Urban Institute, SCAN Foundation, Release Analysis of Options to Improve Financing for Long-Term Services and Supports
June 1, 2016 12:44 PM
The Urban Institute recently released a brief funded by the SCAN Foundation analyzing options for improving financing for long-term services and supports (LTSS). According to the brief, about half of those who are age 65 today will eventually need “substantial amounts” of LTSS. While most will receive “informal help from family and friends,” the number of individuals who will either receive services from paid caregivers or end up in a nursing home will continue to increase. Currently only “about 11 percent” of adults ages 65 and older have private long-term care insurance because of perceptions that either it is unneeded or that premiums are too high. As a result, those who end up needing LTSS often rely on unpaid caregivers or “pay out of pocket until they exhaust their resources and end up on Medicaid.”
“As the population ages and LTSS costs rise, there is growing concern that Medicaid will increasingly strain federal and state budgets (Commission on Long-Term Care 2013),” the Urban Institute stated in the report. “Although exact estimates vary, Medicaid pays more than $100 billion a year for LTSS, covering between 40 and 60 percent of the nation’s LTSS costs (Congressional Budget Office 2013; Kaiser Family Foundation 2013; O’Shaughnessy 2014). The Congressional Budget Office (2015) projects that between 2015 and 2040, total Medicaid spending as a share of gross domestic product will rise from 2.2 to 2.9 percent.”
The brief stated that “new LTSS insurance programs could provide better financial protection to people with disabilities; improve the care they receive; and reduce Medicaid costs.” The Urban Institute modeled several program options including one that provided front-end benefits and one that provided catastrophic benefits:
The front-end plan would begin paying a benefit after the first 90 days of need and continue coverage for up to two years.
Under the catastrophic plan, insurance would be available only after two years but would then continue indefinitely; consumers would be responsible for the first two years of expenses once they develop substantial LTSS needs.
While both options would eventually have about the same costs, the Urban Institute found that the front-end option “would reduce family out-of-pocket spending more than the catastrophic option, whereas the catastrophic option would reduce Medicaid spending more.”
The full brief is available here.