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Long-term care reform: will consumers sign on?

After three months of discussion and consultation, the long-term care proposals circulating among the Clinton Administration's health care reform task force looked increasingly like the general guidelines proposed by the American Association of Homes for the Aging (AAHA) and the American Health Care Association (AHCA). If this is the consensus position when the Administration's long-awaited plans are released -- and word had it at press time that this would be the case this month -- this means (surprise, surprise) that long-term care will not be a major factor in the principal health care legislation to be sent to Congress.

Instead, it appears that long-term care funding will be addressed in separate legislation that will seek to force consumers to pay a larger share for their own nursing home care, whether directly out-of-pocket or through insurance

policies. Central to this policy will be provisions aimed at eliminating the ability of older Americans to transfer financial assets to family members as a means of qualifying for Medicaid coverage.

The AAHA proposals, "A Partnership in Caring," were unveiled to the press at the association's annual legislative conference in Washington in March. The AAHA package features a new federal catastrophic insurance program for coverage of nursing home expenses incurred after the first 24 months of a nursing home stay. For shorter stays, most consumers would be required to pay for nursing home services with their own resources, including private long-term care insurance. Only the most needy individuals would continue to be subsidized by Medicaid for their nursing home care. In addition, individuals who had sufficient assets would be required to use the income from those assets to pay back the government for expenses covered by the new catastrophic insurance.

The AHCA proposals, "Quality Care For Life," were released one week later. They contain many of the same basic elements as the AAHA plan. "Quality Care For Life" also emphasizes consumers individually purchasing long-term care insurance from the private sector as the primary solution to the soaring Medicaid budgets.

Both the AAHA and AHCA proposals stress the need to close loopholes in financial eligibility for Medicaid as a critical element in resolving the problems facing funding of long-term care. Currently, nearly half of all older Americans entering nursing homes for protracted stays qualify for Medicaid, often by transferring titles to their home and other assets to their children. Under the suggested reforms, this practice would be outlawed and subject to severe penalties. Similar legislation has already been enacted for college loan programs to prevent families from hiding assets that would decrease students' eligibility for financial assistance. AHCA's "Quality Care For Life" proposal would further restrict Medicaid eligibility to patients who are functionally impaired, are unable to perform three of the five Activities of Daily Living (ADL), or who have been diagnosed with Alzheimer's or a related dementia.

AAHA studies suggest that the typical buyer--the older working American--could purchase private sector insurance covering two years of nursing home or home health care for about $1,000 in annual premiums. This represents about 5 percent of that individual's after-tax income. Although the general thrust of health care reform under consideration by the Clinton Administration calls for continuation of health care as an employment benefit, this policy does not apply to proposals to expand the role of long-term care insurance. Most recipients of long-term care benefits are retirees no longer covered by an employee health insurance plan. In addition, the Federal tax code does not clearly give businesses a tax deduction for contributing to their employees' long-term care insurance.

One economist noted that this amounts to a "pre-death benefit" for most recipients, because the overwhelming majority of long-term care patients who stay two or more years in a nursing home do not return to the community. Some observers also questioned the viability of a new federal catastrophic insurance approach in view of the experience with the failed catastrophic coverage sponsored by the Reagan Administration.

AHCA took the initiative in trying to counter these criticisms by commissioning a Gallup Poll on issues related to the financing of nursing home. The poll found that 73% of respondents agreed that "prior to the government paying for nursing home care, an individual or their spouse should first be required to pay a reasonable portion of the basic costs." The poll also reported that 76% of respondents agreed with the statement that, "government should pay the cost of nursing home care only for those who cannot afford it." The strong support on these questions explains why both associations and the Clinton Administration oppose earlier suggestions that government should pay for the first several months of nursing home care for all Americans and designate private sector health insurance as the means of payment for only long stays.

In general, sources close to the Clinton Administration's health care reform task force indicate that the near-consensus between AHCA and AAHA on long-term care financing provides a strong incentive for the Administration's proposals to follow the general guidelines established by the two groups. In addition, the proposal would prevent Republicans from charging that the Clinton Administration "destroyed Medicare and Medicaid," even if it meant that the elimination of the two programs would be replaced by a more rational system. A final justification for adoption of something close to the AHCA and AAHA proposals is that neither would impose a major new financial burden on the federal budget. Instead, greater reliance on private sector long-term care insurance would mesh with the Clinton Administration's call for individual sacrifice among those who can afford it.

That leaves only one group still to be convinced of the soundness of the new policy: the health care consumer. Despite the AHCA Gallup Poll results, it may prove difficult to include the people who are paying the bill within the growing consensus on long-term care reform.
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Title Annotation:View from Washington
Author:Stoil, Michael J.
Publication:Nursing Homes
Date:Jun 1, 1993
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