Report of the Governor's Private Sector Insurance Task Force on Long Term Care

              REPORT OF THE
GOERNOR'S PFUVATE SECTOR
NSURANE TASK FORCE ON
LONG TERM CARE
January, 1986
Printing of this Report was provided
by CIGNA HEALTHPLAN OF ARIZONA, INC.
Table of Contents
Paqe
VI .
VIP .
VIII .
A- 1
A- 2
Preface ..............................................
Members of Task Force ................................
Findings and Recommendations ........................
Overview of Report ...................................
FAiltnearnncaitnigv eLson gf orT ePrrmo Cvairdei n.g. .a.n.d. .......................
A. Public Funding .................................
Be Private Funding ...............................
1 . Insurance Mechanisms .......................... a . Medigap or Medicare Supplement Policies. .. b . Nursing Home Insurance .................... c . Income Replacement Insurance. ............. d . Life Insurance Products. ..................
e . Annuities .................................
f . Risk Pools. ...............................
2 . Delivery Systems ..............................
a . Health Maintenance Organizations (HMOs) ...
b . Social HMOs (S/HMOS) ......................
c . Preferred Provider Organizations (PPOs). ..
d . Life Care Communities .....................
3 . Financing Mechanisms ..........................
a . Home Equity Conversion ....................
b . Individual Retirement Accounts (IRAs). ....
c . Employee Benefit Plans (Pensions) .........
Marketing and Consumer Education .....................
Tax Incentives .......................................
State and Federal Activity ...........................
Definitions of Services ..............................
Review of State and Federal Activity .................
I. PREFACE
This r e p o r t p r e s e n t s the work of the Governor's P r i v a t e * Sector Insurance Task Force on Long Term Care. In March 1984.
Governor Bruce B a b b i t t appointed t h i s Task Force in d i r e c t
response t o recommendations contained in the "Long Term Care in
Arizonan r e p o r t prepared by the P r i t z l a f f Commission on Long Term
Care. In h i s charge t o the Task Force, Governor B a b b i t t asked
Task Force members t o "review t h e state of the insurance i n d u s t r y
with regard t o long term care financing and e v a l u a t e t h e
d e s i r a b i l i t y , f e a s i b i l i t y and b a r r i e r s t o the development of
p r i v a t e l y financed long term care products i n Arizona".
11. IWMBERS OF THE TASK FORCE
S. avid C h i l d e r s , Task Force Chairman and
D i r e c t o r , Arizona Department of Insurance
The Honorable Tony West, Arizona Senate, Chairman,
Senate Insurance, Retirement and Aging Committee
The Honorable Tony Gabaldon, Arizona Senate
The Honorable Carolyn Walker, Arizona House of
Representatives
The Honorable Nancy Wessel, Arizona House of
Representatives, Chairman of the House Human
Resources and Aging Comrni t t e e
J. E l l i o t t Hibbs, D i r e c t o r ,
Arizona Department of Revenue
Stanley Kleiner, Arizona Department of Health S e r v i c e s
Bert B. Wagener, P r e s i d e n t of CIGNA Healthplan
of Arizona, Inc.
Laurence M. Linkner MODo, Senior Vice P r e s i d e n t of
Medical A f f a i r s , Blue Cross/Blue Shield
of Arizona, Inc.
Arthur Ericson, Vice President and Associate Actuary,
The P r u d e n t i a l Insurance Company of America
Jo Ann G. Pedrick Ph.D., Executive D i r e c t o r ,
Governor's Advisory Council on Aging
Adam Diaz, Senior Consumer Advocate
Marie S c o t t i , C e r t i f i e d Safety and Health P r o f e s s i o n a l
Edward H. Hermanson, President and C.E.O.
U.S. Care Corporation
Ruth Becker-Schaller RN, FNP, Chairperson,
Developmentally Disabled Advisory Council
The Task Force met regularly from ~pril, 1985 to December,
1985. During these meetings, which were open to the public, the
Task Force focused on organizing and reviewing written materials
from a variety of sources. The Task Force received oral and
written testimony from Task Force members, insurance industry
representatives, and providers of long term care services.
During this time, Task Force members also divided into five
subcommittees, each of which individually worked to report on the
following issues:
1. The Subcommittee on Industry Concerns and Product
Development summarized the existing coverages, alternative
insuring mechanisms, and barriers to product development
which are present in the long term care marketplace. This
subcommittee was chaired by Bert Wagener and included Dr.
Laurence Linkner.
2. The Subcommittee on Regulation reviewed Arizona and
federal laws, and prepared a report on existing laws which
would affect product development and marketing. This
subcommittee was chaired by Stanley Kleiner.
3. The Subcommittee on Tax Incentives examined
potential effects of state tax incentives to encourage the
development and availability of long term care
insurance. This subcommittee, chaired by ~lliott Hibbs,
included Senator Tony West.
4. The Subcommittee on Public Perception and Education
reviewed the need for increased activity to educate the
public regarding long term care financing. This
subcommittee was chaired by Dr. Jo Ann Pedrick and
included Adam Diaz and Ruth Becker-Schaller.
5. The Subcommittee on Interstate Coordination
reviewed current state and federal activity on long term
care. This subcommittee was chaired by Marie Scotti and
included Representative Nancy Wessel and Arthur Ericson.
The Task Force acknowledges the assistance of the ~ational
Association of Insurance Commissioners (NAIC). In January, 1985,
the NAIC formed the Medicare Supplement, Long Term and Other
Limited Benefits Plans Task Force, which is also chaired by S.
David Childers. In turn, this Task Force is being assisted by a
national insurance industry advisory committee which is chaired
by Arthur Ericson of Prudential Insurance Company of America.
This advisory committee is currently preparing an extensive
report on private payment mechanisms which will be presented to
@ the NAIC Task Force in June, 1986. Portions of this report are
based on the work prepared by this insurance industry advisory
committee.
The Task Force expresses its appreciation to the Stanford
Research Institute (SRI) . Materials developed by SRI in
preparation for a conference and report on long term care were
adapted and used by the members of the Task Force to examine the
presence or absence of regulatory barriers,
Finally, the Task Force recognizes the contribution of the
1984 Pritzlaff Report on Long Term Care which was completed for
the Governor and Legislature. One of the major Pritzlaff
Commission recommendations called for expanded private payment
options and the Report's findings are carried forward to the
Overview Section of the report.
III. FINDINGS AND RECOMMENDATIONS
Regulation
1. The Task Force found that growth of the elderly
population, combined with health care trends and demographic
changes, is already beginning to strain public and private @ resources available for long term health care. The public sector
and individuals have reached financial limits, and private
alternative financing options must be developed. Emphasis should
not be placed on developing a single financing method as the only
alternative, but rather on developing a wide range of
alternatives which can be selected and adapted to meet
inidividual needs and capabilities. Thus, the Task Force
identified alternatives for providing and financing long term
care, including insurance and noninsurance mechanisms, which are
currently available in Arizona or which could be developed. Each
alternative was then reviewed for regulatory barriers or
limitations which might inhibit or prevent development in
Arizona. With several minor exceptions, there were no regulatory
barriers identified. Therefore, the Task Force finds that no new
legislation or revisions to existinq laws or requlations are
necessary at this time. However, the Task Force also recommends
the Arizona Department of Insurance continue to maintain an
extremely flexible regulatory approach to lonq term care
insurance policies, and work with insurers wherever necessary to
allow the development and marketing of innovative policies in
Ar izona.
Product Development
2. P o t e n t i a l i n s u r e r s o f long term c a r e s e r v i c e s r e p o r t t h a t
a c t u a r i a l e s t i m a t e s of l o s s e s and a p p r o p r i a t e premium l e v e l s for
long term care p o l i c i e s a r e d i f f i c u l t t o e s t a b l i s h . Minimal d a t a
is a v a i l a b l e on c o s t s and u t i l i z a t i o n of long term c a r e insurance
and very l i t t l e of t h e d a t a r e f l e c t s a c t u a l experience. However,
the Task Force also recognizes t h a t information and s t a t i s t i c s
a v a i l a b l e from the Arizona Departments of Insurance, Health
Services and Economic S e c u r i t y r e g a r d i n g n u r s i n g home
u t i l i z a t i o n , home and community-based care, etc., could be used
by p r i v a t e i n s u r e r s t o develop a c t u a r i a l data. The Task Force
recommends t h e s e state a q e n c i e s c o o p e r a t e w i t h p r i v a t e i n s u r e r s
a s necessary t o aid i n the development of a c t u a r i a l models and
c o m p i l i a t i o n of other v i t a l s t a t i s t i c s .
3. There has been a r e c e n t i n c r e a s e i n the number o f n u r s i n g
home indemnity p o l i c i e s a v a i l a b l e in Arizona. However, t h e r e has
been l i t t l e develo~ment of i n s u r a n c e p r o d u c t s which would provide
coverage for home and communi ty-based care. The ask Force
recommends the Arizona Department of Insurance develop "model"
o l i c y language t o provide coverage f o r home care and community-zased
care, and d i s t r i b u t e t h i s "model" language t o major h e a l t h
i n s u r e r s with a sugqestion t h i s coveraqe be considered in product
development.
4. A number of states have developed r i s k pooling h e a l t h
insurance plans t o provide coverage of s i t u a t i o n s not covered by
t r a d i t i o n a l h e a l t h insurance programs. R i s k pools t y p i c a l l y
o f f e r h e a l t h insurance coverage at a reasonable c o s t t o persons
who a r e a c t u a r i a l l y uninsurable by v i r t u e of a high r i s k medical
condition. It is f e a s i b l e , however, t h a t s i m i l a r pooling
arrancrements could be e s t a b l i s h e d t o fund long term care needs.
The f a s k Force recommends the Arizona ~ e p aCrm ent of Insurance
a s s e s s the need for and the f e a s i b i l i t y of developing a lonq term
care r i s k pool f o r Arizona. This r e p o r t should include a
complete assessment o f the p o t e n t i a l c o s t s t o consumers,
i n s u r e r s , and the s t a t e i f a pooling arranqement is e s t a b l i s h e d .
I f a pooling arrangement is considered a v i a b l e a l t e r n a t i v e , the
Department of Insurance should then prepare a report and
recommendations, includinq recommendations for b e n e f i t l e v e l s ;
funding o f p o o l , i n c l u d i n q adequate premiums; a d m i n i s t r a t i o n of
the pool; and the a n t i c i p a t e d c o s t s t o the s t a t e , i f any. This
r e p o r t and recommendations. should be submitted t o t h e Governor's
Office by October 31, 1986.
5. Health maintenance o r g a n i z a t i o n s (HMOs) provide prepaid,
c a p i t a t e d medical c a r e t o e n r o l l e e s and guarantee t h e d e l i v e r y of
a fixed set of b e n e f i t s . Recent f e d e r a l l e g i s l a t i o n , a s w e l l as
a d e s i r e t o expand t h e i r marketshare by o f f e r i n g increased
b e n e f i t s , have encouraged HMOs t o e n r o l l more e l d e r l y members and
explore t h e p o s s i b i l i t y of adding long term care b e n e f i t s . The
Task Force recommends t h a t h e a l t h maintenance o r g a n i z a t i o n s be @ encouraged to explore a l t e r n a t i v e long term c a r e d e l i v e r y
systems, and t h a t t h e Arizona Department o f I n s u r a n c e work
c l o s e l y with t h e s e p l a n s to d e v e l o p i n n o v a t i v e programs.
State Administration
6. R e s p o n s i b i l i t i e s f o r long term care d e l i v e r y systems and
f i n a n c i n g mechanisms a r e divided among s e v e r a l s t a t e a g e n c i e s ,
i n c l u d i n g t h e Department of Economic S e c u r i t y , H e a l t h S e r v i c e s ,
Insurance, and t h e Governor's Councils on Aging and
Developmentally Disabled. S e v e r a l o f t h e s e a g e n c i e s c o n t r o l a
combination of s t a t e funds and f e d e r a l monies, w h i l e o t h e r s
provide consumer education and a s s i s t a n c e . However, t h e r e is no
o v e r a l l p o i n t o f c o n t r o l and c o o r d i n a t i o n f o r long term c a r e , a s
t h e r e is c u r r e n t l y no formal mechanism through which s t a t e
agencies can i d e n t i f y common problems and p o t e n t i a l s o l u t i o n s , a s
lvernor appoint an interagency t a s k f o r c e ,
comprlsed of r e p r e s e n t a t i v e s from t h e aforementioned state
agencies and o t h e r aqencies or departments a s a p p r o p r i a t e . The
Task Force f u r t h e r recommends t h e Governor d e s i q n a t e a s i n g l e
aqency t o lead t h i s t a s k f o r c e , and to appoint t h i s same agency
t o be t h e lead aqency f o r a l l long term care i s s u e s .
