Kamala Harris’ $500B home care election proposal and her incorrect calculations

During her appearance on ABC’s “The View” on Tuesday, Kamala Harris introduced a groundbreaking new Medicare at Home benefit to provide coverage for home care services for the first time.

The estimated cost of this benefit could rise to $500 billion per year, amounting to nearly $4,000 per American household.

Despite this significant cost, the Harris campaign asserts that funding for the program could be achieved by cutting Medicare payments for prescription drugs.

As individuals age, they often require assistance with daily tasks such as bathing, eating, dressing, and using the bathroom. Approximately 40% of Americans aged 85 and older require such assistance, a number expected to double by 2040. Currently, most of this care is provided by family members.

However, as more seniors are without spouses or children, or live far from their family members, the demand for formal assistance is growing. This type of care can be quite costly, with the median hourly rate for a home health aide being $33.

Medicare does not cover home care except for a limited period following hospital stays, and only 4% of seniors have private long-term care insurance. Currently, two-thirds of home care is financed by Medicaid, which allocates federal funds to states to support low-income residents.

However, Medicaid eligibility and benefits vary significantly by state. Some states enforce strict asset tests, inadequate payment rates to attract caregivers, and have long waiting lists, while others provide cash payments to family members who are already providing care and rarely seek reimbursement from wealthy beneficiaries’ estates after their passing. In 2021, Medicaid spent $115 billion on home-based care, equating to an average of $15,407 per recipient.

The current structure of long-term care under Medicaid requires reform. The eligibility rules are complex, inconsistent, and easily bypassed, discouraging individuals from investing in private long-term care insurance. Medicaid benefits do not transfer across state lines for retirees, and Florida receives five times less federal funding than New York despite having a larger population.

The Harris campaign argues that their proposal would improve access to care, allowing family caregivers to reenter the workforce. They suggest that this initiative could save money for both families and the federal government by reducing nursing home costs and hospitalizations, and could be financed through reductions in Medicare payments for drugs.

Unfortunately, the claims made by Harris are muddled and exaggerated. Many states have already expanded home-based care in areas where it could lower nursing home expenses. The majority of home care is provided by elderly spouses who are unlikely to return to work. Given the high demand for professional household assistance among seniors, broadening federal funding for home-based services could incur significant fiscal costs.

Harris’s campaign mentions that other proposals similar to the Medicare at Home initiative have been estimated to cost around $40 billion per year. However, the Brookings Institution study they reference advocates for a conservative program design that would essentially federalize and standardize Medicaid’s existing means-tested benefit.

In order to prevent costs from escalating further, the Brookings plan would entail substantial political efforts to reclaim Medicaid savings from high-spending states. It is unrealistic to assume that cuts to Medicare payments for drugs, estimated by the CBO to be between $0 and $4 billion per year, would be sufficient.

A substantial home care benefit, in line with the Harris campaign’s promises, would likely align more with the proposal put forth by the Urban Institute in 2020. Their estimate suggests that a Medicare home care benefit with a $150 daily service limit could increase federal spending by $250 billion to $394 billion per year. Since then, the cost of home health aides has risen by one-third.

Even the Brookings plan may be overly ambitious. In 2021, Joe Biden proposed a $15 billion expansion of Medicaid long-term care funding to enhance access to care, a proposal that was rejected by the Democratic Congress due to its financial implications.

Chris Pope is a senior fellow with the Manhattan Institute.