Long-term care is quite costly, with senior housing hitting consumers hard in the pocketbook. The introduction of new insurance models, though, could mean the difference between someone’s ability to pay for assisted living and foregoing care altogether.
That’s the premise of a new study conducted by the Urban Institute and Milliman Inc. and funded by AARP, LeadingAge and The SCAN Foundation, a public charity committed to improving access to health and supportive services for older adults. Given that more than 50% of older Americans will need long-term services and support (LTSS) and about half of associated costs will be funded out of pocket, the study examines three new long-term care insurance options and simulates their costs and distributional effects in an effort to better understand how policy changes could expand the role of such insurance in the financing of LTSS.
“This goes beyond typical nursing home care,” LeadingAge President and CEO Larry Minnix tells Senior Housing News. “It’s designed to help people find the least restrictive setting that they can call home.”
The insurance options analyzed in the study include a program with a front-end benefit that begins after a 90-day waiting period and covers a maximum of two years of need; a catastrophic-only or back-end program that begins after a waiting period of two years but provides a lifetime benefit from there on out; and a comprehensive program that begins following a 90-day waiting period and provides a lifetime benefit.
Each was modeled as voluntary insurance and as a mandatory program for workers, could be operated by the government or private carriers and factored in benefits, premiums, participation and outcomes projected through 2087.
“We found no ideal solution to what has been a decades-long policy challenge,” the report’s authors write. “However, by carefully comparing alternatives to each other and the current situation, we found important differences among the new insurance programs that could help guide policy makers as they seek viable ways to finance LTSS.”
But as has been the case with new health insurance models under the Affordable Care Act, making sure long-term care insurance options are affordable could hinge on controversial mandates.
Participation in the programs was greater when they were deemed mandatory as opposed to voluntary, according to the report. This proved especially true when voluntary insurance was unsubsidized, as it became largely unaffordable for low- and moderate-income consumers, in particular.
“Access to this insurance would be especially beneficial to middle-income consumers, many of whom are unlikely to be able to afford voluntary insurance,” the authors write. “Per beneficiary expenses—which reflect affordability—tended to be lower in mandatory programs than in voluntary programs.”
Increasing accessibility to long-term care insurance across the board opens consumers to options they may not have considered previously, Minnix says.
“If people can purchase insurance for the loss of their ability to function, they can live in a housing type model, and not necessarily a nursing home,” Minnix tells SHN. “Assisted living should be very pleased with the kinds of programs that private insurance might soon offer.”
In the end, it all comes down to the motivating factors behind advocating for long-term care insurance reform, according to the study.
“Policy makers will have to choose between imperfect options that achieve quite different goals,” the authors write. “If the primary purpose is to significantly increase insurance coverage, the mandatory programs we modeled would be far more successful than the voluntary ones. If the major aim is to reduce Medicaid costs, the comprehensive and back-end mandatory programs would be most beneficial.”
Written by Kourtney Liepelt