As baby boomers age over the next several decades, the demand for senior care options will increase—and there currently are limited ways for middle-income earners to pay for these services.
It’s an issue that the senior living industry is grappling with, as many leaders speak out about the need for new housing and financing models to serve this demographic. An overhaul of senior care financing is not currently in the cards, but a more incremental approach that includes new types of insurance plans could be a place to start, according to a report released Monday from the Bipartisan Policy Center (BPC) Long-Term Care Initiative.
The Initiative was formed in 2013, under the leadership of former Republican Wisconsin Governor and U.S. Health and Human Services Secretary Tommy Thompson, former Senate Majority Leaders Tom Daschle (D) and Bill Frist (R), and Dr. Alice Rivlin, who was Congressional Budget Office Director in the Clinton administration. The new report contains the group’s initial recommendations, which include a detailed proposal for more affordable private insurance to cover senior care expenses for a set number of years.
Current long-term care insurance policies are “too expensive and complex for most consumers,” and insurance companies have struggled to create stable products, the report notes.
“For example, I have private long-term care insurance, and it’s $3,600 a year for my husband and me,” BPC Director of Health Policy Katherine Hayes told Senior Housing News. “That’s a lot.”
Part of the problem is that insurers have had a hard time predicting costs over time, and the products they initially offered had unsustainable lifetime benefits, she said. But the insurance industry has proven to be better at handling the first few years of costs, and that’s what the BPC focused on in its models.
Three potential “retirement long-term care insurance” plans are outlined in the report, ranging from $100 daily maximum benefits for a two-year period to a $200 daily maximum for three years. The plans would have various deductibles and elimination periods, and all would include 20% coinsurance. The beneficiary would have discretion over how to apply his or her benefits—they could go toward assisted living, home health or other services deemed eligible.
“Many features, such as the premium design and inflation protection, would be standard among all retirement LTCI,” the report states. “Product features would include cash deductibles, coinsurance, inflation protection, a non-forfeiture benefit, and an innovative non-level premium design that would bemore sustainable for carriers and offer consumers the opportunity to benefit from lower-than-expected claims experience.”
Certain regulatory and legal barriers would have to be lifted in order for these plans to be offered. In particular, current law should be altered so that younger employees can tap into 401(k) and other retirement accounts to purchase long-term care insurance, the report proposes. Employers who offer these plans should be extended safe harbor protections to limit fiduciary liability, and the plans also should be available on state and federal exchanges.
Expanding Medicaid-reimbursed home- and community-based services and a public insurance program for catastrophic long-term care needs are among the other topics covered in the report. More specific recommendations likely will be forthcoming this year, including expanding Medicare Advantage and Medigap coverage to include long-term care.
This report and the additional work forthcoming this year reflect an emerging consensus among senior care advocates about the best approaches for financing reforms, according to Long-Term Quality Alliance Executive Director Larry Atkins, Ph.D. He moderated a panel discussion about the BPC report on Monday.
“I think there’s been a concerted effort in [Washington, D.C.] to try to bring these different pieces in place together … because the only way we’re going to advance this is start to build a large base of support on the business side, the consumer side and the practitioner side,” Atkins told SHN. “I think it’ll help getting sponsors on the Hill, for them to feel like we’re not having a big argument about how to do this, we’re all thinking about this in a similar way. Some of us may decide to tweak it one way or a different way, but hopefully we’ll have enough common ground to have a well-informed and rational policy discussion and make progress [on this issue], even though the political situation on the Hill may get in the way in other areas.”
The bipartisan nature of the new report is notable given that the Congressional Long-Term Care Commission split largely along partisan lines in 2014. Tasked with providing recommendations on long-term care financing reform, the Commission provided two separate reports on the topic, with one emphasizing private sector involvement and the other focused on the government’s role.
But the LTC Commission lacked important data on the services and supports people are receiving and the associated lifetime costs, said Atkins, who was executive director of the group. That data subsequently was compiled and released and by The Urban Institute and actuarial/consulting firm Milliman, and enabled greater consensus in this BPC report. This report is “taking it to the level,” Atkins said, but he was quick to emphasize that more data and research still is needed to support additional recommendations and refine these.
“I still think there’s a way to go,” he said.
Written by Tim Mullaney