How long-term care should be financed: the nuts and bolts of a workable public/private partnership.Providing financial assistance for those who need care but legitimately cannot afford it is a realistic government function. Setting payment rates with little or no regard for actual market forces is not.
As has been demonstrated repeatedly throughout our history, the free-enterprise system is by far the most efficient arbiter of purchase decisions as they relate to both quality and price. The most appropriate course for government, therefore, is to substantially disentangle itself from the arena of payment-system design, concentrating instead on appropriate financing approaches and assuring quality care. In a new charge-based payment environment, providers must be willing to accept the concept and risk of a marketplace where fair and open competition will occur.
To produce maximum efficiency and competition to ensure fair pricing and equal access, long-term care long-term care (LTC),
n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. providers must be allowed to establish prices that are acceptable to the free market (probably, in the near future, working in a managed-care-oriented environment). Government would establish the amount it will pay for services (the base price); the difference, if any, would be paid by the patient, either directly or through insurance.
This will, by definition, entail entail, in law, restriction of inheritance to a limited class of descendants for at least several generations. The object of entail is to preserve large estates in land from the disintegration that is caused by equal inheritance by all the heirs and by the ordinary a public/private partnership. Public funds See Fund, 3.
See also: Public will be available only to those in need of public assistance, and then only to the extent necessary. Private funds will be used to purchase noncovered services, pay for the difference between the "base price" (as mentioned above) and the publicly funded portion of the base price, and pay for any covered services covered services,
n.pl the services for which payment is provided under the terms of the dental benefits contract.
a species that causes Q fever in man. that are priced above the base price. Patients will have the freedom to use their own funds (or those of family and friends) to purchase extra services, as well as pay for those services that are priced above the "base price." This would avoid the "all or nothing at all" restrictions inherent in current policy.
Under this proposal, every resident would effectively become economically equal from the providers' point of view. The discrimination against government-funded residents, which providers often find necessary to admit for economic survival under the present system, would be eliminated. Depending on available income and patient acuity acuity /acu·i·ty/ (ah-ku´i-te) clarity or clearness, especially of vision.
Sharpness, clearness, and distinctness of perception or vision. , the government may have to subsidize sub·si·dize
tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es
1. To assist or support with a subsidy.
2. To secure the assistance of by granting a subsidy. many of these patients to one extent or another--but long-term care providers should receive their reasonable market-based charge for every patient, regardless of payer type. In this way, patients will receive the benefits of having true "freedom of choice".
All of this implies some degree of deregulation Deregulation
The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.
Traditional areas that have been deregulated are the telephone and airline industries. . Deregulation of rate-setting within our healthcare delivery system will reduce administrative expense and should produce heretofore untapped efficiencies on the part of long-term care providers, as they strive (often for the very first time) to compete for every resident, not just private-pay residents. Depending on the goals and objectives finally selected, a new and innovative system could even cost fewer government dollars than are currently being expended ex·pend
tr.v. ex·pend·ed, ex·pend·ing, ex·pends
1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend.
2. , while potentially yielding higher-quality patient care.
Now the big question: If free-market forces determine the charges set by each individual provider, what portion of those charges should be funded by government? I would submit that the answer encompasses four basic steps:
Step 1: The Income/Asset-Based Health Benefit Schedule
As suggested, any new program should make maximum use of available private resources, while providing assistance only where it is truly required. Therefore, maximization of private resources should include tighter restrictions on asset transfers, greater use of reverse mortgage programs, and the use of other tools ensuring that public funds do not supplant sup·plant
tr.v. sup·plant·ed, sup·plant·ing, sup·plants
1. To usurp the place of, especially through intrigue or underhanded tactics.
2. private resources. An equitable equitable adj. 1) just, based on fairness and not legal technicalities. 2) refers to positive remedies (orders to do something, not money damages) employed by the courts to solve disputes or give relief. (See: equity)
EQUITABLE. health benefit schedule could be developed using readily available income distribution tables, disposable income disposable income
Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also data, and the average charges applicable to long-term care services within each geographic area. While social policy and fiscal limitations should play a part in designing an appropriate benefit schedule, we would suggest that "available income" should:
* include all current income (including interest and dividends), as well as all income attributable to any form of asset transfer that occurred in the preceding ten-year period, including annuities and trust fund transfers of all varieties;
* potentially include an estimated rate of return on significant non-income-producing assets; and
* exclude income and assets necessary for the reasonable support of a noninstitutionalized spouse spouse A legal marriage partner as defined by state law and/or dependent children, if any.
