A Bipartisan Group Proposes A Package of Modest, But Important Long-Term Care Financing Reforms

The Bipartisan Policy Center, a Washington (DC) based group that develops consensus policy solutions,  has proposed a series of reforms aimed at helping families finance long-term care for themselves and their loved ones. The proposal aims to encourage more people to buy private long-term care insurance, including through Medicare,  and would provide a new Medicare respite benefit for family caregivers.

BPC’s latest proposals come about 18 months after the group suggested a package of initial financing ideas, including better access to workplace-based long-term care insurance and general support for the concept of public catastrophic insurance. This week’s proposals were relatively modest.  And the group failed to agree on the details of a catastrophic program. Still, while the new report falls well short of fixing the nation’s long-term care financing problem, it does address some key issues.

The BPC recommendations were made by four former senior government officials including former Senate majority leaders Bill Frist (a Republican) and Tom Daschle (a Democrat); former Wisconsin Governor and US Health and Human Services Secretary Tommy Thompson (a Republican); and Alice Rivlin, a Democrat who has led the Office of Management and Budget and the Congressional Budget Office and served as vice-chair of the Federal Reserve Board.

First, a look at what BPC proposed:

A Medicare long-term care benefit. Both Medicare Advantage and Medigap (Medicare Supplemental) plans could offer a separate, optional home care benefit. Seniors could only buy the coverage when they first enroll in either insurance program. Premiums would be fully funded by enrollees unlike the rest of Medicare where the cost is shared with all taxpayers.  It could either be an additional benefit that supplements  health care coverage or a standard long-term care (LTC) policy that is grafted on a medical plan.

BPC figures a policy that covers $75-a-day for a year (after the first 180 days) would cost an extra $35 or $40-a-month, but that price could vary dramatically depending on how many people enroll. The problem with any voluntary plan, as BPC notes: Relatively few people may buy, and those who do are more likely to claim benefits, driving up premiums and eventually creating an unstable market.

I wouldn’t have done it this way. Instead of selling what is in effect an optional stand-alone LTC policy along with a health insurance, I’d fully incorporate some level of LTC benefits into all MA or Medigap plans. Just as you now get coverage for hospital care or a doctor visit, you’d get some level of personal assistance or other long-term supports and services as part of your benefit, assuming you meet an agreed-on level of need.

Respite Care. BPC acknowledged the enormous burden that caring for a loved one puts on family members. Thus, it proposed that Medicare Advantage plans and other coordinated care partnerships such as Accountable Care Organizations be allowed to offer respite care to the family members of certain high-need, high cost patients.

Worried about the added cost, BPC looked at ways to limit eligibility by allowing only caregivers of those with very high functional needs to participate, prohibiting spouses from getting the benefit, and limiting the number of hours per year the benefit would cover.

Private long-term care insurance for workers.  Last year, BPC made several proposals to make private long-term care insurance more accessible to consumers. Currently very few buy, primarily because of the high cost. One BPC suggestion in 2016: Auto-enroll workers in employer-based LTC insurance and allow them to use their 401(k) or IRA accounts to pay premiums. This week, BPC fleshed out the latter plan.

Under current law, if someone younger than 59 ½ withdraws money from their retirement account, they must pay both ordinary income tax and a tax penalty on the withdrawals. BPC would keep the regular tax but eliminate the penalty for those 45 and older. BPC calculates that combining the penalty-free withdrawals with the auto-enrollment feature would encourage about 8.5 million more people to buy long-term care insurance, roughly doubling the number of people with coverage.

Catastrophic insurance. Finally, a word on what the group could not agree on. Since its initial report, the BPC leaders  have been trying to settle on a public catastrophic long-term care insurance program, similar to what the Long-term Care Financing Collaborative proposed in 2016 (full disclosure: I was a member of that group).  But BPC couldn’t get there.

In the end, the group only affirmed its support for the concept:  “We agree that a credible overall LTSS framework would include a public catastrophic LTSS program….Such a policy, which should not add to the deficit, would help address the unmet needs of those individuals with significant LTSS needs and would incentivize the purchase and greater use of private LTC [insurance].”

Still, give BPC credit for taking up the long-term care financing challenge. Adding respite and long-term care as benefits under Medicare would be a major step forward, even if the first steps are small. In addition, some of BPC’s ideas would fit well with Senate legislation to allow MA plans more flexibility in offering non-medical services to their members.

Given the current political impasse over the health care, it is not surprising that BPC is being so cautious. But its ideas could be the start of something much bigger.

 

 

 

 

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