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The Aging Population: A Crisis in Plain Sight

By Jane Norman, CQ HealthBeat Associate Editor

February 25, 2013 -- The stories are ubiquitous and intensely personal. You hear them at work, at dinner parties, at kids' soccer games. Someone's mother, or widowed dad, or favorite aunt, or disabled brother needs long-term care—and that person has no idea where to turn for help.

Where will these loved ones live? Who will pay for their care? How can they live out the rest of their lives with as much choice, independence and dignity as possible?

Providing long-term-care services and support for the elderly and people with disabilities arguably is the biggest problem in health care policy today. Ten million to 12 million Americans are in need of some kind of long-term care, ranging from regular visits by home-health aides to around-the-clock attention in a nursing home. Most people don't plan for this expense. And yet most would do anything to avoid living out the end of their lives in a "home" or in a way that puts a physical and financial burden on their families.

No national strategy to finance and provide long-term care exists in the United States. Congress attempted a small step in 2010, creating a voluntary long-term-care insurance program as part of the health care law. But that program, known as the CLASS Act, was repealed last year after the Obama administration determined it was financially unsustainable. Private insurance exists to cover some long-term-care expenses, but it's expensive and is purchased by relatively few people. Most of the time, families provide the care at first and then turn to the overburdened, cash-strapped, complex Medicaid program when the money runs out. Some also argue that because Americans assume Medicaid will always be there as a last resort, they don't make plans for long-term care.

"It's hard to engage public officials in a discussion about this because it sounds expensive and insurmountable," says Bruce Chernof, president of the SCAN Foundation, which aims to raise public awareness about the need for a plan for long-term care. Chernof recently was appointed to a commission created last year by Congress to study the issue.

"The public is not engaged," he says, noting that most Americans assume they'll live into their 90s and die quickly of a heart attack. "We have a reality issue."

As the 80-million-member baby boom generation moves beyond the healthy years of early retirement and grows increasingly frail and ill, this national crisis will accelerate. It's true that Americans born after World War II are healthier than previous generations, but age will catch up with them—as will the medical problems attendant to growing older. Moreover, boomers are likely to live longer as medical treatments continue to improve and help them stave off death.

"We're about 10 years away," says Jesse Slome, who leads an association of long-term-care insurers. "There's going to be a big difference between being 65 and walking slowly, and being 75 and you can't get out of bed."

The few national policy ideas floating around include the small-scale proposal to provide tax incentives for private insurance, and the much larger-scale notion of creating a mandatory system of social insurance to underwrite the kinds of services that will be demanded. The new high-level commission, whose congressional mandate is to make recommendations to lawmakers for how to address this growing need, is supposed to begin its work soon.

Researchers estimate that 70 percent of baby boomers as they age will need assistance of some kind—in their own homes or in some sort of care facility—for three years on average. It's also noteworthy that many people who need extended care aren't elderly. People of all ages with physical and intellectual disabilities need assistance throughout their lives, although most federal and state long-term-care spending is strongly tilted toward seniors because so much is spent on nursing homes, according to research published in the journal Health Affairs.

By 2020, about 15 million people will need aid from some kind of caregiver, and by 2050 the number may reach 27 million, according to projections by the Department of Health and Human Services.

"Everyone thinks of it as a special interest group, and it's all of us," says Connie Garner, executive director for Advance CLASS, a coalition of groups that supported the CLASS Act.

But a resolution of this issue is very difficult politically at a time when the Medicare and Medicaid programs are being eyed for spending cutbacks or, at a minimum, will be left alone. More than two decades ago, an earlier commission created to study the issue that was the brainchild of Rep. Claude Pepper, a Florida Democrat, called for a long-term-care program that would have cost $42.8 billion even then.

On top of that, the National Bureau for Economic Research reports that spending on long-term care has been growing faster than other health care expenditures, and says that trend will continue over the next four decades.

The Insurance Option

Private long-term-care insurance is available and resembles other insurance plans—regular premium payments are made in exchange for future covered benefits. Depending on how much beneficiaries are willing to pay in premiums, policies cover anything from help with bathing or toileting in the home to lengthy nursing home stays. Some employers, including the federal government, offer policies—usually unsubsidized—but mostly this insurance is sold to individuals.

And it's pricey. The Congressional Research Service says the average annual premium in 2010 for people aged 55 to 64 was $2,255, up 71 percent since 1995. While some of that increase was due to better benefit packages and higher daily benefit amounts, some was due to premium increases for policyholders, CRS says. Insurance companies blamed price increases on low interest rates that constrained the return on their investments.

Moreover, not everyone can buy long-term-care insurance. People with pre-existing health problems, for instance, might be denied coverage entirely, just as with ordinary health insurance.

