to kick seniors out of nursing homes, they will probably end up having to top up the federal grants with their own money, and/or shift more and more resources away from younger patients.
This is not the only question about this bill. The most crucial policy question is simply “Who will buy insurance once these changes are phased in?”
As I’ve written before, the Republican plan essentially helps the old and the poor less than Obamacare, while helping the young and the middle class more. That policy choice is not necessarily as indefensible as the left has made it out. The major problem on the exchanges right now is that the young and healthy are not buying insurance.
This has driven premiums up, despite strenuous efforts by insurers to control costs with things like “narrow networks” (read: we don’t cover any of the doctors or hospitals you want). In areas where narrow networks can’t be deployed — notably rural areas where there aren’t enough providers to give insurers negotiating power — the system increasingly seems to be melting down.
Alaska set up a $55 million reinsurance fund, which kept an anticipated premium spike of 42% to a dainty 7%. (Though we should note that a mid-level plan in the state still cost $904 for 2017, so this did not exactly make insurance cheap.) Minnesota recently followed suit, passing a bill that allocates nearly half a billion dollars to reinsurance, on top of the $326 million the state had already allocated to premium relief for consumers.