accurately. Little long-term claims insurance experience yet exists, and it may not be available for many years to (or a portion of it) to the insured in the event of terminal illness or a specified disease and have experienced rapid Medicaid while retaining some of their assets. consumer out-of-pocket payments (chart 4). Most of the remainder was financed through the Medicaid program Insurance Commissioners, 1993. and/or skilled nursing care as a prerequisite for home- or community-based care. However Committee on Government Reform and Oversight Principal Points , medical necessity Chart 4 Table 6 come because many of those who currently hold LTCI will likely not use it for many years. Insurers are encour Ch Ch T Table 5 able 3 art 1 art 2 - growth since their introduction. One study indicated that in 1987 there were no life insurance policies with a L (47.8 percent), with Medicare accounting for 1 The Prudential. W The private-sector L ritten communication, 1994. TCI market has also evolved significantly in recent years, growing from approxi- 1.3 percent, other public and private programs accounting for TC triggers and prior hospitalization requirements are prohibited by current model regulations and are regarded as Subcommittee on Civil Service National Nursing Home and Home Heal Average Annual Premiums for Leading Individual and Group Associa th Care Expenditures, by Source of Funds, 1996 tion 1 Median Daily Nursing Home Charges, 1991 and 1993 Long-Term C Percent are Expenditures as a Proportion of age of Emplo Long-Term Care Services, Settings, and Providers yers Offering Long-Term C Total Na are Insur tional Heal ance, by Region, th Expenditures T-109 aged by current legislative proposals to enter the field of LTC financing in order to provide an alternative to 4.3 percent, and private insurance paying for 5.1 percent. Home health agencies accounted for $32.2 billion, of rider mately 815,000 policies sold by 1987 to a total of 4.4 million by 1995 (Coronel and Fulton, 1997). Shikles, Janet. T , but that about 335,000 such policies had been sold by 1995 (chart 3). estimony. U.S. Congress. House Committee on Ways & Means. Subcommittee on Health. 1 Improvements in 1 April • anti-consumer by regulators and consumer advocates. For the most part, these features are no longer included in Increased life expectancy and the aging of the baby boom generation will bring rapid growth in the number of Long-Term Care Sellers, 1995 and Industry by Source of Funds, 1996 , and Firm Size, 1993 public-sector financing. They are also encouraged to keep premiums level. Yet, the actuarial basis for developing which 42.2 percent was financed through Medicare, 13 percent through Medicaid, and 18.3 percent through out-of- plan design have helped to fuel this growth. For example, many plans now include protection against inflation and 1991.Although the market is currently dominated by policies that are sold individually and through associa- current plan design. However people at risk of needing long-term care (L , in past—as well as in current plans—definitions of Long-T TC). Relative to the number of individuals who can provide physical erm Care Insurance ADL are not standardized; some Long-term care can generally be classified as skilled nursing care State Intermediate Care , intermediate nursing care Skilled Care, and custodial (or personal) care Intermediate Care . These services h Skilled Care ave traditionally been Nursing Home Expenditures Home Health Expenditures premiums and statutory reserves is limited. tions, employment-based plans offer several benefits over individual policies and could potentially dominate the pocket payments. T loss of benefits due to policy lapses. However eachers Insurance and Annuity Association. , perhaps the most significant change has been in the increased Long-Term Care: A Guide for the Education and Research Communi- insurers may clearly define each provided either b and financial assistance, the proportion of those in need will increase dramatically over the next several y family members at home or in f Percentage of Emplo ADL, others may not, making eligibility less clear ormal settings such as in a nursing home yers Off Base Plan with ering . While care is still often provided a Base Plan with Of . Some insurers may also Those Not Off Base Plan with Both t home by famil ering Long-T y members, a number of erm Care nontraditional settings and types of providers have developed that focus on providing care in the most home-like setting possib Long-Term Care Expenditures, le. While it is difficult to c by Source, 1996 lassify these National Health Expenditures, 1996 Base Long-Term Care Insurance to: 5 Percent Compounded 1991 Nonforfeiture 1993 Inflation Protection and Percentage Who: market in the future. Group insurance can be less costly because of potential economies of scale in marketing and flexibility that is now built into many policies, in some cases even allowing individuals to customize the use of ties. New York, NY: Teachers Insurance and Annuity Association, 1993. Introduction specify that the individual be unable to perform the decades. In response, the private-sector long-term care insurance (L ADL, as opposed to simply needing supervision with the TCI) market has also evolved significantly EBRI Medicaid settings and providers, the f Age ollowing continuum attempts to present a range of the services, settings, and providers—from the l Plan Inflation Protection Provision Nonfeast intensive to the most intensive— orfeiture Protection Nonforfeiture—As is increasingly common in private disability insurance, many LTCI policies now include op- T administration. Employment-based groups generally have a particular advantage in this respect because there is T their benefits package to meet their needs at the time care becomes necessary rends ransamerica Life Companies. Personal and written communication. April 1995. . This flexibility enables plans to activity in recent years, growing from approximately 815,000 policies sold by 1987 to a total of 4.4 million by 1995. , thereby making eligibility more restrictive. Medicaid 13% Patients and Medicaid now available. Alabama Active $ 65 Both active $ 68 Total Do Not $ 72 $ 75 Patients and Long-Term Care EMPLOYEE Families 18% 48% tional nonforfeiture features. Nonforfeiture provisions prevent the policyholder from forfeiting his or her full U.S. Bi-Partisan Commission on Comprehensive Health Care. While expenditures for nursing home care have risen from $20.5 billion in 1980 to $78.5 billion in 1996, they have a central mechanism for collecting premiums (i.e., payroll deduction). These factors, together with the reduced keep pace with the continually evolving L Alaska Coverage Amount: $80/$40 a Day Nursing Home/Home Health Care TC market.aaaa A Call for Action. 