The Urban Institute says 7.6 million Americans who were 55 and older had such private policies in 2008, amounting to 10.7 percent of that age group. Several companies have left the long-term-care market since 2010, although the industry says those that continue to write policies have a vast pool of potential buyers. Figuring out which policy to buy is also often confusing, however, even with the help of an agent, because there are so many variables. Such insurance is regarded as a niche product.

For those who don't choose to try to insure against the cost of long-term care, the remaining options are few and not always satisfactory.

Seniors with equity in their houses or other savings can sometimes afford to move into assisted living communities, for which the national average monthly base rate was $3,550 in 2012, according to a survey by MetLife Insurance. In some cases, family members pick up the tab if money runs out, nursing home care is needed and a Medicaid-financed bed isn't available. But a private room in a nursing home now tops $90,000 a year, MetLife says.

For those who want to live at home for as long as possible, assistance can be obtained from home health aides. But that isn't inexpensive, either: National average pay is $21 an hour, MetLife says.

Beyond insurance and out-of-pocket pay for private help, there are two main sources of long-term care. The first is Medicaid, the open-ended state-federal program for the poor and people with disabilities that will foot the bill for nursing home care in specific circumstances. The second is unpaid family members or friends who are willing to perform nursing tasks once reserved for professionals while coping with the not-insignificant stress of juggling the other needs of their lives with caregiving.

According to the SCAN Foundation, 87 percent of Americans who need long-term care get it from unpaid caregivers. They most often require help with getting out of bed, getting dressed and bathing or showering, AARP research has found.

This group includes older people with serious conditions. More than 15 million Americans provide unpaid care for people with Alzheimer's or dementia, AARP says.

Medicaid: The Final Choice

Many seniors and their family members think that Medicare, the health care program for the elderly and disabled, will foot the bill when someone needs help for months or years on end. But, except in limited circumstances, such as medically necessary recovery from surgery and rehabilitation, that isn't the case. Medicare pays for doctor and hospital bills, and short-term institutional care while a patient is in recovery, but Medicaid is the long-term-care system's safety net.

Depending on the state, Medicaid will in some circumstances also pay for such services as home health aides or adult day care. The 2010 health care law also included some incentives. The Kaiser Commission on Medicaid and the Uninsured says states have made considerable progress in recent years in trying to provide long-term-care services in the home or community, but recent budget problems have slowed these efforts. Waiting lists for services are long and make it difficult to take advantage of them.

Yet much of the time, Medicaid still means nursing home care at a facility with Medicaid beds available, which may or may not be convenient for or acceptable to family members.

The difficulty is, Medicaid was never intended to be the backstop for an entire system of long-term care. Nonetheless, "Medicaid is the nation's primary payer of long-term services and supports," says the Kaiser Commission. Out of $342 billion spent on long-term care in 2010, Medicaid paid 41 percent, says the Kaiser group. Already under strain, Medicaid is facing cutbacks and changes to make it less costly. Plus, Medicaid is very complicated for families to understand.

Medicaid policy requires seniors to spend down almost all of their own money, and dispose of most assets, before they qualify. "I was personally familiar with it because I went through it with my mother," says Dave Heymsfeld, a policy adviser to the American Association of People With Disabilities.

"She was getting home care and then couldn't afford it anymore and went to a nursing home. She used up all her assets for that," Heymsfeld says. "Eventually she got to the point where she qualified for Medicaid, but she didn't live long enough to actually get the benefits."

Heymsfeld's mother is one of many. "There are an awful lot of people like that," he says.

At the same time, Medicaid is consuming more and more of government budgets. Although the growth of health care spending including Medicaid has slowed nationally, the Congressional Budget Office predicted in February that overall federal Medicaid spending will more than double from $251 billion in fiscal 2012 to $572 billion in fiscal 2023. A large portion of that increase will be the result of changes in the health care law that extend Medicaid insurance coverage to low-income adults under 65 in 2014, depending on state decisions. Leonard E. Burman, a professor specializing in public finance at Syracuse University, forecasts that federal and state spending on Medicaid will rocket past defense spending by 2040, when 80 million Americans will be 65 or older.

Qualifying for Medicaid means that seniors must prove they have few assets, excluding a car and a home. Individuals over 65 generally qualify for Medicaid's long-term-care coverage if they have assets of less than $2,000 to $3,000 and meet income limits that vary and are set by states. For example, in Ohio, a single senior can't have an income of more than about $589 a month.

Eligibility standards were tightened in a 2005 deficit reduction law, but Republicans in Congress and some governors recently have raised questions about whether too many people are sheltering their assets through purchase of annuities that are exempt from the asset limitations.

