The Role of the Private Sector in Financing Long-Term Supports

1. Long-Term Care Financing Advisory Committee Meeting June 18, 2009 The Role of the Private Sector in Financing Long-Term Supports

2. Summary ofDr. Garner Presentation

3. Summary of Dr. Connie Garner visit • Summary of Dr. Garner’s background and work with Senator Kennedy • Senator Kennedy has new perspective on disability work given his functional limitations • Must integrate disability with health care, education, employment, housing, rights, etc., so it becomes a lens through which we look at every issue • National health care reform process • Senate Health, Education, Labor & Pensions and Finance Committees • House Ways & Means, Energy & Commerce, and Education & Labor Committees • Stakeholder meetings and “workhorse” meetings • Workgroups • Coverage: mostly models MA, including “Exchange”/Connector; sticking points include public plan and employer mandate • Systems reform/quality: includes HIT and medical homes • Prevention: includes primary and secondary prevention • LTSS: includes cash benefit model based on functional limitations (CLASS Act) • Fraud and abuse

4. Summary of Dr. Connie Garner visit (2) • LTSS in Health Care Reform: an “uphill battle” • Voluntary opt-out cash benefit program that pools risk • Explored mandatory: $50B in federal savings per year (voluntary = break even) • CBO scores high due to “wood-work” effect • Wraps to other products and “payer of first resort” to Medicaid • Consumer must be working at enrollment and work for 5 yrs • Benefit triggers based on functional limitations lasting more than 90 days • Unable to perform at least minimum # (2 or 3) of ADLs without substantial assistance • Requires substantial supervision due to substantial cognitive impairment • Functional limitation similar (as determined by HHS regulations) to level of functional limitation described in i. or ii. • Maximum monthly limit: • $5/month for individuals at or below 100% FPL; $65/month for others (can be lower for younger individuals than for older individuals) • Cash benefit: can never be less than $50/day

5. Summary of Dr. Connie Garner visit (3) • Focus groups with 20,000 college students indicate support for cash benefit program • Willing to pay ~$30/month • Actuarial analyses indicate importance of including employed younger people with disabilities because act as risk-adjuster • Sen. Harkin’s “community choice” bill not included

6. Context forPrivate Financing Discussion

7. Framework for this discussion • Private financing (excluding out-of-pocket spending and informal supports) is a small part of the current picture • ~5% - 9% (including LTC insurance and other private financing mechanisms) • Individuals and families bear a significant portion of the “costs” • ~20% is out-of-pocket spending • ~36% is unpaid informal supports (for seniors) • For many, needing LTS is a significant risk (but not a certainty) • 69% of all people turning age 65 in 2005 will need LTS; 40% will need 2 years or more of LTS • For some, needing LTS is a certainty (not a risk) • 53% of people with LTS disabilities in MA are under age 65

8. Framework for this discussion (2) • 96.7% of people with disabilities in MA have health insurance coverage* (which generally does not cover LTS) • For seniors with disabilities (310k), 93% have Medicare (~100k are dual eligibles who also have MassHealth) • For non-elderly adults with disabilities (710k), 60% have employer-sponsored health insurance (some also have MassHealth) and 17% have Medicare (~100,000 are dual eligibles who also have MassHealth) • Nature of LTS is different than that of other types of insured medical care • Focuses on functional needs, social and health-related supports, independent living, etc… * Includes all people with disabilities, not just those needing assistance with self-care or everyday tasks (i.e., “LTS disability”).

9. Critical questions to consider • What is a more sustainable distribution of the financing burden? • E.g., to take some of the pressure off of Medicaid, individuals, and families • How big a part of the solution should/can private financing, and particularly private LTC insurance, be? • For which populations? • Delineate by age? Functional limitation? Income? • Are there private financing strategies for people who are going to need a lifetime of LTS?

10. Critical questions to consider (2) • For whom is it feasible to save for LTS needs? • Relative value of the risks we are trying to minimize? • Risk of needing LTS? • Risk of incurring out-of-pocket costs? • Risk to families of providing informal care? • What mechanisms are best for mitigating these risks? For whom? • Private health insurance? Private LTC insurance? Social insurance (via public or private mechanism)? Combination? • Role of government in improving/promoting private mechanisms?

11. Policy questions • What % of “the pie” should this be and for whom? • Strengths and deficiencies of the private financing system? • Is there any private product for younger people with disabilities? • How can these private financing mechanisms be improved to make the private sector function better? • Potential incentives to increase utilization? • Role of government • Consumer protection; consumer education; orchestrating incentives? • Role and implications of social insurance • Different mechanisms and contribution systems? • As a complement to private LTC insurance?

12. Committee Business

13. Business items • Update on letter to federal officials (sent) • Update on “data workgroup” • Transforming Care for Dual Eligibles initiative (CHCS and Commonwealth Fund) • LTC Information Campaign • Ongoing schedule: are Thursdays or Fridays better? • Next meeting: • Thursday, July 23rd , 9:00 -11:30am • Location: 21st Floor, One Ashburton Place