38%, $41.7 Billion Washington, DC: U.S. Govern- Mr. Chair and members of the committee, I am pleased to appear before you this afternoon to discuss the issue of Employment-based plans accounted for a significant proportion of this growth, increasing from 7 employers Some plans may also include limitations on preexisting conditions, although such provisions are no longer employees Retirees emplo Families 32% yees Offering Offer Decided not May offer Never 11%, $108.7 Billion BENEFIT Arizona only onl 69 y and retirees 80 Coverage Coverage 75 to offer 85 in future considered it benefit in the event of a voluntary policy lapse. likelihood of adverse selection when younger groups are enrolled, can make group plans less expensive than remained fairly constant as a proportion of total national health expenditures over this same time period (table 7). ment Printing Office, 1990. While private insurance now finances only a small portion of LTC needs (chart 2), it is expected to grow as long-term care and the baby boom generation. My name is Paul Fronstin. I am a research associate at the Em- common. Policies are much more likely to include a specified waiting period for benefits based on a preexisting offering LTCI in 1988 to 1,260 employers offering it in 1996. Improvements in plan design have helped to fuel Intensity 50 Arkansas $ 310 54 $ 651 RESEARCH 59 $ 451 55 $ 929 63 Nonforfeiture benefits can take many different forms and may vary with an insured’s age, claims history, As a proportion of all expenditures for nursing home care, Medicaid has remained fairly constant, with Medicare comparable coverage offered on an individual basis (Friedland, 1990). U.S. Department of Labor plan design improves and as an increasing number of individuals recognize the possibility of needing L . Bureau of Labor Statistics. Employee Benefits in Medium and Large Private Establish- TC and the ployee Benefit Research Institute (EBRI), a private, nonprofit, nonpartisan, public policy research organization condition (generally six months). this growth. Total 65 California 817 10% 1,481 85 0% 2% 90 12% 1,158 88% 75 2,419 3% 94 9%HIGH 87% LOW INSTITUTE ® and the duration the policy has been in force. These benefits may be included in the policy on a voluntary basis, accounting for an increasingly larger proportion and out-of-pocket costs accounting for an increasingly smaller associated costs. Both individually purchased policies and employment-based plans will expand further as a result ments 1993. In addition to the potential of group insurance to be less expensive, employment-based L 79Washington, DC: U.S. Government Printing Office, 1995. Colorado 3,353 4,579 70 74 4,738 75 6,800 81 TCI policies may based in Washington, DC. EBRI has been committed, since its founding in 1978, to the accurate statistical analy- Connecticut 130 148 126 157 Region with a higher premium assessed for those purchasing the option. make employees, retirees, and their families aware of the possible liabilities associated with L proportion. U.S. Department of Labor of changes in the tax laws. However . Bureau of Labor Statistics. , barriers remain that may inhibit this growth. For example, some studies Employee Benefits in Medium and Large Private Establish- TC at an earlier age, sis of economic security issues. Through our research we strive to contribute to the formulation of effective and Sites of Care • Private insurance now finances only a small portion of L —Most plans now offer coverage for nursing home care and home- and community-based care. In ServicesTC needs. Theoretically, individuals with assets to West Delaware 5002 Coverage Amount: $100/$50 a Day Nursing Home/Home Health Care 80 91 95 87 3 8611 86 One type of nonforfeiture provision continues coverage at a reduced benefit level if a minimum number of when they can better afford to plan for L indicate that growth potential is limited because only a small portion (10 percent to 20 percent) of those most ments 1995. Home health care expenditures have also risen over time (from $2.4 billion in 1980 to 30.2 billion in 1996). Washington, DC: U.S. Government Printing Office, 1998. TC needs. Moreover, employment-based LTCI policies are generally responsible health and retirement policies. Consistent with our mission, we do not lobby or advocate specific policy addition, coverage is often now available in many nontraditional types of settings such as in adult day care centers protect should be willing to pay for LTCI. While the chances of having extended LTC needs are small, the Midwest District of Columbia7 178 0 5 178 12 88 91 0 9410 89 Intermediate Skilled Custodial payments has been made. For example, one employer plan provides that if the insured has paid premiums in the Northeast50 Florida $ 378 20 78 0 $ 798 3 85 23 $ 540 7 85 6 $1,124 90 6 88 However negotiated by a benefits professional, who may be better informed than a lay person about the nuances of policy U.S. General likely to need services–the elderly–can afford a good quality L , unlike nursing home expenditures, home health care expenditures have risen as a proportion of total Accounting Office. Long-Term Care: Diverse, Growing Population Includes Millions of Americans of TCI policy (Weiner, et al., 1994; Friedland, 1990). In solutions. I would ask that my full statement be placed in the record. (see chart 1). costs of such needs are extremely high. Only a small portion of those who can afford L Nursing Care TCI have actually Nursing Care Statement South 65 Georgia 1,0108008 1,881 60 64 1,39592 65 2,560 5 7510 86 LTCI program for 10 consecutive years and then voluntarily discontinues premium payments, he or she will retain national health expenditures, increasing from 1.0 percent in 1980 to 2.9 percent in 1996. provisions and coverage limitations. Past reports citing the prevalence of sales abuses suggest that having a particular All Ages. , though, there is currently no clear public policy with regard to L GAO/HEHS-95-129. Washington, DC: U.S. General Accounting Office, 1994. TC in the United States. As a proportion of all purchased it. For individuals who have no assets to protect or who believe they will never require formal care, Increased life expectancy and the aging of the baby boom generation will bring rapid growth in the Some plans give potential insureds the option of selecting a nursing-home-only provision or a more 79 Hawaii 4,148 105 5,889 115 5,676109 8,146 114 coverage of 30 percent of the original daily maximum benefit. For each year beyond the 10th year that the insured W home health care expenditures, both Medicaid and out-of-pocket expenditures have declined since 1990, whereas knowledgeable person conduct the search for the best policy can be particularly valuable (Consumer einer, Joshua M., Laurel Hixon Illston, and Raymond J. Hanley. Sharing the Burden: Strategies for Public and ’s Union, 1991; number of people at risk of needing long-term care (L comprehensive plan that lets the individual decide on where care will be provided at the time the care is needed. LTCI may never be worth the price. However, others may lack information on the probability of needing such Settings TC). Relative to the number of individuals who can provide Industry Idaho 72 76 79 75 Medicare Private Health Medicare continues to pay premiums, the amount of the reduced coverage is increased by 3 percent, up to a maximum Manufacturing Source: Health Insurance Association of America. Illinois 17 65 0 0 78 17 83 70 2 80 9 88 Shikles, 1991). Medicare has accounted for an increasingly larger proportion. Private Programs Private Long-Term Care Insurance. Washington, DC: The Brookings Institution, 1994. physical and financial assistance, the proportion of those in need will increase dramatically over the next several However care; may mistakenly believe that they are already covered by Medicare, health insurance, or disability , even though a policy may indicate that care at home is covered, there may be restrictions such as a 21%, $22.5 Billion Insurance 10% Patients At Assisted Adult Nursing Medicare Wholesale and retail trade Notes: Indiana These policies generall 8 y includes a 20-day elimination period and provides 4 y 71 0 Before the 5 86 13 42% ears coverage 87 73 . 