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Four ways to fix long-term care

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KIM KYUNG-HOON REUTERS Across the political spectrum, there’s pretty widespread recognition that, as written, health reform’s CLASS Act would have failed. The long-term care insurance program wouldn’t be able to cover the expected health care costs of those most likely to enroll: people who needed to use a lot of health care.

But what we have now doesn’t work very well, either. Only about 7 million Americans currently buy insurance policies for long-term care, even though many more will need these kind of services, like nursing homes and rehabilitative care, at some point in their lives.

There are a lot of reasons for the low take-up, which range from the high cost of premiums to lack of information to confusion about what services Medicare will cover. What that means, is a lot of Americans end up covering long-term care costs out of pocket. When they run out of money, they move onto Medicaid. Here’s what that looks like in graph form:

Politics aside, health economists have spent a lot of time thinking about how you fix this and get more people purchasing long-term care insurance. “If you got  bunch of real long-term care wonks in a room, we could figure something out,” says Duke University’s Donald Taylor, a health care economist. I spent most of yesterday talking to those wonks, and here are four solutions they came up with:

Fix the CLASS Act: While the White House has halted implementation on the CLASS Act, it has also opposed repeal. And some see ways to fix the insurance program to make it sustainable, mostly by making it easier for lower-cost patients to join. Taylor would introduce one-time underwriting that would make it slightly more expensive for those at higher risk to join the program. He would also ratchet up the required hours worked to get into the program, meant to be a proxy for measuring physical fitness . “Both of those ways make sure you’re signing up relatively healthy folks,” says Taylor.

HHS has expressed concerns that many of the changes it would need to make would face legal challenges, for stepping outside the bounds of the health reform law. But, as the Urban Institute’s Howard Gleckman points out, “What part of the law isn’t being legally challenged at this point?”

Expand Medicare to cover long-term care: Medicare has grown substantially since its enactment in 1965, to cover prescription drugs and other new benefits. But its services have never touched long-term care. “In one sense, it’s a historical accident,” says Taylor. “When Medicare passed, people didn’t live as long.” So one possible solution would be creating a new Medicare program to cover long-term care issues. There’s one huge roadblock here: Medicare is already very expensive, with costs growing at a rapid clip. Adding in long-term care benefits - which can cost, on average, $50,000 for one year - “You could imagine having bigger deductibles as a sort of quid pro for an expansion of Medicare to long term care,” says Mark Pauly, a professor of health care management at the University of Pennsylvania’s Wharton School of Business.

Model long-term care insurance after pensions: Taylor has written on the idea of making long term care insurance a forced saving account, financed by an employee payroll tax. But unlike traditional saving programs, like 401(k)s, the accrued funds could be used on the individual, their parents or bequeathed to their children. “The idea is some kind of forced savings,” says Taylor, who wrote a 2008 paper on this topic. “Even if you don’t need it, you end up getting something out of it.”

Mount an aggressive marketing campaign: Much of the hesi­ta­tion about buying long-term care insurance is likely wrapped up in a lack of knowledge about who covers such services. In a Prudential survey last year, more than half of Americans thought that Medicare or their private health insurance plan would cover long-term care benefits (generally, they won’t.) “When I talk to consumer groups, I ask who has long-term care insurance, and about half the room will usually raise their hand,” says Urban Institute’s Gleckman. “We know that’s not right. It turns out what they’ve actually got are Medicare supplemental policies. But nobody really knows the difference and they do think the government is paying for this.”

Most experts are skeptical, though, that any marketing campaign, no matter how aggressive or well-crafted, would be enough to get people to sign up in a voluntary, private market situation.”I’m pretty pessimistic there’s going to be a real market ever in private, long-term care insurance,” says Pauly, noting that Medicaid continues to act as a safety  net for this kind of care. “Unless you abhor the quality or stigma of Medicaid, there are pretty modest incentives to save more.”

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