Changing Aging

Following are highlights of the American Association of Homes and Services for the Aging (AAHSA) framework for financing long-term care, which was presented at the recent forum at the University of Minnesota Humphrey Institute.  Earlier we outlined the AARP plan here.  To read more about The Long-Term Solution by AAHSA, go here:

Key Features

• Cash should be the one, if not the only, choice of benefits to be used at the beneficiary’s discretion.
• Benefits should be tied to a simple level of need based on functional status, not age.
• Benefit levels should provide for a foundational level of services for people in the community and in residential settings, consistent with keeping the program actuarially sound.
• Systems to ensure that beneficiaries can access with appropriate help selecting and securing needed services must be available.

The Solution: National Insurance Trust Financed by Premiums

The foundation of a long-term financing strategy should be a broad-based national insurance trust with low overhead costs and an all-inclusive risk pool.  This insurance should be financed by premiums, not by general tax revenues, with premiums and benefits aligned to produce an actuarially sound program.  This approach would allow baby boomers to prefund their long-term care needs.  An independent, federally-charted organization could manage the premiums, investments and payments to ensure the funds are used only to pay benefits for this program.

Benefits Available Regardless of Setting

Benefits should be available regardless of setting.  The dollar value of benefits should be tied to simple level-of-need determination that consumers can easily understand and focuses on a person’s need for assistance with activities of daily living (ADLs), including bathing, dressing and eating.

Even if all or most Americans are enrolled, the benefits would not cover all long-term care costs.  Some may wish to purchase extra wraparound insurance to cover full costs, and some may pay the difference with private funds.  People with very low incomes will continue to need financial assistance.

Wraps Around Medicare, Doesn’t Replace It

The optimal financing plan is one that wraps around and extends, rather than replaces, existing Medicare benefits, which will continue to provide for the more intensely medical and shorter-term rehabilitation needs.

Future expected Medicaid costs could be mitigated, helping to ensure the sustainability of Medicaid as a safety net.  But near universal participation will be required, which could be achieved through a mandate or - perhaps more likely - through a strategy in which people are automatically enrolled in the plan and can opt out if they wish.

Could a National Insurance Trust Work?  Yes, For the Cost of a Cup of Coffee a Day

AAHSA commissioned The Moran Company, a nationally known economics consulting firm, to model a long-term care insurance trust that would provide a daily cash benefit for people needing assistance with two or more ADLS and be fully funded for at least 75 years.  The model provided premium prices for one, two, three and five-year benefits as well as a lifetime benefit.  For simplicity, participation was determined to be mandatory for all adults.

The study found that for about the cost of a large cup of coffee each day for each of us, we can create a national insurance trust that would pay a benefit of about $27,000 per year to each adult who needs assistance with two or more ADLs.

Here are 10 reasons why we have to change the way our country pays for long-term care.  Please add others:

1.  The Age Wave is Unprecendented:  About 10 million Americans need long-term care today.  (Note: Long-term care is an array of services, from home care to assisted living, not simply nursing home care.)  By 2020, 12 million older Americans will need long-term care.

2.  Americans Want More Choice:  People want more choices than ever in how they live and receive care.  The nursing home isn’t a place they want to choose. Guess what?  Many states rely on institutional nursing homes for long-term care.   To pay for choices that today’s consumer desires, we have to have new ways to pay for care.

3.  The Costs are Unsustainable: According to the independent, non-partisan Government Accounting Office (GAO), Medicare, Medicaid  (which pays nearly half of all long-term care expenditures)and Social Security will nearly double as a share of the economy by 2035.  Today long-term care alone costs federal and state governments $116.8 billion every year.  We’ve been able to sustain these entitlements because of a low-depression era birth rates and a large postwar workforce.  No more.  Absent substantive change, Medicaid, Medicare and Social Security will overwhelm the rest of the Federal budget.

4.  America’s Savings Rate is Deplorable:  Americans are horrible savers.  In fact, 2005 and 2006 marked the first time since the Great Depression that American’s charted a negative savings rate in back-to-back years.  By 2030, many retirees will not have enough income and assets to cover basic expenditures or any expenses related to aging services.

5.  Business Production is Taking a Hit:  According to the Metlife Mature Market Institute and National Alliance for Caregiving, American businesses lose as much as $33.6 billion in annual revenue because of employees’ need to care for their loved ones.  That is approximately $2,110 per full-time employee who is also a caregiver.

