REUTERS/Evelyn Hockstein
Appearing on ABC’s “The View” Tuesday, Kamala Harris proposed “a historic new Medicare at Home benefit” to “cover home care for the first time.”
The cost of such a benefit could reach $500 billion per year (almost $4,000 per American household).
But the Harris campaign implausibly claims that it could be funded merely by cutting Medicare payments for drugs.
As people age, they increasingly need assistance with basic chores like bathing, eating, dressing, or using the bathroom; 40% of Americans aged 85 and older need such help – and their number is expected to double by 2040. Most of this care is currently provided by relatives.
But as seniors are increasingly divorced, childless, or living far from their kids, the need for formal assistance is growing. This can be enormously expensive: the median cost of a home health aide is $33 per hour.
Except for a limited period following hospitalizations, Medicare doesn’t cover home care, and only 4% of seniors hold private long-term care insurance. Two thirds of home care is currently financed by Medicaid, which provides federal funds for states to cover poor residents.
But Medicaid eligibility and benefits vary greatly by state: some strictly enforce asset tests, pay inadequately to attract staff, and have long waiting lists, while others provide cash payments to relatives who would be delivering care anyway and seldom claim repayment from estates of wealthy beneficiaries after death. In 2021, Medicaid spent $115 billion on home-based care – an average of $15,407 per recipient.
The current long-term care set-up certainly needs an overhaul. Medicaid eligibility rules are complicated, inconsistent, and easily circumvented – which deters the purchase of private long-term care insurance. Medicaid benefits do not follow seniors when they retire across state lines, and the federal government gives Florida five times less funding than New York – even though its population is larger.
The Harris campaign claims her proposal would increase access to care, while allowing family caregivers to return to work. This, they suggest, would “save both families and the federal government money” by reducing nursing home costs and hospitalizations, and could be paid for by cutting Medicare payments for drugs.
Unfortunately, Harris’s claims are confused and exaggerated.
States have already expanded home-based care where it is likely to reduce nursing home costs. Most home care is provided by elderly spouses, who are unlikely to return to the workforce. Because so many seniors would eagerly claim professional help with household chores, the fiscal cost of broadening federal funding for home-based services could be astronomic.
The Harris campaign suggests that “similar proposals to the Medicare at Home initiative have been estimated to cost around $40 billion per year.”
But the Brookings Institution study it cites advocated a “very conservatively designed program,” which would do little more than federalize and rationalize Medicaid’s existing means-tested benefit.
To avoid the cost soaring much further, the Brookings plan would require a big political struggle to claw Medicaid savings back from high-spending states. It is fanciful to claim that cuts to Medicare payments for drugs (which CBO estimate at between $0 and $4 billion per year) would suffice.
A transformative home care benefit that lives up to the hype from the Harris campaign would look more like that proposed in 2020 by the Urban Institute. It estimated that a Medicare home care benefit with a $150 per day limit on services could increase federal spending by $250 billion to $394 billion per year. Since then, the cost of home health aides has increased by a third.
But even the Brookings plan may be unrealistic. In 2021, Joe Biden proposed a $15 billion expansion of Medicaid long-term care funding, to improve access to care – and that was rejected by the Democratic Congress, due to its cost.
Chris Pope is a senior fellow with the Manhattan Institute.