Medicare Cuts Make Long Term Care Insurance More Attractive

According to analysis conducted by the American Health Care Association the funding reductions come at a time when seniors' nursing home care funding has already been deeply cut by Medicare.

"You can't pay the huge cost for care for millions of people unless you have the funds, and Medicare simply doesn't have the funds," states Jesse Slome, executive director of the American Association for Long-Term Care Insurance. "The only alternative is to significantly increase taxes and Americans have shown an unwillingness to pay more."

Medicare spends $450 billion a year and under a plan by President Obama, broad reforms to the Medicare system are needed to reduce the federal budget deficit and slow the growth of Medicare. Doctors, hospital executives and those involved in providing nursing home and other care to seniors are lobbying against the plan fearful that the federal agency being proposed would cut their Medicare payments.

States pay a significant cost for long-term care and most states are facing serious budget deficits. As a result, a number are also seeking cuts to Medicaid. In many cases, these proposed cuts are being met with resistance. Lawsuits have delayed millions of dollars in budget cuts needed to balance Washington state's budget, and court orders are blocking a handful of reductions worth more than $3 million a month.

Gov. Chris Gregoire called the lawsuits a huge financial burden and says the court action might force her to make cuts elsewhere if the state cannot lift the orders or loses the cases. The total value of the cuts to nursing home payments and other skilled nursing care for Medicaid patients is about $37 million to $38 million a year.

A $19 million a year reduction in payments to nursing homes is being contested by the Washington Health Care Association and seven owners of nursing facilities, who have sued in federal court to block the cuts. U.S. District Court Judge Ronald Leighton in Tacoma has blocked the rate cut for 30 days.

"States can't print money and there's ultimately a limit to how much the federal government can borrow from foreign countries," Slome notes. "Those who want control and choice for their own care are going to increasingly look at long-term care insurance as an affordable and viable option."