From the November 2013 issue of Investment Advisor • Subscribe!

LTC Report: Looking for a Cure

The Commission on Long-Term Care has released its study, and the diagnosis isn’t promising

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Obamacare was originally supposed to include an affordable provision for long-term care through the CLASS Act. When that proved to be untenable, it was dropped.

Instead, the Commission on Long-Term Care was tasked with putting together a report that laid out the problems and provided a solution. The 15-person commission produced a 114-page report—a lot of work considering they only had from June till September—but a solution? Not so much.

In fact, there was so much disagreement that six commissioners voted against passing the report, and five issued their own dissent and recommendations.

LTC difficulties were divided into three basic categories: delivery system challenges, work force challenges and financing challenges.

Delivery system challenges include a lack of coordination in delivering long-term support and services (LTSS) partly due to “misalignment of benefit structures, conflicting rules and separate funding streams of Medicare, Medicaid and other public and private programs.” Lack of integration between agencies and professionals compounds the problem.

Stating the obvious, the report also pointed out that the cost of LTSS is a challenge for families and governments facing severe financial pressures.

LTC insurance isn’t the only answer, either. Coverage is expensive and increasingly hard to get. The report pointed out that “a significant number of insurers have left the private LTCI market and closed blocks of policies due to low interest rates that have affected the products’ financial performance and unexpectedly low forfeiture rates, among other reasons. Many policies that are in force have recently experienced substantial premium increases.”

The report suggested changing the way services were provided so those who need them are offered more appropriate levels of care and bound by fewer restrictions.

The work force challenges section addressed the need to improve the “availability and quality of paid and unpaid caregivers.” Suggested solutions ranged from integrating family caregivers into the system to improving the career potential of care worker positions, allowing nurses to delegate some of their responsibilities and performing more criminal background checks on caregivers.

The commission did not agree on a financing solution, but did offer two ways to restructure LTSS financing.

The first approach is “through private options for financial protection,” which included encouraging people to save more and boosting participation in private LTCI by means of new incentives, more flexibility for insurers, more affordable coverage and education campaigns.

Some of the incentives named in the report were tax breaks for LTC policies through retirement and health accounts, policy portability, partnership programs and stronger asset recovery (“to prevent [...] seniors from hiding assets to gain eligibility for Medicaid”). Ironically, the report conceded that was not much of a factor in using up Medicaid resources since “a Government Accountability Office (GAO) study [. . .] found that most older adults gaining Medicaid eligibility have very limited incomes.”

The second approach is to use “social insurance,” which would provide “a public financing mechanism that spreads risk broadly. [...] Since everyone is at risk, everyone contributes in order to benefit should a long-term functional need arise.”

Et voilà, the element that was missing from the CLASS Act: mandatory participation, without which the project was doomed to fail.

The dissenting commissioners, in their own statement, expressed their “shared vision” of a comprehensive LTC system. “We are convinced that no real improvements to the current insufficient, disjointed array of LTSS and financing can be expected without committing significant resources, instituting federal requirements and developing social insurance financing.”

They too provided recommendations, which included a social insurance program; the need for direct-care workers to be paid a living wage, be well-trained and have opportunities for advancement; and the integration of family caregivers into the loop.

The need for LTC is growing. It’s going to take more than a report to produce a viable solution.

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