The Financing of Long-Term Care: An American Conundrum SPRING 2019 volume 43 number 1

Journal of the American Society on Aging

The Financing of Long-TermCare: AN AMERICAN CONUNDRUM

America’s long-term-care “system”—costly and unsustainable High demand, fragmentation: the current state of long-term services and supports Reimagining care delivery

for older adults with chronic conditions

Volume 43 . Number 1 | 1

GENERATIONS – Journal of the American Society on Aging

ASA/USC Online Courses Continue in 2019! ASA and the University of Southern California Leonard Davis School of Gerontol- ogy are partnering again to bring you four courses pertinent to your work with older adults in a flexible online format. • Understanding Abuse and Neglect • Prevention of Abuse and Neglect • Fundamentals of Gerontology • Managing Health and Chronic Conditions in Older Adults Successful participants will earn a certificate of completion from USC, and CE credits are offered from select accreditation providers. The cost of each five-week online program and certificate of completion is $500. All courses will take place April 29–May 31 and August 26–September 27. “This course presented an incredible amount of information which applies to my job and home life alike. I appreciate ASA’s commitment to sharing pertinent timely information about the important aspects in the field of gerontology!” —Gina Maguire, Stockton Center on Successful Aging www. a s a g i n g . o r g / U S C - g e r o

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GENERATIONS – Journal of the American Society on Aging

ASA Executive Committee Chair, Board of Directors Karyne Jones, Washington, DC Chair-Elect Michael Adams, New York, NY Immediate Past Chair Robert B. Blancato, Washington, DC Secretary Jean Accius, Washington, DC Treasurer Lisa Gables, Alexandria, VA ASA Board of Directors Ginna Baik, San Diego, CA Connie Benton Wolfe, Fort Wayne, IN Richard Browdie, Cleveland, OH Yanira Cruz, Washington, DC Robert Espinoza, New York, NY Paul Downey, San Diego, CA Brian M. Duke, Radnor, PA Maria Henke, Los Angeles, CA Brooke A. Hollister, San Francisco, CA Karen N. Kolb Flude, Chicago, IL Daniel Lai, Hong Kong Rebecca C. Morgan, Gulfport, FL Scott Peifer, San Francisco, CA Kevin Prindiville, Oakland, CA Deborah Royster, Washington, DC Phil Stafford, Bloomington, IN Joyce Walker, Richmond Heights, OH President and CEO Robert G. Stein, San Francisco, CA

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Alison Hood Senior Editor Alison Biggar Typography & Production Michael Zipkin | Lucid Design, Berkeley Generations cover and book design by Lisa Rosowsky, Blue Studio. Generations Editorial Advisory Board Wendy Lustbader Chair Susan C. Reinhard Immediate Past Chair Tobi Abramson Jean Accius Patrick Arbore David Bass

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Sam Fazio Sarah Jen

AndrewMacPherson Robin Mockenhaupt Vyan Nguyen

Kevin Prindiville Anne Tumlinson

Front cover image ©iStockphoto/ delihayat © 2019 American Society on Aging

Union Bug

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The Financing of Long-Term Care: An American Conundrum

ins ide generat ions The Financing of Long-Term Care: An American Conundrum

4 Our Guest Editor Ruth Katz

49 The States Can’t Wait: The Long-Term-Care Financing Imperative By Eileen J. Tell and Marc A. Cohen 55 Financing Long-Term Services and Supports— and the Challenge of Underlying Assumptions By Robyn I. Stone 58 Preparing for LTC Financing Reform: How Can Racial Disparities Be Addressed? By Barbara Gay, Ruth Katz, and James H. Johnson Jr. 65 Bringing Financing into the LTSS Reform Conversation By Richard Frank and Donald Moulds 71 Shifts in Family Caregiving— and a Growing Care Gap By Lynn Friss Feinberg and Brenda C. Spillman poss ibi l i t i es : ideas for a new v i s ion of long- term care 76 Reimagining the Delivery of Care for Older Adults with Chronic Conditions By Howard Gleckman 83 Branding Long-Term-Care Financing Reform By Cynthia Cruver 86 Is Insurance the Answer to the Long-Term Care Financing Challenge? By Al Schmitz and Chris Giese 89 Housing Plus Services: A Model That Supports the “Whole” Person By Alisha Sanders 94 Home Equity Extraction—A Long-Term-Care Financing Solution for Older Adults? By Richard K. Green

a f ragmented l andscape : long- term care in Amer i ca 6 America’s Long-Term-Care Conundrum By Ruth Katz 10 Financing Long-Term Services and Supports By Michael Lepore 18 High Demand and Fragmentation: The Current State of Long-Term Services and Supports in America By Barbara Coulter Edwards and Aditi P. Sen 23 How Many Long-Term-Care Surveys and Polls Do We Need? By Galina Khatutsky and Angela M. Greene 31 The Concept of Four Pillars: The Fine Balance of Principles and Politics By Connie Garner and Rodney L. Whitlock 34 How Much Is This Going to Cost? Inviting the Math Club to the Table By Melissa M. Fauvreault and Anne Tumlinson 40 The Rolling Out and Back of Universal Long-Term-Care Supports in Europe By Joan Costa-Font pars ing the probl ems and cha l l enges of long- term- care f inanc ing and reform 46 The Dynamics of Denial: An Interview with Risk Management Expert Robert Meyer By Ruth Katz

