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Avalere Health LLC | The intersection of business strategy and public policy
Long-Term Care Financing Reform: A Federal and Private Insurance Partnership Model
Dan MendelsonJanuary 15, 2008
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American Consumers are Largely Unprotected Against the Costs of Long Term Care
Few people are insured against the risk of long-term care costs
» 90% of people over age 55 have no long-term care insurance coverage despite the risk of annual costs exceeding $70,000
Few Have Adequate Assets
» Two-thirds of elderly couldn’t cover more than one year of nursing home care
Medicare doesn’t cover long-term care
Medicaid requires impoverishment for coverage
» Coverage only after the exhaustion of personal resources, limited home care coverage for the elderly and no coverage for assisted living services
Family caregivers fill in the gap at high cost to their own well-being
» There are 50 million family caregivers in the U.S.
» Caregivers are 2 to 6 times as likely to develop depression / anxiety
Sources:, AHIP Center for Policy and Research, “Long-Term Care Insurance Partnerships: New Choices for Consumers – Potential Savings for Federal and State Governments,” January 2007. National Family Caregivers Association and Caregiving in the U.S., National Alliance for Caregiving and AARP, 2004 Long-Term Services and Supports: The Future Role and Challenges for Medicaid, Judith Kasper for the Kaiser Commission on Medicaid and the Uninsured, September 2007
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Few people are insured against the risk of long-term care costs
Private Long-Term Care Insurance Coverage, 10%
No Insurance Coverage, 90%
Population Over Age 55
Source: AHIP Center for Policy and Research, “Long-Term Care Insurance Partnerships: New Choices for Consumers – Potential Savings for Federal and State Governments,” January 2007.
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Few Have Adequate Assets
3+ Years Nursing Facility Cost, 19%
1-3 Years Nursing Facility Cost, 16%
<1 Year Nursing Facility Cost, 65%
Distribution of Elderly Living in the Community by Level of Assets, 2005
Source: Long-Term Services and Supports: The Future Role and Challenges for Medicaid, Judith Kasper for the Kaiser Commission on Medicaid and the Uninsured, September 2007. Uses $70,000 as the nursing home annual cost.
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Family caregivers fill in the gap at high cost to their own well-being
48%
23%
8%
17%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
8 hours or less
9-20 hours
21-39 hours
40+ hours
Hours of Care Per Week Provided by Caregiver Survey Respondents
Source: Caregiving in the U.S., National Alliance for Caregiving and AARP, 2004
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Government agencies are under budget pressure as the primary payers of long-term care
Medicaid and Medicare together pay nearly 70% of post-acute and long-term care costs
Medicare Hospital Insurance Trust Fund will be exhausted in 2019
Long-term care accounts for more than 35% of state Medicaid budgets
Individuals using both Medicare and Medicaid are especially a challenge
Sources: Avalere Health Analysis of CMS National Health Expenditure Data, Medicare Trustees Report; Medicaid Expenditures for Long-Term Care Services: 1992-3004 by Brian Burwell, Kate Sredl and Steve Eiken
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Medicaid and Medicare together pay nearly 70% of the nation’s post-acute and long-term care costs
Medicare, 19%
Private Insurance, 7%
Out-of-Pocket, 19%
Other Private, 3%
Other Public, 3%
Medicaid, 49%
Source: Avalere Health analysis based on: Medicare, private and non-CMS public expenditures for free-standing nursing home and home health care reported by Centers for Medicare and Medicaid Services (CMS), National Health Expenditures by Type of Service and Source of Funds for 2004, and Medicaid Expenditures for Long-Term Care Services: 1992-3004 by Brian Burwell, Kate Sredl and Steve Eiken, www.hcbs.org. Figure includes Medicaid spending on ICF/MR.
2004 Nursing Home and Home Care Spending: $185.3 billion
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Individuals using both Medicare and Medicaid are among the costliest to these programs
Sources: MedPAC Data Book 2006: Section 3, Dual Eligible Beneficiaries, June 2006; John Holahan and Arunabh Ghosh, “Dual Eligibles: Medicaid Enrollment and Spending for Medicare Beneficiaries in 2003, for the Kaiser Commission on Medicaid and the Uninsured, July 2005.
Medicare Spending, 2003
Non Dual Eligible76%
Dual Eligible24%
Medicaid Spending, 2003
Non Dual Eligible60%
Dual Eligible40%
16% of the population 14% of the population
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Provide federal catastrophic long-term care coverage for individuals who contribute –according to their ability— toward the costs of long-term care
Reward individuals who save or insure for future LTC costs by age 55 or earlier
Reshape private financing options and improve affordability through creation of federally-approved private financing options, including LTC insurance
Establish strong public outreach campaign to educate the public about the availability of the new options
Goal: Provide incentives and opportunities for individuals to protect themselves against the financial risk of LTC
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Goal: Preserve and improve the safety net through modernization of government benefits and choice of care options
Replace Medicaid coverage of long-term care services for low-income elderly with federal uniform eligibility rules and benefits
Exempt low-income elderly from the private contribution requirement
Improve benefit options by adding the choice of:
» cash certificates for home and community-based services, including family caregivers, and
» assisted living facility services
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Goal: Ensure that beneficiaries are cared for in the most appropriate setting and align care delivery with a single financing entity
Create comprehensive, nationwide post-acute and long-term care assessment system for determining need and benefits
Implement a new Medicare post-acute care payment system based on characteristics of the patient regardless of the post-acute care setting in which the patient receives care
Federalize existing Medicaid LTC benefits to ensure that post-acute and LTC services are appropriately aligned
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New System
Federal FFS rates, managed care, cash certificates
Private insurance, LTC savings accounts, reverse mortgage
FFS unified payment system or managed care
Low-income Receive Federal BenefitMedicare
Federal CatastrophicPersonal LTC Contribution
Community/No prior PAC Use
Nursing Facility Services
Assisted Living Facility Services
In-Home/Other Residential Care and Services
Adult Day Care
Long-Term Care Hospital
Rehab Hospital
Skilled Nursing Facility
Home Health
Post-Acute Care
CareCoordinators
DeterminePlacement
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Sources and Uses of Federal Funds
Sources of Federal Funds
Medicare Part A Post-Acute Care Reform
State LTC Maintenance of Effort
Replacement of Medicaid with Private Coverage
Better Management and Targeting of Public LTC Benefits
Uses of Federal Funds
Catastrophic Coverage
Federal Low-Income Benefit
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Gradual Implementation Needed
Preparatory LTC Reforms
Reform LTC Insurance Market
Create LTC Financing Tools
Post-Acute Reforms
Patient Assessment Tool
Payment System Reforms
Federal LTC Benefit
Create LTC Payment System and Rules
Administer Personal Accounts
Transition Duals
2007-2012 2012-2017
Package Breadth Requires Multi-Stage Implementation
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Model Summary
Reforms current system to address lack of coverage
» Grants incentives for individuals to maintain coverage
» Modernizes government benefit structure
» Creates consistency across care settings
Creates partnership between federal government and private financing
» Fosters improved, affordable private LTC financing and insurance options
» Provides public catastrophic benefits to people who plan for their own care
Creates national low-income benefit
» Includes cash certificates, managed care, and fee-for-service
» Shifts financing and administration from states to feds