0 9011 89 Private Health CCRC Other Other Other Public Other Private and Families reduced coverage of 75 percent of the daily maximum benefit (IBM, 1994). Some plans, rather than reducing the Home Living Facillity Yakoboski, Paul, et al. “Employment-Based Health Benefits: Day Care Analysis of the April 1993 Current Population Home decades. Continuing trends of more two-worker families, more single workers, and the increased geographic maximum daily benefit amount. insurance; or may be dissatisfied or mistrustful of policies that are currently available. Still others may not 11% Services Iowa 2057 58 90 Other Public93 60 0 8919 81 Insurance 5% Public 2% Other Private Other National Health Expenditures Private 2% 6%Private Health 10% 28%, $30.6 Billion daily benefit amount, provide for a shortened benefit period. For example, in one plan, if a shortened benefit Plan Design Out-of-Pocket Private Insurance Survey.” EBRI Issue Brief no. 152 (Employee Benefit Research Institute, August 1994). spread of family members means that there will be fewer family members available to provide care on an informal purchase insurance because of the knowledge that Medicaid covers L Many plans also now include a case management or care advisory provision. Case management is a form Kansas 52 74 2%, $2.0 Billion TC. 55 70 Transportation, communications, 4%, $4.8 Billion 89%, $926.4 Billion Insurance and utlities Kentucky 0000 64 80 100 66 12 870 88 period nonforfeiture rider has been in effect for at least five years at the time the policy lapses, coverage is contin- Committee on Government Reform and Oversight Providers A Private L Private insurance now finances only a small portion of L large proportion of L TCI plans have changed significantly since their inception in the early and mid 1980s. L TC is financed out-of-pocket by recipients or their friends and families. National health TC needs (chart 2). Theoretically, individuals with assets TCI policies have basis. In this testimony I provide an overview of the current L of utilization review. In some plans, it is mandatory that the plan of care be followed in order for benefits to be TC financing and delivery system in the United 7%, $7.2 Billion $78.5 Billion $30.2 Billion Health care Louisiana 14 51 0 0 59 14 86 64 1 74 1 98 ued based on the same benefits in effect at the time of the lapse; however Respite , the policy maximum is reduced Endnotes become less restrictive as they have evolved, and many of today’ account data indicate that $30.6 billion, or 28 percent, was spent by patients and their families on nursing home to protect should be willing to pay for LTCI. Furthermore, since people of any age may potentially need L s policies have additional provisions that make Hospice TC States, focusing on private-sector initiatives to meet the nation’ • paid. Sometimes mandated case management is combined with premium reduction incentives. More often, plans While private insurance now finances only a small portion of L Subcommittee on Civil Service s LTC needs. TC needs, its use is expected to grow as plan Home Health $1,035.1 Billion Family Finance Maine 2024 99 124 96114 12 141 Institutional96 Volunteers Care $108.7 Billion 1 Source: Health Care Financing Administration. Care Agency Members (Transamerica Life Companies, 1995). Personnel and home health care in 1996 (chart 2). them more valuable to employees and other individuals than earlier policies. For example, many plans no longer services, their assets could be at risk at any time. While the chances of having extended L These data represent the total number of policies sold as of the date indicated. Due to policy lapses, the number Additional amounts spent in nontraditional LTC settings, such as for adult TC needs are small, the include a care advisory provision. In this case, the plan of care does not need to be followed in order that benefits design improves and as an increasing number of individuals recognize the possibility of needing L Government Maryland 3 95 0 8 105 10 90101 0 105 6 TC and the 94 Personnel U.S. House of Representatives Personnel Personnel Massachusetts 125 135 134 145 Other 13 0 0 13 87 11 11 77 Source: Health Care Financing Administration. Another type of nonforfeiture benefit allows partial recovery of premiums paid in the event of voluntary require only a medical trigger to become eligible for benefits, and several insurers now offer policies that adjust day care and respite care as well as, for example, costs for help with personal care and homemaking, meal pro- of policies actually in force is lower costs of addressing such needs are extremely high. However . , for a variety of reasons, only a small portion of those Long-T be paid but is there to assist the individual in identifying and sorting through care options. Care may also be associated costs. Both individually purchased policies and employment-based plans will expand further as a erm Care Michigan 79 84 80 86 lapse of the policy. For example, one employer plan provides that for every year the policy is in force, 5 percent of the benefit for inflation. Many policies also now offer an optional rider that ensures that policyholders who have grams, and special transportation would increase this amount but are difficult to determine. 