Private Financing of Long Term Services and Supports in Massachusetts

Christine E. Bishop

Schneider Institutes for Health Policy

Heller School for Social Policy and Management

Brandeis University

Long-Term Care Financing Advisory CommitteeJune 18, 2009

22

I. Introduction: Public interest in private financing for LTSS for seniors

II. Private resources for LTSS

III. Private service use

IV. Public Policy Options

33

I. LTSS for Seniors* a Private Responsibility

An individual responsibility First payer: individual income / wealth

A family concern Family care from spouse, daughters, sons

A Matter of Choice (like other consumption choices) Where and how to live, with whom Markets serve consumer choice (?)

State safety net for poor /impoverished seniors* with disability Low private resources trigger Medicaid If private family care, income/wealth become less adequate more

spending by public programs

*Note: Private resources also first payer for many younger persons with disability

44

But Private Financing is a Public Policy Concern

Consumer protection for private service purchasers Private financing capacity complements public

spending Private utilization may crowd out – or enhance

opportunities for -- public utilization Unmet need for middle-income consumers

Lack of access to “affordable” services? Market prices restrict private use hardship, poor

health outcomes

Do Private Markets Give Massachusetts Seniors Choice?

55

II. Private Capacity for LTSS

Informal support Income and wealth (including housing wealth) Long Term Care Insurance

66

Private Resources for LTSS Security

52% of elders at age 65 expected to need services for lost functional ability (including cognitive) for 1+ years (simulations, Kemper 2005)

Most will use informal care Availability of adult children, other relatives?

Paid care at home can fill need gaps

BUT 16% will have costs over $100,000 Extensive paid care at home Residential care

77

Need for LTSS Resources (Informal and Financial) Depends on Time in Need AND

Type of Services Used

Simulated Distribution of Years of LTSS Need at 65

Kemper (2005)

88

Most Community-Resident Elders with Disabilities Rely on Informal Care

0

200

400

600

800

1000

1200

1400

1600

1800

2000

IADL o

nly

1 ADL

2 ADLs

3 ADLs

4 ADLs

5 ADLs

Inst

itutio

n

Per

son

s (0

00)

Paid OnlyPaid & InformalInformal OnlyNo Assistance

Liu Manton Aragon (2000) 1994 NLTCS

99

80% of Community Elders’ 5.3 billion Care Hours were Unpaid (1994)

Liu Manton Aragon (2000) 1994 NLTCS

0

200

400

600

800

1000

1200

1400

1600

1800

IADLonly

1 ADL 2 ADLs 3 ADLs 4 ADLs 5 ADLs

Tota

l H

ou

rs (

Mil

lio

ns)

PaidInformal

930 million

760 million690 million

540 million

840 million

1,570 million

1010

For Massachusetts, estimated 690,000 persons involved in caregiving at any one time

At $11 per hour, estimated value of $8.8 billion annually

Will Informal Support Remain Available?

1111

Increased longevity for both men and women increases the proportion married at

advanced ages

56.5%53.4%

15.3%11.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1995 2000 2010 2030

Per

cen

tag

e 85

+ M

arri

ed

Men

Women

1212

The oldest old will have fewer adult children in 2030

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1895-18991985

1905-19091995

1915-19192005

1925-19292015

1935-19392025

Birth Years/Year Age 85-89

Me

an

Ch

ild

ren

Ev

er

Bo

rn

1313

Paid ServicesCapacity to Finance does Not Match Need

-- Older Elders Have Less

Had lower earnings during working life Have spent on health costs Triple jeopardy for widows:

Women had lower earnings and pension benefits Husband’s pension may not continue Spending on spouse last illness

1414

Distribution of LTSS SpendingSimulated for 65-year-old (2004)

Kemper (2005)

1515

Most Seniors 80+ Are Not Poor But Few Can Afford to Pay for Extensive LTSS out of Income

1616

Challenging to Find Data on Assets Available for LTSS Expenses

$118,500

$87,500

$73,200

$36,200

Mean Wealth Per Adult for Middle Quintile of Wealth Distribution Ages 55-64 in 2001/2004 (2004 Dollars)

