We Don’t Care What People Say, Rock ’n Roll Is Here to Stay
—Danny and the Juniors
It does appear that the urgency of the long term care situation has created a new commitment to find workable solutions for abrogating America’s largest unprotected risk. A serious effort is being made to step back and look at where we have been, the true size of the problem, and what basic ingredients are needed to achieve much greater success.
The Class Act, which proved to be actuarially unsound, was surgically removed from The Affordable Care Act and a new Commission on Long Term Care was created when the American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013. The commission was composed of 15 appointees from the President and both parties in the Senate and House of Representatives.
The commission’s final report was published on September 18, 2013 with a nine-to-six bi-partisan vote. Their findings do provide a basic outline of how we might harmonize all the required moving parts into one unified and systemic approach. There is substantial insight into where we need to provide emphasis and guidance. There is recognition of the clear and present danger of inaction. The report was delivered to the President with this final note: “We request your highest attention to this report and urge you to take action to maintain momentum toward creating a long term services and supports system that will meet the needs of all Americans with functional or cognitive needs now and in coming generations.”
In January 2013 a new research project was commissioned by the Long Term Care and Forecasting and Futurism Sections of the Society of Actuaries. This project is entitled “Land This Plane,” is managed by SOA’s Future of LTC Think Tank (of which I have been a member for six years and was named co-chairman in March 2012), and will use the Delphi method for its research. The LTC think tank has more than 70 members, including regulators, actuaries, market/sales leaders and insurance company executives. We have worked constantly to try to find consensus and discern ways to move private insurance solutions forward.
A smaller group was needed for the Delphi approach of subjective opinion consensus-building research; therefore a cohort of 40 experts was created, composed of select members from each discipline category. The project began in February with an initial round of questions that generated six major principles for the second round of questions, completed in June. The final round of questions was completed in October and answered by both the select committee and all members of the LTC think tank.
Roger Loomis, my think tank co-chair, and I reported the final survey results with the help of the Delphi project’s steering committee members—John O’Leary, Steve Schoonveld, Jay Bushey, Ben Wolzenski, Amy Pahl, Brian Grossmiller, Clark Ramsey and John Cutler at the SOA National Convention in San Diego.
You Can’t Always Get What You Want, But If You Try Some Time, You Just Might Find You Get What You Need—The Rolling Stones
These simultaneous efforts to identify a comprehensive structure to solve the massive LTC conundrum clearly complement each other. A preliminary report of SOA’s Delphi project results was given to the Commission on LTC and some of the Delphi conclusions did appear in the commission’s report. Public and private stakeholders are in basic agreement on a vast number of issues.
There Must Be Some Way Out of Here—Bob Dylan
The commission’s mission statement outlines our need to build: “a more responsive, integrated, person-centered, and fiscally sustainable long term services and support delivery system that ensures people can access quality services in settings they choose.”
The commission’s report clearly delineates a role for both public and private initiatives. The statute which created the commission required them to “develop a plan for the establishment, implementation and financing of a comprehensive, coordinated and high quality system that ensures the availability of long term services and support for individuals.”
The report points out that there are currently more than 12 million Americans with functional impairments who rely on long term services and support in their home, community or institution. Federal and state governments finance more than half of this expense. Recognition was given to the fact that aging baby boomers, fewer family caregivers, limited savings, inadequate private insurance, and rapidly increasing pressure on Medicaid are building to a monumental financing crisis. “The need is great. The time to act is now.”
Sometimes the Lights Are Shining On Me, Lately It’s Occurred to Me What a Strange Trip It’s Been—Grateful Dead
To understand the insurance recommendations, we have to begin by facing the same facts as the commission: Private LTCI has been sold for more than 30 years, yet only 10 percent of the available market has been enrolled. Policy issue continues to decline, and 90 percent of the companies in the market 10 years ago are gone. Rate increases are accelerating. And more of the same appears inevitable without a new and more effective strategy.
