The high cost of long-term care. Congress is looking to restitch US patchwork of private, public aid

Who pays the bill? For elderly Americans, that may be the most challenging aspect of long-term care. Nursing-home care averages $22,000 a year, well beyond the means of the average American.

Care at home, while generally less, can also be expensive. US Rep. Claude Pepper (D) of Florida says that it accounts for more than 80 percent of the cost of long-term health care in the United States.

``We simply don't have an organized way of paying for long-term care, either privately or publicly,'' says Alice Rivlin, who with fellow Brookings Institution scholar Josh Weiner has just completed a study and a book on the subject.

Over the years a patchwork of payments has been stitched together: Individual Americans pay for a little more than half of this custodial care, such as help with washing and dressing. Medicaid, which was designed to aid the poor, pays about 40 percent, while private insurance and medicare, intended to aid the elderly, combine to pay for less than 3 percent.

About a million elderly Americans sink into poverty every year trying to pay for nonmedical long-term care. Some Americans, concerned they are spending their way into poverty - and medicaid eligibility - by paying for long-term care, violate attempt to pass some of their assets on to their children. ``It's a terrible moral and ethical dilemma,'' says a lawyer who specializes in estate planning.

There is indeed ``widespread abuse of the system, driven by people's conviction that ... everybody else does it,'' says William Roper, Washington's top administrator for medicare and medicaid.

As the number of elderly continues to grow, greater demands will be placed on nursing homes and organizations that provide home care, both stretched to the limit. And new federal rules, intended to improve the nursing-home quality, will also increase costs. And most experts say a significant pay raise will solve the severe nursing shortage in the field.

Everyone agrees that the present haphazard mix of funding must be changed. But there is wide disagreement on how.

``There are going to be no easy solutions,'' says Daniel P. Bourque, ``and perhaps no single solution. And therefore we need to look everywhere we can for solutions.'' Mr. Bourque is corporate senior vice-president of the Voluntary Hospitals of America, an association of nonprofit hospitals.

Edmund F. Haislmaier favors emphasizing private insurance. Very few health-insurance policies cover long-term care. But financing such care through private policies, he says, is ``a perfect example of what insurance is designed for'' - with many people paying, through premiums, a portion of the cost of financing the long-term care that only a few will ever need.

Although long-term care is insurable, ``the question is how you get people to buy'' such insurance, says Judith Feder, co-director of the Center for Health Policy Studies at Georgetown University. When people are elderly, the premiums can be too high for them. When they are young, such care seems a remote prospect.

Two years ago about 5,000 Americans held such policies; today some 440,000 policies are in force. Many people say the industry is on the verge of a major surge in these policies, as they are improved and are offered in job benefit packages. So far, most insurance policies have been purchased by individuals.

But most experts say policies will not be widely purchased until there is affordable protection against inflation. ``It's almost ludicrous'' to offer a 20-year-old a policy with no inflation increment, for possible use 60 years later, says Robert Hall of the Aetna Insurance Company.

Some insurance companies offer plans that take inflation into account, but for higher premiums. Says Dr. Feder: ``They are improving the benefits and protection - but that raises the price. ... The better it is, the fewer people can afford it.''

Dr. Rivlin says only a third of America can afford private insurance. Thus, she concludes, some form of government financing will be needed, even if effective private plans become widely available.

Dr. Roper is skeptical about establishing a federal program now: ``I don't think we know enough to craft a uniform national policy [for financing] at the moment.''

A number of proposals are being introduced into Congress that would provide substantial federal payments for long-term care and protect more assets of the middle class.

Many proposals would finance the cost through a tax on the wealthy by requiring that social security taxes be collected on all wages, instead of the first $45,000 each year, as under current law. But higher taxes are as unpopular with Congress as they are with the public.

Yet funding must be figured out in advance if any proposal is to have a change to become law. ``The days are over,'' says Sen. George Mitchell (D) of Maine, ``when we can simply add new benefits to programs and let someone else figure out'' where the money will come from. Senator Mitchell chairs the Senate Finance Subcommittee on Health. He will likely be a key congressional player.

Mr. Mitchell has scheduled hearings for Friday on his bill to provide limited government assistance to people requiring long-term care. His proposal, like most, envisions a combination of government program and private insurance. He would have individuals, presumably through insurance, pay the cost of long-term care for the first two years. A new government program would pay it thereafter.

The health insurance industry opposes his proposal, calling it premature. Instead the Health Insurance Association of America seeks changes in tax law and government policy that, it says, would stimulate innovation in private long-term-care insurance.

At the same time, it does not rule out an agreement with Mitchell. ``There is room for compromise,'' says Susan Van Gelder, the group's associate director of research and policy development.

A proposal by the American Association of Retired Persons (AARP) would also require individuals to pay part of the cost. It would provide financial aid to the elderly, the disabled, and to children under 18. People in nursing homes would pay 30 percent of room and care costs; those receiving home care would pay 20 percent.

Representative Pepper, Congress's best-known advocate for the elderly, would revamp medicare to pay the home-care costs for the elderly, the disabled, and children.

Sen. Edward Kennedy (D) of Massachusetts proposes paying the full costs of care at home and the first six months in nursing homes. Longer nursing-home stays would be partly reimbursed.

Sen. David Durenberger (R) of Minnesota says: ``In the short term it's a matter of'' changing programs like medicare and medicaid ``to expand the options for reimbursement at the community level,'' such as home care. ``In the longer term, the emphasis is on individual responsibility'' to finance long-term care, privately..

As serious as the problem is, some US officials wonder whether Americans really want to give priority to an expensive new program for long-term care over other major domestic issues, notwithstanding polls that report a willingness to pay higher taxes in return.

``Yes, we can have a [higher] payroll tax,'' admits Thomas Burke, chief of staff of the Department of Health and Human Services, ``but is this all we have to worry about?'' At a meeting of the AARP's legislative council, he ticked off other problems: AIDS, a 25 percent school dropout rate, a $1 trillion unfunded US health-care liability. ``We have a drug problem that is getting worse. ... We lose $117 billion [annually] to alcohol problems in the US.'' Then there's teen pregnancy.

``Long-term care - you don't get it free,'' he warned. ``You get it at the expense of something else.''

Second of five articles. Next: Nursing homes.