Moreover, the existence of Medicaid serves as an excuse not to plan, they contend. "Estate planning for Medicaid discourages individuals from engaging in meaningful financial planning that would enable them to take greater responsibility for their future long-term care needs," New Mexico Gov. Susana Martinez, a Republican, wrote in a recent letter to members of Congress.

Ignoring Reality

Long-term care has not exactly been a front-burner issue for politicians. During the 2012 presidential campaign, President Barack Obama and his Republican challenger, Mitt Romney, fought over the future of Medicare. But there was mostly silence about what to do about long-term care. What was said centered on whether or how Medicaid should be cut or its money redistributed to the states, rather than any plans for rethinking the system, including long-term care.

The issue was perhaps last put forward plainly in a presidential campaign by Hillary Rodham Clinton during her primary race against Obama in 2008. Clinton, who unsuccessfully tried to revamp the nation's health care system during her husband's presidency, notably tackled long-term care in a speech in Waukee, Iowa, in August 2007.

"The good news is, we are living longer, and we are living healthier lives. But we still have to figure out how we are going to get our system to catch up with what is the reality of life today," Clinton said, citing growing Medicaid costs for long-term care. "Medicare also faces significant financial challenges [that] are driven by the spiraling cost of health care. And unfortunately we are not addressing any of these issues and planning for the future."

In remarks to the Democratic National Convention last summer, her husband, Bill Clinton, talked about long-term care, too, although in the context of defending it from Republican proposals to reduce funding.

"A lot of folks don't know it, but nearly two-thirds of Medicaid is spent on nursing home care for Medicare seniors who are eligible for Medicaid," said the former president. "And a lot of that money is also spent to help people with disabilities, including a lot of middle-class families whose kids have Down syndrome or autism or other severe conditions.

"And honestly, just think about it," he continued. If cuts to Medicaid happen, "I don't know what those families are going to do."

HHS makes a stab at educating people about costs and choices, most prominently through an online National Clearinghouse for Long-Term Care Information.

But HHS acknowledges the limits of government intervention. "The proportion of adult children providing personal care and/or financial assistance to a parent has more than tripled over the past 15 years," the department's website notes.

Rise and Fall of CLASS Act

The most notable effort at changing the country's response to long-term care needs recently crashed and burned, leaving the issue perhaps even tougher to tackle.

Beginning about a decade ago, Sen. Edward M. Kennedy, a Massachusetts Democrat, and his staff began formulating the program that became the CLASS Act. A signature measure for Kennedy, supporters won its inclusion in the 2010 health care law after his death in August 2009. The voluntary program was supposed to provide a $50 daily cash benefit for people with disabilities, financed by premiums from workers. Anyone with any health condition could sign up to pay premiums. Even if it didn't finance nursing home care it still could provide enough help to keep people off the Medicaid rolls, advocates felt.

But the measure elicited withering criticism from Republicans and even such Democrats as Sen. Kent Conrad of North Dakota, who retired in 2012 and famously dubbed the CLASS Act a "Ponzi scheme of the first order" because it would begin collecting premiums right away but wouldn't pay benefits for years.

"It became a symbol of what people did not like about Obamacare," says Larry Minnix, president of LeadingAge, which represents nonprofit organizations that are involved in providing long-term-care services.

Unable to come up with a way to make the law work financially, HHS announced in October 2011 that the CLASS Act wouldn't be implemented, to the great disappointment of advocates who felt it still could be made to function. At a minimum, they wanted to see an advisory committee appointed that was supposed to go along with the program.

They got their wish, in a way. When the CLASS Act withered away, West Virginia Democratic Sen. Jay Rockefeller cooked up the idea of a national commission on long-term care that would report to Congress on solutions.

The CLASS Act was formally repealed in January as part of the fiscal-cliff law, and Rockefeller's Commission on Long-Term Care was created in the same law. The temporary 15-member panel was modeled on other independent health care panels and will have six months after its members are appointed to come up with proposals for Congress.

At the end of their work, commission members will make their recommendations through a majority vote and submit them to the president, House and Senate. The law requires that the commission's recommendations then be introduced in both chambers the first legislative day after the panel submits them, which means that some kind of comprehensive measure might come before Congress by next fall.

Lawmakers, though, are under no obligation to vote on the recommendations, which means they might wind up on the same dusty shelf as other ideas advanced over the years. The group also will be dominated, 9-6, by Democrats, leading to skepticism among Republicans about whether their input will even be considered.

Already two of the appointees are shaping up as strong advocates for partisan points of view. Democratic appointee Judy Feder, a professor of public policy at the Georgetown Public Policy Institute, is a former congressional candidate who was staff director of the Pepper Commission in the late 1980s. Grace-Marie Turner, a Republican appointee who's president of the right-leaning Galen Institute, is a leading GOP voice on health care and wrote a book titled "Why Obamacare Is Wrong for America."

