Long Term Care problems won’t just go away

Busy week and little time to blog, but a quick note on this Kaiser story reporting on a SCAN Foundation poll on long term care needs/perceptions/preparations in California, sent my way by Brad Flansbaum. The article nicely summarizes the surprise many families receive when it comes time for a loved one to need LTC:

Long-term care costs can surprise many families who expect Medicare to cover their needs. After a hospital stay, Medicare will pay for 100 days of nursing home care, but after that, families are on their own or are forced to spend down their assets to become poor enough to qualify for Medicaid.

Only 35% of Californians correctly understood that Medicare does not pay for extended nursing home care and only 1 in 5 understood the Medicare home health benefit (they think it is more generous than it is). So, Medicaid is the default nursing home payer in the U.S. and the program pays around half of the nation’s nursing home bill. Block granting Medicaid in a way that reduces fairly Federal costs for the program will pit LTC services for the elderly and disabled against the need for acute care insurance for children and pregnant women, and say to states “tag; you’re it!”.

We desperately need a more coherent LTC policy in this country. Private LTC insurance offers no hope of a population based answer. Families are left to stand in the breach, doing the best they can. As I have said before, one of the worst outcomes of the ACA debate was the demise of CLASS in a way that treated those provisions only through the lens of deficit reduction. Deficit accounting is important, but cannot answer all important policy questions.

CLASS wasn’t a deficit gimmick, it was an attempt to set up a self sustaining LTC insurance benefit that could have helped people age in their homes and delay NH admission. Like so much of health reform, critics know far more about what they are against than what they are for.

The question remains: how will our country insure against the need for LTC?

cross posted at freeforall.

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

12 thoughts on “Long Term Care problems won’t just go away”

  1. And don’t get treated for depression, ever. LTC insurance companies won’t pick you up if you’ve ever been treated.

  2. I didn’t follow this part of your linked piece: “This would leave CLASS covering that part of the market with the largest moral hazard (you use more if it is paid for by insurance), with the private market covering the part with the least (I don’t know anyone who wants to live in a nursing home).”

    Are you saying that private insurers would start offering more LTC options, and that people taking them would be less likely to use them when they didn’t really need them? I don’t get it.

    Also, why link it only to employment? Wasn’t that the mistake we made before?

    On your larger point though, something like this makes a ton of sense. As you said, no one wants to have to go to a nursing home.

    1. The issue is that if CLASS covers the “desireable” LTC (home care), private LTC will be able to (as they would prefer) sell only nursing home insurance. This will have the effect of shifting costs from the private system to the public system.

      1. Oh, thanks! I thought he was talking about the people. I’m not sure I’d ever heard “moral hazard” applied to a corp, but of course it fits.

        But won’t most people want both? At some point, can you really stay home? Wouldn’t that mean lots of equipment? Seems like bifurcating it might not work. I can’t see people buying *three* kinds of health insurance. Something’s got to give.

    2. NCG
      The benefit level of CLASS (~$40-$75/day) is not enough to finance a NH stay (range from ~$150-$350+/day). CLASS benefits are best understood as age-on-place benefits that would give families more flexibility and might prevent NH admissions. My main point is that moral hazard would be a problem with this type of insurance, so the worries about adverse selection in how CLASS was written are real and I think the decision by HHS to not go ahead is correct on the merits….some type of underwriting needed, esp at first.

      Employment link mostly used as a way to get some sort of subtle underwriting since goal is setting up self sustaining LTC plan where none exists….CLASS was not designed to help those already disabled. But, work requirement very low, so adverse selection would remain a problem. A better option might be simple underwriting and de link from employment conceptually, but other benefit of employment is ability to ‘nudge’ people via auto enroll mechanisms that would have been allowed, but would not have been required.

      Lots of policy work to do in LTC….

  3. The last sentence of this article points out, to some extent, why we’re in this financial mess. Why is it a “gimmick” to want to be financially responsible? We, as a country, cannot keep spending money we don’t have. People need to educate themselves as to what is available and plan accordingly. The following can be one step in that process:

    There’s a new type of long-term care policy that can protect your assets from Medicaid even after the policy runs out of benefits. These government-approved policies are like a traditional long-term care policy with additional consumer protection features.

