LTC Bullet:  Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations

Friday, February 5, 2016

Seattle—

LTC Comment:  The Bipartisan Policy Center’s new report on long-term care leads with LTCI (hear, hear!), but makes Medicaid even more tempting (boo!) and adds a new, expensive, mandatory government program (boo!) based on faulty premises.  Our analysis and critique follow.

 

LTC BULLET:  THREE CHEERS (BUT TWO FROM THE BRONX) FOR NEW BPC-LTC RECOMMENDATIONS

LTC Comment:  The Bipartisan Policy Center released “Initial Recommendations to Improve the Financing of Long-Term Care” this week to considerable live, web-based fanfare.  The new report is the second deliverable in fulfillment of the BPC’s “Long-Term Care Initiative” launched in April 2014 with the publication of  “America's Long-Term Care Crisis: Challenges in Financing and Delivery.”  We summarized and criticized the BPC’s ambitious long-term care plans in “LTC Bullet:  Will Bipartisan LTC Policy Be Better?,” Friday, April 11, 2014.  Let’s apply a critical eye now to what they’ve come up with 22 months later.

What follows are quotes from and our comments on the BPC’s “Initial Recommendations to Improve the Financing of Long-Term Care.”

BPC Quote:  “BPC’s Long-Term Care Initiative plans to produce a set of recommendations that weave together the approaches of publicly funded programs, such as Medicaid, with private insurance products, while also improving the efficiency and quality of LTSS.”  (p. 4)

LTC Comment: A worthy goal, but the devil is in the details.

BPC Quote:  “[S]ales of private LTCI continue to fall, largely because premiums are unaffordable and the traditional product design has proved to be unsustainable for carriers.”  (p. 5)

LTC Comment:  Wrong!  Devilish detail #1:  The real cause of falling LTCI sales is government fiscal and monetary interference in the market.  Easy access to Medicaid after the insurable event occurs crowded out demand for private LTC insurance and the Federal Reserve’s zero-interest-rate policy (ZRP) made the product unprofitable, thus necessitating premium rate increases.  Artificially low interest rates also reduced seniors’ incomes making it harder for them to afford LTCI premiums, a double whammy.  Blaming the victim (LTCI carriers) instead of the culprit (bad government fiscal and monetary policy) for poor LTCI sales is incorrect and irresponsible.

BPC Quote:  “BPC’s work over the last two years led us to conclude that the challenges to achieving consensus on long-term care financing are numerous.  Among them:  …  Lack of awareness about the costs and risks of needing LTSS and the incorrect belief that Medicare or Medicaid will cover LTSS needs … Significant variation in the need for LTSS. For example, while more than half of Americans age 65 and over will need LTSS during their lifetimes, only 15 percent will have LTSS expenses exceeding $250,000 during their lifetimes.”  (p. 5)

LTC Comment: False assumptions!  Devilish detail #2:  Erroneous foundational premises bode poorly for BPC’s conclusions.  The “belief that Medicare or Medicaid will cover LTSS needs” is hardly incorrect.  Those two public programs pay for most high LTC costs, whether the public realizes the fact or not.  Variations in the need for LTC are hardly a “challenge”; they are precisely what makes private insurance a viable solution. 

BPC Quote:  “The Long-Term Care Initiative recommendations place a heightened focus on the role of the private market, outline improvements to public programs such as Medicaid, and consider the potential for catastrophic coverage.”  (p. 5)

LTC Comment:  OK, sounds reasonable, what exactly does BPC recommend?

BPC Quote:  Recommendation:  “Increasing the Availability and Affordability of Private Long-Term Care Insurance to Extend Existing Resources” including “establish a lower-cost, limited-benefit private LTCI product, called ‘retirement LTCI,’” for which “employees may use funds in retirement accounts to pay retirement LTCI premiums (early withdrawals would be penalty-free),” and “providing incentives for employers to offer retirement LTCI on an opt-out basis through workplace retirement plans and permitting the sale of retirement LTCI through state and federal insurance marketplaces.”  (pps. 5-6)

LTC Comment: Well, hallelujah, now you’re talking!  I think we have LTCI analyst/advocate Marc Cohen’s participation in the BPC project to thank for the ascendancy of private long-term care insurance in the report’s hierarchy of priorities.  These are proposals LTCI carriers’ government affairs specialists have been advocating for decades.  Unfortunately, designing a lower-cost LTCI product and getting expensive LTCI incentives passed will be very difficult, more likely impossible, unless and until the Devilish Details identified above are recognized and corrected.  Affordable LTCI won’t happen as long as Medicaid LTC is easy to get, artificially low interest rates prevent profitability, and so-called experts believe Medicaid and Medicare do not pay for LTC.

