"More than 40% of people over 65 years old misperceive that Medicare covers long-term care."
-Marc A. Cohen, PhD
Long-term care is care across a range of settings and can include medical and non-medical services that assist individuals who cannot care for themselves for extended periods. Also, long-term care is often provided at a person's home, largely by family and friends.
Thus, it's a challenge to discern whether you even need long-term care insurance coverage. If you can afford this type of policy, it's even harder to know if the insurer and the policy will still be there with adequate coverage whenever you need it.
In this episode of This Is Getting Old, Marc A. Cohen, PhD., will talk about the basics of how long-term care is paid for now - and discuss future trends for the long-term care insurance industry.
Part One of “Do I Need Long-Term Care Insurance? And Future Trends”
How Is Long-term Care Currently Financed?
Long Term Services and Supports (LTSS) are services designed to help people with functional incapacities, limitations, or cognitive issues. These circumstances limit a person’s ability to perform basic activities of daily living like bathing, dressing, toileting; all the things that one would need to be able to do in order to live independently.
Unlike acute medical care, with services like hospital care, physician care tends to focus on curing people of specific ailments; long-term services and supports are designed to help people living with chronic illnesses maintain their function or reduce the decline in functioning over time.
In today’s market, long-term care is financed in three major ways:
✅ Out-of-pocket: Disabled older adults and their families pay out-of-pocket for care.
✅ Medicaid: A federal-state social safety net program. Older adults must qualify for Medicaid by meeting very low income and asset thresholds.
✅ and private long-term care insurance.
Is Private Long-term Care Insurance Still And/Or Going To Continue A Valuable Product For Consumers?
The long-term care financing problem in the United States is enormous. People over age 65 today, around twenty-five million of them will require long-term care services and supports projected to cost trillions of dollars; including family support provided care, which is not often evaluated.
When we look at the dollars spent and put a dollar value to the care provided by families, it's more than seven times what our public program, Medicaid, pays.
So given that the bulk of care is provided by families, we have these situations now, where the caring family network is stretched. We used to talk about the “Sandwich Generation” - where you had an older adult caring for an elderly parent and a school-aged child— Dr. Cohen now calls this the “Panini Generation”. In other words, paying for and providing long-term care can create a situation that crushes families.
Given these circumstances, we need to have more financial resources flowing into this system. The problem is so big that no one sector can handle it on its own. That means that we can't fully publicly finance long-term care —and we've already proven that it can't be a privately owned, privately funded solution. Therefore, we need roles for the public and private sector in order to find a viable solution.
Part Two of “Do I Need Long-Term Care Insurance? And Future Trends.”
Can Long-term Care Insurance Still Play A Meaningful Role In Addressing The Challenges Of Long-term Care Financing? And What Public Policies Need To Change For Long-term Care Insurance To Remain A Viable Product?
We've seen in the private market that private insurance companies can no longer handle that “catastrophic risk” that is called “long-tail risk” or “long-term risk”.
Another one is that the private insurance industry is much better at handling folks who need care for one, two, three, four, maybe five years, but they get in trouble with rating agencies who think that they're taking on uncapped liabilities. With that, the private sector has stopped providing coverage.
So the long and the short of it is that each financial option has a clearly defined role. The private insurance sector has to worry about developing insurance products that will work based on their terms. The public sector takes on the predominant part of the risk—the catastrophic.
The idea is that by doing that, older adults can put together a package of comprehensive insurance that starts with the private sector and moves to the public sector.
"It's no longer an accident that we live long lives —we expect to live long lives, but that brings functional impairment and cognitive impairment levels that we haven't seen. And because the long-term care financing problem necessitates bold action, it's going to require bold action." -Marc A. Cohen, Ph.D
A Catastrophic Public LTSS Insurance Program Can Significantly Help The Market Thrive And Meet America's LTSS Financing Challenge.
