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Long Term Care Briefing Book [2]
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TAB 2: PROBLEMS AND ISSUES
This section includes a working group paper on problems and issues of long-term care.
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
L.
M.
N.
o.
WHAT ARE THE PROBLEMS?
SPECIAL ISSUES
SUBSTITUTION OF PAID HOME CARE FOR UNPAID INFORMAL CARE
DOES PAYING FOR HOME CARE SAVE PUBLIC DOLLARS?
INDUCED DEMAND FOR NURSING HOME AND HOME CARE
THE ECONOMIC BURDEN OF LONG-TERM CARE:
MEDICAID
SPENDDOWN
POTENTIAL FOR PRIVATE LONG-TERM CARE INSURANCE
REGULATION OF PRIVATE LONG-TERM CARE INSURANCE
TAX INCENTIVES FOR PURCHASING PRIVATE LONG-TERM CARE
INSURANCE
SOCIAL INSURANCE VERSUS MEANS-TESTED PROGRAMS
SOCIAL INSURANCE FOR LONG-TERM CARE: BENEFIT DESIGNS
SOCIAL INSURANCE FOR LONG-TERM CARE: HOME CARE ONLY
WORK DISINCENTIVES FACING PEOPLE WITH DISABILITIES
INTEGRATION OF ACUTE AND LONG-TERM CARE SERVICES
PREFUNDING OF LONG-TERM CARE SOCIAL INSURANCE
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TABLE OF CONTENTS
WHAT ARE THE PROBLEMS?
B-l
SPECIAL ISSUES
B-3
SUBSTITUTION OF PAID HOME CARE FOR UNPAID
INFORMAL CARE
B-5
DOES PAYING FOR HOME CARE SAVE PUBLIC DOLLARS?
B7
INDUCED DEMAND FOR NURSING HOME AND HOME
CARE
B-8
THE ECONOMIC BURDEN OF LONG-TERM CARE:
MEDICAID SPENDDOWN
B 10
POTENTIAL FOR PRIVATE LONG-TERM CARE INSURANCE
B 12
REGULATION OF PRIVATE LONG-TERM CARE INSURANCE . . . . B 14
TAX INCENTIVES FOR PURCHASING PRIVATE LONGTERM CARE INSURANCE
B-16
SOCIAL INSURANCE VERSUS MEANS-TESTED PROGRAMS
B-17
SOCIAL INSURANCE FOR LONG-TERM CARE: BENEFIT
DESIGNS
B-19
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SOCIAL INSURANCE FOR LONG-TERM CARE: HOME
CARE ONLY
B-20
WORK DISINCENTIVES FACING PEOPLE WITH
DISABIUTIES
B 21
INTEGRATION OF ACUTE AND LONG-TERM CARE
SERVICES
B-22
PREFUNDING OF LONG-TERM CARE SOCIAL INSURANCE
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TAB 2: PROBLEMS AND ISSUES
WHAT ARE THE PROBLEMS?
Most people believe that the public long-term care system is inadequate and federal policies
must be radically reformed. Critics of current policy identify the following problems:
•
The current system relies too heavily on informal caregivers. While the
commitment of family caregivers is an obvious strength of such a system, many
people argue that families are overburdened and need help. For working age adults
with disabilities, only having access to family provided care, is a severe limitation on
personal independence.
•
The public financing system is highly fragmented and poorly coordinated. We
finance long-term care services through a multiplicity of programs. People in need of
services have a limited understanding of how these various programs work, who is
eligible and how services can be accessed.
•
Our national long-term care policy is primarily based on a welfare model. Public
financing is dominated by Medicaid which accounts for over three-forths of public
spending. As a consequence public assistance is made available only to those persons
who do not have the financial resources to pay for their own care. Major criticisms of
this welfare orientation include:
It forces people to deplete all of their life savings on the private cost of longterm care before they are eligible for public assistance. As a result long-term
care is the largest out-of-pocket health care expense faced by older people
(out-of-pocket long-term care costs for younger people are not known).
Many people who have been financially independent all of their lives are
emotionally devastated by being dependent on "welfare" at the end of their
lives.
Some people who have exhausted their resources paying for nursing home care
do not return home, even if they are able, because their resources are gone.
A welfare oriented system creates perverse incentives for people to "look poor"
to qualify for expensive nursing home services by sheltering or divesting their
financial assets.
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A welfare oriented system creates perverse incentives for people to "look
poor" to qualify for expensive nursing home services by sheltering or
divesting their financial assets.
It has been difficult to garner political support for adequate funding for
low income people in the absence of social insurance for all.
Public funding is biased toward institutional care. Sixty-nine percent of total
public funding goes to support nursing home care and Intermediate Care
Facilities for the Mentally Retarded in spite of the fact that people prefer inhome and community-based services. Federal support of more home-like
residential services such as assisted living and commumty supported living
arrangements is just beginning to develop.
The potential of private long-term care insurance to help protect people against
catastrophic costs is uncertain. Cumulatively, about 2.5 million long-term care
policies have been sold. Many people question whether these products will ever
be affordable to a large segment of the population and even if they are, whether
they are a good value. People who already have disabilities cannot purchase
these policies.
Access to services under Medicaid is tremendously varied. Because Medicaid
permits states considerable flexibility in designing their long-term care programs,
there is wide variation across states in the number and types of people served and
the kinds of services available.
Access to publicly-financed home care services is particularly uneven. In states
that have very limited home care benefits under Medicaid, many poor disabled
persons receive no formal home care, no matter how much in need they might be.
A small handful of states account for the great majority of spending for home care
services because most states remain wary of the cost implications of expanding
access.
Some population groups with disabilities, particularly people with chronic mental
illness and working age adults, are largely left out of the Medicaid long-term care
system. The home and community-based waiver program is only available to
people who would otherwise be in an institution. This requirement ends up
discriminating against some groups even though they may have a high level of
need.
The public long-term care system is over professionalized and not consumer
driven. It is largely based on a model where professionals make decisions on
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behalf of others. Many younger people with disabilities expect to make their own
decisions about what services they need and where they want them delivered
without the advice of a professional. This is why case management is viewed by
many younger disabled persons with considerable concern as limiting consumer
choice.
SPECIAL ISSUES
In addition to these overarching problems in the long-term care system, there are several
special issues which merit consideration. These issues are summarized in Appendix B.
They include the following:
Substitution of paid home care for unpaid informal care. One of the primary
barriers to expanding paid home care is the fear that it will cause relatives and
friends to stop providing care. Studies vary, but most find no or minimal
reduction in informal care when paid care is provided.
Does paying for home care save public dollars? People often assert that the
government could save money paying for home care, since is costs so much less
than nursing home care. While paying for home care for an individual may cost
less, paying for home care through public programs usually increases aggregate
public costs.
Induced demand for nursing home and home care. The effect of social insurance
on long-term care is not known, but many people believe that it will increase use.
Estimating the costs of public and private insurance is difficult because of the
uncertainty of the number of additional people who will seek services.
The economic burden of long-term care: Medicaid spenddown. Medicaid is a
means-tested program that pays for long-term care for people who are certified to
need the care and have income and assets low enough to meet the program's
means test. Studies have demonstrated that from 11 to 25 percent of elderly
nursing home residents convert from private pay to Medicaid eligibility.
Potential for private long-term care insurance. Very few people have private
long-term care insurance; however the number of policies is increasing. There is
substantial disagreement over the potential of private insurance to cover longterm care expenditures in the future.
Regulation of private long-term care insurance. There are a number of problems
with the current private long-term care insurance market. Consequently, there
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has been increased interest in strengthening the regulation of this industry.
Several key questions include what will be the respective roles of the federal and
state governments and what standards will be established.
Tax incentives for purchasing private long-term care insurance. Under current
law, consumers buy long-term care insurance in after-tax dollars. Benefits are
taxable, although in practice they are rarely taxed. In order to encourage
development of the market, some observers believe the tax treatment of long-term
care insurance should be changed or clarified.
Social insurance versus means-tested programs. A key issue is whether long-term
care should be provided on a universal basis without regard to the financial status
of the recipient, or whether government programs should be limited to people in
financial need. Public spending is now dominated by a means-tested programMedicaid. A switch to non-means-tested social insurance would be a change.
Social insurance for long-term care: benefit designs. There are several different
ways to design benefits for a social insurance program. Four options, including
two which are not included in the Options section of this briefing book, are
described in the Special Issues appendix.
Social insurance for long-term care: home care only. It is possible to design a
social insurance program for long-term care that covers home care only~not
nursing home or other institutional care. The pros and cons of this approach are
discussed briefly in the Special Issues appendix.
Work disincentives facing people with disabilities who receive public services.
People with disabilities who enter the work force may face extraordinary out-ofpocket expenses. Furthermore, the income earned from a job may precipitously
reduce cash assistance and health benefits for such individuals. These are
powerful disincentives to work.
Integration of acute and long-term care services. One of the problems with the
current health care system is the lack of integration between acute and long-term
care services. Current research and demonstration efforts on integrated models
have focused primarily on the elderly. There is to date little evidence indicating
cost savings form these linkages.
Prefunding of long-term care social insurance. Mandatory prefunding is an
alternative to a pay-as-you-go approach to financing social insurance for long-term
care. Proponents are concerned both with increasing the savings rate and with
generational equity. Opponents note that the current elderly would not benefit
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from prefunding. In addition, this approach could be a hard sell given that people
would receive benefits decades after they began contributing.
SUBSTITUTION O F PAID HOME CARE FOR UNPAID INFORMAL
CARE
ISSUE
Family provided help is the mainstay of the great majority of disabled elderly who live in
the commumty. Approximately 90 percent of the disabled elderly received help from
family and friends. One of the main barriers to the expansion of paid home care is the
fear that it will cause relatives and friends to stop providing informal care. While study
results vary, the vast bulk of studies find either no or only small reductions in informal
care when paid home care is provided.
STUDIES
An exhaustive review of nearly all home and community-based care studies found
that of the 53 evaluation findings on the effect of paid home care on the supply of
informal care, 41 were statistically nonsignificant, seven suggested a statistically
significant increase in unpaid care, and only four suggested a statistically
significant decrease (Weissert et al. 1988).
The major study which found a substantial reduction of informal care reported
informal caregivers withdrawing from 1.35 areas of help (e.g., bathing, toileting,
housework, meal preparation) when formal care was provided in one additional
area (Greene 1983). This finding may reflect a redirection of family help rather
than an actual reduction in their overall effort.
In the evaluation of the Channeling demonstration of case management models,
the model that provided a rich array of formal in-home services resulted in only a
small reduction in the percentage of the disabled elderly receiving any informal
care. The effects also included a nonsignificant decrease in the number of visits
per week by informal caregivers and a nonsignificant increase in the number of
hours per day of care provided by the primary informal caregiver (Christianson
1986).
A small reduction was found in California's Multipurpose Senior Services Project.
For persons living with others, a 10 percent increase in informal care led to a 1.2
percent decrease in informal care. The effect was smaller for elderly people
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living with a child and for those with a sibling living nearby (Smith-Barusch and
Miller 1985).
An analysis of the National Long-Term Care Survey, a large survey of the
noninstitutionalized disabled elderly population, found no significant substitution
effects between paid and unpaid care (Hanley, Wiener, and Harris 1991).
An evaluation of the Five Hospital Program community care project in Chicago
are found no evidence of a significant decrease in the total number or volume of
services provided by informal caregivers between the time the study began and the
nine month and the 48 month follow-up surveys, despite a significant increase in
formal services (Edelman and Hughes 1990).
A study of the Minnesota Pre-Admission Screening/Alternative Care Grants
Program found informal caregivers did not reduce support following the
introduction of formal care services (Moscovice et al. 1988).
STUDY LIMITATIONS
These studies measure mostly local, short-run experience rather than long-run
responses to a national public or private long-term care insurance program.
However, a review of the literature in Europe, where extensive and permanent
home care programs are more common, found informal support to be at a high
level (Sundstrom 1992).
REFERENCES
Christiansen, J. 1986. Channeling Effects on Informal Care. Princeton, NJ:
Mathematica Policy Research.
Edelman, P. And S. Hughes. 1990. The Impact of Commumty Care on Provision of
Informal Care to Homebound Elderly Persons. Journal of Gerontology, 45(2):S7484.
Hanley, R., J. Wiener, and K. Harris. 1991. Will Paid Home Care Erode Informal
Support? Journal of Health Politics, Policy and Law, 16(3):507-521.
Moscovice I., G. Davidson, and D. McCaffrey. 1988. Substitution of Formal and
Informal Care for the Community-based Elderly. Medical Care, 26(10):971-81.
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Smith-Barusch, A., and L.S. Miller. 1985. The Effect of Services on Family Assistance
to the Frail Elderly. Journal of Social Semces Research, 9(l):31-46.
Sundstrom, G. 1992. Family Care for Frail Elderly People in OECD Countries. An
Overview of Trends. Jonkoping, Sweden: Institute of Gerontology.
Weissert, W., C. Cready, and J. Pawelak. 1988. The Past and Future of Home and
Community-Based Long-Term Care. Milbank Quarterly, 66(2):309-88.
DOES PAYING FOR HOME CARE SAVE PUBLIC DOLLARS?
People often assert that paying for home care would save the government money
because caring for a person with disabilities at home would be less costly than placing
the person in a nursing home. This turns out to be a complex issue.
It is true that typical home care costs for an individual are below nursing home costs.
However, paying for home care through public programs actually increases aggregate
public costs.
This counterintuitive finding is the result of a series of social experiments funded by the
Department of Health and Human Services in the late 1970s and early 1980s to test the
effects of paying for home care. The findings are:
Expanding publicly-financed home care increases aggregate long-term care costs.
This is because small reductions in nursing home costs for some people are
more than offset by the increased costs of providing more home care to
others who would remain at home even without the expanded services.
Put simply, given a choice between entering a nursing home and staying at
home without care, many choose staying at home with nothing. However,
given a choice between entering a nursing home, staying at home without
care, and staying home with publicly-financed home care, many choose
publicly-financed home care.
Although it increases costs, paying for home care improves the reported wellbeing and satisfaction with services of both persons with disabilities and their
family caregivers.
Moreover, paying for home care does not cause wholesale substitution of paid
care for family care. Although some substitution occurs in the area of
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housekeeping, shopping, etc. the extent of substitution is small-certainly less than
some fear.
REFERENCES
Kemper, Peter. "The Evaluation of the National Long Term Care Channeling
Demonstration: Overview of the Findings." Health Services Research, 23(1): 161174. 1988.
Kemper, Peter, Robert Applebaum, and Margaret Harrigan. "Community Care
Demonstrations: What Have We Learned?" Health Care Financing Review, 8(4):
87-100. 1987.
Weissert, W.G., CM. Cready, and J.E. Pawelak. "The Past and Future of Home and
Community-Based Long Term Care." Milbank Quarterly, 66:309-388. 1988.
INDUCED DEMAND FOR NURSING HOME AND H O M E C A R E
ISSUE
The effect of insurance on long-term care services is not known, but many believe it will
substantially increase use. Estimating the costs of public and private insurance is difficult
because of the uncertainty about the amount of increase.
