LTC Bullet: Would New LTC Proposal Save $35 Billion?

Wednesday, April 29, 2009

Albuquerque, New Mexico--

LTC Comment: Health industry consultant Avalere has "scored" LTC provider proposal at $35 billion savings per decade. Details and queries after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a Master General Agent who serves LTCi producers nationwide. Claude is the lead author of the Towers Perrin Broker World Individual and Group LTCi Surveys. He helps you build whichever market suits you best (individuals, executive carve-out, work-site, affinity, financial institutions, referrals from other professionals, etc.). Claude has been active in the State Partnership movement and campaigns for independent review of LTCi claims. Test Claude by calling 800-999-3026, x2241 to ask questions or get references or email ***

*** LTC-TV: Check out these two new LTC-TV episodes on the Center for Long-Term Care Reform's LTC Consciousness Tour YouTube channel. "No Snow Job" and "Stop Digging." We had some fun with these episodes and you'll find more humorous vignettes on LTC-TV, but you'll also find many interesting and educational interviews with experts on various aspects of long-term care financing. Check out all 38 episodes at ***

*** STEVE MOSES will speak in Miami on May 1. Details here. Special thanks to Miami Regional Representative George Braddock for organizing this event. Steve will also present in Orlando on May 6 and Tampa on May 7. Details here. Special thanks to Gold Sponsor State Life/OneAmerica, VP Bruce Moon, and local organizer Elaine Marvin, who will also be presenting, for organizing these events. ***

*** THREE MORE forthcoming programs you should consider attending if mastery of long-term care insurance is one of your educational goals:

*** Join Phillip Sullivan as presents the LTCi Café Power Lunch Webinar "Systematic Blueprint for Overcoming Objections," May 6, 2009, 1:00 pm EST. Details and registration here. ***

*** Phyllis Shelton's ONLY 2009 Training Event--LTCI Sales Skills Seminar--May 20-21, 2009 -- Nashville, TN: Check out all the details and register here. ***

*** Jesse Slome announces "Two Great LTCi Summits in One"-- The "Long-Term Care Partnership Summit" and the "AALTCI Producers' Summit" together in one place--Kansas City--on November 14-16, 2009. Details and registration here. ***



LTC Comment: Kudos to the American Health Care Association (AHCA), the National Center for Assisted Living (NCAL) and the Alliance for Quality Nursing Home Care (the Alliance). Their LTC financing plan is the best one offered for national scrutiny so far. But will it work?

Read health consultant Avalere's analysis and "score" of the LTC providers' proposal and see what you think. The "Executive Summary" follows. You can read the full report here. Rejoin me below for some queries and discussion.


Executive Summary

The United States spent about $230 billion in 2006 on a long-term care (LTC) system that inadequately protects today's elderly population from the financial devastation of a long-term disabling condition such as Alzheimer's disease or stroke. Private insurance covered only about 7 percent of this amount and private long-term care insurance an even smaller percentage.

To address the inadequacies of the current financing system, the American Health Care Association (AHCA), the National Center for Assisted Living (NCAL), and the Alliance for Quality Nursing Home Care (the Alliance) have developed a proposal that would reform the financing of both LTC and Medicare post-acute care (PAC) benefits. The proposal would create a new federal program that covers catastrophic LTC costs for the elderly, increases the amount of private funding used to pay for LTC, and bases PAC payments on individual service needs, not the location of where the services occur. The proposal would take effect in 2012.

AHCA, NCAL, and the Alliance engaged Avalere Health to estimate the federal budgetary impact (or "score") of this proposal. The following summarizes our key findings, the key elements of the proposal, and the methodology and assumptions we used to score the plan.

Key Finding

Avalere Health has analyzed the LTC and PAC components of this proposal and estimated that together they would reduce federal spending by $35 billion during the program's first 10 years (2012-2021). We also estimated that the net savings from the beginning of the program through the end of the current 10-year budget window - federal fiscal years 2012 through 2019 - would be $25 billion.

