LTC Bullet: Umpteenth Long-Term Care Study Disappoints

Friday, August 14, 2020


LTC Comment: Sometimes bad studies happen to good people. We explain after the ***news.***

*** ILTCI CONFERENCE: Why am I getting Denver history lessons from Barry Fisher? Because he’s a former resident, knows the city well and he’s in charge of the 20th anniversary Intercompany Long-Term Care Insurance Conference to be held March 8-11, 2021 in Denver. This iteration of the event replaces the one canceled due to the pandemic in March of this year. Get all the details here and here. Barry reports “The good news is that almost all our exhibitors and sponsors have committed to attend the 2021 Conference. The Program and Education Committee is hard at work creating sessions designed to instruct, enlighten, and entertain. And, our Keynote Speaker, Futurist Anders Sorman-Nilsson, will share a whole new look into his crystal ball.” I’m reminded there’s a little Denver lore in the Moses family history also. It seems my great grandfather traded 40 acres of prairie waste land for a pair of pearl-handled six-shooters. Those 40 acres are downtown Denver today, but we don’t even have the pistols to show for it. Oh well! At least we have a great reunion with friends and colleagues coming up in the Mile High City next March … Covid-19 permitting, of course. ***



LTC Comment: Having toiled in the long-term care field for 38 years, I’ve seen a lot of study groups and commissions come and go aimed at finding a better way to provide and pay for long-term services and supports. Besides their universal abject failures, these many endeavors also have this in common. They brought together experts representing various “stakeholders’” interests who talked, talked, talked until they arrived at the lowest common denominator of their wishful thinking. That usually included a long list of wonderful things to do with no mention of how to pay for them. How might we define such a “study?” The Urban Dictionary suggests this: “A group discussion or activity between like-minded individuals that validates mutual biases or goals in a non-confrontational environment.” What got me thinking along those lines?

Learning from New State Initiatives in Financing Long-Term Services and Supports” is a report published last month jointly by the Center for Consumer Engagement in Health Innovation at Community Catalyst and The LeadingAge LTSS Center @UMass Boston. Its authors include two, Marc Cohen and Eileen Tell, whose previous work deserves praise. The report is the fruit of deliberations by “42 stakeholders and state officials” who shared “their depth of knowledge and insightful observations on the reform efforts occurring in their states.” Their states, which have “adopted or are considering innovative state-based LTSS financing reforms” include California, Hawaii, Maine, Michigan, Minnesota and Washington. As I’ve conducted studies in three of those states (CA, ME and WA) I’ll offer some balancing perspective when relevant.

So let’s dive into this new report and see what we find. I’ll select a quote and then make a comment. I’m omitting the report’s footnotes but you can find them quickly in the original.

LTSS Report: “Most of the LTSS costs that people are projected to pay will be out of their own pockets (53%); this is especially true when it comes to home and community-based care (68%). Yet Americans are woefully unprepared to pay for their own care, should they need it.” (p. 4)

LTC Comment: What those percentages ignore is that the vast majority of all high cost long-term care expenses are paid for by Medicaid and Medicare. If these catastrophic costs were not removed by public financing, people would worry about and save, invest or insure for long-term care. They would be much better prepared for LTC risk and cost than they are now. I’ve explained in Medicaid and Long-Term Care (pp. 64ff) that “some recent research suggests how we might reconceptualize the quandary we are in so that it is not such a huge challenge and may in fact be amenable to a market-based solution.” Check it out.

LTSS Report: “The bottom line is that private LTC insurance is now out of the financial reach of most middle-income Americans and for that reason, it is not likely to play a meaningful role in financing LTSS costs in the coming decades.” (p. 4)

LTC Comment: This statement reflects a misunderstanding about why private LTCI take-up is so low. Many more consumers than now would find a way to afford the product if they believed they needed it. If, for example, their home equity were at risk for potential long-term care expenses, they’d see a real risk far more starkly. But despite decades of the media and insurance agents telling people they’ll lose their life savings if they don’t insure, they still don’t believe it. Ironically, they’re right. They can ignore the risk, avoid the premiums, and, if they ever need expensive long-term care, Medicaid provides while exempting most assets and charging only excess income as a kind of co-insurance. Until those facts change, the market for private LTC insurance will languish. But those facts will change soon when the bottom falls out of the existing welfare-based LTC financing system.

