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Mandate could amplify LTCI effects, analysts say

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Analysts at the Urban Institute have used simulations to show that voluntary, unsubsidized long-term care insurance (LTCI) may have little effect on Medicaid long-term care (LTC) spending.

The simulations suggest that requiring people to buy LTCI, through a payroll tax, could lead to a big reduction in Medicaid LTC savings, Melissa Favreault and two Urban Institute colleagues wrote in a paper published in Health Affairs, a health policy academic journal.

“Any successful voluntary program must overcome several challenges, including price, perceived value, adverse selection (when those who purchase coverage have a disproportionate risk of claiming benefits), and moral hazard (when insured consumers may demand more care than those paying completely out of pocket),” the analysts write. “Voluntary insurance, especially if unsubsidized, is largely unaffordable for low- and moderate-income consumers.”

See also: Policy group: Restructure private LTCI

A mandatory program, in contrast, could enroll more than 95 percent of the population, the analysts write. 

If the participants paid for the mandatory LTCI coverage through payroll taxes, that would increase payroll taxes by about 0.6 percentage points to 1.35 percentage points, the analysts estimate.

The analysts used a homegrown simulation system to look at how several different LTCI products might affect Medicaid LTC spending in 2050.

Today, private U.S. LTCI products offer “front-end” benefits or comprehensive lifetime benefits. The comprehensive policies pay benefits for as long as eligible claimants are getting eligible LTC services. Front-end policies pay for the first few years of LTC services.

In the United Kingdom, policymakers are setting up a public LTCI system that will offer “back-end” benefits, or catastrophic LTC benefits that kick in after claimants have been already been using LTC services for several years.

The analysts contend that voluntary, unsubsidized LTCI coverage will have only a tiny effect on total Medicaid LTC spending in 2050.

Adding subsidies might help voluntary front-end LTCI reduce Medicaid LTC spending by about 3 percent to 5 percent in 2050, and it might help voluntary back-end LTCI cut Medicaid LTC spending by about 6 percent to 10 percent, according to the analysts’ simulations.

The analysts have included simulation results suggesting that adding an LTCI purchase mandate would be much more effective.

The Medicaid program’s 2050 LTC spending could fall 10 percent if the country mandates the purchase of front-end LTCI by about one-third if the country mandates the purchase of back-end LTCI and by about 35 percent to 40 percent if the country mandates the purchase of comprehensive LTCI, according to the analysts’ simulations.

The analysts also tried to analyze the effects of various LTCI strategies using criteria such as how the strategies would affect younger and older people, and higher-income and lower-income people.

The analysts show, for example, that in their analysis, a voluntary LTCI system with no subsidies does little to help reduce Medicaid spending on low-income people, and that programs with mandates are likely to do far more to reduce Medicaid spending on moderate-income people.

The analysts acknowledge that they modeled only a small number of options.

“However, our project demonstrates that models can help ground discussions in evidence-based evaluations of these trade-offs,” the analysts say.

Marilyn Tavenner, the new president of America’s Health Insurance Plans (AHIP), who previously was the administrator for the Centers for Medicaid & Medicaid Services (CMS), responded with a statement emphasizing the value of the current private LTCI products.

“It’s critical that funding proposals account for combined partnerships that demonstrate cost-savings for individuals and states, rather than stand-alone reforms,” Tavenner said in the statement. “A sustainable solution is best achieved through a strong collaboration between the public and private sectors to build on their combined strengths and ensure the millions who depend on long-term care have access to the services they need.”

AHIP says policymakers should strengthen the LTC safety net for low-income individuals, use consumer education and tax incentives to encourage the purchase of private LTCI, and create a federal and state regulatory environment that encourages growth, innovation and access to affordable LTCI products.

See also: Actuaries feel for way forward at LTCI event


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