Issue for Elderly : Long-Term Care: a Hole in Safety Net

ADRIAN, Mich. — Florence Mosher was enjoying a comfortable, secure old age until she fell down in her living room and broke her left leg in five places. Treated at a local hospital and sent to a nursing home to convalesce, the formerly vigorous 85-year-old widow returned a virtual cripple, gripping the frame of a metal walker as she inched between rooms of the house where she has lived since 1923.

And freedom of movement is not all she lost. More than $12,000 in health-care bills virtually wiped out her bank account. Today, burdened with poor eyesight and hearing and a plate in her withered leg, she is spending the last of her savings on round-the-clock home care. When that money is gone, she will go on welfare.

“I thought I had my old age very well taken care of,” she said recently, sitting propped up with pillows in a recliner in her living room. “But everything changed.”

Most are blissfully unaware of it, but similar financial catastrophes are close at hand for millions of elderly Americans. Fortified with Social Security, pensions, Medicare and supplemental private insurance, legions of middle-class elderly people now face old age with equanimity--at least as far as potential financial problems are concerned.

Yet there is a gaping hole in this safety net that can reduce supposedly secure individuals--and their spouses--to utter poverty in a matter of months: Neither Medicare nor most private insurance policies cover more than a tiny fraction of the costs involved in the kind of long-term care and assistance many elderly people need when debilitating medical problems arise.

End Lives as Paupers

Most nursing home care is not covered, for example. Neither is most at-home care. Help with these expenses is usually available only to those who qualify for welfare. Because the cost of long-term care can sap the life savings of even the thriftiest with brutal speed, many elderly Americans are routinely--and demoralizingly--forced to close out their lives as paupers.

“We now have this big, long-term-care time bomb,” warns Rick T. Zawadski, a San Francisco researcher on the elderly. “It’s the ghost that’s in our closet.”

And beneath this frightening reality is a difficult question of social policy: How much should government--already financially strapped itself--do to cover the living expenses of people who have assets of their own?

“What is their money for?” asks Stephen Reissman, president of a Los Angeles nursing home corporation. “Is it so you can die and leave it to your children, or is for yourself? Should taxpayers pay for somebody’s long-term care if the person has the money? That’s the social issue.”

For many, the question is not quite that simple. Forcing the elderly to give up everything they own to get assistance often leaves surviving spouses in dire straits. Moreover, some question whether it is humane, or even good economics, to wipe such people out financially.

“I think it’s one of the cruelest things the government can do, to wipe someone out, to absolutely destroy them financially, before they can receive any help,” Rep. Ron Wyden (D-Ore.) said.

A majority of the elderly remain independent to the end. As the ranks of the very old expand, however, there is a corresponding increase in such debilitating illnesses as stroke, arthritis and Alzheimer’s disease--wasting ailments that rob victims of the ability to survive without assistance. After age 85, at least one-third of the population needs help with the basic tasks of daily living. Those who cannot get all the care they need from family and friends have only one choice--to pay for it.

Nursing Home Costs

Nursing home care is covered by Medicare only when related directly to medical problems, but never for the kind of care needed when a person has become enfeebled or otherwise unable to live at home unaided. The costs of at-home care, such as an occasional housekeeper or someone who helps with shopping, or a companion like Florence Mosher’s, are ignored by Medicare and private insurance.

Such care has become the major catastrophic health cost facing people 65 and older, dwarfing the amount they pay hospitals out of their own pockets. In 1984, they and their families spent $12.9 billion of their own money for nursing homes and another $3.5 billion for visiting aides, therapists and housekeepers, according to the Senate Special Committee on Aging. These sums dwarf the $1.7 billion in personal spending for hospital care.

Such expenses can ravage the quality of life even for a healthy spouse. Consider the experience of Grace and Lawrence Hanson.

During Lawrence Hanson’s seven years of illness, which included seven strokes and a heart attack, the Jackson, Mich., couple went through their entire $49,000 in savings. “We cashed in everything we had and lived on it,” Grace Hanson recalled.

Had ‘Not One Dime’

Lawrence Hanson died five weeks after entering a nursing home, and his wife was left with nothing. She had to sell his gardening tools and small tractor just to pay for her husband’s $1,600 funeral. “When we had his funeral, there was not one dime I could say was mine,” she said. Alone now, Grace Hanson scratches by on $460 a month in Social Security payments.

Her predicament is no accident. Congress designed the Medicare program in 1965 to help those 65 and older pay for the treatment of short-term, curable illnesses. Nursing home costs, visiting nurses and other services were acceptable only if they were directly related to recovery from a temporary illness. “Non-medical” custodial care, whether in a nursing home or the person’s own home, was excluded.

