BROKER WORLD MAGAZINE

MARK J. WARSHAWSKY PhD, is visiting adjunct scholar at the American Enterprise Institute and was vice chairman of the recent federal commission on long term care. His prior article on the subject for BROKER WORLD magazine appeared in July 2013 and was titled Questions for the New Federal Commission on LTC.

Some Answers And More Questions From The Federal Commission On LTC
T
he Commission on Long Term Care was established under Section 643 of the American Taxpayer Relief Act of 2012, signed into law January 2, 2013. The statute called for the President, as well as the majority and minority House and Senate leaders, to appoint a total of 15 commissioners. The commission was given six months from the day of the final commissioners appointment to convene, to develop a plan for organizing and financing a comprehensive, coordinated and high quality system of long term services and supports (LTSS), and to vote on a report based on the plan, including recommendations for legislative or administrative action. The final appointments of members were made by the President on March 12, but the commission was delayed for nearly three months pending Congressional action to appropriate necessary funds. With funds appropriated, on June 10 the commission elected a chairBruce Chernof, president of the Scan Foundation, a Democratic appointeeand Vice Chairmyself, a Republican appointeeand proceeded to hire staff and convene its first meeting on June 27. The commission held four public hearings with testimony from 34 witnesses. It solicited and received extensive comments from the general public. It worked through nine executive sessions to develop broad agreement on the report and recommendations. On September 12, as required by statute, commissioners voted 9 (five Republican appointees and four Democrats) in favor of and 6 (five Democrats and one Republican) opposed to putting its final report forward as the broad agreement of the commission. Throughout this process, the commission worked to identify areas of broad bipartisan agreement. The common vision and 28 recommendations presented by the commission reflect the input and areas of agreement among commissioners. Initial recommendations from commissioners that were broadly opposed were either modified for inclusion or removed. An appendix of all of these initial recommendations was, however, included in the report as a record of the proceedings and to serve as a menu of ideas for the future. Through this process, the commission produced a strong bipartisan vision of a fiscally sustainable and effective LTSS delivery system built on concepts of individual- and family-centered care, as well as a well-trained and adequately supported array of family caregivers and paid workers with a comprehensive financing approach that would balance public and private financing to insure the most catastrophic expenses, encourage savings and insurance for more immediate LTSS costs, and provide a strong safety net for those without resources. Following is a summary of the 28 recommendations that align with and would

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make progress toward the shared vision developed by the commission. In the area of service delivery, the commission seeks a more responsive, integrated, person-centered and fiscally sustainable LTSS delivery system that ensures that people can access quality services in settings they choose. To this end, the commission recommends changes that would lead to a balance of home- and community-based care and institutional care options, integrate LTSS and medical care, implement a uniform assessment tool in support of the LTSS care plan, use information technology more effectively across settings, ensure consumer and caregiver access to information, and improve LTSS quality through outcomes-focused care management. In the area of paid and unpaid care giving, the commission seeks an LTSS system that is able to support family caregivers and attract and retain a competent, adequately sized work force capable of providing high quality, individual- and family-centered services and supports to individuals across LTSS settings. To this end, the commission recommends changes that would: focus LTSS on the individual with cognitive or physical functional limitations and the family caregiver, involve family caregivers and their needs in care planning and as part of the care team, improve caregiver training, and encourage an array of interventions to support family caregivers. The commission also recommends changes to improve the paid work force, including revising scope of practice to broaden opportunities for professional and direct care workers, creating opportunities for direct care workers to advance, integrating workers into care teams, encouraging states to improve standards for home care workers, and collecting data on the LTSS work force. In the area of financing LTSS, the commission seeks a sustainable balance of public and private financing for LTSS that enables individuals with functional limitations to remain in the work force or in appropriate care settings of their

choice. Accomplished through a financing approach that (1) provides the tools and protection to enable Americans to better prepare for the financial risk of needing LTSS and (2) ensures that individuals with limited financial resources or for whom the cost of their care exceeds their financial resources have access to needed high-quality services and supports. The commission reaffirms the importance of an effectiveand improvedpublicly funded safety net. It also stresses the importance of creating viable mechanisms for insuring what is for many an insurable risk, including the need to provide catastrophic insurance for the most devastating costs in order to encourage savings and private insurance for the more immediate LTSS costs. The commission offers two different approaches for mechanisms to move toward this endone relying largely on private options and the other largely on public social insurance. The commission also recommends several changes to improve access to Medicare skilled nursing facility and home health care benefits, to provide support through Medicaid for working adults with LTSS needs, and to allow families to save through tax-favored accounts for an individuals LTSS expenses. The broad bipartisan agreement the commission achieved on a vision statement and the specific recommendations was put forward as a strong foundation for the additional work that could not be completed in the time allowed. The commission recommended follow-up on efforts to take this vision and these recommendations further. Specifically, the commission recommended the creation of a subsequent national advisory committee to continue this work and consider the commissions recommendations and potential financing frameworks as a starting point for its own assessments and recommendations. The commission also recommended convening the White House Conference on Aging in 2015 to include LTSS in partnership with the National Council on Disability. Although the commission did reach a consensus at a high level on the need for

