Recently in long term care reform Category

Money Follows the Person is a cornerstone of the federal government's effort to move Medicaid beneficiaries from nursing homes into the community. But a new study commissioned by Medicaid itself shows how difficult those transitions can be. In the 30 states that have been testing the program over the past three years, only 8,500 people have used MFP to return to their communities.

That's just a tiny fraction of the nearly 1 million people who are eligible, and only about one-quarter of the 35,000 the participating states initially hoped to move. And of the 8,500 who have enrolled in the program, one-third lived in just one state--Texas. By contrast, California has signed up only 186 people since MFP began, and New York only 165, according to the study done by Mathematica Policy Research Inc.  

The concept makes great sense. Move people out of nursing homes, where most don't want to live and where the costs to Medicaid are extremely high, and help them get back to their homes or other community residences. Unfortunately, states have struggled to turn this concept into reality.     

Most troubling for the frail elderly, it turns out that while three out of every four people eligible for the program are age 65 or older, only one-quarter of participants are seniors. Money Follows the Person has been far more successful for younger adults with physical and developmental disabilities than for the frail elderly. 

Mathematica identified several reasons why so few frail elders participate. The biggest may be that they have no home to return to. In the original design, MFP participants had to have been nursing home residents for at least six months. Because many elderly people sold their homes or given up their apartments when they moved into a nursing facility, it was not possible for them to return to their communities. In addition, in many states participants were not allowed to move into assisted living facilities.

Just as troubling, many states don't have enough subsidized rental housing or funding for necessary home and community based services, such as personal aides or transportation. Unfortunately, the growing wave of state budget cuts is likely to make that problem even worse.  

Still, there is some good news. The 2010 health reform law (the Affordable Care Act) allows people to use the program after only 90 days in a nursing facility, instead of six months. That will make another 112,000 people eligible to participate. The health law also promised an additional $1.75 billion in funding, gives states new flexibility in providing community-based services, and continued MFP experiment until 2014.

Long-term care experts and top government officials have had high hopes for Money Follows the Person. They see it as key to helping both the frail elderly and younger people with disabilities receive the supports and services they need at home and not in nursing facilities. But as the Mathematica study suggests, MFP has so far fallen far short of those expectations.   

As Medicaid budget pressures grow, more states are turning long-term care over to private managed care companies. USA Today reports that six states now require both frail elderly and younger adults with disabilities to enroll in insurance-run Medicaid managed care plans. Another 10 states are planning to either create or expand these programs, according to the story.

The reason, of course: money. States pay the insurance plans a fixed amount to care for these patients. And the private insurers say they can provide quality care for less cost through their use of care coordinators and by keeping many people at home. 

Tennessee, for instance, pays private insurers an average of $4,400 per patient per month to provide Medicaid long-term care services. Under this system, if the insurer can provide care for less, it makes a profit. If its costs are higher, the insurer is at risk for the difference. This is a big incentive to create a care plan built around home care, which for many beneficiaries can be far less costly than a skilled nursing facility.

USA Today reported that one Tennessee insurer, Amerigroup, spent about $3,000 per month to care for one patient at home. The cost for this patient in a nursing facility would have been almost $4,600 per month and a money-loser for the insurer.     

Medicaid managed care isn't new. States have been using it for acute care beneficiaires (mostly low income mothers and kids) for years. But long-term care patients are a very different challenge.

One one hand, more than any other population, the frail elderly need to have their care coordinated. They have complex medical needs, often suffer from multiple chronic diseases, and frequently take many medications. If a mix of care managers, personal assistance, nursing, and other services and supports can help them get the care they need at home for less money, that is great.

This flat fee, or capitated, payment model works well with programs such as hospice and PACE, for instance.   

On the other hand, many insurance companies badly damaged their reputations in the 1980s and '90s with managed care plans that seemed more intent on maximizing profits than care. It will be important to put protections in place to be sure that the frail elderly, who are often unable to advocate for themselves, are getting the care they require.

The other problem with Medicaid managed care is that these beneficiaries often receive their physician and hospital care through Medicare, not Medicaid. Because these two programs are so poorly coordinated, seniors who transition from, say, home to hospital to rehab and back to home may not get proper care as they cross settings.

This lack of coordination between Medicare and Medicaid also creates some perverse and dangerous incentives. If, for instance, a Mediciad managed care patient winds up in the hospital as a result of poor care, neither Medicaid nor the managed care firm is on the hook. The bill, instead, is paid by Medicare.