LTSS Report: “Medicaid provides coverage of LTSS only after individuals have depleted their own resources in paying for care.” (p. 4)

LTC Comment: That statement is so blatantly false it is hard to believe serious people still publish it. Medicaid requires excess income to be spent down for care. But that rule does not apply to excess assets. Assets may be spent down for anything of value. As long as the items purchased are exempt, and most large assets are, Medicaid does not care for purposes of determining eligibility. That’s why elder law attorneys keep long lists of exempt resources and encourage their clients to spend any disqualifying countable assets on them. Even Medicaid eligibility workers frequently advise families to do the same. It defies belief that long-term care experts remain so uninformed or naïve as to ignore these facts. You can find scores of examples with citations to the sources in How To Fix Long-Term Care Financing, pp. 34-63.

LTSS Report: “Currently, Medicaid pays roughly 57% of LTSS costs, elders and their families pay an additional 23%, other public sources contribute 16%, while private insurance pays less than 5% of the nation’s bill.” (p. 4)

LTC Comment: Of that 23% of LTSS costs attributed to elders and their families, roughly half is Social Security income received by people already on Medicaid, which they’re required to contribute to offset Medicaid’s cost for their care. In other words, it’s not—or even mostly—life savings being spent down catastrophically into impoverishment as analysts imply. I explain this Social Security “spend-through” and why it’s so critical to understanding LTC risk and cost in Medicaid and Long-Term Care at pp. 7-8. The key point is that nearly 90% of LTSS costs as cited by the LTSS report come from Medicaid (57%), other public sources (16%), LTCI (5%), or Social Security (1/2 of the 23% attributed to out of pocket expenditures). Why should we be surprised that most people fail to plan, save or insure for long-term care when they’re only personally at risk for about 10% of the cost? What’s worse, when the Social Security trust fund runs out, as it is likely to do much sooner than previously anticipated because of current monetary and fiscal policies aimed at providing coronavirus relief, Medicaid and its long-term care providers will have to adapt somehow to the loss of some or all of this substantial “spend-through” revenue. As Medicaid and providers are already vastly underfunded, this loss will be devastating.

LTSS Report: “Median retirement savings for Americans between age 55 and 64 is roughly $107,000, which is far less than the average expected LTSS costs for those who have to purchase care.” (p. 5).

LTC Comment: True, but irrelevant. Medicaid already covers people with median savings and below. The key question is whether Medicaid also covers most people with savings above the median. It can and often does. In Medicaid and Long-Term Care (pp. 44-46), I explain how Medicare beneficiaries up to the 95th percentile of income and assets qualify financially for Medicaid LTC benefits. As long as this remains true, don’t expect most people to worry about long-term care until it’s too late to save or insure and Medicaid, despite its flaws, becomes preferable to spending privately.

LTSS Report: “All of the data suggests that our current approach – based on Medicaid, savings, and private insurance – is not meeting the needs of families, providers, nor public payers. Currently, there are two primary strategies designed to move the system toward greater insurance coverage: (1) a federal public insurance approach which is designed to add social insurance coverage for LTSS to existing health insurance programs offered at the federal level, and; (2) state-based social insurance programs, which represent the most recent efforts at reform and for which there is growing interest across multiple states. These state-based efforts are the primary subject of this report.” (p. 5)

LTC Comment: This is the switcheroo. Having described the existing LTC system’s many shortcomings, the LTSS Report jumps right into proposing “strategies” based on social insurance, i.e. more government money, regulation and compulsion. Neither this report nor others of its ilk give the slightest attention to why and how America’s long-term care system became so fouled up in the first place. How in the world can we conclude that new federal or state-based social insurance programs are the right strategies to pursue without explaining what went wrong with the existing government dominated system and why? That explanation is what I provided in Medicaid and Long-Term Care (pp. 10-16). I concluded that excessive government funding and regulation is exactly what ruined the long-term care system over the past eight decades. Adding more of what caused long-term care’s problems in the first place is hardly likely to fix them going forward.

LTSS Report: “In light of the fiscal strain brought on by the COVID-19 pandemic, as well as uncertainty regarding the upcoming federal election results, it is highly unlikely that these [federal LTC reform] bills will move forward in the immediate future.” (p. 7)

LTC Comment: This is a neat brush-off of omnipresent but simpleminded proposals to add long-term care to Medicare. But the same facts bear even more heavily against state-level reform plans. States can’t print and borrow unlimited funds like the federal government can. We’ve barely begun to see the devastation unconstrained federal monetary and fiscal profligacy will cause. Will the federal government pay all the states’ bills in the same way as it has taken the place of private payrolls nationwide? How long before the trillions of newly printed dollars, with no new goods and services for them to purchase, lose their value? “Too much money chasing too few goods?” Where have I heard that expression before? Oh yeah, Econ 101.