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GENERATIONS – Journal of the American Society on Aging

Our Guest Editor Elegant Failures and Undaunted Advocacy: The Ongoing Quest for Long-Term-Care Reform T he Spring 2019 Generations Guest Editor Ruth Katz and others like

“We heard from somany TownHall participants about problems people have paying for LTSS, sincemost people are not eligible forMedicaid and don’t have LTC insurance. As one provider noted, ‘At the end of the day, there has to be some acknowledgment of the volume of what is coming at us, and that all people want is for their momor dad to be well cared for.’ ” Prior to her arrival at LeadingAge, Katz spent 27 years in the Office of the Assistant Secretary for Planning and Evaluation (ASPE) in the U.S. Depart- ment of Health and Human Services, where she led the Office of Disability, Aging, and Long-Term Care Policy, con- ducting policy research and analysis. There she worked for both Democratic and Republican political leaders. “The thing about disability, aging, and long- term care is these issues affect people no matter their political beliefs,” Katz says. One memory stands out for Katz from those years : a quote emblazoned on the wall of the Great Hall in the Hubert Humphrey Building, words from the former vice-president, wisdom that she passed by daily, walking to work: It was once said that the moral test of government is how that gov- ernment treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy, and the handicapped.

her who have steadily been working away on long-term-care reform, try-

ing for years to fgure out stratagems of its policy and fnancing, personify the saying, “It’s not a sprint, it’s a marathon.” Many would be exhausted

‘I hope someday to see LTSS reform become a reality.’ RUTH KATZ

by the process and would have given up long ago, but Katz, undaunted, is ener- gized by it. As Senior Vice President for Pol- icy at LeadingAge, she is the eyes and ears of its membership in Washington, D.C., interacting with Congress and the White House, voicing members’ views and interests. LeadingAge represents approximately 6,000 nonproft aging services providers, including afford- able housing providers, nursing homes, assisted living settings, home- and com- munity-based services providers, hos- pices, home health agencies, and the whole continuum of services. Since joining LeadingAge in 2018, Katz has worked on numerous proj- ects, one of which was to organize and activate a Town Hall Conversa- tion process that led to thirty-four Town Halls around the country, draw- ing more than 3,000 members whose input helped develop LeadingAge’s 2019 policy priorities.

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The Financing of Long-Term Care: An American Conundrum

Katz believes this basic idea endures: “Government must be held to a standard of moral responsibility to all the citizens who support it, includ- ing and especially when any of us need some additional supports.” She faced many challenges in her years of working on long-term care; and cites three examples. Her frst work on long-term services and supports (LTSS) reform involved a bill, proposed by the late Sen. John Chafee (R-RI), to promote broader eligibility and more robust services for people with disabili- ties. The bill was not enacted. Later, she served on Hillary Clinton’s Task Force on National Health Care Reform (in the Long-Term Care Work Group), on another bill that also was not enacted, although she says “some notable pro- gram developments arose from the ashes, including the Cash and Counsel- ing Demonstration and Evaluation,” led from her ASPE office. The third defeat was the demise of the CLASS Act, which Congress repealed. In spite of such setbacks, Katz has “had the great honor of traveling around the country and around the world to talk about LTSS fnancing reform and I hope someday to see it become a reality.” It took a long time to enact the safety net Americans beneft from today— Medicare, Medicaid, Social Secu- rity—and Katz reminds us that these programs are not, nor have they ever been, free: “It’s a matter of political will. Someone is going to have to be coura- geous enough to step up and propose a way for people to pay for this bene- ft. Like other types of insurance, not everyone will need the same amount of beneft, but we all will pay.”

Although she understands the ratio- nale, Katz fnds it unfortunate that in its infancy long-term care services were connected to healthcare, as she points out that helping someone to eat or to get out of bed isn’t really a healthcare ser- vice. Due to this connection, somehow such care was left to be performed by available family members, gratis. “It’s easy for policymakers to think, well, if we don’t take care of this, fam-

ily members will do it. Except familymembers break—physically and fnancially,” says Katz. And, often, family members move away.

‘We’ve failed at this so elegantly, and so many times.’

The current setup of LTSS needs versus available services, combined with the fact that people remain in denial about the possibility that they will ever need long-term care, and even hope to die to avoid the prospect of it, saddens Katz. She frmly believes that “it’s possible to have a good life full of community and family and love, even if you need help with daily activities.” This, in a nutshell, explains Katz’s intense motivation to keep at her work. “There’s a small group of people, many featured in this issue of Generations , who have been working on LTSS fnanc- ing reform for decades. And several of us are still toiling away. What we have in common is that we’ve failed at this so elegantly, and so many times. Each time, we’ve retrieved something from the rubble . . . but the heavy lifting is done . . . the beneft design choices and actu- arial models are on the shelf, ready to be pulled into service; what remains is to fgure out how to pay for it.” —Alison Biggar and Alison Hood

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GENERATIONS – Journal of the American Society on Aging

America’s Long-Term-Care Conundrum By Ruth Katz

Why won’t Americans, who are living longer lives, plan for their long-term care? And where are the policies for financing it?

