Why not make insurance for long-term care services and supports part of health care coverage?

It is a radical idea that turns the current model—which often treats long-term care insurance as an element of retirement planning—entirely on its head. 

The concept isn’t new. John Rother, who ran public policy for AARP for many years, talked about integrating long-term services and chronic care long ago. And real people with chronic disease see no difference between medical and personal care. But nobody could ever figure out how to make the insurance work.

Here’s the problem: As long as most medical insurance was based on a fee-for-service model, there was little incentive for carriers to provide benefits for personal care. Why would they add a costly extra benefit if it didn’t improve the bottom line?

But the rise of Medicare Advantage managed care plans, Medicaid managed care, and the growth of integrated health systems such as Kaiser Permanente may be changing that. In fact, a few states are effectively trying this experiment by expanding Medicaid managed care to seniors. The PACE progam is built on the same idea.

In all these managed care models, which are explicitly encouraged by the 2010 health reform law, insurers are at financial risk if their cost of care is too high. And they have the opportunity to make more money if they can provide quality care at lower cost.

A key goal is to keep people with chronic disease out of the hospital. And one cost-effective way to do that is to get elderly patients with chronic disease good quality personal assistance.

Here’s a simple example:  Medicare spends nearly 40 percent of its budget on patients with congestive heart failure (many of whom suffer from other diseases as well). And the average cost of hospitalizing a patient with severe heart failure is about $24,000-a-year.

We can keep heart failure patients stable and out of the hospital by making sure they watch their diet and properly take their medications, and by weighing them regularly (weight gain is a key indicator that CHF is out of control).

Now, imagine a system where, as part of Medicare Advantage insurance, a senior receives basic long-term care benefits that may include an aide who weighs them, cooks healthy meals, and helps administer meds.

Keeping a patient at home is a potential win/win. She is healthier and the insurer saves money.  While such a system might only provide basic coverage for personal care, consumers could supplement coverage much as they buy Medigap health insurance today.

I don’t know what such coverage would cost or what the benefits would be. But, as a reality check, I asked a senior executive at a large health insurer what he thought. His response: “The concept seems to make sense.”  

We have to try something new. Given its increasingly constrained resources and complex rules, traditional Medicaid–which finances more than 40 percent of all paid long-term care–isn’t the answer.

Similarly, private long-term care insurance, sold almost exclusively through life insurance companies, has been a dismal failure. The few who do buy tend to be the wealthy who are looking to preserve assets for their heirs.

But I’m not worried about them. A solution to the problem of financing long-term care should be about middle-class people who need resources to pay for quality assistance in frail old age or in the event they become disabled as younger adults. And for them, personal assistance, whether at home or in a nursing facility, is an integral part of their health care. Why not insure it that way?