6.  Busting State Budgets:  On average, state governments spend 18% of their budgets on Medicaid, which pays for all most half of all long-term care costs.  These costs are only rising and if left unchecked will crowd out all other spending.

7.  Americans are Clueless as to What Care Costs:  In 2006, according to AARP study, only 8 percent of Americans over 45 could estimate the average monthly cost of what care costs within 20 percent of its actual cost.  In an Ecumen study of baby boomers, nearly a third of boomers think that they will use Medicare to pay for their long-term care costs.  Sorry . . . . Medicare won’t pay for costs such as memory care and assisted living.

8.  Long-Term Care Insurance isn’t the Whole Answer.  Only one in five Americans can afford the long-term care insurance policy needed to meet their long-term needs.  And even if everyone purchased the best private coverage he or she could afford, Medicaid costs still would triple by 2045.

9.  A Worker Shortage:  According to the U.S. Department of Health and Human Services, the next four decades will see a need for more than 4 million care professionals in the U.S.  Who will pay their salaries?  We need to change the financing system to attract great professionals to this profession for the long-term. 

10.  Voters Want Change:  The vast majority of Americans say that our health care system is broken and they desire a well-coordinated, integrated, cradle-to-grave system.  To have such a system, long-term care/aging services must be part of the solution.  According to a 2007 national poll by Genworth and the Mellman Group, voters want long-term care/aging services to be part of national health care reform.  Nearly 8 in 10 voters (78%) stated that the presidential candidates should make this part of their health care proposals.

Fidelity Investments estimates in a new study released Thursday that a 65-year old couple in 2008 will need $85,000 to insure against long-term care expenses

Do you have your $85,000?

Just when you think there aren’t issues that Red and Blue America can agree on, there comes this little thing called aging that we’re all doing and want to do well. 

On Wednesday a packed auditorium at the University of Minnesota Humphrey Institute of Public Affairs participated in a discussion about financing long-term care in America. And what one saw was a great issue opportunity for Red and Blue America to forge common ground.  As several panelists, including a Republican state legislator, said: Aging isn’t a Republican or Democratic issue.

The forum was sponsored by the Minnesota Health and Housing Alliance, the American Association of Homes and Services for the Aging and AARP.  Twin Cities Public Television is creating a one-hour special on it and we’ll post that when it comes out later this year. 

In upcoming posts we’ll look at finance plans introduced at the Forum, but first, following are several highlights/themes from the discussions moderated by Minnesota state commissioner of labor and industry Steve Sviggum and Larry Jacobs, director, at the University of Minnesota’s Center for the Study of Politics and Governance.  I know a number of Changing Aging readers were there, so please share what you found interesting or heard differently . . . thanks.

- Environments are Disabled:  Jan Malcolm, CEO of Courage Center, put a different paradigm on disability.  Too often people live in environments that don’t allow for people with physical challenges.  So why do we always focus on the person’s physical disability? Why aren’t we focusing on maximizing the physical environment in our communites to allow people young and old to live easily where they want to? 

- Money Has to Follow the Person:  With government reimbursement money encumbered and siloed in so many areas of health care, people are mice in a never-ending maze, captive to running to the cheese (fragmented, inflexible funding sources).  Let the money follow the person, so they can make the choices in their care and service options. 

- A Healthy Health Care System in America Must Include Aging Services:  If we’re going to truly have a well-coordinated cradle-to-grave health care system that focuses on wellness, aging services must be an essential piece of the solution wheel. We have to connect the dots.

- New Language:   What do you think of when you think of long-term care?  Many people think “nursing homes.”  Guess where people don’t want to live? Long-term care, er, aging services encompasses so much more than a nursing home, including:  assisted living, rehab services, wellness centers, transportation, home care, memory care, technology . . . .

- Home-Centered System:  Home has to be an integral part of public policy innovation.  Because that’s where people most want to be.  Nursing homes will still have an integral role, but they will look very different. 

- This is a [Fill in the Blank] Issue:  Long-term care isn’t just a long-term care issue.  It’s a health care issue, business issue, education issue, economic security issue and community development issue.  If we don’t ride the age wave, it’s going to damage other sectors of our communities.

