Two days ago, the Harris-Walz campaign released the basic outline of a proposal to expand Medicare benefits to cover home health care for 67 million elderly and disabled individuals. The announcement received widespread media coverage in largely favorable terms without much analysis, despite the campaign providing only sketchy details and no budget score. The proposal is bad policy because it would be costly for the federal government amid massive budget deficits, and inequitable, passing resources freely to those who can already afford care. It would increase the costs of many types of personal care by significantly raising demand for home care while constraining supply; moreover, an expansion of supply would likely require increased immigration. It would create poor incentives to save and obtain insurance, while reducing the need for family formation. The proposal would create a massive federal bureaucracy and would be partially funded by restricting drug prices paid to manufacturers, which could hinder life-saving medical discovery.

Currently, home health care assistance with activities of daily living like dressing, eating, toileting, or bathing is provided in limited circumstances by Medicare, expansively by Medicaid for the many retired elderly and disabled people broadly eligible for it, and by family members. It is also funded through veterans’ benefits, retirement assets, home equity, income, private insurance, and philanthropy. The Nation spends more than $130 billion on home care (compared to $190 billion on nursing home care). Placing this benefit in a universal social insurance program like Medicare, without any restrictions, even without assuming any induced changes in consumer or provider behavior, would directly increase Medicare spending by 14 percent. But research shows that including the home care benefit (as opposed to nursing home) in insurance coverage will significantly increase the demand for it. Hence, we can expect the cost of the home care benefit to be much higher than what current conditions suggest. For those with significant disabilities needing constant care and oversight, the substitution of home care for nursing home care, as the proposal encourages, would nearly double costs—$218,400 annually (24 hours a day, 7 days a week, at $25 an hour) compared to $120,000 per year for nursing home care. Moreover, the surge in demand, without a corresponding increase in the supply of home health aides, will drive up prices, increasing the cost of the benefit to the government, and raising costs in other cognate fields, such as child care. An increase in supply would likely require an increase in immigration, legal or otherwise; currently almost half of aides are immigrants. But even then, supply will be constrained by the requirement in the proposal that aides must pass state qualification tests, unlike the current system where families can hire any aide of their choosing.

A new universal home health care benefit would also be inequitable, favoring those who currently fund long-term care from their income or wealth or who have no children to provide care. The Harris proposal states, with no detail, that there would be a major departure from current Medicare benefit policy by imposing some cost-sharing for higher-income seniors. For retirees, however, assets and wealth are a much better measure of ability to pay than income, as recognized by the Medicaid program. Research shows that saving for retirement is highly motivated by the risk of needing long-term care; therefore a universal benefit would negatively impact the national saving rate and reduce domestic financing of investment. Research also shows that access to Medicaid has a negative impact on the purchase of private long-term care insurance; this new Medicare benefit would certainly acerbate that effect. The important motivation for family formation driven by the need for love and companionship, manifest in children taking care of their parents in old age, will also be weakened by this new government benefit, at a time of a declining birth rate in the US.

The Harris proposal states that a government bureaucracy will evaluate Medicare enrollees to ascertain the ability to perform activities of daily living or the presence of cognitive impairments. A comparable government evaluation of individual personal function is currently performed by nearly 50,000 Social Security Administration and state agency employees with an administrative budget of about $10 billion annually to determine eligibility for disability benefits. This complex government process uses outdated standards and data, increasing taxpayer costs; claimants often experience significant delays amid several layers of review and appeal.

The Harris proposal states that the new home health care benefit will be funded by expanding Medicare drug price negotiations, increasing the discounts drug manufacturers cover for brand-name drugs in Medicare, and the ever-popular—but why not already achieved—goal of reducing fraud. There is an analytical consensus that these actions will reduce pharmaceutical research and development, potentially leading to lives lost, though the exact extent is uncertain.

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