W e humans live complicated and rich lives, but lives of hopeful perseverance nonethe- less. We reside comfortably in stark dichotomy. We smoke, for example, knowing that smok- ing kills. “It is a happy faculty of the mind to slough that which conscience refuses to assimi- late,” wrote William Faulkner in 1932 in Light in August . Or, more succinctly, as Scarlett O’Hara said in Gone with the Wind , “I’ll think about it tomorrow.” So true as it applies to long-term-care (LTC) planning—for each of us individually and for the American government and society. We don’t plan for our own possible—and likely—need for help in the future, and the federal government has yet to offer a program to meet LTC needs for most people. Over the past year, I have had the privilege of hearing from aging services providers and consumers in Town Hall conversations spon- sored by my organization, LeadingAge, in towns and cities across the nation. LeadingAge is an association of close to 6,000 nonproft provid-

ers of aging services; from Texas to Washington State to Maine to South Carolina and most points in between. Thus, my colleagues and I have been schooled in what happens on the ground when people need and use long-term services and sup- Long-term-care planning and reform is ‘an uphill climb so steep most people don’t like to think about it.’ ports (LTSS). This situation is foremost on their minds, and they deal with it for a living. Despite that, what an eye opener it was for this former federal employee!

LTSS in America: An Unsustainable, Unplanned Landscape

“The current state of LTSS fnancing is unsus- tainable,” as Lepore reminds us in his sweep- ing description of the checkered, and as yet unsuccessful, history of the nation’s attempts to address the problem of paying for LTC (page 10).

abstract Half of America’s 65-year-olds will need some paid long-term-care (LTC) services before they die, yet decreasing numbers of them have planned for a healthy retirement and even fewer for the possible need for paid LTC. Many still wrongly believe Medicare covers LTC. Medicaid is the largest public payer of these services, but eligibility depends upon having very few financial resources. Debate continues about how government, individuals, and-or other private sector actors might solve this dilemma. This article provides an overview of the attitudinal, economic, and structural challenges and offers insights into building a solution. | key words: long-term care, retirement, Medicaid, Medicare, LTC funding

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supplement these services with “informal” care from friends and family. Many fear Medicaid will collapse under the burden of growing LTC needs; the program, which spent $115 billion in 2016 on fee-for- service LTSS, is expected to be on the line for $158.7 billion in 2026. And this does not take into account additional spending for managed LTC and the higher-than-average healthcare spend- ing of LTSS users. To further complicate matters, there is an increasing dearth of family members and friends who live nearby, who can take time away from work, and who have the physical strength to provide care, as Friss Feinberg and Spillman point out in their arti- money changes hands (for what is commonly referred to as “informal care”) does not mean this care is “free.” Can we save our way out of this mess? For many, that would require signifcant behav- ioral and economic change. The median non– real estate assets held by Americans older than age 65 total $71,000—not enough for a healthy retirement, much less to pay for long-term care. A quarter of these people rely on Social Secu- rity alone as their retirement income. Further, as is the case throughout the healthcare system, there are signifcant disparities in access, quality, and outcomes. Gay, Katz, and Johnson (page 58) explore the disparities African Americans face in fnding and using long-term care. Certainly pay- ing out of pocket or buying insurance are options for individuals who can afford them. Schmitz and Giese outline some trends in LTC insurance that will affect that limited number of us (page 86). With the oldest of the baby boomers turning age 65 at the rate of 10,000 a day, we are going to have to start talking about this in stores and schools, at club meetings, and around water cool- ers at work. “At the end of the day, there has to cle on family care- giving trends (page 71). Just because no

This Spring 2019 issue of Generations is ded- icated to LTC planning and fnancing reform, “an uphill climb so steep most people don’t like to think about it,” according to a wise provider from North Carolina. Beyond a small group of people who think about it for a living, many of them contributors to this issue, most of us “refuse to assimilate” the complexities around LTC until we or someone we love can no lon- ger carry out the basic activities of living—such as getting in and out of bed, using the bathroom, and eating—that we engage in each day. “That will never happen to me,” we tell our- selves, but the fact is that half of people who are age 65 today will need paid help for these basic activities at some point before they die. So, we don’t plan. many individuals still believe Medicare will be there to cover personal care at home or take care of the $90,000 it costs to receive LTSS in a semi- private room in a nursing home for a year (or just under $50,000 for personal care at home). Most people say their main concern is they “don’t want to be a burden on [their] children.” Yet they don’t plan and when the time comes, it is the sons and daughters who pick up the responsibility of providing care. Is this magi- cal thinking or just that happy faculty to ignore what we cannot imagine? These are some hard truths to confront. Medicaid, the federal−state partnership that provides healthcare for people without the means to pay for health insurance, is the pri- mary public payer for LTC. But, as Edwards and Sen write in their article (page 18), it is by no means a perfect solution. You have to spend just about everything you have to qualify for Medicaid. And, the program offers home- and community-based services, but what is offered is usually not enough to support a person who needs daylong or 24-hour care and thus must As Khatutsky and Greene describe in their article (page 23),

‘When the time comes, it is the sons and daughters who pick up the responsibility of providing care.’