Taxat ion
7. S t a t e t a x laws do not impede t h e development of long term
care insurance. There is every i n d i c a t i o n t h e demands of t h e
marketplace w i l l r e s u l t i n long term care insurance being more
r e a d i l y a v a i l a b l e in t h e f u t u r e without t h e n e c e s s i t y of
providing t a x i n c e n t i v e s . The c o s t of such insurance or t h e
a b i l i t y to purchase insurance, however, could be made marginally
more a t t r a c t i v e i f a s t a t e t a x deduction f o r such a purchase
e x i s t e d . Tax i n c e n t i v e s could a l s o a i d p u b l i c education about
t h e r i s k s of needing long term care by drawing a t t e n t i o n through
an i t e m on the t a x r e t u r n . However, t h e s e advantages must be
weighed a g a i n s t t h e d i s a d v a n t a g e s o f s t a t e t a x i n c e n t i v e s , such
as: e r o s i o n of t h e t a x base; s t a t e i n c e n t i v e s without p a r a l l e l
f e d e r a l i n c e n t i v e s would l i k e l y be somewhat i n e f f e c t i v e ; and
i n c e n t i v e s can lead to s t i f l i n g of a l t e r n a t i v e s being developed
t h a t may not have r e l a t e d t a x b e n e f i t s . It is t h e recommendation
of t h e Task Force t h a t s t a t e t a x i n c e n t i v e s n o t be adopted a t
t h i s t i m e , b u t g i v e n f u t u r e c o n s i d e r a t i o n a f t e r r e c e n t p r i v a t e
i n d u s t r y e f f o r t s to produce and m a r k e t lonq term c a r e insurance
p r o d u c t s can be evaluated.
Consumer Education
8. The N a t i o n a l A s s o c i a t i o n o f Insurance Commissioners (NAIC)
is c u r r e n t l y preparing an e x t e n s i v e r e p o r t on long term c a r e
private payment mechanisms which will be available in June
1986. In conjunction with this report, a consumer guide is being
designed which will answer, in easy to read language, the most
commonly asked questions about long term care products. Upon
completion, the guide will be distributed to all state insurance
departments. he Task force recommends that when available, the
Department of Insurance obtain and adapt this quide for long term
care consumers in Arizona. This quide should then be distributed
by the Department of Insurance to other state aqencies involved
in lonq term care services, area agencies on the aqinq and other
arties as requested. This quide should provide information
:egardinq the limitations of Medicare and ~edicare Supplement
insurance in f inancing lonq term care; the increasing
availability of nursing home insurance; other financinq options
which may be available to the consumer, such as home equity
conversion, and the use of health maintenance organizations to
provide acute and lonq term care services to the elderly.
9, A uniform and coordinated method of providing information
and education about long term care services and costs to the
elderly, their families and advisors is needed in Arizona. One
method for disseminating information is through the use of a
volunteer peer counseling service. The Task ~orce recommends the
Arizona Departments of Insurance, Health Services, and Economic
Services develop and implement a statewide counseling service,
utilizing volunteers from the Retired Senior Volunteer Proqrams
(RSVP) . In addition to information about long term care
financing, senior counselors should be trained to supply
information about the different modes of long term care services,
especially community alternatives to institutionalization.
10. The Task Force has compiled within this report a listing
of alternatives for providing and financing long term care,
including insurance and non-insurance mechanisms. Each option is
described along with discussion of the application or potential
use of each and the limitations to use of the option. The Task
Force also has assessed the relative usefulness of each product
as a guide for both present and future application. The Task
Force recommends this section of the report be adapted and
printed by the Department of Insurance, and distributed to
potential consumers and other interested parties. The Department
of Insurance should utilize other state aqencies and various
organizations, as well as printed and televised media, to promote
this educational effort.
IV. OVERVIEW
Long term care is the prolonged day to day assistance
required by individuals who have become dependent on others as a
result of some physical or mental disorder causing functional
limitations or disabilities. The prolonged assistance -- while
always r e q u i r i n g the s e r v i c e s of o t h e r s -- may vary i n degree
from simple, non-medical support t o i n t e n s e , continuous
monitoring and s e r v i c e s . Those most l i k e l y t o need long term
care a s s i s t a n c e a r e the older e l d e r l y , chronic mentally ill,
developmentally d i s a b l e d and s e v e r e l y p h y s i c a l l y d i s a b l e d ,
Although the e l d e r l y r e p r e s e n t the majority of those who a r e most
l i k e l y t o need long term c a r e , people of any age can have mental
and p h y s i c a l impairments t h a t cause dependency r e q u i r i n g the
a s s i s t a n c e of o t h e r s .
The e l d e r l y -- or those people age s i x t y - f i v e or over --
a r e t h e f a s t e s t growing segment of t h e U. S. population. In
1960, persons over s i x t y - f i v e represented nine per cent of the
United S t a t e s population. That p e r c e n t a g e o f e l d e r l y increased
t o eleven per cent i n 1980 and is expected to i n c r e a s e t o twelve
per c e n t by the year 2000 and twenty per c e n t by 2020. Within
t h i s e l d e r l y category, the number of very old (defined a s those
aged eighty-f ive or o l d e r ) have experienced the g r e a t e s t
percentage g a i n . By the end of t h i s century, only f i f t e e n years
from now, t h i s very old group w i l l number 5.1 m i l l i o n , about two
per cent of a l l Americans. S i m i l a r b u t more extrememe p a t t e r n s
of growth a r e projected for Arizona where those over s i x t y - f i v e
w i l l r e p r e s e n t f i f t e e n per c e n t of the s t a t e ' s population by the
year 2000. I n a b s o l u t e numbers, t h i s means a doubling in the
numbers of Arizona e l d e r l y from approximately 385,000 in 1985 t o
projected 775,000 i n 2000.
In Arizona t h e r e a r e approximately 65,000 e l d e r l y and
another 63,000 d i s a b l e d r e s i d e n t s who now r e q u i r e some t y p e o f
long term c a r e a s s i s t a n c e . The following s e c t i o n , " F i n a n c i a l
A l t e r n a t i v e s " , c o n t a i n s a d e t a i l e d d i s c u s s i o n of the financing
options a v a i l a b l e t o t h e s e r e s i d e n t s . Conservative estimates
p r e d i c t the t o t a l number w i l l grow t o 225,000 by the year 2000.
This number includes over 125,000 e l d e r l y r e s i d e n t s , most of whom
w i l l be in t h e i r s e v e n t i e s and e i g h t i e s and approximately 100,000
developmentally d i s a b l e d , chronic mentally ill, and s e v e r e l y
p h y s i c a l l y disabled r e s i d e n t s .
There is a v a s t a r r a y of medical and support s e r v i c e s
required by i n d i v i d u a l s who r e q u i r e long term care. These
s e r v i c e s can be provided in a v a r i e t y of s e t t i n g s , ranging from
the i n d i v i d u a l ' s home t o a h o s p i t a l or nursing home, and ranging
in non-medical a c t i v i t i e s from meal p r e p a r a t i o n and household
chores t o medical c a r e i n s k i l l e d nursing f a c i l i t i e s ,
Between e i g h t y and n i n e t y per cent of a l l long term care
needs a r e i n t h e form of n o n i n s t i t u t i o n a l s o c i a l / supportive /
personal c a r e a s s i s t a n c e , Only ten t o twenty per c e n t r e q u i r e
more i n t e n s i v e medically r e l a t e d c a r e . F u r t h e r , of t h i s t o t a l
a s s i s t a n c e , approximately two-thirds is provided w i t h o u t c h a r g e
by informal c a r e g i v e r s , u s u a l l y family members. The remaining
t h i r d is provided formally, f o r a charge, by a v a r i e t y of
agencies and i n s t i t u t i o n s .
The formally provided s e r v i c e s r e q u i r e reimbursement by
e i t h e r p r i v a t e or p u b l i c means. Much of t h e formal c a r e is pro-vided
t o i n d i v i d u a l s i n home and community s e t t i n g s who a r e a l s o
c o n c u r r e n t l y r e c e i v i n g informal a s s i s t a n c e . Generally, t h e s e
d u a l sources of formal and informal a s s i s t a n c e tend t o comple-ment,
r a t h e r than overlap. Examples of such formal c a r e include
home h e a l t h n u r s i n g , homemakers, a d u l t day care and home h e a l t h
a i d e s .
The remaining p o r t i o n o f formal care is f o r those
i n d i v i d u a l s who r e q u i r e a l t e r n a t i v e r e s i d e n t i a l l i v i n g or i n s t i -
t u t i o n a l nursing f a c i l i t i e s . P l e a s e r e f e r to Appendix A-1 of
t h i s r e p o r t for a list of d e f i n i t i o n s of t h e s e s e r v i c e s , a s
defined by t h e P r i t z l a f f Commission. This group comprises
approximately t w e n t y - f i v e per c e n t of t h e e l d e r l y needing formal
long term care and uses about e i g h t y per c e n t of t h e funds s p e n t
( p u b l i c and p r i v a t e ) f o r formal l o n g term care. Conversely, t h i s
means t h a t t h e o t h e r seventy-five per c e n t r e c e i v i n g formal long
term c a r e a s s i s t a n c e a r e using j u s t twenty per c e n t of t o t a l
formal payments. Long term care e x p e n d i t u r e s for formal
a s s i s t a n c e a r e h e a v i l y weighted toward i n s t i t u t i o n a l c a r e :
Home/Community Based Care $l,OOO/person/year
A l t e r n a t i v e R e s i d e n t i a l Care $5 , 000/person/year
Nursing Home Care $15,000/person/year
@ In 1983, j u s t over $200 m i l l i o n was spent f o r organized long term care s e r v i c e s i n Arizona. Half of t h i s amount was paid
through p r i v a t e funds and t h e o t h e r h a l f was paid by f e d e r a l ,
s t a t e and county governments. Less than two per c e n t of t h e
p r i v a t e payments f o r long term care were from commercial
i n s u r e r s . This is i n sharp c o n t r a s t to t h e c o s t of a c u t e care,
of which f o r t y - s e v e n p e r c e n t of t h e total cost is paid from
p r i v a t e s o u r c e s , but seventy-one per c e n t of t h e p r i v a t e s h a r e is
covered by insurance. F u r t h e r , with t h e major r e s p o n s i b i l i t y f o r
p r i v a t e payment placed d i r e c t l y on i n d i v i d u a l s , many people
become impoverished and dependent on p u b l i c a s s i s t a n c e .
The growth of t h e e l d e r l y p o p u l a t i o n , combined with
h e a l t h care t r e n d s and demographic changes in family support
s t r u c t u r e s , is a l r e a d y beginning t o s t r a i n t h e r e s o u r c e s
a v a i l a b l e for long term h e a l t h c a r e . The p u b l i c sector w i l l be
i n c r e a s i n g l y unable to meet t h e f i n a n c i a l burden o f long term
c a r e . Concurrently, many i n d i v i d u a l s in need of c a r e and t h e i r
f a m i l i e s w i l l be hard-pressed t o continue paying f o r t h e i r long
term c a r e needs s o l e l y from t h e i r own pockets. Both t h e p u b l i c
and p r i v a t e s e c t o r have reached t h e i r f i n a n c i a l l i m i t s and must
be balanced through p r i v a t e a l t e r n a t i v e f i n a n c i n g o p t i o n s * Thus,
although t h e Task Force focused its e f f o r t s on t h e development of a p r i v a t e f i n a n c i n g o p t i o n s , t h e need to develop and implement
i n t e g r a t e d p u b l i c and p r i v a t e financing systems is recognized.
The emphasis should not be placed on developing one financing @ method a s t h e only a l t e r n a t i v e , but r a t h e r on developing a wide
range of a l t e r n a t i v e s from which knowledgeable i n d i v i d u a l s can
select t h e o p t i o n s they consider most f e a s i b l e for t h e i r needs.
Given the c o n s i d e r a t i o n s mentioned above, t h e Task Force
has compiled i n its r e p o r t a list of a l t e r n a t i v e s f o r providing
and financing long term c a r e , i n c l u d i n g i n s u r a n c e and non-insurance
mechanisms, which are c u r r e n t l y a v a i l a b l e i n Arizona or
which could be developed. Each option is described a l o n g w i t h a
d i s c u s s i o n of the a p p l i c a t i o n or p o t e n t i a l use of each and the
l i m i t a t i o n s or b a r r i e r s t o the product. The Task Force a l s o has
assessed t h e r e l a t i v e u s e f u l n e s s of each product a s a guide for
both p r e s e n t and f u t u r e a p p l i c a t i o n .
The r e p o r t n e x t p r o v i d e s a d i s c u s s i o n of s t a t e tax
i n c e n t i v e s which might be a t o o l for encouraging i n s u r e r s t o
develop and i n d i v i d u a l s t o purchase, long term care insurance.
P u b l i c education, which has been i d e n t i f i e d by i n s u r e r s as one of
t h e b i g g e s t b a r r i e r s t o marketing of a long term c a r e product, is
a l s o discussed. A d d i t i o n a l l y , a b r i e f review of o t h e r ' states'
a c t i v i t y in t h e a r e a of long term c a r e is provided.
V. AL!PERNATIVES FOR PROVIDING AND FINANCING LONG TERM CARE
This s e c t i o n addresses p r i v a t e financing o p t i o n s for
long term care. Before proceeding, however, it is h e l p f u l t o
underscore the c l o s e i n t e r e l a t i o n s h i p between p u b l i c and p r i v a t e
funding. Many b e l i e v e t h e a v a i l a b i l i t y of p u b l i c a s s i s t a n c e f o r
long term c a r e has restricted consumer i n t e r e s t and commercial
development of p r i v a t e funding mechanisms. A t the same t i m e ,
p u b l i c a s s i s t a n c e has been a v i t a l s a f e t y n e t for those who a r e
impoverished or those who use a l l t h e i r p r i v a t e funds t o pay for
long term care a s s i s t a n c e , become impoverished and then seek
p u b l i c aid.
