Medicaid: The Family of Last Resort Dilemma

Society faces a dilemma.  It does not want to see children and the elderly suffer from the neglect of family members.  When it assumes the role of “family of last resort,” however, it encourages the selfish to shift family burdens onto the community, taxing those who meet such obligations to pay for it.  Concerns about burden shifting by parents led to the Welfare Reform Act of 1996, which cut them off from assistance after five years even at the risk of suffering by the children.  Yet the modest, and now miniscule, cost of welfare is dwarfed by the cost of custodial care for the elderly, and as the population ages that cost is set to explode, with consequences that dwarf those of baby boom retirement and the unfunded cost of Social Security.  This may be the most important financial issue we face as a society.   And for New York, which has more generous services for the elderly than any other state, it is a greater issue still.

As reported in prior posts, although in other states extensive spending on home-based care is intended to substitute for institutional care, New York State has a high level of Medicaid recipients for both.  In two categories, nursing home care and personal care, its spending per recipient is also far higher than in other jurisdictions.  In New York City, where home-based care is concentrated, employment growth in the private sector industries that provide it has continued unabated for years.  For example, I received an e-mail with the latest Current Employment Survey data from the New York State Department of Labor this very afternoon.  Home Health Care services gained another 3,100 jobs (6.7%) in New York City from July 2005 to July 2006, while Individual and Family Services, which (as discussed previously) mostly consists of personal care services for the seniors, gained 3,200 (2.8%).  These are typical gains, and have been going on for two decades.   Meanwhile, employment in the city’s public schools was down 1,400 year-over-year.

The difference between the never-enough attitude toward the seniors in New York State, and the “why bother” attitude toward the children of New York City, is startling.  Senior health care is more expensive everywhere, but it particularly costly in New York.  In 2003, as the chart below shows, the state accounted for more a far higher share of the nation’s spending on adults than on children.  Then again, in 1990, 70 percent of New York City’s elderly were non-Hispanic Whites; 70 percent of its children were not.   With more parenting age immigrants moving to the suburbs, and the upstate population aging, those ratios could go statewide.

New York spends more on care for the seniors for three reasons.

The first is that non-poor seniors are more likely to arrange their assets to qualify for care under Medicaid, which by intent is a program for the poor, in New York than elsewhere.  New York is the home of the “elder-law” industry, an industry that believes it is fair for seniors to transfer assets because, by right, the government should be funding any service they need.  This is one aspect of the “family of last resort” problem, since the children of those seniors are often beneficiaries of the transferred assets that could otherwise have been used to fund their care.  But this will be a less significant issue in the future.  Those who entered the labor force after 1975 have been worse off financially throughout their lives than the generations that preceded them, and have far fewer savings for retirement. They will have few assets to transfer.

The second, it would appear, is that New Yorkers are less likely than those elsewhere to care for their own aging parents at home.  This is a second aspect of the “family of last resort problem,” and can be expected to intensify over time.  People have been given the impression that the care of elderly persons with self-care limitations is a government, not personal responsibility.  But for those who do care for parents in the last phases of their lives, the sacrifice is enormous – lost income due to abandoned careers, incredible stress, lost attention to children if still present, strained marriages.  The policy has been to provide extensive care for seniors who do not receive care from family members, but no assistance for family members providing such care.  This is an enormous inequity.

In the past, the consequences of being alone in old age were presumably an incentive for people to model a commitment to family members throughout their lives.  But many of those who are young today have parents who were not present when they were children, or who divorced to their detriment.  Can they be expected to provide 24/7 to those parents in the years before death?  Should others, who are providing such care to their own parents, also pay heavy taxes to pay for social care for those whose children are unwilling to bear the burden?  And which children? The onset of such an enormous burden can cause conflict in families.  Moreover, children often move to a different state, leaving their parents behind to be cared for by others.  From New York, many move to lower tax states.  Should taxpaying New Yorkers pay to care for the parents of those enjoying lower taxes in North Carolina?

The third reason is that New York seniors may be receiving services they want, but do not really need, because they have an incentive to receive them, and the health care industry has an incentive to provide them.  Anyone with aging relatives knows that as their health fails it is at first inconvenient, then difficult, the painful, then impossible for senior citizens to live on their own without assistance.  To know when assistance is required, a bureaucrat reviewing an application would not only have to see what happens in an applicant’s home 24/7, but also know how they feel while trying to do the tasks of daily living.  In practice, government officials either roll over and provide services to all who know enough to ask for them, or throw bureaucratic obstacles in the way to screen people out.  Those screened out are often not those who have lesser needs, but those who have a lesser ability to work the system. New York has a particular twist.  In case after case, the responsibility of determining who really needs care is delegated to organizations that make money providing that care.  The results are obvious.

According to the report Medicaid Empire: Why New York Spends so much on Health Care for the Poor and Near Poor and How the System Can Be Reformed, “While personal and home care substitute for institutional care in other states, New York spends more than most states for all three, and a fourth of all Medicaid dollars spent nationwide for personal care are spent in New York!”  That is an observation I made long ago.  The people who prepared the report, the National Center for Policy Analysis, claim to know some reasons.  While I don’t know anything about this group and the accuracy of its analysis, you can add these observations to the list of possibilities for explaining New York’s high Medicaid expenditures.

“Home health aides typically come once a day to wash dishes, perform light cleaning, deliver or prepare meals, and help with bathing and dressing. Enrollees often begin receiving personal care after discharge from a hospital, when a Medicaid official assesses their level of disability and calculates the number of hours of assistance they need for daily living activities.”

“Once recuperated, most recipients have come to expect the higher level of service they were receiving (due to illness) and resist having the number of hours of personal care assistance cut back. If clients complain, the system generally favors clients over administrators. In New York, Medicaid enrollees often use home care attendants for nonmedical tasks such as shopping. Furthermore, in some cases, assistants are chosen by the recipients themselves, and can include other members of the household, relatives or neighbors. Thus, Medicaid often pays family members to do what they would have done anyway.”

“Home- and personal-care services may be justified when they allow the disabled or frail seniors to avoid institutional care, but many New Yorkers receiving home care could perform more of the tasks themselves and are receiving more assistance than is needed to keep them out of institutionalized care. Thus, apart from skilled nursing services, home care often amounts to free maid service.”

“Whereas those receiving home care benefits in other states get helpers an average of 11 hours per week, the average is 30 hours per week in New York”

That last statement certainly sounds like a fact, though one wonders how accurate it is.  At 30 hours per week, how is that cheaper than institutional care, where one worker can supervise a ward with 10 to 20 patients?

The issues surrounding the care of  elderly people who are no longer able to care for themselves, and for identifying such people, are indeed difficult.   But by providing most services and asking the fewest questions, New York has been unfair to the young, to taxpayers, and to those who care for elderly friends and family members on their own. 

Moreover, as the population ages, the economic development formula has become clear:  whoever attracts the college-educated young wins, whoever pays for the government-dependent old loses.  In much of the state, people are complaining that the young people – their children — are leaving.  But the state’s priorities make it wise for them to do so.  Something has to change, if the state is to remain vibrant enough to provide a decent life for non-seniors, but also to have the resources to care for seniors for whom the support of the community is the only choice.  By the time a crisis arrives, it will be too late and, in the way of things, old people (presumably those of my generation) will be cut off from care willy-nilly.

I’ll take a shot at the beginnings of a solution this fall.