Long-Term Care Financing Reform: A Federal and Private Insurance Partnership Model

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Long-Term Care Financing Reform A Federal and
Private Insurance Partnership Model

• Dan Mendelson
• January 15, 2008

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American Consumers are Largely Unprotected
Against the Costs of Long Term Care

• Few people are insured against the risk of
  long-term care costs
• 90 of people over age 55 have no long-term care
  insurance coverage despite the risk of annual
  costs exceeding 70,000
• Few Have Adequate Assets
• Two-thirds of elderly couldnt cover more than
  one year of nursing home care
• Medicare doesnt cover long-term care
• Medicaid requires impoverishment for coverage
• Coverage only after the exhaustion of personal
  resources, limited home care coverage for the
  elderly and no coverage for assisted living
  services
• Family caregivers fill in the gap at high cost to
  their own well-being
• There are 50 million family caregivers in the
  U.S.
• Caregivers are 2 to 6 times as likely to develop
  depression / anxiety

Sources, AHIP Center for Policy and Research,
Long-Term Care Insurance Partnerships New
Choices for Consumers Potential Savings for
Federal and State Governments, January 2007.
National Family Caregivers Association and
Caregiving in the U.S., National Alliance for
Caregiving and AARP, 2004 Long-Term Services
and Supports The Future Role and Challenges for
Medicaid, Judith Kasper for the Kaiser Commission
on Medicaid and the Uninsured, September 2007
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Few people are insured against the risk of
long-term care costs
Population Over Age 55
Source AHIP Center for Policy and Research,
Long-Term Care Insurance Partnerships New
Choices for Consumers Potential Savings for
Federal and State Governments, January 2007.
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Few Have Adequate Assets
Distribution of Elderly Living in the Community
by Level of Assets, 2005
Source Long-Term Services and Supports The
Future Role and Challenges for Medicaid, Judith
Kasper for the Kaiser Commission on Medicaid and
the Uninsured, September 2007. Uses 70,000 as
the nursing home annual cost.
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Family caregivers fill in the gap at high cost to
their own well-being
Hours of Care Per Week Provided by Caregiver
Survey Respondents
Source Caregiving in the U.S., National Alliance
for Caregiving and AARP, 2004
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Government agencies are under budget pressure as
the primary payers of long-term care

• Medicaid and Medicare together pay nearly 70 of
  post-acute and long-term care costs
• Medicare Hospital Insurance Trust Fund will be
  exhausted in 2019
• Long-term care accounts for more than 35 of
  state Medicaid budgets
• Individuals using both Medicare and Medicaid are
  especially a challenge

Sources Avalere Health Analysis of CMS National
Health Expenditure Data, Medicare Trustees
Report Medicaid Expenditures for Long-Term Care
Services 1992-3004 by Brian Burwell, Kate Sredl
and Steve Eiken
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Medicaid and Medicare together pay nearly 70 of
the nations post-acute and long-term care costs
2004 Nursing Home and Home Care Spending 185.3
billion
Source Avalere Health analysis based on
Medicare, private and non-CMS public expenditures
for free-standing nursing home and home health
care reported by Centers for Medicare and
Medicaid Services (CMS), National Health
Expenditures by Type of Service and Source of
Funds for 2004, and Medicaid Expenditures for
Long-Term Care Services 1992-3004 by Brian
Burwell, Kate Sredl and Steve Eiken,
www.hcbs.org. Figure includes Medicaid spending
on ICF/MR.
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Individuals using both Medicare and Medicaid are
among the costliest to these programs
14 of the population
16 of the population
Sources MedPAC Data Book 2006 Section 3, Dual
Eligible Beneficiaries, June 2006 John Holahan
and Arunabh Ghosh, Dual Eligibles Medicaid
Enrollment and Spending for Medicare
Beneficiaries in 2003, for the Kaiser Commission
on Medicaid and the Uninsured, July 2005.
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Goal Provide incentives and opportunities for
individuals to protect themselves against the
financial risk of LTC

• Provide federal catastrophic long-term care
  coverage for individuals who contribute
  according to their ability toward the costs of
  long-term care
• Reward individuals who save or insure for future
  LTC costs by age 55 or earlier
• Reshape private financing options and improve
  affordability through creation of
  federally-approved private financing options,
  including LTC insurance
• Establish strong public outreach campaign to
  educate the public about the availability of the
  new options

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Goal Preserve and improve the safety net through
modernization of government benefits and choice
of care options

• Replace Medicaid coverage of long-term care
  services for low-income elderly with federal
  uniform eligibility rules and benefits
• Exempt low-income elderly from the private
  contribution requirement
• Improve benefit options by adding the choice of
• cash certificates for home and community-based
  services, including family caregivers, and
• assisted living facility services

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Goal Ensure that beneficiaries are cared for in
the most appropriate setting and align care
delivery with a single financing entity

• Create comprehensive, nationwide post-acute and
  long-term care assessment system for determining
  need and benefits
• Implement a new Medicare post-acute care payment
  system based on characteristics of the patient
  regardless of the post-acute care setting in
  which the patient receives care
• Federalize existing Medicaid LTC benefits to
  ensure that post-acute and LTC services are
  appropriately aligned

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New System
Medicare
Low-income Receive Federal Benefit
Federal Catastrophic
Personal LTC Contribution
Post-Acute Care
Home Health
Adult Day Care
Care Coordinators Determine Placement
In-Home/Other Residential Care and Services
Skilled Nursing Facility
Assisted Living Facility Services
Rehab Hospital
Nursing Facility Services
Long-Term Care Hospital
Community/No prior PAC Use
Federal FFS rates, managed care, cash certificates
Private insurance, LTC savings accounts, reverse
mortgage
FFS unified payment system or managed care

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Sources and Uses of Federal Funds

• Sources of Federal Funds
• Medicare Part A Post-Acute Care Reform
• State LTC Maintenance of Effort
• Replacement of Medicaid with Private Coverage
• Better Management and Targeting of Public LTC
  Benefits

• Uses of Federal Funds
• Catastrophic Coverage
• Federal Low-Income Benefit

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Gradual Implementation Needed
Package Breadth Requires Multi-Stage
Implementation
2007-2012
2012-2017
Federal LTC Benefit Create LTC Payment System
and Rules Administer Personal Accounts Transition
Duals
Preparatory LTC Reforms Reform LTC Insurance
Market Create LTC Financing Tools
Post-Acute Reforms Patient Assessment
Tool Payment System Reforms
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Model Summary

• Reforms current system to address lack of
  coverage
• Grants incentives for individuals to maintain
  coverage
• Modernizes government benefit structure
• Creates consistency across care settings
• Creates partnership between federal government
  and private financing
• Fosters improved, affordable private LTC
  financing and insurance options
• Provides public catastrophic benefits to people
  who plan for their own care
• Creates national low-income benefit
• Includes cash certificates, managed care, and
  fee-for-service
• Shifts financing and administration from states
  to feds