Public Fundinq
According t o the P r i t z l a f f Commission, $200 m i l l i o n is
c u r r e n t l y spent for organized long term c a r e s e r v i c e s in
Arizona. Half of t h i s amount is paid by i n d i v i d u a l s p r i v a t e l y
and the o t h e r h a l f is paid by p u b l i c agencies. N a t i o n a l l y , over
e i g h t y per cent of p u b l i c funds for long term c a r e a r e from one
source -- Medicaid. This is a shared f e d e r a l / s t a t e program for
i n d i g e n t s in which each state determines program parameters
r e l a t e d t o both a c u t e and long term c a r e . ~ e d i c a i d s e r v e s two
very d i f f e r e n t populations: young f a m i l i e s and t h e e l d e r l y . On
the average, the e l d e r l y r e p r e s e n t about twenty-f ive per cent of
a l l Medicaid r e c i p i e n t s and account f o r seventy per cent of a l l
Medicaid e x p e n d i t u r e s , due t o t h e i r u s e o f long term c a r e
s e r v i c e s . With l i m i t e d exception, Medicaid pays for nursing home
c a r e and does not pay for the non-medical home or community based
care. In Arizona, which has no Medicaid funding for long term
c a r e , county governments have l e g a l r e s p o n s i b i l i t y t o pay for the
e l d e r l y indigent in nursing homes. In 1982-1983, c o u n t i e s s p e n t
$40 m i l l i o n on 4,000 i n d i g e n t p a t i e n t s and by 1985, t h i s amount
was projected t o be $58 m i l l i o n .
Some a d d i t i o n a l p u b l i c funds are a v a i l a b l e for home and
community based care. There a r e t w o f e d e r a l s o u r c e s , T i t l e I11
(Older Americans A c t ) and T i t l e XX ( S o c i a l Services Block
G r a n t s ) . These funds are administered in c o n j u n c t i o n w i t h some
s t a t e funds through the Arizona Department of Economic
S e c u r i t y . Although l i m i t e d t o approximately $13 m i l l i o n in 1985,
these funds are critical f o r t h e support of programs t h a t provide
home a s s i s t a n c e , medical case management and a d u l t day care.
There is a widely held misbelief t h a t ~ e d i c a r e is a l s o a
p u b l i c resource f o r long term care. Medicare p r i m a r i l y provides
s h o r t term physician, h o s p i t a l and r e h a b i l i t a t i v e care f o r acute
d i s o r d e r s , not long term care. S k i l l e d nursing home b e n e f i t s
from Medicare cover a maximum of one' hundred days. The f i r s t
twenty days are covered in f u l l ; however, the remaining e i g h t y
days r e q u i r e a d a i l y copayment equal t o one-eighth of the
h o s p i t a l d e d u c t i b l e . In 1985, the copayment was $50 per day and
i n 1986, t h i s copayment was increased t o $61.50 per day. To be
@ e l i g i b l e for nursing home b e n e f i t s , t h e Medicare p a t i e n t must be
h o s p i t a l i z e d for a t l e a s t t h r e e days for the same i l l n e s s or
i n j u r y , and be t r a n s f e r r e d by a p h y s i c i a n ' s order t o a s k i l l e d
nursing f a c i l i t y (SNF) within t h i r t y days of the h o s p i t a l
discharge. The p a t i e n t must need and be r e c e i v i n g d a i l y s k i l l e d
nursing care or r e h a b i l i t a t i o n therapy.
U t i l i z a t i o n of Medicare SNF b e n e f i t s is low because the
e l i b i g i l i t y c r i t e r i a is r e s t r i c t i v e and only a p o r t i o n of a l l
nursing home beds a r e c e r t i f i e d for Medicare p a t i e n t s . For the
average Medicare p a t i e n t , only seventeen SNF days per year a r e
used,
Medicare home h e a l t h b e n e f i t s a r e a l s o r e s t r i c t e d . To
be e l i g i b l e f o r t h e s e b e n e f i t s , a p a t i e n t must be housebound and
in need of s k i l l e d nursing, p h y s i c a l therapy or speech therapy a s
documented by a p h y s i c i a n . Homemaker s e r v i c e s can be covered if
they a r e i n c i d e n t a l t o personal c a r e and do not s u b s t a n t i a l l y
increase the t i m e required of a home h e a l t h aide. u t i l i z a t i o n of
home h e a l t h s e r v i c e s is low, p r o v i d i n g o n l y twenty-three v i s i t s
per year for the average Medicare p a t i e n t . Nevertheless, u n l i k e
its l i m i t e d r o l e f o r nursing home payments, Medicare is a major
t h i r d p a r t y source of payment for home h e a l t h c a r e s e r v i c e s .
a In summary, Medicare covers e l d e r l y i n d i v i d u a l s f o r a major p o r t i o n of t h e i r a c u t e medical care provided by physicians
and h o s p i t a l s . Some s k i l l e d nursing home and home h e a l t h
s e r v i c e s a r e provided, b u t o n l y f o r very l i m i t e d p e r i o d s
@ following an a c u t e c a r e h o s p i t a l i z a t i o n . N e v e r t h e l e s s , many people continue t o t h i n k Medicare is a major source for long term
c a r e reimbursement. The myth of adequate l o n g term coverage is
a l s o supported by t h e myriad of Medicare supplemental p o l i c i e s
owned by s i x t y per c e n t of a l l Medicare covered i n d i v i d u a l s .
These supplemental p o l i c i e s w i l l be d i s c u s s e d in d e t a i l in t h e
next s e c t i o n of t h i s Report.
B. Private Fundinq
P r i v a t e payments f o r long term care comprise h a l f of a l l
reimbursements f o r formal care. Approximately n i n e t y per c e n t of
a l l p r i v a t e payments are made d i r e c t l y by i n d i v i d u a l s a s an out-of-
pocket expense and a r e not reimbursed by i n s u r e r s . P r i v a t e
insurance f o r long term care has been very limited. E x i s t i n g
p o l i c i e s have covered nursing home care, t h e most expensive
method of formal care. The less expensive formal s e r v i c e s t h a t
a r e s o c i a l and s u p p o r t i v e a r e not g e n e r a l l y included in p r i v a t e
i n s u r a n c e o p t i o n s .
There a r e many reasons f o r t h e underdeveloped p r i v a t e
insurance market. Insurance i n d u s t r y r e p r e s e n t a t i v e s p o i n t t o
concerns of adverse s e l e c t i o n , insurance induced demand, p r i c i n g
d i f f i c u l t i e s and lack of consumer understanding a s b a r r i e r s to
product development. Some i n s u r e r s have expressed f e a r t h a t t h e
@ open-ended l i a b i l i t y which could r e s u l t from long term c a r e
p o l i c i e s would be f i n a n c i a l l y devasting to t h e i r companies.
Perhaps more importantly, t r a d i t i o n a l t h i n k i n g w i t h i n the h e a l t h
insurance f i e l d is t h a t non-medical, p e r s o n a l s e r v i c e s such a s
homemaker c a r e and r e s p i t e c a r e a r e not i n s u r a b l e . In many
i n s t a n c e s , p a t i e n t s p r o g r e s s from -the need for h i g h l y s k i l l e d
medical s e r v i c e s to lower l e v e l s of c u s t o d i a l care a s t h e aging
process continues. As a r e s u l t , t a r g e t i n g coverage on t h e b a s i s
of l e v e l of c a r e is thought to be a r b i t r a r y and open to c h a l l e n g e
from t h e insured and t h e provider of t h e s e r v i c e s .
I n s u r e r s a l s o f i n d t h a t a c t u a r i a l e s t i m a t e s of f u t u r e
l o s s e s and premium l e v e l d e t e r m i n a t i o n for long term c a r e
p o l i c i e s a r e d i f f i c u l t to make. Minimal d a t a is a v a i l a b l e on
costs and u t i l i z a t i o n of long term care insurance and very l i t t l e
of t h e d a t a r e f l e c t s a c t u a l experience. It may be t h a t only high
r i s k i n d i v i d u a l s w i l l be a t t r a c t e d t o long term care insurance.
A t p r e s e n t , however, there is no r e l i a b l e a c t u a r i a l model
a p p l i c a b l e t o a long term c a r e p o l i c y which would d i f f e r e n t i a t e
t h e high r i s k purchaser from t h e l o w r i s k purchaser and allow f o r
a v a r i a b l e r a t e s c a l e .
Consumers ' c a p a c i t y to f i n a n c e long term c a r e insurance
may be another b a r r i e r to product development. The need for long
term c a r e t y p i c a l l y occurs a t a t i m e when t h e p a t i e n t ' s income
l e v e l is fixed or d e c l i n i n g . Because Medigap p o l i c i e s dominate
the p r i v a t e h e a l t h insurance market for t h e e l d e r l y , t h e r e may be
@ only l i m i t e d amounts of money a v a i l a b l e f o r other insurance
products such a s long term c a r e insurance.
However, economic c o n d i t i o n s of the e l d e r l y continue t o
improve. The e l d e r l y today en joy more d i s c r e t i o n a r y income than
the e l d e r l y in t h e p a s t , making them b e t t e r a b l e to a f f o r d
insurance. S i g n i f i c a n t l y , a r e c e n t r e p o r t prepared f o r t h e
United S t a t e s Department of Health and Human S e r v i c e s i n d i c a t e d
long term c a r e insurance premiums would r e p r e s e n t less than ten
per cent of the cash income of e i g h t y per cent of those
i n d i v i d u a l s i n t h e s i x t y - f i v e t o sixty-nine age group. This
r e p o r t a l s o estimates t h a t by the year 2005, n i n e t y per c e n t of
a l l married couples a t age s i x t y - f i v e and almost s i x t y per c e n t
of a l l s i n g l e persons a t t h a t age, would be a b l e t o purchase long
term care i n s u r a n c e w i t h less than f i v e per c e n t of t h e i r cash
income.
F i n a l l y , marketing and d i s t r i b u t i o n mechanisms f o r long
term care insurance products are l a r g e l y undeveloped. A t t h i s
time, most long term care financing products are sold on an
i n d i v i d u a l b a s i s . Current commissions on i n d i v i d u a l long term
care i n s u r a n c e p r o d u c t s are f r e q u e n t l y as high a s f i f t y per cent
of the i n i t i a l y e a r ' s premium, plus an a d d i t i o n a l f i f t e e n t o
twenty per cent commission f o r each subsequent year of renewal.
@ This r e l a t i v e l y s u b s t a n t i a l marketing c o s t l e a v e s less funds
a v a i l a b l e f o r the payment of a c t u a l b e n e f i t s .
Some n a t i o n a l groups of the e l d e r l y , such as t h e
American A s s o c i a t i o n o f Retired Persons (AARP) and the National
Retired Teachers -Association (NRTA) , o f f e r some p o t e n t i a l group
marketing e f f i c i e n c i e s . However, these advantages may be o f f s e t
by the problems o f d e s i g n i n g a n a t i o n a l long term care insurance
p o l i c y with a uniform premium t h a t a l s o meets t h e i n d i v i d u a l
s k i l l e d nursing and c u s t o d i a l care d e f i n i t i o n s of each s t a t e .
Greater uniformity in b e n e f i t d e f i n i t i o n s may e v e n t u a l l y over-come
such b a r r i e r s . A l t e r n a t e l y , t h e e s t a b l i s h m e n t of statewide
a s s o c i a t i o n s o r o t h e r groups o f the e l d e r l y might provide an
e f f e c t i v e marketing umbrella without the need t o s t a n d a r d i z e
d e f i n i t i o n s .
The foliowing s e c t i o n s d e s c r i b e a v a r i e t y o f i n s u r a n c e
and non-insurance o p t i o n s which may be a v a i l a b l e f o r t h e pr i v a t e
financing of long term c a r e s e r v i c e s . There is, in the opinion
of the Task Force, no s i n g l e option t h a t w i l l meet the needs of
a l l people. Rather, the o p t i o n s a r e choices ranging from
insurance p o l i c i e s covering s p e c i f i e d s e r v i c e s t o general funds
t h a t can be used a t the d i s c r e t i o n of the p r i v a t e i n d i v i d u a l f o r
whatever type of s e r v i c e s a r e needed, including non-medical
a s s i s t a n c e .
1. Insurance Mechanisms
a. Medigap or Medicare Supplement P o l i c i e s
P r e s e n t l y , most p r i v a t e insurance simply f i l l s the
gaps i n Medicare nursing home coverage. "Medigap"
p o l i c i e s are purchased by approximately f i f t y - n i n e per
c e n t of the s i x t y - f i v e and over p o p u l a t i o n . Premiums
for these supplemental p o l i c i e s range from $150 t o
$1,000 p e r y e a r . These products h i s t o r i c a l l y have
covered people for acute care (not long term care)
s e r v i c e s normally provided by physicians and
h o s p i t a l s . The primary long term care b e n e f i t is
nursing home care; the b e n e f i c i a r y is reimbursed for
the Medicare copayment f o r t h e twentieth through the one
hundredth day of an approved s t a y i n a s k i l l e d nursing
f a c i l i t y . From a p r a c t i c a l viewpoint, however, l i t t l e
coverage for iong term c a r e r e s u l t s from Medigap
p o l i c i e s . Few p a t i e n t s q u a l i f y for Medicare s k i l l e d
nursing f a c i l i t y b e n e f i t s beyond the f i r s t twenty days,
and g e n e r a l l y t h e r e a r e few, i f any, home h e a l t h
b e n e f i t s provided. A major need with r e s p e c t t o Medigap
p o l i c i e s is t o educate the c u r r e n t and f u t u r e
p o l i c y h o l d e r s t h a t they a r e NOT protected a g a i n s t long
term care expenses.
b. Nursing Home Insurance
Nursing home insurance p o l i c i e s a r e i n d i v i d u a l
p o l i c i e s for p a t i e n t s i n nursing homes and a r e u s u a l l y
a p p l i c a b l e only t o s k i l l e d nursing f a c i l i t i e s . These
products a r e regulated by the Arizona Department of
Insurance with s p e c i f i c s t a t u t e s addressing f i n a n c i a l ,
investment and o t h e r requirements of the companies.