The notion of “catastrophic public long-term services and support” is an idea that proposes financial help would be variable, depending on your economic circumstance. For example:
✅ If you're lower middle class, the public program would pay after you need care for one year.
✅ If you are a little bit wealthier, you would pay for the first two years with your savings or insurance, and then the public program would kick in.
✅ And if you're wealthy, then potentially you have to worry about the first four years of care, and then the public program provides coverage.
What's nice is there are a couple of good things about this scenario:
✅ First of all, when you have a well-defined public role, it will help people understand, "Oh, I've got some personal accountability or responsibility for worrying about whether it's one year, two years, or three."
✅ Number two is about how the middle-income folks accessed Medicaid because they spent down their income and assets. Well, if you have an insurance solution for those folks, that means you have fewer claims on the social safety net. This further means that states will have some pretty significant savings to their Medicaid programs. So it'll be relatively attractive to states and the people accessing Medicaid—people for whom there are no insurance alternatives and no savings alternatives.
✅ The third thing that it does is that it will stream new money into the system. All of us know what happened during the pandemic, especially in the beginning when the pandemic ravaged elders in nursing homes in particular. Part of the issue is that we have underfunded the entire long-term care system. So there has not been enough money to support levels of wages that we need to attract and keep people working, develop career ladders, pay for high-quality care and safety. A public insurance program with private insurance filling in the gaps and savings will stream more money into the system and will have everyone benefit from a better system.
Congress.gov will have information on The WISH Act proposed by Rep. Tom Suozzi (D-NY-3) shortly!
About Marc A. Cohen PhD
Marc A. Cohen, Ph.D. is a Professor of Gerontology at UMass Boston and the Co-Director of the LeadingAge LTSS Center @UMass Boston. He is also a Research Director at the Center for Consumer Engagement in Health Innovation at Community Catalyst. Before joining UMass in 2016, Dr. Cohen founded and led LifePlans, Inc., a long-term services and support (LTSS) research and risk management company.
Over his 30 year career, Dr. Cohen had conducted extensive research on LTSS financing and delivery issues, testified before Congress, served on an appointed Massachusetts' LTSS financing task force, and chaired a study panel on designing state-based LTSS social insurance programs. He has been quoted extensively by major news outlets and is viewed as a thought-leader on issues affecting eldercare financing. He received his Ph.D. from the Heller School at Brandeis University and his Master's Degree from the Kennedy School of Government at Harvard University.
Connect With Dr. Marc A. Cohen through the following social media platforms:
Twitter: @UMassBoston @LeadingAge @CCEHI @CommCatHealth
Facebook: @UMassBoston @communitycatalyst @LeadingAge
Instagram: @UMassBoston @LeadingAge
For more valuable resources, check out the episode of Elder Care: Past and Future with Joanne Lynn, MD, MA, MS, and Carrie Graham, PhD, MGS.
Watch the full episode here: https://youtu.be/4S8ongyzMco
About Melissa Batchelor, PhD, RN, FNP-BC, FGSA, FAAN:
I earned my Bachelor of Science in Nursing ('96) and Master of Science in Nursing ('00) as a Family Nurse Practitioner (FNP) from the University of North Carolina Wilmington (UNCW) School of Nursing (SON). I genuinely enjoy working with the complex medical needs of older adults. I worked full-time for five years as an FNP in geriatric primary care across many long-term care settings (skilled nursing homes, assisted living, home, and office visits), then transitioned into academic nursing in 2005, joining the faculty at UNCW SON lecturer. I obtained my Ph.D. in Nursing and a post-master's Certificate in Nursing Education from the Medical University of South Carolina College of Nursing ('11). I then joined the faculty at Duke University School of Nursing as an Assistant Professor. My family moved to northern Virginia in 2015 and led to me joining the George Washington University (GW) School of Nursing faculty in 2018 as a (tenured) Associate Professor. I am also the Director of the GW Center for Aging, Health, and Humanities. Please find out more about her work at https://melissabphd.com/.