OVERVIEW
Most disabled persons who might qualify for paid long-term care services do not
receive any.
The principal effect of insurance is to reduce the net price of a service. People
tend to buy more of a good or service when it costs less out-of-pocket.
Because no public insurance exists and private insurance is so new, available
research is very limited.
The increased use of services that is associated with insurance is often called
"induced demand" or "moral hazard." The sensitivity of demand to price is
referred to as "price elasticity."
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NURSING HOMES
Existing studies provide a variety of induced demand estimates and show a 10
percent decrease in price leading to an increased demand ranging from 7 to 23
percent (B. Chiswick, 1976; A. Headen, 1993; J. Nyman, 1989; and, W. Scanlon,
1980). These studies must be viewed with caution because of the use of old data,
the use of very aggregate measures, and other severe methodological limitations.
Most gerontologists believe that the level of induced demand for nursing home
care under insurance would be much lower than indicated by the econometric
estimates. This is because:
The elderly fear nursing homes and want to stay out of them if at all
possible. When asked, 95 percent of the disabled elderly agreed with the
statement, "It's better to stay out of nursing homes as long as you can" (A.
Rivlin and J. Wiener, 1988).
When Manitoba, Canada, introduced a universal entitlement for nursing
home care in the 1970s, nursing home use did not increase (N. Roos,
1989).
HOME CARE
Much less research has been done on induced demand for home care. However,
most gerontologists believe that insurance would greatly increase use.
This is mostly because of the inherent desirability of some low-skill home
care services, such as homemaker and chore services.
Cost estimates include a 100 percent increase in use.
Some experts believe that the potential for induced demand for home care has
been overstated.
After introducing a broad-based home care program, British Columbia,
Canada, found that service use increased substantially but then leveled off
after about three years (R. Kane and R. Kane, 1985).
During the Social Health Maintenance Organization (SHMO)
demonstration, in which HMOs offered a limited chronic care benefit, only
44 to 80 percent of the eligible population (depending on the site) received
services ( C Harrington and R. Newcomer, 1990).
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REFERENCES
•
Chiswick, B. 1976. The Demand for Nursing Home Care: An Analysis of the
Substitution Between Institutional and Noninstitutional Care. Journal of Human
Resources, 11:295-316.
Headen, A. 1993. Economic, Disability and Health Determinants of the Hazard of
Nursing Home Entry. Journal of Human Resources, 28:80-110.
Kane, R. and R. Kane. 1985. The Feasibility of Universal Long-Term Care Benefits:
Ideas from Canada. New England Journal of Medicine, 312:1357-64.
Nyman, J. 1989. The Private Demand for Nursing Home Care. Journal of Health
Economics, 8:209-31.
Rivlin. A and J. Wiener. 1988. Caring for the Disabled Elderly: Wlio Will Pay?
Washington, DC: The Brookings Institution.
Roos, N. 1989. How a Universal Health Care System Responds to an Aging Population:
Demographics, Supply and Utilization in 1975 and 1983 in Manitoba, Canada.
Journal of Aging and Health, 1:651-69.
Scanlon, W. 1980. A Theory of the Nursing Home Market. Inquiry, 17:25-41.
THE ECONOMIC BURDEN OF LONG-TERM CARE: MEDICAID
SPENDDOWN
People who enter nursing homes, deplete their financial assets, and then apply for
Medicaid coverage, are commonly identified as a population which experiences severe
economic burdens as a result of long-term care services. This process is commonly referred to as "Medicaid spenddown." Many critics point to this phenomena as evidence that
current federal long-term care financing policies are bankrupting people and must be
reformed. What do we know about the impact of Medicaid spenddown?
A number of studies of spenddown have been conducted in recent years. Although all
studies to date have some methodological limitations, they do provide guidance about
how extensive this phenomena actually is. Some of the key findings of these studies are
summarized below:
At any point in time, 50-60 percent of current nursing home residents are
receiving Medicaid benefits (Short et al. 1992; Spence and Wiener 1990);
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however, only about 11 percent of these residents started out as private payers
and then converted to Medicaid. (Short et al.).
If we look at the use of nursing homes over a persons lifetime (many people have
multiple nursing home stays), about 14 percent of elderly nursing home users will
spenddown to Medicaid, representing about a quarter of those entering nursing
homes as private payers and a third of those ultimately receiving Medicaid in
nursing homes (unpublished estimates, Spillman and Kemper, AHCPR 1993).
Several studies have looked at spenddown patterns in individual states. One study
showed that 27 percent of all nursing home users in Michigan who were eligible
for Medicaid had begun their stay a private pay patient.
Studies tracking nursing home admission cohorts in the state of Connecticut have
found that 21 percent of all persons admitted to nursing home as private pays had
spent down after 7-8 years.
Not all persons spenddown to Medicaid as a result of a nursing home stay. One
study estimated that the actual number of disabled elderly persons who convert to
Medicaid is higher in the community. However data on what causes elderly
people to spenddown to Medicaid in the community are lacking.
REFERENCES
Adams, E. Kathleen, Mark R. Meiners, and Brian O. Burwell. "Asset Spend-Down in
Nursing Homes, Methods and Insights." Medical Care, 31(1), January 1993.
Burwell, Brian. Middle-Class Welfare: Medicaid Estate Planning for Long-Term Care
Coverage. Lexington, MA: SysteMetrics/McGraw-Hill, September 1991.
Burwell et al. "The Economic Impact of Long Term Care on Individuals". Unpublished
manuscript, Office of the Assistant Secretary for Planning and Evaluation, 1990.
National Governors' Association. "Medicaid Long Term Care Eligibility as of January 1,
1991." Medicaid Memo. Washington, DC: National Governors' Association,
January 1991.
Short, Pamela Farley, Peter Kemper, Llewellyn J. Cornelius, and Daniel C. Walden.
"Public and Private Responsibility for Financing Nursing Home Care: The Effect
of Medicaid Asset Spend-down." Milbank Memorial Fund Quarterly, 70(2), 1992.
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Spence, Denise A., and Joshua A. Wiener. "Estimating the Extent of Medicaid Spenddown in Nursing Homes." Journal of Health, Politics, Policy and Law, 15(Fall
1990):607-626.
Spillman, Brenda C, and Peter Kemper. "Lifetime Spenddown to Medicaid Eligibility
among Nursing Home Users." Unpublished manuscript, Agency for Health Care
Policy and Research, Division of Long-Term Care Studies, 1993.
POTENTIAL FOR PRIVATE LONG-TERM CARE INSURANCE
Relatively few persons currently have private long-term care insurance; however, the
number of policies sold has increased considerably in recent years. There is substantial
disagreement over the potential of private insurance to cover long-term care
expenditures in the future.
Private insurance will cover only about 1 percent of the $74 billion the Health
Care Financing Administration is projecting will be spent on nursing home care in
1993 and about 7 percent of the $12 billion projected to be spent on home health
care.
It is important to note that the total number of long-term care policies sold has
grown rapidly from 815,000 in 1987 to 2.4 million in 1991.
Private long-term care insurance now is primarily sold to elderly individuals. The
average age of a person buying individual insurance in 1991 was 69 years.
Premiums are high if persons wait until late in life to purchase insurance. (A
typical policy offering inflation protection cost $1,781 annually in 1991 for
purchasers age 65. Costs are higher for policies with nonforfeiture benefits.)
There is disagreement, about how many people 65 and older will be able to afford
private policies. Rivlin and Wiener estimated that between 10 and 21 percent of
individuals age 67 or older could afford policies, while Cohen et al. estimated that
42 percent of those 65 or older could afford policies.
Insurance underwriting also precludes some individuals from purchasing insurance.
One estimate is that between 12 and 23 percent of the population would be
rejected for private insurance because of their health if everyone applied at age
65.
Policies are more affordable at younger ages and fewer individuals would be
rejected because of their health. (A typical policy offering inflation protection
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cost $852 annually in 1991 for purchasers age 50.) The willingness of younger
individuals to buy this type of insurance, however, may be limited by concern
about the value of long-term care insurance. Most policies offer purchasers no
benefit if they discontinue a policy even after decades of paying premiums, and
whether private insurers will be solvent when claims are likely to occur is a
concern.
Even for those who buy a private long-term care insurance policy, there may be
significant limitations in coverage. There is no coverage for care exceeding
lifetime maximums and the value of a daily dollar payment can be severely eroded over time by inflation. A growing number of policies sold include inflation
protection but this feature raises the cost of the insurance significantly.
Uncertainty about whether the federal government or states eventually will
expand public funding of long-term care also may reduce interest in private longterm care insurance.
REFERENCES
Burner, S.T., D.R. Waldo, and D.R. McKusick. "National Health Expenditures
Projection through 2030." Health Care Financing Review, Fall 1992 (Table 9).
Cohen, M., N. Kumar, T. McGuire, and S. Wallack. "Long-Term Care Financing
Proposals: Their Costs, Benefits and Impact on Private Insurance." Washington,
DC: Health Insurance Association of America, 1991.
Health Insurance Association of America. Long-Term Care Insurance in 1991.
Washington, DC: Health Insurance Association of America, 1993.
Kemper, P., B.C. Spillman, and CM. Murtaugh. "A Lifetime Perspective on Proposals
for Financing Nursing Home Care." Inquiry, Winter 1991.
Murtaugh, CM., and P. Kemper. "Risky Business: Long Term Care Insurance
Underwriting." 1993 (unpublished).
Rivlin, A.M., and J.M. Wiener. Caring for the Disabled Elderly: Wlio Will Pay?
Washington, DC: The Brookings Institution, 1988.
Wiener, J.M., and L.H. Illston. "Options for Long-Term Care Financing Reform: Public
and Private Long-Term Care Insurance." Paper presented at the Foundation of
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the American College of Health Care Administrators National Futures
Symposium, Washington, D.C, 1992.
REGULATION OF PRIVATE LONG-TERM CARE INSURANCE
ISSUE
There are a number of problems with the current private long-term care insurance
market. Consequently, there has been increased interest in strengthening the regulation
of this industry. Several key questions include what will be the respective roles of the
federal and state governments and what standards will be established.
RATIONALE FOR STRENGTHEN REGULATION OF PRIVATE LONG-TERM CARE INSURANCE
Individuals are unable to assess the risks of needing long-term care, value of longterm care insurance, and financing mechanisms for long-term care.
Consumers are vulnerable to purchasing unnecessary and inadequate long-term
care insurance products for a variety of reasons including:
Certain insurer marketing practices encourage abuse and fraud (e.g.,
twisting and churning, high pressure sales tactics, agent compensation
arrangements, and agent sales to Medicaid recipients);
Policies lack standardized format, terminology, and eligibility criteria;
Products often fail to keep pace with inflation; and
Failure to protect against lapses leaves consumers to vulnerable to loss of
coverage and accumulated reserves.
Regulation and enforcement of long-term care insurance requirements are
currently state responsibilities. There is variation in these standards and
enforcement of these requirements across states.
SPECIAL ISSUES CONCERNING REGULATION
Who should regulate long-term care insurance-federal and/or state governments?
Regulating long-term care insurance has been primarily a state, not a federal,
responsibility. However, many believe federal intervention is necessary in terms
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of setting standards, monitoring, and enforcement (see Appendix D for the
following articles: May 20, 1992 statement of Paul Rapo before House Energy
and Commerce Committee, "Regulation of Private Long-Term Care Insurance" by
Joshua Wiener, and GAO report to the House Ways and Means Committee,
"Long-Term Care Insurance - Risks to Consumers Need to be Reduced"). There
are differing opinions regarding extent of federal involvement in this market
place, how federal intervention could best be achieved, and the nature of federal
monitoring and enforcement.
What long-term care insurance standards should be established?
Debate exists regarding the regulation of the following key long-term care insurance
issues:
Inflation Protection. Some believe consumers will be unable to understand the
effects of inflation on long-term care insurance benefits and believe this
protection should be mandated, regardless of additional cost. Others argue
consumers can be educated to make an informed choice on the appropriateness of
purchasing inflation protection.
Nonforfeiture Protection. Because long-term care insurance is typically purchased
years in advance of utilization, consumers may lose significant reserves and
needed protection when policies lapse while insurers stand to gain from these
losses. Because lapse rates are estimated to be high and individuals are unlikely
to anticipate the lapsing of their policies at the time of purchase, some believe
that non-forfeiture protection should be mandated. Others believe, the cost of
mandating non-forfeiture protection outweighs the gain and advocate consumers
be offered non-forfeiture protection.
Eligibility Criteria. Because eligibility criteria are often vague and differ across
long-term care insurance policies, some believe eligibility triggers for long-term
care insurance benefits should be standardized across policies. Others argue this
degree of standardization will limit innovation and as an alternative, recommend
standardized terminology to facilitate understanding and comparison.
Agent Commissions. Agent commissions for initial sales of long-term care
insurance policies are often quite high and create significant incentives for
inappropriate marketing. Some believe agent commissions should be limited (i.e.,
as are Medigap commissions). Others believe limiting agent commissions will
discourage good agents from entering a market in which products are
complicated and sells are difficult.
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TAX INCENTIVES FOR PURCHASING PRIVATE LONG-TERM CARE
INSURANCE
ISSUE
Under current law, long-term care insurance premiums are paid with after-tax
dollars and benefits are probably taxable, although in practice benefits are rarely
taxed. This contrasts with the tax treatment of acute care insurance. In order to
encourage development of the market, should the tax treatment of private longterm care insurance be changed or clarified?
BACKGROUND
Long-term care insurance has attributes of both health or accident insurance and
of life insurance:
Like health or accident insurance, it provides benefits contingent on a
health-related event.
Like life insurance, the event which triggers payment is a predictable part
of aging. Thus, premiums paid while the insured is younger accumulate as
reserves to finance benefits paid many years or even decades later.
Several past legislative initiatives, including S.1693 introduced in 1991 by then
Senator Bentsen, proposed treating long-term care insurance similarly to accident
and health insurance for tax purposes.
Many of these legislative initiatives also included stricter regulation of the longterm care insurance market.
There is much uncertainty about how much the tax incentives will increase
demand for insurance.
Options/Recommendations
The Long-Term Care Work Group recommends stricter regulation combined with
tax clarification and incentives. The main proposed changes include:
Clarifying that payments received from long-term care insurance policies
are not taxable income.
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Making employer purchases of long-term care insurance for their
employees deductible as a business expense.
The motivation for tax clarification and incentives is:
Encourages the purchase of long-term care insurance.
Provides an incentive for more companies to enter the market and offer
better products.
Encourages the development of a group market through the workplace,
which would allow people to purchase insurance at a younger age when it
is more affordable.
Opponents of tax clarification or incentives argue:
Long-term care insurance is purchased primarily by people with moderate
to high incomes, so the benefit is regressive.
Promotion of an industry perceived as selling poor quality products and
engaging in unscrupulous business practices is undesirable.