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GENERATIONS – Journal of the American Society on Aging

be some acknowledgment of the volume of what is coming at us and that all people want for their mom or dad [or themselves] is to be well cared for,” one Massachusetts provider warned. To add even more complexity to the LTC conundrum, consider that by the time a person needs LTSS, they also are likely to have multiple chronic health conditions. Gleckman’s article on page 76 explores some of the promising pro- grams in operation today and points to the inte- gration of healthcare and social supports as a good direction for the future. The truth is we do not like to talk about healthy aging, except to imagine our future selves as everything we are today—only faster, smarter, and better. As Meyer explains (see interview on page 46), humans exhibit tenacious (and often dangerous) ways of thinking; for example, what is it in people’s thought processes that prevents them from evacuating low-lying areas when catastrophic hurricanes are bearing down? And how do such thought patterns keep us from fac- ing the realities of aging and planning for how we’ll fnd and pay for any future care we might need? What can we learn from psychologists who study how humans behave in the face of disasters, natural or otherwise? Of Truth, Magical Thinking, and Glimmers of Hope If we really are headed for trouble, why aren’t policy makers doing something about it? Some thoughtful articles in this issue address this question. It is not that we cannot estimate costs, as Favreault and Tumlinson’s article demon- strates (page 34), but the cost estimates are high for comprehensive reform. Even advocates and other experts argue about the critical elements of reform, as Stone’s article deftly points out (page 55). Is the perfect the enemy of a good solution? Maybe we need some champions in Congress suggest Garner and Whitlock, the bipartisan staff partners who advocated for the CLASS pro- gram (page 31). Although enacted as part of the Affordable Care Act, CLASS got tangled up in

fnancing and political headwinds. Long-term- care reform won’t happen without political will. And courage. As one New England provider said, “It’s almost like the federal government wants senior citizens to go away, so let’s not fund long- term care. This cuts to the core.” There is, however, some hope on the horizon. Maybe marketing professionals can help us fnd a more palatable way to “have the conversation,” as Cruver posits (page 83) with her suggestion of flipping LTC into TLC. But if we do solve the problem, are there models of care that people will want to use? With nursing home occupancy as low as 63 per- cent in some states, and with only a small per- centage of people needing assistance who are moving to nursing homes, assisted living facili- ties, or other settings, we must bring to the fore every bit of creative design thinking we can mus- ter. In her article on page 89, Sanders describes some innovative ways to combine housing with services for the “middle market”—those individ- uals who may not qualify for public programs, but who cannot afford private pay for care. We must be ready with an aging services system that is adequately funded and includes organizations and settings in which people want to work—and where older adults would want to live. As for the crux of the issue—how will we pay for it—we haven’t run out of ideas yet. Green’s article explores options using home equity (page 94), and Frank and Moulds (page 65) offer an innovative approach to raise the necessary funds. We will solve this problem. We can learn from past efforts. We can look to Europe for ideas, as Costa-Font suggests in his article on page 40. Here at home, we can learn from our more pro- active states: they realize that a federal solution is not immediately forthcoming and have taken responsibility to come up with some answers. Tell and Cohen offer a great description (page 49) of some of these efforts and guidelines for other states that may also rise to the challenge. And we need to keep working on a federal answer. Medicare came about due to a combi-

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The Financing of Long-Term Care: An American Conundrum

nation of too much poverty, a lack of healthcare among older Americans, and politicians who were willing to reach across the aisle and go bold. Half a century later, thanks in large part to this abso-

be?” We surprised ourselves: the most common answer was “a grandparent.” By 2050, when one out of fve people will be older than age 65, many will, perhaps, be missing their great grandpar- ents—but they will probably be celebrating their grandparents’ hundredth birthdays. This is such a blessing, and such a responsi- bility for each of us and for American policymak- ers to ensure that everyone can fnd and afford the care they need to live the best life possible, no matter their age and functional status.

‘Is the perfect the enemy of a good solution?’

lute entitlement to healthcare for Americans older than age 65, we are living longer and healthier. We need to get back in there and fnish the job: adequate coverage of long-term care would pro- vide the missing—and much needed—piece. I hope this collection of articles, which con- tains some of the most important and creative thinking about LTC fnancing reform, will pro- pel more of us to tell our stories to policy makers who are in a position to act. This kind of advo- cacy makes a difference. Let the articles in this issue of Generations arm you with the informa- tion you need to help us move forward. Recently, I was with a group of colleagues ranging in age from their 20s to their 60s, exploring the question, “If you could talk with someone who is no longer alive, who would that

Ruth Katz, M.A., is senior vice president for Public Policy/Advocacy at LeadingAge in Washington, D.C.

Author’s Note During the planning process for this issue of Generations on long-term services and sup- ports fnancing reform, the feld of aging lost an important voice. Joshua Wiener, whose contri- butions to policy research on the topic are cited throughout this journal, died on January 9, 2018. Without his passion and tenacity, the feld would not have the solid evidence base that exists today—a base from which sensible policy options can be designed and enacted.

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Financing Long-Term Services and Supports By Michael Lepore

A short retrospective view of U.S. long-term-care policy financing efforts: what lessons have we learned?

