In the Fiscal Cliff Deal, A New Push for Long Term Care in 2013

When the House of Representatives voted by a comfortable margin a few hours ago to approve the American Taxpayer Relief Act (ATRA) and step away from the "fiscal cliff" for another two months, it agreed to two Senate provisions affecting elders and others with long term care needs.

The first was the "doc fix," which prevented a nearly 30% cut in Medicare payments to physicians.  This was important.  If it hadn't happened, doctors would have fled the Medicare program.

The second was tucked away into Section 643 of the Act.  It establishes a new 15-member Commission on Long Term Care, replacing the CLASS Act provisions of the Affordable Care Act that are now finally, formally repealed by ATRA.

The Commission could turn out to be a very big deal if it does it job well, because it could lead the way in changing our system of providing and financing long-term care in America.

The Commission is charged with writing a bill over the next six months "to establish a plan for the establishment, implementation, and financing of a comprehensive, coordinated, and high-quality" long term care system for elders, people with cognitive impairments, people needing help performing activities of daily living, and all "individuals desiring to plan for future long term care needs."

The Commission will focus on three things:

• the interaction and coordination of new services with Medicare, Medicaid, and private long term care insurance;
• improvements to Medicare, Medicaid, and private long term care insurance needed to ensure availability of long term supports and services; and
• long term care service workforce needs.

If the Commission completes its work on time, it could mean the introduction of new long term care legislation as early as the fall of 2013.

What could this legislation mean for us?

It could be the first step on our nation's long and necessary path to bring long term care costs under control, and make long term care services available to individuals without first impoverishing and exhausting them or their families.

It could also help states bring Medicaid costs under control, and the federal government better manage Medicare costs, too.  Long term care costs are the real culprits in rising Medicaid costs for state budgets and state taxpayers.

Let's keep our eyes open, and hope for two things.  First, that this new Commission does a better job fixing our nation's long term care problem than our broken Congress has done with the Fiscal Cliff.  And second, that if it does bring some recommendations forward, Congress listens.

This column is an Our Health Policy Matters extra.  Read on below for this week's regular column.  Follow Paul Gionfriddo on Twitter @pgionfriddo.  

The Top Health Policy Stories of 2011, Part One

Public policy attacks on public health and mental health, intrusions in doctor/patient privacy, the continuing fight over the Affordable Care Act, and our collective loss of faith in private health insurance were among the top health policy story lines of 2011.

This year, eight stories make my short list.  Not all of these stories made big headlines during the year.  But they have had, or will have, an outsized impact on our lives.

I’ll begin the countdown this week with four that capture and continue some of the major trends of the recent past.   Next week, I’ll offer four more that hint at where health policy may go in the future.

8.  The Shooting of a Congresswoman.  In January, the first big health policy story of the year was about violence and mental illness – the horrible wounding of a member of Congress, and the murder of several people around her.  As the media struggled to make sense of this, it raised once again the relationship between mental illness and violence.  What it failed to do was to report that, while this particular shooter seemed mentally imbalanced, most perpetrators of violence are not, and many victims of violence either already have mental illness, or will develop it as a result.

The continuing trend – Our jails are our nation’s largest mental health institutions, and will remain so until we invest more in prevention and treatment of mental illness.   

7.  The End of the Iraq War.  The War in Iraq may have ended this month, but its health effects will be with us and our veterans for many years to come.   A GAO report released in Octobergot little mainstream media attention, but was blunt in its description of the effects of this war and others on veterans’ mental health.  The 2.1 million unique veterans who received mental health treatment in the five year period between 2006 and 2010 represented over 30% of the veterans who received any type of health care.  The fastest-growing groups of veterans receiving mental health treatment during this period were the 213,000 Iraq and Afghanistan veterans with mental health needs.  And 38% of all Iraq/Afghanistan veterans who received health care during that time required mental health care. 

The continuing trend – So long as we remain at war, veterans’ health and mental health services will need to be expanded significantly throughout the foreseeable future, and, as taxpayers, we will need to pay for them.

