Thursday, December 08, 2011

Long-term Care Insurance & Multigenerational Families

The bitter experience of Alison Briolat from Ohio - illustrates why millions of Americans, especially multigenerational families, desperately need affordable long-term care insurance.

A recent New York Times article[i] described one family's distress. Briolat moved her parents into her home after her mother's health deteriorated, chiefly because of the stress of caring for Briolat's father - who suffered an injury that eventually required a foot amputation, followed by five months in a nursing home that cost the family $60,000. Briolat now pays a home heath aide to care for her parents while she and her husband are at work.

"Everybody at work is very glib about how they'll never be a burden to their children and how I'm such a saint," Briolat says. "But unless you have millions sitting in the bank, there's no other way."

For the past 25 years, proposals in Congress to provide long-term care coverage have failed, largely because they were too costly. But the Affordable Care Act included the Community Living Assistance Services and Support (CLASS) Act, a program intended to provide a long-term care benefit of at least $50 a day, or $18,000 a year with no cost to the government. While it would not have covered many months of nursing-home care, it would at least have helped caregivers pay for home health aides. Diane Rowland, vice president of the Kaiser Family Foundation, notes that CLASS "was designed to serve as a bridge between the affluent who can care for their own and the poor who get Medicaid."

More than 10 million Americans have long-term care needs, and at least a third of the cost is paid out-of-pocket by family members like Briolat. CLASS could have been a financial lifeline, especially for multigenerational families. But the program had a major issue that needed to be addressed. It was to be voluntary, with benefits to be paid entirely from premiums rather than from dedicated revenues collected via any form of mandate.

As all insurance actuaries know, a voluntary program invites moral hazard: people who believe they'll need long-term care will enroll, while those willing to bet on not needing it (or believing, wrongly, that Medicare covers it) will stay away from the program - until they need it. Since a distinguishing feature of CLASS was a prohibition on underwriting – the tool private insurers use to keep sick people from enrolling, other methods needed to be used to create a large pool under which risk could be spread among young and old, and disabled and not disabled, purchasers. Since attempts to subsidize premiums or require employers to offer the coverage were rejected, advocates hoped to keep premiums low and attract healthy buyers by providing flexibility to create work requirements and delay the period of time between purchasing coverage and filing for benefits.

Even though CLASS was budget neutral, reduced Medicaid costs and imposed no mandates, opponents of health reform tried to kill it. Since the process in health reform did not permit an opportunity to amend the bill to better address adverse selection concerns, the US Department of Health and Human Services (HHS) struggled to balance actuarial, legal, and marketing concerns, along with the requirement that CLASS would be self-sustaining for 75 years. As a result, HHS has suspended implementation of the program and opponents are pushing for repeal – without offering any alternatives to address the problem. Advocates want to “mend it, not end it” and are offering suggestions to fix issues raised.

There are lessons to be learned from CLASS – both from success of the collaborative effort to include the provision in the law against long odds, and from the raw, partisan political opposition and complexity of implementation that followed. As we continue to promote progressive legislation that promises to help multigenerational families, we need to be sure they represent both good policy and good politics, pay close attention to details, and are sensitive to current budget realities.

For more on our healthcare recommendations, check out page 38 of our latest report: Family Matters: Multigenerational Families in a Volatile Economy.

[i] [i] “Still No Relief in Sight for Long-Term Needs,” New York Times, October 25, 2011


venba said...

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Good Health

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Long-term care insurance requires a very long-term contract, which raises problems of its own. Long-term care insurance policies with only moderately decent coverage can still be quite expensive.

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