G etting on” with the refnancing of long- term services and supports (LTSS)—that is, with the policy making necessary to restructure our fragmented and fscally failed approaches to LTSS fnancing—is the goal of this article. Decades of policy stalemate have crippled our capacity to sufficiently or equitably fnance LTSS, leaving large numbers of low-income people at high risk of having unmet LTSS needs or going broke paying privately for LTSS. State and fed- eral budgets also are buckling under increasing costs of their Medicaid programs, which provide a societal safety net for people in poverty (Cohen and Feder, 2018; Wiener, 2013). The Bipartisan Policy Center (2017) summa- rized this risky state of LTSS fnancing affairs, wherein efforts to restrain spending by Medicaid programs pose social justice risks by eroding benefciaries’ access to services: The current state of LTSS financing is bur- densome on individuals and their families and unsustainable for state and federal Medicaid budgets. Additionally, current proposals to

significantly reduce federal Medicaid fund- ing would further strain state budgets. If these cuts are realized, many states will need to choose between cutting LTSS services, eligi- bility, and/or provider payment rates. American notions of social justice are fray- ing as our safety net rips and lets individuals with serious care needs and limited fnancial resources slip through, rendering them unable to access needed services and falling prey to poor quality and even unlicensed LTSS (Lepore et al., 2017, 2018). Decades of LTSS policy-making efforts and fnancing proposals, including sev- eral promoting universal LTSS coverage through a federal social insurance program—like Medi- care—have offered solutions to the problems of American notions of social justice are fraying as our safety net rips and lets individuals with serious care needs slip through.

abstract Decades of policy stalemate have crippled our capacity to sufficiently or equitably finance long-term services and supports (LTSS), leaving large numbers of low-income people at high risk of having unmet LTSS needs or going broke paying privately for LTSS. State and federal budgets also are buckling under increasing costs of their Medicaid programs. Modernizing LTSS financing has been a national priority for decades, but policy makers have failed to achieve significant reform. This article reviews past LTSS financing proposals, objections, and failures to draw lessons to spur policy making. | key words: Medicaid, social insurance, means-testing, policy making

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insufficient LTSS funding and resulting eco- nomic peril, but all have been repealed or oth- erwise failed to be enacted (Kaiser Family Foundation, 2015). This article briefly reviews LTSS fnancing and the history of LTSS fnanc- ing efforts to draw lessons in the hopes of spur- ring effective policymaking. LTSS Financing Is Fragmented Across Public and Private Sources LTSS fnancing is fragmented, as it has been for decades (see Table 1, below). LTSS are funded by several private and public sources that largely cover separate populations at different payment rates (Bipartisan Policy Center, 2017). This frag- Table 1. Financing for Long-Term Services and Supports, 1988 and 2013

Figure 1. Sales of Individual LTCI Policies, 1990–2014 (in thousands) Figure 1. Sales of Individual LTCI Policies, 1990–2014 (in Thousands)

Source: Cohen, 2016. Source: Cohen, 2016.

2005 and 2014, the number of people with private LTCI policies plateaued at about 7 million, show- ing no prospect of signifcant increase (Cohen, 2016). The number of companies selling policies that cover LTSS plummeted from 125 in 2000 to just 15 in 2014 (Cohen, 2016), and policy sales dropped nearly six-fold (see Figure 1, above). Because few people have private LTCI, most private LTSS costs are borne out of pocket. However, LTSS are increasingly expensive and catastrophically unaffordable for most peo- ple. Between 1988 and 2013, out-of-pocket LTSS expenditures more than tripled (Wiener, Knowles, and White, 2017). In 2017, the national median annual out-of-pocket cost of a nursing home stay was more than $85,000 for a semi- private room and more than $97,000 for a pri- vate room (Genworth Financial, 2017). Few disabled older adults can afford LTSS out of pocket, and many LTSS users “spend down” to qualify for Medicaid (Wiener et al., 2013). Medicaid is the jointly fnanced federal−state means-tested welfare program that is the pre- dominant source of LTSS fnancing, and it also covers an array of health services for numer- ous vulnerable populations (Wiener et al., 2013). Medicare, in contrast, is a federal social insur- ance program that does not cover LTSS but does cover post-acute care. Combined federal and state Medicaid spending on LTSS totaled $167 billion in 2016, an increase of 4.5 percent from

Financing Source 1988 ($ billions)

2013 ($ billions)

Medicaid Medicare



4.8 0.9


Other public payers Out of pocket



47.7 32.4

Private insur- ance and other private financing Total, excluding Medicare Total, including Medicare






Note: Other public payers may include the Department of Defense and Department of Veterans Affairs. Data availability for other public payers, out-of-pocket, and private insurance, and other private financing sources is limited to home health and nursing homes expenditures. Source: Wiener, Knowles, and White, 2017. mentation makes it impracticable to ensure equi- table LTSS access, or to control LTSS growth in costs (Wiener, Knowles, andWhite, 2017). One fragment of LTSS fnancing is private, including coverage through long-term-care insurance (LTCI) and out-of-pocket spending. Private LTCI covers few, mostly high-income people, and the LTCI market is soft. Between

