Long-term Care Financing Reform:
Lessons from the U.S. and Abroad
Howard Gleckman
Building Bridges:
Making A Difference in Long-Term Care
March 23, 2010
Goals of This Paper
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Past US Initiatives: Private Insurance
Worldwide Reform Movement: Social Ins.
Lessons for U.S. Financing Reform 3.0
CLASS
Focus Is On Financing Only—Not Delivery
Natalie
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What Should Long-Term Care
Financing Look Like?
• Best Possible Care
• Insurance not Welfare
• Maximum Consumer Flexibility
• Relieve Pressure on Government
Resources
The Problem
A Bit of History
• 1990s Great Worldwide Interest in LTC
– Pepper Commission in U.S.
• Early 90s Devolution of Responsibility to
Local Governments (Sweden/UK)
• Parallel Movement Away from Welfare
– Social Insurance (Germany/France/Japan)
– Private Insurance (US)
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Recent Experiences of Six
Countries
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France
Germany
Japan
Netherlands
UK
US
International Models
Financing
Benefit
Eligibility
Private Ins.
France
General
revenue
Cash
Universal 60+
coinsurance
Growing
Germany
Payroll tax
Cash/
Service
Universal
<10%
Japan
Mixed
Service
Universal 65+
None
Netherlands
Mixed
Cash/
Service
Universal
Managed thru
Private
insurance
U.K.
Gen Revenue
Service/cash
Means-tested
Limited
U.S.
Gen Revenue
Service/
limited cash
Means-tested
<10%
Germany
• Universal Insurance
• Payroll Tax Funding
• Tax vs. Premium vs. Contributions –
framing matters
• Cash or Service Benefit
• Limited Private Insurance
– Take-up similar to US
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Germany II
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Costs Higher Than Anticipated
Coverage: 30% vs. 50% Goal
Payroll Tax Increases
Benefit increases
Japan
• Universal for 65+
• Coverage for those 40-64 only with agerelated disease.
• Mixed Financing: Similar to Medicare
– Payroll tax, general revenues and incomerelated premiums.
• Service benefit only—90% of costs
Japan II
• Eligibility, benefits, price and copays fixed by
central government
• Premiums vary by region
• Higher than expected costs—2007 benefit cuts
• Still significant hospitalizations
• Woodwork?
• 80% of certified get benefits
• Receive about 50% of maximum
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The Netherlands
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Early Adapter: Universal LTC since 1968
Constant Revisions
Current Version:
Managed by Private Carriers w/o risk
Financing:
– Pay as You Go
– Income Related Premiums
– Taxes
The Netherlands II
• Major Cost Problems
– Spends twice as much as Others
• Now Scaling Back Benefits
– Especially for younger disabled
France
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Universal for 60+
Funded by general revenues
Cash benefit only
Benefits severely means-tested
Average for home care $621(30% of costs)
Managed by regional departments, benefits
uniform across country
• Initial costs 1/3 higher than anticipated
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France II
• Developing Private LTCi Market
– Covers 25% of 65+
– Pays 30% of Costs.
• Covered lives growing by 15%/year
• Cash benefit—similar to public insurance
United Kingdom
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Means-tested benefit—Medicaid-like
Funded by general revenues
Service or cash, but few take cash
Carer’s Allowance (for low-income, intense care)
High-profile studies in 1999 and 2006 called for
major reforms. Social insurance.
• Few adopted.
• No political consensus for reform
• Very limited private LTC market
United Kingdom II
• Latest Initiatives
• Brown Government Proposes Broad
Insurance-Based Reforms
• Taking a Mulligan
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Government Proposed Expanding
Free Care, But only for Neediest
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The U.S.
• Are We Getting Our Money’s Worth?
• How Can We Do Better?
Long-Term Care Spending in the U.S.
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The Future
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Enhancing Private LTCi
• Tax Subsidies
• Partnership Act
• Government Marketing
• Bottom Line: Market is Flat
LTC Insurance
The Real Crisis of the Uninsured
• 250 Million have health insurance
• 7 million have long-term care
insurance
NEXT STEPS
• Long-Term Care and Health Reform
• Big Steps in the Right Direction
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CLASS Act
More Medicaid HCBS
Care Coordination
• But Only First Steps
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Models for U.S. Reform
• Enhance Private Insurance
• Social Insurance
• CLASS
Private Insurance
• Sell through Medicare, ala Medigap
– Optional purchase, underwriting permitted
– Consideration for low-income, uninsurable
Social Insurance
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Many models-vary mostly by form of tax
Medicare Part E
Burman/Johnson Income tax surcharge
Payroll tax, ala Germany
VAT—part of health care
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CLASS Act
Uniquely American Model
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Government insurance
Voluntary—Auto-enroll w/ Opt-out
Low-income premium subsidy
Benefit: Lifetime, cash, modest
Medicaid—Yes, as secondary payer
Cash
• A Big Deal
• But…
• Can Families Manage?
– Caregivers as Small Business People
• How Will It Mesh With Private Insurance?
– Usually reimbursement, sometimes indemnity
CLASS Challenges
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Broad Flexibility for HHS
Benefit Design
Premiums
Will Private Insurance Sell Around CLASS
No individual or employer mandate
Adverse Selection
Who Will Buy and Who Will Opt Out?
Fiscal Issues
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Lessons
• Private LTCi may be part of policy solution
– But… Not as Stand-alone
• Mandate works in Europe and Japan
– Tradition of solidarity there, not here
• Will Voluntary coverage work here?
– Americans see little value in private LTCi
– Will they see value in government LTCi?
• Cash benefit can succeed
– But caregiver training needed
• Costs will be higher than anticipated
More research
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Regional versus central control
Behavioral response to opt-out
Woodwork
Genetic testing
Provider prices
Howard Gleckman
The Urban Institute
hgleckman@urban.org
202-261-5420
www.caringforourparents.com
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