6.  The Death of the CLASS Act.  What does it say when the first major provision of health reform to be killed off in a bipartisan way was the one provision that had enjoyed bipartisan support for a generation?  There are at least two things about long term care most of us don’t want to face.  The first is that most of us will need it someday.  The second is that practically none of us can afford it on our own.    Rather than coming up with a meaningful public/private partnership to pay for it after almost thirty years of trying, the Administration and Congress quietly killed CLASS in October, choosing once again to keep the current, broken system in place.  This is the one where we first impoverish people when they get old and sick, and then let government pay the whole bill.

The continuing trend – Medicaid will remain the default payer for long term care.  Costs will continue to skyrocket, we’ll all continue to complain, and long term care insurance won’t gain a greater foothold in the market any time soon.   

5.  Low PCIP Enrollment Numbers.  The most compelling evidence in 2011 that we may have finally lost our faith in private insurance was found in the late summer reports of the low enrollment in the Pre-Existing Condition Insurance Program (PCIP).  This is a program that eligible uninsured people were supposed to embrace, because it pretty much guaranteed that it would pay out far more for their health care than it collected in premiums, saving each of them lots of money.  But when only 30,000 of the 4 million eligible people enrolled as of July, most of the rest seemed to be saying that they would rather take their chances on permanent financial ruin than insurance.  Or that they were already so impoverished by illness that they no longer had anything to lose.

The continuing trend – If the health insurance industry cannot restore our trust, even the people who need it most will opt out, relying only on safety net government funding.

Next week:  The final Our Health Policy Matters column of the year looks at four more big stories of the year, and their implications for the future. 

Does The PCIP Enrollment Problem Signal the End of Private Insurance?

There are 4 million or more Americans who can’t get regular insurance because of a pre-existing condition.  You might be one of them.  Now there’s a policy that costs less than $300 per month and covers all of your medical needs, including your pre-existing condition. 

Will you buy it?  Apparently not.

And that may signal the beginning of the end of private insurance in America.

I first wrote about the diminished role of private insurance in a column last month entitled America’s Health Insurance Myth.  Privately-financed private health insurance today pays only 17% of America’s health care bill.

Two recent developments suggest that this share will become even smaller in the future.

The first was last week’s death of the CLASS Act.  As a result, long term care will continue to be an out-of-pocket and government expense only for nearly everyone.

The second was the report of first-year enrollment numbers for the new Pre-existing Condition Insurance Plan (PCIP).  PCIP was created as part of the Affordable Care Act.  It offers low-cost health insurance for adults who have – or have had – conditions like mental illness, cancer, diabetes, and heart disease.  (Children are now covered on their parents’ policies.)

PCIP is comprehensive.  It covers hospitals, doctors, and drugs. 

There is no means test to qualify.  Provided that you have been uninsured for at least six months, all you need to apply is a note from a physician attesting to your chronic condition.

PCIP is inexpensive.  In Florida, the monthly PCIP premium for a forty-year old is only $211 for the standard option.  There are deductibles and co-pays, but annual out-of-pocket costs are capped at $5,950.  This may seem like a lot, but it is less than 20% of the 2009 average charge of $30,655 for a single hospital stay.

The federal government operates Florida’s plan and those of 22 other states.  Connecticut, on the other hand, is one of 27 states that choose to run their own programs.  In Connecticut, PCIP insurance costs $381 per month, but out-of-pocket costs are capped at $4,250 per year.  So its overall costs are similar to Florida’s.

Of an estimated 4 million people eligible for PCIP and 375,000 expected to sign up in the first year, only 30,395 bought policies.  Just 1,454 people enrolled in Florida, and only 62 enrolled in Connecticut.

Why so few?

The answer is obvious in states like Massachusetts, which has only one PCIP enrollee, and Vermont, which has none.  They have near universal coverage, so they don’t need PCIP.

What about states without universal coverage?  Pennsylvania had the highest first-year enrollment.  It had 3,762 people insured through PCIP.  If every state were like Pennsylvania, then PCIP would have around 100,000 enrollees today, still far below the expected number.

There are three explanations for why people aren’t enrolling in PCIP that speak to how little faith we have in insurance.

The first is that they believe that when there’s a crisis, hospitals and doctors will treat them whether or not they are insured.  Health care providers rarely turn their backs on people in need.

But someone still has to pay the bill.  And it usually gets paid through hidden charges in everyone else’s insurance premiums. 