Additional r e g u l a t i o n is not needed and t h e r e is c l e a r
i n d i c a t i o n t h a t these indemnity p o l i c i e s a r e becoming
one of the b e s t insurance o p t i o n s f o r financing the c o s t
of p r i v a t e nursing home care for the e l d e r l y . For
example, in the last s i x months of 198Sv the Department
of Insurance approved for sale in Arizona f i f t e e n new
nursing home indemnity p o l i c i e s .
Impeding the development of t h i s product is a lack
of understanding on the p a r t of consumers who confuse
t h i s option with Medicare supplemental p o l i c i e s and
Medicare coverage i t s e l f . While nursing home p o l i c i e s
f i l l a v o i d , t h e y f a l l f a r s h o r t of insuring i n d i v i d u a l s
f o r long term care expenses t h a t a r e not received i n a
s k i l l e d nursing f a c i l i t y (e.g.: home and community based
s e r v i c e s ) . It is the consensus o f the Task Force t h a t
pr i v a t e insurance companies should expand these
narrowly-focused nursing home p o l i c i e s t o include
coverages for home and community based insuracze plans.
c. Income Replacement Insurance
Income replacement insurance coverage g e n e r a l l y
provides f o r the replacement of l o s t income r e s u l t i n g
from an i n j u r y occurring away from the work place.
Usually, t h e r e is a w a i t i n g p e r i o d a f t e r t h e a c c i d e n t
before the income payments commence. F u r t h e r , the
d i s a b i l i t y must be one t h a t prevents the insured from
c a r r y i n g on h i s o r her usual occupation. Most p o l i c i e s
continue payment of b e n e f i t s only for a s p e c i f i e d
maximum number of y e a r s , but l i f e t i m e b e n e f i t s a r e
a v a i l a b l e i n some c o n t r a c t s . Under a l l such l o s s of
income p o l i c i e s , the b e n e f i t s are terminated a s soon as
the d i s a b i l i t y ends.
These products are regulated by the Arizona
Department o f I n s u r a n c e under the s t a t u t e s r e g u l a t i n g
the f i n a n c i a l condition of insurance companies and
s t a t u t o r y requirements r e l a t i n g t o the sale and c o n t e n t s
of h e a l t h insurance p o l i c i e s . Income replacement
coverage is u s u a l l y a v a i l a b l e as p a r t of an employee
b e n e f i t package and is normally terminated when a person
reaches r e t i r e m e n t age. Thus, the l i m i t a t i o n of such
insurance is t h a t it is n o t u s u a l l y in f o r c e f o r those
people who a r e over s i x t y - f i v e and most l i k e l y t o need
long term care coverage. The major b a r r i e r t o the use
of t h i s option f o r the e l d e r l y is not caused by e x i s t i n g
r e g u l a t i o n , b u t by the f a c t t h a t t h i s is insurance
designed and p r i c e d f o r those who are s t i l l in the work
force. However, income replacement insurance is a
v i a b l e and u s e f u l product for younger i n d i v i d u a l s who
become d i s a b l e d .
d. Life Insurance Products
L i f e i n s u r a n c e p r o d u c t s p r o v i d e funds a t the t i m e
of an i n s u r e d ' s death. A number of d i f f e r e n t l i f e
insurance programs a r e a v a i l a b l e , including termi whole
l i f e , u n i v e r s a l l i f e and endowment p o l i c i e s . However ,
with the exception of term insurance, l i f e insurance
p o l i c i e s a l s o accumulate a c a s h v a l u e t h a t can be paid
t o the insured while l i v i n g , in the form of a lump sum
surrender o r , i n some insurance c o n t r a c t s , a s an
annuity.
L i f e insurance products and l i f e i n s u r e r s are
h e a v i l y r e g u l a t e d by the Arizona Department of
Insurance. In the o p i n i o n o f the Task Force, no
a d d i t i o n a l r e g u l a t i o n s a r e needed. Consumers a r e
protected by a v a r i e t y of s t a t u t o r y and r e g u l a t o r y
requirements r e l a t i n g t o the p r i c i n g , s a l e , 3nd c o n t e n t s
of l i f e insurance c o n t r a c t s .
The main d e f i c i e n c y o f l i f e i n s u r a n c e p r o d u c t s as a
p o t e n t i a l source o f long term care payment is t h a t they
t y p i c a l l y do not accumulate cash value in an amount
adequate t o finance the long term care needs of a
d i s a b l e d person. It would be unusual for a l i f e .
insurance c o n t r a c t t o c a r r y a c a s h v a l u e of more than
s e v e r a l thousand d o l l a r s -- an amount t h a t would pay for
only a small p o r t i o n of t y p i c a l long term c a r e c o s t s .
In a d d i t i o n , the i n t e r e s t r e t u r n on l i f e insurance is
normally q u i t e conservative. In the case of death and a
p o s s i b l y higher term insurance award, the money would be
u s e f u l only i f a surviving b e n e f i c i a r y had need f o r long
term care s e r v i c e s .
e. Annuities
An annuity is g e n e r a l l y defined a s a stream of
p e r i o d i c payments made for a fixed period during a
p e r s o n ' s l i f e . Annuities t y p i c a l l y a r e used t o provide
p r o t e c t i o n a g a i n s t the p o s s i b i l i t y of o u t l i v i n g o n e ' s
immediate f i n a n c i a l resources. They can be used t o pay
income c u r r e n t l y o r i n the f u t u r e a t r e g u l a r i n t e r v a l s ,
usually monthly. Most a n n u i t i e s a r e intended t o provide
guaranteed r e t i r e m e n t income of a predetermined amount
most commonly for l i f e . Annuity plans a r e a v a i l a b l e on
a group b a s i s , most o f t e n a s pension plans set up by
employers, or can be purchased i n d i v i d u a l l y through a
l i f e insurance company. Annuities are h e a v i l y regulated
by many of the same s t a t u t e s and r e g u l a t i o n s t h a t apply
t o l i f e insurance p r o d u c t s . In the view of the Task
Force, t h e r e is no need f o r f u r t h e r r e g u l a t i o n of
a n n u i t i e s . L i k e l i f e insurance products and other forms
of cash accumulation instruments, the value of most
a n n u i t i e s is not l a r g e enough t o pay for any s i g n i f i c a n t
p o r t i o n of long term c a r e expenses. Again, however,
t h i s depends upon the s i z e of the i n i t i a l c a p i t a l
investment
f . Risk Pools
The r i s k pool concept is one of p a r t i c i p a t i o n by
i n d i v i d u a l s in a common pool i n t o which premiums a r e
paid, with the pool assuming the r i s k of l o s s t o any of
the p a r t i c i p a n t s . 'Such a program does not p r e s e n t l y
e x i s t in Arizona, but i f it d i d , it would be c l a s s i f i e d
a s insurance and would be p r o h i b i t e d by the Arizona
insurance code s i n c e only an insurance company can
provide coverage under the c u r r e n t l a w . I f such
i n d i v i d u a l r i s k pools were developed, r e g u l a t i o n would
be needed t o a s s u r e f i n a n c i a l s t a b i l i t y and proper
performance. In a d d i t i o n , f o r such an arrangement t o
become r e a l i t y , many d i f f e r e n t f a c e t s of its purpose and
o p e r a t i o n would have t o be c a r e f u l l y analyzed.
Determination of b e n e f i t s t r u c t u r e and r a t e l e v e l s ;
c o n t r i b u t i o n s from i n s u r e d s , i n s u r e r s , employers, and
the state; and methods of coping with entrance t o and
e x i t from the pool are only a few of the d e t a i l s which
would have t o be addressed.
2. Delivery Systems
a. Bealth Maintenance Organizations (HMOs)
HMOs a r e h e a l t h plans which provide p r e p a i d ,
c a p i t a t e d medical c a r e t o e n r o l l e d members and which
guarantee the d e l i v e r y of a fixed set of b e n e f i t s . HMOs
are regulated as h e a l t h care s e r v i c e o r s a n i z a t i o n s by
the Arizona Department of Insurance. S i g n i f i c a n t
r e g u l a t i o n a l r e a d y e x i s t s and while in g e n e r a l t h e s e
r e g u l a t i o n s a r e not s i g n i f i c a n t o b s t a c l e s t o HMO
a c t i v i t i e s , a t l e a s t one e x i s t i n g r e g u l a t i o n may impede
HMOs' a b i l i t y to add long term care b e n e f i t s . In order
t o o f f e r membership t o Medicare e l e g i b l e e l d e r l y , HMOs
must comply with r e g u l a t i o n s governing Medicare
supplement p o l i c i e s (described p r e v i o u s l y ) . P r e s e n t
Medicare supplement r e g u l a t i o n s r e q u i r e HMOs t o cover,
on a c e r t a i n percentage b a s i s , a l l s e r v i c e s and b e n e f i t s
covered by Medicare. In the p a s t , t h e r e has been a
trend t o mandate a l l types of b e n e f i t s under the laws
governing h e a l t h care s e r v i c e o r g a n i z a t i o n s . In the
event long term care is o f f e r e d by HMOs, similar
mandates may be developed t o s p e c i f y t h e types of long
term c a r e which must be provided. I n such a s i t u a t i o n ,
HMOs could l o s e t h e i r a b i l i t y t o tailor-make b e n e f i t
packages for t h e i r members r e s u l t i n g i n fewer HMOs
e n t e r i n g the long term care m a r k e t .
Many HMOs are considering the e n r o l l m e n t o f more
e l d e r l y members f o r a c u t e care and long term c a r e
b e n e f i t s . However, it is u n l i k e l y t h a t s i g n i f i c a n t long
term care o p t i o n s w i l l be marketed for s e v e r a l years.
HMOs may be an e f f e c t i v e source of long term care i n the
f u t u r e ; however, a g r e a t d e a l more study needs t o be
done towards developing s a t i s f a c t o r y methods of
c o n t r o l l i n g t h e f i n a n c i a l r i s k a s s o c i a t e d with such long
term care coverage.
b. Social HMOs
S o c i a l HMOs (S/HMOs) a r e based upon conventional
prepaid c a p i t a t i o n health plans. Yet, S/HMOs a r e
experimental in t h a t they provide a l l s e r v i c e s paid by
Medicare, a s w e l l a s other b e n e f i t s which may encourage
s u b s t i t u t i o n of ambulatory and home h e a l t h c a r e for care
i n h o s p i t a l s and nursing homes. S/HMOS a r e c u r r e n t l y
being t e s t e d in New York, Minnesota, Oregon and
C a l i f o r n i a . S/HMOS emphasize comprehensive home care
f o r .chronic or d i s a b l i n g conditions which r e q u i r e
r e h a b i l i t a t i o n , support and maintenance care t h a t may
not meet Medicare c r i t e r i a . By providing personal care
s e r v i c e s a t home, it is expected t h a t i n s t i t u t i o n a l i -
zation w i l l be prevented, r e s u l t i n g in g r e a t e r p a t i e n t
s a t i s f a c t i o n and a tremendous c o s t savings t o t h e h e a l t h
plan. Home c a r e b e n e f i t s may include medical
t r a n s p o r t a t i o n , home delivered meals, a d u l t day c a r e ,
and homemaker s e r v i c e s , as w e l l as n u r s i n g , therapy and
home h e a l t h a i d s e r v i c e s .
The u t i l i z a t i o n of S/HMO b e n e f i t s is c o n t r o l l e d by
strong case management, copayment requirements for
e n r o l l e e s and b e n e f i t c e i l i n g s . It is important t o note
t h a t S/HMO b e n e f i t s a r e l i k e l y t o cover only p a r t of t h e
c o s t s for the most impaired members, e s p e c i a l l y those
need ing nursing home care. Community and home-based
b e n e f i t s a r e renewable annually, but i n s t i t u t i o n a l i z e d
care is not always renewable.