2 who can afford LTCI have actually purchased it. For individuals who have no assets they wish to protect or who monitored to ensure that the individual has access to services that meet his or her needs. However result of the changes in tax laws. However, barriers remain that may inhibit this growth. For example, some , terms are not Firm Size Minnesota 67 89 66 95 Disability insurance replaces lost wages; it does not cover any health or long-term care costs. the premium will be refunded in the event of a voluntary lapse (less any benefits that have already been paid). stopped paying premiums will nevertheless retain some of the benefit. These and other innovations give an believe they will never require formal care (perhaps because they have a large family), L 10–49 Nursing home care—the most expensive type of L Mississippi 10 58 0 2 TC—consumes the greatest amount of out-of-pocket 60 11 89 61 4 TCI may never be worth 6212 84 The terms standard and are not used consistently; therefore, it is important to carefully interpret what type of care provision studies indicate that growth potential is limited because only a small portion of those most likely to need long-term care and long-term care services refer to a broad range of health, social, and environmental This continuum is by no means all inclusive or standardized. It is meant to give a general idea of the range of LTC services, settings, and providers. For example, while 3 Hearing on One study indicates that, for persons who reached age 65 in 1990, 43 percent will enter a nursing home at some 50–199 Missouri 13 55 0 3 62 15 85 60 0 66 0 100 assisted living facilities are presented as more intensive with regard to the type of setting in which care is provided, based on the given individual’s needs, the type of Thus, for example, if the policy has been in force for one full year Table 1 , 5 percent of the premium would be refunded; if indication of how much the private L spending. the price. However As shown in chart 4, individuals spent $24.7 billion on nursing home care and an additional $5.9 billion , others may lack information on the probability of needing such care; may mistakenly believe TCI market has evolved. However, the most significant development relates support services and assistance provided by paid and unpaid caregivers in institutional, home, and community is included in a given contract. services—the elderly—can afford a LTCI policy. Montana 68 82 74 84 200–499 7018 Table 7 92 14 95 care provided at an adult day care center may actually be more intensive. In addition to variation based on each individual’s n2 eeds, definitions vary and may overlap. time before they die. Of those entering a nursing home, 55 percent will have a total lifetime use of five years or The U.S. Long-Term Care Population by Age and Care Setting the policy has been in force for two full years, 10 percent would be refunded. The individual is entitled to a on home health care in 1996. to the flexibility included in current plan design. that they are already covered by Medicare, health insurance, or disability insurance; or may be dissatisfied or settings to persons who are limited in their ability to function independently on a daily basis. Functional depen- 500–999 Nebraska 14 58 0 8 68 22 78 60 7 78 7 86 Following are general descriptions of the terms used in this illustration. National Health Expenditures (NHE) in Nursing Home and Home Health Agencies, more. The authors of the study also projected that women are more likely to enter a nursing home than men 100 percent refund if the policy is in force for 20 or more years (The Prudential, 1994). mistrustful of policies that are currently available. Still others may not purchase insurance because of the knowl- 1,000–4,999 LTCI is evolving in an environment of continuously changing regulations and uncertainty regarding the Nevada 10 Long-T 82 2 erm Care Insurance 10 100 21 79 93 12 9724 64 dency can result from physical or mental limitations and is generally defined in terms of the inability to indepen- • Benefit Amounts Premiums for L —Private L TCI vary substantially TCI plans now generally base benefit amounts on a daily benefit maximum, with a , based on age and plan design. For example, average annual premiums Selected Years, 1960-1996 At Home or in 5,000–9,999 New Hampshire 5 108 0 10 150 15 85120 19 13334 47 (52 percent versus 33 percent). See Kemper and Murtaugh (1991). Adult Day Care While a nonforfeiture provision may be effective for the person who does not want another LTC policy, for future direction of L Conclusion edge that Medicaid covers L TC policy Age Group TC, albeit while restricting choice and requiring that the individual be at or near the , the cost of LTC, which services are most cost effective, and which design features In Institutions Community Settings Total Population dently perform essential activities of daily living (ADLs) such as dressing, bathing, eating, toileting, transferring corresponding lifetime benefit maximum. Generally in 1995 ranged from $310 for individuals purchasing a base plan at age 50 to $8,146 for individuals purchas- , an individual is given several options regarding level of 10,000–19,999 New Jersey 7 116 1 8 122 15 85118 15 12242 41 Adult day care offers a structured daytime program that typically includes assistance with personal care, lunches, and a variety of social, recreational, and rehabilita- Nursing Home Expenditures Home Health Expenditures the buyer who wants to exchange one policy for another, a nonforfeiture provision is of only limited value Although a large proportion of L are best suited to meet individuals’ poverty level to qualify for coverage. TC is provided on an informal basis by family and friends, many individuals needs–especially given the increasingly diverse population in need of LTC (for example, from a bed to a chair), walking, and maintaining continence or to perform instrumental activities of coverage. For example, an individual may select a daily benefit maximum of $50, $100, or $150 per day with ing a plan that included inflation protection and a nonforfeiture provision at age 79. Other plan features can New Mexico 75 111 74 138 20,000 or more 4 0 15 19 81 22 37 41 tive activities in a protective environment (The Prudential, 1994). Long-term care insurance (L by TCI) contracts may only pay for care in an adult day care center if the (thousands) (McNamara, 1995). On the group side, policies may be upgraded through the same insurer New York 103 144 105 148 , or reserves may be require formal care either in the community or in an institutional setting, which can be quite expensive. The need services. The market has responded by creating plans that have several options and that, in some cases, can be center is appropriately state licensed or is recognized as a home health agency b However, as an increasing number of individuals recognize the possibility of needing L y Medicare. TC and the costs daily living (IADLs) such as shopping, cooking, and housekeeping. corresponding lifetime benefit maximums of $91,250, $182,500, or $273,750. Once the individual becomes eligible also significantly affect premium amounts. Total Out of Out of Under 500 North Carolina 10 75 0 2 86 12 88 75 3 90 9 88 transferred to a new insurer who will then upgrade the policies. By transferring reserves, credit is given such that Year NHE Total Medicaid Medicare pocket Other Total Medicaid Medicare pocket Other for L custom tailored at the time care is needed. The “alternate plan of care” option provides the possibility of payment associated with such care, private initiatives to provide for this need have grown, both through individually TC services is most prevalent among the elderly Total 2,440 . However, individuals of all ages may need L 10,400 12,840 TC services. for benefits, the insurer would pay based on charges incurred up to the daily benefit maximum and based on the The majority of LTC services are provided by the private sector but are financed through the public sector. 