“We knew Congress wouldn’t pay for nursing homes as part of Medicare because it cost too much,” said Wilbur Cohen, who helped devise the program when he served as an aide to President Lyndon B. Johnson.

But a great many of the elderly are still shocked to find that Medicare provides nothing toward their long-term care. In a 1983 survey of 1,009 of its members, the American Assn. of Retired Persons found that 79% of those who believed they might enter a nursing home thought Medicare would pay all or part of the bill.

“I’d heard that Medicare pays for this, that and the other thing,” said 77-year-old Ruth Young, whose husband lived in a nursing home east of Los Angeles. “Don’t believe it.”

Shifted to Welfare Program

Nursing home expenses for those needing permanent custodial care are covered by another government program--the joint federal-state welfare program called Medi-Cal in California and Medicaid in the rest of the country. “I figured it was better to have nursing home care as a welfare program than not to have it at all,” recalled Cohen, now a University of Texas professor.

But to qualify, the elderly have to be poor--extremely poor.

Although standards differ among the states, patients are typically forced to cash in virtually all their assets--savings accounts, stocks and bonds--and spend all but their last $1,700 on nursing home bills before Medicaid kicks in. Single people deemed by their doctor to be unlikely ever to be able to live independently again must also sell their houses. Except for a tiny allowance, usually $25 to $40 a month, any income from such sources as Social Security and private pensions must be applied to nursing home bills.

Nursing homes are so expensive--typically $2,000 or even $3,000 a month--that many residents quickly deplete their own resources and qualify for Medicaid. As many as two-thirds of those who enter nursing homes as private paying patients exhaust their life savings and become eligible for Medicaid, which pays the bills until they die, according to a report last year by the House Select Committee on Aging.

‘Price of Old Age’

“The price of reaching old age . . . “ Committee Chairman Edward R. Roybal (D-Los Angeles) said, “is the risk of living with impaired health and having to exhaust one’s financial resources to obtain needed health care.”

Harvard Medical School researchers last year found that nursing home costs would bankrupt 46% of a sample of single 75-year-olds in Massachusetts in just 13 weeks. By the end of a year in a nursing home, the survey found, 72% would have nothing left.

Families sometimes go to great lengths to prevent Medicaid eligibility requirements from wiping out their savings. In New York, individuals have been suing their nursing-homebound spouses for nonsupport, a legal maneuver to shelter some of the family money and keep it for use of the healthy spouse.

In California, a new law protects half of the family’s assets for use by the healthy spouse. But not everybody is receiving even this protection because many are not aware of the rule.

Ruth Young, a former model who now lives in a mobile home, found out the hard way. When her 81-year-old husband, Andrew, checked into a nursing home last May after a series of bouts with heart disease, prostate cancer and diabetes, the Youngs still had about $20,000 in cash.

‘Couldn’t Keep From Crying’

By October, less than $5,000 was left. “That’s the lowest I ever was in my life,” recalled Ruth Young, an Ohio native whose coal-black hair has turned white. “No one in my family ever had any need for outside help. And to me it was just the end of the world. I couldn’t keep from crying.”

Until she got a lawyer, she did not know that half of the financial assets could be shielded from nursing home bills. Only after she paid thousands of her own dollars unnecessarily did an attorney separate her assets from her husband’s, salvaging $2,200 from the nursing home.

Fred Marr, a paralegal familiar with the Youngs’ case, said the California Health Services Department often fails to issue patients the required notification of their right to divide community property. “We’re looking at several thousand dollars for Mrs. Young,” he said. “For others, we’re looking at substantially more.”

Andrew Young died in his nursing home on April 10, and Ruth Young now lives on $553 a month from Social Security and the federal Supplemental Security Income program for the elderly poor. But she is not bitter.

“I don’t feel that anyone owes me anything,” she said. “When we were young we spent money like we were off our rocker. When you’re young you think it’s going to go on forever.”

Ways to Shelter Assets

There are other ways to shelter savings accounts, securities and other assets from being consumed by long-term care expenses. If parents shift their wealth to children under certain trust arrangements, for example, the money cannot be touched for nursing home bills--provided the parents had the foresight to establish the trust at least two years before entering a nursing home.

“Nelson Rockefeller could have been on welfare,” declared Stephen Moses, who works in the Seattle office of the Health Care Financing Administration, which administers the Medicaid program for the federal government. “All you have to do is get the money out of your name two years before you need it.”

Some other maneuvers are illegal. Some Medicaid beneficiaries fail to report all their financial assets when applying for Medicaid. Although the extent of such cheating is not known, such maneuvers could be costing the Medicaid program as much as $535 million a year, according to a recent study by HCFA’s Seattle office.

