LeadingAge : Finance Reform Task Force

1. LeadingAge:Finance Reform Task Force Guiding Power Point April 19, 2013

2. Background Work • Reviewed implications of LTSS on: • Federal Budget • Medicaid Program • Exploring framework and scenarios for a preferred future and “intentional” approach for LTSS

3. Work to Date Articulated preliminary charge: Recommend a framework for action to help our country and its people plan for the potential need for long-term services and supports, and to reduce federal and state government obligations to meet this need.

4. Problem and Contributors

5. Aligned Desired Outcomes • Our Country and its people have information and awareness of the need for LTSS and how to plan for those needs. • Our Country and its people have meaningful options for meeting LTSS needs and a willingness and ability to act on the options. • Options are feasible and sustainable financially, politically, and from a workforce perspective (paid and volunteer). • Our systems are designed and aligned to foster quality and cost-effective care.

6. Question Algorithm

7. Potential Scenarios Created four potential future scenarios for LTSS in America • LTSS for All Adults 65+ --Government incents behavior in private market • LTSS for All Adults 65+--Government arranges and pays for options and incents behavior in public/private market • LTSS for All (or just adults)—Government arranges for options and incents behavior • LTSS for All (cradle to grave)--Government arranges and pays for options and mandates behavior

8. Learning Agenda Review of other countries approaches to LTSS to inform our own scenarios

9. Cross-Country Comparative Background • Purpose: • Better understand the array of possible solutions • Guide solution considerations based on other countries’ experience • Range of countries selected for different approaches to LTC and cultural and political backgrounds • Caveat: quantitative data can vary across sources, so some information should be viewed as “order of magnitude” • Caveat: examples provided to show range of experiences, not as evaluation of systems

10. Tipping Points Many countries debated and/or experimented with the creation of a LTC systems for many years… • Germany: 20-year debate, during which means-tested assistance was a large and rapidly growing financial burden on communities • France: prolonged debate and experiments capped by heat wave of 2003 • Israel: early law in 1980 due to concerns about aging, but also inadequate home care services and burden of family care; full implementation began 1988 • Netherlands: robust 1960’s improved general welfare, but LTC services left behind • Japan: 1960’s changes in health system and Gold Plan led to growing use of (free) hospital stays for LTC; also concern about imposing care on daughters-in-law

11. Comparative Lessons • Many possibilities, no “right” answer • Budgetary pressures are common • Pressure for expansion of benefits • Design can help control costs • Intergenerational equity a difficult challenge • Culture matters • Public-private interplay matters • Interface with other systems matters • Policy heritage matters • Administrative structures vary, but challenges are common

12. Lessons—No right answer • Many possibilities, no “right” answer: all countries continue to learn and evolve • Multiple reform commissions in the U.K. • Major reform proposals under debate in Germany • Court challenges in the Netherlands led to five major reform proposals • Early Gold Plan in Japan scrapped for new plan

13. Lesson—Fiscal 2. Budgetary pressures are common, and are anticipated for the future • France: participation rose from 150,000 in 2001 to 1.1 million in 2008 • Japan: higher than expected costs (20% first 5 yrs) due to higher than expected enrollment • Netherlands: budget increased 35% in 2007 • Germany: contributions for people with children increased from 1% to 1.95% in 2009, with future rates projected in the range of 3.2% to 5.9%

14. Lessons—Fiscal 2. Once LTC system established: • Public spending tends to increase • e.g., public expenses in Germany immediately increased from 8 to 20 million euro • But shift in how spending is funded and/or level of government bearing costs • Federal and municipal expenditures reduced to about 1/3 of original (social assistance) spending

15. Lessons—Fiscal 3. Once established, there is often pressure for expansion of benefits • Japan: earlier Gold Plan established broad eligibility considered sacrosanct for later plan design • Netherlands: Expectations about LTC services prompted court case, which ruled that budgetary constraints are irrelevant • Spain: calls for reform driven in part by demand for expanded benefits

16. Lessons—Fiscal 3. Exception: Sweden • Started with generous universal benefits • Imposed stricter needs assessment • Home/residential care fell from 57% of 80+ in 1982 to 37% in 2006

17. Lessons—Cost Control 4. Design can help control costs • Size of elderly population weakly correlated with costs • High costs not synonymous with high satisfaction • Choices about level of benefits and eligibility • Incentives, intended or not, are important

18. Lessons US Population generally younger than Europe

19. Lessons But LTC spending dependent on more than age

20. Lessons Netherlands Sweden Finland UK Belgium-NO Luxembourg France Austria-NO Slovenia Germany Spain Poland Slovakia Index constructed from 2007 EU survey (Eurobarometer 283), includes: worries about dependency; quality, accessibility and affordability of home and nursing care; financial preparation; excellence of professional caregivers; appropriateness of care; maltreatment of dependent elderly. Spending data source: OECD Social and Demographic Database, 2010 and OECD Health Data 2010

21. Lessons—Cost Control • System structure, for example: • Limiting public costs via cost sharing such as deductibles or copayments (most countries) • Sliding scale of benefits by income (France) • Imposing budget caps (Netherlands) • Care service supply controls, e.g., controls on number of beds or controls on worker qualifications (Australia; Japan)

22. Lessons—Cost Control • Implementation, for example: • Eligibility definitions/criteria (narrowed in Sweden, U.K.) • Tighter targeting (Sweden) • Standardized assessments (Germany, France, Japan) • Cost-of-living increases (Germany) • Redefined services (Japan)

23. Lessons—Cost Control • System structure can unintentionally create disincentives to curb costs • Spain: incentive to assess as more severely disabled • Netherlands: regional purchasers have limited incentive for efficiency • Germany: disincentives for rehab

