On February 22, 2016, the Long-Term Care Financing Collaborative (the Collaborative) released its final recommendations (the Report) for a new public and private insurance-based financing system that would provide protection against catastrophic losses for Americans at all income levels in need of long-term services and supports (LTSS). This widely diverse group, comprised of thought leaders across the political spectrum, has worked together for more than three years to develop “… pragmatic, consensus-driven recommendations for a sustainable and affordable public and private insurance-based financing system ….”
Most Americans have not prepared for the cost of LTSS. Half of all seniors will need a high level of personal assistance. More than six million older Americans have limitations in their activities of daily living that demonstrate the need for a high level of care. Most of such assistance is provided by family members and friends. Medicaid is the largest single source of paid LTSS. Within 50 years, the number of people needing assistance will reach nearly 16 million. Changing demographics mean fewer people will be able to rely on unpaid care in the future. Moreover, the Medicaid safety net is already fraying. Members of the Collaborative firmly believe that doing nothing is not really a choice.
The Collaborative's recommendations are built upon three pillars:
- a universal catastrophic insurance program;
- a series of private-public initiatives to revitalize the long-term care insurance market; and
- a modernized Medicaid LTSS safety net.
In addition, the Collaborative encourages additional experimentation that would integrate medical and long-term care coverage through commercial insurance for working-age Americans and through Medicare fee-for-service and Medicare Advantage. Better management and coordination of the two currently separate systems can improve quality of life and reduce the projected growth in health care spending.
Universal catastrophic insurance program
After studying and debating several models, the Collaborative reached a consensus that there should be a universal catastrophic insurance program financed by a dedicated revenue source. Individuals would be responsible for the cost of their care for the first two or three years of need, following which the catastrophic insurance would provide a limited daily benefit.
The catastrophic insurance product itself could be offered in a variety of ways including through new public/private partnerships, Medicare Advantage plans or Medicare Part D plans.
Revitalizing the long-term care insurance market
Because the universal program would provide only catastrophic coverage, Americans would still need to plan, save and insure themselves against immediate costs of care. Coverage would reduce risk against financial catastrophe but would not eliminate it. The Report encourages increased savings for retirement and new uses of home equity for LTSS financing.
Specific ways to stimulate private market participation could include:
- providing federal and tax incentives;
- deregulating policies at the federal and state levels that unnecessarily increase costs;
- marketing long-term care (LTC) insurance with Medicare Advantage and Medi-Gap policies;
- encouraging state or multi-state reinsurance arrangements that provide some protection against sudden changes in the marketplace; and
- experimenting with hybrid products that combine LTC insurance with life insurance, disability insurance and annuities.
Medicaid LTSS would be dramatically restructured. The Report acknowledges the evolution from institution-based care to home and community-based care, but the very structure of Medicaid needs to be modernized to meet 21st century obligations.
Eligibility would no longer be tied to the current institutional level of care. New eligibility standards would be based on a functional assessment and a needs assessment. The financial determination, based on income and assets, would be raised modestly as an acknowledgement that the asset limitations have not been increased in more than 20 years. Individuals with disabilities would be encouraged to work and save by allowing them to build assets for future needs without losing eligibility. In raising financial eligibility levels, states would also be permitted to charge for services on a sliding scale based on income and assets.
The LTSS benefit would eliminate the institutional bias that was built into the program 50 years ago. The distinction between “mandatory” and “optional” LTSS services would be eliminated, creating a level playing field among the services.
Medicaid modernization would include greater flexibility for states in program operations, allowing for greater integration between LTSS, healthcare and social services in order to improve quality of life and promote fiscal responsibility.
The Collaborative presents a fresh opportunity to focus on the importance of LTSS. Most Americans are woefully unprepared and face the risk of financial ruin. If the Collaborative's recommendations are adopted, vast new opportunities will be created for insurers, providers, IT vendors and states.