The e f f i c i e n c y of S/HMOS in providing long term
care b e n e f i t s and c o n t r o l l i n g t h e associated f i n a n c i a l
r i s k remains t o be determined. The experimental S/HMOs
have been in operation for only a s h o r t t i m e . Adding
social s e r v i c e s t o the more i n t e n s i v e h e a l t h care
s e r v i c e s of the HMO makes the S/HMO'S r i s k c o n t r o l task
a l l the more challenging. Recognizing t h a t HMOs can
provide acute care b e n e f i t s e f f i c i e n t l y , those
p a r t i c i p a t i n g in the experimental p r o j e c t f e e l S/HMOs
should be able t o provide less than acute care b e n e f i t s
e f f i c i e n t l y a s w e l l .
c. Preferred Provider Organization (PPOs)
PPOs a r e organized arrangements in which member
groups receive discounted f e e - f o r - s e r v i c e care. A PPO
c o n t r a c t gives members of t h e covered groups a f i n a n c i a l
incentive t o use providers on a p r e f e r r e d list. Because
of favorable agreements negotiated with providers, a PPO
can provide medical coverage for a plan at ten t o twenty
per cent below normal cost. These agreements usually
i n c o r p o r a t e d i s c o u n t s and c o n t r o l s on i n f l a t i o n and
u t i l i z a t i o n . A t t h e p r e s e n t t i m e , t h e r e is no state
r e g u l a t i o n of PPOs. The PPO system is r e l a t i v e l y new
and p r i m a r i l y organized to a t t r a c t employed, working age
i n d i v i d u a l s . Therefore, a t t h i s t i m e , PPOs have l i t t l e
p o t e n t i a l f o r t h e e l d e r l y long term c a r e u s e r ,
d. L i f e Care Communities:
L i f e care communities for t h e e l d e r l y are u s u a l l y
r e s i d e n t i a l housing programs which also provide s h o r t
and long term nursing care w i t h i n a continuing care
community nursing u n i t . These f a c i l i t i e s r e q u i r e a
monthly s e r v i c e f e e and may a l s o r e q u i r e a n u p - f r o n t
payment for t h e r e s i d e n t i a l l i v i n g u n i t , A r e s i d e n t of
t h e f a c i l i t y who must be t r a n s f e r r e d from a housing u n i t
to a nursing home is guaranteed payment f o r t h e nursing
home care. L i f e c a r e communities can be q u i t e expensive
with t h e i n i t i a l endowment or " f r o n t end" payment for a
r e s i d e n t i a l u n i t varying from $50,000 to $100,0001 p l u s
a monthly s e r v i c e f e e of $400 to $1,500.
L i f e care communities a r e r e g u l a t e d by t h e Arizona
Department o f I n s u r a n c e and t h e Arizona Department of
Health S e r v i c e s , with t h e l a t t e r agency being
r e s p o n s i b l e f o r r e g u l a t i n g t h e s e p a r a t e l y l i c e n s e d
nursing home a s s o c i a t e d with t h e l i f e care f a c i l i t y .
L i f e care communities a r e not an a l t e r n a t i v e f o r many
s e n i o r c i t i z e n s because of t h e high cost a s s o c i a t e d with
t h e endowment and monthly s e r v i c e fee. ~ d d i t i o n a l l y r
t h e r e s i d e n t s of l i f e care communities a r e g e n e r a l l y
those persons who a r e "aging well", in f u l l possession
of t h e i r f a c u l t i e s , who a r e i n t e r e s t e d i n maintaining
c o n t i n u i t y with t h e i r local community and peers.
However, t h e Task Force acknowledges t h a t f o r those
s e n i o r s who have s u f f i c i e n t funds, l i f e c a r e communities
are a v i a b l e and a t t r a c t i v e o p t i o n f o r long term c a r e
costs in t h e nursing home.
3. Financinq Mechanisms
a. Home Equity Conversion:
S e v e r a l programs c u r r e n t l y e x i s t which enable
s e n i o r s who f u l l y own o r n e a r l y own t h e i r own homes t o
c o n t i n u e l i v i n g i n those homes while r e c e i v i n g up-front
and on-going monthly payments based on t h e e q u i t y in
t h e i r homes. These programs a r e g e n e r a l l y r e f e r r e d to
a s home e q u i t y conversions. There a r e no state agencies
having any s i g n i f i c a n t r e g u l a t o r y a u t h o r i t y over home
e q u i t y conversion o p t i o n s . There is, however, f e d e r a l
r e g u l a t i o n of t h e savings and loan i n s t i t u t i o n s or
lending agencies which would make home e q u i t y loans.
It is the view of the Task Force t h a t a d d i t i o n a l
r e g u l a t i o n w i l l u l t i m a t e l y be needed for home e q u i t y
conversion programs. A t the l e a s t , t h e r e should be a
requirement t h a t any p o t e n t i a l u s e r o f t h i s product be
c a r e f u l l y counseled because o f t h e compiexity in
s e l e c t i n g the b e s t t y p e o f home e q u i t y arrangement for
t h e i n d i v i d u a l and because of the impact of such a
conversion on the borrower's e s t a t e . Another major
b a r r i e r t o the home e q u i t y conversion is n o t t h e
presence or absence of r e g u l a t i o n , but t h e l i m i t e d
i n t e r e s t by banks and other l e n d e r s i n making home
e q u i t y loans. When compared t o o r d i n a r y home loans, the
lender must provide f a r more counseling and information
and be w i l l i n g t o make less prof it on the loan. Home
e q u i t y conversions a r e , n e v e r t h e l e s s , a u s e f u l financing
mechanism for people who have s u b s t a n t i a l e q u i t y i n
t h e i r home and want t o remain - i n the home, but need
a d d i t i o n a l funds t o pay f o r the long term c a r e of a
family member.
b. Individual Retirement Accounts (I-) :
IRAs a r e p a r t of a mechanism whereby p r e t a x income
can be deposited in an account with income taxes on the
i n t e r e s t earnings d e f e r r e d u n t i l the money is withdrawn,
normally a f t e r retirement. Such funds could be used t o
pay for long term care expenses. IRAs a r e regulated by
the Arizona Department of Banking a s w e l l as by the
S e c u r i t i e s Division of the Corporation Commission and
f e d e r a l r e g u l a t i o n s . Any i n d i v i d u a l can set up an IRA
account with the i n t e n t of withdrawing the money when
necessary for long term care.
While a d d i t i o n a l r e g u l a t i o n s a r e not required for
t h i s t y p e o f funding option, the Task Force recognizes
t h e need for p u b l i c education i n t h i s area. I n d i v i d u a l s
must be made aware, during the e a r l y s t a g e s of f i n a n c i a l .
and estate planning, t h a t IRA accounts can be used t o
meet the high c o s t s a s s o c i a t e d with long term care.
c. Employee Benefit Plans (Pensions) :
Most employee b e n e f i t plans provide for a pension
which is u s u a l l y in the form of an annuity ( a l r e a d y
d i s c u s s e d ) . These pension programs a r e c o n t r o l l e d under
the Federal Employee Retirement Income S e c u r i t y A c t of
1974 (ERISA). As such, these plans a r e exempt from
s t a t e r e g u l a t i o n because the pension component of an
employer b e n e f i t package is employer generated and t h e r e
is no a s s o c i a t i o n with insurance products. A s with the
above o p t i o n s , the pension is a source o f funds t h a t in
l a t e r years could be used for long term care. One
p o t e n t i a l o p t i o n to i n c r e a s e t h e p r i v a t e f i n a n c i n g of
long term c a r e would be t o allow i n d i v i d u a l s t o elect a
v a r i a t i o n on a l i f e annuity. Under t h i s o p t i o n ,
i n d i v i d u a l s would be a b l e , a t t h e i r own d i s c r e t i o n , to
r e c e i v e an e x t r a y e a r ' s pension a t any t i m e . This
o p t i o n does not reduce t h e p r e s e n t v a l u e o f o n e ' s
pension b e n e f i t s , but simply modifies t h e timing of t h e
b e n e f i t payments. Any funds not used f o r long term c a r e
could be used f o r o t h e r purposes or become p a r t of o n e ' s
s t a t e . It is our view t h a t a d d i t i o n a l state r e g u l a t i o n s
are not needed for such v a r i a t i o n s of pension b e n e f i t s
to be developed as long term care f i n a n c i n g
mechanisms.
MARKETING AND CONSUMER EDUCATION
As stated p l e v i o u s l y , consumer education has been
i d e n t i f i e d a s a major b a r r i e r to t h e development of e f f e c t i v e ,
a f f o r d a b l e long term care insurance. The Task Force recognizes
t h i s lack of consumer education encompasses a l l age groups. For
example, younger i n d i v i d u a l s and t h e i r f a m i l i e s (ages twenty-five
to f o r t y ) do not understand t h e need for f i n a n c i a l planning i n
order to meet t h e i r p o t e n t i a l long term care needs in what w i l l
probably be t h e d i s t a n t f u t u r e . T h i s same group a l s o does not
recognize t h e p o s s i b i l i t y of someday having a c h i l d or o t h e r
dependent who may r e q u i r e long term c a r e due to p h y s i c a l or @ mental impairment.
The next age c a t e g o r y , ages forty-one t o s i x t y - f o u r , a r e
t y p i c a l l y in a t r a n s i t i o n a l period. These i n d i v i d u a l s may be
r e s p o n s i b l e f o r t h e long term c a r e needs of t h e i r p a r e n t s and/or
grandparents. Thus, while t h i s group may be more aware of t h e
problems a r i s i n g from t h e l a c k of adequate long term c a r e
f i n a n c i n g , they may not have t h e f i n a n c i a l c a p a c i t y to provide
f o r t h e i r own f u t u r e long term c a r e needs.
More than any o t h e r group o f i n s u l a n c e p u r c h a s e r s ,
however, t h e e l d e r l y do not have an adequate understanding of
t h e i r i n s u r a n c e c o v e r a g e s and t h e h e a l t h c a r e risks they f a c e ,
r e s u l t i n g in a g e n e r a l i n a b i l i t y t o e f f e c t i v e l y a r r a n g e for long
term care p r o t e c t i o n . For example, i n a survey of its membership
conducted in 1984, t h e American Association of ~ e t i r e d Persons
(AARP) found t h a t e i g h t y per c e n t of its membership thought they
had long term c a r e coverage under Medicare. A l m o s t f i f t y per c e n t
of t h e s e people thought they had adequate coverage under t h e i r
p r i v a t e Medicare Supplement p o l i c i e s . Of course, Medicare and
Medicare Supplement p o l i c i e s a c t u a l l y cover only s h o r t term
nursing home care for those r e c u p e r a t i n g from a h o s p i t a l s t a y .
When q u e s t i o n e d a b o u t gaps i n t h e i r insurance coverage, only t w o
per c e n t of t h e AARP members mentioned t h e lack of extended care
b e n e f i t s . T h i s s u r v e y documents the widespread c o n f u s i o n a b o u t
long term c a r e f i n a n c i n g , and h i g h l i g h t s t h e need f o r an
immediate, e f f e c t i v e consumer education program.
There is a l s o a preference among the e l d e r l y , a s with
a l l insurance consumers, for " f i r s t d o l l a r " coverage. C u r r e n t l y ,
t h e g a p - f i l l i n g i n s u r a n c e p r o d u c t s which dominate the p r i v a t e
h e a l t h insurance market for the e l d e r l y indemnify insureds for
t h e d e d u c t i b l e s and copayments required by Medicare. Purchase of
these p o l i c i e s may, however, l i m i t the amount of money a v a i l a b l e
f o r purchasing o t h e r i n s u r a n c e p r o d u c t s such a s long term care
p o l i c i e s . Again, t h i s h i g h l i g h t s t h e need for an e d u c a t i o n a l
program which w i l l provide s e n i o r s with information regarding the
need for both types of coverage -- both " f i r s t d o l l a r " and
" c a t a s t r o p h i c " -- and which w i l l a s s i s t s e n i o r s i n making the
b e s t use of t h e i r funds.
A study for the United S t a t e s Department of Health and
Human S e r v i c e s , published i n January, 1985, projected t h a t f o r t y -
seven per cent of people between the ages of sixty-seven and
sixty-nine having a s s e t s of a t l e a s t $3,000 would buy long term
care insurance i f it c o s t ten per cent or less of t h e i r annual
income. That would reduce f e d e r a l government expenditures for
long term care by a s much a s twenty-three per cent -- or nine
b i l l i o n d o l l a r s -- over a t h i r t y - f i v e y e a r p e r i o d . Using a more
c o n s e r v a t i v e assumption t h a t people would purchase the insurance
only i f the premiums c o s t less than f i v e per cent of t h e i r annual
income, the study found t h a t twenty-one per cent of the same @ group would buy the insurance, producing about an e i g h t per cent
s a v i n g s o f f e d e r a l d o l l a r s over the same period. W e can
conclude, based on t h i s study, t h a t a v i a b l e , i n t e r e s t e d m a r k e t
for p r i v a t e long term c a r e insurance coverage could be developed
i f consumers were made aware of t h e i r p o t e n t i a l long term care
needs.
Regulators and i n s u r e r s have been r e l u c t a n t t o i n s t i t u t e
e d u c a t i o n a l programs regarding long term care f i n a n c i n g , because
so few a l t e r n a t i v e s have been a v a i l a b l e . With the i n c r e a s e in
the number of financing a l t e r n a t i v e s , such as the increased
number of nursing home indemnity products now a v a i l a b l e in
Arizona, and growing i n t e r e s t in home e q u i t y conversions and l i f e
c a r e communities, the need for an organized, formal e d u c a t i o n a l
program is evident.
VIP. TAX INCENTIVES
Tax i n c e n t i v e s may be a t o o l for encouraging development
and a v a i l a b i l i t y of long term c a r e insurance. Too o f t e n ,
however, t a x i n c e n t i v e s a r e viewed a s an answer t o accomplish an
economic or s o c i a l purpose.
