CLASS would provide a government-sponsored basic cash benefit to those needing long-term care services at home, in assisted living, or in a nursing facility. All workers would be automaticaly enrolled, although they'd have the right to opt-out of coverage. The design of the policies, including premiums and benefits, would be left to the Secretary of Health & Human Services.

The proposal is strongly opposed by many private long-term care insurance companies.   

The study will be very influential on Capitol Hill. Yet independent analysts say it is far too pessimistic. As one long-term care health economist told me this morning, "Actuaries lack imagination." For more on the pros and cons of CLASS, check out my Kaiser Health News column from this morning   

Foster projects only about 2.8 million people would purchase the voluntary insurance--about 2 percent of potential participants. One reason: He estimates the average premium would be a steep $180 per month. Because so few would buy insurance, Foster estimates that CLASS would do little to reduce Medicaid long-term care costs.

In addition, he projects that 10-year net revenues for the program would be only about $39 billion--a little more than half of an earlier Congressional Budget Office estimate. Most of that, he concluded, would be during the first five years when CLASS would be collecting premiums but not yet paying benefits (the program would require people to pay premiums for five years before becoming eligible for benefits). After 2025, he says, the program would lose money.

Foster's estimate of the number of people who would participate in CLASS is lower than CBO's and even lower than the insurance industry. Both projected about 5 percent would buy.

Privately, however, some long-term care experts think the participation rate could be as high as 20 percent, but only if average premiums could be held below $100 per month.

The Medicare study identifies the key challenge to the CLASS advocates. Many economists and actuaries believe a national long-term care program works best when everyone is required to participate. The premium for such a mandated program would be very low--perhaps averaging as little as $45 per month, according to several experts. Most industrialized countries--including Germany, Japan, and France--have already adopted such a system and consumers are very happy with it. Unfortunately, it is hard to imagine that Congress would enact such mandatory insurance as part of health reform.

I agree with those who think the actuaries are being overly-pessimistic and I believe participation in a well-designed program will be much higher than they project. But Foster, CBO, and the industry all identify real problems with a voluntary system. Thus, CLASS backers face a tough choice: pass a second-best program that runs the risk of failure, or come back again in a couple of years with a better plan. Welcome to health care politics, 2009-style.             

New Hampshire faces some special challenges. Only about 13 percent of its Medicaid dollars for adults with disabilities and the elderly are spent on home and community care. The rest goes to county-run nursing homes, which receive Medicaid payments that are among the highest in the nation. On top of that, it is not easy to deliver home care in a state that is both overwhelmingly rural and faced with snowy and cold winters. Finally, New Hampshire faces a very difficult budget environment in the current recession, in part because of its very narrow tax base.  

At the same time, like many other states, New Hampshire also must also deal with a severe shortage of health aides and other dirct care workers--a resource that is key to any successful home care program.

The caucus would like to find ways to expand the state's Medicaid home care program, but skeptical lawmakers fear it would only increase overall Medicaid spending. Already worried  that federal health reform will put new pressure on that part of Medicaid that provides health care for poor mothers and their children, the state is especially wary of taking on new, and potentially more costly, obligations to seniors. 

There are no easy answers, but it is good to see a group of commited legislators trying to come to grips with a tough set of issues.

For those caring for parents, this is one worth checking out.    

(I posted this yesterday on my TaxVox blog, but those interested in long-term care may be interested as well)

Long-term care insurance has been a model of market failure. The need for care in frail old age or disability seems to be the ideal insurable event. Two-thirds of those over 65 will need some assistance before they die and 20 percent will need it for more than five years. Yet only about 6 million people own this insurance, and few seem interested in buying.

To boost sales, the industry has pushed for all sorts of government assistance. A federally-funded marketing effort called the Own Your Own Future campaign has tried to raise public awareness of the need for coverage. A joint state/federal program called the Partnership Program attempts to more closely link private long-term care insurance with Medicaid. And about three dozen states now offer tax incentives for the purchase of insurance (30 provide a deduction, 7 give credits, and 3 give both).

Now, in the context of health reform, carriers are pushing for new federal tax subsidies--either a credit or inclusion of long-term care insurance as part of an employer's overall benefit plan. Making this insurance a benefit in such a "cafeteria plan" would allow workers to buy coverage with pre-tax dollars, significantly reducing their costs.

The question is: Do tax subsidies encourage people to buy insurance? The answer seems to be: Not much. In a forthcoming paper, David Stevenson and others at the Harvard Medical School compare purchase rates in states that have tax subsidies with those that do not. They found sales are about 10 percent higher where buyers can get a tax break. Credits increase the participation rate by about 20 percent while deductions make no significant difference at all. Oddly, people are more likely to buy in states with low level credits than in those with more generous credits.