LTSS Report: “We describe recent LTSS financing reforms in six states, identify motivating factors that are driving policy change, describe how policy design decisions are being made, and document the key players involved in these reform initiatives. ... The fact that a growing number of states are seeing a broad and disparate array of LTSS stakeholders come together to work in concert on this issue represents a real change in the policy landscape; in essence, it highlights an expansion in the potential policy solution-set for this issue.” (p. 7)

LTC Comment: “Growing number of states?” These are the same six referenced in a program titled “State Initiatives for LTC Financing Reform” at the 19th Annual ILTCI Conference in Chicago on March 25, 2019 minus one planned then for Illinois. We’re not exactly seeing a wave of new enthusiasm for higher payroll taxes to fund more government long-term care.

LTSS Report: “We conducted comparative qualitative case studies across six states in various stages of developing or executing on reform initiatives including Washington State, which recently passed and is currently implementing a new social insurance program for LTSS; Hawaii, which has programs designed to assist family caregivers; and Maine, which put a specific LTSS financing initiative on the ballot in 2018 that failed to pass. The other three study states – Minnesota, California and Michigan – are at various stages of building stakeholder coalitions to work with policymakers to develop new programs, undertaking studies of the issue to inform policy development, or are ready to move to a full-blown legislative agenda.” (p. 8)

LTC Comment: Now we’re getting into the meat of the report. Of the six states reviewed, only one, Washington, actually has “a new social insurance program for LTSS” underway. The rest have either tried and failed, done something very different, or are perennially studying the matter.

LTSS Report: “In total, we completed interviews with 42 stakeholders and state officials across these states, many of whom were referred by state leaders. Key informants included state officials, leaders working in aging services, consumer advocates working on a broad range of health, disability, and LTSS issues, union leaders, and an assortment of individuals from LTSS provider organizations.” (p. 8)

LTC Comment: What every one of these “stakeholders” has at stake is getting more money from the state and federal governments to finance their special interests. There’s a name for this process: “crony socialism.” When you decide before you begin a study that LTC only has two ways to go, federal or state social insurance, and then interview only people who stand to benefit from either of those options, you’ve squandered intellectual and financial resources.

LTSS Report: “In all the study states, the median monthly costs of home care and nursing home care exceed the national average, and in all but two, the median monthly costs for care in an assisted living facility are also in excess of the national average. This indicates a growing payment burden faced largely by families paying out-of-pocket or, on behalf of those who are poor or become poor paying for care, on the state’s Medicaid program.” (p. 11)

LTC Comment: No, what those constantly rising home care and nursing home costs “in excess of the national average” actually show is that these study states have failed miserably to control expenditures by means of the government regulation and interventions they’ve already employed. For example, rebalancing from nursing home care to home care was supposed to save money, but it didn’t. It turned out home care only delayed institutional care and the two combined cost more. Pouring more and more Medicaid money into experimental programs and continuing to allow easy access to Medicaid benefits with generous financial eligibility rules impeded the private markets for home care, home equity conversion, and private long-term care insurance leaving consumers dependent on poor public programs. Social insurance isn’t the solution for the long-term care problem; it is the problem. For full development of this argument, see any or all of the state-level studies here including these three reports covering states addressed in the current study: What We Don't Know About Medicaid and Long-Term Care is Hurting Washington State (2004); Medi-Cal LTC: Safety Net or Hammock? (2011); The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net (2013); and Maximizing NonTax Revenue from MaineCare Estate Recoveries (2013).

LTSS Report:  “We compared the amount of taxes paid per capita by the study states to explore two opposing concepts. The first is that a high tax rate per capita could reflect a state’s willingness to invest in social infrastructure, inferring a greater probability that they would be willing to continue to do so for LTSS finance reform. … On the other hand, states with higher than average taxes per capita may be reluctant to put in place new programs requiring additional tax increases, feeling that citizens are already paying enough in taxes. While there is a great deal of variation in the ranking of taxes paid per capita among the case study states, five of the six states are within the top half of the country in terms of overall ‘tax burden,’ and four of them are in the top 11.” (p. 11)

LTC Comment: A more credible interpretation is that lukewarmness toward expensive new social insurance schemes documented in this study simply means overtaxed citizens are increasingly reluctant to take on an even greater tax burden.

