Four former top government officials—two Democrats and two Republicans—have proposed a new plan aimed at improving the nation’s system for financing long-term care. Their package of ideas is detailed but relatively modest. However, by agreeing to a consensus plan, the officials have taken a major step in raising the profile of the critical issue of long-term care financing.
The group recommends changes in two key areas: making private long-term care insurance more attractive to middle-income buyers and improving Medicaid benefits for long-term supports and services for lower-income individuals. The former officials also say they’ll consider more ambitious ideas in a second stage of their initiative.
The plan was developed by the Bipartisan Policy Center, a Washington-based think tank that tries to develop policy solutions that cross party lines. The long-term care report was released by Democrats Tom Daschle, a former Senate Majority leader, and Alice Rivlin, former director of the Congressional Budget Office and the Office and Management and Budget; and Republicans Bill Frist, also a former Senate majority leader, and Tommy Thompson, a former Wisconsin Governor and U.S. Secretary of Health and Human Services.
At today’s roll-out, Rivlin said long-term care “will always be a shared responsibility among families, states, and the federal government.” The group’s proposal, she said, would create “a set of doable practical changes that could help improve services for frail seniors…without much cost.”
Here is a quick look at each element of their plan:
Improving private LTC insurance: The group proposes a new product called retirement long-term care insurance that would offer a limited but more affordable benefit. These policies may provide a modest daily benefit for, say, two or three years, but not kick-in until after the policyholder has paid a deductible of perhaps $25,000 or waited a year after triggering benefits.
The group also proposed standardizing benefits, selling insurance on electronic exchanges, and allowing carriers to regularly raise premiums every three years instead of the level premium model now common. It suggested incentives to encourage employers to offer such an insurance product as an opt-out benefit as part of an employee benefit plan. In this design, workers would be automatically enrolled unless they choose to decline coverage. Another proposal: Consumers age 45 and older could pay premiums out of retirement funds without paying penalties, although buyers still would owe taxes on their withdrawals.
Medicaid: The plan would make it easier for states to offer home and community based care under Medicaid. This would accelerate the shift of Medicaid long-term care services from nursing homes to the community. The BPC plan would also allow younger people with disabilities to buy in to Medicaid long-term services and supports, even if their incomes exceed current eligibility levels. This would allow these people to keep important Medicaid LTSS benefits without falling off the eligibility cliff once their income exceeds a fixed level.
The group also promised a second phase, where it would consider some form of public catastrophic insurance program as well as the potential of including a long-term care benefit in managed care insurance.
Could the private insurance reforms BPC proposed will substantially increase the market for this product? While BPC did not estimate premiums for its retirement insurance product, it is unlikely that they’d be attractive enough to generate big increases in sales. The idea might modestly increase take-up, and that’s a good thing. But I don’t think it would do very much to solve the LTC financing problem.
Even the authors of the proposal acknowledge that today’s proposal is just a first step. At BPC’s rollout this afternoon, Thompson said, “We’ve got some good recommendations, but it not the complete thing.” He said his group would try to “come up with more complete…answers.”
The BPC report is the first of at least three sets of high-profile financing recommendations that will be released over the next few months. In late February, the Long-Term Care Financing Collaborative, a group I am involved in, will release its proposals. LeadingAge, a group representing non-profit service providers, is also expected to issue its report. Stay tuned.
