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