SOCIAL INSURANCE VERSUS MEANS-TESTED PROGRAMS
ISSUE
A key issue is whether long-term care should be provided on a universal basis without
regard to the financial status of the persons in need of services or whether government
help should be limited to persons in financial need. Since public spending is dominated
by Medicaid, a means-tested, welfare program, a shift to social insurance would be a
major change in how long-term care is financed.
ARGUMENTS FOR SOCIAL INSURANCE
Universal Coverage. Social insurance is the only approach that guarantees that
everyone will have coverage for long-term care services. Social insurance covers
the able-bodied and the currently disabled, the young and the old, and people of
all levels of income and wealth. Private long-term care insurance is unlikely to
ever cover the vast majority of people.
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Protection Against Catastrophic Costs. Nursing home care is very expensive and
is a major cause of catastrophic costs among the elderly. By providing coverage,
social insurance reduces the likelihood of catastrophic out-of-pocket costs.
Improved Access to Services. Under the current system, nursing homes and other
providers strongly prefer private patients because they pay substantially higher
fees than do Medicaid patients. In social insurance programs, this would be
alleviated because payment rates would be higher. In addition, since more of the
costs of long-term care would be covered by public programs, providers would be
less able to discriminate against public patients.
Long-Term Care Affects All Ages. While long-term care services are used
primarily by the elderly, need exists at all ages.
While disability rates are much higher for the elderly than the nonelderly,
perhaps as much as half of the community-based disabled population is
under age 65.
Because family care is the backbone of community-based long-term care,
middle-aged caregivers will benefit from an expanded home care program.
Because they are likely to live longer, the current generation of people
under the age of 65 is more likely to need long-term care than is the
current generation of elderly.
Target Efficiency. Since the disabled population is disproportionately low income,
the bulk of incremental expenditures will be for people with modest incomes.
Between 67 and 80 percent of incremental public expenditures would be for the
elderly with incomes below $30,000 (Cohen et al., 1992; Wiener et al., 1992).
Since, the nonelderly disabled population is quite poor, the proportion for the
nonelderly population would be even higher.
Public Support for Social Insurance. Although they must be viewed with caution,
public opinion polls generally find strong preference for public insurance for longterm care over means-tested strategies.
ARGUMENTS FOR MEANS-TESTED PROGRAMS
Less costly. Significant improvements in means-tested programs would cost an
additional $5-10 billion. While the costs of social insurance programs would vary
with the benefits included and the cost containment mechanisms established,
estimates for a full-phased-in program range from $22 to $55 billion in additional
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public spending. Given the tax increases in the President's economic plan and the
cost of the acute care reforms, a social insurance program for long-term care
requires too much additional revenue.
Generational Equity. Critics contend that it is unfair to create yet another
program-in addition to Social Security and Medicare-that benefits mostly the
elderly and isfinancedmostly by the nonelderly. They argue that too much
federal money is going to the elderly now, squeezing available resources for the
nonelderly.
Target Efficiency. By definition, social insurance provides benefits for all people
without regard to income, including upper-income people who could otherwise
afford to pay for long-term care themselves. Between 20 and 33 percent of
incremental public expenditures under social insurance programs would be for the
elderly with incomes above $30,000 (Cohen et al., 1992; Wiener et al., 1992). The
proper role of government is to provide for only that part of care that is beyond
the financial resources of the disabled.
Avoids Overloading the States. Over the near term, states will need to focus on
acute care reform. A social insurance program for long-term care runs the risk of
giving the states more to do than they can handle. By contrast, changes in meanstested programs would be a manageable extension of existing programs.
SOCIAL INSURANCE FOR LONG-TERM CARE: B E N E F I T DESIGNS
ISSUE
There are several different benefit designs possible under social insurance. Presented
below are four possible designs, including two that are not discussed in the Options Tab.
OPTIONS
All major proposals would cover a broad array of home and community-based
services (e.g., personal care, homemaker services, and personal assistance
services).
Proposals differ in the amount of nursing home care they cover. Commonly
discussed options include:
No coverage of nursing home care under the social insurance program, as
originally proposed by the late Representative Claude Pepper. The
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rationale for this approach is to focus incremental expenditures on the
community-based population.
"Front-end" coverage (e.g., the first three or six months of nursing home
patient's stay), as proposed by the Pepper Commission and the last year's
Senate and House leadership bill. The rationale for this approach is to
focus incremental spending on persons in the community and those nursing
home patients who have the greatest chance of being discharged alive back
to the community.
"Back-end" coverage (e.g., nursing home stays after a two-year deductible
period), as originally proposed by Senator George Mitchell. The rationale
for this approach is to focus incremental spending on persons with truly
catastrophic costs.
"Comprehensive" coverage (e.g., all nursing home stays, except possibly for
a short deductible), as originally proposed by Representative Henry
Waxman and by Representative Pete Stark. The rationale for this
approach is to comprehensively solve the problems of long-term care.
SOCIAL INSURANCE FOR LONG-TERM CARE: H O M E C A R E ONLY
PROPOSAL
Under this option, a wide array of home and community-based services would be offered
through a social insurance program. No new nursing home or other institutional benefits
would be provided, except for minor modifications of Medicaid financial eligibility rules.
These changes would raise the personal needs allowance from $30 to $100 a month and
increase the level of protected assets from $2,000 to $12,000.
PROS
This option would provide a boldfinancingshift away from nursing home and
other institutional care.
Public opinion polls show that the elderly and disabled want more home care (See
Appendix A: Public Opinion Polls).
Among the social insurance options, it is the least expensive in terms of new
public expenditures.
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CONS
This approach does little to address the fact that nursing home care, not home
care, is the major cause of catastrophic expenditures among people in need of
long-term care. Elderly advocacy groups will push for some nursing home
coverage.
The differential in how home care and institutional care is financed (i.e., universal
coverage versus means-tested program) could create incentives to keep people at
home who should be institutionalized.
If the federal government heavily funds home care, but nursing home and other
institutional care continues to be financed by a more even combination of federal
and state funds, then states will have a strong incentive to inappropriately shift
costs to the home care program.
WORK DISINCENTIVES FACING PEOPLE WITH DISABIUTIES
Entering or staying in the labor force has been a high risk proposition for people with
disabilities even when they have the necessary skills and want to work.
First, people with severe disabilities can face extraordinary out-of pocket expenses
if they go to work. They may need special wheelchairs, communication
equipment and attendant services to effectively perform their work activities. For
people with low or moderate earnings, these things are usually not affordable.
Second, the income earned from a job may not be less enough to compensate for
the loss of cash assistance and health benefits that can result if you go to work.
For example, prior to 1981, disabled SSI recipients faced a substantial risk of
losing their cash assistance benefits and Medicaid if they went to work. Since
Medicaid was virtually the only way to obtain health coverage, this created a
powerful incentive to stay out of the labor force.
In 1981, Section 1619 of SSI corrected many work disincentives by permitting people to
retain more of their earnings while still maintaining their Medicaid eligibility as well as
allowing certain income disregards for disability related expenses. As Medicaid coverage
of personal assistance services has expanded over the years, access to these services
through Section 1619 has become as important to many disabled people as health care
coverage.
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Long-term care reform proposals which are targeted only at low income persons will
perpetuate work disincentives that were ameliorated through the implementation of
Section 1619. Section 1619 protections should be extended to any new means-tested
long-term care program.
INTEGRATION O F A C U T E AND LONG-TERM C A R E S E R V I C E S
BACKGROUND
One of the problems of the current health care system is the inability of managed
care programs to meet the entire acute and long-term care needs of disabled
populations.
Traditional health maintenance organizations that participate in public and private
programs typically limit coverage to acute care benefits and do not provide the
full array of long-term care benefits required to support disabled persons in the
community or in institutions. Health maintenance organizations (HMOs) do not
market to disabled persons and the disabled do not enroll in HMOs.
Nursing homes and case management programs for the disabled typically limit
coverage to long-term care services covered under a variety of state programs.
Typically these public programs are not integrated into one comprehensive service
plan.
Several observers have advocated that pooling funds from public and private
programs could integrate long-term care benefits with acute care benefits and
enable managed care providers to develop specialized programs that coordinate
the full range of acute and long-term care needs of this population within one
delivery system.
If successful, advocates argue, these programs would improve continuity of care
and minimize the tendency to institutionalize the disabled in hospitals and other
long-term care facilities, which would improve the independence and quality of
life of disabled persons.
SERVICE USE
Evidence suggests that elderly disabled persons living in the community are heavy
users of acute care services:
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Information from the 1987 National Medical Expenditure Survey indicates
that the disabled elderly use more physician visits, hospital stays and days,
and emergency room visits and have substantially more hospital outpatient
visits, home health visits, and prescription drugs, than the general elderly
population.
Not surprisingly, the disabled elderly also have higher per capita health
care expenditures. Data from the 1984 National Long-Term Care Survey
linked with Medicare administrative data suggest that per capita health
expenditures for disabled persons are more than double that of Medicare
beneficiaries who are not disabled.
The disabled elderly residing in nursing homes have the highest per capita health
care spending among the disabled. Data from four states (California, Georgia,
New York and Tennessee) indicate that per capita spending for elderly nursing
home residents ranges from 4.5 to 6.1 times that for disabled elderly persons
without nursing home care.
CURRENT INITIATIVES
Unfortunately, we have little evidence on the ability of integrated care systems to
control acute and long-term care costs and improve the quality of life of disabled
persons.
The Health Care Financing Administration (HCFA) has sponsored several
demonstration projects which experiment with integrated acute/long-term care
models. The most significant initiatives include:
The Social Health Maintenance Organization (SHMO) demonstration is a
four site demonstration that adds limited chronic care benefits to the usual
acute care HMO service package. The SHMO model has been operational
since 1987 at full risk and HCFA is currently planning a new model that
will be implemented at four new sites. Although these programs have
demonstrated they can operate successfully in the marketplace at full risk,
the cost-effectiveness of the SHMO is still under investigation.
The Program for the All-inclusive Care of the Elderly (PACE)
demonstration is a replication of the On-Lok program that has successfully
operated in Chinatown in San Francisco since 1986. The PACE program is
the only service delivery model developed that fully integrates all Medicare
covered acute care with the full continuum of long-term care benefits
covered by a state's Medicaid program under a pooled prepaid capitation
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rate system. There are currently nine sites operational across the country.
These programs are still in their early states of implementation and findings on program impacts are not yet available.
Evercare. a subsidiary of United Health Care Corporation, is currently
developing a nine site HCFA-sponsored demonstration initiative that will
integrate all acute care services for Medicare beneficiaries who are long
stay nursing home residents. While Evercare has operated for several
years in a few HMOs, this demonstration is testing the feasibility of the
Evercare model as an independent provider organization.
Experience with integrated models for the nonelderly disabled is even more
limited. The states, despite having program authority under Medicaid to develop
managed care programs for the disabled, have yet to do so. Several states (e.g.,
Massachusetts and Minnesota) are currently working with private Foundations to
develop such models, but these program models are not yet operational.
PREFUNDING O F LONG-TERM CARE SOCIAL INSURANCE
ISSUE
The American population is aging. The proportion of people who are over 65 (relative
to the population under 65) will double (from 14 percent to 28 percent) by 2030. The
proportion of people over 85 to those under 65 will increase from 2 percent to 5 percent
over the same period, and rise to 11 percent by 2050. Because of this, the costs of longterm care are expected to increase sharply over the next half century.
If current trends continue, the current generation of working people will have insufficient
savings to afford the average cost of their long-term care needs after retirement.
Many on the President's economic team support the idea of increasing the savings rate
now to prepare for these future costs. This is called "prefunding."
DESCRIPTION
Mandatory prefunding is an alternative to a pay-as-you-go approach tofinancingsocial
insurance for long-term care. If social insurance is not adopted, these savings can still be
used to pay for future long-term care expenses under an alternative system.
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Under prefunding, people would contribute to a trust fund (public or private) during
their working years. The returns from the investments of the fund would later finance at
least a portion of the costs of long-term care.
Even if social insurance is phased in gradually, proponents argue that prefunding should
begin now. That way the early beneficiaries of the program would have had some time
to contribute.
PROS
Proponents of prefunding are concerned both with increasing the savings rate and
with generational equity. Because of demographic trends, under pay-as-you-go
financing for social insurance, future generations may have to pay about twice as
much in taxes for long-term care as current generations will pay. Even though
children expect to care for their parents, equity suggests spreading the financial
burden more evenly across generations.
CONS
Since the current elderly have no opportunity to prefund long-term care, this
approach does not address their immediate needs. Other taxes would still be
needed in the transition.
Prefunding could be a hard sell. People would receive benefits decades after they
began paying in, and then only in the event that long-term care was needed.
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marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
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TAB 3: TOLL GATE 5 TALKING POINTS
This section includes a working group paper prepared for Tollgate V. It presents more
thoroughly the options discussed in the briefing paper.
A.
INTRODUCTION AND SUMMARY
B. PACKAGE ONE: INCREMENTAL MEDICAID REFORM OR BLOCK
GRANT AND NURSING HOME INCOME AND RESOURCE
PROTECTIONS AND PRIVATE INSURANCE IMPROVEMENTS
C. PACKAGE TWO: NEW FEDERAL/STATE PROGRAM, LOW INCOME
PROGRAM AND VOLUNTARY PUBLIC INSURANCE
D.
PACKAGE THREE:
SOCIAL INSURANCE FOR HOME CARE
E. PACKAGE FOUR: SOCIAL INSURANCE FOR HOME CARE AND
NURSING HOME CARE
F.
#
DEPARTMENT OF VETERANS AFFAIRS: LONG-TERM CARE REFORM
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TABLE OF CONTENTS
INTRODUCTION AND SUMMARY
C-l
PACKAGE ONE: INCREMENTAL MEDICAID REFORM OR
BLOCK GRANT AND NURSING HOME INCOME AND
RESOURCE PROTECTIONS AND PRIVATE INSURANCE
IMPROVEMENTS
C-5
PACKAGE TWO: NEW FEDERAL/STATE PROGRAM, LOW
INCOME PROGRAM AND VOLUNTARY PUBLIC
INSURANCE
C-l
PACKAGE THREE: SOCIAL INSURANCE FOR HOME CARE
C 10
PACKAGE FOUR: SOCIAL INSURANCE FOR HOME CARE
AND NURSING HOME CARE
C 12
DEPARTMENT OF VETERANS AFFAIRS: LONG TERM
CARE REFORMS
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TAB 3: TOLL GATE 5 TALKING POINTS
INTRODUCTION AND SUMMARY
If the Health Reform proposal is to include Long-Term Care—two decisions must be made
now:
•
The amount of new federal money to be made available over the next four years to
support a long-term care initiative.
•
Whether new federal funding should be targeted to low income people or to people
without regard to income.
The Long-Term Care Work Group has developed four proposals:
PACKAGE ONE: INCREMENTAL REFORM
This package contains a series of incremental changes without major structural reform.
Modifications to public programs, primarily serving low and moderate income individuals
include:
•
Incremental reforms of Medicaid home and community-based services including state
flexibility to provide home and community-based and personal care services.
•
Improving catastrophic nursing home protections through increasing the Medicaid
personal needs allowance to $100, increasing the level of protected assets under
Medicaid for single persons to $12,000, and requiring that all states have Medically
Needy programs.
