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New Report Suggests Fixes to LTC Financing Challenge

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Financing of long-term care continues to plague lawmakers in Washington as people live longer and the number of dementia and Alzheimer’s cases continues to skyrocket, driving the increased need for long-term care coverage.

Just-released research by the Bipartisan Policy Center sets out recommendations for improving the financing and delivery of long-term care.

The study notes that roughly $725 billion is spent annually on long-term care, but that three out of four Americans older than 40 are not confident they will have the financial resources to pay for care as they age.

The proposals outlined in BPC’s new report, “Financing Long-Term Services and Supports: Seeking Bipartisan Solutions in Politically Challenging Times,” call for improving the availability of affordable long-term care insurance and financing of long-term services and supports (LTSS), or long-term care services.

The new report builds on BPC’s February 2016 report, “Initial Recommendations to Improve the Financing of Long-Term Care.”

BPC’s 2017 recommendations include:

Private long-term care insurance. Permit penalty-free (but still taxable as income) early withdrawals from retirement savings accounts such as a 401(k) to purchase private long-term care insurance. BPC said this could help bear the costs for long-term services and supports.

Medicare respite benefit. Allow Medicare Advantage plans and other Medicare provider organizations the flexibility to offer respite care to high-need, high-cost Medicare beneficiaries. This would apply to patients who have three or more chronic conditions and functional or cognitive impairment and are part of a person- and family-centered care plan.

Beneficiary-financed Medicare supplemental benefit. BPC’s new analysis suggests that Medigap and Medicare Advantage plans could offer an affordable LTSS benefit for older adults not eligible for Medicaid. Such a policy could result in premiums of $35 to $40 per member per month.

The U.S. is dealing with 1965 health care structures that “we can kind of keep patching, which we have to do and should do, and we do it in this report,” BPC’s Bill Frist said at an event held in Washington when the report was released. Frist is a former Republican senator from Tennessee who served as Senate majority leader, and is now BPC senior fellow and co-chairman of the BPC Health Project.

However, “at the end of the day we have to get new funding streams in there for this new challenge, this new miracle in health and health care that people are living longer,” said Frist, who began his career as a heart and lung transplant surgeon.

“We have to think more innovatively; we have to say public-private partnerships, but what does that mean? It means we have to incentivize our private insurance markets. It means our federal government has to step up and work together with the private insurance market to bring in new capital,” he explained.

Much of the argument today among lawmakers and policymakers is “we have to keep fighting for Medicaid dollars to do more of the same in nursing homes,” Frist added. “It’s a losing argument; we’re beyond that.”

As the study notes, for those who lack sufficient personal resources to pay out of pocket, Medicaid is the primary payer for LTSS costs, while Medicaid is expected to cover about 34% of average lifetime LTSS costs of people turning 65 today.

Tom Daschle, a Democratic former Senate majority leader as well as a BPC co-founder and co-chairman of the Health Project, stated at the event that long-term services consist of “providing assistance for daily activities, getting in and out of bed, managing prescriptions — all the personal things that happen in daily life as healthy people but that all require assistance going forward, as well as physical adjustments that have to be made in a home.”

“Studies have shown that a typical person over the age of 65 is going to need three years of long-term care support and services,” Daschle said, “and half of them will need more than that” — at least five years.

LTC is “clearly going to need a lot more attention in public policy.”

Costs of LTC Continue to Climb

Daschle said users of long-term care services spend more money now on home-based services than on nursing homes.

But as the report points out, the costs of LTSS can be significant regardless of the setting.

In 2015, the median annual cost for a home health aide was approximately $45,800, the median annual cost for community-based adult day-care centers was $17,900, and the median annual cost to live in a nursing facility was approximately $91,300.

In 2013, total national spending for formal LTSS services amounted to $339 billion, with public spending accounting for about 72% of this amount.

Formal LTSS spending for older Americans was approximately $192 billion in 2011, the report states.

“These costs are expected to rise as the population ages, consuming a larger portion of federal and state Medicaid budgets and placing an even greater burden on older Americans’ and their families’ personal finances,” the BPC report said.