Tax i n c e n t i v e s may be a way t o influence or a f f e c t
insurance purchase d e c i s i o n s by p o t e n t i a l consumers. It is not
presumed t h a t tax laws a c t a s a b a r r i e r t o the a v a i l a b i l i t y of
t h i s insurance, but t h a t the c o s t of the insurance or a b i l i t y t o
purchase the insurance could be made more a t t r a c t i v e through tax
i n c e n t i v e s .
Tax p r e f e r e n c e s for t h e e l d e r l y a r e not new. Federal
and s t a t e tax laws a l r e a d y provide s p e c i a l treatment designed t o
i n c r e a s e the spending power of e l d e r l y and d i s a b l e d persons.
Federal income tax laws, for example, provide an a d d i t i o n a l
personal exemption allowance f o r those s i x t y - f i v e and over, allow
s p e c i a l c a p i t a l g a i n s tax treatment when the e l d e r l y sell t h e i r
r e s i d e n c e s , and encourage savings f o r r e t i r e m e n t through IRAs.
Current Arizona income tax law adopts the f e d e r a l c a p i t a l g a i n s
and IRA treatment. S p e c i f i c a l l y , Arizona provides a deduction of
$800 for income tax purposes for a taxpayer who pays more than
one-quarter of the c o s t of maintaining an i n d i v i d u a l aged s i x t y -
f i v e or over in a nursing c a r e i n s t i t u t i o n or supervisory c a r e
home, or an a d u l t f o s t e r care home. The deduction is a l s o
a v a i l a b l e i f the taxpayer makes payments of $800 or more for home
h e a l t h care or o t h e r t y p e s o f medical care f o r an i n d i v i d u a l who
is not i n s t i t u t i o n a l i z e d .
Additional tax i n c e n t i v e s could f u r t h e r enhance the
spending a b i l i t y of the e l d e r l y and f a m i l i e s who a r e in need of @ long term c a r e s e r v i c e s . This could serve a dual purpose.
F i r s t , the i n c e n t i v e s would i n c r e a s e the funds taxpayers might
have a v a i l a b l e t o purchase long term c a r e insurance. Secondly,
i f more e l d e r l y i n d i v i d u a l s can a f f o r d and purchase the insur-ance,
the increased p a r t i c i p a t i o n w i l l p o t e n t i a l l y r e s u l t in
decreased o v e r a l l c o s t s of the insurance.
Tax i n c e n t i v e s could a l s o draw a t t e n t i o n t o t h e r i s k s of
needing long term c a r e . The average l i f e expectancy continues t o
grow, making the p r o b a b i l i t y of needing long term c a r e much
g r e a t e r for l a r g e r numbers of people. Without proper coverage or
income/assets t o pay f o r t h e c o s t s , many e l d e r l y and t h e i r
f a m i l i e s could be f i n a n c i a l l y devastated by the unplanned,
expensive n a t u r e o f the care required. Tax i n c e n t i v e s may help
draw a t t e n t i o n t o t h i s f u t u r e r i s k and encourage taxpayers t o
take preventive a c t i o n .
Tax i n c e n t i v e s can be t a r g e t e d t o a f f e c t a p a r t i c u l a r
group. The wealthy may be a b l e t o a f f o r d t h e care needed, but
low and lower middle income persons and f a m i l i e s may not be a b l e
t o a f f o r d coverage without a i d . Income tax i n c e n t i v e s in t h e
form o f d e d u c t i o n s o r c r e d i t s , d i r e c t e d toward those t r u l y in
need of f i n a n c i a l a s s i s t a n c e , might allow more of these persons
t o p r o t e c t themselves r a t h e r than f a l l i n t o government a s s i s t a n c e
programs l a t e r when they can no longer a f f o r d t o c a r e for
themselves. Targeting s p e c i f i c groups would minimize t h e loss of
t a x d o l l a r s while broadening the base o f t h o s e who could a f f o r d @ p r i v a t e coverage.
The advantages t h a t some t a x p r e f e r e n c e would give
toward the development and a v a i l a b i l i t y of long term care
insurance must be weighed a g a i n s t the disadvantages. There has
been growing sentiment a g a i n s t t h e p r o l i f e r a t i o n of t a x incen-t
i v e s and t h e e r o s i o n of t h e t a x base. Only i f an i n c e n t i v e is
cost e f f e c t i v e should it be adopted, It is beyond t h e scope of
t h i s study to make t h e d e t e r m i n a t i o n o f t h e cost e f f e c t i v e n e s s of
the v a r i o u s i n c e n t i v e s mentioned later, The following a r e simply
p o i n t s which should be considered p r i o r to formal adoption of a
t a x p r e f e r e n c e program for long tegm care insurance.
F i r s t , innumerable f a c t o r s are important i n t h e d e c i s i o n
to buy insurance. Current h e a l t h , income s t a b i l i t y , n e t worth,
p r i o r knowledge or e x p e r i e n c e r e g a r d i n g t h e need for long term
care, p e r c e p t i o n s of o n e ' s own f u t u r e h e a l t h , understanding of
o t h e r medical cost p r o t e c t i o n s (such a s Medicare and AHCCCS), and
a p e r s o n ' s l i f e s t y l e a r e j u s t a few of t h e v a r i a b l e s t h a t w i l l
i n f l u e n c e a d e c i s i o n , There is no guarantee t h a t a t a x i n c e n t i v e
w i l l achieve a n intended o b j e c t i v e .
Second, state income t a x i n c e n t i v e s without comparable
or p a r a l l e l f e d e r a l i n c e n t i v e s would p o s s i b l y be i n e f f e c t i v e
@ because of r e l a t i v e l y low state t a x rates. Some of t h e v a r i o u s
t a x p r e f e r e n c e s f o r t h e e l d e r l y were mentioned e a r l i e r in t h i s
Study. They a l l s e r v e to reduce state t a x e s on t h e e l d e r l y .
With a maximum r a t e f o r i n d i v i d u a l s of only e i g h t per c e n t ,
compared to f e d e r a l r a t e s t h a t range from f o u r t e e n to f i f t y per
c e n t , most i n d i v i d u a l taxpayers cannot achieve much r e a l t a x
relief from state i n c e n t i v e s alone. P e r s o n s w i t h t h e g r e a t e s t
need for a s s i s t a n c e , t h e low income e a r n e r s , a l r e a d y pay l i t t l e
or no s t a t e tax.
Third, t h e f a i r n e s s of any t a x i n c e n t i v e would be
d i f f i c u l t t o ensure. Some investment income is not taxed by t h e
s t a t e s . The income on which an i n c e n t i v e might be based may not
reflect t r u e f i n a n c i a l a b i l i t y of t h e taxpayer. To attempt t o
put a l l taxpayers on a l e v e l b a s i s would g r e a t l y i n c r e a s e t h e
complexity of f i l i n g and the costs of a d m i n i s t e r i n g t h e
i n c e n t i v e .
Fourth, many i n c e n t i v e s a r e used by r e c i p i e n t s for
unintended purposes, or a r e given t o persons who have no
demonstrated need. To avoid t h e s e p i t f a l l s , an i n c e n t i v e should
e x p l i c i t l y t a r g e t the persons and the s u b j e c t t o be given s p e c i a l
t a x treatment. T a r g e t i n g , however, has its own shortcomings.
For example, t a r g e t i n g may unknowingly ignore a l t e r n a t i v e s and
@ l i m i t development t o programs t h a t a r e aided by t h e i n c e n t i v e s . New concepts o r a l t e r n a t i v e approaches t o a problem w i l l r e c e i v e
f a r less a t t e n t i o n . This would discourage economic e f f i c i e n c y .
F i n a l l y , tax-based i n c e n t i v e s a r e being more cr it j c a l l y
examined in l i g h t of a t i g h t f i s c a l outlook for Arlzona.
P r e f e r e n t i a l tax treatment for some reduce the l e v e l of tax
r e c e i p t s and r a i s e s the f i n a n c i a l burden for other taxpayers.
This is magnified many times when an i n c e n t i v e is abused. Unless
s u b s t a n t i a l p r o t e c t i o n s a r e b u i l t i n t o the r e p o r t i n g system, the
c o s t s can o f t e n e s c a l a t e while l i t t l e of the b e n e f i t s may
a c t u a l l y be used f o r long term care insurance.
The Task Force concluded t h a t e x i s t i n g s t a t e tax laws do
not impede the development of long term care insurance. Given
the amount of i n t e r e s t in developing long term care p o l i c i e s
c u r r e n t l y demonstrated by t h e insurance i n d u s t r y , t h e r e is every
i n d i c a t i o n t h a t market demand w i l l r e s u l t i n the development of a
broad range of p o l i c i e s without t h e n e c e s s i t y of providing tax
i n c e n t i v e s t o t h e p u b l i c or i n s u r e r s .
V I I I . STATE AND FEDERAL ACTIVITY
In c o n j u n c t i o n w i t h the National ~ s s o c i a t i o n of
Insurance Commissioners (NAIC) Long Term Care ~ d v i s o r y
Committee, the Task Force reviewed s t a t e and f e d e r a l a c t i v i t y in
the long term care arena. Appendix A-2 t o t h i s r e p o r t is a
@
d e t a i l e d o u t l i n e of state and f e d e r a l e f f o r t s t o date.
A t l e a s t twenty-five states, including Arizona, have
proposed or authorized some type of study or l e g i s l a t i o n
regarding long term care. These e f f o r t s range from the
e s t a b l i s h m e n t o f t a s k f o r c e s or study committees charged with
exploring the a v a i l a b i l i t y of long term care insurance and long
term care d e l i v e r y systems t o passage of l e g i s l a t i o n which
r e q u i r e s h e a l t h i n s u r e r s t o extend coverage t o p a r e n t s of the
insured who r e s i d e i n the i n s u r e d ' s home. Several s t a t e s have
proposed l e g i s l a t i o n which r e l a t e s t o tax c r e d i t s or tax
exemptions. For example, Minnesota has considered l e g i s l a t i o n
which would exempt from the s t a t e income tax t h e pension income
which is used t o purchase long term c a r e insurance.
A lesson in the problems surrounding the "over-r
e g u l a t i o n " of long term care insurance can be gathered from the
experience of the S t a t e of Wisconsin. In 1981, the Office of the
Commissioner o f I n s u r a n c e i n Wisconsin promulgated a d m i n i s t r a t i v e
r u l e standards (Ins. 3.46, November 1, 1981) which defined the
type of nursing home insurance which might be sold within t h a t
s t a t e . The r u l e sought t o reduce abuses and confusion a s s o c i a t e d
with the sale o f n u r s i n g home insurance by providing for minimum
l e v e l s of coverage. Minimum coverages required by law included
@ mexinciemeudm s ibxetnye fdiatyss ; ofl i f etetni m ed omlalxaimr su mp eorf 3d6a5y ;d adyesd; uacntdi b cl eosv ernaogte ot of
c a r e c e r t i f i e d by a physician a s being necessary. I n a d d i t i o n
p o l i c i e s could n o t c o n t a i n exclusions which would l i m i t l e v e l s of
care; l i m i t coverage t o c a r e received a s a r e s u l t of s i c k n e s s or
i n j u r y ; or l i m i t coverage t o care received a f t e r h o s p i t a l
confinement.
The r e a c t i o n of i n s u r e r s t o t h i s r e g u l a t i o n was
immediate and d e v a s t a t i n g ; a l l but one ceased t o o f f e r any long
term care insurance within the state. The s o l e remaining i n s u r e r
r a i s e d its p r i c e s and ceased a d v e r t i s i n g , c i t i n g the
"experimentalw n a t u r e of the p o l i c y shaped by the new r u l e s .
From an a c t u a r i a l p o i n t o f view, t h e i r concerns were
understandable. Coverage of care needed simply as a r e s u l t of
the n a t u r a l e f f e c t s of aging, and not because of any acute
medical c o n d i t i o n , would be mandatory. The i n a b i l i t y of i n s u r e r s
t o l i m i t t h e i r r i s k s by r e q u i r i n g a p r i o r h o s p i t a l i z a t i o n o r some
evidence of sickness or i n j u r y removed the insurance from the
usual h e a l t h insurance realms a s described i n the s e c t i o n of t h i s
r e p o r t e n t i t l e d " P r i v a t e Funding".
Wisconsin is c u r r e n t l y seeking to amend its r u l e t o
allow i n s u r e r s more f l e x i b i l i t y in p o l i c y design. The O f f i c e o f
the Commissioner has proposed changes which would allow i n s u r e r s
t o l i m i t coverage to c e r t a i n l e v e l s of c a r e , such a s s k i l l e d
nursing care, and t o allow i n s u r e r s t o l i m i t coverage t o care
received in a nursing home a f t e r a h o s p i t a l i z a t i o n of a t most,
t h r e e days.
