Long term care: a scary abyss

June 18, 2013

By Matt Perry

The exploding number of older adults in the United States – over 8,000 people turn 65 each day according to the U.S. Census Bureau – means Baby Boomers are staring into a terrifying abyss as a faltering economy wreaks havoc with retirement funds and the ability to pay for long-term care.

In an admission of defeat, the Obama administration threw up its hands long before January 1st when Congress officially scuttled plans for a new, voluntary long-term care insurance program, once part of the Affordable Care Act.

Replacing the aborted plan is a new 15-member commission of blue chip appointees representing nursing homes, labor, consultants, healthcare executives, and other experts.

After a lengthy delay – no budget was originally prescribed to help fund the meetings – the committee will finally meet on June 27.

Its goal: help devise a long-term care system that covers a fast-growing populace through ever-expanding life spans. All with dwindling resources.

In other words: Mission Impossible.

The shocking lack of preparation by Californians for long-term care was acutely revealed last September when The SCAN Foundation* reported that almost half of California voters 40 and over anticipated needing some type of long-term support for a family member within the next five years. Of that number, almost half said they couldn’t pay for even a single month of nursing home care; 73% said they couldn’t pay for over three months.

Today, there are currently eight million people nationwide with long-term care insurance policies. Yet even these may be insufficient.

Buyers who purchased plans back in the 1970’s and 1980’s sometimes found it difficult to extract benefits because of strict limitations.

“The original long-term policies really only covered nursing home care,” says Dr. Bruce Chernof, president and CEO of the SCAN Foundation, which funds research on long-term care solutions. “For somebody in our generations, that’s not what we’re looking for.”

Chernof will chair the new commission.

Today, nursing homes are only one small slice of a complex and expensive pie for long-term care costs that are increasingly focused on non-medical needs: preparing food, transportation to medical appointments, and other basic livings needs like cleaning and bathing. Family members often must dress wounds, empty colostomy bags, and administer drugs – including injections.

Besides nursing homes and in-home care, long-term care also spans assisted living and continuing care facilities.

The typical insurance buyer has also changed dramatically, says Bonnie Burns a policy consultant for the California Healthcare Advocates. Buyers in the 1990’s were often retirees in their 60’s – 70’s with moderate assets, she says. Today, those buyers have been blown out of the market by a faltering economy, replaced by wealthy middle-agers aiming to protect their much higher assets.

“This is a very different marketplace than it was 20 years ago,” says Burns.

While a dwindling number of insurers offer long-term care insurance – Prudential left the national market last year, and MetLife stopped writing new California policies in 2010 – those still remaining often demand nearly perfect physical and mental health.

“The underwriting requirements are so strict that the people who are likely to need it, can’t get it,” says Larry Minnix, president and CEO of LeadingAge, a national aging advocacy organization. “It’s now become a silk stocking product for people who can afford it and can get it.”

The cycle is a vicious one. Cash-strapped consumers buy fewer policies, which means greater risk for insurance companies, who must then hike premiums…. scaring off new buyers.

California’s largest public purchaser of health benefits – CalPERS – stopped taking new applications for long-term care insurance in 2009. Then, in a controversial vote last October, the CalPERS board approved an 85% premium hike starting in 2015 to bolster the struggling insurance program. (CalPERS may re-open its application process by the end of this year.)

Currently about 40 companies offer this insurance in California. But Nettie Hoge, chief deputy commissioner at the state’s Department of Insurance, says fewer than 20 are “actively selling.”

“A lot of the large insurers are not finding this a sustainable market,” says Chernof.

Why is long-term care insurance so critical when most citizens assume Medicare will cover them once they turn 65?

It won’t.

Medicare covers patients only for 100 days, providing that coverage only when older adults qualify for highly skilled care.

After that, patients pay for long-term care themselves. With nursing home costs averaging $6,800 a month or more than $80,000 a year – a figure that could double in the next 20 years – the coming need for long-term care insurance is overwhelming.

Increasingly, California residents are using up savings on long-term care until they are so destitute they qualify for Medi-Cal – the state’s equivalent of Medicaid.

And this “spend down” is precisely what worries state and federal officials: bankruptcy for these programs serving the poor.

How can long-term care insurance be saved?

“The way do to that is to create a much larger, broader market pool that allows you to spread more risk,” says Chernof.

Some are skeptical about the commission’s success.

“It’s going to be a real challenge for this group to accomplish very much,” says Howard Gleckman, a long-term care expert and author of the book “Caring for Our Parents.”

Gleckman notes the commission only meets for 6 months, and is filled with widely divergent interests that could spell trouble for consensus. Included are the head of the nation’s largest trade group representing nursing homes, and the president of the labor-backed United Long-Term Care Workers Union, part of SEIU – the Service Employees International United.

“There’s no agenda, there’s no real structure to this,” says Gleckman. “This is the more typical congressional hearing that won’t accomplish very much.”

Chernof – appointed to the commission by House Democratic Leader Nancy Pelosi – references a handful of states that have attained success in the long-term care market, most notably Maine, which has signed up a whopping 30% of adults 40 and over.

The top five states nationwide average 15% insured, according to a 2011 report co-authored by the Long Beach-based SCAN with the Commonwealth Fund and AARP.

California tallies just 4.3% — 24th in the nation.

That figure frightens aging experts who anticipate the state’s population 65 and over will double to 8 million in the next 20 years.

“We have a long way to go,” says Chernof.

Gleckman suggests the new committee look overseas for solutions.

“Every major developed country in the world except for the U.S. and Britain have moved to a (federally-supervised) social insurance system,” says Gleckman. “But everyone’s done it a little differently to reflect the cultures of their counties.”

France offers a cash benefit that can be used as recipients decide – which includes paying relatives for in-home care. Japan pays long-term care providers directly. Germany blends the two systems.

Gleckman cites Germany as the best potential model for America with its 2% payroll tax.

“It made their equivalent costs of Medicaid go down considerably,” agrees Minnix.

“The Germans don’t think of the payroll tax as a tax,” adds Gleckman. “They look at is as a contribution.” Workers must participate, and 90% purchase government insurance rather than private plans. Benefits are reviewed every five years.

Still, Gleckman says any politician here suggesting a 2% payroll tax “would get run out of office.”

He suggests another possible template for long-term care insurance would be the Medicare Part D voluntary prescription drug program.

At his most optimistic, Gleckman hopes the commission will “deliver a bi-partisan statement that this is a really serious problem that needs to be fixed.”

Official documents state the commission has just six months to produce a “comprehensive and detailed” report.

Chenof says the future for long-term care is grim “if we don’t put into place something fairly substantial within the next five years.”

He hopes the committee can deliver.

“The commission will bring together some of the best thinking we have.”

Perry wrote this article as part of the MetLife Foundation Journalists in Aging Fellows program, a collaboration of New America Media and the Gerontological Society of America.

Note: The SCAN Foundation is a sponsor of healthycal.org

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