here for PDF format
here for participants' responses to this interview.
Stacy Becker, Citizens League
Consultant on Long-term Care
Civic Caucus, 8301
Creekside Circle #920, Bloomington, MN 55437
Clay, Marianne Curry, Paul Gilje, Dwight
and Dan Loritz
lacks a workable strategy to address rapidly growing long-term care
expenses for its low-income residents. These expenses, now more than $1.1
billion a year, are creating significant pressures on state taxes and
squeezing the state's ability to finance other services. Calling the
current approach "unsustainable", the Citizens League says individuals
should take more responsibility for their own care. The League recommends
new incentives to stimulate personal savings and greater use of long-term
care insurance, including co-insurance with Medicaid. The League calls for
new types of long-term care insurance and an intense effort to offer
unbiased information to help individuals make intelligent decisions.
Welcome and Introductions--Verne
and Paul welcomed and introduced Stacy Becker, Citizens League
consultant on long-term care and chief architect of a recently-issued
Citizens League report, "Moving Beyond Medicaid",
http://bit.ly/fE2l3h. Prior to
her independent consulting practice, Becker held positions of Public Works
Budget Director for St. Paul, and Budget Director for the City and
has degrees from Macalester College, the John F. Kennedy School of
and the London School of Economics.
Comments and discussion--During
Becker's presentation and in discussion with the Civic Caucus the
following points were raised:
Investment in long-term care in Minnesota is very large--Using
2004 figures, the latest available in a comprehensive format, Becker
reported that expenses in Minnesota for long-term care services in that
year totaled $6.8 billion, of which over two-thirds, $4.6 billion was
attributed to the value of informal, unpaid, long-term care provided by
families and friends. Of the remainder, 13 percent was paid by Medicaid
and other state sources; 11 percent by private individuals; 7 percent, by
Medicare, and 1 percent by private insurance. To provide some perspective
on those numbers, the $6.8 billion paid in 2004 for long-term care is
equivalent to almost one-half of Minnesota's state general fund
appropriations in that year.
The state and nation face an enormous problem of
financing long-term care--Most people don't begin to appreciate
the magnitude of the problem of financing long-term care, Becker said.
Considering only that portion of
long-term care financed by Medicaid (for persons in poverty) the 2010
figure was $1.1 billion, according to Becker. Unless massive increases in
taxes occur that annual amount is projected to grow by 2035 to $5 billion
, which the Citizens League report terms "unsustainable". Currently,
health care expenses in the state budget are rising at a rate of 8.5
percent a year, while state revenue sources are rising at less than 4
percent a year. As originally contemplated in the mid-1960s, Medicaid was
to be a safety net for those in poverty. But today, Medicaid pays 40
percent of all Minnesota's long-term care expenses. The state and federal
government shares of those Medicaid payments are approximately 50-50.
It's difficult to maintain, let alone increase, current levels of
informal, uncompensated, family care--It
is not likely that informal care provided by family and friends can make
up the loss if Medicaid isn't available. Informal, unpaid care provided by
family and friends already makes up the biggest portion of all persons
receiving long-term care (estimated at 90 percent in hours of care). The
number of persons needing care but who are without family members nearby
is rising, placing more pressure on the Medicaid system. Each 1 percent
loss of informal care adds $30 million annually to Medicaid expenses.
family care imposes significant financial burdens on families. The
Citizens League report states that the average loss of wealth--in foregone
earnings--for informal caregivers over their lifetimes (in 1999 dollars)
is more than $650,000. In addition, informal caregivers spend an average
of $19,500 for out-of-pocket expenses to help the care recipient.
Many people erroneously believe that long-term
care financing is available for them, should they ever need such care--While
fewer than 10 percent of Minnesotans have long-term care insurance,
another 10 percent think they have such insurance, even though they don't.
Another 29 percent mistakenly believe that Medicare will cover their
long-term care needs, whatever they happen to be.
Others are well aware that they can be eligible
for full long-term care under Medicaid, provided they are poor enough--Under
Medicaid, persons become eligible by being sufficiently poor, as defined
by Medicaid, or by first using up whatever personal assets they might have
accumulated during their lifetimes. Such a provision has the objective of
making sure taxpayer dollars for long-term care under Medicaid are given
only to the truly needy and not wasted on people who can afford to use
their own resources.
noble the intent of requiring persons to use their own assets first, the
provision has perverse effects. Many apparently feel there's no need to
set aside personal savings, or invest in long-term care insurance. They
expect Medicaid will be available for them if needed, so choose neither to
save or buy insurance. Consequently, the numbers of persons on Medicaid,
and the tax dollars to support Medicaid, are much higher than they would
need to be if personal savings were available. To illustrate the savings
deficiency, the League report noted that as of 2001, 56 percent of senior
couples had insufficient assets, excluding their home equity, to cover
even one year's long-term care.
currently structured, Medicaid is indifferent to whether or not someone
has taken personal financial responsibility--indeed, in a sense it rewards
those who have not," the report states.
seeking Medicaid coverage for long-term care must demonstrate that
personal finances were exhausted at least five years prior to the
application for assistance. Such a provision is designed to keep
individuals from prematurely distributing assets to family members simply
to make themselves eligible for Medicaid.