If managed care is going to work well, there will have to be much closer delivery and financial relationships between these two payers, as there is with successful programs such as PACE or through provider-based managed care mechanisms such as Accountable Care Organizations.           

In an important speech for those interested in the future of the CLASS Act, federal Department of Health and Human Services Secretary Kathleen Sebelius said today that the program must be self-supporting but conceded that, as designed, it may not meet that goal. 

"The program must be able to pay for benefits over the long-term with the premiums it takes in,' she told the Kaiser Family Foundation. "No taxpayer dollars will be used to pay for CLASS benefits.This is non-negotiable."

At the same time, however, Sebelius said she was open to major changes to the program and acknowledged that the national, voluntary long-term care insurance system that was included in the 2010 health reform law "is not perfect." And, in an apparent nod to critics, said "it would be irresponsible to ignore the concerns about the CLASS program's long-term sustainability in its current form."

To respond to those fears, she suggested that HHS has broad authority to restructure key provisions of the law. Sebelius said that, besides sustainability, CLASS contains only two other "key principles." The first is that consumers must have the ability to direct their own services--a reference to CLASS' cash benefit. The other is that there should be no traditional underwriting for health status such as is included in private long-term care policies.

However, she explicitly opened the door to other highly controversial changes to the law. These include tightening its "at work" requirement, changing its premium structure, and assisting employers who offer CLASS benefits to their workers. 

The biggest change would make it tougher for some people with disabilities to enroll in the program. The law allows anyone 18 and older to sign up for CLASS as long as they earn just $1,100 a year, which makes it possible for many working people with disabilities to buy coverage. This is an extremely important change for them, but such a flexible standard has been sharply criticized by industry actuaries.

The problem is that this design may mean that those buying CLASS insurance will be more likely than average to claim benefits under the program. If that happens, the government will have to increase premiums to pay those claims which in turn will discourage healthy consumers from buying coverage. This will eventually lead to a "death spiral" that will destroy the program.

Sebelius said her office is reviewing that at-work requirement, although it is unclear how much flexibility she has to change it without an amendment to the law.

Other changes she is considering include:

Replacing a flat premium with one that increases annually with inflation. This postive change would allow for relatively low initial premiums, especially for young buyers.

Imposing anti-gaming rules. These would prevent consumers from going in-and-out of coverage during their lives without paying penalties.

Easing the burden on employers that offer CLASS insurance. This could be another key change. The law automatically enrolls workers in CLASS, but only if they get coverage through their job. Currently, however, the law includes no incentives for employers to participate.

Creating an aggressive marketing campaign for long-term care insurance. This change could attract broad insurance industry support. But coming up with the funding will be a huge challenge, especially given severe budget pressures and the strong opposition to CLASS from congressional Republicans.

Tailoring benefits to individual needs. The law appears to require Sebelius to approve only a single policy. But today she suggsted she might have the flexibility to approve multiple coverage options. This could be another key change.

Sebelius' speech today was a major acknowledgement that CLASS as currently designed is in deep trouble--both politically and as an insurance program. By recognizing the flaws that some of us have been noting for more than a year, she has taken the first steps towards making CLASS successful. The question now is whether it is not too late given the broad opposition to the program that has been building for months on Capitol Hill. 

A new study by the highly respected Center for Retirement Research at Boston College concludes that premiums for coverage under the CLASS Act--the new voluntary national long-term care insurance program included in the 2010 health reform law--are likely to be unaffordable for many middle class families.

The analysis, by center director Alicia Munnell and co-author Josh Hurwitz, projects an average monthly CLASS premium of $194--a rate that falls within the wide range of earlier estimates by both government and private analysts. For instance, the Congressional Budget Office projected monthly premiums for a CLASS-like policy would cost an average of $123, while the office of the Medicare actuary projected a premium twice as high.

To estimate premiums, Munnell and Hurwitz built a basic economic model to project premiums for both CLASS and several variations of the insurance program. The authors conclude that premiums could be cut significantly with some major changes to the basic CLASS framework. However, they found that the deepest premium cuts would only come if the insurance were made mandatory--an outcome favored by many economists but quite unlikely in the current political climate. 

They concluded that only a mandatory program could drive premiums below $100 per month.      

As I have noted at Caring for Our Parents in the past, the big problem with the CLASS design is that coverage is available to all, including working people who already have disabilities. This is good for them, but their high level of likely claims threatens to make premiums unaffordable for healthy buyers.