500 or more North Dakota 11 65 1 9 80 21 79 a 10 8218 74 Assisted Living Facilities Paul Fronstin, Ph.D. Under age 18 90 330 420 the upgraded policies may be based on the age at which coverage was originally purchased rather than at the Moreover for nonstandard customized services not specified in the policy purchased and employment-based plans. , demographic trends such as an aging population, an increased female labor participation rate, and As mentioned above, by the end of 1995, a total of 4.4 million private- . Services may include alternative sites of care, L • site of care. Nursing home care is generally paid at 100 percent of the daily benefit amount, while charges in- TC can include care in many different settings and for many different kinds of support services (see chart 1). For Premiums may rise over time because rates generally can be increased on a class basis if claims are higher Ohio 80 93 85 100 These facilities offer shared and supervised housing for those who cannot function independently, including individuals needing only minimal support as well as those ($ billions) Ages 18–64 710 4,380 5,090 Research Associate Oklahoma 48 75 50 75 more expensive rate based on the insured’ Source: Foster Higgins. s current age. Some larger employers may be able to negotiate when facilities, and/or providers. Examples are care in a facility that is not a nursing home but that specializes in care delayed childbearing may mean a reduction in traditional sources of informal L sector insurance policies had been sold, up from about 815,000 in 1987 (chart 3). Private policies include indi- who are more severely impaired (Teachers Insurance and Annuity Association, 1993). TC. These factors have caused example, care may be provided at home, in an adult day care center curred for home health care and adult day care are generally paid at 50 percent of the daily benefit amount. than expected. And, because the LTCI market is such a new market, it is difficult to set premiums accurately , or in a nursing facility. It may include both . Ages 65 and older 1,640 5,690 7,330 Oregon 76 118 76 116 establishing their plan to provide for upgrades and to ensure that funds will be transferred to another insurer on 1960 $ 27.1 $ 1.0 $ 0.0 $0.0 $ 0.8 $0.2 $ 0.0 $0.0 $ 0.0 $0.0 $0.0 for patients with leaders in business, academia, and government to be concerned about financing L vidual, group association, continuing care retirement community (CCRC), employment-based, and accelerated Alzheimer’s disease or modifying a residence to accommodate wheelchair access (T TC. eachers skilled medical care (care that can only be provided by a registered nurse on a doctor Little long-term claims insurance experience yet exists, and it may not be available for many years to come The level of benefits selected can significantly affect premiums. Thus, factors to consider in selecting a ’s orders) and custodial care Pennsylvania 90 97 95 101 Continuing Care Retirement Community (CCRC) 1980 247.3 17.6 8.8 0.3 7.4 1.1 2.4 0.3 0.7 0.5 0.9 (percentage) request. If this is not done, the insurer may refuse to transfer reserves. Then, if the employer does decide to move Insurance and death benefits specifically for L Aside from informal care provided in the community Annuity Association, 1993). Generally TC. While the majority of these plans were sold to individuals or through group , a plan of care is developed that the insured, insurer , the current system of financing LTC depends on the , and (for example, assistance with bathing and dressing) or it may include only custodial care. However daily and maximum benefit amount should include, for example, the cost of services in the service area (table 5), because many of those who currently hold L Rhode Island Employee Benefit Research Institute 107 TCI will likely not use it for many years. 112 109 115 , skilled care for A CCRC is a residential community for older people that offers lifetime housing and a range of social and health care services (Teachers Insurance and Annuity 1990 699.5 50.9 23.1 1.8 22.0 4.0 13.1 2.1 3.0 3.6 4.4 Chart 3 South Carolina 74 75 75 79 to a new insurer Association, 1993). These services are generall , individuals in the plan are required to decide whether they want to pay the higher premium or y provided in exchange for an upfront fee and monthly payments. provider agree on at the time care is needed. In addition, some plans now enable the individual to select from Medicaid program and individual financing. Issues confronting this system include spiraling costs associated with associations, employment-based plans accounted for a significant proportion of this growth (increasing from an acute temporary medical condition is different from L what the individual can afford, and the type of care that will likely be needed. For example, if the individual has a 1996 1,035.1 78.5 37.5 8.9 24.7TC. This can be an important distinction because, while 7.4 30.2 4.2 13.6 5.9 6.5 Total 100.0%Table 4 100.0% 100.0% 2121 K Street, NW Long-Term Care Policies Sold in Individual and Group, Employer, and Life Insurance Markets, South Dakota 65 69 66 71 leave the group plan in order to remain with the original insurer Under age 18 3.7 . 3.2 3.3 L numerous options when purchasing a policy 20,000 policies sold and 7 employers offering L TC services that may threaten beneficiaries’ Typical Cover , such as the daily benefit amount, a maximum benefit amount, the age Offered access to care. Other issues include the potential depletion of TCI in 1988 to over 530,000 policies sold and 1,260 employers by 1995 Leading Sellers treatment for a temporary medical condition by a licensed provider is generally covered by private medical insur • good support system (i.e., family members in the area), adult day care and/or respite care benefits may suffice. The largest barrier to the expansion of the private LTCI market is the lack of public readiness to use assets to - 1987–1995 Tennessee 58 91 70 105 Custodial (or Personal) Care Suite 600 (as a percentage Ages 18–64 (as a percentage of total 29.1 (as a percentage 42.1 39.6 (as a percentage of total 3 Although not specifically a type of nonforfeiture benefit, another design feature sometimes included in a type of care to be provided (e.g., nursing home only versus nursing home or other type of care setting to be deter personal assets, a bias toward institutionalization (which may not always provide the most cost-effective or offering LTCI in 1996) (chart 3 and table 2). A separate study indicated that 12 percent of all employers with 10 or - ance plans and Medicare, custodial care generally is not. Others may prefer–or need–nursing home care. insure against the relatively low probability of need. Public education is very much needed. Until it occurs and Texas 57 78 58 78 Custodial care may be given by people