The second is that people don’t think they can afford even $211 per month for health insurance, or up to $5,950 in medical bills in a year. 

But when the costs of common chronic diseases routinely run into six figures, the alternative can be bankrupting.

The third is that we don’t trust insurance.  Insurance companies take our money, fight with us about covering our bills, and make huge profits. 

But PCIP isn’t like that.  Unlike other insurance, it is designed to pay out far more money than it takes in.  PCIPs paid out four times in benefits what they charged in premiums during the first few months of the program, and Congress set aside $5 billion – of which only a fraction was spent – for this.

Here’s the bottom line.  If $211 a month is too much to pay for insurance we are sure we will use, then health insurance is dying in America.  Many of us say we will rely on our own resources, but also expect a government safety net to be there when our resources fall short.

If we roll the dice and don’t buy PCIP when we can, then we may lose more than we think.  There are political leaders who are already celebrating the demise of the CLASS Act.  Many also would happily repeal both PCIP and the Affordable Care Act, and replace them with… well, nothing.

For more information about federal and state PCIP, visit https://www.pcip.gov/.  If you have questions about this column or wish to receive an email notifying you when new Our Health Policy Matters columns are published, contact gionfriddopaul@gmail.com.

CLASS Warfare

Is the CLASS Act already dead and buried, a full year before it comes to life?

A couple of months ago, I wrote a column about the ill-advised, bi-partisan Congressional effort by the Senate “Gang of Six” to deep-six the CLASS Act. 

The CLASS Act is the new national privately-financed long term care insurance program authorized by Congress in 2010.  Without going into all the details again, it is intended to make long term care insurance care available to the working middle class.  This would take pressure off of the Medicaid program, resulting in billions of dollars of savings to taxpayers.

The CLASS Act won’t even take effect until October, 2012, and the Administration hasn’t even announced exactly how it would be structured.  But the Department of Health and Human Services may be closing down the CLASS office.  This past weekend’s news report from the Hill and other media outlets noted that it has let its actuary go and asked the Senate not to appropriate $120 million needed for the CLASS Act’s implementation.

That’s not “life support,” as one writer who is sympathetic to the Act suggested.  It’s a death rattle.

A program designed to cost the government next to nothing, provide benefits that people need, and save taxpayers significant dollars should be popular with elected officials.  However, that’s not the case here. 

According to the Hill, Senator Kent Conrad, a Democrat, has called the CLASS Act “a Ponzi scheme of the first order.”  Representative Phil Gingrey, a Republican, agrees with him.  Last March, according to Howard Gleckman in his Caring for Our Parents blog, Rep. Gingrey called the CLASS Act “a Bernie Madoff Ponzi scheme run by the Secretary of Health and Human Services.” 

On CNN almost two years ago – before the CLASS Act was even enacted – Senator Lindsey Graham called anyone who would vote for it a “co-conspirator to one of the biggest Ponzi schemes in the history of Washington.”  And Senator John Thune also characterized it in a 2009 Timearticle as “a classic definition of a Ponzi scheme.”

Aside from the hyperbolic tic that appears to compel all these members of Congress to refer to the CLASS Act in precisely the same way, and in the most demeaning manner possible, you get the bi-partisan picture.  They oppose it.

Their problem seems to be that it would collect premiums from a lot of people to pay for the care needs of a few.  What they call a “Ponzi scheme” is often referred to as “insurance.”

Other opponents have literally thrown the kitchen sink at the CLASS Act.  Heritage Foundation writers have made the simultaneous and contradictory arguments that too few and too many people will enroll, premiums will be too low and too high, benefits will be too small and too great, and the Trust Fund it establishes will be so big the Congress will raid it and so small that it will have to be subsidized.

The real problem seems to be that as it is currently designed, the program’s primary beneficiaries will be working members of our disappearing middle class. 

This is because most well-to-do aging Americans, like members of Congress, have personal wealth sufficient to help finance their long term care.  Long-term care insurance isn’t a necessity for people who have over $1 million in assets, because they can usually generate enough income from these assets to pay for their own long term care needs.

Or they can protect these assets by transferring them to their children, and qualify for Medicaid just like any other indigent person.    