personal savings and insurance coverage, significant government support for the lower income population, and continued roles for private and public sources of funds, it did not agree on structures or proportions. Some of that disagreement reflects fundamentally different political and philosophical views on the appropriate roles of social and personal responsibility, the relative efficiencies of the public and private sectors, the ability and capacity of the working population in the middle-income range and higher to plan ahead, and the impact of higher taxes and deficits. At least some of that divergence arises from a lack of empirical clarity on several aspects of the problem, which perhaps further time, resources, study and analysis could resolve. In particular, the commission had debates on whether Medicaid is now a program for the middle-income and even higher-income households and, if so, how and why, whether there is significant capacity of working age adults with functional limitations to participate in the labor force, and the realistic possibility to improve the functioning of the private insurance market. Focusing on the older population, some have expressed the view that Medicaid is a program just for the poor. But others see that there is significant scope of Medicaid coverage for those who were solidly in the middle-income group and above in their working years and through retirement. In part, this reflects a fuzziness on the levels and distribution of the complete incomes and assets of the elderly (including their housing and retirement assets) before functional limitations hit. How significant is spend-down? What about the current law exclusions of significant housing values, term life insurance and, in most states, retirement assets from Medicaid eligibility tests? What is the true extent of gamesmanship in Medicaid eligibility? What would additional efforts by the states bring in through estate recovery? And how much do the elderly really care about leaving bequests or having expanded care options beyond what Medicaid provides? We heard some testimonies relevant

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to these topics, but much more solid and unbiased data is needed to create more knowledge here. Such information is important to the design and administration of any public programs, including Medicaid, to the accurate measurement of the financial capacities of the older population, and to understanding their true interest in comprehensive insurance coverage for LTSS risks. In fact, the proposal by the group favoring private market solutions to create an optional Medicaid carve-out program was in part motivated by our lack of knowledge. Lets offer the option of sliding-scale subsidized comprehensive and permanent private long term care insurance, perhaps standardized and sold on exchanges, instead of Medicaid coverage with overall tightened eligibility rules, and see who and how many take it. Turning to the working age population with functional limitations, what little we heard and discussed indicated conflicting views about the extent of the capacity to return or to continue to work if significant supports were to be provided without the Medicaid requirement for impoverishment. Past experience here is not encouragingeven after improvements, the Ticket to Work experiment for disabled workers and people administered through Social Security is a failure, and data indicates current asset accumulations even below the low allowable levels for those on the Medicaid program. But the majority supported the commis sions recommendations to create a demonstration project to provide workers with disability coverage for the LTSS they need to remain employed and assist the states to achieve greater uniformity of eligibility and benefits in state Medicaid buy-in programs for LTSS. Hopefully we can learn from these projects and changes. However, even assuming that the results are positive, it is likely that the indicated changes will be costly. In my opinion, in light of the severe fiscal condition of the nation, the disability advocacy community must be willing to agree to

cuts elsewhere; my suggestion is to tighten eligibility standards in the burgeoning and nearly bankrupt Social Security Disability Insurance program. Finally, there was factual disagreement about the possibility to improve the functioning of the private long term care insurance market. We all agree that it is currently a mess, but there was lesser consensus on the whys, which, of course, leads to the prescriptions put forward. We really did not have time to consult with a range of industry experts to learn more. In my view, the problem is mainly one of inadequate demand arising from the crowd-out effect from the Medicaid program, as well as a lack of public understanding. Also the low interest rate policy of the Federal Reserve Board has been harmful to the long term care insurance industry, and the assumption of most within the industrythat there would be significant lapse activitywas clearly mistaken. At the same time, there are problems on the supply side. Those in favor of a primarily private sector solution think regulations and law should allow policies with long exclusion periods, so that savings would fill most of the coverage gap and premiums could be lowered. Also, flexible insurance policies should be allowed, fairly reflecting changing macroeconomic conditions, especially in interest and inflation rates, both on the up and down sides, not systematically advantaging policyholders or insurance companies. Several commissioners were also in favor of federal tax subsidies for the purchase of long term care insurance, and there was support expressed for partnership policies, as a device for the sharing of risk. Innovative designs such as the life care annuity, combining long term care insurance and an immediate life annuity, which would lead to lower costs and much less restrictive underwriting, should be offered within the attractive environment of qualified retirement accounts, according to the private market advocates. Finally, I believe we need serious exploration of whether a government-sponsored

catastrophic risk reinsurance program for the industry would, in fact, lead to lower priced and more widely available lifetime benefit policies. It is also worth noting that at the same time five of the six Republicans voted in favor of the commission report, all the Republican commissioners issued a letter stating that the commissions recommendations should not increase the existing budgetary commitment to health care faced by both state and federal governments. The letter said that at a time when the federal government faces postwar record levels of debt, and Medicaid costs have crowded out other priorities for states, we do not believe the commissions recommendations warrant an increase in overall spending levels. Likewise, the commission believes that raising taxes to fund additional entitlement commitments is both politically infeasible and economically unwise, given the lingering effects of the tax increases enacted in January and those included in the Patient Protection and Affordable Care Act. With continued increases in public funds being unsustainable, future generations will need to plan ahead for funding their own care. In June, the Congressional Budget Office (CBO) released a report projecting that spending on LTSS (most of which is funded by the government) would rise significantly between now and 2050. Assuming no major changes in the prevalence of functional limitations, the CBO estimated that current-law spending on LTSS as a share of gross domestic product will more than double, climbing from 1.3 percent in 2010 to 3.0 percent in 2050. Given the dire fiscal prospects of governments and the generally poor preparation of the current generation of workers for retirement (including its many risks), it really is time to design a sustainable and efficient system of care delivery, work force, and financing for LTSS that will begin to operate as soon as possible. Such a system should emphasize and encourage the private sectors capabilities and the innate capacity of most households to responsibly plan for the future.

Reprinted from BROKER WORLD December 2013 Used with permission from Insurance Publications

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