For three years, I’ve been working with a diverse group of policy experts to create a consensus framework for financing long-term supports and services (LTSS). This morning, the Long-Term Care Financing Collaborative, released its recommendations. And they are built around two major reforms: a new universal catastrophic long-term care insurance program and major improvements to Medicaid’s LTSS benefit.
Our insurance proposal would create an alternative to Medicaid for many middle-income people who now impoverish themselves paying for both long-term care and related medical expenses.
Our plan recognizes that everyone who needs care is not the same. A 45-year old with MS has very different needs than an 85-year-old widow with dementia. Similarly, people with high lifetime incomes should be expected to pay for a share of their care through personal savings, home equity, or private insurance. Others will never have the resources to finance their care.
But while there may be no single solution to these challenges, the universal catastrophic program we proposed is a financially-sustainable plan that could help those who need care the most.
Why catastrophic insurance?
In theory, long-term care insurance could cover a lifetime of risk. But it would be enormously expensive, far beyond the reach of all but the wealthiest consumers. So we focused on the greatest need, those who require a high level of personal assistance for many years.
While we didn’t propose a specific plan, it could work something like this: Once a person was certified as having a high level of need, they’d pay for care for, say, the first two or three years. They could use savings, home equity, or private insurance to cover that initial period. After that time, they’d receive public insurance—perhaps $100-a-day—for life. They could get benefits in cash or to reimburse their costs. Such a universal plan might boost taxes by about $300-a-year (or less than $6-a-week) for a middle-income worker.
Last summer, my Urban Institute colleague Melissa Favreault estimated that half of those turning 65 today will need a high enough level of personal assistance that they’d qualify for long-term care insurance benefits. They’ll need that care for an average of two years at a cost of $138,000 in today’s money.
But those averages are misleading. One-quarter of those turning 65 today will need this high level of care for less than two years. But another quarter will need it for more than two years and one of every seven will need it for five years or more.
For them, the cost of care will exceed $250,000, far beyond the capacity of nearly all Americans. So that’s where we started: With back-end insurance, to help those with truly catastrophic needs.
Why universal coverage?
Today, insurance companies generally limit new stand-alone policies to coverage of five years or less, and five-year policies are extremely expensive. In the absence of a private market solution for middle-income households, public insurance is the only available option.
Analysis by the actuarial firm Milliman Inc. convinced us that voluntary insurance would fail. Premiums would be so high that only those most likely to claim benefits would purchase insurance, thus further driving up premiums. As a result, we turned to universal insurance.
Some will say we are creating a new government program. But government already has a catastrophic long-term care program—Medicaid. And an Urban Institute analysis found that a well-design catastrophic program could reduce Medicaid LTSS costs by 35 percent.
Others will say our plan would still be unaffordable for many Americans who don’t have savings to pay for those first couple of years.
And they are right, so we looked at two ideas. The first would tie the catastrophic insurance benefit to lifetime income. In other words, the less you’ve made, the sooner the back-end insurance would kick in. And for those still unable to pay for those first years of cost, we tried to make Medicaid long-term care more flexible and more responsive to the individual needs of beneficiaries. We’d end the nursing home bias of Medicaid LTSS, and we’d be sure Medicaid no longer discouraged working age people with disabilities from taking a job.
Who is the Collaborative?
Our group represented a broad range of political views, including representatives from consumer groups as well as the provider and insurance industries. Our two dozen members included Gail Wilensky, who was a senior health policy adviser to President George H.W. Bush; Ron Pollack, executive director of Families USA; Shelia Burke, chief-of-staff to then-Senate Republican leader Bob Dole; John Rother of the National Coalition for Healthcare; Susan Coronel of America’s Health Insurance Plans; Jennie Chin Hansen, immediate past CEO of the American Geriatrics Society and former president of AARP; and Audrey Weiner, president of Jewish Home Lifecare of New York and immediate past president of LeadingAge, the group that represents non-profit senior service providers.
Our primary goal was to develop a system that could finance care where and when people need it. It would be built around robust home and community supports and be better integrated with medical care, give those who need personal assistance maximum autonomy and choice, and support both family and paid caregivers who are the bedrock of the care system.
Our recommendations are a big step towards long-term care financing reform. Much more work needs to be done. But all of us, representing diverse political views and institutional interests, agree that we can improve the current system for those who require personal supports and their families.