WASHINGTON — A Reagan Administration task force is recommending that nursing home costs, perhaps the most menacing financial expense faced by the elderly, be financed through group insurance offered to workers before they retire.
"At an average of $22,000 a year, nursing home care for extended periods very quickly brings financial ruin to people on limited, fixed incomes," says the report, which will be issued Monday by the Health and Human Services Department.
Medicare pays just 2% of all nursing home costs, usually restricted to the comparatively few cases where a person has come from the hospital and is being treated for a specific acute illness. By contrast, most nursing home residents are receiving custodial care because they are unable to live independently at home.
Only a handful of the nation's elderly, about 400,000 people, are covered by private insurance policies that will pay for nursing homes. However, the Administration task force on long-term care believes that millions of Americans could be encouraged to get insurance coverage through their jobs. "Privately sold, long-term-care insurance offers the best means at present for financing long-term care," says the report, a copy of which was obtained by The Times.
Ruinous Financial Burden
Insurance could ease the ruinous financial burden of nursing homes, according to the report. In 1984, nursing home residents over 65 and their families paid $16 billion directly out of their own pockets. By contrast, those over 65 spent only $3 billion directly for hospital bills--the rest of the hospital charges were paid for by Medicare and health insurance.
Congress, fearful of the burgeoning cost of nursing homes, did not attempt to deal directly with the issue while preparing the "catastrophic care" legislation that passed the House and is now being considered in the Senate. The proposed legislation deals only with "acute care," the costs of staying in a hospital and paying doctors' bills. The insurance approach for nursing homes will be promoted strongly by the Reagan Administration and many Republican and some Democratic members of Congress anxious to avoid further increases in government spending.
The task force report calls for tax law changes to make nursing home insurance attractive to both workers and corporations. "Compared to other approaches, employment-based plans would make more attractive and affordable products available and extend coverage to the greatest number of people," the report said. Workers would buy the coverage and carry it with them through retirement.
The first major employee group plan will be offered in January to the 49,000 workers and retirees of Aetna Life & Casualty Co.
Depending on the amount of the premium paid, Aetna's policy will offer payments of $50, $75 or $100 a day for those in nursing homes. For those getting care at home, the policy will pay 50% of the nursing institution rate. The home-bound must be unable to perform independently at least two of the basic tasks of daily living: bathing, dressing, feeding, getting in and out of bed, and using the toilet.
Costs Would Vary With Age
Premium costs would vary with the age at which the insurance is bought and would continue until policy-holders become eligible for benefits, or die. For the $50 daily benefit, a 50-year-old would pay $55 a month, a 65-year-old would pay $82 a month and an 80-year-old $233 a month. Aetna hopes to attract younger workers through low fixed-rate premiums. For example, a 45-year-old would pay $16 a month.
Aetna also has begun selling nursing home coverage to retired employees of the State of Alaska and their spouses. The policy pays a maximum of $125 a day for institutional care and $75 for care at home. The monthly premium ranges from $45 a month for those under 65, up to $385 a month for an 85-year-old.
Aetna will offer versions of its corporate plan to other major businesses.
The Administration task force report was carefully written to minimize any discussion of the problem of quality in nursing homes, sources said. Several task force members argued that it would be hard to sell insurance to people fearful of nursing homes.
A draft of the report said: "Anecdotal information provides many statements of 'I'd rather be dead than be in a nursing home.' " This sentence was dropped from the final version of the 322-page document.
The study also called for an educational campaign, to tell Americans that Medicare does not routinely cover nursing home costs. Some experts think this may stir sentiment to expand Medicare rather than to sell more private insurance.
'Clamor to Change Things'
"When people find out Medicare doesn't help with nursing home charges, there will be a big clamor to change things and offer new Medicare coverage," predicted a congressional aide who works on health legislation.
Some key Democrats involved with aging issues want public financing through Medicare to help defray the high cost of nursing homes. Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee, is promoting a program that would use higher Medicare payroll taxes, an expanded cigarette tax and an income surtax to provide a comprehensive national health care system.
Sen. John Melcher (D-Mont.), chairman of the Senate Aging Committee, wants to expand Medicare to cover prescription drugs, nursing homes and home care.
The task force is a 19-member advisory group that includes representatives of federal and state agencies, consumer groups, providers of long-term care services, and the insurance industry. Otis R. Bowen, secretary of health and human services, selected its members last September in response to a request from Congress for a study of long-term care financing.