Editor's Note: America's population is aging rapidly. By 2029, 75 million baby boomers will have reached age 65 and older, and older adults will represent more than 20% of the U.S. population. Many older people are poor or have insufficient savings or incomes for retirement. Medicaid is the default payer and provider for many of the long-term services and supports (LTSS) needed by the growing number of older Americans with low incomes and limited resources. The new administration must address the looming challenges that threaten Medicaid's ability to protect elders and fulfill its assumed responsibility for LTSS. In a new article for the Winter 2016–17 edition of Generations—Journal of the American Society on Aging, summarized below, Manatt Health presents seven strategies to preserve and strengthen Medicaid and create new financing options for delivering LTSS to low-income elders. Click here to download the full article free. ____________________________________
A Bleak Outlook for Older Americans
Many older Americans have insufficient income and assets to protect them through retirement. They often rely on Social Security (SSA) for retirement income, but Social Security only provides an average of $16,000 per year for retired workers. Many do not qualify for Social Security or receive very small Social Security payments and rely on Supplemental Security Income (SSI), which provides monthly benefits well below the Federal Poverty Level (FPL).
In addition, almost half of retirees surveyed in the 2016 Retirement Confidence Survey reported having less than $10,000 in savings and investments. Lack of savings will present a major challenge for people as they age. As of 2013, the median savings for Americans between ages 55 and 65 was only $14,500. Estimates show, however, that couples who retire at age 65 will require $260,000 for health costs alone during retirement.
Almost all older adults have Medicare coverage, but Medicare has gaps (most notably for LTSS) and substantial out-of-pocket costs. Those with low incomes are "dually eligible" for both Medicare and Medicaid. Those who reach 65 without enough work history to qualify for Medicare will rely on Medicaid for both their healthcare and LTSS coverage.
Older Americans living below 75 percent of the FPL (about $13,000 a year for a couple) automatically qualify for Medicaid in most states. Some of those not eligible for Medicaid when they turn 65 become eligible as a result of spending down their savings or income to cover medical expenses. In the absence of other public and private financing options for LTSS, Medicaid assumes the role of default payer of these costly services for six million elders. In 2014, total federal and state Medicaid LTSS spending was $152 billion, or a third of total Medicaid expenditures.
A Seven-Point Action Plan
The new administration must address the looming challenges that increasingly threaten Medicaid's ability to protect older adults. Below are seven actions that the new President can take not only to ensure greater economic and health security for our nation's older Americans and their families but also to preserve Medicaid as a critical safety net for our most vulnerable citizens.
Action 1: Ensure Medicaid is adequately funded and preserved as an entitlement program. Today's elders are living longer than ever before, with the average number of people ages 100 or older rising 43.6% between 2000 and 2014. People are also living longer with chronic illnesses and various forms of dementia, increasing the need for costly LTSS. To preserve Medicaid, the President must ensure sufficient funding and reject proposals that reduce or cap the federal government's responsibility to share in financing the program. Such initiatives would destabilize a 50-year-old cost-effective health insurance program; threaten the financial and health security of millions of older people who rely on Medicaid for LTSS; and increase pressure on states and the providers, health plans and somewhat fragile workforce that depend on Medicaid reimbursement.
Action 2: Advance proposals that automatically trigger an increase in federal Medicaid contribution during economic downturns. Medicaid was intentionally designed as a safety net for people in need and as an entitlement program for people who satisfy eligibility requirements. Enrollment is expected to (and does) grow during recessions, as people lose jobs, health insurance and savings. Increased federal Medicaid support is critical for states, especially during stressful economic times.
The federal matching assistance percentage (FMAP) is the percentage rate used to determine the federal matching funds allocated to states for Medicaid expenditures. The FMAP calculation is prescribed by federal law but, in general, can be no lower than 50 percent and no higher than 63 percent, and varies based on the relative wealth of each state. Congress has enacted numerous exceptions to the regular FMAP calculation, authorizing higher FMAPs to states in up to 20 circumstances, including two after the September 11 terror attacks. While these temporary adjustments have documented value, they are not guaranteed and, even when enacted, they may not be initiated soon enough to prevent damage and may end too quickly for many of the affected states. The President should call for an FMAP formula that is automatically increased without congressional action during times of economic stress.