Their results track an earlier paper by Anne Cramer and Gail Jensen, and another by my Urban colleague Rich Johnson that also found that demand for this insurance does not respond very much to lower prices.

The purpose of these subsidies is to reduce Medicaid costs, which states share with the federal government. The idea: Private insurance can at least delay the time when someone needs to go on to Medicaid by picking up some nursing home or home care expenses.

But this benefit to states may not outweigh the costs of providing the tax breaks. Harvard's Gopi Shah Goda finds consumers may be more responsive to tax subsidies than other research concludes, but still estimates that $1 in state tax expenditures produces just 84 cents in Medicaid savings, half of which go to the federal government.

Because federal tax rates are much higher than state rates, a federal subsidy might be worth more to consumers. And including this insurance in a cafeteria plan may increase worker awareness of the product. On the other hand, these incentives are most likely to encourage wealthy consumers to buy, the very population least likely to qualify for Medicaid. And, like most tax subsidies, a big chunk will end up in the pockets of people who would have purchased the insurance anyway.

The apparent failure of these state tax breaks is something Congress should keep in mind as it weighs whether to expand federal tax breaks for this insurance.   

However, CLASS is running into new roadblocks in the Senate, where a consensus bill is still being written by Democratic leaders and President Obama. Key Democrats, including Kent Conrad of North Dakota and Ben Nelson of Nebraska, have turned sharply critical of the plan, especially because Congress would count premium revenues as a way to help pay for broader health reform. At the same time, big private long-term care insurance companies are stepping up their efforts to derail CLASS. One strategy: Delay passage by calling for a government study of long-term care financing needs.

The CLASS Act would make government long-care insurance available to all workers over 18. No one could be excluded because of pre-existing conditions. All workers would be automatically enrolled, although they'd have the option to opt-out.

Those with disabilities would receive an average minimum cash benefit of $50-a-day for life once they showed an inability to care for themselves. The premium for this coverage is uncertain. In earlier versions, the proposal set a target of an average premium of $65-a-month. Recent estimates by the Congressional Budget Office assume premiums would average around $120-a-month.    

However, the House version gives broad authority to the Secretary of Health and Human Services to design policies, including flexibility to set both premiums and benefits. For the poor, Medicaid would continue to provide assistance beyond the CLASS benefit. Others could purchase private insurance to supplement the government policies.

In recent weeks, nearly all advocacy groups for seniors and the disabled have lined up behind the measure. They see it as a major step towards giving those who need long-term care, either at home or in nursing homes, important financial resources. But the insurance lobby is hardening its opposition, fearing CLASS coverage would further damage an alrready-weak private market.  

These facilities operate on several different business models but Erickson, like many others, requires a hefty, refundable, entrance fee (often hundreds of thousands of dollars). Residents also pay an additional monthly fee depending on their level of need. For instance, an independent living apartment may run $2,000 per month, while a nursing facility stay may cost $300 per day.

In the Erickson model, the entrance fees are fully refundable but only after a resident leaves their apartment and it has been reoccupied. Residents never own their units, but are instead buying lifetime access to the comunity's services. The fees serve as, in effect, an interest-free loan to the operator. Erickson Communities has 23,000 residents in 19 states. 

CCRCs have been under tremendous pressure in the current economic downturn. Their business model relies on new residents selling their homes and using the proceeds to the pay their entrance fees. With the collapse of the real estate market, fewer upper middle-class seniors have been able to sell. At the same time, highly-leveraged CCRC operators are being squeezed by impatient lenders. According to Erickson's bankruptcy filing, available here, the firm was driven into Chapter 11 by its bankers.

The consequences to residents are unclear. Erickson says their entrance fees are safe, but what happens if a current occupant dies or moves and a new resident is allowed to move in with a lower entry fee? Jay Hancock at The Baltimore Sun takes a good look at this issue. So does the Wall Street Journal's Anton Troianovski.

These problems highlight the complexity of resident agreements with CCRCs, arrangements many seniors simply do not understand. I am also concerned with the quality of care and services residents will receive as operators of these facilities face growing financial pressures. This is especially important for those living in the assisted and nursing facilities in the communities. 

The Erickson bankruptcy is likely to accelerate questions that lawmakers have been asking  about CCRCs. The U.S. Senate Aging committee has been investigating the business model for the past several months, and is likely to hold hearings on CCRCs sometime next year. 

Financial scams, sometimes orchestrated by trusted advisers and friends; physical abuse by caregivers; physical abuse of caregivers (I can't tell you how many stories I've heard about people being assaulted by the person they are caring for); and often-brutal psychological abuse. It all happens, and it is time we get it on the table. 