    The Long-Term Care Partnership programs provide dollar-for-dollar asset protection. Each dollar that your partnership policy pays out in benefits entitles you to keep a dollar of your assets if you ever need to apply for Medicaid services.

    Here’s an explanation of how these policies work:

    http://bit.ly/How-Partnership-Policies-Protect-Assets

    1. This constant repetition of “can’t spend money we don’t have” (with the false subtext that saying this somehow makes the speaker “fiscally responsible”) as a reason to screw people out of services and care is just foolish and mean-spirited–not to mention without basis in our financially driven economy.

      I’m spending money I don’t have this weekend to buy a new car (gotta get that consumer spending up to improve the economy!).

      The government is always spending money it doesn’t have–just ask GW Bush about how he ran up the deficit after Clinton started clearing it away.

      The reality is almost no one can afford the cost of long-term care if it goes on for a really long time, no matter what insurance they buy. This is going to end up a social responsibility.

      What we really need is not useless sermons about soi-disant (I do love that phrase) fiscal responsibility and some useful programs that will help to keep folks going in old age in their local community with support where needed. Lots cheaper than institutionalizing them in nursing facilities.

      I recently visited a village in France where a friend’s ninety year old Uncle was living. He had grown-up in the region and now had a small apartment in a retirement development in the center of the village. It was built above an elementary school and child day care center. The elderly tenants could eat breakfast and lunch with the kids if they wanted to and it was great to watch the interaction. It was also interesting to hear the kids ask the Uncle about his experiences in the Second World War when, as a prisoner of war he walked from Russia back to France. Talk about a living history lesson.

      Where is my French style development for when I and everyone else who gets elderly needs it.

      1. A key in all policy conversations if what is the counterfactual? In LTC, it is not lets spend alot or spend nothing. We spend tons now, just much of it is via informal care with tremendous burden and health effects to family caregivers, distributed based on serendipity often (one persons mother dies of a stroke acutely, the other’s needs 5 years of intensive care, etc.). The Medicaid share of NH care is in the open, but the informal LTC costs are double or triple with even conservative estimates. this ungated paper has a bit more http://www.ncmedicaljournal.com/wp-content/uploads/NCMJ/jan-feb-05/Taylor.pdf

    2. Partnership models whereby if you buy X coverage you will get 2x protection from Medicaid spend down are ways to incentivize purchase, as are tax credits that we have had for years. I don’t think it is enough. We need some sort of forced risk pooling. Also, for many seniors, protection of assets is not a motivation because their wealth is so low already. But, these types of policies along with combi policies (a death benefit with no LTC use that can be spend for LTC) are options that do exist for those interested in LTC cover (my finanical planner dad says the premium delta on combi policies is not worth it, but he is not really an insurance believer in the first place, but I always point out to him that his high wealth clients are very rare probabilitistically speaking.

      private insurance cannot provide a population based LTC solution. This post notes 6 main reasons people don’t buy LTC insurance and many of these choices are rational http://donaldhtaylorjr.wordpress.com/2011/07/20/what-is-the-best-way-to-insure-long-term-care/

  4. From your linked article:

    If ever there were a risk that called out for social insurance (broad spreading of premium in return for broad coverage) it is LTC. The policy answer is risk pooling and the private market has failed to do it.

    Of course this is true. Just as it’s true of other types of health care, for similar reasons. The problem is not so much one of designing the policy as it is one of politics and persuasion. That, of course, means it’s much harder.

    1. I think this is even more true the risk distribution for LTC. In acute care, the premium this month can probabilistically cover the cost next month, but with LTC, the expected value calculation for a 45 year old LTC costs is an incredibly complicated set of joint probabilities and potential costs. When underwritten individually and with ~10% max buying, the adverse selection problem is immense….private LTC insurance is in the process of going away

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