Social Security

Pensions and Retirement Accounts

Home Equity

Financial and Other Assets

Total Wealth = $332,300

2001/2004 SCF, Mermin, Zedlewski &Toohey December 2008

1717

What’s Available for Rainy Day?(Social Security and DB Pension Part of Wealth But Spendable only as Income)

2001/2004 SCF, Mermin, Zedlewski &Toohey December 2008

1818

Uncovered Health Expenses Decrease Ability to Fund LTSS

Savings a couple aged 65 needs to fund future Medicare B & D and Medicare supplement premiums in retirement with increases expected under current law (EBRI: Fronstin 2006)

For average life expectancy: $154,000

$282,000 to age 90

1919

Health Spending Threatens Retirement Security:Health Spending as % of Median After-Tax Income for 65+

Johnson 2004

2020

Risk Pattern of LTSS Need Ideal for Insurance!

Kevin Beagan

2121

Costs Higher in Massachusetts Because LTSS Private Prices are Higher than

National

2222

Impact of Economic Downturn

Social Security income No COLA this year, although LTSS costs don’t stop rising

Pension benefits – may be at risk Financial wealth

Not a large portion of middle-income elders’ portfolio

Housing wealth Steady for those who LIVE in owned housing

Value falls but implicit “rent” also falls Decline in ability to finance residential alternatives using sale

of housing Independent living, Assisted living

2323

Housing Wealth

Housing values up 60% between 2000 and 2006 Value of rental services rises in tandem with

home value, so no net gain in theory

But 30% of households nearing retirement (50-64) extracted equity (Munnell & Soto 2008, Survey of Consumer Finance)

Bursting housing bubble thus leaves some households less able to finance LTSS

2424

Opportunity for Better Financial Planning

Seniors should prepare for LTSS needs

2525

III. What services do private payers use?

Private Revenue Stream Sustains Access, Good Quality Service for All Users (or not)

Providers Serving Public Clients – Services Accessible to Private Users (or not)

2626

Private Pay Rate of Nursing Home Use is Falling (less rapidly than Medicaid use….)

2727

Assisted Living

11,830 units listed in June 2009 Not all private pay

ElderChoice (MassHousing program for low-income persons with disabilities)

(Group Adult Foster Care: MassHealth) SSI-G

2828

LTSS in the Home =Home and Community Based Services

Home health Agency

Home care Agency Informal hiring

Home services: meals, housekeeping, shopping Changes in markets that allow older adults to remain in

community Adult day health, adult day care Coordination of care

Market innovations

Markets tend to be segmented—public only or private only (unlike nursing home)

2929

Market Segmentation

Some providers cannot segment their markets Paid “at the margin” for public services – need base

of private payment

Other providers segment private and public markets, supply to each depending on payment Quality, access likely differ

3030

IV. Public Policy to Bolster Private Financing for LTSS

3131

Remember Why Private Financing is a Public Policy Concern

Private service purchasers need consumer protection re: quality

Private financing capacity complements public spending Private utilization may crowd out – or enhance opportunities

for -- public utilization Unmet need for middle-income consumers

Lack of access to “affordable” services? Market prices restrict private use hardship, poor health outcomes

for those with resources < need

LTSS is a Middle-Income Issue

LTSS is a Women’s Issue

3232

Consumer information/ quality regulation Financial instruments to insure for LTSS Quality reporting and regulation on services to meet LTSS needs

Nursing Home Compare Home health care Day care Assisted living Care coordination

Public investment to avoid spenddown, address unmet need Support informal caregivers — workplace policy Support information, private planning for LTSS resource needs Share public infrastructure for coordination Training for LTSS workforce to enhance quality, supply

Access to public-oriented services? Sliding scale fees based on income?

Public Policy Options Relevant to Private Resources

3333

Risk Pattern of LTSS Need Ideal for Insurance!

Kevin Beagan

3434

National Options for Social Insurance for LTSS

Kevin Beagan