There is now a new national campaign to do something about elder abuse. The National Council on Aging and others have begun the Elder Justice Now! campaign to raise awareness and push for federal legislation to combat the problem. To learn more about the issue, and what this group would do about it, check out their website  http://elderjusticenow.org/  

Connie said the proposal continues to evolve, to satisfy both substantive and political concerns. However, its basic form remains unchanged: People would be able to participate as soon as they begin working, enrollment would be automatic, but they could choose to opt-out. Once they need care, they'd be eligible for an average minimum cash benefit of $50-a-day for life. The benefit would increase both with care needs and inflation.

It looks like the premium would now average about $120-a-month, twice what sponsors of the bill had first hoped. However, neither premiums nor benefits would be fixed in the legislation. Instead the Secretary of Health and Human Services would be given broad flexibility to design coverage.

While people would have to be actively working to be eligible for the insurance (a provision actuaries say is important to keep premiums relatively low), employers would not be required to offer a payroll deduction plan. This exemption could make enrollment complex and hold down participation.

We'll know within the next week or so whether CLASS will be included in the combined Senate bill. If it is, it will be a major step forward for the measure, which is already in the House version of health reform.     

That conclusion may seem obvious to caregivers, but Spillman and Long back it up with some hard data. They found that when family members suffer physical strain, lack of sleep, or financial pressures, their elders are far less likely to be able stay at home. Their research squares with what I saw over and over again with the families in my book Caring for Our Parents.

One family, Steve and Judy Dow of Burlington, Vermont were trying to care for Steve's mom, Judy's parents, and raise two high school kids while working full time--Steve as a contractor and Judy as a public school teacher. It finally became too much, especially with Steve's mother who suffered from severe dementia, and the couple made the decision to move her into an assisted living facility.

There are lots of other reasons why chronically ill seniors are no longer able to stay at home, including their own declining health. But Brenda and Sharon conclude that if severe caregiver stress could somehow be eliminated, nursing home admissions could be cut by more than 70,000. 

Finding ways to reduce these crushing levels of stress is not easy, but this research, which expands on the results of some earlier studies, shows why it is important to try.        

Today, far too many Americans pay for care out of their own pockets until they run through their financial assets, then they go on to Medicaid, a welfare-like government program. Medicaid pays for their care in nursing homes, where they don't want to be, or, if they are lucky, provides some limited home care benefits. Almost no one buys Steve's preferred alternative, private long-term care insurance, because they can't afford it, don't understand it, and don't want to think about it. 

While Moses runs what he calls The Center for Long-Term Care Reform, he is an outspoken opponent of nearly all actual proposals for long-term care financing reform (George Orwell, phone home). His blog is bankrolled by the insurance industry, and his favored solution is to push more people to buy private LTC coverage by limiting their eligibility for Medicaid. Dude, the Democrats won the election.

He and I agree that Medicaid is a poor solution for those who need long-term care. For many, the benefit is both parsimonious and inappropriate, and care is poorly coordinated for those chronically-ill "dual eligibles" who receive both Medicare and Medicaid benefits. In addition, Medicaid is breaking the back of state budgets and putting enormous fiscal pressure on Washington.

That's why I like the idea of a national insurance program. Properly designed, it would give people more choice in the care they receive, ease the cost pressures on Medicaid, and substitute the personal responsibility of broad-based insurance for the welfare-like Medicaid system. So how does this make me "an advocate of more government financing?"

The CLASS Act can, and should, be designed to be self-financing. People would pay market premiums and get, in return, a benefit. No taxpayer dollars involved. If consumers chose, they could buy additional private long-term care insurance to supplement the CLASS benefit, much as they buy Medicare Supplement (Medigap) coverage today. And to the degree they'd be covered by a national insurance plan, some people could avoid Medicaid. That means less government financing of long-term care, not more.

I'd go a step further and make the insurance mandatory, but as long as it is self-financed through premiums there would be no new government costs.  

Steve's rhetoric echoes the absurd claims of a "government takeover" of insurance that we hear from some conservatives in the broader health debate. This argument is even more ridiculous in the context of long-term care reform. Private insurance pays only 7 percent of long-term care costs. Medicaid pays nearly half. It has already "taken over" paying for most of this assistance. In the real world, if your goal is to get Medicaid out of the long-term care business, a broad-based, financially stable, self-funded national long-term care insurance program isn't a bad place to start.

Oh, by the way Steve, despite your deepest wishes, I don't think the CLASS Act is dead. Far from it. The proposal faces an uphill battle this year--no surprise there--but it remains very much alive.

Currently, Medicaid is only required to provide long-term care in nursing homes. States provide limited home care services, but in most, the benefits are very limited. The amendments would make more frail seniors and younger people with disabilities eligible for home care, and provide financial incentives for states to expand these benefits.

Baucus also added a separate proposal that would allow hospice patients to receive full Medicare benefits. This three-year demonstration project would make it possible for hospice patients to get both hospice benefits and treatment for their terminal illness. 

