The Role of the Private Sector in Financing Long-Term Supports

Long-Term Care Financing Advisory Committee Meeting June 18, 2009

Summary ofDr. Garner Presentation

Summary of Dr. Connie Garner visit Summary of Dr. Garner’s background and work with Senator Kennedy

Senator Kennedy has new perspective on disability work given his functional limitations

Must integrate disability with health care, education, employment, housing, rights, etc., so it becomes a lens through which we look at every issue

National health care reform process Senate Health, Education, Labor & Pensions and Finance Committees House Ways & Means, Energy & Commerce, and Education & Labor

Committees Stakeholder meetings and “workhorse” meetings

Workgroups1. Coverage: mostly models MA, including “Exchange”/Connector; sticking points

include public plan and employer mandate

2. Systems reform/quality: includes HIT and medical homes

3. Prevention: includes primary and secondary prevention

4. LTSS: includes cash benefit model based on functional limitations (CLASS Act)

5. Fraud and abuse

Summary of Dr. Connie Garner visit (2) LTSS in Health Care Reform: an “uphill battle”

Voluntary opt-out cash benefit program that pools risk Explored mandatory: $50B in federal savings per year (voluntary = break

even) CBO scores high due to “wood-work” effect Wraps to other products and “payer of first resort” to Medicaid Consumer must be working at enrollment and work for 5 yrs Benefit triggers based on functional limitations lasting more than

90 daysi. Unable to perform at least minimum # (2 or 3) of ADLs without substantial

assistance

ii. Requires substantial supervision due to substantial cognitive impairment

iii. Functional limitation similar (as determined by HHS regulations) to level of functional limitation described in i. or ii.

Maximum monthly limit: $5/month for individuals at or below 100% FPL; $65/month for others (can

be lower for younger individuals than for older individuals) Cash benefit: can never be less than $50/day

Summary of Dr. Connie Garner visit (3)

Focus groups with 20,000 college students indicate support for cash benefit program Willing to pay ~$30/month

Actuarial analyses indicate importance of including employed younger people with disabilities because act as risk-adjuster

Sen. Harkin’s “community choice” bill not included

Context forPrivate Financing Discussion

Framework for this discussion

Private financing (excluding out-of-pocket spending and informal supports) is a small part of the current picture ~5% - 9% (including LTC insurance and other private financing

mechanisms) Individuals and families bear a significant portion of the

“costs” ~20% is out-of-pocket spending ~36% is unpaid informal supports (for seniors)

For many, needing LTS is a significant risk (but not a certainty) 69% of all people turning age 65 in 2005 will need LTS; 40% will

need 2 years or more of LTS For some, needing LTS is a certainty (not a risk)

53% of people with LTS disabilities in MA are under age 65

Framework for this discussion (2)

96.7% of people with disabilities in MA have health insurance coverage* (which generally does not cover LTS) For seniors with disabilities (310k), 93% have Medicare

(~100k are dual eligibles who also have MassHealth) For non-elderly adults with disabilities (710k), 60% have

employer-sponsored health insurance (some also have MassHealth) and 17% have Medicare (~100,000 are dual eligibles who also have MassHealth)

Nature of LTS is different than that of other types of insured medical care Focuses on functional needs, social and health-related

supports, independent living, etc…

* Includes all people with disabilities, not just those needing assistance with self-care or everyday tasks (i.e., “LTS disability”).

Critical questions to consider

What is a more sustainable distribution of the financing burden? E.g., to take some of the pressure off of Medicaid,

individuals, and families How big a part of the solution should/can private

financing, and particularly private LTC insurance, be?

For which populations? Delineate by age? Functional limitation? Income? Are there private financing strategies for people who are

going to need a lifetime of LTS?

Critical questions to consider (2)

For whom is it feasible to save for LTS needs? Relative value of the risks we are trying to minimize?

Risk of needing LTS? Risk of incurring out-of-pocket costs? Risk to families of providing informal care?

What mechanisms are best for mitigating these risks? For whom? Private health insurance? Private LTC insurance? Social

insurance (via public or private mechanism)? Combination? Role of government in improving/promoting private

mechanisms?

Policy questions

What % of “the pie” should this be and for whom? Strengths and deficiencies of the private financing system? Is there any private product for younger people with

disabilities? How can these private financing mechanisms be

improved to make the private sector function better? Potential incentives to increase utilization? Role of government

Consumer protection; consumer education; orchestrating incentives?

Role and implications of social insurance Different mechanisms and contribution systems? As a complement to private LTC insurance?

Committee Business

Update on letter to federal officials (sent)

Update on “data workgroup”

Transforming Care for Dual Eligibles initiative (CHCS and Commonwealth Fund)

LTC Information Campaign

Ongoing schedule: are Thursdays or Fridays better?

Next meeting:

Thursday, July 23rd , 9:00 -11:30am

Location: 21st Floor, One Ashburton Place

Business items