There is every possibility the new President and Congress will seek changes in Medicaid and Medicare. For Medicaid, they may decide that turning this matter over to the states is the best way to curb rising costs. If so, this may entail block grants to the states. This piece is not going to get into the merits of block granting Medicaid, but, as Medicaid is the primary payer for LTSS, there is little doubt that it will be one of the first areas states will scrutinize.
This will not be the first time we have tried to address long-term care (LTC) risk. The most recent policy solution was the CLASS Act. Design problems killed that. Before that, the business world created private LTC insurance. Design problems seems to have killed that, too.
More recently there has been a lot of buzz around work coming from what can only be called a consortium led by The SCAN Foundation. SCAN, along with AARP, LeadingAge and others are looking at what might really work in reforming LTSS. This led to the idea that a governmental backstop to provide coverage of catastrophic LTC events should replace Medicaid as our primary source for funding LTC .
If you are wondering the "why" and “how” behind this, the Bipartisan Policy Center and the LTC Financing Collaborative have reports out on catastrophic coverage. Unfortunately, nearly all reform efforts have been focused on modeling the back end structure, referring to public coverage provided after a waiting period of some number (usually 2 or 3) of years. There is also an assumption – indeed an expectation – that private insurance will dramatically increase sales and cover people during those initial gap years.
Yet the assumption by supporters – that the mere existence of a catastrophic backstop will be sufficient to signal that people should explore private coverage options during the waiting period (the front end) – is unproven. Evidence from the current insurance market should alert us to the possibility, indeed likelihood, that this won’t work unless something more extensive is done to restructure the private market. But it may not be as hard as one thinks. For instance, the industry is already heading toward what they call “short term care,” meaning policies of a year or less.
Even more important is to make sure the public and private forms of coverage mesh. For example, if private insurers won’t cover costs unless the policy holder is unable to perform two activities of daily living (ADLs) but the public program is more stringent and requires the policy holder to need help with three, a person requiring assistance for two ADLs could exhaust private coverage but not be eligible for public coverage.
Both the issues of front end design and coordination are addressed more in-depth below.
Front End Design
The way the front end market would work best is to mirror the best features of the employer market, rather than the individual market, for LTC insurance. For example, in employer settings, a simplified array of choices is available. In addition, there is a single point of entry, though that includes multiple channels of communication (e-mails from the employer, town hall meetings, direct mail to the home and so forth).
Among current reform models the one that might work best is Paul Forte’s American Long Term Care Insurance Program. His model is the employer-provided Federal Long Term Care Insurance Program, with standardized choices and simplified marketing and purchasing. This model also provides for reduced underwriting so more people are able to actually insure themselves if they desire.
Interestingly, this idea was also picked up by Anne Montgomery of the Altarum Institute recently. Though similar, she thinks there are many issues that still must be resolved, including the chief one: how to instill more consumer confidence in LTC insurance. The product has to be something worth buying instead of putting the money into something else. And a fair deal for consumers, one that is guaranteed to be there when you need it.
The other issue is making sure private coverage complements the public program. One could create a complex system to integrate these two. Or do nothing special. That latter arrangement would look something very much like what we see with Medicare and the Medigap market. The states, perhaps through the National Association of Insurance Commissioners, would at best assure common standards. But the carriers would create the benefit designs.
But there is another possible direction. What if, instead, the interaction between public and private insurance reflects what is going on today in both Medicare and Medicaid? Rather than replicate the existing LTC insurance world, what if we ditched fee-for-service LTC insurance? We could create a system where the insurer retains the medical risk (as with Medicare Advantage) and LTC insurance would be coordinated with the public program. This is also what is happening within the Medicaid program, as states increasingly combine managed acute care and LTSS.
Given a new President and Congress, it might seem like efforts to advance a catastrophic LTSS backstop have come to a halt for a time. However, by reversing the emphasis and seeking the best design for private LTC insurance we actually have one of our best shots in the near future to move these proposals forward. But, regardless of the timing, we still need better ways to integrate our public and private payment systems.
The opinions expressed in this blog post are the author's own and do not necessarily reflect the view of AcademyHealth, the LTSS Interest Group or other organizations with which he is affiliated.
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