The Long-Term Care Criteria Work Group wants policymakers to take economic constraints into account when they are thinking about how to meet the needs of the elderly.

The work group is part of the American Academy of Actuaries, a Washington-based organization that helps the government with gather and analyze data.

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The academy set up the work group to try to give members of Congress and others an idea of what a realistic long-term care finance program ought to look like.

Given how far apart top Democrats and Republicans are on acute health care, the idea that they could even think about agreeing on a long-term care finance proposal might seem far-fetched. But Republicans have talked seriously about the need to improve the U.S. long-term care financing system in the past year, and Democrats have acknowledged that paying for long-term care is difficult.

The Republican party included a plank in its platform stating that the country should figure out how help more people who need long-term care services stay in their own homes.

Mike Pence, the vice president-elect, said during the vice presidential debate that a society can be judged based partly on how it cares for the aged, the infirm and the disabled.

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Hillary Clinton, Trump’s opponent, talked about the need to improve pay and working conditions for home health workers. She also talked about the need to support caregivers. But behind the scenes, an aide acknowledged that making any promises about home health care or home health workers would be difficult, because “home health is a lot of money.”

But the oldest baby boomers will reach age 85, the cusp of the “oldest old’ stage of life, in just 14 years.

Private groups and congressional committees have held many discussions about preparing for the “silver tsunami” through strategies such as improving support for private long-term care insurance and other private funding vehicles, improving support for family caregivers, or adding new long-term care benefits to Medicaid or Medicare.

Bruce Stahl, the chairperson of the work group, and other committee members, developed an issue brief that lists seven different criteria for promising long-term care finance reform proposals, including criteria involving the quality and comprehensiveness of the benefits.

The actuaries also emphasize that any successful long-term care finance program must be set up in a such a way that consumers can be confident that the program will deliver the benefits that were promised.

Here’s a look at some of the economic constraints described in the sections on affordability, risk management and cost control, and financial soundness and sustainability.  

Actuaries say developers of any serious long-term care finance program need to think about how the cost will compare to the enrollee's earnings. (Photo: Thinkstock)

Actuaries say developers of any serious long-term care finance program need to think about how the cost will compare to the enrollee’s earnings. (Photo: Thinkstock)

1. Consumers’ current income

In a section on affordability, the actuaries say the purchaser of insurance or some other financing vehicle could be either an individual or an entire family unit. The affordability of coverage for a family may vary by level and source of income, type of coverage purchased, other household expenses, and other factors.

“Affordability may be usefully described on an after-tax, available-dollars basis, including income and assets,” the actuaries say.

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The actuaries point out that people may have a more difficult time absorbing increases in long-term care protection program costs once they retire. (Photo: Johnny Greig/iStock) The actuaries point out that people may have a more difficult time absorbing increases in long-term care protection program costs once they retire. (Photo: Johnny Greig/iStock)   

2. Consumers’ future income

The actuaries point out in the affordability section that consumers’ income and assets may change over time, and that any realistic proposals have to reflect the reality that many purchasers who are closer to needing long-term care services may be living on a fixed retirement income, with little ability to handle ordinary, expected increases in costs, and even less ability to handle unexpected increases in costs.

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Keeping any long-term care finance program on track will require careful use of statistics from the past to come up with assumptions about the future, the actuaries say. (Image: iStock)Keeping any long-term care finance program on track will require careful use of statistics from the past to come up with assumptions about the future, the actuaries say. (Photo: iStock)

3. Statistics

The actuaries say developers of any sound long-term care finance reform proposal will need help from actuaries to gather significant amounts of data about past claims experience, develop assumptions about what might happen in the future, and monitor how well the performance of the program is matching expectations.

“Before a reform is implemented, a pre-planned feedback mechanism that studies the effectiveness of the reform is important,” the actuaries say. “Corrective actions or controls might include changing the amount of money paid into the program or limiting or changing the benefits payments or eligibility requirements to receive benefits.” 

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Efforts to make access to a long-term care financing program easier now could lead to higher costs later, the actuaries warn. (Photo: Thinkstock)

Efforts to make access to a long-term care financing program easier now could lead to higher costs later, the actuaries warn. (Photo: Thinkstock)

4. Long-term care program underwriting

The insurers that now write stand-alone long-term care insurance tend to seek as much underwriting flexibility as possible.

Consumer groups often want any long-term care insurance programs to offer coverage on a guaranteed-issue basis, or at least on a guaranteed-issue basis to people who are able-bodied enough to be working when they apply for the coverage.

In the issue brief, the actuaries say whatever medical underwriting rules a program adopts will shape future claim risks.

If program designers want to restrict medical underwriting, and have the program offer coverage to high-risk applicants, then they need to decide how they will control plan costs through some mechanism other than weeding out high-risk applicants, the actuaries say.

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If they have access to long-term care insurance, he may be less inclined to help care for them. (Photo: Thinkstock)

If the parents pictured here have access to long-term care insurance, the son may be less inclined to help care for them himself. (Photo: Thinkstock)

5. Long-term care benefits

The actuaries say having access to long-term care benefits may encourage enrollees in a program to use too much care.

“To control costs, there will need to be features that limit benefits and unintended utilization,” the actuaries say. “The interests of the users of the program and the financiers of the program should be aligned. Care should be taken so that individuals are not able to profit from using services and are not encouraged to use services that may not be necessary. Possible controls may include reimbursing a portion of actual expenditures, rather than paying a stipulated cash benefit, and by not reimbursing for care provided by family members.”

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Managers of any long-term care financing program with reserves may have to think about accepting more risk to earn higher returns, the actuaries say. (Image: Thinkstock)

Managers of any long-term care financing program with reserves may have to think about accepting more risk to earn higher returns, the actuaries say. (Image: Thinkstock)

6. Investment returns

Economists say investors typically get higher returns for what are believed to be higher-risk investments.

“Choices for investments will depend on whether the program is private or public, with greater restrictions likely on the options for public programs,” the actuaries say. “The options for private programs, absent regulatory restriction, allow greater flexibility in investment options, which means that the trade-off between risk and return becomes a more important consideration when evaluating financial soundness and sustainability of the program.”

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Harry Truman's Medicare card (Image: White House)

Any long-term care financing arrangement will interact with the Medicare acute care benefits program, Medicaid, veterans’ programs, and other types of public, private, formal and informal care delivery and finance mechanisms, actuaries say. (Image: White House)

7. Program interactions

The actuaries note that many existing programs, such as Medicaid, Medicare and the Veterans Health Administration, now pay for about two-thirds of the cost of formal long-term care services in the United States.

“How is any new program to interact with these existing public and private programs?” the actuaries ask. “Is the new program intended to displace all or part of the existing programs? Is the new program intended to provide coverage to persons not currently covered by any existing program? How do definitions of a qualifying event vary between programs? Are participants in existing programs penalized by the reform?”

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