without medical skills to help a person perform activities of daily living, which include assistance with bathing, eating, dressing, of total NHE) nursing home expenditures) of total NHE) home health expenditures) Ages 65 and older 67.2 54.7 57.1 Services Covered Washington, DC 20037 Nursing home care (11 out of 11) Utah 65 75 69 80 policy provides that a portion of the premium may be returned to the insured’ and other routine activities. It is less intensive or complicated than skilled or intermediate care and can be provided in man s estate in the event of death. For y settings, including nursing homes, adult desired type of care available), and the ability of some individuals who transfer assets to become eligible for mined at the time care is needed), or whether to include provisions such as inflation protection. This flexibility is a more employees offered LTCI in 1993, 10 percent to active employees only and 2 percent to both active employees the public is ready to pay either through premiums or taxes, it is unlikely that the goals of adequate coverage, Most plans now also include a coordination of benefits feature to prevent duplication of benefits. For Home health care (11 out of 11) 815 Vermont 90 100 102 116 day care centers, or at home (National Association of Insurance Commissioners, 1993). 1960 100.0% 3.7% 0.0% 0.0% 80.0% 20.0% 0.0% n/a n/a n/a n/a Source: U.S. General Accounting Office, 1994. example, one employer plan provides that if the insured dies on or before his or her 65th birthday, an amount Medicaid. Many leaders regard private L likely imperative to the survival of the L and retirees (table 3). Most likely to offer coverage were employers in the Northeast (23 percent), in the manufac- 815 TCI market given the continually evolving L TCI as a way to increase access to financing and as a potential alterna- Alternate care (11 out of 11) TC system. The Market example, if the daily benefit amount selected is $100 and an individual is receiving care at the cost of $90 per day universal access, and affordability through risk pooling will be achieved. 1987 Virginia 96 79 80 104 0 1980 100.0 7.1 50.0 1.7 42.0 6.3 1.0 12.5% 29.2% 20.8% 37.5% 0 Assisted-living facility (9 out of 11) Voice: 202-775-6352 equal to all contributions paid up to the time of death, less any benefits paid, will be paid to the insured’ Total s estate. If tive to Medicaid and out-of-pocket financing. turing industry (17 percent), and those with 500–999 employees (22 percent). Least likely to offer coverage were These and other design features now commonly available—particularly in employment-based plans— Washington 89 As a recent innovation, this method of financing care currently 84 89 99 in a nursing home and Medicare pays $19 for that care, then the L Family Members TCI plan would pay $71. The remaining $29 1,130 1990 100.0 7.3 45.4 3.5 43.2 7.9 1.9 16.0 22.9 27.5 33.6 Hospice care (10 out of 11) 1 West Virginia 74 76 75 85 Although a large proportion of LTC services are provided informally by family members, most policies, with rare exceptions, specifically exclude coverage for such the individual covered under the plan dies between his or her 65th and 75th birthday, the estate receives an include those listed in table 4. Much of the following discussion is based on review of individual employers’ and accounts for only a small proportion of expenditures. However employers in the W 1996 est (5 percent), employers in the transportation, communications, and utilities industries 100.0 7.6 47.8 1,109 11.3 Fax: 202-775-6312 31.5 , tax incentive measures, plan design improvements, 9.4 2.9 13.9 45.0 19.5 21.5 The population in need of L would still be available as part of the maximum lifetime benefit. 1988 TC has become increasingly diverse. While the likelihood of requiring long-term care Respite care (11 out of 11) Wisconsin 73 80 80 Individual and Group 86 20 care. 1 amount equal to all contributions paid up to the 65th birthday, reduced by 10 percent for each year after the 65th and population aging may encourage more insurers’ (0 percent), and employers with 200–499 employees (8 percent). current actual LTC policies for the individual and/or group markets. (Individual and group plan design Americans to purchase coverage. Some analysts believe that taxpayer Among those who did not offer coverage, 9 percent does increase with age, a growing proportion of those in need of services are under age 65. A study by the U.S. E-mail: fronstin@ebri.org Wyoming 75 1,550 76 76 76 Source: Health Care Financing Administration. Daily Benefit $40–$250/day nursing home birthday and less any benefits already received (J.P. Morgan & Co., 1994; Prudential, 1994). Many policies also financed public social programs should simply be expanded. features are not discussed separately indicated they would consider offering it in the future. .) Employment-Based General Inflation Protection Home Health Care Accounting Office indicates that, of the 12.8 million people needing assistance with everyday activities, 1989 —Several insurers now offer policies that adjust the daily benefit maximum and lifetime 1,490 $40–$250/day home health care Internet: www.ebri.org 51 Source: CNA Nursing Home Cost Surveys. This care includes a wide variety of services delivered at home or in a residential setting that can range from skilled nursing care and physical therapy to personal 9 Table 2 now include protection against unintended lapse through the designation of an alternative party who would be The largest barrier to the expansion of the private LTCI market is the lack of public readiness to use 5.1 million (39.6 percent) are working-age adults, and approximately 420,000 (3.3 percent) are children under age benefit maximum for inflation. One type of inflation protection feature results in an automatic adjustment in the a 1,930 Data not available. care and help with household chores (T Benefit Eligibility eachers Insurance and Annuity Association, 1993). Medical necessity or ADLs or cognitive impairment (11 out of 11) Life Riders Employer-Sponsored Long-Term notified in the case of a missed premium payment before the policy lapses. assets to insure against the relatively low probability of need. Public education is very much needed. Until it Eligibility and Benefit Eligibility T Plan Types riggers—Many employment-based plans guarantee issue of insurance to active 18 (table 1) (U.S. General benefit, commonly 5 percent per year 1990 Accounting Office, 1994). Chronic conditions such as mental retardation and . Premiums for a policy with this feature will be considerably higher than for AIDS affect 1,793 114 Care Plans Introduced Each Year, Maximum Benefit Period Unlimited/lifetime (11 out of 11) Some companies may also offer “paid-up” policies. These policies entitle the insured to the full amount of 23 occurs and the public is ready to pay either through premiums or taxes, it is unlikely that the goals of adequate workers, with limited or no medical underwriting, during an enrollment period. Others (e.g., retirees, spouses, Individual and group association policies are the most common L Hospice Care TCI products (chart 3) and have been available individuals of all ages. In addition, due to advances in medical technology and treatments, individuals are increas- a policy without such a feature. A second type of inflation protection feature allows policyholders the option of 1987-1995 2,430 Hospice care includes services provided to assist a person with a terminal illness that may be provided in various settings, including, for example, at home or in a benefits if premiums have been paid for a certain amount of time (for example, for 20 years or 30 years). Once the coverage, universal access, and affordability through risk pooling will be achieved. parents, and parents-in-law) are generally medically underwritten. the longest. Individual policies are marketed on an individual basis rather than through an employer or other ingly likely to survive—although not necessarily free from disability—what may in the past have been a fatal increasing their benefit every so many years (for example, every three to five years) (T 1991 eachers Insurance and Deductible Period 0–100 days 2,085 nursing home care setting (T203 ravelers Group, 1995). 141 policy is “paid-up,” no additional payments are required (American 26 March 1998 Total Number of Cumulative Association of Retired Persons, 1995). Total group. Group association L Benefit eligibility is generally triggered when the insured is unable to perform or needs assistance with TCI policies are made available to members of nonemployment-based groups or associa- accident or childhood ailment. Annuity Association, 1993; The Prudential, 1994). In this case, premiums are lower from the outset, but the cost of Preexisting Condition 6 months (2 out of 11) 2,930 Year Plans Introduced of Plans Introduced 2 two out of five or three out of six or seven References tions that typically have elderly or near Intermediate Nursing Care -elderly memberships such as the ADLs, depending on the insurer and insurer American Association of Retired Persons. ’s definition of ADL. Eligibil- any additional coverage purchased is based on age at the time the increase is selected. Some proposals have The needs of this growing and diverse population vary considerably 1992 2,415 . For example, some individuals may None if disclosed during application (9 out of 11) 357 This type of care is ordered by a physician and supervised by a registered nurse for stable conditions that require daily, but not 24-hour, nursing supervision. 158 Waiver of Premium–Many policies now include a provision that allows policyholders to stop paying premiums after ity may also be triggered based on cognitive impairment such as the need for supervision due to American These types of policies are targeted at elderly or near Association of Retired Persons. “Long-Term Care T -elderly individuals for whom the prospect of L ax Clarification.” Testimony before the House W Alzheimer TC may seem ’s ays & need around-the-clock assistance. Others may simply need assistance with shopping or traveling to and from advocated that inflation protection be made mandatory, while others would require only that insurers offer the 1987 2 2 3,417 Intermediate care is generally needed f Renewability or a long period of time (National Association of Insurance Commissioners, 1993), is les Guaranteed (11 out of 11) s specialized than skilled nursing care, a specified number of days of care in a nursing home. Some policies include a waiting period such as 60 days from 1988 5 7 disease. imminent. Means subcommittee on Health. 20 January 1995. school or work. option of an inflation protection feature when a policy is initially sold. 1993 and often involves more personal care. 2,727 406 1989 47 54 Alzheimer’s Disease Coverage For ages 18–99 284 the day payments are first made to the day premiums are waived. Consumers Union “An Empty Promise to the Elderly?” Benefit waiting periods generally require the individual to wait between 20 days and 100 days from the Employment-based plans are marketed to individual employers and are typically available to a firm’ Consumer Reports (June 1991): 425–442. s Individuals, employers, and public policymakers have all begun to focus on the impact of these trends. 3,837 1990 81 135 Respite Care time of meeting the criteria to the time of receiving payment for services received. The waiting period (often called Coronel, Susan, and Diane Fulton. “Long-T employees, their spouses, parents of employees and spouses, and retirees on a beneficiary-pay-all basis. These 1994 Age Limits for Purchasing erm Care Insurance in 1995.” W Yes (11 out of 11) ashington, DC: Health Insurance Among the general population, recognition that neither Medicare nor most private health insurance plans cover Premiums—Premiums for LTCI vary substantially based on age and plan design. For example, Health Insurance 1991 153 288 Respite care offers temporary relief, or time off, for family members or other unpaid caregivers who are responsible for the care of a dependent person (The 1992 218 506 Financing Sources the elimination period) may be based on a set number of days regardless of the receipt of services or may be based insurance plans have grown significantly over the past few years but are still uncommon relative to other types of Association of America, 1997. L Association of TC has come slowly America survey data indicate that average annual premiums for leading individual and group . Nevertheless, many retirees and workers have now begun to understand their exposure to Prudential, 1994). This service is provided by volunteers, an institution, or an adult day care center (Teachers Insurance and Annuity Association, 1993). LTCI plans Waiver of Premiums Yes (11 out of 11) 4,351 1993 462 968 generally limit the number of days for which respite care is reimbursable (The Prudential, 1994). The majority of functionally dependent individuals receive LTC on an informal “unpaid” basis from friends and on services received. In the first case, the waiting period generally begins based on the date Employee Benefit Research Institute/The Gallup Organization, Inc. employment-based insurance. For example, analysis of the 1995 April 1993 Current Population Survey indicates that Public Attitudes on Long-T ADL erm Care, 1993 dependence is . the risk of needing costly community or institutional L association LTC sellers in 1995 ranged from $310 for individuals purchasing a base plan at age 50 to $8,146 for TC as an increasing number have faced the necessity of 3,485 1994 60 1,028 531 Free Look Period 30 days (11 out of 11) family, making it difficult to measure the total value of this care (U.S. Bipartisan Commission on Comprehensive ascertained. In the latter case, the waiting period usually begins based on the first day of services received. In 73 percent of workers ages 18–64 worked for an employer that sponsored a health insurance plan in 1993 Report no. G-47. Washington, DC: Employee Benefit Research Institute, 335 August 1993. caring for a parent, spouse, or child needing long-term personal care assistance. Employers have also begun to individuals purchasing a plan that included inflation protection and a nonforfeiture provision at age 79 (table 6). 