Singing the same old stale songs is no longer acceptable. It has been recognized that we must find “a balance of public and private financing.” Public resources must be reserved for those in the greatest need, and more private resources must be accumulated to finance long term services and support. Everyone understands that private insurance stands as a firewall to already overburdened Medicaid expenditures. We should be in absolute agreement with the commission’s conclusion: “Financing of long term services and support must reflect a comprehensive and balanced approach to public and private responsibility. It must encourage and enable individuals to prepare adequately to finance their own needs while providing a strong safety net for those who simply cannot do so.”
The commission recognized that creating an insurance strategy for catastrophic coverage would help, that regulatory restrictions were preventing policy flexibility and lower cost options, and that combination policies were a valuable part of the plan. Ultimately the commission failed to suggest any specific financing options. It therefore provided two alternative approaches.
Different Strokes for Different Folks and So On and So On and Scooby Dooby Dooby—Sly and the Family Stone
Approach A placed a greater emphasis on private market solutions to include:
• Provide new market incentives including tax preferences and access to tax-qualified dollars in 401(k)s, IRAs and Section 125 accounts.
• Create new combo policies, including “living care annuities,” which would result in lower costs and relaxed underwriting.
• Reform Medicaid, including the ability to use the present value Medicaid benefits and preserve Medicaid for the poor.
• Provide a public/private catastrophic reinsurance financing mechanism.
• Remove regulatory burdens and barriers (e.g., NAIC reforms that would allow smaller and more flexible policies are needed).
• Support partnership programs, reverse mortgages and asset recovery.
Approach B discussed the public sector:
• Create a new public financed social insurance program.
• Develop a mandatory participation model by enhancing Medicare Part A or creating a new stand-alone program to cover a portion of the risk.
• Continue the role of private insurance, but it might look a lot like what many refer to as “Obamacare.”
You Would Think with All the Genius and Brilliance of These Times, We Might Find a Higher Purpose and Use of Mind—Jackson Browne
Although the SOA-sponsored Delphi project took place independently of the commission’s considerations, many of the conclusions were similar. Those of us involved in SOA do believe that we were able to contribute to the commission’s findings. We also believe the commission was short on sound financing alternatives, falling back on the old standards of Medicare Part A payroll taxes and theoretical Medicaid savings. The commission was also lacking in any new or creative insurance approaches to the problem.
The creative energy and singular focus of the SOA project may finally transcend the existing stalemate. The final survey results generated six principles that may provide a lighted runway to finally land this plane.
And So Castles Made of Sand, Slip Into the Sea Eventually—Jimi Hendrix
Here are some excerpted results from “Land This Plane, a Delphi Study about Long Term Care in the U.S. (They will be discussed in greater detail next month.)
Principle 1: A Robust and Efficient LTC System. Need for a robust and efficient LTC system—88 percent agreed. Private insurance should be a part of solution—100 percent agreed. The survey identified and evaluated several potential product innovations including high-deductible strategies, short term care, Medicare supplement, term LTC with an investment side fund, and a mutual LTC approach.
Principle 2: Social Insurance. Social insurance is a necessary part of the solution—88 percent agreed.
Principle 3: Changes in Medicaid. Medicaid reform is needed via tightened eligibility requirements—79 percent agreed.
Principle 4: Changes to Regulations and Legislation. The NAIC Model Act needs to be modified and an outline was provided.
Principle 5: An Active Government Role. Need government-sponsored public awareness—92 percent agreed.
Principle 6: Improved Marketing and Sales. Improve LTCI training—83 percent agreed.
Common cause, common purpose and common ground. Public and private. Regulators, companies, reinsurers, sales distribution, actuaries, politicians and all those who are concerned about quality of care are playing the same songs. Finally by recognizing the financial as well as emotional impact of individual and cumulative denial, we will be able to create music that allows all the band members to perform in the same historic national concert tour.
Just Slip Out the Back Jack, Make a New Plan Stan, You Don’t Have to Be Coy Roy, Just Get Yourself Free—Paul Simon
Other than that I have no opinion on the subject.
