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 PremiumsThe 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 SettingBenefits 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 ItThe 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 DayAAHSA 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.