BPC Quote:  Recommendation:  “Expanding Options at Home and in the Community for Older Americans and Individuals with Disabilities under Medicaid Under Medicaid” including “Create incentives for states to expand the availability of HCBS by: (1) combining existing Medicaid waiver and state plan amendments (SPAs) authorities into a single streamlined SPA; and (2) extending existing enhanced federal matching to encourage states to take advantage of the new streamlined authority.”  (p. 6)

LTC Comment:  Sounds great.  Most seniors prefer home and community-based services (HCBS) to living in a nursing home and shouldn’t Medicaid give its “customers” what they want?  Sure, but the presumed financial viability of expanding Medicaid HCBS depends on another erroneous assumption—Devilish Detail #3—that home care saves money.  It does not.  Home care delays but too often does not replace institutional care.  Everywhere and everywhen Medicaid LTC expenditures for nursing home care and HCBS combined have increased rather than decreased year after year.  That’s why Congress only dipped its toe into providing non-institutional Medicaid LTC services originally.  It required formal waivers approved by the federal government which, ironically, limited HCBS to people who already need nursing home care and, as a cost-effectiveness guarantee, mandated that total costs could not exceed what expenditures would have been for purely institutional care.  BPC’s belief that Medicaid can throw the doors wide open to HCBS without breaking the bank is as dangerous as it is naďve.  The truth is that making Medicaid even more attractive and tempting will drive up costs and further crowd out private LTC financing alternatives.

BPC Quote:  Recommendation:  “Addressing the Needs of Americans with Significant LTSS Needs” including “For individuals with significant LTSS needs, pursue concepts and elements for a public insurance program to: (1) address uninsurable long-term care costs; (2) protect Americans from the catastrophic costs of LTSS; and (3) provide relief to states, which along with the federal government face significant Medicaid costs in the coming years as baby boomers begin to need LTSS.”  (p. 6)

LTC Comment:  Did you wonder why people with such an obvious bias for a government-program solution led with a nod to private LTC insurance?  Now you have the answer.  They think we really need a public LTC financing program to “address uninsurable long-term care costs.”  But what LTC costs are uninsurable?  Well most of them supposedly because BPC assumes private LTC insurance is severely limited by challenges they delineate, but which wouldn’t exist in the absence of government interference in the fiscal and monetary markets, as I explained above.  (See Devilish Details 1, 2 and 3.)  BPC wants to relegate LTC insurance to covering relatively small front-end LTC expenditures which would turn this genuine insurance product into a pseudo-insurance, pre-payment mechanism like Medigap.  The true purpose of insurance is to replace the small risk of a catastrophic loss with the certainly of an affordable premium.  By claiming the back-end, catastrophic costs of LTC for a new government program, these analysts relegate private LTC insurance to a permanent third class position and elevate the public program to a precarious fiscal pedestal from which, like its predecessors Social Security and Medicare, it will inevitably fall.

BPC Quote:  Recommendation:  “Program costs should be fully financed so as not to add to the federal deficit over the long-term.”

LTC Comment:  This is the “have our cake and eat it too” portion of the BPC proposals.  How exactly shall we pay for this big new back-end catastrophic LTC government program?  For that you have to leave the “Executive Summary” and dig through the weeds of the report.  Here’s what you’ll find:   

BPC Quote:  “A variety of financing approaches could be considered, including:  A dedicated payroll-tax financing approach, similar to Social Security or Medicare Part A” or “A general-funding approach, which could be offset through changes to the tax system, such as broadening income or consumption-tax bases or increasing tax rates, changes to spending programs, such as adjustments to Medicare and Social Security, or a combination of both.”  (pps. 22-23)

LTC Comment:  Bottom line, if you start with the false premises (1) that people are spending down to impoverishment for long-term care because Medicaid and Medicare don’t pay for it, (2) that variations in LTC risk are a detriment to LTCI instead of its basis, and (3) that home and community-based services save Medicaid money, you’ll end up concluding that the only solution to the LTC financing crisis is to increase payroll taxes, income taxes, sales taxes, or most likely, all of the above.

Closing LTC Comment:  We saw this upshot coming.  Here’s how we closed our analysis and critique of the Bipartisan Policy Center’s original “Long-Term Care Initiative” mission statement (America's Long-Term Care Crisis: Challenges in Financing and Delivery) in LTC Bullet:  Will Bipartisan LTC Policy Be Better?, Friday, April 11, 2014:

“The consensus coalescing around a long-term care financing solution is that some form of mandatory social insurance should supplement private LTC insurance.  The dangers in that remedy are myriad.  Do we really need another expensive entitlement program?  What happens when Social Security cuts back so that people have less income to spend on LTC?  What happens when Medicare reduces its generous provider reimbursements that currently enable LTC providers to survive despite Medicaid’s low payments?  Wouldn’t more public financing of LTC only increase the public’s growing entitlement mentality?  Don’t we need to start weaning people off dependency on government largesse?  How long will it be before economic gravity takes hold again and government has to pay normal interest rates on its trillions of debt?  What happens when the unfunded entitlement liabilities come due?  It is nothing short of bizarre that serious people claim to study, diagnose, and prescribe about long-term care without taking these factors into account.  It goes to show we’re not much closer to a real solution and that the new consensus coalescing is as much a danger as an opportunity.”

We see no reason to amend this judgment based on the Bipartisan Policy Center’s latest report.  If anything, we’re more concerned than ever.  We document our concerns in much greater detail in a new report soon to be published by Federalism in Action and the Center for Long-Term Care Reform titled “Cassandra’s Quandary:  The Future of Long-Term Care in New Hampshire.”  This report will show why the current long-term care service delivery and financing system in the USA in general and New Hampshire specifically is highly unlikely to survive the age wave.  It will recommend viable solutions.  Stay tuned.