Senior Issues (B) Task Force

Attachment ?

8/??/16

Draft: 7/5/16

Long-Term Care Innovation (B) Subgroup

Conference Call

June 27, 2016

The Long-Term Care Innovation (B) Subgroup of the Senior Issues (B) Task Force met via conference call June 27, 2016. The following Subgroup members participated: Teresa D. Miller, Chair (PA); Fred Andersen, Vice Chair (MN); Mary Ellen Breault (CT); Eric Johnson and Rich Robleto (FL); Dean Cameron (ID); Marti Hooper (ME); Brendan Peppard (NJ); Elizabeth Kelleher Dwyer (RI); Suzi Anderson and Melissa Klemann (SD); and Mike Bryant and Molly Nollette (WA).

Also participating were: Steve Ostlund (AL); Tyler McKinney (CA); Sally Frechette (DE); Teresa Winer (GA); Karl Knable (IN); Cindy Hermes and Mark McClaflin (KS); Laura Bryan (LA); Feng Ji (MD); Daniel Bradshaw, Shawn Parks and Bob Williams (MS); Bob Potter (NC); Nishit Goradia (ND); J.P. Sabby and Martin Swanson (NE); David Sky (NH); David Barton and Terry Seaton (NM); Annette James and Mackay Moore (NV); Laura Miller (OH); Jan Graeber (TX); Tomasz Serbinowski (UT); Elsie Andy (VA); and Mary Carlson, Susan Ezalarab and Jennifer Stegall (WI).

1. Heard presentations from Bonnie Burns, Birny Birnbaum, and Brenda Cude

Ms. Burns (California Health Advocates—CHA) began her presentation illustrating the changing dynamic of the long-term care (LTC) insurance marketplace. She said the risk pattern has changed. She pointed out that approximately half of all claims are for care at home and assisted living helps in avoiding nursing homes.

Ms. Burns also said the market has changed. In 1990 the average age of a purchaser of LTC insurance was 68; 42% of purchasers were over 70 years of age. They had median income of $27,000 and only 21% had over $50,000 in income. In 2010 the average age was 59; 8% of purchasers were over 70 years of age. They had a median income of $87,500 and 77% had over $50,000 in income.

Ms. Burns also said the demographic market has changed; baby boomers are not their parents. Baby boomers are more likely to be divorced or never married and live alone, therefore no live-in caregiver. Baby boomers have fewer children so there is less availability of potential caregivers. She said baby boomers have lower retirement income; 1 in 4 people ages 55 to 64 have no retirement savings, a median net worth of $9000, and half are still paying off a mortgage.

Ms. Burns said different products are needed. She highlighted the California Partnership for LTC, a state sponsored program that is a contract between the state, participating insurance companies and purchasers. The theory is private insurance comes first with a Medicaid backstop. Insurance payments would protect assets from spenddown. She said the trend has shown that benefits used break down to 8% for skilled nursing facilities (SNF), 24% for assisted living, and 68% for home and community care.

Ms. Burns said some options that could be examined are 1) premium subsidies for new sales based on age, income, assets and health; tied to countable assets; and possibly including home equity; 2) restrict asset protection where it is only for countable assets below a threshold and limit to those most likely to spenddown; 3) combine with premium subsidy based on home equity, income, assets, and risk of care; or 4) subsidies are paid back at estate recovery; sort of a public version of reverse mortgages.

Ms. Burns concluded that simplified benefit choices are needed. There needs to be standardized benefit packages, standardized definitions and exclusions, and a streamlined claims process. She said there needs to be utilization of built in benefits for care assessment, management, and coordination with all available public and private services, such as: transportation, meal delivery, and smart technology. She also said there must be more affordable premiums, which should not mean stripped down benefits, loss of protection against inflation, less consumer protection, increasing cost at older ages, and contracts that restrict benefits while marketing materials glorify benefits. She concluded that consumer trust must be restored, and that there must be a more efficient use of services and benefits, as well as a way to help people stay at home.

Mr. Birnbaum (Center for Economic Justice—CEJ) said there is a consumer and a government cost of LTC. If the consumer cannot afford it then the government ends up paying. He said there needs to be a way to find the most efficient method to administer LTC. Though a proponent of the private market if it is efficient, he said the private market is not a goal in of itself but rather a tool to address the future of LTC.

Mr. Birnbaum said that consumers in the 1980s and 1990s bought LTC insurance more as a health supplement and not as an insurance product. Now the market has hybrid and combination products but they are not fully understood by the consumer.

Mr. Birnbaum said consumers do not look to the future of costs. He said stagnating wages and increasing costs for daily living leave a majority without the income to buy private coverage. He said the ideas on how to deliver LTC more efficiently this Subgroup and others have proffered so far seem to emphasize privatizing profit and socializing risk.