Action 3: Increase awareness of LTSS needs and support creation of viable financing options. The need for LTSS will be a fact of life for more than half of those retiring today, yet few people reach old age prepared to deal with or pay for it. Only half of people ages 40 or older even know where to go for information. Additionally, most people are unaware of their financing options. Many mistakenly assume Medicare will pay for their LTSS needs, even though it only covers short-term nursing, home health and therapy services after a hospital stay. To complicate matters, the private insurance market for LTSS coverage is unraveling as premiums continue to rise while benefits shrink.
The President should support enhanced federal efforts through the Centers for Medicare & Medicaid Services (CMS) or the Administration for Community Living to increase awareness of people's lifetime LTSS needs. The President should also champion the creation of more viable and affordable LTSS financing options.
Action 4: Create a national family caregiver strategy. More than 80 percent of Americans who need LTSS receive it from informal caregivers (i.e., family members) and more than 40 percent of Americans ages 40 and older report having provided LTSS to family or friends. Family caregivers, the backbone of the LTSS workforce, contributed nearly half a trillion dollars' worth of unpaid care in 2013. Family caregivers experience high levels of emotional stress and financial strain and, as the population ages, the number of potential family caregivers is rapidly declining. Failure to support family caregivers adequately could result in increased pressure on Medicaid to provide care in their place.
The President should spur the creation of a national family caregiver strategy by advancing reforms that not only recognize the important role family caregivers play but also provide much needed financial and emotional support. To begin, the President should prioritize increasing awareness of existing tax incentives for family caregivers and explore strengthening them or creating new ones. The President also should support programs and initiatives that connect family caregivers directly to dedicated care coordinators.
Action 5: Support and enhance the direct care workforce. Demand for LTSS is increasing so rapidly that it is estimated that the direct care workforce will add 1.6 million new jobs by 2020 and become the largest occupational group in the country. However, direct care workers face many challenges, including low wages, lack of affordable housing and lack of training, leading to the rate of those leaving the occupation outpacing those entering. A strong workforce is key to providing quality care and helping individuals avoid expensive hospital visits or re-admissions.
At a minimum, the President should support proposals to articulate and ensure minimum training standards for direct care workers. The President also should support efforts to increase and stabilize direct care workers' earnings. Advocacy to increase wages also must promote steady hours and more predictable work schedules.
Action 6: Develop a core set of LTSS-specific quality metrics. Because LTSS span a multitude of care settings, provider types and payment structures, the healthcare industry has struggled to create meaningful quality metrics. The lack of meaningful measures results in a lack of comparable information, which consumers and policymakers need to make informed decisions.
The President should encourage consumer groups, providers, health plans, caregivers and other stakeholders to come together and develop a core set of meaningful quality metrics. These metrics must include both clinical and nonclinical measures to be standardized (to the extent possible) and connect to existing population health and hospital quality improvement measures. The President also must work with states to create a streamlined, straightforward and regularly updated dashboard that includes a manageable number of publically accessible metrics on LTSS quality.
Action 7: Challenge CMS and the private sector to develop care delivery innovations that include LTSS. To date, LTSS providers have generally been left to operate in a fee-for-service environment, largely disconnected from the rest of the healthcare continuum. Care fragmentation continues even in states that have moved LTSS into broader Medicaid managed care arrangements. The President should challenge CMS and the private sector to develop innovative care delivery and payment models that improve care quality while containing cost growth. In addition, the President should spur innovation in new technologies to support people in their homes, reducing the need for intensive face-to-face visits. Finally, the President should encourage the development of new independent and supportive housing alternatives.
Given that many people approaching retirement find themselves in challenging economic circumstances, the President must support proposals and initiatives that preserve and strengthen Medicaid, as it is the primary source of LTSS coverage for low-income adults. Doing so will give all older Americans health and financial security—and greater peace of mind.