Rep. Richard Neal, D-Mass. (Photo: Neal) Rep. Richard Neal, D-Mass. (Photo: Neal)

State insurance regulators are helping a key member of Congress analyze the idea of offering long-term-care (LTC)  benefits through Medicare supplement insurance policies.

House Ways and Means Committee Chairman Richard Neal asked for the help of the National Association of Insurance Commissioners (NAIC) in June, in a letter sent to NAIC President Eric Cioppa.

Neal — a Massachusetts Democrat — suggested that Medigap policies could make a good vehicle for offering some “long-term services and supports” (LTSS) benefits to older U.S. residents.

(Related: Pension Bill Could Add $70 Billion in Group Annuity Sales)

“Offering a front end LTSS benefit to seniors through a Medigap plan, even if limited to a modest lifetime cap, could provide some relief to family caregivers and might delay or prevent many seniors from spending down their savings to access Medicaid LTSS,” Neal wrote in the letter.

Neal asked for the NAIC’s help with figuring out whether adding limited amounts of LTC-type benefits to Medigap policies would really be affordable and practical.

Members of the NAIC’s Senior Issues Task Force have been talking about how to respond. They put out a request for comments in June and discussed the Medigap LTC benefits concept during a conference call held Wednesday.

The History

Private insurers have been selling stand-alone long-term care insurance (LTCI) for decades, and they are also offering LTC benefits packaged with annuities and life insurance policies.

Insurance industry market researchers are not sure how well consumers really understand the term “long-term care,” or how well they understand their coverage arrangements, but 15% of U.S. adults who participated in a Life Happens/LIMRA survey earlier this year said they believe they have some type of LTC coverage.

Traditionally, Medicaid — a program designed for people who are poor — has paid for nursing home care for poor people, and for other people who meet their states’ Medicaid nursing home benefits eligibility requirements.

Medicare has paid for home medical care and skilled nursing facility care for people who were recovering from acute health care problems, not for people who need LTC or LTSS simply because they are getting older.

Consumers can use three main types of Medicare and Medicare-related coverage: traditional Medicare coverage, which is designed to pass responsibility for many types of costs, such as deductibles and co-payments, on to enrollees; Medicare Advantage plans, which try to provide soup-to-nuts coverage for the enrollees, without large out-of-pocket costs; and Medicare supplement insurance policies, which are designed to fill in many or most of the gaps in traditional Medicare coverage.

The idea of the Medicare program offering true LTC benefits has a long, painful history.

In the 1988, when private insurers were much more enthusiastic about the idea of selling private LTCI coverage, Congress passed the Catastrophic Coverage Act of 1988. The act would have paid for a new Medicare nursing home care benefit by imposing an annual surtax of up to $2,100 per couple.

Congress ended up repealing the act in late 1989, after concerns that the surtax would be too burdensome and that the program would increase the federal budget deficit.

Medicare Social-Determinants-of-Care Benefits

The Trump administration’s Centers for Medicare and Medicaid Services (CMS) shook up attitudes about Medicare benefits in 2018, by announcing that it would let providers of Medicare Advantage plans offer some coverage for the “social determinants of care” with their 2019 coverage. Earlier this year, CMS said it would expand the types of social determinants of care benefits Medicare Advantage plans cover offer with their 2020 coverage.

The announcements mean that a Medicare Advantage plan can add coverage for some home meal delivery services, house cleaning services, adult daycare services, or family caregiver respite services, if it thinks providing those benefits will help minimize an enrollees’ overall care costs.

Some members of Congress and others have asked whether the Medicare Advantage changes mean that the traditional Medicare program should add similar social-determinants-of-care benefits.

The new social-determinants-of-care talk has revived discussions about whether some or all Medigap policies should offer social-determinants-of-care coverage.

Commenter Reactions to the Medigap LTC Benefits Concept

Ruch Guenther, a consultant, said the NAIC should welcome Neal’s interest in finding new ways to address LTC risk. “NAIC should not discourage Congress’s efforts and should offer its expertise as the issue moves forward,” Guenther wrote.

Many commenters, including Guenther, said there are many practical realities that could make offering Medigap LTC benefits difficult.

Offering even small amounts of LTC benefits can be expensive, and the process used to decide whether LTC-type claims will be covered tends to be much different, because of the nature of the risk that LTC benefits address, Guenther wrote.

“By adding the long-term benefit to Medicare supplement, the nature of the coverage would significantly change,” Guenther wrote.

Rhonda Ahrens, chief actuary of the Nebraska Department of Insurance, suggested that any effort to make access to LTC-type Medigap benefits optional could lead to anti-selection problems, especially if current Medicare enrollees get a one-time chance to add LTC benefits.

Requiring issuers to offer the same LTC benefits prices to applicants of all ages would be especially complicated, because the issuers would have no good way to predict what kind of enrollee age mix the LTC benefits would attract, Ahrens wrote.

Paul Lombardo, direct of the life and health division at the Connecticut Insurance Department, wrote that many Medigap issuers lack the expertise to price LTSS benefits. “Would they be required to offer LTSS benefits if they still want to write Medigap policies?” he asked.

Prepaid Benefits v. Immediate Benefits

 

John Cutler, an LTC consultant, said that some critics of the Medigap LTC benefits concept have noted that issuers of traditional LTC benefits hold down premiums and maximize benefits by having consumers pay for the benefits in advance, over many years.

Cutler argued that, in some ways, having consumers pay for modest amounts of immediate LTC-type benefits as they go along could work better.

 

“There is no prefunding or reserving, so we won’t see the problem of pricing inaccuracies — and massive rate hikes — we saw with long-term care insurance,” Cutler wrote.

(Related: 7 Public Reactions to Virginia LTCI Rate Increases)

Today, when policymakers are proposing LTC finance solutions, they are talking mainly about products that people would buy now and wouldn’t use for decades, Cutler wrote

“The boomers will long be dead before those solutions help them, unless they were some of the 10%-12% of the population that bought (and kept) long-term care insurance,” Cutler wrote.

“This LTSS proposal is one of the few that offers to help today’s seniors,” Cutler wrote. “Because it can and likely will be limited in scope it will, frankly, not do as much as true long-term care protection. But that also means the costs will be much less.”

Resources

Links to documents related to Richard Neal’s query about Medigap LTC benefits are available here, under the Meeting Materials tab.

— Read Maybe Traditional Medicare Should Cover Chronic Care, Too: Hearing Witnesses, on ThinkAdvisor.

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