Baucus added the changes as the Finance Committee began drafting its version of health reform.  

The massive health reform bill proposed today by Senate Finance Committee Chairman Max Baucus (D-Mont) touches nearly every part of the health system: Medicare, Medicaid, private insurance, hospitals, doctors, you name it. Except for one critical element. The proposal all but ignores the needs of the 10 million Americans who require long-term care, both at home and in nursing facilities, and the 40 million family members and friends who care for them.

In fact, the measure could end up hurting some of the poorest and most frail who rely on Medicaid for the long-term care services. I'll tell you why in just a minute.

The proposal does include some new incentives for people to buy private long-term care insurance through their workplace. For the first time, it would allow employers to include this coverage in what are known as cafeteria plans. The benefit for workers is they'd be able to pay their premiums with pre-tax dollars. That's a big advantage, especially for the highest earners.

However, the proposal also would cap the amount of a worker's annual pre-tax Flexible Savings Account contributions at $2,000. That means they would have only that amount to pay for health care deductibles, copayments, and other uncovered medical expenses. And it would leave them with very little to pay for long-term care premiums.

Baucus' proposal does not include the national long-term care insurance program known as the CLASS Act, although that idea is included in another bill that was approved over the summer by the Senate Health Committee. It includes only some modest provisions to better coordinate care for those with multiple chronic diseases, and it does nothing for hard-pressed direct care workers such as home health aides.

Finally, the Baucus plan does nothing to encourage states to provide Medicaid long-term care at home rather than in nursing facilities. And here is where it may make it even more difficult for those at home to get help from Medicaid. The Baucus plan would greatly expand the number of young mothers and children eligible for Medicaid. But states must pay half of those costs, and they would be only partially reimbursed by the feds. That means their Medicaid budgets, already stressed to the breaking point, will be squeezed even more. And where will they cut to make up their new costs? Home care expenses for the elderly and disabled--a costly benefit states are not required to provide--could well be a prime target.

Health reform will go through many more steps over the next few months. And long-term care reforms remain on the table. But by ignoring this critical issue today, Baucus certainly didn't help those efforts.           

The second panel was made up of congressional staffers, all of whom work for lawmakers who have sponsored long-term care legislation that Congress is considering as part of broader health reform. The aides included Connie Garner of the Senate Health Committee, who worked for the late Ted Kennedy for many years on a plan for national long-term care insurance (the CLASS Act); Alison Bonebrake, whose boss, Senator John Kerry (D-MA), is sponsoring a bill to make it easier for Medicaid beneficiaries to receive home care; Anne Montgomery, senior policy adviser to the Senate Aging Committee; and others. 

As readers of this blog now, long-term care is very much on the bubble in the debate over health reform. With changes in the overall health system so controversial, many lawmakers have been reluctant to confront long-term care as well. Financing issues such as the CLASS Act; Medicaid reforms such as Kerry's; and measures to encourage doctors, nurses, aides, and others to take jobs caring for the frail elderly are all in the mix. Each addresses a critical problem for the 10 million Americans who need long-term care and the 40 million family members and friends who help them. But all must overcome a wall of indifference if they are to become law.

In that environment, I asked each of the Hill staffers whether it is better to address long-term care this year as part of health reform, or to wait for another year or two and consider these issues separately. Every one of the six staffers on the panel said the same thing: Do it now. Don't wait. Get as much long-term care reform as possible today.

It sounded like a pretty good message to me.

It may sound selfish, but if you are assisting a loved one, you first need to take care of yourself. After all, if you get sick, who will help mom or dad? It is like the announcement flight attendants make: In an emergency, first put on your own oxygen mask before helping your child.

Often, people must move into a nursing home, not because their own health changes, but because their caregiver suffers a medical crisis. It happened to my own mother-in-law, Ida, who suffered a massive stroke while caring for her husband Al.

What can you do to keep yourself healthy while assisting a loved one who is frail or disabled? Here are a few tips:

Take a break. I know it is hard, but at least one day each week take some time off. Ask a neighbor or friend to sit with your dad or your spouse for a couple of hours. If you can afford it, hire an aide. While she is there, she can help with cooking or housework.

Use adult day care. Many offer meals, activities, and even transportation. Not only do they provide caregivers with important time off, but they can also be a great change of pace for mom or dad.

Get some exercise. If nothing else, at least walk a little bit each day. It will not only make you more physically fit, but it will help relieve stress.

Watch your own health. If you start feeling unusually tired or weak, or get headaches or lose your appetite, see your doctor.

Join a support group. They are a great way to share ideas or find a shoulder to cry on.

Caring for a loved one is never easy. But you can make it a lot more manageable if you first remember to care for yourself.