The Future and Financing of Long Term Care

Long-term care is fast becoming a vital issue for our nation to address.  We have 78 million aging baby boomers.  The costs of long-term care to these baby boomers will be catastrophic, and few people have sufficient resources to pay for needed long-term care.

In an effort to deal with this growing concern, in 2012 the Convergence Center for Policy Resolution informally launched the Long-Term Care Financing Collaborative (the “Collaborative”).  The Collaborative has since become a formalized group made up of a variety of national experts and stakeholders with varying ideological stances.  Their common goal is to improve the way Americans pay and prepare for non-medical care needed by the elderly and those living with disabilities.  On February 22, 2016, the Collaborative announced its third and final set of recommendations.

About the Collaborative

This diverse group is made up of policy experts, consumer advocates, and representatives from service providers and the insurance industry.  In addition, the group consists of senior executive branch officials in both the Democratic and Republican administrations, former congressional aides, and former top state health officials.

Growing Need for Long-Term Supports and Services

The Collaborative defines long-term supports and services (“LTSS”) as non-medical assistance.  Examples of LTSS are help with food preparation and eating, help with personal hygiene, use of assistive devices and transportation, and assistance with bathing.

The statistics surrounding LTSS needs are eye-opening.  According to the Collaborative, between 10 and 12 million adults today require LTSS, and that number is expected to double by the year 2030.  More than two-thirds of older adults will eventually need some assistance with daily activities, and nearly half of older adults will have a great enough need to qualify for private long-term care insurance or Medicaid to pay the bill.  More than 6 million older adults require that level of care today, and it is estimated that nearly 16 million will need it in 50 years.

Cost of LTSS to the Elderly or Disabled

Many elderly or disabled persons who find themselves in need of LTSS try to pay for it out of their savings or income from their retirement along with help from family members.  Often their resources are insufficient to cover the costs, and many people have to turn to Medicaid for help.  Overall spending on LTSS is expected to double by 2050, which will cause even more people to depend on Medicaid to pay for it.

Few people have saved sufficiently for LTSS.  In fact, the Collaborative reports that a typical American between the ages of 65 and 74 has financial assets of $95,000 and about $81,000 in home equity (total $176,000 in savings).  According to the Collaborative, to be 90% sure that a single person’s lifetime medical expenses are covered, that person requires savings of about $130,000 to cover essential medical services plus an additional $69,500 for LTSS costs (total $199,000 in medical and LTSS expenses).  With this in mind, it is easy to see how people are running out of money.  Our experience at Elder Law of East Tennessee is that in fact LTSS can cost a good deal more in some cases, with assisted living costs ranging from $36,000 to $54,000 annually, memory care as much as $72,000 annually, and nursing home costs at $90,000 to $108,000 annually.

Nationwide, individuals pay for about 55% of LTSS expenditures; Medicaid pays about 37%; and private LTSS insurance pays for less than 5%.

Cost of LTSS to Family and Friends

In addition to the financial stress on the elderly and disabled, paying for LTSS also significantly affects their families.  The Collaborative estimates that in 2013, family and friends provided 37 billion hours of uncompensated LTSS to adults.  This uncompensated care, valued at up to $470 billion, is worth more than three times the amount Medicaid spent on LTSS the same year.

When family members provide care to loved ones, it often comes at the cost of their jobs.  On average, the Collaborative reports, a woman in her 50s who leaves a job to care for her aging parents does so at a cost of $300,000 of income over her lifetime.  The Collaborative states that “unpaid family caregivers lose an estimated $3 trillion in lost lifetime wages and benefits.”

One approach to easing a small amount of the cost of caregiving is the Credit for Caring Act.  This bill, which would permit an employed family caregiver to claim a tax credit of $3,000 per year, was introduced in the House of Representatives in March 2016.  Family members who might benefit from this bill should contact their representative and encourage their support.

Cost of LTSS to Employers of Family and Friends

The Collaborative reports that employers experience a loss of $17.1 to $33 billion worth of productivity due to absenteeism alone.  In addition, they state that “costs of turnover and schedule adjustments for caregiving workers add an additional $17.7 billion in costs.”

