National Nursing Home Insurance

It appears that the Senate national health care bill, like that from the House, will include a provision for minimal long term care insurance. Participation in the program will be optional. Those who participate, (pay premiums), for a minimum of five years could receive a lifetime benefit of up to $75 per day. The goal is to provide sufficient coverage to permit more individuals to receive home care--a laudatory goal. With broad participation, according to the Congressional Budget Office, the program could be self-sustaining for its first 75 years.

Unfortunately, as we point out in To Tax or To Ration, if participation is voluntary, the program will not work. A concept called "adverse selection" steps in. Only those persons who expect to need coverage, based upon personal health history or family health history, participate. Furthermore, only older individuals will participate, not younger. As a result, according to the actuaries at the Center for Medicare and Medicaid Services, there is a significant risk that the program will not be self-sustaining. It will, in fact, put an additional strain on the federal budget.

It would be unwise to rely on this benefit, if it passes, to solve the problem of providing long-term care for America's elderly. As pointed out in the book, ultimately it will come down to a combination of additional taxes and rationing.