Long-term care is an enormous challenge for middle-income older adults. They face big gaps in how they receive and pay for care. Unlike low-income seniors, they are ineligible for Medicaid’s safety net and unlike the wealthy, they don’t have sufficient resources to pay for a significant amount of care out-of-pocket. And, despite the widespread public perception, Medicare generally does not pay for long-term services and supports.

To help change that, the consulting firm ATI Advisory has developed a modest, highly targeted Medicare LTSS benefit. It would be far from comprehensive care, but it is a start.

More important than the specific details, this plan shows it is possible to design a home-based long-term care benefit under Medicare that can lower overall costs while improving the well-being of participants.

The plan is part of a larger report, called Evaluating the Needs, Preferences, and Potential Avenues of Care Support for California’s Overlooked Middle.  While the report focuses on California, its ideas could be tailored to older adults in any community or state.

How It Would Work

The LTSS plan, which ATI calls Medicare Advancing Home and Community Care, would be a substantial change from the existing government long-term care system, which is built on Medicaid.

Unlike Medicaid, which supports only those with very low incomes, MAHCC would be available to all frail enrollees in original Medicare. While the model does not include those in Medicare Advantage managed care, ATI says those plans also could adopt the design.

Medicaid would continue to offer its own LTSS benefits to those with very low incomes, including those eligible for both Medicare and Medicaid. And, of course, middle-income people could supplement the new benefit by paying for additional services out-of-pocket or with insurance.

The MAHCC benefit would be available to enrollees at home or through an adult day program. That latter model could look something like a stripped-down version of the Program for All-Inclusive Care for the Elderly, better known as PACE.

MAHCC would provide frail Medicare enrollees living at home with a suite of supports, including care navigation and access to services such as personal care, adult day, transportation, meals, and caregiver support. In one potential design, the program would pay $11.65 monthly for care navigation. The annual benefit for most other services would be capped at $2,500 or about $200-a-month.

CAPABLE

Participants also could also use a program called the Community Aging in Place Advancing Better Living for Elders, or CAPABLE. Developed by Sarah Szanton and colleagues at Johns Hopkins School of Nursing, CAPABLE is built around a team that helps people stay at home. It includes an occupational therapist, registered nurse, and handyman able to make modest home modifications.

CAPABLE was initially developed as a Medicaid benefit. But MAHCC would expand it to traditional Medicare. Its goal would be the same: To make it possible for a beneficiary to remain at home for as long as possible and avoid institutional care. Under this model, Medicare would pay up to $5,500 for CAPABLE services.

Cost Savings

If well targeted, MAHCC could reduce overall Medicare spending in California by more than $500 million, according to the actuarial firm Milliman.

Where would the savings come from? Primarily from reducing avoidable acute health care episodes, such as falls or infections, or conditions such as malnutrition and dehydration, which all are frequent causes of emergency department visits, hospitalizations, and nursing home stays.

ATl estimated that Medicare Parts A and B spend an average of nearly $57,000 annually for individuals with moderate or significant levels of frailty. That is five times its average cost for all beneficiaries. Those very frail people account for nearly half of all acute and post-acute Medicare spending.

Providing well-designed services and supports to those vulnerable enrollees can reduce those acute episodes and lower total Medicare costs. Milliman did not model additional potential cost savings that could come from, for example, delaying their enrollment in Medicaid LTSS.

A key to the cost-effectiveness of MAHCC is targeting it to those with a moderate to severe level of frailty. An enrollee’s frailty would be determined by using standard surveys that assess, for example, overall health status, cognition, weight loss, depression, medication use, need for help with daily activities, and recent hospitalizations.

It may be that providing MAHCC supports to those with lower levels of frailty also could save money by helping them maintain their relatively good health. But the cost benefit of this kind of prevention is hard to measure, thus the plan focuses on the savings from covering the most frail.

Other Medicare LTSS Plans

ATI proposed MAHCC at a time when others have embraced far more expansive—and expensive–Medicare long-term care reforms.

Rep. Debbie Dingell (D-MI) has introduced a bill to create a Medicare home-care benefit that would cover up to 20 hours weekly of personal care.

A group of policy experts at the Brookings Institution proposed their own Medicare home-and-community based program. It would pay for 10 to 60 hours of care per week, depending on the beneficiary’s level of need. Its annual cost would top $100 billion.

After beneficiary copayments, state payments, and other offsets, the net cost would be $40 billion to $70 billion that would need to be funded with government borrowing or some form of tax increase.

And the top Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-OR), has asked for public comments on a detailed set of questions that also focus, in large part, on creating a new Medicare home care benefit.

The specific benefits in the ATI plan are representative only. Medicare spending for an LTSS program could be adjusted up or down. I’d be curious to know, for example, how much more assistance could be provided if beneficiaries paid a modest additional Part B premium.

However those benefits are adjusted, you can think of MAHCC as a modest, cost-saving version of Medicare LTSS compared to plans by Dingell and Brookings that would be far more generous—and vastly more costly. If policymakers do take the Medicare approach, perhaps they’d meet somewhere in the middle.

ATI’s Medicare LTSS benefit is supported by serious analysis that shows it is both affordable and can improve the lives of its beneficiaries and their families. And it makes a major contribution to the growing discussion over how government can best support those who need long-term care.