LTSS Report: “In Appendix 2, we include state timelines showing key milestones in the move to adopt these financing initiatives. They clearly illustrate that the journey of reform is best described as a ‘long and winding road’ filled with both off-ramps and on-ramps.” (p. 12)

LTC Comment: An objective interpretation of these financing initiatives’ sluggish progress would use different metaphors, such as wild goose chase, cul-de-sac and dead end.

LTSS Report: “The profiles begin with a brief description of the type of initiative, its current status and the nature of the coalition working on it. Also summarized are the primary motivators driving the LTSS reform efforts identified by respondents. These motivators include easing the burden on family caregivers, concern about the growth in Medicaid budgets, financial help for the middle class, improving financial access to LTSS services, improving support for the LTSS workforce, and compensating for the failure of the private market.” (p. 12)

LTC Comment: All those “motivators” are fine goals. But don’t we need to understand first why and how our existing LTC system, dominated by government funding and regulation, came to have these problems? Don’t we risk making the problems worse by adding more of the same? Forging ahead to propose more government interference in the long-term care market without first explaining how (1) the LTC burden became so great on family caregivers, (2) Medicaid budgets exploded, (3) the middle class are financially overburdened, (4) the workforce struggles and (5) private insurance failed, is intellectually negligent.

LTSS Report: “The driving force in California is the need to address what stakeholders cited as ‘a rapidly rising and unsustainable’ Medicaid budget. Additionally, there is concern with providing financial protection for the state’s broad middle class. As one stakeholder stated the problem, ‘I would say it’s primarily related to the fact that people who are above the Medi-Cal eligibility level…I would say, the whole middle-income…of our state, can’t afford the cost of long-term care. They’re having to impoverish themselves…And Medi-Cal is not an ideal system…it has its own challenges.’ Working with an outside actuarial firm, the coalition is presently exploring a wide variety of program design options and the pricing implications of each.” (p. 12)

LTC Comment: This assessment of the long-term care problem in California would be laughable if it weren’t so sadly mistaken. Middle class people in California do not have to impoverish themselves to get long-term care. The state has the most generous Medicaid financial eligibility standards of any in the country and the biggest elder law bar artificially impoverishing more affluent people. California Medicaid has not even implemented some of the mandatory federal standards from OBRA ’93 and DRA ’05 designed to target Medicaid to the needy. Long-term care is a mess in California because the state trapped its population on Medicaid by making public welfare the path of least resistance for citizens who failed to plan, save, invest, or insure for long-term care. For a full development of this analysis, see Medi-Cal LTC: Safety Net or Hammock? (2011).

LTSS Report: “Hawaii does not currently have an LTSS social insurance program. However, of all the case study states, they have the longest history of attempting to pass a social insurance program for LTSS, as we describe below. … Unlike other states reviewed here, current activity in Hawaii is more narrowly focused on improving the caregiver support program rather than on trying to develop a new social insurance program for LTSS. … In 2012, the legislatively appointed State LTC Commission recommended establishing a ‘limited, mandatory public LTSS insurance program.’ It was to be funded by a 0.5% general excise tax on businesses and would provide 365 days of front-end insurance coverage paying up to $70 per day in benefits. The measure failed to pass the legislature …. Social insurance for LTSS has not been taken up since that time. Even so, Hawaii maintained its interest in addressing resident LTSS needs but no longer through a social insurance mechanism.” (p. 14)

LTC Comment: Well, then, it sounds like Hawaii thoroughly explored and decisively rejected the social insurance approach to long-term care. So why is Hawaii featured in a study that limits “primary strategies” on page 5 to two: either federal or state-based social insurance?

LTSS Report: “Maine’s attempt at LTSS financing reform was based on a ballot initiative – rather than the legislative approach in the other five states studied – to establish a social insurance program focusing exclusively on comprehensive in-home care. The ballot measure failed when put to a vote in November 2018.” (p. 15)

LTC Comment: What part of the public’s clear rejection of these tax-based social insurance programs do these researchers not get? If you want to know what’s really wrong with Maine’s long-term care system and what to do about it, read this: The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net (2013).