To ease that problem, Munnell and Hurwitz propose a couple of changes to the CLASS design that would mimic the medical underwriting that private insurers use to hold down premiums. They'd require both a tougher work requirement for buyers and a 10-15 year waiting period before they can collect benefits. The current waiting period is five years. 

Unfotunately, while these changes may make good actuarial sense, they'd drive a wedge between the political coalition of aging and disabilities groups that backed CLASS in the first place.

The authors also suggest a more practical change that I have also proposed. They'd index premiums for inflation instead of setting them at a fixed level for life. This one adjustment could cut average premiums by one-third to about $120, Munnell and Hurwitz estimate.

Finally, they urge a major marketing campaign to teach prospective buyers the importance of planning for long-term care needs. As they note, however, such an effort will be costly for the government. While some private foundations and advocacy groups have commited to help fund such a campaign, it is hard to imagine the current Congress allocating any new funds for the effort. 

The Munnell and Hurwitz paper is more evidence that while CLASS is based on a good idea, it faces huge challneges if it is going to succeed in the real world. 

Prepare yourself for big new cuts in government support for elder care.  

In his State of the Union address last evening, President Obama called for a five-year freeze on a narrow slice of the federal budget. Unfortunately, programs subject to the freeze would include many that are critically important to the frail elderly and younger people with disabilities--especially those living in the community.

This is only the beginning of what will be a very difficult period. Yet it is an opportunity for communities to pull together to provide services that government may no longer offer.

The freeze would not include Medicare or Medicaid, although Medicaid long-term care benefits are already being cut at the state level. However, it is very likely that programs such as meals-on-wheels, adult day care, transportation, housing, aging and disability resource centers, and Area Agencies on Aging would all be hit by this freeze.

It is not clear exactly how the freeze would work. It could be an across-the-board cut in all so-called domestic discetionary programs. These are programs that are subject to annual congressional review, but exclude entitlements such as Medicare, Medicaid, and Social Security. Alternatively, Congress could pick and choose which programs to cut, as long as the total amount of all domestic non-entitlement spending did not rise from year to year.

Either way, a freeze will inevitably result in fewer services since demand for this assistance is growing as the population ages and the cost of services rises.

Congressional Republicans are already criticizing Obama's plan as too weak and vow to cut even more deeply into these programs. Some would return spending to 2008 levels, others to 2006 funding. However it finally works out, there is little doubt that many of the long-term care supports and services that seniors now rely upon are in line for major cuts.

With a national debt of $14 trillion and annual deficits of more than $1 trillion, there is no doubt that government spending is going to be trimmed--perhaps quite substantially.It is also likely that sooner or later, federal payments for Medicaid services will also be slashed. One can hope that an eventual budget deal will eventually include tax increases as well, which would help soften the spending blow. But in the current political environment, that is not likely--at least until after the next presidential election.

So what do families and advocates do? I believe we need to begin to look for community, non-government solutions. If transportation services are cut, we should pull together to create volunteer ride programs. Senior villages are one way to build such an infrastructure. So are more informal groups organized around neighborhoods, churches, synagogues, or fraternal organizations.

If budgets for government-funded resource centers are slashed, we should support private non-profits that pick up the slack.(Full disclosure: I serve on the board of one of these--the Jewish Council for the Aging of Greater Washington--and as an adviser to another--Caring from a Distance). 

As needs grow and government services shrink, we all face a huge challenge. But it is also an opportunity to rethink our obligations to, not only our own parents, but to our neighbors and friends. I hope we will be creative enough to take up this challenge.    

Last year, the Minnesota Citizen's League asked me to help with a very ambitious project: The group wanted to find ways to improve our broken system of long-term care financing. Earlier this month, the non-profit, non-partisan League came up with its recommendations. I don't agree with them all, but among their far-reaching proposals are some ideas that I hope have legs. 

The League's white paper, called "Moving Beyond Medicaid: Long-Term Care for the Elderly as a Life Quality and Fiscal Imperative" makes three basic recommendations--all aimed at increasing the role of personal responsibility for long-term care while maintaining a safety net for the most needy.

The group would restructure Medicaid, encourage innovative financial products to help families pay for long-term care, and begin a broad education campaign through civic organizations and employers.Their goal is for half of Minnesotans to have some financial planning in place for long-term care by 2015. 

