Long Term Care Financing in a Post CLASS America

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Long-Term Care Financing in a Post-CLASS America Howard Gleckman The Urban Institute


Long-term Supports and Services in a Medical Care World Existing LTC Financing in the U.S. is unsustainable It drives inefficient and dangerous care Solutions are complex and challenging ‌But not impossible


Costs of LTC Nursing Home

$81,000

Assisted Living Facility

$40,000

Home Health Aide

$20/hour

Adult Day Service

$60/day


We are Not Prepared


How We Pay Total Paid LTC Spending $208 Billion 4.40% Medicaid

11.60%

Out-­‐of-­‐pocket 21.90% 62.20%

LTC insurance and other private Other public


Medicaid The wrong care, in the wrong place, at the wrong time •  HCBS v. Nursing Home •  Growing cost constraints •  Rules-based v. choice •  Poor coordination with Medicare


The Fiscal Environment


The Crisis of Private Long-Term Care Insurance Challenges: •  Few buyers •  Low-interest rates •  “Tail risk” Consequences: •  Premium Hikes •  Tougher underwriting •  Benefit cuts •  Market consolidation: •  Since 2010, Hancock, UNUM, CNA, Metlife suspended sales •  Genworth dominates


The Crisis of Private LTCi II The Collapsing Market 800 700 600 500 400

Sales of Individual LTC policies

300 200 100 0 1992

2002

2005

2011


The CLASS Act: Lessons we learned: •  The risk pool matters: •  GI+Voluntary Insurance will fail

•  Two problems/two solutions •  A mandate solves nearly everything, but is politically unrealistic •  Can the right incentives mimic a mandate?


Opportunities for Innovation‌. Private long-term care Insurance Savings/home equity Federalize Medicaid Social Insurance instead of welfare Mix and Match: The Medicare Part D design Are we thinking about this all wrong? A new model The changing role of communities


LTCi: Some Possible Incentives Simplify/Standardize Coverage Index Premiums More Education Mandate employer offer Employee opt out Targeted subsides Reinsurance pool Joint marketing w/ health insurance

Payoff= 20 Percent Take-up •  Frank, Cohen, Mahoney, SCAN FoundaMon 2013


Social Insurance Pros: •  Encourages pre-funding w/in an existing, familiar system •  More likely to deliver integrated care •  Eliminates state variation •  Avoids impoverishment Cons: •  Subsidy design •  Funding •  Political challenges


Modified Social Insurance: The Part D Model Private insurance sold through Medicare Design options: •  Catastrophic/ First dollar •  Premium subsidy

Pros: •  Addresses needs of “middle-mass” •  Higher probability of political support

Cons: •  Cost •  Are incentives per Frank, Cohen & Mahoney enough?


Another Option: LTC and Managed Care Medicaid Medicare ACOs/Bundles/Medical Homes/Transitions Readmission Penalties The Role of Assisted Living


Another Option II Make LTC an added benefit to Medicare/commercial insurance Pros May be more attractive to buyers •  Potential cost savings •  Potential to fully integrated medical and personal care •  Already happening with the dual eligibles •  Medicare MCOs also exploring •

Cons •  Can it work w/ FFS? •  Will people buy without a mandate? •  Important lifecycle issues


A Growing Role for Communities Families provide 85 percent of care Demographic changes Can communities substitute for some informal care? Role of ALFs—assisted living without walls Payment model?


A Renewed Discussion Congressional LTC commission Society of Actuaries/Academy of Actuaries Long-term Care Financing Collaborative


Bottom Line: Middle-income families will have to take more financial responsibility for LTC Old solutions won’t work. Build new models. Think differently about old ones.


Thank You Howard Gleckman 202-261-5420 hgleckman@urban.org www.caringforourparents.com


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