Ask Americans what they fear most about aging, and many will tell you it is the possibility of needing nursing care - and not being able to pay for it.
They are right to worry. Federal data shows that about half the people who turn 65 today will not have any need for long-term care. But 27 percent will spend at least $100,000 lifetime, and about 15 percent will face costs over $250,000.
Yet we do not have a comprehensive national policy approach for covering long-term care. Only the most affluent households can afford to pay out of pocket, and private long-term care insurance covers only about 7.4 million people, according to the National Association of Insurance Commissioners. Many others will be covered under Medicaid, which funds care only in cases where a patient’s assets have been almost completely spent.
Congress has not addressed the problem, partly due to the highly polarized atmosphere surrounding health policy. In the debate about long-term care, the right wants private-market insurance solutions, while the left advocates for public coverage through Medicare.
A new emerging approach is a hybrid that could bridge the partisan divide. The core idea: make private insurance work better, but cover the most extreme risk through a publicly financed insurance program.
The first set of recommendations was released recently by the nonprofit Bipartisan Policy Center (BPC), and two other sets are scheduled for release soon. All three are based on detailed research about the United States' long-term care needs, insurance markets and financing mechanisms by the Urban Institute and Milliman, an insurance industry actuarial consulting firm.
The BPC report offers comprehensive recommendations for changes in everything from Medicaid to delivery of care in home and community settings. But two recommendations, in particular, point to promising middle ground that could really help solve the long-term care riddle.
Improve th Private Insurance Market
BPC recommends creating a new class of “retirement LTC” that would provide limited benefits - two to four years after a cash deductible is met. Workers could use savings from their 401(k) plans to buy insurance, and early withdrawals for that purpose (before age 59-1/2) would be penalty-free. The policies also would be sold on federal and state health insurance exchanges.
Insurance policy choices would be boiled down to three basic options. Premium design and inflation adjustments would be standardized across all the plans; the key choices would be daily benefit level, length of coverage and length of waiting period before coverage begins.
Complexity is a key barrier to success in the current private market, said Dr. Bruce Chernof, chief executive of the SCAN Foundation, one of the funders of the research. “The social science literature shows that when people have too many choices, they freeze.”
The researchers believe these simplified policies would cost about half of current private market insurance policies. The American Association for Long-Term Care Insurance reports that typical annual initial premiums for high-quality coverage currently range from $2,035 for a single male buyer, age 55, to $2,580 for a single female buyer of the same age. A married couple age 60 can expect to pay an average of $3,560. Some rates have fallen over the past year, the trade group reports.
Create a Public Option
The BPC also proposes shifting coverage for patients with lifetime costs exceeding $250,000 to a public plan run by the federal government.
A catastrophic Medicare benefit would be costly. BPC estimates that if 90 percent of Americans were covered, benefits paid in 2015 would have totaled $411 billion, or about half the cost of Medicare’s Part A (hospitalization) program. Some of that cost would be offset by lower Medicaid spending, but a new revenue source would also be needed - either an increase in the payroll taxes paid by workers for Social Security and Medicare, or through a “general funding” source, such as changes to the income tax or a consumption tax.
New taxes are a nonstarter in Washington today, and LTC reform is not likely to move forward during this election year. But Chernof sees 2016 as a good time to lay the groundwork for action next year.
“There is a really good opportunity to have a broad discussion about what the future looks like for families during the campaign,” he said. “And the first year of a new Congress is always an important time for setting the legislative agenda.”
(The writer is a Reuters columnist. The opinions expressed are his own.)
(Editing by Lauren Young and Matthew Lewis)