The Collaborative’s Recommendations

In their final set of recommendations, the Collaborative makes proposals in four key areas.  These recommendations primarily focus on the needs to:  1) provide universal catastrophic insurance; 2) revitalize the long-term insurance market to address non-catastrophic LTSS risk; 3) better support family and community caregivers; and 4) enhance Medicaid eligibility and options to include LTSS options for more people.

Providing Universal Catastrophic Insurance.  The Collaborative calls for a strong government role in the solution.  The group considered both voluntary and universal catastrophic insurance programs and concluded that universal insurance is the only viable, long-term solution.  Unlike voluntary programs, universal insurance would distribute the risk across the entire population and avoid challenges of adverse selection.  The Collaborative noted in the report, “universal insurance appears to offer broad-based insurance at a comparatively low lifetime cost.”

Revitalizing the Long-term Insurance Market. The Collaborative also suggests many ways in which the insurance industry, employers, and policymakers could revitalize the private long-term care insurance market.  For example, employers could offer long-term care insurance as part of their opt-out benefits packages, a strategy which has worked well to increase participation in 401(k) plans.  Regulatory changes in the insurance industry to standardize policies and/or sell through an electronic marketplace would also help reduce the cost of long-term care insurance to consumers.  Long-term care insurance could even be sold in conjunction with Medicare supplemental programs.  In addition, the Collaborative suggests that policymakers should continue to encourage and support efforts by the insurance industry to experiment with more hybrid products, combining long-term care insurance with other products, such as annuities or disability insurance.  At the same time, policymakers could improve consumer confidence by working with the insurance industry to educate the public about products and strengthen consumer protections.

Improving Support for Family and Community Caregivers.  The Collaborative recommends social, workplace, and policy changes to improve support for family caregivers.  This could take a number of forms, including better integration of LTSS and medical care; increased opportunities for training of family caregivers; creation of care teams that collaborate to provide care and acknowledge the central role of family caregivers; development of a national strategy to support family caregivers; creation of “family-friendly” workplaces that are flexible enough for family members to continue working while caregiving; and elimination of regulatory barriers to family and community caregiving.  The Collaborative does not make specific recommendations as to how these suggestions might be implemented or who would be responsible for implementing such policies but states that LTSS reform should begin with initiatives providing greater support to family caregivers.

Adapting Medicaid to Better Support LTSS Needs.  Of note was a recommendation made by the Collaborative to modernize Medicaid financing and eligibility for LTSS services.  The recommendation is to expand Medicaid coverage to include more people, in more settings, for more care.  The Collaborative acknowledges that some states have expanded Medicaid waiver coverage in the last few years to cover some home and community-based services rather than requiring institutional care in order to receive Medicaid benefits.  However, individuals must still need an “institutional level of care” or be at risk of needing that level of care and meet Supplemental Security Income requirements in order to receive benefits.  In the model suggested by the Collaborative, eligibility would be based on a functional assessment rather than the “institutional level of care” model; LTSS would be covered before the applicant’s needs became so dire that he or she would qualify for residential care in a nursing facility.  The Collaborative also recommends use of a sliding scale for determining financial eligibility with income-based cost sharing.

In Tennessee, we seem to be moving in the opposite direction.  Instead of expanding home and community-based services, we are restricting those programs.  Last year, the state legislature declined to expand Medicaid to cover 250,000 uninsured in the state.  In 2012, the state implemented new acuity scoring standards to make it harder for people to qualify medically for CHOICES programs, including nursing home care and home and community-based care.  And, in 2015, the state restricted Choices Group 3 coverage to only those persons receiving Supplemental Security Income, thereby eliminating the safety net for persons who did not meet the institutional level of care model.  The very programs that would be helping the state form a safety net and reduce costs in the long term are the programs being cut.

Conclusion

The Collaborative leaves us with a final recommendation to provide more education about and pursue deeper research of LTSS.  As discussed in our November 2015 newsletter, many people are in denial about the possibility that they may one day need long-term care, and therefore they do not adequately plan for it.  While it is encouraging that this nationwide issue is being studied and taken ever more seriously, the problem is far from resolved.  We need to have a local and national conversation on the problem now and start discovering and implementing creative solutions to the problems of too much need and too little resources.

If you or someone you know has questions about how to plan for the costs of long-term care, please contact our office.  We will be happy to help you think about how to plan for the future.  You don’t have to go it alone — we’ll walk you through every step of the process.