- Marry Technology and Results:  We spend billions in America on technology in hospitals, attempting to help people live longer.  What about adding life to years?  Technology in aging services, such as sensors in people’s homes that spot small health problems before they grow into big ones, is the preventive-type of technology we should be focusing on in a results-based, wellness-focused health care system.

- Fiscal Responsiblity Doesn’t End with the Mortgage:  To save safety nets for those truly in need, more of us simply have to plan ahead and pay our way for aging services.  The alternative is not sustainable for America.

Who is going to pay for the unprecedented numbers of seniors who will need care? 

How will they pay? 

What are better ways to pay than what America has today?

Your’re invited to a discussion about potential approaches to long-term care financing reform and what states can do to be national leaders in creating solutions.  The conference is co-sponsored by the Center for the Study of Politics and Governance, Minnesota Health and Housing Alliance, American Association of Homes and Services for the Aging (AAHSA), and American Association of Retired Persons Minnesota (AARP).  Ecumen CEO Kathryn Roberts will be one of the panelists.

For more information and the conference agenda, go to: http://www.politicsandgovernance.org/events.html
Wednesday, June 4, 2008
8:00am - 12:15pm
Cowles Auditorium
Hubert H. Humphrey Center
301 19^th Avenue S.
Minneapolis, MN 55455

Registration Information: This conference is FREE to attend and includes a continental breakfast. Registration is limited and handled on a first-received basis. Registration deadline is Friday, May 23, 2008. Please direct all registration questions to Beth Gabrysiak at MHHA.
You can register in one of three ways:

1. Register online at MHHA.com (click on events)
2. Fax registration form to 651-645-0002, Attn: #8258
3. Mail registration form to MHHA, 2550 University Avenue West, Suite 350 South, St. Paul, MN 55114-1900, Attn: #8258.

Once registered, you will receive an e-mail confirmation with the information for this event. 

That’s the question that our friends at Future of Aging are asking.  They have a few others they’d like younger readers to think about on long-term care and how the heck they’ll pay for it, too.  Go here to check the questions out . . . .They get you thinking.

I like Nebraska’s thinking on saving for aging services.  What do you think?  Taking a leadership role they’ve launched a savings option called The Long-Term Care Savings Plan. 

Here are some key elements of the first such state plan in the United States:

- You can put $1,000 ($2,000 filing jointly) in an account to qualify for savings that’s state-tax free until withdrawn.  They’re looking to increase those contribution limits.

- When withdrawn they can be used to pay for a multitude of aging services, including home care, nursing care, assisted living, technology and other services.

- If the account is not used, and the account holder dies, it can be passed on to a spouse or other family members.

- At the age of 50, the account holder can withdraw savings tax-free to pay for long-term care insurance.

 There are a number of appealing things about Nebraska’s program:

- It elevates the importance of planning ahead for aging services and makes you think about how you want to live if you need assistance or care.

- It allows you to save money beyond traditional retirement accounts.

- It gives you flexibility.  You ultimately determine what services your dollars buy.

- If you want to buy long-term care insurance, but don’t want to buy it in your 30s and 40s (which the vast majority of Americans don’t), you can use your savings to pay for premiums later in life.

- You can pass the accumulated savings to heirs for them to use to pay for aging services, undescoring the need that even though we might come from different generations, we likely all will have the need for some type of assistance and care.  And we have to pay for it.

When we talk at Ecumen about changing how America finances long-term care and aging services, this isn’t what we’re talking about . . . .

From today’s St. Petersburg Times:

Two Tampa Bay area lawmakers want to put a $1 tax on strip club admissions so they can give low-income nursing home residents more spending money.

Rep. Rick Kriseman, D-St. Petersburg, said he got the idea after an elderly constituent complained that a $35 monthly stipend for Medicaid recipients was not enough to cover personal needs, such as haircuts, clothing and movie tickets.

“I’m sorry if I’ve taken a dollar that you would have otherwise stuck in someone’s garter,” said Kriseman, who is sponsoring the legislation with Sen. Ronda Storms, R-Brandon.

In Finland, Gallup recently conducted a poll of Finns, age 49-60. 

According to the poll, every second middle-aged Finn is prepared to purchase care services for their parents to supplement services provided by municipalities.

I don’t think you’d get quite the same response in the United States.

Wondering what the Presidential Candidates are thinking about aging services and long-term care? 

(It’s kind of unreal that they’re not thinking more when you look at the age wave.)

Read this post at the AAHSA Future of Aging blog.