Here is a brief summary of each proposal:

Medicaid: The state/federal insurance program would remain a safety net for the very poor, but middle-class families would be expected to self-finance some of their long-term care costs. While Medicaid would supplement coverage, families would either rely on savings, private long-term care insurance, or home equity to pay their share. They could also buy coverage through the the CLASS Act, the new voluntary national long-term care insurance program that was included in the 2010 health reform law.

New Financing Tools: These include a program to offer prizes to low- and middle-income households who open new savings accounts, a design modeled on an existing program in Michigan. My favorite idea, however, is a new hybrid home equity/reverse mortage product that would provide a low-fee way for people to tap into the equity in their homes for long-term care needs. Today, reverse mortgages can serve that purpose but their fees are too high.

In the League model, Minnesota could create a new low-cost product. I've written about a similar model where the state itself could lend money to those who need long-term care and, get, in return, a lien on the recipient's home. After the person getting care and their spouse died, the loan would be repaid with interest. Such a design would give people broad flexibility in designing their own care, an advantage not available with Medicaid.           

Education: Finally, the League, which has close ties to the local business community, urged companies to play a larger role in encourgaing workers to plan for their long-term care needs.It calls on business to encourage workers to increase both savings and consider home equity or insurance projects to prepare for care in old age. 

This would be a major change. Today, only one in seven workers has access to long-term care insurance through their workplace, according to the SCAN Foundation. And while the CLASS Act is built on workers buying government long-term care insurance through their job, there is little evidence that employers will be willing to offer the coverage as part of their benefit packages.  

The League has built a sturdy foundation for long-term care reform--education, better savings vehicles, and a broad reform of Medicaid. Minnesota's state-funded long-term care program is, like most states, under tremendous financial pressure these days. I hope the state gives some of the League suggestions a try.       

Senior Obama Administration official Richard Frank says he is "cautiously optimistic" that the Department of Health and Human Services (HHS) can build a viable government sponsored long-term care insurance program under the CLASS Act. CLASS is a national, voluntary long-term care insurance system that was included in the 2010 health reform law.

Frank, a highly respected professor of health policy at Harvard Medical School, is Deputy Assistant Secretary for Policy and Evaluation at HHS. He told a group of long-term care industry representatives, researchers, and elder advocates today that while HHS faces major challenges, the agency can design a workable insurance program under the controversial law, 

Although a deficit reduction commission appointed by Obama recommended last week that CLASS be either repealed or reformed, Frank says he is squarely in the reform camp. And, while he acknowledges it will be a major challenge to create policies that consumers will be willing to buy, he thinks that goal can be reached without changes to the law. CLASS, Richard says, "is designed to change the terms under which we buy and sell long-term supports and services in this country." And, he adds, "it has a great deal of potential."

I agree. But I worry that a real insurance market may never develop under CLASS. The problems are many: CLASS is a voluntary program for both consumers and their employers. The government is barred from refusing coverage to anyone over 18 who works even part-time, no matter what their health status. Anyone who makes more than $1,100 a year is eligible to participate, and low-income workers may buy insurance for only $5-per-month. This arrangement will encourage many working people with disabilities to buy, but also threatens to drive premiums so high that others will be discouraged from purchasing.

Richard acknowledges the problem, and says he assumes initial participation rates will be quite low--likely well below 10 percent. He also says HHS is wrestling with a number of technical issues, such as how to encourage employers to participate in the program, how CLASS will work for those who are also using home care services under Medicaid, how to manage the risk of rapidly-rising long-term care costs, and how to deermine eligibility, especially for those with mental illness. The mentally ill are not usually covered by long-term care insurance but some will be eligible for CLASS benefits.

Making CLASS work will be a huge challenge, but at least today, two years before HHS is due to begin selling policies, Frank still thinks the agency can pull it off. I hope he's right.    

Erskine Bowles and Alan Simpson, the co-chairs of President Obama's deficit reduction commission, have called the CLASS Act "unsustainable" and are proposing that it be either reformed or repealed. They say the national voluntary long-term care insurance program passed as part of this year's health reform law "is viewed by many experts as financially unsound."

The first version of the Bowles-Simpson plan, released last month, was silent about CLASS although sources were warning it was on the panel's radar screen. However, in an effort to win votes from members who have been skeptical about CLASS since it was enacted, the co-chairs added their call to repeal or reform the law in a way that is "credibly sustainable over the long-term."

Unfortunately, the co-chairs dodged the question of how they'd do that. And that was a serious mistake. 

