September 17, 2013

LTC Financing in Crisis, Commission Says

One LTC expert says recommendations are ‘Band-Aids,’ while another calls them a ‘step in the right direction’

While the recommendations that the Long Term Care Commission voted Sept. 12 to include in its final report to Congress later this month are “Band-Aids on [the] large and ever-growing problem” of LTC financing, according to one LTC expert, another expert believes the report was “a step in the right direction as it makes very clear that there is a crisis situation facing the country.”

The federal Commission on Long-Term Care completed its work on a package of recommendations that are designed to better ensure LTC coverage is available for the elderly and disabled. The recommendations must be included in the final report the group sends to lawmakers on Sept. 30.

In the area of LTC financing, the commission recommended improvements to Medicare and Medicaid as well as a "sustainable balance of public and private financing  for long-term services and supports (LTSS) that enables individuals with functional limitations to remain in the workforce or in appropriate care settings of their choice."

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, says that the recommendations “appear to be many small steps,” with the biggest recommendation being the “creation of a new committee to study the issue” of LTC financing. “It is silly to think that an issue as complex as long-term care financing could be resolved, let alone adequately addressed, in such a short time and in such a heated political climate.”

Slome notes that those who were hoping the commission “might recommend a new social program must be disappointed.” The private marketplace, he says, “will continue. Rising interest rates will relieve much of the financial pressure on insurers, and we are confident about the future.”

However, with midterm elections on the horizon followed by a new presidential campaign, Slome says, “it will be interesting to see if there is any traction or support for further action.”

Bruce Chernof, the commission’s chairman, said in releasing the recommendations that while the commission had less than 100 days to craft solutions, he was “pleased” that a majority of the commission agreed on a number of “thoughtful recommendations that serve as a launching pad for future action by Congress and the administration.”

Chernof said that he was hopeful the “bipartisan nature” of the report and “the suite of ideas garnering broad agreement dispels the myth that our nation’s long-term care crisis is just too hard a problem to tackle. We must work to improve our approach to serving Americans with functional and cognitive limitations and their families, realizing that the time to act is now.”

But Chris Orestis, a long-term care specialist and former insurance industry lobbyist who is CEO of Life Care Funding, says that six of the panel members voted against the commission’s final report “because they do not believe it goes far enough in recommending specific ways to address the financing of long-term care.”

While Orestis says he’s “glad” that the commission acknowledged there is a “national financial crisis surrounding long-term care,” he’s hoping “they will do more to act on solutions, such as Life Care Funding.”

As he explains, Life Care Funding is one private-funding option recommended to the commission. It would allow middle-class seniors with too much money for Medicaid and too little to pay for their long-term care to convert their life insurance policies into LTC benefits earmarked to pay for such services as in-home nursing care and assisted living.

“Numerous states introduced legislation this year, and Texas passed into law, a bill that would require their Medicaid departments to inform seniors” of the Life Care Funding option, he says. “The seniors can sell the death benefit — instead of just giving up the policy they’ve been paying premiums on for years — and use the funds to pay for their care.” This allows them to “avoid the restrictions imposed by going on Medicaid and they keep future Medicaid eligibility intact.”

The LTC Commission, which consists of 15 members appointed by Democratic and Republican congressional leaders and the White House, was established after the Community Living Assistance Services and Supports (CLASS) Act was repealed by the American Taxpayer Relief Act, better known as the fiscal cliff  law, in January.

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Check out 4 Reasons Americans Skip LTC Insurance on ThinkAdvisor.

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