For the elderly who are seeking to avoid poverty, another possible avenue is private health insurance. About 70% of the elderly, some 21 million people, already buy supplemental insurance to help pay hospital and doctor bills that are not fully covered by Medicare.

But so-called “medi-gap” policies typically cover only hospital care and doctors’ bills related to specific identifiable ailments. Only a scant 150,000 people have policies that pay for custodial care in nursing homes or the patient’s own home, according to Ron Hagen, director of insurance services for the American Assn. of Retired Persons.

Face Painful Awakening

Those who thought their medi-gap insurance had prepared them for any costly medical contingency often face a painful awakening.

Edward Howard, 71, of Upper Marlboro, Md., assumed that Medicare and his four supplemental health policies would pay for even the most threatening and complex medical expenses. He felt secure. After a career as a designer and equipment builder in an Army research laboratory and a brief stint as a construction inspector, he had pension and Social Security income of $2,000 a month and savings of $109,000.

It may not be enough. An infection in Howard’s foot last year forced four successive amputations and left him with a stump of a leg. Doctors also took out his gallbladder and prostate gland. Howard, formerly a robust 180 pounds, came home from the hospital weighing slightly more than 100 pounds and needing round-the-clock care.

Home health aides cost about $76 a day, and he has already spent $48,000 of his savings. “I’m ever conscious of the cost,” said Howard, who is restricted to a wheelchair. “I’m fighting like hell to get a prosthetic leg on me soon--then I can get around and get control of things.”

Medicare pays for just three hours a week of his 24-hour-a-day care. That, he remarked bitterly, “does me about as much good as giving a starving man a penny and saying, ‘Go feed yourself.’ ”

Debate Over Support

Government officials and other experts debate whether taxpayers should be asked to help support such people as Howard.

Nursing homes already cost taxpayers more than Congress ever imagined. The number of elderly residents tripled during the last two decades to 1.3 million, and Medicaid’s nursing home outlays, shared by Washington and the states, have reached $12 billion a year.

California and 17 other states attempt to recover Medicaid costs from estates after nursing home patients die. Oregon recovers about $4 million a year, 2.5% of its Medicaid budget, by aggressively seeking money from patients’ estates and carefully monitoring shifting of assets. Alabama routinely places liens on single patients’ homes as a way of guaranteeing reimbursement for its Medicaid costs.

“Families should be putting more into taking care of their parents,” said Alabama Medicaid Commissioner Fay Baggiano. “Sorry, but we’re old-fashioned down here.”

And at the federal level, a law recently approved by Congress requires that income earned on money given in trust to children must be applied to nursing home bills before federal benefits become available.

Rep. Henry A. Waxman (D-Los Angeles), the House sponsor of the restriction on trusts, said he sympathizes with people who want to protect their life savings. “But we’re saying that Medicaid is for the poorest of the poor,” he said, “and it just isn’t fair to use the Medicaid money for those who can afford to pay for their own services.”

Similarly, the Reagan Administration favors private financing, perhaps by encouraging new insurance policies or permitting tax breaks for savings accounts dedicated to long-term care. Officials have made it clear that government financing for extended, custodial care is not acceptable.

“We believe strongly that the strength of America is in the family unit and that . . . they will rise to the occasion and provide the necessary levels of support for elderly family members,” said C. McClain Haddow, former acting director of HCFA.

The insurance industry, which is moving into the business very gingerly, worries that only the elderly sick would sign up for long-term care policies--and that companies would sustain huge losses. “Most people don’t begin to think of it until they are actually in need of services,” said Arthur Lifson, vice president of Equitable Life Assurance Co. of New York.

Indeed, most people apparently do not understand their financial vulnerability. In its 1983 survey, the American Assn. of Retired Persons found that 60% of its sample members were not worried about paying for long-term care.

In a test marketing last year, the AARP and Prudential Insurance Co. sold just 1,200 policies. The AARP, in a telephone survey of people who declined to buy, found that they simply did not want to face the issue.

“There is a strong resistance to the subject,” said the AARP’s Hagen. “People seemed to think, ‘If I buy this product, I am doomed to needing it.’ ”

Florence Mosher is among the many who might have been helped if private insurance had been commonly available. She doesn’t expect any aid from the government as long as she can pay for the round-the-clodk companions who help keep her on her feet. “But I think if elderly people are helpless they should be taken care of,” she said.

Once her last $3,000 is used up, her income from Social Security, her late husband’s pension and Medicaid will enable her to employ the aides for only 10 hours a day. But she remains determined not to go back to a nursing home.

“I guess I will be alone whether I can manage or not,” she said. “If I fall, well, it’s not that far.”