Modifications to enhance the private long-term care insurance market, primarily targeted at
moderate and upper income individuals, include:
•
Consumer education regarding the risks, costs, and financing alternatives for longterm care;
•
Federal requirements for long-term care insurance regulation and for monitoring and
enforcing these requirements;
•
Tax clarifications and incentives for LTC insurance;
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Permitting states to offer a minimum level of spenddown protection for
purchasers of qualified long-term care insurance. (Although this is permitted by
current law, Congress is considering eliminating this flexibility.)
A tax credit for personal assistance services, primarily for younger persons with
disabilities, to assist them in entering or staying in the work force.
Approximate net new federal costs for Package One: $6 billion if fully implemented in
1993.
PACKAGE TWO: A NEW LOW-INCOME PROGRAM, VOLUNTARY PUBLIC INSURANCE, AND
WORK INCENTIVES
This package significantly alters current federal long-term care/personal assistance
financing policy while targeting public resources on low-income people. It includes the
following components:
A new closed-ended program of home and community-based/personal assistance
services for low-income people with severe chronic disabilities, including children,
working age adults with physical disabilities, and the elderly.
State flexibility in designing benefits and program administration.
The closed-ended program would increase annually based on inflation and
the growth of the population in need.
A residual Medicaid program would remain for persons not meeting the
disability requirements.
A new closed-ended federal/state program for institutional and community-based
services for people with mental retardation and other developmental disabilities
(MR/DD).
A limited, voluntary public insurance program, offered under a new Medicare
Part C.
The same tax credit for personal assistance services outlined in Package One.
Measures to enhance the private insurance market outlined in Package One.
Improving Medicaid nursing home catastrophic protections as outlined in Package
One.
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Approximate net new federal costs for Package Two: $7.9 billion if fully implemented in
1993.
PACKAGE THREE: SOCIAL INSURANCE FOR HOME CARE WITH CLOSED-ENDED
FINANCING
This package expands public coverage for home and community-based/personal
assistance services without regard to financial status. The program would include:
State flexibility in designing benefits and program administration.
Closed-ended financing with a guaranteed annual growth rate based on inflation
and the growth of the population in need.
Individuals with severe disabilities of all ages would be entitled to a minimum
benefit level. Additional services would be available to the extent permitted by
the closed-ended financing.
Unlike Package Two, there is no separate program for persons with MR/DD.
A residual Medicaid program would remain for person not meeting the disability
requirements.
A monthly premium of $20 for the elderly with the low-income population
exempted.
Other components of the program include:
Liberalization of institutional Medicaid eligibility in the same manner as Package
One.
Measures to enhance the private insurance market in the same manner as
Package One.
Same tax credits as Package One to encourage people to work.
Approximate net new federal costs for Package Three: $5.3 billion in 1994, rising to
$27.4 billion if fully phased in in 1998.
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PACKAGE FOUR: FULL SOCIAL INSURANCE PROGRAM
Expands social insurance program for home care by phasing in nursing home care
in 2005.
Compared to home care only program, state match rate is higher because states
currently spend more on institutional services.
Nursing home services are covered with no deductible, but with 20 percent
coinsurance.
Ultimately covers unlimited nursing home care.
Same tax credits as Package One to encourage people to work.
Approximate net new federal costs for Package Four: $5.6 billion in 1994, rising to $86.7
billion if fully phased in in 2010.
In addition, the following two options could be combined with any of the above options.
A.
Expansions to the Department of Veterans Affairs long-term care services.
(Estimated Net Federal Costs: FY 1994 $2.4 billion)
B.
A Demonstration of the Integration of Acute and Long-Term Care.
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PACKAGE ONE: INCREMENTAL MEDICAID REFORM OR BLOCK
GRANT AND NURSING HOME INCOME AND RESOURCE
PROTECTIONS AND PRIVATE INSURANCE IMPROVEMENTS
INCREMENTAL REFORM
States select among the following Home and Community-Based Waiver (HCBW)
choices:
HCBWs operate as now with minor modifications.
Any or all state HCBW programs converted to a state plan option;
spending capped; services expanded; and eligibility no longer tied to need
for institutional care.
Institutional and HCB expenditures combined into a single global state
budget for long-term care serving distinct subsets of the eligible population
(e.g., mentally retarded/developmentally disabled, elderly).
Modify optional Medicaid personal care program by expanding state choices
regarding eligibility, settings, providers, and supervision.
Nursing facility (NF) Medicaid eligibility rules modified.
Protected assets raised to $12,000 and personal needs allowance to $100
per month; states must permit spenddown.
Asset transfer penalties strengthened; loopholes closed (basically as
proposed in President's budget).
States permitted to prospectively redefine NF level of care.
Require a higher level of asset spenddown protection for purchasers of
qualified private long-term care insurance.
ALTERNATIVE BLOCK GRANT
Federal Medicaid long-term care spending would be block granted and states
given flexibility to establish eligibility, coverage and quality assurance
requirements.
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Federal payments indexed for annual increases in price and population with one
time new federal payment of $5 billion to supplement existing spending.
PRIVATE LONG-TERM CARE INSURANCE IMPROVEMENTS
Establish federal requirements concerning:
Minimally acceptable long-term care insurance product and business
requirements.
Monitoring and enforcement of standards to insure compliance with federal and
state regulatory requirements.
Provide limited tax incentives that would encourage the growth of private longterm care insurance (e.g., deductibility of long-term care insurance benefits and
deductibility of employer contributions for long-term care insurance premiums).
Consumer education to provide information on the risks of long-term care and the
availability and limitations of private long-term care insurance.
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COST TABLE
$10.7
$11.3
$25.7
Home Care Program for Low-Income Recipients
Net Public Expenditures
9.8
9.4
21.6
Institutional Care Net Public Expenditures
Catastrophic Protection
Effects of Increased Insurance Purchase due to
Long-Term Care Insurance Changes
0.7
0.7
0.0
0.9
0.9
0.0
1.1
1.4
-0.3
Federal Income Tax Loss Due to Long-Term Care
Insurance Clarifications/Changes
0.2
a
1.0
3.0
Net Federal Expenditures
6.0
6.7
15.6
Net State Expenditures
4.7
4.6
10.1
Net Public Expenditures
a
b
b
b
Treasury estimate.
Based upon extrapolation of the Treasury estimate.
NOTE: These estimates assume the program is fully phased in in 1994. In the short-run, not all states
would increase their funding at this level. Therefore, state and federal expenditures would likely be less
than indicated for 1994.
PACKAGE TWO: NEW FEDERAL/STATE PROGRAM, LOW INCOME
PROGRAM AND VOLUNTARY PUBLIC INSURANCE
CHRONCARE
Mandatory program for severely disabled low income population (below 100
percent of poverty) to partly replace Medicaid community long-term care;
spenddown required. Current recipients grandfathered.
Enhanced federal match for mandatory group (90-10). Regular Medicaid match
for state-designated optional groups: any disability level, up to 300 percent
poverty; spenddown permitted. Cost sharing required. Funding for optional
groups capped.
Preliminary Staff Working Paper for Illustrative Purposes Only
�C-8
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Aggregate funding ceiling set at 55 percent of nursing home rate; individual
funding capped at cost of most cost effective setting.
Federal government specifies and oversees individual assessment; states
administer.
States define community service package. Cash payments to recipients allowed.
States establish consumer oriented quality assurance; federal approval.
No change in federal match for nursing homes.
Same nursing home modifications as in Option 1.
REPLACE MEDICAID WITH SEPARATE GLOBAL BUDGET
MR/DD
PROGRAM
Combine all Medicaid MR/DD institutional (ICF/MR) and community (HCBW
and state plan) spending into global budget. Equalize for some amount of unmet
need. Index annually by inflation and population. Matched state-federal
program.
Cap on institutional beds.
States establish, federal government approves: eligibility, service package,
consumer oriented quality assurance, provider qualifications/licensure,
reimbursement, financial reporting.
National board advises federal program/policies; state boards, dominated by
consumers, guide state programs/policies.
MODIFY NURSING FACILITY (NF) RULES
Same as Incremental Option.
OFFER VOLUNTARY PUBLIC INSURANCE (MEDICARE PART C)
Limit dollar amount of coverage to ensure affordability (e.g., $30,000).
Offer one time opportunity to buy (e.g., age 65) and a five year waiting period to
protect against adverse selection.
Self-financed through premiums, no public subsidies.
Preliminary Staff Working Paper for Illustrative Purposes Only
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PRIVATE LONG-TERM CARE INSURANCE IMPROVEMENTS
Same as Incremental Option.
WORK INCENTIVES FOR PEOPLE WITH DISABILITIES
Expand current federal tax credits for working individuals with disabilities to allow
up to a 50 percent credit for costs of personal assistance services, up to a
maximum of $15,000. (Costs being determined by Treasury).
Extend work incentives under SSI (Section 1619) to any new public program that
provides personal assistance services for people with disabilities who go to work.
Preliminary Staff Working Paper for Illustrative Purposes Only
�C-10
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COST TABLE
(in billions of constant 1994 dollars)
liiiiisiiiiii
Net Public Expenditures
$8.0
$11.8
$18.6
Home and Community-Based Care (CHRONCARE
Program)
3.2
4.5
6.2
Institutional
Catastrophic Protection
Effects of Increased Insurance Purchase due to
Employer Deductibility and Asset Spenddown
Voluntary Public Savings
0.7
0.7
0.0
0.9
0.9
0.0
0.3
1.4
-0.3
0.0
0.0
-0.8
MR/DD Block Grant
4.0
4.8
8.1
Federal Income Tax Loss
Long-Term Care Insurance Clarifications/Changes
Work Incentive
0.2
0.1
a
1.0
0.4
Net Federal Expenditures
7.9
11.8
19.0
Net State Expenditures
0.2
0.0
-0.4
a
b
a
b
b
3.0
1.0
b
b
Treasury estimate.
Based upon extrapolation of the Treasury estimate.
NOTE: These estimates assume the program is fully phased in in 1994. The federal expenditure
estimates do not reflect the premiums collected for the voluntary public insurance program. These
estimates are consistent with HCFA estimates for these years.
PACKAGE THREE: SOCIAL INSURANCE FOR HOME CARE
OVERVIEW
Provides increased federal funding for home care without regard to financial
status of persons in need. Only the severely disabled are eligible.
Covers persons of all ages.
Preliminary Staff Working Paper for Illustrative Purposes Only
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BENEFITS AND ADMINISTRATION
States have great flexibility in designing benefits and administering the program.
Provides entitlement on a European rather than Medicare model. Entitlement is
to assessment, plan of care, and services on a funds-available basis. Notion is full
funding.
Residual Medicaid program remains for persons not meeting the disability
requirements.
COST CONTROL AND FINANCING
Establishes a global budget beyond which neither the federal nor state
government must provide funding. Budget increased annually on the basis of
inflation and population in need.
To control costs and recapture existing state spending on long-term care, this is a
federal/state matching program.
To control costs, there is coinsurance, except for the low income population.
To control costs, states may limit individual care plans to a percentage of
institutional costs.
Elderly pay a premium of $20 per month; services for nonelderly financed solely
through other revenue sources. Low-income population exempted.
Program phased in over five years. First year is 20 percent of budget; second year
is 40 percent of budget; third year is 60 percent of budget; fourth year is 80
percent of budget; and, fifth year is 100 percent of budget.
PROMOTION OF PRIVATE MARKET
Same as Option 1.
LIBERALIZATION OF MEDICAID FINANCIAL ELIGIBILITY FOR NURSING HOME PATIENTS
AND CLOSING OF LOOPHOLES
Same as Option 1.
Preliminary Staff Working Paper for Illustrative Purposes Only
�For Official Use Only
C-12
COST TABLE
SOCIAL INSURANCE FOR HOME, MEDICAID LIBERALIZATION, AND TAX
.::
(amounts in billions of constant 1994 dollars)
1994
1995
1996
1997
1998
2000
2020
Net Public Expenditures
$4.5
$9.0
$13.0
$17.5
$21.8
$23.4
$35.2
Home and Community-Based Care
Program
Portion of Program
Total Additional
Premium Offset
Net Additional
20%
4.6
-1.1
3.5
40%
9.6
-2.3
7.3
60%
14.7
-3.5
11.2
80%
20.2
-4.7
15.5
100%
25.9
-6.1
19.8
100%
27.4
-6.3
21.1
100%
41.6
-11.8
29.8
Insitutional Medicaid Liberalization
0.7
0.7
0.7
0.8
0.8
0.9
1.4
Federal Income Tax Loss
Long-Term Care Insurance Clarification
Work Incentives
0.2
0.1
0.7
0.3
0.7
0.4
0.8
0.4
0.8
0.4
1.0
0.4
3.0
1.0
Net Federal Expenditures
4.2
8.7
12.7
17.2
21.3
22.8
33.9
Net Federal Expenditures without
Premium Offset
5.3
11.0
16.2
21.7
27.4
29.1
45.7
Net State Expenditures
0.3
0.3
0.3
0.3
0.3
0.4
1.3
NOTE: The amount of Part B premiums required of Medicare beneficiaries follows the phase in of the
home and community-based care benefit. Individuals with income above 150 percent of the poverty level
would pay $4 per month in 1994, $8 per month in 1995, $12 per month in 1996, $16 per month in 1997,
and $20 per month in 1998. All premiums are in constant 1993 dollars. The estimates of total additional
expenditures under the home and community-based care program arc consistent with HCFA estimates
for 1994 (comparing both fully phase in) and 2000.
PACKAGE FOUR: SOCIAL INSURANCE FOR HOME CARE AND
NURSING HOME CARE
OVERVIEW
Expands social insurance program for home care to include nursing home care.
Phased in over a long period, for example:
Preliminary Staff Working Paper for Illustrative Purposes Only
�C-13
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1994 Establish federal home care for severely disabled poor and raise nursing
home resource protections (Option 2).
1997 Extend home care program to incomes up to 150 percent poverty.
2000 Extend home care program to incomes up to 200 percent poverty.
Cover first six months in nursing homes for all severely disabled, without
regard to income.
2005 Extend home care program to incomes up to 300 percent poverty.
Increase nursing home resource protection for stays beyond six months to
protect full assets of average senior.
2010 Provide full coverage of home care and nursing home care without regard
to income.
COST CONTROL AND FINANCING
Compared to home care only program, state match rate is higher because states
currently spend more on institutional services.
INSTITUTIONAL SERVICES
Nursing home services are covered with no deductible, but with 20 percent
coinsurance.
Ultimately covers unlimited nursing home care.
Preliminary Staff Working Paper for Illustrative Purposes Only
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COST TABLE
:
Year
IHIlllS
Expenditures
1994
Home care for severely disabled begins (as in Package Three)
5.6
1998
Home care for severely disabled fully phased in (as in Package Three)
27.7
2005
Same coverage as 1998 for home care.
First six months of nursing facility care.
Total
32.8
10.9
43.7
2010
Same coverage as 1998 for home care.
Full coverage for nursing home care with 25 percent cost-sharing.