Benefits available would depend on a weighted scale ranging from 0 to 100, reflecting available income. For example, an individual below the poverty level might receive a 100% benefit, while a middle-income individual's health benefit might be set at 50%. An individual who can realistically afford the full cost of long-term care would be expected to do so with no assistance. Again, this is in contrast to the current Medicaid Medicaid, national health insurance program in the United States for low-income persons; established in 1965 with passage of the Social Security Amendments and now run by the Centers for Medicare and Medicaid Services. and Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. systems, under which the choices are essentially either a 0% benefit or a 100% benefit.
Step 2: The Base Price
The next step is to determine the payment amount that would apply in the case of a 100% benefit. This amount could be set at the median cost of purchasing nursing home services at the semiprivate sem·i·pri·vate
Shared with usually one to three other hospital patients: a semiprivate room.
Adj. 1. room rate for each state, region, or other meaningful geographic area. There would be no differentiation based on type of provider (for-profit versus nonprofit A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive.
Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. , hospital-based versus freestanding free·stand·ing
Standing or operating independently of anything else: a freestanding bell tower; a freestanding maternity clinic. , etc.); because the product being purchased is the same in all cases, the legal tax status or site of business of the provider is of no relevance.
A simple one-page cost report, including a complete schedule of charges, would be required annually of all facilities in order to determine actual charges and geographic cost differences on an ongoing basis.
Step 3: Adjustments to the Base Price
In determining the benefit level applicable to any given individual, geographic cost differences, as well as the individual's specific care needs, must be considered:
* Geographic price differences. Since costs and charges will vary geographically because of variations in labor costs and other factors, the base price would be adjusted to account for these differences. Appropriate adjustment factors would be developed from the cost and charge data submitted annually by all facilities.
* Required service intensity. To ensure full access for people at all care levels, as well as to ensure that fair and appropriate prices will be paid to providers, individual patient care needs must be considered when setting payment levels. To achieve maximum efficiency, the method of measuring patient acuity should be based on an existing measuring tool, such as the MDS MDS,
n See temporomandibular pain-dysfunction syndrome.
MDS 1 Maternal deprivation syndrome, see there 2 Myelodysplastic syndrome, see there system.
Step 4: The Payment Mechanism
Upon entry into the system, every potential resident will be assessed relative to assets, income, and acuity. These assessments could be performed through the same mechanisms used to presently determine Medicaid eligibility, or they could be performed by some type of case-management organization. The results of an individual assessment will be expressed as a factor that is then multiplied mul·ti·ply 1
v. mul·ti·plied, mul·ti·ply·ing, mul·ti·plies
1. To increase the amount, number, or degree of.
2. Mathematics To perform multiplication on. by the 100% benefit rate to determine a per-day amount (see "System Function" below).
The individual is then given a health benefit certificate indicating the per-day benefit amount that the evaluating agency has determined to be appropriate for that person. This certificate can be used toward the purchase of long-term care services in any nursing facility that the potential resident may choose. (Periodic recertification recertification Recredentialing Graduate education A process in which a professional is periodically re-evaluated–eg, every 10 yrs by an accrediting body to assure continued provision of safe, high-quality health care of the individual would take place, as it currently does under Medicaid, with adjustments to the benefit amount based on any changes in the individual's income or acuity status.) Since the health benefit amount is based on the geographic median charges for long-term care services (as adjusted for acuity), and not on some artificial concept of accounting "cost," individuals will be able to choose among all the long-term care nursing facilities within their vicinity. The prospective resident will moreover be free, if he or she so desires, to choose more expensive facilities or options by paying the additional charges out of pocket.
