long-term care financing reform: a federal and private insurance partnership model

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Long-Term Care Financing Reform: A Federal and Private Insurance Partnership Model

Dan MendelsonJanuary 15, 2008

© Avalere Health LLC

American Consumers are Largely Unprotected Against the Costs of Long Term Care

Few people are insured against the risk of long-term care costs

» 90% of people over age 55 have no long-term care insurance coverage despite the risk of annual costs exceeding $70,000

Few Have Adequate Assets

» Two-thirds of elderly couldn’t cover more than one year of nursing home care

Medicare doesn’t cover long-term care

Medicaid requires impoverishment for coverage

» Coverage only after the exhaustion of personal resources, limited home care coverage for the elderly and no coverage for assisted living services

Family caregivers fill in the gap at high cost to their own well-being

» There are 50 million family caregivers in the U.S.

» Caregivers are 2 to 6 times as likely to develop depression / anxiety

Sources:, AHIP Center for Policy and Research, “Long-Term Care Insurance Partnerships: New Choices for Consumers – Potential Savings for Federal and State Governments,” January 2007. National Family Caregivers Association and Caregiving in the U.S., National Alliance for Caregiving and AARP, 2004 Long-Term Services and Supports: The Future Role and Challenges for Medicaid, Judith Kasper for the Kaiser Commission on Medicaid and the Uninsured, September 2007


Few people are insured against the risk of long-term care costs

Private Long-Term Care Insurance Coverage, 10%

No Insurance Coverage, 90%

Population Over Age 55

Source: AHIP Center for Policy and Research, “Long-Term Care Insurance Partnerships: New Choices for Consumers – Potential Savings for Federal and State Governments,” January 2007.


Few Have Adequate Assets

3+ Years Nursing Facility Cost, 19%

1-3 Years Nursing Facility Cost, 16%

<1 Year Nursing Facility Cost, 65%

Distribution of Elderly Living in the Community by Level of Assets, 2005

Source: Long-Term Services and Supports: The Future Role and Challenges for Medicaid, Judith Kasper for the Kaiser Commission on Medicaid and the Uninsured, September 2007. Uses $70,000 as the nursing home annual cost.


Family caregivers fill in the gap at high cost to their own well-being

48%

23%

8%

17%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

8 hours or less

9-20 hours

21-39 hours

40+ hours

Hours of Care Per Week Provided by Caregiver Survey Respondents

Source: Caregiving in the U.S., National Alliance for Caregiving and AARP, 2004


Government agencies are under budget pressure as the primary payers of long-term care

Medicaid and Medicare together pay nearly 70% of post-acute and long-term care costs

Medicare Hospital Insurance Trust Fund will be exhausted in 2019

Long-term care accounts for more than 35% of state Medicaid budgets

Individuals using both Medicare and Medicaid are especially a challenge

Sources: Avalere Health Analysis of CMS National Health Expenditure Data, Medicare Trustees Report; Medicaid Expenditures for Long-Term Care Services: 1992-3004 by Brian Burwell, Kate Sredl and Steve Eiken


Medicaid and Medicare together pay nearly 70% of the nation’s post-acute and long-term care costs

Medicare, 19%

Private Insurance, 7%

Out-of-Pocket, 19%

Other Private, 3%

Other Public, 3%

Medicaid, 49%

Source: Avalere Health analysis based on: Medicare, private and non-CMS public expenditures for free-standing nursing home and home health care reported by Centers for Medicare and Medicaid Services (CMS), National Health Expenditures by Type of Service and Source of Funds for 2004, and Medicaid Expenditures for Long-Term Care Services: 1992-3004 by Brian Burwell, Kate Sredl and Steve Eiken, www.hcbs.org. Figure includes Medicaid spending on ICF/MR.

2004 Nursing Home and Home Care Spending: $185.3 billion


Individuals using both Medicare and Medicaid are among the costliest to these programs

Sources: MedPAC Data Book 2006: Section 3, Dual Eligible Beneficiaries, June 2006; John Holahan and Arunabh Ghosh, “Dual Eligibles: Medicaid Enrollment and Spending for Medicare Beneficiaries in 2003, for the Kaiser Commission on Medicaid and the Uninsured, July 2005.

Medicare Spending, 2003

Non Dual Eligible76%

Dual Eligible24%

Medicaid Spending, 2003

Non Dual Eligible60%

Dual Eligible40%

16% of the population 14% of the population


Provide federal catastrophic long-term care coverage for individuals who contribute –according to their ability— toward the costs of long-term care

Reward individuals who save or insure for future LTC costs by age 55 or earlier

Reshape private financing options and improve affordability through creation of federally-approved private financing options, including LTC insurance

Establish strong public outreach campaign to educate the public about the availability of the new options

Goal: Provide incentives and opportunities for individuals to protect themselves against the financial risk of LTC


Goal: Preserve and improve the safety net through modernization of government benefits and choice of care options

Replace Medicaid coverage of long-term care services for low-income elderly with federal uniform eligibility rules and benefits

Exempt low-income elderly from the private contribution requirement

Improve benefit options by adding the choice of:

» cash certificates for home and community-based services, including family caregivers, and

» assisted living facility services


Goal: Ensure that beneficiaries are cared for in the most appropriate setting and align care delivery with a single financing entity

Create comprehensive, nationwide post-acute and long-term care assessment system for determining need and benefits

Implement a new Medicare post-acute care payment system based on characteristics of the patient regardless of the post-acute care setting in which the patient receives care

Federalize existing Medicaid LTC benefits to ensure that post-acute and LTC services are appropriately aligned


New System

Federal FFS rates, managed care, cash certificates

Private insurance, LTC savings accounts, reverse mortgage

FFS unified payment system or managed care

Low-income Receive Federal BenefitMedicare

Federal CatastrophicPersonal LTC Contribution

Community/No prior PAC Use

Nursing Facility Services

Assisted Living Facility Services

In-Home/Other Residential Care and Services

Adult Day Care

Long-Term Care Hospital

Rehab Hospital

Skilled Nursing Facility

Home Health

Post-Acute Care

CareCoordinators

DeterminePlacement


Sources and Uses of Federal Funds

Sources of Federal Funds

Medicare Part A Post-Acute Care Reform

State LTC Maintenance of Effort

Replacement of Medicaid with Private Coverage

Better Management and Targeting of Public LTC Benefits

Uses of Federal Funds

Catastrophic Coverage

Federal Low-Income Benefit


Gradual Implementation Needed

Preparatory LTC Reforms

Reform LTC Insurance Market

Create LTC Financing Tools

Post-Acute Reforms

Patient Assessment Tool

Payment System Reforms

Federal LTC Benefit

Create LTC Payment System and Rules

Administer Personal Accounts

Transition Duals

2007-2012 2012-2017

Package Breadth Requires Multi-Stage Implementation


Model Summary

Reforms current system to address lack of coverage

» Grants incentives for individuals to maintain coverage

» Modernizes government benefit structure

» Creates consistency across care settings

Creates partnership between federal government and private financing

» Fosters improved, affordable private LTC financing and insurance options

» Provides public catastrophic benefits to people who plan for their own care

Creates national low-income benefit

» Includes cash certificates, managed care, and fee-for-service

» Shifts financing and administration from states to feds

long-term care financing reform: a federal and private insurance partnership model

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