Mr. Birnbaum said varied approaches cut across different groups of consumers and perhaps a more universal system would help. He said a public program might be a better solution than carving out catastrophic because the private market cannot handle that and to spread catastrophic claims over a larger population..

Mr. Birnbaum concluded that LTC needs to be looked at as health insurance rather than an investment and to examine combination products such as a health/LTC hybrid.

Ms. Cude (University of Georgia) began by focusing on the goal to better prepare for LTC, remembering that Americans must also finance education and/or pay down student loan debt and plan for retirement. She said to get greater numbers of Americans to prepare to finance long-term care there needs to be increased private long-term care insurance coverage in target markets and a reduction in private long-term care insurance lapse rates.

Ms. Cude said being uninsured is the “natural reference point” in a market where most are uninsured and she asked how can we change that for LTC insurance so most are insured? She said to harness the power of defaults to increase those who have some form of LTC insurance, for example, make LTC insurance an opt-out employer-based coverage – perhaps for a certain age and above and/or for a limited benefit policy. She also pointed out behavioral factors. She said that, by nature, most Americans are overly optimistic and they cannot be scared into buying LTC insurance with statistics. She said there must be a retooling and rebranding of private LTC insurance. She said that it is not nursing home insurance anymore but that maybe it should not be LTC insurance either.

Ms. Cude said consumers pay more attention to the “now” than to their futures. Therefore, she said the question is really “what can LTC insurance do for me NOW?” She said tax incentives for premiums have not worked, so some answers may be: 1) financial incentives/discounts to encourage healthy practices; 2) a small monetary return for each year consumers keep the policy; or 4) consumers entering into a lottery to win something “free” each year to keep the policy. The problem has to be framed more broadly than just preparing for LTC. She suggested perhaps combining LTC insurance with retirement and funeral planning.

Ms. Cude said most consumers think their families will care for them and coverage in LTCI for unpaid caregivers and respite care may be a solution. She said consumers also think Medicare will pay for LTC so perhaps repackaging LTC insurance as a limited-benefit Medicare “Part Y” or as a Medicaid supplemental insurance with no means testing. She also said consumers think they cannot afford LTC insurance so present coverage in a way that focuses on gains and not losses, such as $300,000 in benefits for a $2,000 annual premium. Or, she suggested offering a single premium policy with no future rate increases and there would be no lapses.

Ms. Cude spoke of perhaps combining LTC planning with existing incentives, such as 1) repurposing or broadening the purpose of 401(k) plans and individual retirement accounts (IRAs) to encourage saving for later life, including LTC; 2) allowing withdrawals from 401(k) plans and IRAs to pay for LTC and LTC insurance without early withdrawal penalties or even tax liability; 3) providing paid adult care leave (parallel to maternity leave but less restrictive than family leave); or 4) using tax incentives - for example, an adult care/life care tax credit, not just a child care tax credit on federal returns or providing tax credits for unpaid family caregivers for adults. She also said to increase the pool of qualified caregivers by allowing family caregivers to accrue Social Security benefits for unpaid family care, perhaps contingent on online training about how to be a caregiver, or recruit and train a “Compassionate Care Corps” (CCC) to be paid caregivers using government subsidies.

Ms. Cude highlighted a 2013 study where 46% of Americans 40 and older said they had received information about “ongoing living assistance” in the last 12 months. Of those who did get information, 45% received information from friends, family, or coworkers; 30% from Medicare; 27% from a financial planner or accountant; 20% from a family physician; and 10% from an employer. She concluded that there must be a rethinking of LTC. She said LTC is three components: 1) housing; 2) personal care, and 3) health care (chronic disease management). She said past decisions about LTC have been driven by housing and there must be a way to uncouple the other two components from housing.

Commissioner Miller opened the call to questions.

Mr. Andersen asked Mr. Birnbaum to elaborate on his point of privatizing profit and socializing risk.

Director Cameron asked about cost drivers of LTC treatment versus LTC financing.

Commissioner Miller asked Ms. Burns how she reconciles in her presentation that the vast majority of benefits used are home and community care benefits (much less expensive than nursing home care) and the need for affordable premiums without stripping down benefits because it seems that you only get more affordable plans if you reduce benefits.

Ms. Graeber asked Ms. Cude whether it was LTC insurance or LTC premiums she referred to when speaking of LTC planning with existing incentives.

Bonnie Burns (California Health Advocates—CHA) pointed out that Medicaid savings are only achieved if one has money to spenddown. She said Medicaid does not save any money until after every other resource is used.

Having no further business, the Long-Term Care Innovation (B) Subgroup adjourned.

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