The f e d e r a l government has a l s o taken measures r e c e n t l y
t o address long term c a r e i s s u e s . Representative Ron Wyden (D-Oregon)
has introduced l e g i s l a t i o n which would e s t a b l i s h a task - --
force on long term care i n s u r a n c e . This t a s k f o r c e , which would
be comprised of r e p r e s e n t a t i v e s from the NAIC, p r i v a t e i n s u r e r s ,
p r o v i d e r s o f long term care s e r v i c e s , consumer advocates, and
f e d e r a l and s t a t e agencies r e s p o n s i b l e for the e l d e r l y , would
develop g u i d e l i n e s regarding the c e r t i f i c a t i o n of long term
h e a l t h care p o l i c i e s . In a d d i t i o n , s e v e r a l b i l l s which would
provide tax r e l i e f f o r f a m i l i e s of e l d e r l y dependents who r e q u i r e
long term c a r e have been introduced in Congress.
e APPENDIX A-1
S E R V I C E S
S e r v i c e s Delivered in t h e C l i e n t ' s Own Home
1.
e s s e n t i a
frequent
d i a b e t i c
EIoae Health Care: In-home n u r s i n g and p e r s o n a l care a r e
1 s e r v i c e s f o r many impaired and d i s a b l e d people. Most
nursing s e r v i c e s needed are s k i l l e d o b s e r v a t i o n ,
care, care of t e r m i n a l or bedbound p a t i e n t s , care of
wound or i n c i s i o n s , a d m i n i s t r a t i o n of medications, d e c u b i t u s (bed
sores) care, and care r e g a r d i n g i n c o n t i n e n c e or
c a t h e t e r i z a t i o n . (Nursing s e r v i c e s of a home h e a l t h agency also
a r e provided to c l i e n t s i n t h e a l t e r n a t i v e r e s i d e n t i a l homes
described below).
I n a d d i t i o n to l i c e n s e d n u r s e s , o t h e r f r e q u e n t l y used
staff of home h e a l t h care agencies a r e home h e a l t h a i d e s who
provide p e r s o n a l care, do i n c i d e n t a l homemaking chores and
monitor h e a l t h s t a t u s . Home h e a l t h c a r e agencies in Arizona also
provide p h y s i c a l therapy, speech therapy, o c c u p a t i o n a l t h e r a p y ,
and medical social work a s supplemental s e r v i c e s . Other s e r v i c e s
include r e s p i r a t o r y therapy, l a b o r a t o r y work, p a t i e n t care,
providing equipment and s u p p l i e s , n u t r i t i o n counseling, and @ p s y c h i a t r i c n u r s i n g . Arizona has 45 medical l i c e n s e d home h e a l t h
care agencies. I n a d d i t i o n , another f i v e home c a r e agencies
working i n 10 c o u n t i e s t h a t a r e not l i c e n s e d by t h e s t a t e or
Medicare-certif ied, provide many of t h e same s e r v i c e s , but a r e
not e l i g i b l e for Medicare reimbursement.
2. Home Repair: Modification to t h e home o f t e n is needed
to maintain or i n c r e a s e t h e i n d i v i d u a l ' s s e l f - s u f f i c i e n c y . T h i s
involves recommending and making s t r u c t u r a l r e p a i r s and
a d a p t a t i o n s which i n c r e a s e t h e i n d i v i d u a l ' s a b i l i t y t o per form
t h e a c t i v i t i e s of d a i l y l i v i n g or d e c r e a s e environmental h a z a r d s .
3. Reassurance Service and Emergency Response System:
Regular phone or in-person i n t e r a c t i o n , u s u a l l y with a v o l u n t e e r ,
aimed a t reducing s o c i a l i s o l a t i o n and i n s u r i n g h e a l t h and
s a f e t y , determining i f s p e c i a l a s s i s t a n c e is r e q u i r e d , providing
p s y c h o l o g i c a l r e a s s u r a n c e and n o t i f y i n g a c o n t a c t person if t h e
person does not respond. Emergency response systems, such a s
L i f e l i n e , c o n s i s t of a call button on a telephone or a mobile
u n i t which t h e person can wear. Pushing the b u t t o n a u t o m a t i c a l l y
a c t i v a t e s a call to a base s t a t i o n from which emergency a i d can
be s e n t .
4. Hone Delivered Meals: Commonly c a l l e d ~ e a l son Wheels, @ t h i s s e r v i c e uses community v o l u n t e e r s to d e l i v e r e i t h e r hot o r
cold meals t o people who a r e unable t o leave home or cook. A
secondary b e n e f i t of t h e program is t h e social c o n t a c t
f a c i l i t a t e d through t h e r e g u l a r v i s i t s of the v o l u n t e e r s .
5. Respite Care: R e s p i t e care -- r e l i e f f o r c a r e g i v e r s --
may f r e e t h e family member f o r a few hours to handle p e r s o n a l
business or may r e l i e v e him o r her for a week or more, e i t h e r for
vacation or r e c u p e r a t i o n from i l l n e s s or exhaustion. S e r v i c e s
may t a k e t h e form of a sitter or a t t e n d a n t who comes to t h e home,
a congregate day program or temporary i n s t i t u t i o n a l c a r e .
6. Hospice: Hospice is a s e r v i c e based on a philosophy
t h a t has a s its foremost goal t h e r e d u c t i o n of p h y s i c a l ,
emotional, and p s y c h o l o g i c a l pain in t h e t e r m i n a l l y ill. Home-based
hospice s e r v i c e s are u s u a l l y provided only to those who
have a primary c a r e g i v e r i n t h e home. I n p a t i e n t s e r v i c e s f i l l a
r e s p i t e role or t a k e over when symptoms cannot be adquately
c o n t r o l l e d i n the home. In a d d i t i o n t o pain c o n t r o l , g o a l s
include management of symptoms (e.g.: nausea) and t h e maintenance
of a l e r t n e s s and mood. Hospice involves t h e family in planning
and p r o v i s i o n of care. Pharmacy c o n s u l t a t i o n , oncology, e x p e r t
nursing c a r e , c l e r g y s e r v i c e , v o l u n t e e r involvement, bereavement
s u p p o r t , social work and p s y c h i a t r i c c o n s u l t a t i o n a r e a l l
important components of a hospice program.
S e r v i c e s i n Community Based S e t t i n q s
@ Adult Day Care/Adult Day Health Care: A l l day care
programs provide, as b a s i c s e r v i c e s , t r a n s p o r t a t i o n , n u t r i t i o u s
meals, persona1 a s s i s t a n c e , s o c i a l i z a t i o n , and t h e r a p e u t i c
a c t i v i t i e s . N o s t a l s o include h e a l t h e d u c a t i o n , monitoring, and
counseling. I n a d d i t i o n , those programs with a medical component
provide a f u l l range of h e a l t h - r e l a t e d s e r v i c e beginning with
comprehensive assessment and t h e development of an i n d i v i d u a l i z e d
c a r e plan. S e r v i c e s may include p h y s i c a l , o c c u p a t i o n a l and
speech therapy, s k i l l e d n u r s i n g , and t r a i n i n g or r e t r a i n i n g i n
independent l i v i n g s k i l l s . Some mental h e a l t h agencies sponsor
day t r e a t m e n t programs emphasizing counseling and t h e development
of s u r v i v a l s k i l l s such a s job seeking, p e r s o n a l f i n a n c i a l
management, and s o c i a l s k i l l s .
2. Congregate Meals: Pr imar i l y for t h e e l d e r iy p o p u l a t i o n ,
congregate meals a r e provided i n s e n i o r c e n t e r s , churches, and
schools. This program s e r v e s t h e d u a l purposes of s o c i a l i z a t i o n
and n u t r i t i o n .
3. Outxeach Information and Referral: Many of those in
need o f long term c a r e s e r v i c e s a r e ' n o t f a m i l i a r with t h e
a v a i l a b i l i t y of community-based and home-deiivered s e r v i c e s . A
well p u b l i c i z e d , i d e n t i f i a b l e source of information must be
a v a i l a b l e to anyone on demand.
4. Rehabilitation/Job Training/Sheltered Work: Younger
p h y s i c a l l y and/or mentally d i s a b l e d people can f r e q u e n t l y b e n e f i t
from special training. Job placement assistance supplements this
training. For those whose disabilities preclude functioning
appropriately in unadapted environments, sheltered employment
provides productive roles in a controlled and protected
environment .
5. Transportation: Special transportation services often
make the difference between "housebound at home" and the ability
to maintain social roles in the community. Transportation is
necessary not only for getting to appointments for medical
services and personal business, but also for visiting, shopping,
and participating in recreational and social activities.
Expense, fear of assault, and lack of accessibility contribute to
the difficulties that some individuals experience in using the
general public transportation system.
Alternative Residential Homes
1. adult Foster Care/~rivate Home Care: An individual or
family provides a place of residence, meals, housekeeping,
surveillance, and/or personal care to five or fewer unrelated
individuals. Adult foster care homes are certified by the county
when public monies are being spent for indigent care. If no
public funding is involved, licensing is not required.
2. Supervisory Care ~omes/~ivra te Board and Care Homes :
@ More than five unrelated individuals are provided with housing,
meals, housekeeping, supervision, and minor assistance with
personal care and self-administration of medications. State
licensing is required for supervisory care homes.
3. Congregate Housing: Individuais keep their own
apartment in a complex which may make available meals, escort and
transportation, some housekeeping, and personal care.
Institutional Care
Long term care institutions, which include nursing
homes, are important when the person's need for assistance
becomes so intense that 24-hour care is required. In addition to
shelter, meals, and housekeeping, nursing homes provide
professional nursing care, personal assistance, therapies, direct
adminstration of medications, activities, religious and social
services, and therapeutic diets according to physician's orders
and a care plan developed by the professional staff. Nursing
homes may serve as convalescent centers after an acute illness or
accident, or they may become the long term home of the person,
depending on the rehabilitation potential shown. Three levels of
care exist: (1) personal care, which is less medically oriented
@ and serves people who are less disabled but who lack social
supports ; (2) intermediate care, which serves a moderately
disabled group who r e q u i r e more than personal care o f f e r s ; and
( 3 ) s k i l l e d nursing c a r e , which provides i n t e n s i v e nursing and
personal care s e r v i c e s t o the most dependent population. S t a t e
l i c e n s i n g is required. In Arizona approximately 80% of nursing
home beds a r e licensed for s k i l l e d care.
a APPENDIX A-2
GOVERNOR'S TASK FORCE ON
LONG TERM CARE INSURANCE
Review of Current State and Federal Activity
Studies Currently Underway or Authorized
1. Virginia: HJR 210 - A. resolution to continue the Joint
Subcommittee Study concerning alternatives for long term state
indigent health care begun in 1984.
S.543 - Established the Long Term Care Council to
develop community based continuum of care services for the
elderly in order to deter unnecessary institutionalization.
2. Minnesota: S.543 - Instituted a Feasibility Study of a
home equity conversion program to finance long term health care
and long term health care insurance.
3. Geotgia: 5.128 - Established the Senate Private Long
Term Care Insurance Study Committee to study the availability of
long term care insurance in the state and to explore various * public policy intitiatives which might encourage greater private
sector involvement.
4. Alaska: The Governor has appointed a task force to
study long term care, focusing on public and private financing.
Task Force is chaired by Commissioner, Department of Health and
Social Services.
5. Arizona: The Governor has appointed a task force,
chaired by the Director of the Department of Insurance and
charged with indentifying methods of promoting private sector
financing of long term care.
6. Iowa: The Governor implemented a task force in 1984 to
review the current system of providing long term care to the
public. The task force developed a set of recommendations,
including the establishment of a long term care commission by
January 1, 1986.
7. I l l i n o i s : H.306 - A task force within the Department of
Insurance to study a private market approach to long term care
insurance has been established.
@ 8. #an~as: The Department of Health and ~nvironment implemented a study of long term health care in March, 1985.
9. New Mexico: L e g i s l a t u r e e s t a b l i s h e d a task force t o
study p r e s e n t long term care system and formulate a s t a t e w i d e
@ long term care plan including a community based s e r v i c e s system.
10 North Carolina: L e g i s l a t u r e authorized t h e L e g i s l a t i v e
Research Commission t o study t h e a v a i l a b i l i t y and coverage of
long term c a r e insurance and t o make recommendations t o overcome
any b a r r i e r s .
11. Texas : L e g i s l a t u r e authorized the S t a t e Board of
Insurance t o study t h e f e a s i b i l i t y of providing long term care
b e n e f i t s through p r i v a t e i n s u r e r s .
States Proposing Studies
1. Maryland: HJRS - Would have e s t a b l i s h e d a t a s k f o r c e t o
examine the s t a t e ' s c u r r e n t system of continuum of care s e r v i c e s
for f r a i l e l d e r l y and d i s a b l e d i n d i v i d u a l s . F a i l e d t o pass.
2. Hawaii: H.450 - Would develop a plan t o implement a
s i n g l e access system t o long term h e a l t h care s e r v i c e s i n
H a w a i i . Would provide t w o functions: 1) pr e-screen a p p l i c a n t s
who a r e , or w i l l be within 180 days of i n s t i t u t i o n a l i z a t i o n ,
e l i g i b l e for Medicaid, and 2) determine a program of community
based s e r v i c e s most a p p r o p r i a t e t o prevent unnecessary
i n s t i t u t i o n a l i z a t i o n .
3. North Dakota: SCR 4025 - Would have i n i t i a t e d an
i n t e r i m study on the a v a i l a b i l i t y and coverage of h e a l t h care
insurance plans providing long term care insurance. Has been
withdrawn from c o n s i d e r a t i o n .
4. Connecticut: HCB 5109 - Would c r e a t e a t a s k force t o
study the need f o r a p r i v a t e o r state administered program
o f f e r i n g long term h e a l t h care insurance a t group r a t e s .
HCB 6435 - Would allow t h e Commissioner of Health Care
S e r v i c e s t o e s t a b l i s h a p i l o t preadmission screening program for
a p p l i c a n t s t o long term care f a c i l i t i e s t o c o l l e c t d a t a on t h e i r
var ious c o n d i t i o n s and needs.
