McCormack Speaks

February 22, 2018
by McCormack Speaks
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Gerontology Professor Marc Cohen Presents New “Policy Roadmap” for Future of LTSS Finance

This post originally appeared on the Gerontology Institute blog, written by Steven Syre.

What would a better way to finance long-term services and supports (LTSS) for older Americans really look like? Even more importantly: How would it perform?

Marc Cohen, co-director of the LeadingAge LTSS Center @UMass Boston, and two colleagues took up that challenge and developed a new “policy roadmap” combining public catastrophic insurance with gap-filling private LTSS insurance focused on middle-income people.

“The fundamental LTSS financing problem is the absence of an effective insurance mechanism to protect people against the cost of extensive LTSS they may require over the course of their lives,” said Cohen, also a professor at UMass Boston’s McCormack Graduate School.

Cohen and co-authors Judith Feder, a professor at Georgetown University’s McCourt School of Public Policy and a fellow at the Urban Institute, and Melissa Favreault, a senior fellow at the Urban Institute, said their plan would enhance benefits for people with long-duration impairments, reduce unmet LTSS needs and mitigate burdens facing family caregivers.

The authors said their plan would enhance LTSS spending by 14 percent, reduce out-of-pocket spending by 15 percent and cut Medicaid spending by 23 percent, compared to projected spending under current law.

The public-insurance element of the plan would be financed with a 1 percent Medicare tax surcharge paid by taxpayers over the age of 40.

The authors described their proposal as providing an “analytical foundation for demonstrating how a shift from an LTSS system dependent on impoverishment and last-resort public financing to a financially sound insurance system that can provide meaningful protection for people with catastrophic LTSS needs.”

Cohen and Feder presented their plan at a Jan. 31 discussion hosted by the Bipartisan Policy Center. They were joined on a panel by Gretchen E. Alkema, vice president of policy and communication at The SCAN foundation; Sheila Burke, a BPC fellow and strategic advisor at Baker Donelson; Cindy Mann, the former director of the Center for Medicaid and Anne Tumlinson, the founder of Daughterhood.

Under the plan, eligibility for public catastrophic coverage would be subject to waiting periods at age 65 ranging from one to four years, based on income. Higher earners would be subject to longer waiting periods.

Private insurance would offer a way to cover those up-front gap years. Based on the average cost of private policies on the individual market, the authors estimate gap-filling coverage would amount to 2-4 percent of income for all groups, except the lowest 20 percent of earners. Such costs are in the range of what people appear to be willing to spend for policies, according to the authors.

Individuals assessed with two or more limitations in activities of daily living or severe cognitive impairment expected to last longer than 90 days would qualify for public benefits once they satisfy the waiting period.

The model’s level of benefit payments is linked to direct service costs, excluding room and board. It would provide $110 per day, which was the average expense for five hours of service by home health aide in 2016 (though the benefit could be spent on nursing home care as well).

The authors said the 1 percent Medicare surcharge helping to finance the program would cost a worker earning the 2016 average covered wage of $48,642 about $41 per month, or when split evenly between employees and employers, about $21 in direct monthly costs to employees. They suggested the surcharge could be presented as a premium and taxpayers could be offered the opportunity to opt out of the plan.

Cohen and his co-authors acknowledged that the search for better ways to finance long-term services and supports is not high on America’s current political agenda. But they believe work on the issue now can pay dividends in the future.

“Research undertaken now on the design and challenges of specific proposals for LTSS financing reform will provide the necessary intellectual infrastructure and foundation for effective action when policymakers are inevitably forced to address the issue in the years ahead,” they wrote.

October 16, 2017
by McCormack Speaks
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A Deeper Look at Long-Term Care Insurance

Professor Marc Cohen has spent many years following the market for long-term care insurance – from its days of broad-based popularity to its current appeal among primarily affluent policyholders. Cohen recently talked about that market and ideas about how insurance coverage could change in the future. The following is an edited version of his comments.

picture of a stethoscopeWhy should people care about long-term care insurance, especially if the potential risk may be many years away?

That’s a real challenge. A lot of people misunderstand LTSS and most believe incorrectly the government pays for care, or they don’t understand government pays for care only after people impoverish themselves. For most, the risk is 30 to 40 years in the future and about half will not develop significant long-term care needs. But the risk is highly unpredictable for an individual. You don’t know if you’re going to be struck with Parkinson’s or dementia. Most people also underestimate the cost of home care or nursing homes.

See more Q & A.

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