Health Affairs Web First: Modeling New Ways Of Financing Long-Term Services And Supports

In the United States today, some six million Americans ages 65 and older need long-term help with various routine activities of daily living; that number is expected to reach 15.1 million by 2055. Such assistance costs each person an average of $138,000 over a lifetime. While Medicaid covers these services for Americans with certain disabilities and limited incomes and assets, the number of middle-class Americans purchasing private long-term care has declined in the past decade, meaning that many could eventually turn to Medicaid for assistance.

Policymakers believe that more Americans would purchase long-term care if the plans were changed and the costs reduced. A new study by Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson, being released as a Web First by Health Affairs, offers the first look at some new potential consumer choices, by examining three new insurance options and simulating their costs and distributional effects.

The three models examined in the study included the following: a program with a front-end benefit that begins after a 90-day waiting period and covers a maximum of two years of need; a catastrophic-only (or back-end) program that begins after a waiting period of two years but provides a lifetime benefit thereafter; and a comprehensive program that begins after a 90-day waiting period and provides a lifetime benefit.

Each option was modeled two ways: as voluntary insurance (and as subsidized and unsubsidized) and as a universal mandatory program for workers. While the authors found “no ideal solution,” by carefully comparing alternatives to each other and the current situation, they identified important differences among the alternatives. If the primary goal is to significantly increase insurance coverage, they concluded that the mandatory options would be more successful than the voluntary versions.

However, if the major aim is to reduce Medicaid costs, they found that the comprehensive and back-end mandatory options would be the most beneficial. “We modeled only a small number of options….However, our project demonstrates that models can help ground discussions in evidence-based evaluations of these tradeoffs,” the authors concluded.

The modeling project for the study, which will also appear in the December issue of Health Affairs, was funded by the SCAN Foundation, AARP, and Lending Age. All the authors are affiliated with the Urban Institute in Washington, D.C.

A briefing about the study findings will take place on Tuesday, November 17, from 9:00-11AM, at the National Press Club in Washington, DC. There will be a live webcast of the briefing, and a live twitter discussion at #LTCFinancing.