Total
36.8
49.9
86.7
2020
Same coverage as 1998 for home care.
Same coverage as 2010 for nursing facility care.
Total
47.0
73.8
120.8
NOTE: Net public expenditures will be offset to the extent that premiums are collected (see Package Three).
DEPARTMENT OF VETERANS AFFAIRS: LONG-TERM CARE
REFORMS
(This could be added to any of the preceding options.)
Create an integrated acute/long-term care program through system reorganization
as an AHP; provide long-term care services to "core eligible" veterans who choose
VA care.
"Core eligible" group includes approximately 1.8 million of 11 million VA eligible
veterans.
Benefits will include VA provided or contracted Medicare, health related, and
social support services.
Preliminary Staff Working Paper for Illustrative Purposes Only
�Clinton Presidential Records
Digital Records Marker
This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
This marker identifies the place of a tabbed divider. Given our
digitization capabilities, we are sometimes unable to adequately
scan such dividers. The title from the original document is
indicated below.
Divider Title:
H
�\
ix
For Official Use Only
TAB 4: INTEREST GROUPS
This section includes a working group paper that reviews interest group positions.
A. AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP)
B.
NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND
MEDICARE
C. LEADERSHIP COUNCIL OF AGING ORGANIZATIONS (LCOA)
D. ALLIANCE FOR AGING RESEARCH
E. AMERICAN HEALTH CARE ASSOCIATION (AHCA)
F. AMERICAN ASSOCIATION OF HOMES FOR THE AGING (AAHA)
G. MINORITY AGING GROUPS
H. CONSORTIUM FOR CITIZENS WITH DISABILITIES (CCD)
I. KENNEDY FOUNDATION
J. DEVERAUX FOUNDATION
K. AIDS ACTION COUNCIL
LETTERS RECEIVED FROM INTEREST GROUPS
American Association of Retired Persons
Leadership Council of Aging Organizations
Alliance for Aging Research
American Health Care Association
Consortium for Citizens with Disabilities
World Institute on Disability
Preliminary Staff Working Paper for Illustrative Purposes Only
�For Official Use Only
TABLE OF CONTENTS
AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP)
D-l
NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY
AND MEDICARE
D-2
LEADERSHIP COUNCIL OF AGING ORGANIZATIONS
(LCOA)
D-2
ALLIANCE FOR AGING RESEARCH
D3
AMERICAN HEALTH CARE ASSOCIATION (AHCA)
D3
AMERICAN ASSOCIATION OF HOMES FOR THE AGING
(AAHA)
D-3
MINORITY AGING GROUPS
D4
CONSORTIUM FOR CITIZENS WITH DISABILTITES (CCD)
D5
KENNEDY FOUNDATION
DEVERAUX FOUNDATION
D-6
D7
AIDS ACTION COUNCIL
D8
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-ii
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LETTERS RECEIVED FROM INTEREST GROUPS (attached)
AMERICAN ASSOCIATION OF RETIRED PERSONS
LEADERSHIP COUNCIL OF AGING ORGANIZATIONS
ALLIANCE FOR AGING RESEARCH
AMERICAN HEALTH CARE ASSOCIATION
CONSORTIUM FOR CITIZENS WITH DISABILITIES
WORLD INSTITUTE ON DISABILITY
Preliminary Staff Working Paper for Illustrative Purposes Only
�For Official Use Only
TAB 4: INTEREST GROUPS
Selected position papers, proposals, summaries, letters, and other correspondence from
the interest groups are included in this briefing book as Appendix C.
AMERICAN ASSOCIATION OF RETIRED PERSONS (AARP)
AARP is the largest advocacy and consumer organization for the elderly in the United states.
It is also important to point out that a substantial proportion of its members are under age 65.
AARP has worked together with the Alzheimer's Association, and the Consortium for Citizens
with Disabilities on a consensus approach to long-term services and supports.
AARP presented a draft of its long-term care proposal to the Clinton transition team in
January 1993. This plan phases in a comprehensive social insurance program for home care
and nursing home care over a ten year period. It gradually moves long-term care coverage
from Medicaid to Medicare, eliminating the spenddown requirement; makes comprehensive
coverage available to people of all ages; uses a uniform eligibility criteria; uses care
management and rate setting to control costs; offers a comprehensive array of benefits; relies
on states to manage the program; and targets services first to persons most in need.
Members of the Long-Term Care Work Group met with John Rother and several other
AARP staff in early April to discuss broad policy options. Their major concerns were that
the Clinton plan: (1) move away from a welfare-based program toward a universal system;
and (2) include a timeline specifying the schedule for the phase-in. They expressed the
desire for a serious "first step" toward a social insurance, non means-tested program. AARP
did not respond favorably to the idea of a state-administered block grant, would oppose a
means-tested capped home care program, and were lukewarm to the idea of a liberalized
Medicaid program with voluntary public insurance.
In a subsequent conversation about the potential tradeoffs between a long-term care benefit
and prescription drugs or enhanced Medicaid acute care benefits, AARP was somewhat
evasive. We did get the impression, however, that they would not be very amenable to
trading off drugs for long-term care.
NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND
MEDICARE
�D-2
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NATIONAL C O M M I T T E E TO P R E S E R V E SOCIAL SECURITY AND
MEDICARE
The National Committee is a membership organization of approximately six million
members, many of whom reflect the "more well-to-do" elderly. According to a recent
survey conducted by the organization, its members desire a comprehensive long-term
care program. However, when given the choice between a nursing home or home care
benefit of equal value, respondents chose home care by more than eight to one.
The National Committee recommends that long-term care begin with home and
community-based care, delivered through a care management system with set rates for
services and an overall set budget. A nursing home benefit should be part of the
legislation even if there is a phase-in; a $30,000 nursing home asset protection provision
should be implemented from the onset. This organization also calls for federal standards
for private long-term care insurance.
In addition to these long-term care benefits, the National Committee supports expanding
Medicare to cover prescription drugs and preventive care, ensuring parity with the
standard benefit package of the health care reform initiative.
LEADERSHIP COUNCIL O F AGING ORGANIZATIONS (LCOA)
The LCOA is an umbrella organization of 17 national organizations representing a
variety of aging interests including such diverse groups as AARP, the AFSCME Retiree
Program, the National Council of Senior Citizens, and the Older Women's League. In
our meeting with LCOA, the members emphasized their support for a comprehensive
long-term care program requiring a progressive, broad-based financing mechanism in
which older Americans pay their fair share along with the working-age population. They
favor a universal long-term care program for all ages that includes institutional and home
care, and a definite phase-in schedule in legislation. Although they would accept a three
or more ADL eligibility criterion in the initial years, they support a two or more ADL
eligibility criterion for home and community-based care at full implementation. To
reduce costs in the early stages, LCOA recommends substantial co-payments for home
care, beginning at 40-50 percent and phasing down to 20 percent within five years of
program initiation. This organization sees only a limited role for private insurance,
under strict guidelines.
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-3
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A L L I A N C E FOR AGING RESEARCH
This organization lobbies for aging research, with a particular focus on biomedical
research. They expressed concern about the cuts in the NIH budget and are particularly
interested in the inclusion of a federal research agenda on aging in the health care
reform package. Among their recommendations they advocate a focus on outcomes and
health services research, technology transfers to both spur cost-effective products and
protect tax dollars, and promoting primary care geriatrics. They would also like to see
greater use of the VA medical system in preparing for an older population in the U.S.
AMERICAN H E A L T H CARE ASSOCIATION (AHCA)
AHCA represents the for-profit nursing home industry in the U.S. and is a powerful
lobby group at both the federal and state levels. This organization supports a
public/private partnership for long-term care reform. They argue that we should
encourage and enforce an expectation of personal responsibility on the part of those with
access to the means to plan and pay for long-term care. Their proposal has two basic
features: (1) an improved safety net program covering the whole continuum of services
ranging from sub-acute care to adult day care and hospice care; and, (2) help in planning
and paying for long-term care through public education, federal quality standards and tax
incentives for long-term care insurance, and federal stimulation of other savings
mechanisms (e.g., medical IRAs, reverse mortgages, etc.).
Program eligibility should be based on ADLs and cognitive impairment. AHCA also
advocates strong prohibitions against asset transfer to qualify for Medicaid, leaving the
safety net for the truly needy.
AMERICAN ASSOCIATION O F HOMES FOR T H E AGING (AAHA)
AAHA represents primarily non-profit nursing homes, residential care facilities and
Continuing Care Retirement Communities. It is much smaller than AHCA and is seen
as more "liberal" by advocacy and consumer groups. This organization also supports a
public/private partnership, but using a different strategy from AHCA that envisions a
stronger public role. This organization supports the coverage of catastrophic nursing
home costs by Medicare after a certain long "deductible" period (e.g., two years). This
would provide a defined interim period which could be covered by private insurance. In
order to promote this market, AAHA favors federal standards, tax clarification for
private insurance, and the closing of loopholes for Medicaid asset transfer. In addition,
AAHA supports encouraging states to develop Medicaid asset spenddown protection
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-4
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programs using private as is currently being explored in New York, Connecticut, Indiana
and California.
AAHA also has a special interest in promoting residential care alternatives. They
advocate public policy which enhances the coordination between health, long-term care
and housing programs to help develop the assisted living market.
MINORITY AGING GROUPS
The Long-Term Care Working Group met with representatives of several organizations
that serve aging individuals who are members of minority groups. Among their key
points regarding the minority elderly population were:
Most elderly members of minority groups are poor. Poor elderly individuals are
especially vulnerable to chronic conditions such as hypertension, heart disease,
and diabetes.
Latino and Asian American elders typically rely even more heavily on their
families than many other elderly individuals; public policy should support family
caregivers. [It is important to note that the family caregiving literature does not
support the notion that minority families provide more family care than non
minority families.]
Many of the minority aging experts we met with said that middle and upper
income elderly individuals should not be allowed to shelter their assets to receive
publicly-funded services; they said everyone should pay for long-term supports to
the extent possible.
Health and long-term services reform have to include provisions for affirmative
action, civil rights for all people, and due process. There was a strong sense
among the minority aging groups that the federal government is better than the
states at protecting the rights of minority group members.
Native American elders living on reservations have to leave the reservation for
formal long-term care services. Special arrangements will have to be made in
health and long-term care reform proposals to ensure that Native American elders
on reservations are included.
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-5
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CONSORTIUM FOR CITIZENS WITH DISABILITIES (CCD)
CCD is a network of almost 100 DC-based organizations, that advocate on behalf of
people with disabilities. All the large (and most of the small) disability organizations are
members of CCD.
The Long-Term Care Working Group met with CCD twice, first with the CCD Health
Task Force and second with the CCD Long-Term Services and the CCD Personal
Assistance Services groups.
CCD Views on Acute Health Care and People with Disabilities. The CCD Health Task
Force, representing 61 CCD organizations made the following points:
Health care for people with disabilities should be: non-discriminatory,
comprehensive, allow for choice, and be equitable and efficient. The national
disability values of inclusion, independence, and empowerment should drive
health reform.
Health reform efforts need to take into account that people with disabilities are
disproportionately poor and have pre-existing conditions.
A comprehensive health benefit must take into account a continuum of services to
meet individuals' needs; post acute rehabilitation is a major component of the
continuum.
CCD Views on Long-Term Services. CCD's Long-Term Services and Personal Assistance
Groups have joined in coalition around long-term care issues with AARP. The resulting
recommendation is for a broad based entitlement for social insurance, with eligibility
based on functional disability. The program would be available regardless of an
individual's income, and services would be open ended: each participant would receive
the services they need to live as independently as possible. CCD representatives have
privately told Long-Term Care Work Group members that if the social insurance
program is proposed, but has to be scaled back in any way (e.g., capped, limited to only
those with severe disabilities, etc.), they would reconsider their endorsement for this
solution. During the meeting we held with the Long-Term Services and Personal
Assistance Groups, they made the following points:
Supports for people with disabilities should be provided in home and communitybased settings; there is no support in this group for perpetuating reliance on
ICFs/MR, nursing facilities, and other institutional settings. The goal of most
members of the Consortium is to downsize and eliminate institutions.
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-6
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Services should be designed and delivered based on consumer choice and control.
Service packages should be comprehensive and flexible.
People should have incentives to work; current policy limits the opportunity to
work for people who receive long-term services.
If a broad scale social insurance program that would provide comprehensive
services to most people with disabilities is not enacted, many members of the
group support developing a specialized program for people with MR/DD. In
addition, the group would not support a block grant for long-term services,
because, as one person put it, "people with disabilities will have to compete with
all the other long-term care populations and we will lose. We've made too much
progress to turn around like that."
The infonnation presented by CCD during these two meetings represents consensus
among the majority of disability groups in the country. In reading the following
summaries of our meetings with Kennedy Foundation and Deveraux Foundation
officials, it is important to keep in mind that these foundations represent only a small
percentage of people with MR/DD and their families. The CCD comments and views
should be much more heavily weighted.
KENNEDY FOUNDATION
The Kennedy Foundation, established and operated by the Kennedy family, operates the
Special Olympics program, as well as several smaller programs on specific issues of
concern to people with mental retardation and their families (e.g., a disability prevention
project). Eunice and Sargent Shriver are involved in the day-to-day operations of the
Foundation, and staff maintain close contact with members of Congress. The Kennedy
Foundation is involved in CCD, but it has not been one of the Consortium's principal
players to date.
In our meeting with Kennedy Foundation officials, they stressed three main points, all
related to acute health care for people with mental retardation.
First, in the area of dental care, dentists need specialized training in MR and
reimbursement policies need to take into account the extra time it could take to
serve a person with MR.
Second, appropriate mental health care is vital to people with cognitive
impairments; psychiatric training programs should include training on people with
MR.
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-7
For Official Use Only
Third, people with MR use proportionally more prescription drugs throughout
their lives than most people (e.g., seizure medications); health care reform should
take this into account.
The Kennedy Foundation representatives said that most people with mental retardation
are poor and inadequately insured, especially those without Medicaid. They said this
population relies too heavily on emergency room services, and health care reform should
offer substitutes for this expensive problem. They encouraged the work force training
group to consider the importance of training all health care workers in mental
retardation.
Regarding long-term services, Kennedy Foundation representatives, noted that the needs
of people with mental retardation should be considered separately from the needs of the
elderly, services should be available for people regardless of where they live (i.e., rather
than offering facility based services exclusively), supports should be individually designed,
and people with MR should have incentives to work.
DEVERAUX FOUNDATION
We met with representatives of the Deveraux Foundation in late April. The Deveraux
Foundation is a nonprofit organization that operates primarily residential services for
children and adults with mental retardation and/or mental illness in 13 states. Deveraux
is unique among the groups we talked to because they serve a number of people whose
families pay privately for their care. Deveraux representatives emphasized the
importance of family involvement and family choice. They felt children's services should
be as integrated with "general" health care as possible. On the other hand, they noted
that services for adults with MR or mental illness are not as easy to integrate and
specialized services would probably need to be maintained. Deveraux representatives
were among the few MR/DD experts we talked to who stressed the need for maintaining
the ICF/MR program.