The important point is that a government established level of service will be provided at no out-of-pocket cost to the truly indigent indigent 1) n. a person so poor and needy that he/she cannot provide the necessities of life (food, clothing, decent shelter) for himself/herself. 2) n. one without sufficient income to afford a lawyer for defense in a criminal case. . More costly services will be available to those who want and are willing to pay for them. When government benefit levels are set in this manner, providers will be competing for each and every patient. That competition can only yield a better quality product at the lowest possible price.
It should further be noted that these same payment concepts could apply to home health services health services Managed care The benefits covered under a health contract , assisted living as·sist·ed living
A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. , adult day care, residential care, and other forms of long-term care, as well. This could be accomplished either by creating a separate acuity system for each of these services or by applying an acuity-related percentage to the nursing home schedule of benefits. For example, the home healthcare benefit could be set at 50% of the value applicable to nursing home care, 75% for residential care, etc. If the relative percentages among long-term care services are established based on costs, there will be no bias toward any alternative service.
Today's Medicaid-based long-term care financing systems fail to meet the objectives of a rational reimbursement Reimbursement
Payment made to someone for out-of-pocket expenses has incurred. system (see "General Objectives," p. 66), or do so only minimally. If nursing facilities are to survive the impending im·pend
intr.v. im·pend·ed, im·pend·ing, im·pends
1. To be about to occur: Her retirement is impending.
2. train wreck train wreck Medtalk A popular term for a multiproblem Pt in critical condition posed by baby-boomer demands, significant changes are needed in the funding system a system or scheme of finance or revenue by which provision is made for paying the interest or principal of a public debt.
See also: Funding . The expected quality of care will not be achieved otherwise. It is incumbent upon providers to communicate--continuously, consistently, and convincingly--with their state and federal elected officials regarding the urgent need for change and the specifics, as suggested above (and summarized in "System Function," p. 68) of a reasonable financing system.
Steven C. Wolf C. Wolf is the official mascot of the Erie SeaWolves, a Minor League Baseball team in Erie, Pennsylvania. The SeaWolves are the Double A affiliate of the Detroit Tigers Major League Baseball team. C. Wolf's History
C. Wolf made his debut June 20, 1995, at Jerry Uht Park. is President of Eldercare eld·er·care
Social and medical programs and facilities intended for the care and maintenance of the aged. , Inc., Belleville, Illinois Belleville is a city in St. Clair County, Illinois, United States. The population was 41,410 at the 2000 census. It is the county seat of St. Clair County,GR6 . For further information, phone (618) 234-2273. To send your comments to the author and editors, e-mail firstname.lastname@example.org.
RELATED ARTICLE: General Objectives
To be successful, a new long-term care payment system must meet the following objectives:
* Promote quality. An appropriate system will encourage both quality care and quality of life for long-term care residents. Toward that end, the system should foster increased family involvement in both direct-care planning and cost-effectiveness.
* Be affordable. The payment plan must be designed in ways that will make it affordable, considering realistic limitations on personal, state, and federal revenues.
* Encourage equal access. Long-term care residents must have freedom of choice when selecting a care facility. Furthermore, the system should encourage equal access for all residents regardless of payment source.
* Ensure proper allocation of resources allocation of resources
Apportionment of productive assets among different uses. The issue of resource allocation arises as societies seek to balance limited resources (capital, labour, land) against the various and often unlimited wants of their members. . Public funding Public funding is money given from tax revenue or other governmental sources to an individual, organization, or entity. See also
* Eliminate nonessential non·es·sen·tial
Being a substance required for normal functioning but not needed in the diet because the body can synthesize it. overhead (administrative simplicity). Administrative expenses not essential to the provision of care should be eliminated for both providers and government. A properly designed long-term care payment plan should reduce paperwork and decrease the dependence on sophisticated and expensive accounting and legal expertise. There-duction of these unnecessary overhead costs overhead costs
see fixed costs. should, in turn, provide additional funds to enhance the quality of services.