The AHCA/NCAL/Alliance Proposal

The AHCA/NCAL/Alliance proposal would create a new federal program to cover a wide variety of LTC services (e.g., home care, assisted living services, nursing home care) for the elderly. The following are highlights of the proposal.

o Creates a voluntary federal catastrophic LTC program. The new federal program would replace existing Medicaid coverage of LTC services for the elderly. The new program would cover home- and community-based services as well as care in an assisted living facility or nursing home.

o Increases the amount of private funding used for LTC services. The new federal program would require individuals to spend a certain amount of private funds, known as a personal responsibility amount (PRA), before receiving federally funded benefits. The PRA would vary based on an individual's earning history and assets, and possibly funded through a number of various qualified approaches. Low-income individuals (defined as those with incomes below 150 percent of the federal poverty level) would not have a PRA.

o Provides access for individuals without a PRA to federally funded benefits following spend down of assets. Individuals who do not fund a PRA, as well as low income individuals, would receive federally funded benefits only after spending nearly all of their personal assets, including any home equity that exceeds $50,000 in value, on LTC services. After spending down their assets, individuals not considered low income would also have to contribute most of their income toward the cost of their care; much like Medicaid does now with nursing home care.

o Pays Medicare PAC according to patient need. The proposal would also require the Centers for Medicare & Medicaid Services (CMS) to develop a new prospective payment system for all Medicare PAC services. The new payment system would base payments on each beneficiary's condition and service needs and not on the service setting. Those service needs would be determined using a new patient assessment tool that accounts for a range of factors, including acuity of needs, resource use, diagnoses, comorbidities, and age. CMS would also be required to develop patient and facility criteria to ensure that, under a site-neutral payment system, service providers have the capability to care for patients based on need.


LTC Comment: OK, here's the plan in a nutshell: (1) Replace Medicaid LTC with a voluntary federal program that covers home care and skilled nursing, (2) pull in more private LTC financing by requiring asset and income spend down including home equity over $50,000, and (3) reconfigure Medicare so that funding follows patient needs not care settings.

Brilliant! It solves so many long-standing, heretofore intractable problems. No more Medicaid with its messy mix of federal and state funding. More private LTC financing drawn from previously untouchable home equity to supplement scarce public funds. A new incentive to buy private long-term care insurance to cover the plan's "Personal Responsibility Amount." No more "institutional bias" because new public money will target peoples' actual care needs instead of pushing them into nursing homes. What's not to like?

The LTC providers' plan faces two big challenges. Could it pass? And would it work? The answer to the first question is: "Probably not." For example:

o Why would the federal government be willing to take over financial responsibility for long-term care from the states?

o Why would the new Administration and Congress back more personal responsibility when their proclivity is toward a bigger role for government?

o Wouldn't the senior advocates (AARP, NCOA, ASA, etc.) mobilize to kill such a plan, calling it "picking the bones of the elderly" as they've done in the past?

That's the bad news. The good news is that even if this plan can't pass, it may at least compel policy makers to ask more of the right questions and possibly forestall reforms that would be even worse than the current LTC delivery and financing system.

The answer to the second question--"Would it work?"--is more complicated. It requires answers to many subsidiary questions that the proposal leaves wide open. For example:

o Why would people buy into a voluntary federal catastrophic LTC plan that requires a "personal responsibility amount" and income/asset spend down when they don't buy private LTC insurance today?

o Why would we expect the new federal program to enforce eligibility and spend-down requirements any better than today's Medicaid program?

o Wouldn't a whole new playing field for Medicaid estate planners open up to manipulate the new federal program?

o What happens when Social Security ($16 trillion unfunded liability) and Medicare ($86 trillion unfunded liability) can't go on propping up government financed LTC, whether the current or the new program?

o Why would people buy private LTC insurance to cover their PRA when they don't buy it now to cover an ostensibly greater Medicaid spend down requirement?

o Won't more government financing of home and community-based services (HCBS) open the financial floodgates, because HCBS doesn't replace but only delays institutional care raising overall costs?

o Who would enforce the $50,000 home equity limit when we can't even enforce Medicaid estate recovery rules made mandatory in 1993?

Such questions could go on and on. But again, congratulations to AHCA/NCAL/Alliance for the most creative, comprehensive and thoughtful LTC plan presented to date. Let's hope it forces policy makers and legislators to think clearly about some critical issues and challenges. Otherwise, they may make LTC service delivery and financing worse instead of better.