They highlighted the problems of people with a dual diagnosis of mental retardation/
mental illness, and said that all professionals and paraprofessionals in mental health,
mental retardation, and health care, should understand the unique needs of this
population.
Finally, they suggested that special attention should be paid to certain transition points in
the lives of people with disabilities. Specifically, they pointed to the school to adult life
transition and the needs of older individuals with MR whose parents become elderly and
are no longer able to care for them. They also discussed the special needs of elderly
people with mental retardation.
Preliminary Staff Working Paper for Illustrative Purposes Only
�D-8
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AIDS ACTION COUNCIL
At our meeting with AIDS activists, several attendees explicitly asked about the status of
long-term care in the health care reform initiative. The AIDS Action Council Health
Care Reform Statement of Principles includes coverage of long- and short-term home
and community-based services and case management linking people with appropriate
health and social services in any benefits package.
LETTERS RECEIVED FROM INTEREST GROUPS (attached)
Preliminary Staff Working Paper for Illustrative Purposes Only
�MEMORANDUM
3ATE:
January 2:. :99?
TO:
Judith Feder
Stuart Altman
Christopher Jennings
Marilyn Moon
Kenneth Thorpe
FROM:
John Rother
SUBJ:
Proposal to Phase-in a Lon^-Term Care Program
Over the past several weeks. AARP staff, with comments from members or' the long'.erm care policy and advocacy community, nave continuea to refine our proposal for
jnasing-in a comprenensive. social insurance LTC program. The proposal has been revised
•o rerlec; the comments we received. It represents our most recent thinking as to how this
imponant endeavor might be accomplished.
The basic structure of the proposal has not changed significantly. Notable differences
between the attached draft and the earlier version include changes in:
•
the definition of eligibility (the proposal now begins by providing sen/ices to people
who require assistance with 3+ ADLs, as opposed to people who are limited in 3 +
ADLs);
•
protection for nursmg facility residents with low incomes (financial protecnon will
extend to people with incomes below 300 percent of poverty, not 425 percent); and
•
the phase-in of benefits and the cost-sharing amounts that beneficiaries would
have to pay (fuller benefits are extended much earlier to people with low incomes).
The attached draft has also been revised to reflect concerns of the disability
community.
Program cost-estimates are presented in constant 1994 dollars. In addition, these
estimates now present federal and state costs separately. To facilitate comparison with the
tables accompanying the memo of Dec. 10, tables reflecting nominal costs are available upon
request. You will note that this version does not include detailed options for financing the
program. Additional details on financing may be found in the documents that you received
from AARP on December 3.
We appreciate your interest in this cnucal issue and would be happy to discuss the
proposal with you in greater detail.
�DRAFT ..Jan. I l -- 8:00^
PROPOSAL TO PHASE-IN A LONG-TERM CARE PLAN
Overview
The Medicaid program was not originally intenaed to provide long-term care for ail
Americans, yet it now constitutes the pnmarv vehicle tor the provision of long-term care in
ne United States. Moreover, m order to have access to long-term care services tnrougn
Medicaid, many famines must face financial ruin.
A long-term care system snould be based on a social insurance modei. ano ultimately
oecome pan of Medicare, not Medicaid. The system should be integrated with Medicare to
promote oetter care management. It should be broadly financed and available to ail
ndividuais who need it. avoiding the stigma of the current welfare-oasea Medicaid svstem.
•! should provide a uniform federal benefit to people or all ages who meet specified aisabilitv
;ntena. This federal benefit should be administered by the states, under federal guidelines.
States should be encouraged, however, to set up innovative demonstration projects.
In fact, a federal long-term care program provides an ideal opportunity for the
development of a care managed system that ultimately could integrate acute and long-term
care on a larger scale for those receiving the most expensive care. Care management already
is widely used in state long-term care systems. In order to ensure equity, it is important that
people who request long-term care services be assessed for eligibility using nationally
uniform criteria. In a care managed system, those people who meet the eligibility criteria
would then be authorized to have a plan of care developed.
Such a system can help to control costs in a meaningful way. Care management
provides one cost-containment mechanism. In addition, Medicare Parts A and B
already are equipped to provide cost-containment models that could be adapted to longterm care. Institutional care should be provided through Part A, and home and communitybased care through Pan B.
Among the most critical shortcomings of the current Medicaid long-term care
system are its requirement for spend-down, institutional and medical bias, and limited
eligibility. The first steps of any long-term care plan should be to begin to move longterm care services into the Medicare program, to eliminate the spend-down requirement
and to expand the scope of care provided in the home and community. This proposal
presents one possible model for phasing-in a reformed long-term care system.
�DRAFT Jan. :: -- .5:00)
Key Features
This proposal is designed to address nine key features:
1.
Gradually move long-term care coverage from Medicaid to Medicare, eliminating
the spend-down requirement. (Personal care would be covered under Part B.
nursing facility care under Part A.)
2.
Make comprehensive coverage, including home and community-based and
nursing facility services, available to people of all ages.
3.
Assess eligibility based on age-appropriate, nationally uniform criteria.
4.
Build cost-containment mechanisms into the program's structure from the
beginning, through care management and rate-setting.
5.
Build and improve upon the existing structure for long-term care delivery,
expanding substantially home and community-based care. More fully integrate
the delivery of services along the continuum of acute, transitional, and long-term
care.
6.
Develop a structure for the delivery of a managed long-term care system, tietL _
initially to a relatively small eligible population. One priority in the development J-jj^.of a managed system would be the expansion of social health maintenance
'
organizations (SHMOs), particularly in metropolitan areas.
-—
7.
Maintain benefit flexibility from the program's inception through the provision of
a comprehensive array of benefits.
8.
Provide a role for the states in managing the provision of long-term care.
9.
Target services first to persons most in need. Such targeting can be achieved by:
(a) beginning with home and community-based services, (b) directing services to
people with severe impairments, (c) providing the greatest benefitsfirstto
Medicaid recipients and the poor, and (d) phasing-in nursing facility coverage
over a longer period of time.
�DRAFT .Jan. :: - 4:00)
Step 1
Establish a care management system.
Currently, aii states provide some form of home ana communuy-basea long-term care
services under their Medicaid programs -- either tnrougn the personal care benerit. waiver
urograms, or both. A first step toward implementing a national long-term care program
could be to require each state to establish a care management system. The funding for
tnis care management system would be provided through Medicare. Initially, tms care
management system would aid the delivery of services to Medicaid long-term care
oeneficianes. As a comprehensive program for providing long-term care (LTC) to ail people
vith disabilities unfolds, suosequent steps would be to expand LTC care management to all
current Medicare benericianes. ana finailv to all other participants, as they become eligible
or tne orogram.
Step 2
Implement a personal care benefit under Medicare Pan B.
The ultimate goal of a personal care benent would be to maximize the independence
and autonomy of people with disabilities and enhance their ability to remain in the home or
community. The benerit aiso should be designed to enable caregivers - family and friends to continue to provide care. In order to meet these goals, a comprehensive array of benefits
will be necessary. However, it is possible to phase-in the new personal care program
gradually.
What should be included in a personal care benefit?
•
The specific services offered through a personal care benerit would be established on
an individual basis in consultation between the care manager and the client. The
array of services available through the personal care benefit should include help
with activities of daily living, homemaker services, cueing or reminding,
rehabilitative and restorative care, nursing, respite care, transportation, minor
home adaptations or repairs, and other needed services.
•
Much greater emphasis would be placed on serving people in supportive housing
arrangements in an effort to prevent unnecessary institutionalization. In order to
ensure an adequate supply of supportive housing settings, such as assisted living,
board and care, and congregate housing, it will be necessary to explore financing
options that encourage the development of high quality, licensed facilities.
•
Many of these community-based services already are provided to dually eligible
individuals (i.e., Medicare-Medicaid beneficiaries) and paid for by the Medicaid
program.
�DRAFT .jar,
- 6:00)
V
•
Gradually, the funding for these services would be shifted to Medicare Part B.
U7i0 would be eligible for the personal care benefit?
•
TracRing the development of the care management system, eligibility could be
phased-in. beginning with two groups: (a) people who are currently eligible for
Medicaid, and (b) people with incomes below poverty. Eligibility would
subsequently be extended to people who are currently eligible for Medicare, and
finally to all other persons not currently covered by either program.
•
As a first steo. eligible mdividuais should include: (a) people who require human
assistance with three or more activities of daily living tADU; or (b) people with
cognitive or mental imoairments wno reauire suostantiai supervision: or ic) children
who are unaoie to perform an age-aDoropnate acuvity of daily living. Over time,
coverage should be extenaec to people who neec human assistance with 2 or more
ADLs. people who are limited in multiple instrumentai activities of daily living
(IADL) and ultimately to aii people with significant disabilities. (These additional
costs are not reflected in Table 1.)
•
Throughout the phase-in penod. Medicaid would conunue to serve all persons who
meet Medicaid eligibility catena, including special cntena for waiver services, but
may not meet the eligibility cntena of the new program. It is anticipated that all such
persons would be served under the new Medicare program when it is fully phased-in.
For example, many states currently use Medicaid waiver programs to cover special
populations such as disabled children and persons with AIDS. It is anticipated that
such coverage would conunue throughout the pnase-in.
•
A possible phase-in schedule is illustrated in Figure 1 in the Appendix.
How would people access the system?
•
People who request services under this program would first have their eligibility
assessed by a ca/e management agency. A uniform assessment tool would be used.
If found eligible, the care manager, in cooperation with the individual and/or his
representative, would develop a plan of care. The care plan would be developed in
consultation with the individual's primary care physician, and would build in regular
communication in order to enhance integration of the acute and long-term care
systems. The care plan would be comprehensive, and the care manager would
authorize the services for which the individual is eligible, including nursing home
care, when appropriate. (In early phases, some benefits might not be "covered" for
�DRAFT iJan. : : -- 8:00)
'.ne purposes or payment, out snouid. nevenneiess. oe in the inaiviauai's care pian.)
Clients wouid have tne ngnt to appeal care pian decisions.
•
The personal care oenerit snouid be fully portable. For exampie. -.vithin reasonable
financiai limits, the benericiary would choose in wnich setting to receive care: an
individual's home or woricplace. an adult dav care center, or a board and care home
or other assisted living facility.
•
A possible area for controlled demonstrauons would be in the development of a
voucher, coupon book, or service credit-type system. While some individuals would
prefer to have a care manager assist them in locating and coordinating their care,
other people might prefer to receive a voucner. credit, or coupon-booK that they could
use to purcnase services on their own. Such demonstrations might be pamculariy
appropnate ror some acult disabled oopuiations or in rural areas where the availability
of home care agencies is limited. Vouchers couid onty be used by the individuals to
whom they were awarded: they could not be sold or transferred. These coupons
could specify the type and amount of services for which the individual is qualified,
and set cost caps for each service category.
How would cost-containment and quality assurance be addressed?
•
States would have to work within a budgeted system in providing home and
community-based LTC. State budgets for elderly beneficiaries would be pegged to
65 percent of the average cost of nursmg facility care in the state. Additional
research would be needed to establish appropnate percentages for other populations.
States would, in tum, establish aggregate budget targets for care management
agencies. A care manager could authorize services above the target for heavy need
clients, provided aggregate expenditures did not exceed overall targets.
•
Appropriate fee schedules for services would be developed. The use of some form of
case-mix or outcomes-based reimbursement for providen should be considered.
Demonstrations of prospectively financed packages and capitated systems should also
be tried.
•
A study should be undertaken to evaluate various methods of reimbursement,
including fee schedules, outcomes-basedreimbursement,case-mix reimbursement, and
capitation.
•
Qualified home care agencies would bid competitively to gain approval to participate
in the new program. Criteria used to select agencies would include cost and quality
indicators.
�DRAFT (Jan. 11 - 8:00)
•
The current auaiuv assurance system would be ennancea and expanaea ir. oraer to
provide oveisignt or service aelivery and of the care management process. Strong
quality assurance measures can result in cost-savings by preventing the aeveiopment
of conditions sucn as pressure sores that may require more costly acute medicai care,
improvements would include the development of national standards for care managers
and expansion or ombudsman programs. Attention should also be paid to enhancing
tne professional stanaards ana training of providers.
How would the personal care benefit be phased-in?
•
In order to phase-in the benefit gradually, it would be possible for Medicare to
begin by covering 40 percent of the cost of care authorized in the care plan
during the second year. In subsequent years, this percentage could be increased
to 50 percent, then 60 percent. 70 percent and. finally. 80 percent of the cost of
the benefit.
•
Benericianes or the new program wno are not covered by Medicaid wouid receive a
gradually increasing benefit, as Medicare began to pay a larger share of the cost of
services received. Because of the relatively small benefit in the inmal years, some
individuals may be unable to purchase the full array of services for which they are
eligible. However, when fully implemented, the 20 percent coinsurance should be
affordable for most persons. Medicaid couid continue to subsidize the remaining
costs for low-income mdividuais.
•
The premium cost for Medicare Part B would be kept at 25 percent of program
costs. While this would result in higher premiums for beneticianes. the service
package would be expanded in a meaningful way.
How would income be protected?
Because the full cost of long-term care in the home and community can be quite
high for an individual, a cap on out-of pocket expenditures should be established.
People with incomes below poverty should have their costs fully covered by Medicaid.
People with incomes between 100 and 300 percent of poverty should have lower out-ofpocket caps, established along a sliding scale. Income protection could be phased-in
gradually. (See Figure I.) As income groups are covered, they would be eligible for the
full benefit package. Income protection mechanisms should be crafted to assure equitable
treatment of both single and married individuals.
Wow much would the program cost?
�DRAFT iJan. I; - 8:00)
The cost or mis orooosai is lilustratec in Table i in the Appendix, it snouid oe notec
that these estimates ao not account ror the fact that 25 percent of program costs wouid be
nnanced by the Medicare Pan B premium. As such, total state and federal costs would be
jomewnat lower. Costs are presentea m constant 1994 dollars. (Costs presented in
nominal dollars, which include the effects of inflation, are available upon request.)
Step 3
Provide nursing faciliiv care under Medicare Part A.
Once the system for providing home and community-based long-term care is well
underway, nursing home coverage would be transferred from Medicaid to Medicare
Part A. Ultimately, nursing home coverage would be available for those persons who
meet the eligibility criteria, regardless of age or type of disability. The Medicare benefit
couid be phased-in to cover increasingly large percentages of the cost of nursing facility
care. .See Figure 2 in tne Appenaix for an illustration ofa possible phase-in scnedule.)
•
The care management process established for the delivery of home and communitybased care would aiso pertain to the assessment for and delivery of nursing facility
care. Preadmission screening by the care managers would prevent unnecessary
msutuuonaiization and target nursing facility care to those persons for whom it is
required. Ongoing assessment by care managers would monitor nursing facility
residents to ensure that the appropnate quality and level of care are being received.
Residents who are able to leave nursing facilities for less restrictive environments
would be assisted in finding alternatives to nursing homes.