* Encourage a public-private partnership Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3. . Overall design of the system should be such that it encourages the development and utilization of effective private insurance products, thus minimizing public expenditures.
* Vary payment amounts by patient acuity level. To ensure that the medical and other needs of long-term care residents are properly met, the methodology's design should allow for payment variations based on individual resident acuity (i.e., a case-mix system).
--Steven C. Wolf
RELATED ARTICLE: System Function
Following are some examples of how this system could function. Please note, however, that all price and acuity-level information is purely hypothetical Hypothetical is an adjective, meaning of or pertaining to a hypothesis. See:
Assume a patient classification system that includes nine levels of acuity, with Level 5 equal to the median observed acuity as measured, perhaps, by a derivative derivative: see calculus.
In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. of the current MDS system. Further assume that the following resource utilization weights were determined through a resource analysis study and are applicable for each individual acuity level. Thus:</p> <pre> Level # Relative Resource Utilization
(See Note) 1 (Lowest Acuity)
0.80 2 0.85 3
0.90 4 0.95 5 (Median Acuity)
1.00 6 1.10 7
1.20 8 1.30 9 (Highest Acuity) 1.40 NOTE: Assumes that relative weights have been factored to adjust only variable resource price/values. </pre> <p>Next, assume that the following table, which would be developed from existing data relative to income distribution (and other factors including social policy and fiscal considerations), is used to determine the percentage value to be applied to a 100% benefit amount:</p> <pre> Income Category Available Income Benefit Percentage (Single Individual) A $0-$15,000 100% B $15,001-$20,000
95% C $20,001-$25,000 85% D
$25,001-$30,000 65% E $30,001-$40,000
40% F $40,001-$50,000 20% G
Over $50,000 0% </pre> <p>These two tables are then combined into a single table yielding a benefit percentage based on available income and acuity:</p> <pre> Acuity Level
Income Category A B C D
E F G 1 (Lowest Acuity) .80 .76 .68 .52 .32 .16 0 2 .85 .81 .72 .55 .34 .17 0 3
.90 .86 .77 .59 .36 .18 0 4 .95 .91 .81 .62 .38 .19 0 5 (Median Acuity) 1.00 .95 .85 .65 .40 .20 0 6 1.10 1.05 .94 .72 .44 .22 0 7 1.20 1.14 1.02 .78 .48 .24 0 8
1.30 1.24 1.11 .85 .52 .26 0 9 (Highest Acuity) 1.40 1.33 1.19 .91 .56 .28 0 </pre> <p>Assume that the 100% benefit rate for a given geographic region is the median private pay charge for a semiprivate room. For 2005, assume that this rate is determined to be $140 per day. From the chart above, then, we can see that an individual whose acuity level falls at the median (Level 5) and who has no available income (Category A) would receive a health benefit certificate good for $140 per day toward the purchase of long-term care (a factor of 1.00 from the chart above times $140). That individual could choose any facility he/she desires. If the chosen facility's rate for a Level 5 resident was more than $140, the prospective resident would have to either pay the difference (or get relatives or friends to do so on their behalf), or use private insurance to pay the difference. But since the $140 figure is based on the median charge for a Level 5 resident in that specific geographic area, the resident should have little or no difficulty locating a quality facility that will accept the $140 as payment in full.
As another example, assume that an individual is determined to require care at Level 9 and has available income that falls within Category E ($30,001-$40,000). The health benefit percentage for this individual would be 56% (from the chart above) and the benefit amount would be $78.40 per day ($140 x 0.56). This is considerably less than the benefit amount for the individual in the first example because, even though this person had a much higher acuity, he/she also had a much higher available income.
--Steven C. Wolf