Transferring assets to qualify for Medicaid is a common occurrence, but no one seems to know exactly how common.  In one analysis in New York, 7% of Medicaid applicants were denied because of a recent transfer of assets.  The percentage transferring assets successfully was likely much, much higher.

Maybe limiting the CLASS program to working people, or setting a $50 per day benefit level, or locking in an age-related premium aren’t the best approaches to setting up the program.  Perhaps its Trust Fund will prove too tempting for politicians who to raid for other purposes. 

But we need long term care insurance or our long term care system will collapse one day.  And the current private plans are far too scarce, and too few people are enrolled in them. 

So, instead of doing something about this, Congress will kill the one program it has passed that promised to make a difference – and, at the same time, help the middle class afford long term care.

That’s what CLASS warfare is all about. 

If you have questions about this column or would like to receive an email notifying you when new Our Health Policy Matters columns are published, please send an email to gionfriddopaul@gmail.com.

Deep Sixing the CLASS Act

The debt ceiling and deficit reduction command the attention of Congress this week.  Its members are trying to find trillions of dollars of cuts to balance the budget.

So why are some members of Congress trying to do something that is guaranteed to increase the already sky-high cost of the Medicaid program?  Do they want to drive us further into debt?

The Senate Gang of Six wants to deep six the CLASS Act before it takes effect.  The CLASS Act is the new national long term care insurance program that will take effect next year.  It will cost the federal government nothing and is projected to save the Medicaid program billions of dollars.

The Medicaid program, as most U.S. citizens now know, is a federal/state partnership resulting in different plans in every state.  In 2010, roughly 55 million people were insured through state Medicaid programs.  If they were all combined into one plan, Medicaid today would be the single largest health insurer in the nation. 

Of the 55 million people on Medicaid, half are children, and many more were working adults.  But they are not the most expensive people on the program.

The biggest costs in the Medicaid program are incurred on behalf of the five million elderly and nine million people with disabilities on Medicaid – the long term care populations.

Many members of Congress have put the Medicaid entitlement program at the top of their deficit reduction hit list. The federal government paid about $275 billion for Medicaid in 2010, and total state outlays approached $200 billion more.  That constitutes almost a half trillion dollars of health care spending. 

Almost half goes to long term care.  Medicaid typically becomes a long term care payer when an elderly person develops an age-related condition, like Alzheimer’s, which forces them to enter an institution for twenty-four hour care and exhaust their personal savings.  It also pays for younger people with mental retardation, or people with serious mental illness or other chronic diseases. 

The challenge for policymakers wanting to control Medicaid costs is, therefore, to control long term care spending for people with chronic conditions.  Cutting nursing home provider rates has long been a favored strategy, but this has never succeeded in reducing costs for any length of time. 

Policy makers have also explored managed care options.  These don’t work as well with people with chronic conditions as they do with a healthier population, because people with chronic conditions already have significant care needs.

So policy leaders are faced with only two choices. 

The first is for government to deny people care.  This is taking health care rationing to an extreme, choosing to leave older, sicker, and poorer Americans to fend for themselves while the government protects the interests of those who are better off.  This choice is inhumane and morally reprehensible to most people. 

The second is to devise a plan through which all people can pre-pay some of the cost of their long term care through private insurance before they get sick, reducing the government’s financial burden.

When Congress passed the CLASS Act in 2010, it chose the second way, the humane and rational way.    

It didn’t want to burden taxpayers, so it required the CLASS Act to be self-sufficient.  Premiums had to pay the full cost of benefits.  The premiums will only be affordable if younger, healthier people participate.  But if having to rely on Medicaid when they get sick is the alternative, then that may be the only reason people need to purchase a policy.

Earlier this year, the Congressional Budget Office projected that the CLASS Act will save the federal government $83 billion in its first ten years of implementation. That’s a lot of money.

This month, however, the Gang of Six joined an increasingly dissonant chorus wailing against common sense and humane, rational decision-making.  They don’t like the CLASS Act, so they want to get rid of it.  This won’t save anyone – ever – even a dime. 

The law may be flawed in its present form and need some revisions, but it’s the right idea.  Private long term care financing has to be part of our Medicaid long term care financing solution.

