House Ways & Means Committee Chair Richard Neal (D-MA) is mulling a plan to add a limited long-term care benefit to Medicare Supplement (Medigap) insurance. Minnesota proposed a similar plan last year. And the idea would expand to traditional Medicare a recent innovation that added limited supports and services to Medicare Advantage managed care plans.
Neal is the second key House committee chairman to express interest in a new long-term care insurance benefit. Last year, Rep. Frank Pallone (D-NJ), who now chairs the House Energy & Commerce Committee, proposed a public catastrophic long-term care insurance program. The two panels share jurisdiction over long-term care.
Though their ideas are very different, the take-away is that two powerful House committee chairs are interested in creating a federal long-term care benefit of some kind.
Asking for advice
Separately, the Trump Administration is quietly exploring whether it wants to recommend ways to enhance private long-term care insurance, though it is unlikely to propose anything as expansive as Neal’s idea.
While Pallone proposed a working draft of a bill (though it excluded any financing mechanism), Neal is being even more cautious. Rather than making a proposal, Neal made his interest public by releasing a June 3 letter to the president of the National Association of Insurance Commissioners (NAIC). In it, he asked for comments on the concept of a Medigap long-term supports and services (LTSS) benefit.
Medigap policies are offered by private health insurers to top up traditional Medicare. For an additional premium, they cover out-of-pocket deductibles or copays that Medicare Parts A & B do not and sometimes offer additional benefits. Medigap policies are designated by letter (A-N). No matter the insurer, each letter-designated policy has identical benefits, though the premiums vary by carrier.
Competing with Medicare Advantage
Premiums vary by location and plan design but can range from about $70 to $450 per month. Currently, none offer any supports and services such as non-emergency transportation, adult day, home-delivered meals, or nursing home care. Currently, traditional Medicare does not pay for any of these benefits.
However, starting this year, the government allowed Medicare Advantage (MA) managed care plans to include some of these services in their benefit packages. The program started slowly with only about 200 plans but it is expected to pick up in 2020. Plans have just submitted their 2020 benefit packages to Medicare for approval.
Some advocacy and consumer groups have objected to the MA initiative because they say it will drive older adults to enroll in MA rather than traditional Medicare. Currently about one-third of Medicare beneficiaries are in MA plans. The advocates want to see supports and services offered to all Medicare beneficiaries.
That is what Neal seems to have in mind.
What would it cost?
His letter asks the NAIC for advice on how to design a cost-effective LTSS Medigap benefit. He wants to know how to design a benefit, who is likely to participate, and how much such a benefit is likely to cost. Neal asks whether it should be mandatory in all Medigap policies or offered as an optional rider. He also asks whether an optional benefit would create an adverse selection problem that could make policies unaffordable. Hint: The answer to that last question is, “yes.”
Actuaries who helped design Minnesota’s plan calculated that a one-year, $100-a-day home care benefit (effectively a maximum benefit of $36,500) would add about $21 to a monthly Medigap premium. No insurers are yet offering the plans in Minnesota.
Neal’s idea of a limited front-end benefit is similar to the law recently passed in Washington State. However, the Washington measure is a state-only public benefit that is funded through a payroll tax surcharge. It is not linked to Medicare—indeed it could not be without a major change in federal law.
By contrast, Neal seems to be thinking very differently than Pallone, who proposed a universal catastrophic benefit. Instead of a limited front-end benefit that would be triggered as soon as someone needed assistance with daily activities (the Washington State model that Neal seems interested in), Pallone would provide a lifetime benefit of $100-a-day. But only after someone funded their own care needs for an average of about two years.
These days, Pallone seems more focused on broader health care issues than long-term care. And Neal seems to be in the very early stages of exploring a long-term care plan.
But both lawmakers, and even senior member of the Trump Administration, seem to have figured out that long-term care financing is a critical issue for tens of millions of American families. And, just perhaps, it is something they want to address.