Financing Long-Term Services And Supports: Options Reflect Trade-Offs For Older Americans And Federal Spending

Abstract

About half of older Americans will need a high level of assistance with routine activities for a prolonged period of time. This help is commonly referred to as long-term services and supports (LTSS). Under current policies, these individuals will fund roughly half of their paid care out of pocket. Partly as a result of high costs and uncertainty, relatively few people purchase private long-term care insurance or save sufficiently to fully finance LTSS; many will eventually turn to Medicaid for help. To show how policy changes could expand insurance's role in financing these needs, we modeled several new insurance options. Specifically, we looked at a front-end-only benefit that provides coverage relatively early in the period of disability but caps benefits, a back-end benefit with no lifetime limit, and a combined comprehensive benefit. We modeled mandatory and voluntary versions of each option, and subsidized and unsubsidized versions of each voluntary option. We identified important differences among the alternatives, highlighting relevant trade-offs that policy makers can consider in evaluating proposals. If the primary goal is to significantly increase insurance coverage, the mandatory options would be more successful than the voluntary versions. If the major aim is to reduce Medicaid costs, the comprehensive and back-end mandatory options would be most beneficial.

Medical Underwriting In Long-Term Care Insurance: Market Conditions Limit Options For Higher-Risk Consumers

“…One recent proposal put forward to address long-term care financing needs includes a catastrophic social insurance program that would cover nursing care after a 2-year waiting period and offer a lifetime benefit thereafter, covering 95% of the population while substantially offsetting Medicaid spending and out-of-pocket costs (28). If such a program existed, the role of voluntary long-term care insurance would shift to become a more limited product, covering the interim period after the onset of disability and before the catastrophic insurance took effect.…”

Modeling Health Care Spending Growth of Older Adults

“…; Favreault et al. ; Favreault and Karamcheva ; Favreault and Steuerle ; Smith and Toder ; Commission on Retirement Security and Personal Savings ) and recently extended to project long‐term services and supports (Favreault, Gleckman, and Johnson ). We enhance DYNASIM by adding health status, health insurance, and health care use.…”

“…Our model rests on the platform of Urban Institute's DYNASIM model, which forecasts income and wealth of US residents (including those in US territories), including labor market behavior, wealth accumulation, demographic transitions (e.g., marriage and divorce), and mortality. It has been frequently used for Social Security projections (Uccello et al 2003;Favreault et al 2004;Favreault and Karamcheva 2011;Favreault and Steuerle 2012;Smith and Toder 2014;Commission on Retirement Security and Personal Savings 2016) and recently extended to project long-term services and supports (Favreault, Gleckman, and Johnson 2015). We enhance DYNASIM by adding health status, health insurance, and health care use.…”

Financing Long-Term Services and Supports: Continuity and Change

“…Despite these preferences, few people have private LTC insurance and the market is rapidly deteriorating (Wiener et al, 2013). Moreover, microsimulation analyses consistently find low uptake for voluntary LTC insurance policy options, leaving most people uninsured and benefits primarily serving the upperincome population (Favreault, Gleckman, & Johnson, 2015;Wiener et al, 1994).…”

“…This opposition is despite the fact that a mandatory program will provide coverage for almost all people and substantially reduce Medicaid spending (Favreault et al, 2015;Wiener et al, 1994).…”