5. New Mexico: H.180 - Would e s t a b l i s h a t a s k f o r c e t o
study i n depth t h e p r e s e n t long term c a r e system, ( i n c l u d i n g
p r i v a t e , s t a t e , and voluntary programs) and formulate a s t a t e -
wide long term care plan including a community based s e r v i c e s
system.
6. Maine: The Department of Human S e r v i c e s has proposed t o
e s t a b l i s h e d a study group on long term c a r e by June, 1986.
C. Existing State Laws or Regulations Dealing With Lonq
Term Care
Wisconsin: 9647.01-.08, Wisconsin S t a t u t e s . Continuing
Care Contracts: Continuing c a r e c o n t r a c t s a r e not considered t o
be insurance under Wisconsin law. They a r e entered i n t o d i r e c t l y
between the h e a l t h care provider and the i n d i v i d u a l ; the
provider must o b t a i n a permit from the insurance Commissioner
before o f f e r i n g such c o n t r a c t s . The provider is under strict
s t a t u t o r y g u i d e l i n e s regarding c o n t e n t s , d u r a t i o n , and c o s t of
t h e c o n t r a c t . Contracts are both r e s t r i c t i v e and expensive.
§15.105(10) Wisconsin S t a t u t e s . ~ s t a b l i s h e d the ~ o a r d
on Aging and Long Term Care.
2. Arkansas: S82-2208 t o 2233, Arkansas S t a t u t e s . Long
Term Care: E s t a b l i s h e d the Long term Care F a c i l i t y Advisory
Board t o r e g u l a t e long term care f a c i l i t i e s and f a c i l i t y
a d m i n i s t r a t o r s .
3. West Virginia: 616-5D-1 t o 5, West V i r g i n i a Code.
Continuum of Care: E s t a b l i s h e d the Coninuum of Care Board t o
promote and implement a system of nursing, medical and s o c i a l
s e r v i c e s f o r t h e e l d e r l y , d i s a b l e d , t e r m i n a l l y ill, and t h e i r
f a m i l i e s . S p e c i f i c a l l y e s t a b l i s h e d the Hospice Care Program t o
provide long term care i n a form other than i n s t i t u t i o n a l i z a t i o n . @ 4. North Dakota: 550-10-.l-01 t o 07, North Dakota Century
Code. Long Term Care ombudsman: Provides f o r t h e appointment of
a long term c a r e ombudsman t o oversee a d m i n i s t r a t i v e a c t i o n s
a g a i n s t long term care f a c i l i t i e s and monitor the development of
f e d e r a l , s t a t e and local laws and p o l i c i e s r e l a t i n g t o long term
care.
5. Color ado : S10-8-401, Colorado Revised S t a t u t e s .
Requires a l l i n d i v i d u a l and group accident and s i c k n e s s p o l i c i e s
t o o f f e r insureds the opportunity t o purchase home h e a l t h c a r e
and hospice c a r e b e n e f i t s .
There is a l s o an i n t e r i m study on h e a l t h c a r e c o s t
containment, which w i l l include i n v e s t i g a t i n g long term c a r e
i s s u e s .
6. Georgia: H.190 was passed t o encourage h e a l t h i n s u r e r s
t o make a v a i l a b l e coverage for long term care s e r v i c e s , e i t h e r as
a p a r t of or a s an o p t i o n a l endorsement t o t h e i r p o l i c i e s .
D. States Proposinq Laws or Regulations Dealinq With Long
Term Care
1. Nebraska: L3 647 - Would r e q u i r e i n s u r e r s t o provide
group long term care insurance p o l i c i e s by June 1, 1986. The
Director of Insurance may adopt r u l e s and r e g u l a t i o n s
e s t a b l i s h i n g standards for group long term c a r e p o l i c i e s .
LE 147 - Would implement a reimbursement system for long
term h e a l t h care f a c i l i t i e s c a r i n g f o r a c u t e l y ill or d i s a b l e d
persons, within c e r t a i n g u i d e l i n e s .
2, New Jersey: S.3085 and S.3087 would r e q u i r e c e r t a i n
i n s u r e r s t o o f f e r group indemnity p o l i c i e s for confinement i n
long term care f a c i l i t i e s .
A.4141 would e s t a b l i s h a New J e r s e y S t a t e Reverse
Annuity Mortgage Program for s e n i o r c i t i z e n s .
A.113 would r e q u i r e h e a l t h i n s u r e r s t o make a v a i l a b l e
long term care insurance for s e n i o r c i t i z e n s and would set
minimum standards for such coverage.
3 , New Pork: S.238 - Would e s t a b l i s h long term h e a l t h care
programs a v a i l a b l e a t home or a t a d u l t care f a c i l i t i e s , o t h e r
than a s h e l t e r for a d u l t s ( e . nursing home). Adult care
f a c i l i t i e s would be considered i n t e r m e d i a t e care f a c i l i t i e s , and
s e r v i c e s would be provided on a community o r i e n t e d b a s i s .
4. Washing ton : H.1168 - Would enact the ~ u r s i n g Home
Insurance A c t , intended t o govern the content and sale o f n u r s i n g
home insurance. Would apply t o group or i n d i v i d u a l p o l i c i e s
covering any type o f n u r s i n g home c a r e ; such p o l i c i e s could not
be sold t o i n d i v i d u a l s receiving or e l i g i b l e for Medicaid.
5. Michigan: H.4082 - Would r e q u i r e an i n d i v i d u a l , group
or b l a n k e t n u r s i n g home care insurance p o l i c y t o cover c a r e and
s e r v i c e s t h a t a r e not covered by Medicare or by a Medicare
Supplemental policy. Requires t h a t t h i s type o f p o l i c y cover
intermediate c a r e c o s t s and c u s t o d i a l care c o s t s .
6. Illinois: S.389 - Would amend the I l l i n o i s Insurance
Code r e q u i r i n g a l l h e a l t h and accident insurance p o l i c i e s t o
cover care and t r e a t m e n t o f ~ l z h e i m e r ' s d i s e a s e ( i n c l u d i n g
h o s p i t a l i z a t i o n , nursing home care, surgery and medication) .
These p o l i c i e s must include d i s a b i l i t y income p r o t e c t i o n .
7. Connecticut : H.5416 - Would e s t a b l i s h a s t a t e
administered long term h e a l t h c a r e insurance program f o r the @ e l d e r l y and d i s a b l e d
Other S t a t e A c t i v i t y
@ 1. Minnesota: S.725 - Would exempt from s t a t e income tax any pension income which is used to purchase long term c a r e
insurance. (1985)
2. West V i r g i n i a : H.1521 - Would allow a p e r s o n a l income
t a x exemption f o r taxpayers providing g e n e r a l maintenance and
c a r e to c e r t a i n people (i.e.: family members) 65 or over; l i m i t e d
t o t w o exemptions per year. (1985)
3. F l o r i d a : S.17 - Would c r e a t e a commission f o r t h e study
of c a t a s t r o p h i c i l l n e s s and a c c i d e n t compensation; would study
the need f o r a procedure t o compensate persons who a r e s u b j e c t e d
to c a t a s t r o p h i c i l l n e s s e s or a c c i d e n t costs which a r e compensated
by insurance or another t h i r d p a r t y . (1985)
4. C a l i f o r n i a : AB 1344 - Would allow a t a x c r e d i t of 50%
f o r t h e reasonable costs of h e a l t h maintenance c a r e of a
t a x p a y e r ' s dependent who is cared f o r i n t h e home. A l s o provides
f o r a 50% t a x c r e d i t f o r t h e cost of long term h e a l t h care
insurance. (1985)
5. Idaho: H-84 - Would allow a t a x deduction f o r t h e cost
of nursing home care insurance. (1985) a 6. ~ a s s a c h u s e t t s : S.1043 - Would mandate t h e i n c l u s i o n of
c u s t o d i a l or nursing home care costs f o r p e r s o n s w i t h Alzheimer's
Disease i n h e a l t h insurance p o l i c i e s . (1985)
7. Michigan: 5.102 - Would provide h e a l t h insurance
coverage be extended to cover p a r e n t s of t h e insured who r e s i d e
i n t h e i n s u r e d ' s home. (1985)
F. F e d e r a l A c t i v i t y
1. B i l l s d e a l i n g with long t e r m care
The Long Term Care Insurance Promotion and p r o t e c t i o n
A c t ( R e p r e s e n t a t i v e Wyden, Oregon) - Provides f o r t h e
e s t a b l i s h m e n t of a t a s k f o r c e charged with reviewing t h e s t a t e of
t h e insurance i n d u s t r y w i t h r e g a r d to long term c a r e and making
recommendations to Congress for voluntary g u i d e l i n e s t o be issued
t o state r e g u l a t o r s .
Home Equity Conversion, S.324 ( S p e c t e r ) - Home Equity
Conversion A c t of 1985. F a c i l i t a t e s home e q u i t y conversions
through s a l e - l e a s e b a c k s . N o t s p e c i f i c a l l y f o r f i n a n c i n g long
@ term c a r e , and a v a i l a b l e to homeowners r e g a r d l e s s of age, but noted due t o long term care f i n a n c i n g i n t e r e s t in t h i s
approach. Introduced in s i m i l a r form in 1983 s S.1914, which
generated controversy about homeowner r i g h t s under the
@ arrangement. Outlook uncertain.
Medical Expense Deduction, H.R. 803 (Lent) - ~ e d i c a l
expenses ( i n c l u d i n g insurance premiums of persons over 65 or
handicapped would be d e d u c t i b l e without regard t o c u r r e n t income-t
e s t e d l e v e l .
S p e c i a l c r e d i t s , deductions and exemptions for care of
e l d e r l y family members:
S.779 (Heinz) - Income t e s t e d tax c r e d i t for
expenses for the c a r e of an e l d e r l y family member.
Covered expenses include home h e a l t h , homemaker and
a d u l t day care, r e s p i t e c a r e , and c e r t a i n s u p p l i e s and
equipment. Introduced i n 1983 a s S.1301.
S.263 (Metzenbaum) and H.R. 468 (Snowe) - Similar
b i l l s f o r deduction in household t h a t includes
"dependent" with Alzheimer ' s.
H.R. 467 (Snowe) - Extend dependent c a r e c r e d i t f o r
expenses of dependent i n c a p a b l e o f s e l f - c a r e r e g a r d l e s s
of whether expenses w i l l permit dependent t o be
g a i n f u l l y employed.
H.R. 723 (Spence) - Deduction f o r c o s t o f m e d i c a l l y
necessary c u s t o d i a l c a r e for e l d e r l y .
H.R. 406 ( Q u i l l a n ) - Tax c r e d i t for households with
e l d e r l y d i s a b l e d persons.
R.R. 644 (Conte) - Tax c r e d i t for expenses of c a r e
for c e r t a i n e l d e r l y family members.
H.R. 915 (Byron) - Deduction f o r expenses of
maintaining dependent age 64 or over.
H.R. 196 (Oakar) - A d d i t i o n a l p e r s o n a l exemption
for handicapped taxpayer, spouse or dependent .
2. Expansion of Medicare to Cover Long Term Care:
Medicare/~edicaid Coordination S .780 (Heinz) - Health
Care Coordination of 1985. Optional program for
Medicare/Medicaid dual e l i g i b l e s except ESRD benef i c i a r i e s .
Enrollees would be required t o have access t o a l l Medicare A/B
s e r v i c e s ; a l l Medicaid s e r v i c e s t o which the e n r o l l e e would
otherwise be e n t i t l e d ; case management including h e a l t h @ assessments; home-maker, home h e a l t h a i d e , and a d u l t day h e a l t h
services if determined appropriate by the state; and any other
services determined by the state to be needed to avoid
@ institutionalization. Payment would be 95% of the AAPCC and the method could be by the usual Medicare and Medicaid methods, by
HMO/CMP capitation, or by negotiation. Medicare and Med~caid
waivers would be granted from requirements such as
"statewideness", and numerous enrollment, reporting, and similar
requirements would be established.
Medicare demonstrations: H.R. 1163 (Hughes) - Would
establish demonstrations to make per diem payments to Medicare
beneficiaries and to Medicaid enrollees who are receiving, or
eligible to receive covered SNF of ICF nursing home services.
Payments would be used for non-institutional living arrangements
and would be 50% of the state's average daily benefit payment for
nursing home services (bill is unclear if single overall average
or separate rates for XVIII-SNF, XIX-SNF and XIX-ICF would
apply)
S. 788 (Bradley) - Senior Citizens Independent Community
Care Act. Would provide for a long term care demonstration
program in four states to test cost-effectiveness of prepaid
capitation for acute and long term care services to elderly
Medicare beneficiaries. Services include all Part A and B
services, homemaker/home health aide care, facility-based adult
day care, respite care and service coordination. Very similar
bills were introduced in the 98th Congress as S.1244 (Packwood),
H.R. 3710 (Harkin) and H.R. 3838 (Rangel).
S.751 (DIAmato) and H.R. 67 (Bilirakis) - Both bills
would establish demonstration programs for beneficiaries with
Alzheimer ' s.
Medicare Coverage Expansion, S.778 (Heinz) - Home Care
Protection Act of 1985. Expands Medicare home health services to
include coverage of nursing care and home health aide services on
a daily basis for up to 60 days, with an additional 60 days upon
physician certification of medical necessity. A similar bill was
filed in 1984 by Representative Waxman but has not been re-filed.