Long-term tab

As a former investment banker, Henry Purchase was no stranger to paperwork. But even with that professional background, Purchase said, he was not prepared for—nor did he fully understand—the mounds of forms and myriad regulations he sorted through when he moved his mother, Dorothy, into a nursing home nearly a decade ago.

And the administrative headaches were just one small part of what Purchase experienced during that process. For years, he and his wife paid someone to care for his aging mother so she could live with them. In the beginning, the service was for four to five hours a day. Then, as Dorothy's dementia worsened, her caregiver's hours increased to 12 hours a day, seven days a week, at a rate of $15 an hour.

“I went through $30,000, $40,000 before I knew what happened,” Purchase said. “There is no amount that Medicare or Medicaid can ever really cover,” he continued, adding that his mother eventually “gifted” her income and assets to Stoddard Baptist Nursing Home in Washington, D.C., so she could become eligible for Medicaid to pay for her services.

Purchase's experience in finding the right care for his mother, who died in 2007, is not uncommon in the U.S., where more than

10 million Americans need long-term services to help them with their daily activities. Of those, about half are over the age of 65, while the remaining half are younger people with disabilities, according to figures from the Kaiser Family Foundation.

Medicaid is the primary payer for these services, so examining how to pay for long-term care services certainly has a place in any entitlement-reform discussions in Washington. In 2009, about $240 billion was spent on long-term care services in the U.S., with Medicaid paying for about 43%. Medicare, meanwhile, picked up less than one-quarter of the tab.

Determining who pays for long-term care services for the elderly and those with disabilities has been a thorny issue for patients, families, and federal and state policymakers for decades. Federal lawmakers revisit the issue about every 20 years, according to Bonnie Burns, a long-term care insurance expert who has served for years as a consumer representative on the National Association of Insurance Commissioners.

“It's a huge national problem, and when people are struck with this in their own families, it's relatively invisible,” said Burns, a training and policy specialist consultant at California Health Advocates, a not-for-profit Medicare advocacy group established in 1997. “Everyone builds their own system based on what they know and what's available to them in their community,” she said. “I have adult kids call me and say: 'Where do I start? My mom can't live alone anymore.' ”

For the first time in decades, policymakers tried to tackle the issue of long-term care services through the Community Living Assistance Services and Supports, or CLASS, Act that was included in the 2010 healthcare reform law. The program stopped before it even got started when HHS Secretary Kathleen Sebelius announced in the fall of 2011 that HHS pulled the plug. The department couldn't find a way to make the numbers work for the program, which was conceived as a voluntary and self-sustaining insurance plan, with HHS collecting premiums from future beneficiaries.

House Republicans, who envisioned the birth of a crippling new entitlement program, were determined to repeal this portion of the Patient Protection and Affordable Care Act to ensure it would never resurface. They succeeded in January as part of the fiscal cliff legislation. But lawmakers didn't give up on the issue entirely, as they also created a long-term care commission to examine the issue and make recommendations to Congress in six months.

Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), House Speaker John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.) have each named three appointees, but the commission will not be complete until the Obama administration names its three choices to the 15-member panel. A spokesman for the White House said in an e-mail that the administration had no personnel announcements as of March 8.

Connie Garner, executive director of advocacy group Advance CLASS, said even if the commission agrees on a long-term care solution, that recommendation must still make its way through the House and Senate.

“There has to be a will on the part of Congress on this issue,” said Garner, former policy director for disability and special populations at the Senate Health, Education, Labor and Pensions Committee under Sen. Edward Kennedy (D-Mass.) “I really do not understand how you can have an entitlement reform program on one day and this conversation on the other day.”

Left unaddressed, the problem will only worsen. HHS' Administration on Aging estimates there will be 72.1 million people 65 or older in 2030—more than twice their number in 2000.

“So how do you do that?” said Larry Minnix, president and CEO of LeadingAge, an association that represents not-for-profit long-term care providers. “Do you make Medicaid bigger? I don't think so. Do you make a Medicare Part E, F, G, H, I, J, K? I don't think there's much appetite for that. We've set up a blue-ribbon panel task force to look at these issues.”

Minnix said he hopes the new commission will address the roles and responsibilities of individuals, government and the private sector, which he said could come up with competitive insurance products. “We believe it will take all three of those working together to create some kind of unified, coherent and efficient approach to it,” he said.

The way it works today is anything but coherent. Policy and funding responsibilities are spread across an array of local, state and federal agencies, and patients and their families “are affected in really terrible ways,” said Burns, of California Health Advocates. For instance, Medicare is designed to pay for skilled-nursing services for up to 100 days. But the moment patients don't meet Medicare's criteria—for which patients are evaluated each day—they lose that coverage.

“Medicare is not a long-term nursing home payment service,” said Alvin Loewenberg, president and CEO of skilled-nursing provider Morningside Ministries in San Antonio. “It will pay for the first 20 days of care at a nursing facility, then the remaining 80 days would be a significant co-pay,” he continued. “They'll pay some of the next 80 days, but a majority is paid by the family or supplemental plan.”

Meanwhile, private-pay rates for nursing homes average about $75,000 a year, making it too costly for many individuals. And it gets more expensive for those who retire at 65 and live another 35 to 40 years. “You have to have a pretty significant nest egg to pay for skilled nursing,” Loewenberg said, adding that some of his residents are as old as 108 and 109.

And even if individuals have the means to purchase long-term care insurance, their options are more limited now than before. In the past few years, companies such as MetLife, Unum Group and Prudential have all dropped out of the long-term care insurance market.

“Companies say they underestimated some of their costs,” Burns said, adding that the companies also underestimated who would keep their policies. “Not nearly as many dropped them as planned, so they have more claims than they thought they'd have.”

Pricing concerns led Richmond, Va.-based Genworth Financial to announce last week that it will suspend sales of its long-term care insurance products in California—California Choice and Choice Partnership—effective March 21. “It is important that the products we offer are both priced to balance the needs of our consumers with our desire to achieve long-term profitability,” Pat Kelleher, president and CEO of Genworth Life Insurance Co., said in the news release. A Genworth spokesman said in an e-mail that the company would not comment beyond its announcement.

Most people who require skilled-nursing care are then left to rely on Medicaid, which is the payer for about 50% of residents at Morningside Ministries in Texas.

“For almost every (Medicaid) resident we take, we lose money,” Loewenberg said. “There are many nursing homes that are limiting the number of Medicaid beds they have available because the reimbursement is so poor,” he continued, adding that Morningside receives about $125 per day from Medicaid, while the cost for a private room is $180 a day.

To be eligible for Medicaid, individuals must meet both financial and medical requirements, and Loewenberg said the latter has become more stringent lately. In Texas, a person's monthly income can't be above $2,130, and his or her assets can't be above $2,000. For couples, those levels are $4,260 for income and $3,000 for assets. Loewenberg said he thinks a long-term care solution in the U.S. should require all individuals to have a stake in that, which could start with encouraging younger Americans to set aside something small—say, 1%—from their paycheck to use when they're older.

As the new federal long-term care commission explores all of the parts to the large and growing problem, Garner of Advance CLASS said she hopes the commissioners will remember that not every population has to be managed the same way, and that a few programs, rather than one national program, might be the best solution. And they can't do it alone, she said.

“The country needs to stand up and say: 'We are taxpayers and we need to care about this.' Unless you die” before needing long-term care, she added, “this is going to happen to you. This is part of the aging process.”

TAKEAWAY: With no solution in sight, paying for long-term care continues to vex families, providers and policymakers.