It is too soon to tell whether the CLASS Act will be deep-sixed as part of “deficit reduction,” gutted before it takes effect, left to languish unimplemented in 2012, or implemented as promised.

But there’s no way for our elected officials to argue that they care about deficit reduction if they jettison an $83 billion savings in Medicaid.

Unless, that is, they’re planning to choose the morally reprehensible option.

If you have questions about this column, or wish to be put on an email list notifying you when new Our Health Policy Matters columns are published, please contact gionfriddopaul@gmail.com.

A Long Term Care Win for Everyone

Why is it so important that Florida has won a $35.7 million health reform act grant to participate in the federal “Money Follows the Person” program?

A recent news story provides the answer.   It tells the story of a 20-something Florida resident who is a quadriplegic living in a nursing home.  He doesn’t want to live there.  But he doesn’t have a choice.  It’s the only option for which the Florida Medicaid program will pay. 

We hope he’ll be alive for many years.  A back-of-the-envelope calculation suggests that the cost of his care could approach $4 million by the time he is 65.

A December, 2009, AARP Long Term Care Brief showed that Florida spent 86% of its Medicaid long term care dollar on institution-based services.  It spent about half the national average on home and community-based services (HCBS).

The “Money Follows the Person” program offers a low cost remedy. 

Enacted in 2007, the program has already provided over $1.4 billion to 30 states.  It has helped over 30,000 people transition from nursing home care to lower-cost community-based care.    

The result is improved well-being, greater independence, and more productivity at lower cost.  Not just young people benefit; many older Americans with chronic conditions also prefer living at home.

Wildly popular, the program was re-authorized by the Affordable Care Act.  It was extended for several years and expanded to allow more states to participate.  By accepting the new federal grant, Florida will be one of them. 

In spite of the bluster that Florida would refuse to implement any of “Obamacare,” AHCA and the Governor saw the wisdom of pursuing this piece aggressively. 

Florida may have come late to this party, but better late than never. 

The cost of long term care is one of the biggest drivers of the increase in health care costs in our country.  A majority of our population has one or more chronic conditions.  These conditions are often diagnosed and monitored using expensive medical tests.  They are managed with costly pharmaceuticals.  People with them often need physical and occupational therapy and other supports.  Treatment costs may rise in the future, because genetic therapies are on the horizon.

In a recent issue brief on Medicaid and long term care, the Deloitte Center for Health Solutions noted that Medicaid expenditures are projected to increase by 7.5% per year, largely due to the increase in the numbers of elders and others with chronic conditions on the program.  Examining Florida and nine other states, Deloitte estimated that the percentage of state resources devoted to long term care could double over the next twenty years. 

Controlling long term care costs should be a priority for everyone.  However, this isn’t always the case.  The report noted with concern that states are cutting back on lower-cost community-based services covered by Medicaid, instead of increasing them.

That’s what makes the “Money Follows the Person” program so important.  It helps expand community-based services, at a time they are sorely needed.

Florida’s action also serves as a reminder that the Affordable Care Act isn’t one big government health care program.  It is a collection of smaller, independent initiatives that affect many different components of our health care delivery system.

Another provision of the Act – the creation of the CLASS Long Term Care Insurance program, effective in October, 2012 – is also aimed at changing the way we finance long term care in the future.  It will make more private long term care insurance available for home and community-based care.  My wife and I purchased long term care insurance policies several years ago, when we were in our early 50s and healthy.  Unfortunately, many others wait until it’s too late. 

The HHS National Clearinghouse for Long Term Care Information notes that over 70% of us will need long term care services at some point in our lives.   HHS Secretary Sebelius has pointed out that one in six people who reach the age of 65 will spend over $100,000 in their lifetime on long term care.  The total cost could be upwards of $5 trillion.  The government can’t pay all this.  Private long term care insurance will be needed.    

However, as the planning for the CLASS program is unfolding, people who develop serious chronic conditions before applying for long term care insurance may be out of luck.  To keep insurance costs affordable, HHS is considering limiting the program to higher wage-earning, healthier people at the start. 

That means Medicaid will remain the main long term care payer for the foreseeable future. 

The more it can do to help 20-somethings stay in the community and be productive, the better off we all will be.  This is a health care reform with which no elected official should disagree.