What Does Health Reform Mean for Long-Term Services and Supports?

1. What Does Health Reform Mean forLong-Term Services and Supports? Joshua M. Wiener, Ph.D. RTI International Washington, DC

2. Introduction • Patient Protection and Affordable Care Act (PPACA) • Health Care and Education Affordability Act (HCERA) • Focus on medical insurance for the uninsured and controlling health care costs. • Addresses many major issues in LTSS

3. Areas of Reform in Legislation • Health insurance for direct care workers and people with disabilities • Community Living Assistance and Services and Supports (CLASS) Act • Medicaid home and community-based services • Chronic care coordination • Post-acute care reimbursement • Nursing home quality reforms

4. Health Insurance for Direct Care Workers and People with Disabilities • Big impact, but least discussed among LTSS experts • At least 800,000 direct-care workers not have health insurance in 2008 • About 12% of people with disabilities are uninsured • No employer mandate per se, but financial penalties if employees receive premium tax credit • Individual mandate with exemptions and penalties • Low-income subsidies for insurance purchase and for cost-sharing

5. Health insurance (cont.) • Expansion of Medicaid eligibility to 133% of federal poverty level, with no asset test • Elderly excluded from expansion • Younger people with disabilities who work covered • Expansion group not receive full Medicaid benefits • Workers not obtaining insurance through employers or Medicaid required to purchase insurance through insurance exchange or pay penalty • Insurance reforms will eliminate medical underwriting

6. Community Living Assistance Services and Supports (CLASS) Act • Although large potential impact, virtually no media coverage or Congressional discussion • Voluntary social insurance program for LTSS championed by Senator Ted Kennedy • Only 10% of older people and less than 1 person of younger adults have private long-term care insurance • Program draws heavily on German and Japanese public insurance programs

7. CLASS Act (cont.) • No medical underwriting • To receive benefits, must have: at least 2 or 3 ADLs or substantial cognitive impairment or equivalent • Cash benefit of average of $50 per day • No “services” option • More than average Medicaid HCBS waiver spending • Opportunity for private insurance wraparound • Benefit levels to be determined by the Secretary

8. CLASS Act (cont.) • Unlike Japan, Germany, and the Netherlands, CLASS does not have mandatory participation • Program subject to adverse selection: people with disabilities may disproportionately enroll, driving up costs and premiums • Provisions to address adverse selection: • With the exception of full-time students, enrollment is limited to people who work. Only about one-fifth of people with disabilities work

9. Class Act (cont.) • Provisions to address adverse selection (cont.) • For employers who agree to participate, opt-out rather than opt-in • Enrollees must pay premiums for at least 5 years before they can receive benefits • Financing solely through premiums, no subsidy except for students and working people below federal poverty level

10. CLASS Act • Premiums and adverse selection: Chicken or egg? • Actuaries assume people with disabilities will enroll • If actuaries assume that large numbers of people without disabilities will enroll, then premiums will be relatively low and large numbers of people will enroll • If actuaries assume that relatively few people will enroll, then premiums will be high and few people without disabilities will enroll

11. CLASS Act (cont.) • Actuaries have been conservative, assuming low enrollment, with most premium estimates between an average of $123 to 180 per month • If program were mandatory, premiums could be cut by 2/3 • Initial premium will be self-fulfilling prophecy • Estimated to reduce deficit by $70 billion over first 10 years, due to build up of reserves.

12. Promoting Medicaid Home and Community-Based Services • Institutional bias of the current LTSS system: 32% of Medicaid LTSS expenditures for HCBS in 2008 • Mandatory spousal impoverishment protections for community population (2014-2019 only), extension of Money Follows the Person, and more money for Aging and Disability Resource Centers • Additional Medicaid options for HCBS: • State Balancing Incentive Payments Program • Community First Choice Option—state option for attendant services and supports • Modifications to Section 1915(i) state plan option

13. Medicaid HCBS (cont.) • Options, not state mandates • State Balancing Incentive Payments program provides financial incentives to achieve certain goals. Behavioral change in exchange for more money • Community First Choice option and modifications to 1915(i) show conflict between consumers and states: • Consumers want statewide coverage of broad services to highest possible income group without nursing home level of care and waiting lists • States want fiscal controls, especially ability to limit number of people and ability to target

14. Post-acute care reimbursement • Expansion of coverage financed through new taxes and reductions in Medicare reimbursement rates • Post-acute care providers—inpatient rehabilitation facilities, skilled nursing facilities, home health agencies and hospices--are affected. • High Medicare margins: 10% for skilled nursing facilities, 17% for home health agencies. • Estimated savings through 2019 for skilled nursing facilities, home health and hospice: $61 billion • Independent Medicare Advisory Board

15. Chronic Care Coordination • Current medical and LTSS system fragmented • Medicare/acute, Medicaid/LTSS • Creates incentives for cost-shifting • Lots of administrative changes and demonstrations: • Federal Coordinated Health Care Office • Center for Medicare and Medicaid Innovation • Medical home and related demonstrations • New rules on Medicare Special Needs Plans • National Pilot Program on Payment Bundling • Medicare Hospice Concurrent Care Demonstration

16. Nursing Home Quality Reforms • Continuing quality of care problems in nursing homes: in 2008, 26% of facilities had one or more deficiencies that caused harm or immediate jeopardy • Provisions for: • Nursing home transparency, providing more information to consumers and regulators • Workforce provisions, including demonstration on culture change • National program of criminal background checks • Pay for performance in Medicare skilled nursing facilities implementation plan

17. Conclusion • Health insurance for workers and people with disabilities • CLASS Act may radically change financing over time • Additional Medicaid options for HCBS • Plethora of initiatives on care coordination for people with chronic conditions • Reimbursement trimmed for post-acute care providers • Nursing home quality reform will provide more information, but will not fundamentally alter current system of quality assurance