•
As with home and community services, currently-eligible Medicaid recipients would
connnue to receive nursmg home coverage through Medicaid while the program is
being phased-in; however, a gradually increasing share of the cost of their care would
be covered by the Medicare program. Throughout the phase-in period, people who
meet Medicaid eligibility criteria, but are not yet phased-in under the new program,
would continue to receive coverage under Medicaid. It is anticipated that all such
persons would ultimately be covered by the new Medicare benefit.
•
In the first year of nursing facility coverage, Medicare might cover 10 percent of the
cost of nursing facility care under Medicare Part A. This percentage would be
increased annually, until it reached 65 percent of the cost of care. Overtime,current
nursing facility residents (financed by Medicaid or private payment) would be
replaced by persons covered by a federal benefit under Medicare Part A. In this way,
the role of Medicaid in the provision of long-term care would be reduced to covering
the out-of-pocket costs of low-income individuals and Medicaid-eligible persons with
disabilities who do not meet the criteria of the new program, as it is being phased-in.
�DRAFT u'an. i : -- 8:00)
•
Rate setting tor Medicare payment to nursing homes, analogous to the prosoective
payment system (PPS). wouid be a cnncai component or" cost-containment under this
proposai.
Financial protection for nursing home residents.
Because or the high cost or" nursing home care, it wiil be necessary to proviae some
financiai protection for people with low and moderate incomes. Financiai protection would
be necessary to ensure the ability of nursing home residents to suppon a spouse or
dependents in the community. In addition-, comparable mechanisms would be needed to
protect a single individual's ability to return home after a limited nursing home stay. These
measures would need to be extended beyond the cunent Medicaid-eligible population.
Medicaid should fully cover out-of-pocm costs for people with incomes below poverty. As
the benefit is pnased-in. Medicaid should also cover a poraon of out-of-pocket costs for
people with somewhat higher incomes, according to a sliding scale. As with home and
community-based care, financial protection mechanisms should ensure equitable treatment of
single and mamed persons.
Program costs.
The cost of this proposal is illustrated in Table 2 in the Appendix. As with the cost
figures for home and community-based care, costs are presented in constant 1994 dollars.
(Costs presented in nominal dollars, which include the effects of inflation, are available
upon request.}
Make transitional care pan of the acute care system.
The long-term care system should be coordinated with the acute health care system as
much as possible. In order to do so, transitional care (such as skilled nursing care that
follows a hospital admission) should be part of a mandated benefit package provided by
whichever insurance entity provides the individual's medical care. For example, in a system
in which all employers provide a standard package of medical care and unemployed
individuals receive care through a federal program, provision of transitional care would be
the responsibility of either the employer or the federal program, as appropriate.
A necessary step would be to reform the current Medicare coinsurance for skilled
nursing facility (SNF) care. The SNF comsurance should be set at 20 percent and its link to
the hospital deductible should be severed. (Note: We are not recommending elimination of
the three-day prior hospitalization requirement until the care management system is ready to
control admission to nursing homes.)
�DRAFT '.jan. : : - 8:00)
Step 4
Integration of care managemeni.
If the long-term care program is to be pan of a system m which medicai care is
Troviaea througn managed care organizations, it would be ideal to ultimateiy merge the two
components. The managed care networks wouid be responsible for the provision or longterm care as well as acute medical care. State expenmentation with innovative models such
is On Lok or social health maintenance organizations (SHMOs) should be encouraged,
subject to modifications oaseo on lessons learned from first generation evaluations. One goal
.vould be to establish at least one SHMO in each metropolitan area by the time the home care
benefit is fully phased-in.
Step f
Long-ierm Care Insurance.
Because this proposai envisions an incremenuu phase-in of the Medicare long-term
care oenerits. there will be a continuing role for pnvate long-term care insurance. Standard
LTC insurance packages designed to wrap-around the Medicare personal care and nursing
facility benents should be designed. It also is critical that strong federal standards for longterm care insurance policies be enacted next year in order to afford strong consumer
protection.
Step 6
Financing.
The phase-in of the long-term care program may be adjusted according to the stream
of financing available. The following principles should apply to the financing of a long-term
care system.
•
Financing of the system should be broadly based and shared across age groups.
•
A portion of any savings achieved through cost-containment in the current Medicare
system should be immediately channeled into the development of the long-term care
program.
It should be noted that the proposal described here assumes that 25 percent of the cost
of the personal care benefit will be financed through the Medicare Part B premium.
�DRAFT j.n. : : - -ooi
Conclusion
When ruily impiememea. is envisionea that tnis proposal would result in a universal
orogram or long-term care tnat is well integratea into a reformea health caie svstem. _orikiterm care would be available to ail who neea it. regardless of age. work historv. or tvpe of
Jisabiiity. The use of a care managed svstem would address two importam gLuis: aSiunns
ntegratea service deliverv and contaimns costs.
10
�DRAFT
Appendix
U
:• -• -•
00,
�FIGURE 1
PHASE-IN S C H E D U L E FOR HOME ANO COMMUNirv a A S E U CARE PHOPOSAL
Ymr
1094
P t c m t •!
C a r * Plan
Covcrtf
IOO%
EUattXaPopuktfen
Income Protocilen Available
Psrmars rtquking t c i t v human
mmhUmncm Mtih 3* AIX S witK
in come \e*» t)»n : 00% of tfta
Peraom wmh income
than 100% ct povarty Uval
T
Incofna Protection Schedule
Income a * a ^ertxri
ot the Poverty Leval
100
126-)U
125 MliO'fc
50 1 175%
"/!» 1
200 I 22SN
2?0 1 250'>»
2SO 1 27S%
27% 1 310%
300 1% or n^iote
10OS
49%
1996
63%
19)7
6>%
\99t
70%
1999
80%
aooc
80%
2001
60%
2302
B0%
2303
ao%
2004
80%
20C5
ac%
Madcar* • l(£la po'aona
rMyjbteg adiva hjm»n aatiatanc*
•vir ^ ADLS
All M n o n * ra^uinng acll/a
aMlstonca wtth 3« ADLS
A l parton* requiring activa
a u l d s n c e wtth 3+ ACLS
A l parton* raqilHn) Mli^a
aatlifarc* wit 3 • A D L S
Al parson* raqulring actva
a a s l m r c e «Hih 3-*-ADLS
Al percoia naqutrino acllva
u i U t a n c a wlh 2-» ADLS
Al peraom raqiirtnj actlva
•atliunca w*h2+AlXS
All poraooa nqiirlnj adkya
aotislanca wilh 2 * A D . S
Al persons raquiring acihr*
aatlsUnca wl-h2^AD^S
A l paaofls racu ring actf/e
•Mlelan=a w K h 2 ^ A X S
All para an a raqulHng active
•itktcnce whh2*-ADLS
Paraona w*th Krorre lew
lhan 125% & povany leval
Portom with income luat
than 125%. of pwarty leval
Parsona wlh l-Kome less
ft an 150%ol po/erly level
Panona Mir Income last
lhan 17S% of poverty leval
Paraont Aith Income less
n a n 2O0% of poverry le^al
arec«ia arth Inooma leia
than 225%
po*ert/ .e/el
Parson* wtti inoom* etc
lhan 250% of poveny level
Pononjfctthincome lets
lhan 2 7 S \ olpo^•ort| laval
Partoni wt-h I n o m * lei»
1 hen 300% of poverty level
All parsons
3
Allpersora
Montfify Oi-l-ul Pucltat
Cap
M
S60
S1O0
J150
$200
1250
J32S
5400
$475
�HGURE 2
PHASE-IM S C H E D U L E FOR NURSING f A a t n v C A R L I ' ^ O I I X i A l
1004
P e m n t ol C * n
Plan CovMaif
Ckiirenl Uvu
Incoim PiotacHon Available
Cment t3»v
Irrcane Proie«tion ScrvuUntc
lncoa>e »• a Pcvxcnl
of tha Povany Level
103 12:.).
125 I ISO'/.
1R3 1 H f x .
17S I 20C%
POO I 22CT.
2j'S. I 25C'>i
250.1 27!,%
274 I 30(n'.
300."/.
IMS
IMC
1M7
Cunerrt Law
Cttm-rt L S M
103%
1M6
1-3%
1399
20%
30%
2001
40%
20C2
50%
2003
30%
20O4
65%
2006
&5%
Ufi.'..l.ly Out-olPocke; Cap
i'' •
3I!.C
1200
CMienl Law
Ctrrem Law
Person* vrth Income laas (tan
10O% of aovafty level
Parsons wilh Incomn Isaallian
I26%d
level
Pa-aoaa with Income laaa lhan
150% cf poyirty laval
Pa.'aofisMftt hcome lasa lhan
1 7 S % r i povany level
Pataon* vrth ncome lea* !han
200% of pcvarty laval
Pernor a vUth Income lee* lhan
225% ol pcvafTY teval
Paaiona vAh Incorre lea* ihin
250% cf pcvefiy leval
Paaons wflh Income laaa thar
275% of poverty leval
Pa nana wKh Income lea* Hi in
30>%of poverty leval
C n y singU parton* and rna/red ;oupb> wtiora borh apouaaa are In a nureinf facility are tujjuci io thi* K J I C C ' U O ^Uinjd ie ji.lonis wni » l^inj
apouM ardapandanl In ^ l e a e m n u n ^ i r * pennklad la sal aaWa 11.700 par morth • * tn allov«ancs for r^ecorwi inity D t a s J dopoi-ciorl
�TABLE HOME ANO CCr.-.aUNITY-aASED CARE WITH 20 PERCENT CCCT-SHA.liNG
HJLL PHASE-IN WITH INCOME PROTECTION *
'in onilons of THW nonars)
1
; Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
SOURCE:
•:=t Aaaa i ;
Public
Net Addil
Troarem i
,*;deral
fuulic
5:2.6 1
b13.0 1
53.0 i
6.7 |
•6.7 1
S.5 1
19.5 1
9.0 1
3.3 1
12.0 1
i
22.5 !
11.7 1
:
25.8 1
1A.7 I
U.9 1
17.4 1
y i
17.5 I
23.1 !
35.6 i
V'J.7 1
24./ !
1
36.9 1
M.8 I
24.5 I
38.1 1
25.6 ]
39.5 1
26.5 1
25.3
26.1 |
27.9 1
41.2 1
42.4 |
26.8 |
28.7 |
•"0.4 <
-0.2 !
!
•otl
•0.2 1
-0.1 i
0.6 I
0.9 1
11j
1v1
1 81
9
' J
Lewin-ICF estifnaiss. See Figure 1 for details ol proposaj.
These escimaces are f o r the cost of
the program. I t should be noted that che
proposal c a l l s f o r 25 percent of che costs
of the personal care benefit to be financed
by the Medicare Part B premium, paid by
individuals.
�'ABLE :
MURSING FACILITY CASE WITH 35 PEHCwNT COST-SHARING
ANO LOV; INCOME PROTECTION FOR TWO YEARS
FULL rHASE-iri WITH iNCOME PROTECTION
fin U unb ui 199* Qonars)
i
D
j 1994
1995
1996
1997
1998
1999
Proaram :
36.0' i
37.4' 1
73.8' 1
f
i
jJOOO
2001
2002
2003
2004
2005
1
!
55.2 1
61.2!
58.3 1
74.8 1
82.2 !
^9.0 !
34.6!
98.7 1
•^tAddti
Addtt
federal
"ubllc
SO.O 1
$0.0 1
0.0 1
0.0 1
0.0 I
0.0 1
49 1
5.2 1
13.4 1
13.0 1
18.5 1
17.8 1
24.y 1
23.3 1
28.1 I
29.2 1
34.4 1
33.7 1
38.7 |
38.9 1
42.1 |
42.5 1
43.7 i
44.5 1
'late
:o.o i
0.0 i
0.0
0.3
0.4
-0.7
•0.9
-i 1
-0.7
-0.2
0.4
0.8
Current law public spending.
SOURCE;
Lowtn-ICF estimaies. See Figure 2 for details of proposal.
�April 9, 1993
TO:
Robyn Stone
Josh Wiener
FROM:
John RotheP^U**-^
RE:
Long-term care in the President's health care reform proposai
Thank you for taking the time to meet last week and for outlining some of the policy opuons
you are considering.
I remain very concerned that the proposals you laid out are not built around an objecuve of
ultimately constructing a comprehensive long-term care program that is available to people of
all ages and is not, at its core, welfare-based. As I indicated in the meeting, there are two
principles which I believe will be cnucaJ to our Board of Directors, and ultimately to our
members, age 50 and over, when they evaluate the long-care component of the President's
health care reform proposal:
does the proposal move away from a welfare-based program toward a
u,niversal system?
does the legislation include a timeline-albeit lengthy-which shows when and
how this shift wiil be phased in?
The extent to which a proposal accomplishes these goals will be central to the potential level
of public suppon for the health care reform proposal, particularly among people aged 50 and
over. Our experience with focus groups and polling demonstrate that people in this age
group are especially sensitive to long-term care issues, both as caregivers and potential users
of services.
Attached are some comments on the options you described (Block Grant, Per-capita Payment
for the Severely Disabled, and Liberalized Medicaid with Voluntary Public Insurance). We
are providing our comments on these three options in the form of pros, cons, and
unaddressed issues, and have raised a number of questions which require careful
consideration. We are particularly concerned that none of these approaches would appear to
be a first step toward a social insurance, non-means-tested program. We already have a
seriously inadequate means-tested long-term care program. Simply to add on a home and
community-based long-term care component would not address the fundamental problems of
a welfare-based approach. Nor does such an approach address the fears of millions of
�middle income Americans about the extraordinary cost of long-term care which deprives
them of peace of mind. In short, we believe that these three options, as presented to us, v.rr
wholly inadequate.
We also developed some suggestions in response to your question of how to structure a $15
billion per year option. Working from our January 21 memo, we have outlined how the
costs of a home and community-based care benefit could be reduced. We remain very
concerned that the Medicaid nursing home benefit would still require spend-down.
As we send these comments back to you I feel obligated to say that we do so with an
increased sense of concern. We would like very much to provide constructive suppon K
your efforts to build long-term care benefit into the health care reform package, but we have
not heard any specific feedback on the ideas we submitted several months ago. In the absence
of such feedback, it is difficult to make more specific suggestions that would move us in the
direction of a universal health and long-term care program.
I appreciate the challenges you face as you grapple with the complexities surrounding reform
of the long-term care system. We remain available to assist you in any way that might be
helpful to you.
I hope to hear from you soon.
cc: Ira Magaziner
Judy Feder
Bob Boorstin
�1.
A $15 Billion a Year Program for LTC (Plus Medicaid)
As you recall from our January 21 memo, the home and community-based component of our
suggested long-term care social insurance proposai would cost the Federal government $26.8
billion in constant 1994 dollars, fully phased-in by 2004. In addition, the current Medicaid
program would remain intact, serving those who are currently eligible for long-term care
services as well as those who would become eligible in the future. States would have to
maintain their current levels of effon under Medicaid. Some combination of the following
options could be used to reduce the cost of the social insurance proposal:
•
reducing low-income protection from 300% to 200% of poverty would reduce the cost
by approximately $4.5 billion;
restricting eligibility from 2+ ADLs to 3-1- ADLs would save approximately $4.9
billion;
requiring all Americans to pay a premium based on 25% of program costs for home
and community-based services would reduce the cost by approximately $3.5 billion;
>
imposing a 20% copayment on the current Medicare home health benefit would save
approximately $2.4 billion. Given the fact that this would be a Medicare cutback,
this option should only be considered if the overall Medicare benefit package were to
be strengthened significantly.