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the year prior (Eiken et al., 2018). Given its joint federal−state fnancing, Medicaid spending on LTSS is being squeezed by restraints on both federal and state budgets. The convergence of a growing population in need of LTSS, the collapse of the LTCI market, and increasing public costs tightening state and federal budgets make LTSS fnancing a politi- cally contentious priority, wherein cutting Med- icaid costs could reduce benefciaries’ access to quality LTSS and enflame growing social jus- tice concerns. Modernizing LTSS fnancing has been a national priority for decades (Wiener and Hanley, 1991), but policy makers have failed to achieve signifcant reform. Past LTSS fnancing proposals, objections, and failures are reviewed below to derive any lessons that might aid policy- making efforts. LTSS Financing Reforms Over the Decades The United States had two major LTSS fnancing periods in the past century. The frst was an age of sweeping change—including the establish- ment of our national social insurance and public welfare programs—and the second was an era of stasis with minimal LTSS fnancing reform. Policy-making lessons from these two epochs are reviewed below. Facing the economic catastrophe of the Great Depression, President Franklin Roosevelt passed the Social Security Act of 1935, which supported both means-tested federal−state public assis- tance programs for the aged (Title I-Grants to States for Old-Age Assistance) and a pay- roll tax contributory social insurance program (Title II-Federal Old-Age Benefts). In the 1960s, Medicaid and Medicare were jointly passed as amendments to the Social Security Act, build- ing on its bifurcated approach to covering pub- lic welfare and nonmedical personal care by the means-tested Medicaid program, and to cover- ing medical care through Medicare, the social insurance program (Watson, 2012). The passage of the Social Security Act and the enactment of Medicaid and Medicare are

unparalleled achievements in United States history. Pairing the public welfare approach, which addressed the urgent needs of people in dire fnancial need, with the social insurance approach, which made worker contributions the source of fnancing for most medical care, was key to producing the political will needed for these epochal changes (Watson, 2012). Although the United States substantially reformed LTSS fnancing and delivery during the twentieth century, in recent decades there has been no major LTSS fnancing reform (Caldwell and Bedlin, 2014; Wiener, 2013). Lessons from this era of political stalemate are explored below. The LTSS Financing Impasse In recent decades, efforts to establish a viable private LTCI market have floundered and the evolution of LTSS fnancing policy has stalled. Lawmakers have been unable to sustain con- sensus on any major LTSS fnancing policy. The essential question posed decades ago by Wiener and Hanley (1991) confronts us still: “Should the nation stick with a means-tested public welfare program as its major program for fnancing long- term care or should it enact a new program of social insurance?” We now face that question after decades of additional evidence showing that our current system provides incomplete and insufficient LTSS coverage. An early domino to fall in a series of repealed or otherwise unsuccessful LTSS fnancing reforms was the Medicare Catastrophic Cover- age Act of 1988, which was repealed just a year after its passage. The Act made changes to the Medicare skilled nursing facility beneft to pro- vide slightly more days of coverage, eliminate the prior hospitalization requirement, and change the co-payment, but did not extend Medi- care coverage for nursing home care (Wiener, Knowles, and White, 2017). Repeal, however, was not driven by concerns about the beneft pack- age, but rather about how the benefts would have been fnanced. The benefts were fnanced by Medicare benefciaries, particularly by benef-

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The Financing of Long-Term Care: An American Conundrum

ciaries with greater fnancial resources, mainly through a supplemental premium or income tax and increases to monthly premiums (Wiener and Hanley, 1991). Opposition to this fnancing plan by the proposed fnanciers was convincing: Many elderly resented the idea of paying additional taxes to finance the new coverage. This would have represented a hefty burden on some, and, unlike the rest of the Medicare program, the additional benefits mandated by the act would have been financed entirely by the elderly (Rice, Desmond, and Gabel, 1990). Soon after repeal of the Medicare Catastrophic Coverage Act, a major new LTSS fnancing pro- posal was offered. Clinton’s was not the last attempt at comprehensive LTSS financing reform to succeed technically, but to fail politically. The Medicare Catastrophic Coverage Act mandated a commission to address LTSS fnanc- ing. The U.S. Bipartisan Commission on Com- prehensive Health Care, widely known as the Pepper Commission (named after Representa- tive Claude Pepper, D-FL), was chaired by John D. Rockefeller IV and composed primarily of members of Congress, plus three commissioners appointed by President Ronald Reagan. It had substantial political clout and sought to address the fnancing issues of LTSS and healthcare for the uninsured. The Commission recommended a social insurance program to fnance long-term care, including home- and community-based services (HCBS) and a three-month nursing home beneft. The plan resembled earlier proposals by Senator Ted Kennedy (D-MA) and former Social Security Commissioner Bob Ball that would have covered comprehensive homecare and six months of nursing home care, but the Pep- per Commission’s proposal covered just three months of nursing home care in an effort to

concentrate public expenditures on benefcia- ries with a stronger chance of staying in the community or returning home from a nursing home (Wiener and Hanley, 1991). Despite the proposal’s familiar and somewhat leaner ben- eft design and the increasingly urgent need for LTSS fnancing reform, the $66 billion estimated cost to implement the Pepper Commission’s rec- ommendations made the proposal nonviable. Although the increasing need for LTSS was (and is) undeniable, the costs of action bred a para- doxical political inertia: [A]s a political issue, long-term care faces a paradox. On the one hand, the major factor that is forcing long-term care onto the politi- cal agenda is that every day for the next 70 years there will be more and more disabled elderly. On the other hand, the costs associ- ated with caring for this growing disabled population is the major factor that causes policymakers to hesitate to address this issue (Wiener and Hanley, 1991) . The political intransigence of LTSS fnanc- ing has persisted, as have concerns about who, exactly, would pay for any public LTSS benefts. The Clinton Health Care Plan of the early 1990s offered comprehensive reform in an inte- grated federal system with negligible costs to taxpayers. It provided universal coverage, fnanced by employers for workers, with subsi- dies for small businesses, and fnanced by the government for people who were unemployed. President Clinton’s plan recommended a large, non–means-tested program for HCBS to be administered by the states (Wiener et al., 2001). The plan’s comprehensiveness made it trans- formative, but the beneft design was familiar and included technical solutions that remain important today—such as expanding HCBS and improving Medicaid coverage for nurs- ing homes—but it was never enacted. Ironically, a key technical strength of the plan—its com- prehensiveness—was its political Achilles heel, whereby it was spurned on account of “big gov- ernment” concerns. Shortly after its demise,

