Bipartisan group calls for universal long-term care insurance plans

The long-term care costs for our aging population are growing so fast and can be so financially overwhelming for families that the United States needs a universal catastrophic insurance program similar to Medicare, a bipartisan policy group announced Monday.

The Long Term Care Financing Collaborative, which includes former state Medicaid directors, and members from the Brookings Institution, and the trade group America's Health Insurance Plans, is the third recent policy group to cite universal long-term care insurance as a possible solution — and the one that goes the farthest in recommending it.

"The only thing that's left is a universal program," says Urban Institute senior fellow Howard Gleckman, who was one of the collaborative's founders in 2012. "It's not possible to create a realistic model for a voluntary program."

Gleckman says voluntary programs lead to the type of "adverse selection" some say is affecting costs of plans purchased on the Affordable Care Act exchanges. If there aren't healthier people balancing out the sicker patients with higher needs, premiums become too expensive for many people to buy.

The collaborative's new report also calls for major changes to Medicaid to protect both people with limited lifetime incomes and those who deplete their assets while paying medical bills and for long-term care.

Earlier this month, the Bipartisan Policy Center  issued its recommendations for less sweeping changes to combat long-term care cost issues.  These were endorsed by former Senate majority leader Tom Daschle, former Congressional Budget Office director Alice Rivlin, and former Department of Health and Human Services secretary Tommy Thompson.

These recommendations include linking long-term care insurance to retirement benefits; limited long-term care benefits through Medigap and Medicare Advantage, a Medicare respite benefit for unpaid caregivers; and tax credits for paid long-term services.

LeadingAge, an association of 6,000 not-for-profit organizations that represent those who provider long-term services, has said a universal long-term care program has the greatest potential for addressing the costs of long-term care.

About half of all senior citizens will need about two years’ worth of intensive personal care before they die, which will cost an average of $140,000. For 15% of these people, the cost will top $250,000.

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Up to 30% of Medicaid funding covers long-term care, totaling about $100 billion a year. And something that would be particularly attractive to many Republican members of Congress, the new recommendations call for Medicaid reforms that remove what Gleckman calls the "enormous disincentive to work." When disabled younger people on Medicaid earn more than about $800 a month, they lose their Medicaid benefits, which they really need for their health needs.

"For most people, it’s just a terrible arrangement," Gleckman says.

Other than setting up a new mandatory federal insurance program to fund long-term care, the other major changes proposed by the collaborative include assistance to those who want to use their home equity to finish long-term care, changes to help people continue getting Medicaid even as their earnings increase and better coverage for at-home care.

Mary Kaump, who has been dealing with her 97-year-old mother-in-law's finances for the past several years, was particularly interested in the emphasis on keeping people in their homes and home equity. Kaump estimates she and her husband have spent about $100,000 of their own money and $300,000 of her mother in law Janis' over the last four years to care for her at home and in facilities.

Now, Mary Kaump is also grappling with her own mother's care.

"There are very few options for those with a lot of equity in their homes," says Kaump, a former emergency room nurse whose husband Randy is a doctor in New Haven, Conn. "I have been researching options for my 85-year-old mother, who happens to have a large amount of equity in her home but not a lot of savings for long-term care.  Her only option is a reverse mortgage, but this is very costly."

Many people, including those who were "solidly middle-income until they faced long-term chronic illness or injury" wind up on Medicaid, the collaborative's report notes. And that leaves state governments, which pay for Medicaid along with the federal government, "scrambling to meet Medicaid’s expanding costs and address the policy implications of its huge share of state budgets."

Private long-term care insurance plans used to cover a person's lifetime, which was then lowered to 10 years, and now it's rare to find plans that cover periods longer than five years, says Gleckman. Besides, they've also become so costly that many people resist buying the policies unless they are near certain they will need them.

David Isenstadt, an insurance broker with New England Insurance Group in Guilford, Conn., says he used to sell long-term care insurance quite a bit in the 1990s, when there were a lot of companies selling it and plans were affordable even for people in their late sixties.

"The premiums for the remaining carriers have increased so significantly, that the traditional products are for the most part unaffordable for the average person," says Isenstadt. "People would have to buy this type of policy at a much younger age now so it was affordable, but people under age 50, generally think they are too young, and don’t have a lot of interest in this topic."

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While there's often political resistance to anything that costs more money, existing regulations governing elder care payment can often lead to higher costs.

Kaump says she and her sister hoped to keep her mother at home after recent shoulder surgery, just as she wanted help caring for her mother in law before she went into a nursing home.

Even though Medicare would have paid for a much costlier stay in a rehabilitation facility, at-home care for two hours a day was denied, she says.

"It just doesn't make sense, but there is no continuity of care at the local level," says Kaump.

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