This program could be phased-in over a six year period, using a method similar to that
proposed in our January 21 memo (attached). Ultimately, long-term care reform must
include protection against the cost of institutional long-term care.
Pros:
This program would introduce the concept of social insurance coverage for home and
community-based LTC. All persons with severe disability would be eligible to
receive services, with a reasonable level of copayment. People with low incomes
would be financially protected to ensure affordability.
This program would significantlyreducethe institutional bias in the current system.
It would provide people who require long-term care with choices to meet their
specific needs through a broad array of home and community-based services.
Medicaid would continue to serve those populations that are currently eligible to
receive services, which would help to address the concern voiced by the disability
community that certain special populations might be excluded from coverage in the
future.
�Care managers would have ihe flexibility to design a care plan that meets an
individual's unmet need for care. Thus, people would be eligible to receive a
comprehensive array of services in the home, the community, or in a residential
setting such as an assisted living facility. (However, care in an institution would not
be covered beyond current protection available under Medicaid and Medicare.)
Cons:
Eligibility criteria based on 3 + ADLs would be restrictive. Those with less severe
disabilities would be denied services which could help prevent further functional
decline and loss of independence. Nearly 800,000 older persons with 1-2 ADL
limitations who rely on formal home and community services would be excluded from
this program.
It is possible that a two-tiered service system would be institutionalized, with services
received under Medicaid being inferior to those received under the social insurance
program - especially if reimbursement rates for Medicaid are not equal to those of
the social insurance program.
People with heavy care needs could incur substantial out-of-pocket expenses, if the
program only provided financial protection for those with incomes up to 200 percent
of poverty. There are approximately 8.4 million married-couple families and 5
million people living alone with an annual income between 200 percent to 300 percent
of poverty who would not be able to afford the cost of one year of heavy home care
or nursing home care.
The 1.6'million people who require nursing facility care would receive no protection
and would be forced to continue to rely on Medicaid as a last reson, with the
associated problems of spend-down, welfare stigma, and impoverishment.
Imposing a 20% copayment on Medicare home health benefits would mean that some
beneficiaries would be paying more for current benefits but would not be eligible for
new benefits under the long-term care program. A 20% copayment also could impose
a substantial out-of-pocket burden on many current users, who are disproportionately
women aged 75 and older.
A social insurance approach would allow accountable health plans to coordinate acute
and long-term care services for people who need them. Means-tested programs,
however, do not promote integration because many people are denied services when
their income and assets exceed eligibility standards.
�2.
Block Grant
This option would provide a state-administered block grant under Title XX for home, and
community-based services that would serve people of all ages. Recipients would have to
meet an income and, possibly, an asset test.
Pros:
•
Presumably, states would have more funds available and greater flexibility in the
management of these funds than under the current Medicaid waiver programs. This
would free states to experiment with innovauve models of service delivery.
Cons:
•
A block grant approach would reinforce the enormous variation across states in the
type and level of services delivered. By definidon, block grants have implied brMad
state discretion, with little monuonne or accountability.
•
Funding subject to either annual appropriation or a capped authorization would nnke
the block grant far more vulnerable to reductions than a social insurance program.
Historically, block grants have been developed with inadequate levels of funding,
leading to the need for waiting lists, stringent eligibility criteria, and curtailed levels
of services. These factors, in tum. lead to competition for services among eligibl'
populations, particularly if funds fail to keep pace with inflation.
*•
This approach perpetuates reliance on a welfare-based system, where people above a
certain Income level are categoncaiiy excluded from receiving services. A progiuju
serving only the poor would leave nearly 9.8 million persons with severe funcuonai
limitations with no access to care.
•
The 1.6 million people who require nursing facility care would receive no protection
and would be forced to continue to rely on Medicaid as a last resort, with the
associated problems of spend-down, welfare stigma, and impoverishment.
•
Cost containment may be insufficient without standards for care management,
provider reimbursement, etc. The use of spending caps, by themselves, generally
denies coverage to those in need.
Unaddressed Issues:
*
•
Level of funding: The level of funding would need to be adequate to significantly
reform the current system of long-term care, and to provide meaningful home and
community care benefits to meet the unmet needs of all disabled individuals with low
and middle incomes. Approximately 520 billion would be needed to do this
3
�Funding would need to be increased annually to keep pace with the cost of care. It
must be noted, however, that Title XX funding has been cut by approximately onehalf in the last decade.
Income and asset eligibility st."'adauis: Uniform standards would need to be set at a
level that would guarantee affordable home and community-base care to low and
middle income persons who are not covered under the current Medicaid program.
Minimum federal standards for eligibility, covered services, quality, cost containment,
reporting requirements, and care management: To adequately address long-term care
problems under a block grant structure, current state flexibility in this area would
need to be significantly reduced. Strong federal guidelines would be needed to assure
that states provide good quality care in a cost-effective manner to people whom the
program is designed to serve.
The Medicaid program: States would have to maintain at least their current level of
effon under Medicaid. A generous block grant should supplement Medicaid rather
than supplant it.
Integration of the block grant with other health and long-term care programs: All
long-term care programs serving people of any age need to be integrated to minimize
duplication of effon and to maximize efficiency and client access to the long-term
care system. In addition, linkages between any new long-term care program and the
acute care sector need to be developed to ensure smooth transitions from one sector to
another and to ensure cost-effective delivery of health and long-term care services.
Accomplishing effective integration will be difficult given a means-tested approach to
long-term care.
�3.
Per-capita Payment for the Severely Disabled
This option would provide states with a per-capita payment for each resident with an income
below the poverty level who had 3-r ADL impairments or a comparable level of cognitive
impairment. An asset test may be imposed. States would be required to use a uniform
assessment tool and single point of entry. The payment wouid cover home and communitybased services only, and wouid replace current Medicaid expenditures for home and
community-based care. States could receive federal matching funds if they chose to serve
people with higher incomes or lower levels of disability.
Pros:
Presumably, states would have greater flexibility than under Medicaid waiver
programs in administering the program.
Theoretically, states would receive adequate funding to serve all of the eligible
population (i.e., those with incomes below the poverty threshold who meet the
eligibility standards).
A uniform assessment tool would help reduce inter-state variation in identifying the
eligible population.
A single point of entry should help clients access the long-term care system and
should promote integration of all long-term care programs in a state.
•
Cons:
This approach perpetuates reliance on a welfare-based system, where people above a
certain income level are categorically excluded from receiving services. A program
serving only the poor would leave nearly 9.8 million persons with severe functional
limitations with no access to care. With the accompanying elimination of Medicaid
home and community services, they would be eligible only for nursing home care,
once they impoverished themselves.
There would continue to be large variations across states with regard to the level of
disability and income of the population served.
Presumably, there are large numbers of people currently eligible for Medicaid home
and community-based services who would no longer be eligible under these criteria,
particularly persons in the early stages of Alzheimer's Disease, the mentally ill, and
mentally retarded. We estimate that one-half of developmentally disabled persons
would be excluded from a long-term care program using 2+ ADL eligibility criteria.
�*
•
The 1.6 million people who require nursing facility care would receive no protection
and would be forced to continue to reiy on Medicaid as a last reson, with the
associated problems of spend-down, welfare stigma, and impoverishment.
Unaddressed Issues:
•
Amount of per-capita payment: Per-capita payments wouid need to be set at a level
which allows the program to meet clients' unmet needs for services. A full range of
meaningful home and community care benefits should allow clients to receive help in
their homes, in the community, or in a residential setting such as an assisted living
facility.
•
Current Medicaid funding for home and community-based services: Payments should
capture current state spending for Medicaid home and community services.
Individuals who are cunently eligible, or who would otherwise have been eligible for
Medicaid, should not be disadvantaged. States must be required to maintain at least
their current level of effon.
*
-
Minimum federal standards for eligibility, covered services, quality, care
management: Strong federal guidelines would be needed to assure that states provide a
comprehensive array of services, and that eligibility criteria do not vary from state to
state. Standards must also assure that good quality care is delivered in a costeffective manner.
•
Assessment of cognitive impairment: The eligibility criteria would need to be
designed to include persons with severe mental impairments, regardless of cause.
People with severe levels of mental retardation or mental illness should have access to
services.
•
Integration of per-capita payment with other health and long-term care programs: All
long-term care programs serving people of any age need to be integrated to minimize
duplication of effort and to maximize efficiency and client access to the long-term
care system. In addition, linkages between any new long-term care program and the
acute care sector need to be developed to ensure smooth transitions from one sector to
another and to ensure cost-effective delivery of health and long-term care services.
Accomplishing effective integration will be difficult given a means-tested approach to
long-term care.
�4.
Liberalized Medicaid with Voluntary Public Insurance
This option would provide coverage through a liberalized Medicaid program for people of all
ages with an additional voluntary long-term care insurance program for people age 65 and
over. The voluntary program would require a $60 - $100 a month premium, with no
premium subsidies, and would provide a $30,000 lifetime benent for nursing home and home
and community-based services. People would have the opportunity to enroll at age 65, but
could not use benefits for 2-5 years. If people did not enroll at age 65, they might be able to
buy into the program at a later date at an actuarially adjusted rate.
Pros:
Presumably, the expansion of the Medicaid program could make services more
accessible to poor persons of all ages.
More home and community based services could be made available.
The public insurance option might allow some people to obtain some limited longterm care coverage, who would otherwise be screened out (e.g., someone with
disabilities or with a poor medical history) by a private insurer's undenvriung
process.
Cons:
Given current deliberations within the National Association of Insurance
Commissioners (NAIC), the movement toward minimum federal standards, and the
cost of an unsubsidized premium at age 65, it is not clear what this proposal adds
beyond what is currently available in the private market.
The majority of 65-year-old persons still could not afford to buy coverage through the
public insurance program, leaving most Americans unprotected. For example, using
the Brookings-ICF Long-Term Care Financing Model, only 20 percent of older
persons will be able to afford private long-term care insurance by the year 2020, if
we assume they can pay 5 percent of their income and have at least $10,000 in nonhousing assets. Policies would be even less affordable for those choosing to buy-in
later.
Presumably, all of the weaknesses of the current Medicaid program (e.g., welfarebased, requires spend down, varied state resources and administration, poor provider
reimbursement) would remain.
The proposal would fail to address the needs of those under age 65, particularly older
members of ethnic minorities who often have severe ADL limitations before age 65.
�In the 45 to 64 age group, African Americans are nearly twice as likely to be unable
to carry out major activities as whites.
The 2-5 year waiting penod could make this insurance meaningless for many persons
who need benents during this time. In the 65 to 69 age group, 226.000 people have
2 to 3 ADL difficulties, and 98,000 persons have difficulties with 4+ ADLs. Even
with this provision, adverse selection could still be a problem, making premiums
unstable.
Unaddressed Issues:
•
Universal availability: Long-term care insurance would need to be available to all
interested potential purchasers, without underwriting to exclude those with preexisting conditions. Private insurers would need to do the same. Otherwise, the
public program would become a "dumping ground" for high risk consumers, leaving
the lowest risk consumers for pnvate insurers.
»
•
Liberalization of Medicaid: The Medicaid program would need to be required to
provide a comprehensive array of services, including those in the home, the
community, or in a residential setting such as an assisted living facility. States would
need much more generous Medicaid eligibility criteria for all individuals. In addition,
states would need to be required to have medically needy programs for all long-term
care services, including those for persons in a nursing home. Provider payment
levels should be adequate to ensure quality services. The cost of these improvements
would be substantial but are essential.
•
Benefits and cost-sharing under the public insurance program: A lifetime benefit of
$30,000 is not adequate. This amount covers less than one year of care in the
average nursing home, and perhaps slightly more than one year of services for a
person with heavy home care needs. The program must provide benefits sufficient to
cover a minimum of three years of care needs. Any cost-sharing requirements for
coverage under the public insurance policy would need to be modest and affordable
for people with low incomes. There would need to be income-related caps on annual
out-of-pocket costs for services.
•
Eligibility for the public insurance program: Eligibility for this program would need
to be triggered by the need for assistance with 2 + ADLs or an equivalent level of
mental impairment. Individuals of any age should be able to buy into the public
insurance program and receive services when they meet the program's eligibility
standards.
•
Consumer protection standards: Strong standards are necessary to protect purchasers
of long-term care insurance. These standards should assure stable premiums.
�coverage that is inflated at a minimum of 5 percent (compounded annually), and nonforfeiture protection so that people will not lose their built-up equity if the policy
lapses.
Integration of the public insurance program with private-sector plans: Benefits from
each of these sources may be needed to help older people finance long-term care
services. Those individuals who have invested in long-term care insurance should not
be penalized under the public insurance program. The $30,000 benefit from the
public insurance policy should be added to any other benefits an individual might be
receiving.
A special earmarked financing structure would need to be created to biiild reserves
and contingencies to pay for benefits in the early years of the program. These
revenues would need to be placed in a trust fund within the Treasury. In addition,
premiums would need to be tax-deductible.
Integration of voluntary long-term care insurance with other health and long-term care
programs: All long-term care programs serving people of any age need to be
integrated to minimize duplication of effon and to maximize efficiency and client
access to the long-term care system. In addition, linkages between any new long-term
care program and the acute care sector need to be developed to ensure smooth
transitions from one sector to another and to ensure cost-effective delivery of health
and long-term care services. Accomplishing effective integration will be difficult
given a means-tested approach to long-term care.
�
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Title
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Health Care Reform
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2006-0810-F
Description
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<p>This collection consists of records related to Hillary Rodham Clinton's Health Care Reform Files, 1993-1996. First Lady Hillary Rodham Clinton served as the Chair of the President's Task Force on National Health Care Reform. The files contain reports, memoranda, correspondence, schedules, and news clippings. These materials discuss topics such as the proposed health care plan, the need for health care reform, benefits packages, Medicare, Medicaid, events in support of the Administration's plan, and other health care reform proposals. Furthermore, this material includes draft reports from the White House Health Care Interdepartmental Working Group, formed to advise the Health Care Task Force on the reform plan.</p>
<p>This collection is divided into two seperate segments. Click here for records from:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0810-F+Segment+1"><strong>Segment One</strong></a> <br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0810-F+Segment+2"><strong>Segment Two</strong></a></p>
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Clinton Presidential Records
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William J. Clinton Presidential Library & Museum
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Long Term Care Briefing Book [2]
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Health Care Task Force
General Files
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2006-0810-F Segment 1
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Box 62
<a href="http://clinton.presidentiallibraries.us/items/show/36144" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/12090749" target="_blank">National Archives Catalog Description</a>
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Clinton Presidential Records: White House Staff and Office Files
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5/5/2015
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42-t-2194630-20060810F-Seg1-062-006-2015
12090749