Solutions Scarce

The public is also skeptical. One recent study showed that many surveyed lacked confidence they could pay for the costs of their parents' long-term care, or their own.

Still, advocates for better long-term care, a contingent that has remained hopeful despite political losses, say there are solutions. Some are complete overhauls and others are fixes to the current system.

For instance, private insurance might be made more affordable and attractive through tax incentives. Public-private partnerships might be formed for the sale of highly regulated private long-term-care insurance policies. Or the nation might move toward a nationalized system of mandatory social insurance for long-term care, such as Japan and Germany have done.

The new commission will have plenty to think about. "I'm optimistic," says Katherine Hayes, director of health policy at the Bipartisan Policy Center. "I would expect to see some kind of public- and private-sector options."

New approaches might be considered for increasing the demand for private long-term-care insurance. One way would be for Washington to provide tax incentives to lower the after-tax cost of policies, and at the same time increase protections for consumers. Surveys by the insurance industry have found that people would be more interested in buying policies if they could deduct premiums from their taxable income. However, some states already have tried increased incentives with little effect. "The modest ability of state tax incentives to lower premiums implies that they should be viewed as a small piece of the long-term-care financing puzzle," Harvard Medical School researchers reported.

In a notable policy shift, the United States might look overseas for a model of a system that could be incorporated as part of Medicare. Two decades ago, Germany and Japan adopted mandatory, universal long-term-care systems based on social insurance. Those might serve as models for a U.S. system. But lawmakers shied away from a mandatory system for the CLASS Act and enactment in a time of budget constraints would be politically very difficult.

Some advocates have suggested trying to revive and revise the CLASS Act. Howard Gleckman of the Urban Institute, an expert who has written extensively on long-term-care policy, has outlined a way to do that. But CLASS stirred so much controversy it's not clear how to achieve that politically unless the makeup of Congress changed.

"I don't see how the passage of time is going to make the technical issues go away," says Thomas Wildsmith of the American Academy of Actuaries, which is conducting its own research into long-term care.

Other advocates talk about a public-private partnership in which the federal government either sets up long-term-care insurance exchanges or uses the existing health insurance exchanges to organize the sale of private policies. Participation could be voluntary or mandatory, with incentives in the system built in to encourage sign-up sooner rather than later, researchers Gloria Eldridge and Joanne Lynn suggested in a piece in Health Affairs.

If the current system is to be kept in place, the Centers for Medicare and Medicaid Services is launching demonstration programs in states intended to show ways to better provide care for those known as dual eligibles, the 9 million people who qualify for both Medicare and Medicaid and tend to be the sickest and frailest in public programs. The idea is to provide care in their homes or communities, rather than institutions, at lower cost, and those projects could be expanded or implemented on a national scale.

Coordination across Medicaid and Medicare for these patients is widely regarded as poor, even by those who run them. "Although established at the same time, Medicare and Medicaid were designed with distinct purposes but with little forethought as to how the two would work together," Medicaid director Melanie Bella told the Senate Finance Committee recently. Some states, such as Florida, have sought federal permission to move these patients into managed care, although there's doubt about whether that will work.

Overshadowing everything is the huge cost of the current approach. House Republicans worried about government spending are interested in tightening the requirements for Medicaid admission and reducing the number of people who are eligible. After Rep. Charles Boustany Jr., a Louisiana Republican, solicited their opinions, state officials complained to him about too many people hiding their assets. Boustany also wants to look at ways to increase consumer education about the costs of long-term care so people will save more before they grow old—although that might be tough given stagnant incomes and investments hammered by the recession.

What is certain is that the ravages of age will escape few Americans. Family after family will continue to receive "the phone call" that changes their lives, as is related in Gleckman's moving book "Caring for Our Parents."

"With just a few words, my family was sent plummeting into a painful, mysterious and all-consuming world for which we were completely unprepared," the Urban Institute expert wrote, recalling the moment when he and his wife learned his mother-in-law had a debilitating stroke.

In 1990, the Pepper Commission issued its report calling for widespread changes in the nation's health care system, including a blueprint for long-term care. The commission, in words almost identical to those used by advocates today, described the plight of families "whose emotional and financial resources are exhausted from providing long-term care to frail parents or disabled children." Americans should have the security of knowing that they are not on their own, the commission said.

But Congress didn't act on those recommendations then, and many are skeptical that a report from the new commission will fare any better. For now, though, it's the best hope for those advocating for change.

"It's a critical dialogue that we need to be having. I'm optimistic that recommendations will move forward," says Jane Hyatt Thorpe, an associate professor in the department of health policy at George Washington University and a former CMS official. "But you never know. There are a lot of different priorities right now."

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