Once all but presumed dead, health care reform is now very much alive, resuscitated by an energetic administration.
Although the focus of this initiative will be concentrated on expanding affordable health care for all Americans, long term care finance might just become part of the equation. Forces are converging that could create a perfect storm for change in our long term care financing system. Among them:
o Insolvency of both Medicare and Social Security may be nearer in time than previously forecast by government actuaries.
o Steady increases to federal and state Medicaid budgets.
o Increasing concern about how the current economic crisis will affect retirement security.
o The lack of a coherent national policy on long term care that would facilitate planning for the nation’s burgeoning long term care needs.
o An aging population.
All these forces mean that long term care will be much harder to ignore.
To some, a larger government role in LTC finance seems unlikely. We are grappling with numerous serious issues, including high unemployment brought on by the worst economy in 80 years.
Moreover, we are starting to weigh the cost of entitlements, which are projected to triple as a share of the gross domestic product over the next quarter century. When we add in the costs associated with the economic stimulus package ($787 billion), the cost of bailouts ($350 billion), and the effect of another big program on long-term government debt, now exceeding $10 trillion, it’s hard to see a path by which government intervention in long term care finance could make things better.
But there is another side to the coin. A number of those who have studied LTC finance see it as a problem that should be addressed by the public sector more directly, along with better LTC service access and improved LTC workforce readiness.
The public would appear to agree. Polls by such organizations as the Mellman Group and Glover Park Group show that a majority thinks LTC should be a part of health care reform. Social policy makers point to rising Medicare outlays for LTC (which topped $42 billion in 2005), while unmanageable Medicaid LTC costs (over $100 billion in 2007) have long troubled state governors. Finally, there is growing awareness that current entitlements are unsustainable, although many are beginning to see government action on LTC financing as a potential solution to current ills rather a worsening of matters.
At the same time, there is dissatisfaction among consumers and their advocates about private LTC insurance that parallels the two major complaints about health care itself: affordability and access. The cost of private LTC insurance remains unacceptably high for many, while thousands who want and could afford policies are declined for coverage because their health poses a higher than acceptable risk to insurers.
Critics of the current patchwork of public and private financing assail the catastrophic costs to families and point out that risk could be evenly spread to the wider population. They advocate improving access to home and community-based services, tightening coordination of care for persons eligible for both Medicare and Medicaid, shifting the emphasis from nursing homes to community living, and ensuring better quality of LTC services.
Finally, there are concerns about the LTC insurance industry itself, brought on by the recent disquieting developments within the financial sector, including doubts about the adequacy of insurers’ capital and liquidity.
It was never easy to write LTC in a short-term world; it’s even more difficult now.
There are 20 bills and proposals for LTC financing currently circulating, at least 5 of which are before Congress. They range from pro-market strategies featuring tax incentives for qualified LTC insurance policies and special LTC saving accounts to universal mandated social welfare schemes.
All these proposals rely on both public and private sources. None depends on public or private financing only. The mix of dependencies, with public financing assuming a much more robust role, at least in theory, is greater now than at any time since the introduction of private LTC insurance in the mid-1980s.
To make some sense of these bills and proposals, it is helpful to locate them on what might be called a public/private guidance spectrum (see chart). This spectrum has been drawn up from diverse sources, including the papers of the Georgetown University Financing Project, industry trade groups and independent research.
The two left columns list private LTC insurance approaches. The two on the right list those with a public emphasis. Running along the bottom in italics are features of these proposals as well as trends.
The different colors in the chart are meant to suggest not that an item is exclusively “private” or “public” so much as its political drift, whether it assumes that the driving force is likely to come from the public or the private sector, and whether its authors see one or the other sector as central to directing or governing outcomes.
The bills listed on the left, as well as the “forced savings approach” proposed by James Knickman of the New York State Health Foundation, would offer tax incentives to purchase LTC insurance in exchange for policies of increasing utility and accessibility to consumers. All have merit, but it is not likely that any will emerge as sufficient by itself because they do not address the larger issues of affordability and access.
Medicaid LTC insurance is at the bottom of the column because its continuing availability is assumed for all who can’t afford LTC insurance or who would eventually exhaust their assets paying for LTC out-of-pocket. But Medicaid, as currently offered, is not sustainable as an LTC financing vehicle, and most acknowledge its utility only as a funding source of last resort.
In the next column is what I call “Private LTCI Plus.” Several of these bills and proposals build on what we have now, either by consumer-oriented enhancements to our LTC system, such as greater access to home and community based care via Medicaid; better care coordination (especially for those eligible for both Medicare and Medicaid); and chronic disease control management via Medicare.
Others seek to enhance the appeal of private LTC insurance through better alignment with existing public programs. The Medi-LTC proposal of John Cutler, Lisa M. Shulman, and Mark Litow, for example, would make plans more standardized under the imprimatur of Medicare. This proposal, which borrows features from the Federal LTC Insurance Program under the U.S. Office of Personnel Management, would exploit the marketing reach of Medicare by offering qualified private LTC policies using group-style administration.