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GENERATIONS – Journal of the American Society on Aging

Heclo (1995) explained how the plan’s compre- hensiveness made it a political lightning rod: What was new—and what places the Clin- ton initiative in that rarest category of “big and bold” consolidating reforms— was the aim of incorporating all health industry inter- ests into a single, federally designed structure of regulation. The implication was clear: The fundamental work of health reform would be a thoroughgoing struggle of political power, Clinton’s defeat would not be the last attempt at comprehensive LTSS fnancing reform to suc- ceed technically, but to fail politically. The Patient Protection and Affordable Care Act of 2010 included the Community Living Assistance Services and Supports (CLASS) Act, which offered a voluntary public insurance pro- gram for people with disabilities who need LTSS. The insurance program was fnanced entirely by enrollee premiums, enrollment was voluntary, and the program would have provided mod- est benefts, primarily for HCBS. After paying premiums for at least fve years, enrollees who met the disability beneft criteria would have received a regular cash beneft to help meet their LTSS needs (Wiener, 2010). The CLASS Act was repealed by the Ameri- can Taxpayer Relief Act of 2012 for being fscally unsustainable over a statutorily required mini- mum 75-year stretch, and potentially leading us over the so-called fscal cliff (Wiener, 2013). Anti-government political sentiments opposing social insurance also contributed to CLASS Act repeal, as Frank (2012) argued at the time: not the technical design of good policy or negotiation about incremental changes. In the United States, social insurance has become a political flashpoint in that it is a vehicle for expressing the enormous distrust of government . . . These sentiments were on flamboyant display during the debate over the CLASS Act . . . The implication is that for the foreseeable future there is little chance that a social insurance approach would be politi- cally viable in the United States. This makes

the problem of realizing the welfare gains from expanded insurance protection against the risks of LTSS a much more complicated and difficult economic problem. Repeal of the CLASS Act sent us back to the technical drawing board to reform LTSS fnanc- ing in the same political landscape, and the results were similar. In addition to repealing the CLASS Act, the American Taxpayer Relief Act of 2012 established a Commission on Long-TermCare— with ffteen members, three appointees each by President Barack Obama, Senate Majority Leader Harry Reid (D-NV), House Minority Leader Budgetary pressures and political rhetoric suggest that the time for LTSS financing reform is nigh. Nancy Pelosi (D-CA), Senate Minority Leader MitchMcConnell (R-KY), and House Speaker John Boehner (R-OH)—to resolve LTSS fnancing and workforce and service delivery issues. The Commission was unable to reach agree- ment on LTSS fnancing, but produced recom- mendations on workforce and service delivery issues. LTSS fnancing indelibly, politically, frac- tured the Commission. A subset of one-third of the commissioners provided an alternative report to Congress with recommendations for a major public social insurance program and a coordi- nated private LTCI market solution for LTSS fnancing. These recommendations remain foun- dational to more recent LTSS fnancing reform proposals (e.g., Bipartisan Policy Center, 2017; Tripp, 2017), which are briefly reviewed below. Recent LTSS Financing Reform Proposals Our national failure to substantially reform LTSS fnancing despite decades of efforts has not deterred the development of several additional LTSS fnancing reform proposals and recommen- dations. Two of these more recent recommenda- tions for howLTSS benefts would be funded come fromLeadingAge and the Bipartisan Policy Center.

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The Financing of Long-Term Care: An American Conundrum

LeadingAge recommends a universal social insurance approach to coverage (Tripp, 2017). This approach would spread risk over a large pop- ulation, thus signifcantly reducing out-of-pocket and Medicaid spending, while simultaneously increasing overall spending on LTSS. This univer- sal systemwould infuse the insufficiently funded LTSS market with needed funds, while also low- ering prices for individuals more effectively than do voluntary LTCI programs (Tripp, 2017). The Bipartisan Policy Center (2016, 2017) promotes a different direction, with a strong focus on increasing individual funding of LTSS by improving the private LTCI market and mak- ing adjustments to promote Medicare coverage of LTSS costs. Recommended improvements to private LTCI include permitting penalty-free withdrawals from retirement savings accounts for employer-offered private LTCI, and permit- ting individuals to use retirement savings to pur- chase retirement LTCI that would help defray LTSS costs (Bipartisan Policy Center, 2017). Additionally, LTSS-focused adjustments to Medicare are recommended, including the devel- opment of a benefciary-fnanced Medicare sup- plemental beneft and permitting Medigap and Medicare Advantage plans to market a limited LTSS beneft as a voluntary supplemental ben- eft, or as a separate insurance policy, fnanced through additional premiums paid by enrollees (Bipartisan Policy Center, 2017). However, the Bipartisan Policy Center (2016, 2017) also rec- ommends a public social insurance program for catastrophic LTSS expenses, but recognizes the political challenge to such an approach, succinctly explaining: “There seems to be little appetite on Capitol Hill to develop new social insurance pro- grams” (Bipartisan Policy Center, 2016). Lessons Learned Our history of LTSS fnancing—including suc- cesses and failures—highlights the political inter- play of government spending and social justice concerns in LTSS policymaking. Both the passage of the Social Security Act and enactment of Medi-

