In divisive Washington, commission punts on long-term care
CHICAGO (Reuters) - Why can't we all just get along when it comes to long-term care?
Long-term care services support the medical and non-medical needs of people with chronic illnesses. Coverage is hardly restricted to older people, but demand for long-term care services will explode as the baby boom generation ages.
The U.S. Congress upset the left when it stripped the public option for long-term care insurance out of Obamacare in last January's fiscal cliff deal. The compromise was creation of a commission charged with developing a comprehensive blueprint for financing long-term care services. But the divided Commission on Long-Term Care punted the ball. Unable to agree on a financial vision, its final report offered up two options that reflect the commissioners' ideological differences.
Left-leaning members issued a dissenting report Monday proposing expansion of Medicare to cover long-term care (LTC). The right prefers tax incentives and regulatory reforms aimed at stimulating wider use of private LTC insurance policies.
I have long favored using Medicare to insure against long-term care risk because of its mandatory participation feature. Employers and workers each pay a 1.45 percent Medicare payroll tax, which funds Part A (hospitalization). Parts B (outpatient services) and D (prescription drugs) are optional, but Part A is the largest, most efficient insurance risk pool possible which is exactly what was missing in the Affordable Care Act's now-dead public option, the Community Living Assistance Services and Supports Act (CLASS). The consensus was that the math did not work out because too few younger, healthy workers are expected to sign up voluntarily for coverage.
The alternative report envisions two possible ways to expand Medicare. In one scenario, a comprehensive benefit would be created, financed through an unspecified increase in the payroll tax, and possibly a premium for workers not eligible for Medicare.
Another idea would be to use Medicare to stimulate the private insurance market. Here, a more limited benefit would be created that covers only catastrophic-level LTC needs and that would take private insurance companies off the hook for the largest payouts, allowing them to reduce prices and sell more policies.
"This is a problem for our entire population," says Judith Stein, executive director of the Center for Medicare Advocacy and one of the dissenting commissioners. "I believe in a national community, and when we have circumstances where individuals can't plan on or avert a problem with better behavior, the national community should be a part of taking care of those people who need help."
The right wing of the commission saw Medicare expansion as just another tax hike and entitlement at a time when Social Security and Medicare already face financial challenges. "We are underwater on the entitlement programs we already have, so it's irresponsible to consider yet another program on top of all that," says Mark Warshawsky, visiting scholar at the American Enterprise Institute and vice chair of the commission.
Warshawsky and other right-leaning commissioners offer up a range of ideas aimed at stimulating the private LTC market. For example, they would create tax-advantaged ways to pay LTC policy premiums through withdrawals from 401(k) and individual retirement accounts or through a "life care annuity" policy that combines an annuity and LTC insurance. They also describe ways to loosen up regulation to allow more flexibility in LTC policy design that could bring prices down. The key idea here is to allow insurers to adjust benefits and pricing automatically with fluctuations in inflation and interest rates.
Ideas with merit, to be sure. But making private LTC insurance into a mass-market product is a tall order, given its track record as a small niche product. Data from industry research firm LIMRA suggest policies have been sold only to less than 5.0 percent of potential older buyers. Expanding that market is no less a challenge, really, than convincing a divided Washington to support Medicare expansion.
Financing aside, the commissioners did reach consensus on some good ideas. For example, they recommend eliminating the three-day hospital stay requirement that makes patients eligible for Medicare's current 100 days of skilled nursing care benefits (per illness). The problem here is that a rising number of patients have been held in hospitals on "observation status" in recent years, rather than being formally admitted, leaving them ineligible for nursing care benefits after being discharged.
The commissioners also want better support and information to people who are providing care to family members, an area of fertile ground since family members most often are the primary providers of care, for now. A report from the AARP Public Policy Institute last month forecast a drastic drop in the availability of family members to provide care in the years ahead. That means far more professional caregivers will be needed in the years ahead.
The commission report points to low wages, lack of benefits and limited advancement opportunities as problems that need to be addressed if we're going to have enough caregivers to support an aging population. The federal government addressed that issue just last week, when it announced the minimum wage and overtime protections would be extended to home care workers.( here )
Even if we cannot agree, for now, on long-term care financing, the commission's final report does include some excellent ideas worth pursuing.
Any chance Congress could just get along on this one?
For more from Mark Miller, see link.reuters.com/qyk97s
(The author is a Reuters columnist. The opinions expressed are his own.)
(Follow us @ReutersMoney or here. Editing by Lauren Young)
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