Laying the Framework for Long-Term Care Financing
In a report authored in part by former Senators Tom Daschle and Bill Frist, the Bipartisan Policy Center (BPC) recently issued groundbreaking recommendations for improving long-term care (LTC) financing. The report contains policy proposals detailed with specific steps policy makers should take to proactively tackle the issue of financing LTC for the elderly.
BPC recommends that employers offer LTC insurance and automatically enroll employees with an option to opt-out. LTC insurance plans would also be made available for purchase in the state and federal insurance marketplaces, according to BPC’s recommendations. In addition, a recommendation has been made to allow enrollees to use retirement savings to pay for LTC insurance. BPC also outlines a framework for creating a LTC insurance safety net to cover the small percentage of the elderly population that consume the most care.
Impact on the Industry
The report and initiative is of particular interest to the skilled nursing population for two reasons.
- First, a bipartisan approach, endorsed by prominent policy makers, could shine light on the issue of financing long-term care beyond the issues identified in the report.
- Secondly, should the reforms develop into tangible policy proposals, the skilled nursing group has much to gain, given that the recommendations would shift revenue sources from Medicaid onto Medicare and private insurance.
One drawback for skilled nursing is the increased drive for home-based care, for which the BPC report advocates. Many seniors delay facility-based LTC, relying solely on friends and family in an effort to reduce the financial drain institutionalized care can impose. This obstacle can be overcome, however, if more of the aging population is covered with LTC insurance.
Another major benefit to skilled nursing providers is the creation of a catastrophic LTC safety net. Currently, skilled providers often end up footing the bill for very high-cost Medicaid residents. Added support to cover the real cost of treating high-cost Medicaid residents—who make up about 15% of adults over 65—is a welcome reform to the current standard.
Getting Early Buy-in
As with many life insurance policies, those seeking LTC insurance must meet a certain standard of health in order for the providing company to issue the policy. For most, this criterion means that early enrollment prior to reaching a stage of declining health is required.
The BPC recommendations tackle this issue head-on through incentives and employer buy-ins and by expanding access to LTC insurance plans for middle-income Americans.
The proposal to allow LTC insurance to be funded through pre-tax dollars, essentially wrapping it into existing Medicare or retirement plans, further encourages buy-in from older adults that haven’t yet reached retirement age.
One of the major challenges faced by this initiative is that many of these proposals leave out much of the Boomer population, since these policies would affect those around age 60, an age that half of the Boomers have already reached. Furthermore, even though the recommendations derive from a bipartisan source, they still lean towards expanded government spending in an era when entitlement reform is at the top of the conservative agenda.
Reforms to increase home- and community-based services, according to BPC, are actually reasonably attainable through regulatory reform at the federal level; many of the home- and community-based recommendations do not require legislative action. While increasing the emphasis on such services does not benefit the traditional skilled nursing sector, it does bring down overall costs of treating the frail elderly.
This report and subsequent follow-ups will be interesting to watch, given the potential to influence LTC policy.