care and Medicaid were uniquely successful LTSS fnancing achievements. Their distinct fnancing as social welfare and social insurance programs allowed policy makers to simultaneously address concerns about government spending and social justice. Employment instrumentally differenti- ates the programs. Payroll taxes and benefciary premiums covered the bulk of Medicare costs, thereby at least partially addressing concerns about government spending on medical care, and federal and state contributions pay for the Med- icaid safety net and for LTSS for people who are impoverished and in need, thereby addressing at least some social justice concerns. However, unlike acute or primary care, which are fnanced substantially by Medicare and private insurance, public fnancing for LTSS via the means-tested Medicaid program and a diminutive private LTCI market is insufficient. As government spending has been squeezed, the safety net has frayed, and people have fallen through, a result that has roused a series of (mostly failed) LTSS fnancing efforts. These efforts commonly failed because of faults in their funding plan (e.g., the Medicare Catastrophic Coverage Act) or broader political opposition (e.g., the Clinton Health Care Plan). None of these efforts have effectively offered a new LTSS fnancing solution that would better control gov- ernment spending and promote social justice, but increasing budgetary pressures and politi- cal rhetoric suggest that the time for reform is nigh. Although adopting social insurance for LTSS might solve the technical challenges of LTSS fnancing, historically it has been politi- cally insurmountable. Building on the bifurcated Medicaid and Medicare structure may be more politically viable, but less technically sound. The federalist structure of Medicaid allows state fnancing innovations, which face fewer political challenges than national LTSS fnanc- ing reform. Recommendations for a statewide LTSS beneft providing universal coverage detailed several strategies for beneft funding, including more progressive taxation, increased

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GENERATIONS – Journal of the American Society on Aging

taxing of estates and inheritances, closing the carried interest loophole (which enables hedge fund managers and private equity frms to claim income as capital gains and be taxed at signif- cantly lower rates), luxury consumption and real estate taxation, reallocation of civil monetary penalties to support the statewide beneft, and changing income tax rates, corporate tax rates, and state capital gains taxes to generate pro- gram revenue (Caring Across Generations, 2017). Although these strategies for beneft funding might face political challenge, statewide adop- tion of selected strategies can help substantiate their technical value. Conclusion As the history outlined in this article indicates, we have long needed to refnance LTSS. Nei- ther our private nor public fnancing of LTSS, or a combination of the two, is adequate to meet rising LTSS needs and costs. Fundamen- tal fnancing reform is needed, but decades of policy-making efforts have failed to gener- ate the political will for it to be implemented. Review of these past efforts suggests that generating political will for substantial reform

frst might require prioritizing our national LTSS fnancing concerns, particularly social justice and budgetary concerns. Differences in the priorities and values underlying these con- cerns have stymied decades of LTSS fnancing efforts. Establishing forthright and transpar- ent national consensus on the prioritization of these concerns, and their respective values, could help lawmakers craft policy capable of generating the political will needed for enact- ment. Clarifying how LTSS benefts would be paid for may be a relatively straightforward technical task in comparison. Although hopeful efforts to design a viable private LTCI market are expected to continu- ously show some limited promise for expand- ing the scope of coverage and integrating more seamlessly with public coverage, “getting on” with LTSS fnancing might be better advanced by conceding LTCI market failure and building consensus on a social insurance program aligned with American notions of social justice. Michael Lepore, Ph.D., is senior health policy and health services researcher at RTI International in Atlanta, Georgia.

References Bipartisan Policy Center. 2016. “Initial Recommendations to Improve the Financing of Long- Term Care.” Retrieved August 9, 2018. Bipartisan Policy Center. 2017. “Financing Long-Term Services and Supports: Seeking Bipartisan Solutions in Politically Challenging Times.” Retrieved August 9, 2018. Caldwell, J., and Bedlin, H. 2014. “Beyond the CLASS Act: The Future of Long-Term Care Financ- ing Reform.” Public Policy & Aging Report 24(2): 50–5.

Caring Across Generations. 2017. “Preparing for the Elder Boom: A Framework for State Solutions.” Retrieved August 9, 2018. Cohen, M. 2016. “The State of the Long-Term-Care Insurance Mar- ket.” In E. C. Nordman, ed., The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations . Washington, DC: National Association of Insurance Commissioners and The Center for Insurance Policy and Research.

Cohen, M. A., and Feder, J. 2018. “Financing Long-Term Services and Supports: Challenges, Goals, and Needed Reforms.” Journal of Aging & Social Policy 30(3–4): 209–26. Eiken, S., et al. 2018. “Medicaid Expenditures for Long-Term Services and Supports in FY 2016.” Retrieved August 9, 2018. Frank, R. G. 2012. “Long-Term Care Financing in the United States: Sources and Institutions.” Applied Economic Perspectives and Policy 34(2): 333–45.

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