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Creating Realistic Long-Term Care Solutions As Part Of The Entitlement Reform Debate



January 23rd, 2013
by Bruce Chernof

Great struggles sometimes result in unexpected opportunities.  In the waning moments of 2012, Congress remained in session to bridge partisan divides to solve the fiscal cliff impasse with the passage of the American Taxpayer Relief Act (ATRA).  Signing the ATRA into law also achieved policy change on items far beyond the tax code.

For example, the new law repealed the Community Living Assistance Services and Support (CLASS) provision in the Affordable Care Act, which would have created a new, national, voluntary, long-term care insurance product.  Yet the problem of how to best finance and deliver care for our vulnerable loved ones has been looming for years and endures.  As a much-needed acknowledgment of this, the Congress created a new Commission to propose policy solutions to address the long-term care challenges that a growing number of Americans face.

Given the sheer magnitude of this issue, the current political climate, and the short time span for turning around a meaningful legislative proposal (six months), the Commission’s charge is nothing short of colossal.  However, its creation in the wake of the CLASS repeal is an important step towards system transformation that will enable Americans to age with dignity, independence, and choice.  The Commission will consist of 15 appointees, nine Democrats and six Republicans, to be named in the next month, who will report back to Congress by the summer.  They must devise a plan on the financing and delivery of a comprehensive and coordinated system that ensures available long-term services and supports for people in need today, and options for Americans to plan for their future needs.

Public policy has moved little to address the long-term care needs of Americans since the 1965 passage of Medicare (a well-funded acute health care program), Medicaid (a modestly funded medical assistance program), and the Older Americans Act (a poorly funded supportive services program).  While all of these programs were part of a conceptual vision to care for those most in need, the differential funding levels and prioritization have contributed to the challenges we face in long-term care financing and delivery today.

The last comprehensive Congressional analysis of our long-term care system was through the Pepper Commission in 1990.  Over the past 50 years, the demographic landscape of the country has shifted dramatically.  Life expectancy has increased from 69 to 78 years, making older adults the fastest-growing age group, and 70 percent of seniors will require some daily support for three years on average.  Today, nine million Americans over the age of 65 need long-term care.  This number will jump to 12 million in seven years, and by 2050 approximately 27 million people will likely need services and supports.

The Need For Action

This projected demand threatens the solvency of both the health care and long-term care systems in their current form.  It is time to rationalize the financing and delivery of services to meet the needs of today’s aging population who will live longer and with more functional limitations, but who want to spend these years living to their fullest without being treated like patients.

Americans seeking to plan for their future care needs as they age have few viable options.  The current private long-term care insurance market is effectively broken, given that it has never held more than 10 percent of the potential market and many insurers have stopped offering these policies altogether.  The reasons for poor uptake are many, including limited public understanding of their projected future needs, complex product offerings, high monthly premiums, and underwriting standards that make it difficult to qualify for coverage.  Failure to address these convergent forces has huge consequences.  Once individuals find themselves in need of care and have spent out their personal resources to maintain a dignified way of life, Medicaid becomes the payer of last resort, leaving people to rely on it for the rest of their lives.

The 2013 Commission is a long overdue step towards bringing the long-term care needs of Americans to the forefront of public policy debate, and will do so as the nation’s entitlement reform discussion takes center stage.  While some policymakers want to keep entitlement reform and long-term care financing reform separate for a variety of reasons, the issues and their impact on government spending are inextricably linked.  Data from The SCAN Foundation-funded work and other leaders in the field show that Medicare’s highest expenditures are among those with multiple chronic conditions and functional impairment.  If the premise of entitlement reform means a restructuring and overall decreased spending of Medicare dollars, then the medical care and supportive service needs of this group must be comprehensively addressed.

Right now, this population relies on three interdependent mechanisms to have their needs met.  First is increased utilization of Medicare’s acute and post-acute systems to episodically manage chronic conditions and long-term care needs.  Second, and usually in concert with the first, is utilization and potential exhaustion of one’s own financial and familial support resources to address total needs.  Third is the tapping of Medicaid upon exhaustion of one’s personal resources.  At this point, costs for care shared between states and the federal government soar, which reduces the government’s ability to extract true savings in Medicaid, and exacerbates the nefarious cost-shifting incentives presently occurring between Medicare and Medicaid.  Without a widely available and affordable option for individuals with chronic conditions and functional impairment to manage future long-term care risk and hence mitigate Medicaid’s exposure, high government expenditures for this population in both Medicare and Medicaid will remain.

Members from both political parties increasingly understand the challenges and are signaling a desire to address the indisputable long-term care void confronting Americans of all ages.  This reality was most apparent when Senator Corker (R-TN), a former State of Tennessee Finance Commissioner responsible for Medicaid, warned in a March 2012 Senate Special Committee on Aging hearing that long-term care financing is “a major train wreck” and “heading for a national crisis.”  As the ranking Republican on the Committee, Sen. Corker stated that he was very worried about the viability of private long-term care insurance and added, “There is no doubt there is a public sector role” in the future of financing long-term care supports and services.  Democrats also assert these same worries and agree that the public sector has a role, but clearly there is no consensus on the size and scope of that role in these politically challenging times.  This is the challenge and the opportunity for the new Commission to embrace.

The Path Forward

A solid place for the Commission to start is to define the one-to-two top policy goals for developing a national and rational long-term care financing strategy, and then quickly wrestle with the pros and cons of the core policy parameters and their potential configurations to carry it out.  Building on a large body of work from many sources, The SCAN Foundation has commissioned a series of papers to be released this spring, which we hope will serve as a fresh springboard for this critical dialogue.  Regardless of the specific pathways and policy options chosen, there must be approaches for working Americans to address their future long-term care needs in order to decrease the mounting pressures on individuals and families, Medicaid, and to a lesser degree Medicare.  Whether the ultimate solutions lie in the private sector, public sector, or through a hybrid approach, national public policy must drive the solution set that creates reasonable guardrails for these tools and their associated markets to thrive.

The right next step is to focus on delivery system reforms that move beyond managing the usual list of chronic diseases toward solutions that fully address the interaction between serious chronic illness and functional status.  Individuals with serious chronic illness (such as heart disease, chronic obstructive pulmonary disease, and cancer) and functional limitations (needing help with activities like bathing, eating, and meal preparation) who lack appropriate support often end up in emergency rooms and hospitals, receiving potentially avoidable services that are the most expensive and least person-centered.  The right delivery system that improves quality and cost outcomes is actually the one that most vulnerable people want:  health care coordinated in a way that allows people to stay out of institutions and to receive supportive care in the place they call home.

Why should we now address long-term care, you ask, since this issue has been endlessly dissected by technocrats while generally ignored by most policymakers?  The answer is twofold.  First, because in practical terms, there is no meaningful way to fundamentally bend this country’s health care cost curve (currently at 18 percent of gross domestic product) respective to Medicare and Medicaid expenditures without dealing directly with long-term care needs that nearly all Americans will face one way or another.  Second – and in human terms more relevant — solving this problem is really about aging with dignity, independence, and choice, which all Americans want regardless of party affiliation.  Policymakers who embrace the long-term care challenge and the charge of the new Commission as an opportunity will be rewarded for seeking to rationalize and humanize our current long-term care pseudo-system, which right now is excessively unresponsive and expensive.

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