24. Lessons—Cost Control • Consumer incentives can also work in opposite directions: • Cost-sharing (most countries), helps control public costs but can risk underuse and increase acute care • Cash options, especially that are less than the cost of services (Netherlands and Germany), can encourage efficient provision of services but also attract new recipients

25. Lessons—Cost Control OOP/co-pays are common, although arrangements vary widely, and can help frame and set expectations for public-private responsibility • France: benefits steeply adjusted by income; beneficiaries pay all else • Japan: users pay 10% of total costs • Germany: benefits capped; beneficiaries pay all above cap • Netherlands: minimum monthly co-pay • Belgium: variety of OOP average about 30% of total costs

26. Lessons—Cost Control U-universal system M-mixed system MT-means-tested system Data sources: OECD Health System Accounts, 2010; U.S. data from Leading Age analysis

27. Lessons—Cost-sharing Safety-net features remain in many countries to help with OOP costs • Germany: reliance on social assistance higher than expected, however total spending has been dramatically reduced (to about 1/3) • Belgium: means-tested allowances to assist with OOP for nursing care

28. Lessons—Intergenerational Equity 5. Intergenerational equity is a significant challenge due to growing number of elderly • Most systems pay-as-you-go • Japan and Germany: retirees required to contribute to system • Belgium, Netherlands: partial funding through general taxes, broadening the base • Germany: people without children pay higher contribution rate—recognizing value of informal care

29. Lessons—Culture 6. Culture matters • Western Europe, in general, regards dependency as a social risk • Scandinavia: strong tradition of universalism and equality; state cares for dependents • Japan: desire to reduce reliance on daughter-in-law as caregiver • Germany: desire to support family care

30. Lessons–Culture Source: 2007 Eurobarometer survey

31. Lessons—Culture Source: 2007 Eurobarometer survey

32. Lessons—Public/Private • Private insurance markets are highly dependent on public systems • Products and markets emerge to complement public insurance (Germany, France) • Large system in Israel marketed with health insurance • Size of private markets also dependent on extensiveness (Netherlands decided private insurance would not work) • Markets also dependent on predictability of public system (growth in French market slowing)

33. Lessons—Public/Private 7. The establishment of public systems can also help create new markets for long-term care services • Belgium: “service checks” helped regularize services otherwise performed in black market • Israel: greatly expanded home care services, especial in private sector • Germany: expansion of capacity for home and institutional services

34. Lessons—Interdependencies 8. Interface with other systems matters • Italy: LTC benefits unofficially used to support low-income families lacking other income supports such as UI • Germany: reforms in social security and UI pushed costs onto LTCI • Japan: free health care led to high use of “social beds” among elderly

35. Lessons—Heritage 9. Policy heritage matters • Japan: Gold Plan set standard for eligibility • Netherlands: expanding health insurance to cover LTC not considered possible at time • Israel: goal was to complement existing (limited) system • France, Germany, Austria: children financially liable for care of parents

36. Lessons—Administration 10. While administrative structures vary, they are a common source of challenges • Netherlands: dissatisfaction with regional purchasing • Belgium: coordination between levels of government a major concern • Sweden: looking to private market to provide more consumer choice • Spain and Sweden: reliance on local assessments for eligibility has created disparities and inefficiencies

37. Lessons—What is our “system” in the US? • Mixed system of health (Medicare) and means-tested health and other services (Medicaid) • Medicaid, the primary payor, varies by state • Not managed as a social risk (unlike retirement or unemployment) • Expectation that individuals will prepare financially, e.g., through purchasing LTCI or savings • Yet 70% of expenditures are funded by public sources • Minimal take up of private insurance • Heavy reliance on informal care, but minimal systemic support of caregivers

38. Possible reflections for US system design • What assets—cultural, policy, or service infrastructure-- do we want to build on? • What outcomes should most drive the system design– including undesirable outcomes in the current system we want to change and desirable outcomes we are failing to realize? • What risks are appropriate for the public to bear, and which should individuals bear? • How much room for error can we tolerate in spending estimates? • How can we design a system that enables continuous improvement and reform? • How do we build a system that recognizes that in any system, needs for LTSS will grow and so will spending on LTC?

39. Understanding LTSS Spending:Part of defining problem & solutions Defining LTSS by type of functional limitation (2004-2006): $151B “long-term care in the United States is needed by 10.9 million community residents [people with ADL and or IADL needs], half of them non-elderly, and 1.8 million nursing home residents, predominantly elderly.” Source: Kaye, Harrington & LaPlante; 2010 Recent counts from adding up services (2010-2011): $208B-$813B • Need unduplicated counts • But also “appropriately” inclusive • Need apples to apples approach for comparisons (e.g., international or %GDP) Source: LeadingAge, review of literature and analysis of national data sets; 2013

40. LTSS encompasses a broad range of services and special environments From National Health Expenditure Accounts and Related unduplicated & in GDP: $363B (2011)- 2% of GDP Some Other Costs/Spending • Estimate of value of non-paid family care-giving ($450B)-Not in GDP • Senior/Other housing (not on left): “independent living,” not part of CCRCs • Private homes owned by any older people or those with disabilities • Rental units (with/wo public housing subsidies) for special populations

41. The federal government pays for 49% of LTSS, but states control programs accounting for 45% of the $$ (increasingly delegated to private managed care organizations) By Source of Funds: Total = $363B By Program: Total = $363B

42. Public LTSS Spending (2005)Per Capita , age 65+In US dollars (graph) Total US health expenditures are nearly double those of many OECD countries, but public spending on LTSS is more similar in amount (shown on graph), though other countries cover more of aged by public LTSS payments (below) Japan = 14% (of age 65+ receive publicly-paid LTSS services) Germany = 11% U.S. = 5% Source: Creighton, Ikegami & Gibson; 2010