1995 232 1,260 3 Skilled Nursing Care Health Care, 1990). In a 1993 EBRI/Gallup poll, 59 percent of respondents who indicated they had a family Inflation Protection of general, the waiting period must be satisfied again if care is not received for a specified amount of time (for Friedland, Robert B. (Yakoboski, et al., 1994). Data from the Bureau of Labor Statistics indicates that 6 percent of full-time employees Facing the Costs of Long-Term Care. Washington, DC: Employee Benefit Research Institute, realize that not only must many of their employees now care for young children, but many are being called on to Other plan features, such as categories of care covered (nursing home care, home care, community care), daily This care is available 24 hours a day, is ordered by a physician, and involves a treatment plan for medical conditions that require care by skilled medical personnel 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Source: Health Insurance Association of America, 1995. 5 Percent Compounded Yes (11 out of 11) such as registered nurses or professional therapists. Some people need skilled care for a short time after an acute illness. Others require skilled care for longer member receiving LTC said they were providing that care (Employee Benefit Research Institute, 1993). However, example, six months) (The Prudential, 1994). in medium and large private establishments in 1993 and 1995 were eligible for L 1990. TCI (U.S. Department of Labor, care for elderly parents. Recognizing and meeting the needs of these individuals by assisting them in providing for benefit amount, maximum benefit duration, and deductible periods can also significantly affect premium amounts Thousands periods of time. Sometimes skilled care is provided in a person’s home with help from visiting nurses (National Association of Insurance Commissioners, 1993). The views expressed in this statement are solely those of the author and should not be attributed to the data from the U.S. Health Care Financing Nonforfeiture Benefit Administration’ Return of premium or reduced p s national health accounts indicate that of the aid-up (11 out of 11) IBM. W 1995 and 1998). However ritten communication, 1994 Although policies are now generally less restrictive than in previous years, several limitations may still , these policies have the potential to reach a large number of people because they are their children, parents, and grandparents may have the potential to reduce absenteeism and improve morale, (National Association of Insurance Commissioners, 1993). Because premiums are based on age at enrollment, the Employee Benefit Research Institute, or the EBRI Education and Research Fund, its officers, trustees, Source: Health Insurance Association of America. $1,035.1 billion in total health expenditures in 1996, $108.7 billion (11 percent) was spent on nursing home care J.P apply marketed not only to older retirees and parents of active workers but also to younger active workers and their . Morgan & Co. W , particularly for individuals who purchased a policy in years past and have not updated that policy ritten communication. 1994 . For company loyalty younger the individual, the lower the premium. Insurers generally attempt to set premiums such that they will , and ultimately productivity. Marketing Company or independent agents 1 In 1989, one study estimates that 70 percent of the severely disabled elderly relied solely on family members or other unpaid help to provide long-term care sponsors, or other staff, or to the EBRI-ERF American Savings Education Council. The Employee Benefit and on care received from home health agencies (chart 2). Medicaid financed the largest proportion of this care Kemper example, some plans may still base benefit eligibility on physician certification of need and medical necessity spouses. Thus, the average age of employment-based L , Peter, and Christopher M. Murtaugh. “Lifetime Use of Nursing Home Care.” TCI enrollees is younger (age 43) than enrollees in indi- New England Journal of remain level over the individual’ The debate can be expected to continue about whether government or private-sector initiatives hold s lifetime. Thus, premiums do not increase based on aging or use of benefits. In services. See U.S. Bipartisan Commission on Comprehensive Health Care, 1990. (Data are based on Lewin/ICF and Brookings Institution estimates of the 1982 Source: Health Insurance Association of America. Research Institute is a nonprofit, nonpartisan, public policy research organization which does not lobby or ($41.7 billion or 38 percent), followed by out-of-pocket payments from patients and families ($30.6 billion or rather than on the failure to perform vidual and group association plans (age 68) (Coronel and Fulton, 1997). National Long-Term Care Survey.) Medicine (February 28, 1991) 595–600. ADLs or on the need for supervision based on a cognitive disability. Because greater promise for meeting the needs of a growing and increasingly diverse L addition, policies are guaranteed renewable; thus, as long as premiums are paid, coverage cannot be canceled. TC population. Currently, initiatives 2 Note: Eleven sellers were identified as having sold 80 percent of all individual and group association Medicare and Medicaid have their own definitions of nursing care that do not necessarily match definitions found in LTC policies. take positions on legislative proposals. 28 percent), Medicare ($22.5 billion or 21 percent), and private health insurance ($7.2 billion or 7 percent). Of the McNamera, Cheryl. CNA much LTC is by definition not medical in nature, the medical necessity trigger can prevent people from qualifying LTC coverage sold as a rider to life insurance policies is also fairly new and tends to attract younger Insurance Companies. Written communication. 1995. are being taken in both sectors. The Medicaid program has increased coverage for home- and community-based However, premiums may rise over time because rates generally can be increased on a class basis if claims 3 long-term care insurance policies in 1995. Ibid. $108.7 billion, nursing home expenditures totaled $78.5 billion in 1996, of which 32 percent was financed through National for claims payment. Some plans may also require prior hospitalization as a prerequisite for nursing home coverage enrollees. Life insurance policies with a L Association of Insurance Commissioners. TC accelerated death benefit rider generally advance the death benefit Shoppers Guide. Kansas City, MO: National Association of care, while several public/private sector partnerships have developed that allow people to become eligible for are higher than expected. And, because the LTCI market is such a new market, it is difficult to set premiums 12 10 13 14 11 3 1 6 8 2 4 9 7 5 Year