LTSS Report: “Michigan, like California, is in the earlier stages of building a coalition and exploring approaches for a social insurance LTSS finance reform solution. … The Michigan stakeholders are working in coalition, and have hired an outside actuarial firm to model the pricing impacts of a variety of program options. With the support of a state representative, Michigan created the Bipartisan Care Caucus in 2017 to advocate for LTSS care and finance reforms. … Legislation was introduced in the 99th Legislature (2017-2018) to require a feasibility study on a variety of LTSS finance and workforce reform proposals, including an actuarial study of a social insurance model. … Stakeholder listening sessions, the actuarial analysis, and a workforce analysis are in process. … The study is due to be completed before December 1, 2020 and delivered to the legislature within 60 days of the study completion date.” (p. 17)

LTC Comment: More bureaucratic and legislative wheel spinning with no clue why the problems they are trying to fix exist in the first place.

LTSS Report: Minnesota’s “reform approach is unique in focusing on options to enhance affordable private market solutions for middle income families. … For many years, Minnesota has focused on raising consumer awareness of the need to plan for LTSS needs and building better private LTSS financing vehicles to meet the needs of the middle-income market. … The first product is called LifeStage, a term life insurance policy that converts into long-term care insurance coverage when someone reaches the ‘policy conversion age.’ … The second product seeks to add expanded coverage for a package of home and community services to Medicare supplemental health policies sold in Minnesota.” (p. 18)

LTC Comment: Finally, a state that is trying to make personal responsibility and private insurance work. What Minnesota needs to understand is that what has kept them from fully succeeding with that approach are myriad federal Medicaid laws and regulations that prevent them from targeting Medicaid to the needy so that middle class and affluent people have a stronger reason to plan for long-term care before it’s too late for anything but Medicaid to save their wealth. Instead of celebrating Minnesota’s more thoughtful approach, the LTSS Report tells us that …

LTSS Report: “the Governor appointed a Blue Ribbon Commission to study LTSS finance reforms for Minnesota that go beyond these private sector product options. The commission’s work is about to commence and a number of stakeholders are interested in exploring social insurance options including a program to provide catastrophic coverage for individuals with long-duration LTSS needs.” (p. 18)

LTC Comment: So even in a state that gets it, that understands personal responsibility and private markets are the key to solving the long-term care problems government created, the LTSS reporters still think what Minnesota really needs is a Blue Ribbon Commission with stakeholders pushing social insurance programs.

LTSS Report: “With the passage of the Washington State LTC Trust Act in 2019, Washington became the first state in the country to establish a social insurance program for LTSS. … Premium collection for the LTSS program is scheduled to begin in 2022, with full program implementation in January 2025. The LTSS program will be available to all employed state residents (including those who are self-employed); it is funded through a mandatory employee payroll tax of 0.58%. The program reimburses expenses up to $100 per day (with annual adjustments for inflation) for care provided at home, in the community and in care facilities, up to a lifetime dollar maximum of $36,500. All workers who contribute to the program become eligible for benefits after an initial vesting period and once they meet eligibility requirements based on functional or cognitive impairments.” (p. 19)

LTC Comment: Washington’s program is the LTSS Report’s pièce de résistance. It has everything. Government control; mandatory participation; no premiums until 2022; a payroll tax; and a vesting period before outlays begin. CLASS redux? No, CLASS was voluntary. You could escape CLASS; not this program. Unfortunately for its supporters, this program will never pay a dollar in benefits. It will hit a brick wall of fiscal reality probably before any premiums are paid and certainly before anyone vests. Washington’s experiment with state-based LTC social insurance was doomed from the start but the Covid-19 pandemic, the worsening recession, and irresponsible federal monetary and fiscal policies sealed its fate earlier than otherwise.

LTSS Report: “The uniform view was that ‘success’—defined by an ability to form and sustain a coalition, articulate a common goal, and (for states further along in the policy development process) identify and/or implement a specific approach or program—depends on effectively developing, mobilizing and channeling ground-level demand for policy change.” (p. 21)

LTC Comment: Is it any wonder none of these initiatives will succeed when they’re grounded in bureaucratic claptrap like that? What’s really going on here is that these researchers and the stakeholders they interviewed have closed their minds to any facts or analysis that conflict with their social insurance ideology. That ideology embraces the Marxist precept “from each according to his ability to each according to his need.” Its fatal flaw is that ability is scarce and need always devours any available ability. Human nature rebels at self-sacrifice. Sacrificing ability to need, the philosophical foundation of social insurance, destroys ability without satisfying need. Thus good intentions pave hell. Using government force to compel participation in idealistic social insurance schemes is ironically what made long-term care so bad in the first place and why it keeps getting worse.