1. Private Financing of Long Term Services and Supports in Massachusetts Christine E. Bishop Schneider Institutes for Health Policy Heller School for Social Policy and Management Brandeis University Long-Term Care Financing Advisory Committee June 18, 2009

2. 22 I. Introduction: Public interest in private financing for LTSS for seniors II. Private resources for LTSS III. Private service use IV.Public Policy Options

3. 33 I. LTSS for Seniors * a Private Responsibility l An individual responsibility  First payer: individual income / wealth l A family concern  Family care from spouse, daughters, sons l A Matter of Choice (like other consumption choices)  Where and how to live, with whom  Markets serve consumer choice (?) l State safety net for poor /impoverished seniors * with disability  Low private resources trigger Medicaid  If private family care, income/wealth become less adequate  more spending by public programs *Note: Private resources also first payer for many younger persons with disability

4. 44 But Private Financing is a Public Policy Concern l Consumer protection for private service purchasers l Private financing capacity complements public spending l Private utilization may crowd out – or enhance opportunities for -- public utilization l Unmet need for middle-income consumers  Lack of access to “affordable” services?  Market prices restrict private use  hardship, poor health outcomes Do Private Markets Give Massachusetts Seniors Choice?

5. 55 II. Private Capacity for LTSS l Informal support l Income and wealth (including housing wealth) l Long Term Care Insurance

6. 66 Private Resources for LTSS Security l 52% of elders at age 65 expected to need services for lost functional ability (including cognitive) for 1+ years (simulations, Kemper 2005) l Most will use informal care  Availability of adult children, other relatives? l Paid care at home can fill need gaps l BUT 16% will have costs over $100,000  Extensive paid care at home  Residential care

7. 77 Need for LTSS Resources (Informal and Financial) Depends on Time in Need AND Type of Services Used Simulated Distribution of Years of LTSS Need at 65 Kemper (2005)

8. 88 Most Community-Resident Elders with Disabilities Rely on Informal Care Liu Manton Aragon (2000) 1994 NLTCS

9. 99 80% of Community Elders’ 5.3 billion Care Hours were Unpaid (1994) Liu Manton Aragon (2000) 1994 NLTCS

10. 10 l For Massachusetts, estimated 690,000 persons involved in caregiving at any one time l At $11 per hour, estimated value of $8.8 billion annually l Will Informal Support Remain Available?

11. 11 Increased longevity for both men and women increases the proportion married at advanced ages

12. 12 The oldest old will have fewer adult children in 2030 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 1895-1899 1985 1905-1909 1995 1915-1919 2005 1925-1929 2015 1935-1939 2025 Birth Years/Year Age 85-89 Mean Children Ever Born

13. 13 Paid Services Capacity to Finance does Not Match Need -- Older Elders Have Less l Had lower earnings during working life l Have spent on health costs l Triple jeopardy for widows:  Women had lower earnings and pension benefits  Husband’s pension may not continue  Spending on spouse last illness

14. 14 Distribution of LTSS Spending Simulated for 65-year-old (2004) Kemper (2005)

15. 15 Most Seniors 80+ Are Not Poor But Few Can Afford to Pay for Extensive LTSS out of Income

16. 16 Challenging to Find Data on Assets Available for LTSS Expenses 2001/2004 SCF, Mermin, Zedlewski &Toohey December 2008

17. 17 What’s Available for Rainy Day? (Social Security and DB Pension Part of Wealth But Spendable only as Income) 2001/2004 SCF, Mermin, Zedlewski &Toohey December 2008

18. 18 Uncovered Health Expenses Decrease Ability to Fund LTSS  Savings a couple aged 65 needs to fund future Medicare B & D and Medicare supplement premiums in retirement with increases expected under current law (EBRI: Fronstin 2006) l For average life expectancy: $154,000 l $282,000 to age 90

19. 19 Health Spending Threatens Retirement Security: Health Spending as % of Median After-Tax Income for 65+ Johnson 2004

20. 20 Risk Pattern of LTSS Need  Ideal for Insurance! l Kevin Beagan

21. 21 Costs Higher in Massachusetts Because LTSS Private Prices are Higher than National

22. 22 Impact of Economic Downturn l Social Security income  No COLA this year, although LTSS costs don’t stop rising l Pension benefits – may be at risk l Financial wealth  Not a large portion of middle-income elders’ portfolio l Housing wealth  Steady for those who LIVE in owned housing Value falls but implicit “rent” also falls  Decline in ability to finance residential alternatives using sale of housing Independent living, Assisted living

23. 23 Housing Wealth l Housing values up 60% between 2000 and 2006 l Value of rental services rises in tandem with home value, so no net gain in theory l But 30% of households nearing retirement (50- 64) extracted equity (Munnell & Soto 2008, Survey of Consumer Finance) l Bursting housing bubble thus leaves some households less able to finance LTSS

24. 24 Opportunity for Better Financial Planning l Seniors should prepare for LTSS needs

25. 25 III. What services do private payers use? l Private Revenue Stream Sustains Access, Good Quality Service for All Users (or not) l Providers Serving Public Clients – Services Accessible to Private Users (or not)

26. 26 Private Pay Rate of Nursing Home Use is Falling (less rapidly than Medicaid use….)

27. 27 Assisted Living l 11,830 units listed in June 2009 l Not all private pay  ElderChoice (MassHousing program for low-income persons with disabilities)  (Group Adult Foster Care: MassHealth)  SSI-G

28. 28 LTSS in the Home = Home and Community Based Services l Home health  Agency l Home care  Agency  Informal hiring l Home services: meals, housekeeping, shopping  Changes in markets that allow older adults to remain in community l Adult day health, adult day care l Coordination of care  Market innovations l Markets tend to be segmented—public only or private only (unlike nursing home)

29. 29 Market Segmentation l Some providers cannot segment their markets  Paid “at the margin” for public services – need base of private payment l Other providers segment private and public markets, supply to each depending on payment  Quality, access likely differ

30. 30 IV. Public Policy to Bolster Private Financing for LTSS

31. 31 Remember Why Private Financing is a Public Policy Concern l Private service purchasers need consumer protection re: quality l Private financing capacity complements public spending l Private utilization may crowd out – or enhance opportunities for -- public utilization l Unmet need for middle-income consumers  Lack of access to “affordable” services?  Market prices restrict private use  hardship, poor health outcomes for those with resources < need LTSS is a Middle-Income Issue LTSS is a Women’s Issue

32. 32 l Consumer information/ quality regulation  Financial instruments to insure for LTSS  Quality reporting and regulation on services to meet LTSS needs Nursing Home Compare Home health care Day care Assisted living Care coordination l Public investment to avoid spenddown, address unmet need  Support informal caregivers — workplace policy  Support information, private planning for LTSS resource needs  Share public infrastructure for coordination  Training for LTSS workforce to enhance quality, supply l Access to public-oriented services?  Sliding scale fees based on income? Public Policy Options Relevant to Private Resources

33. 33 Risk Pattern of LTSS Need  Ideal for Insurance! l Kevin Beagan

34. 34 National Options for Social Insurance for LTSS l Kevin Beagan