As regular readers of this blog know, I support the concept of CLASS but have argued since before it passed that it needs to be redesigned. The commission chairs provide no clues about how they would do that. Do they support a mandatory program? Would they make technical changes to try to make the insurance more attractive to buyers in a voluntary system? Do they really want to repeal the whole thing?

It is unlikely that the Bowles and Simpson deficit plan will even win the support of their own commission when the panel votes later this week. And if it did, it is hard to imagine Congress ever approving it. However, it is an indication of the mood of Washington these days, and of the discomfort over CLASS in the context of massive ongoing budget deficits. Most dangerous for the program, should Congress ever tackle the deficit, it is hard to see where CLASS would find the support it needed to survive an assault.  

The co-chairs of President Obama's bipartisan deficit commision have proposed a far-reaching plan to reduce the nation's massive deficit. It includes big changes for both current and future seniors. Among them: higher Social Security taxes and reforms in the design of benefits, reduced payments to Medicare providers and greater cost sharing by Medicare beneficiaries, and, perhaps most dramatic, a fundamental change in federal payments for Medicaid long-term care.

The chairs, Erskine Bowles--who was chief of staff to President Clinton, and Alan Simpson--a former Republican senator from Wyoming--released their draft plan today. Their proposal still must win the support of 14 of the 18 members of the bipartisan commission, which will be an uphill battle. If the group can reach a consensus, the panel's plan would be presented to Congress in early December.

The Bowles-Simpson plan makes cuts throughout government, including defense and most domestic spending programs. It also includes $750 billion in tax increases over 10 years. While much of what the co-chairs proposed will be hugely controversial, their plan shows what it will take to put the nation back on a firm fiscal footing.

In such an environment, long-term care services can't expect to be immune from cuts. Their biggest proposed change: capping the federal contribution for Medicaid long-term care.

Today, the federal government must automatically pay its share of the cost of these services, no matter how fast they rise. The feds contribute an average of about 60 percent of the cost of Medicaid, although the share varies from state to state. Bowles and Simpson would, for the first time, place a ceiling on the federal match for this joint state/federal program, reducing the federal contribution by about $90 billion from 2012 to 2020.

This would place a tremendous increased burden on states and likely result in both lower payments to nursing homes and home health agencies, and tougher eligibility standards and lower benefits for frail seniors and younger people with disabilities.

No doubt these proposals are harsh, but, like them or not, changes such as these are inevitable. They are a big reason why we must find a way to replace Medicaid long-term care with an insurance program.        

There is lots of quiet speculation in Washington about the fate of the CLASS Act in the wake of the huge Republican 2010 election day victory. Will CLASS be repealed? Will it be changed in any major way?

My best guess is that CLASS--the national voluntary long-term care insurance program passed as part of the 2010 health reform law--will neither be repealed nor fundamentally changed, despite the GOP threat to roll back the entire health law. 

That is not to say conservatives won't try. Activists at the Heritage Foundation and elsewhere have called for repeal of CLASS, which they fear will turn into a new unfunded entitlement program. Sen. Lindsey Graham (R-S.C.) has already introduced a bill to repeal the law.

Worse for CLASS backers, the law has no real advocate in Congress. No Democrat has stepped up to take ownership of the idea since its primary sponsor, the late Sen. Edward Kennedy, died last year. Indeed, about a half-dozen Democratic senators opposed the provision when it was added to the health law.

There is a good chance the soon-to-be GOP-controled House will pass a repeal bill early next year. It would fit with the Republican vow to wipe out the entire health law and their special dislike of federal long-term care insurance. But even with strengthened GOP ranks in the Senate and the support of those Democrats, CLASS opponents remain far short of the 60 votes they'd need to repeal the law. And they''d need even more-- 67 votes-- to override a veto by President Obama. As one insurance lobbyist told me today, "CLASS isn't going to disappear."

Similarly, there is little chance Congress will gut the bill. Unfortunately, the new political environment also makes it extremely unlikely that Congress will improve those elements of CLASS that need to be fixed. As I have written before, there is a real question about how many people will buy CLASS policies, which are likely to cost an average of $100 or more per month.

Some changes in premium design and eligibility could help bring those premiums down. But given the hostility to the law on Capitol Hill, there is no chance the White House will ask Congress to make repairs. Those backers of CLASS who pushed to pass the law, flaws and all, in the expectation that they could fix it down the road are now stuck with the measure, flaws and all.