A sad, and
perverse result also can occur. A person at today's meeting noted
afterwards that a funeral was taking place in the Twin Cities metro area
today for an individual who took his own life last Sunday. The individual,
very ill and disabled, didn't want to live out his days in a nursing home
with his estate paying for long-term care rather than going to his heirs.
personal responsibility needed
The Citizens League
report takes note of the fact that this year--2011--is the year that the
first baby-boomers turn 65. They were born in 1946, the year after the
end of World War II. The report highlights the coming growth in the senior
population: from 2005 to 2035, the population of Minnesotans aged 65 and
older will more than double, from 623,000 to 1.4 million. As a
consequence, the elderly sector will grow from 12 percent to 22 percent of
the population, meaning there will be fewer workers per elderly person to
provide tax revenue.
responsibility for long-term care is essential, the League said. The
report outlines three major objectives:
* Medicaid reform, to remove
disincentives for personal financial responsibility.
* A mix of financial products, to help people become better
* A broad campaign of informing the public,
many of whom are unaware of the likelihood of needing care, the expenses
required, and the limits of public funding.
Specific proposals for action
The Citizens League
made the following recommendations:
* Redesign Medicaid to provide a co-insurance
option--Under the League proposal Medicaid would supplement
individual efforts to self-finance long-term care, without requiring an
individual to be entirely impoverished. Middle-income people (in the 25
percent to 65 percent category of income distribution) would be targeted.
The amount of Medicaid assistance could be determined by income and
overall costs of care in relation to the amount self-financed. The League
envisions that the Minnesota Department of Human Services would convene a
redesign effort, with final recommendations in 2013. A federal waiver
would be sought to allow a different approach in Minnesota.
* Implement a "save to win" program for
to stimulate more personal savings--The
League recommends a new type of savings vehicle, started in 2009 by
Michigan credit unions. See
the nation's first demonstration program in Michigan,, every $25 savings
deposit makes an individual eligible for drawing for prizes. In Michigan,
small monthly prizes and an annual statewide prize of $100,000 are
offered. In the first 11 months, more than 11,500 persons opened accounts
totaling $8.5 million, the League said.
Win" gives individuals a chance to win prizes, but everyone participating
will still get their investment plus interest, although interest will be
slightly below market, Becker added. A bill to implement prize-linked
savings is being introduced in the 2011 Minnesota Legislature, she said.
* Make reverse mortgages more usable as a source
of long-term care financing--The League urges lawmakers, the
insurance industry and employers develop a new reverse mortgage approach,
with lower fees than currently available, with loan proceeds dedicated to
financing long-term care.
*Offer more options for long-term care
insurance--New forms of long-term care insurance, for
example, partial coverage with very high deductibles, should be offered by
insurers, the League recommended. Currently, the report said, long-term
care policies emphasize mainly comprehensive coverage.
* Allow employees to invest pre-tax dollars
for long-term care insurance--The League recommends that the
federal government allow employees to invest pre-tax dollars for long-term
care insurance just as it currently allows pre-tax dollars for regular
medical insurance premiums.
* Establish a hub of unbiased information on
long-term care--The League challenges the state of Minnesota,
employers, and senior and civic organizations to create a consortium to
offer "useful, unbiased information" to help people make sound decisions.
To illustrate the need for such information, the League cited a survey
showing 54 percent of Minnesotans find long-term care insurance hard to
understand and that 95 percent of Minnesotans aged 42-60 said an unbiased
website should be developed to learn about and compare financial products.
Unknown impact expected from long-term care savings option in new
federal health care law--The CLASS Act (Community Living
Assistance Services and Support Act) is a voluntary, federally
administered, consumer-financed insurance plan. It became law when
President Obama signed the
Patient Protection and Affordable Care Act
in 2010. The CLASS plan provides cash to help pay for needed assistance
for those participating in the insurance plan. Becker said the program
has several restrictions, including a monthly benefit less than one-half
of typical long-term care expenses. Exact provisions have not yet been
determined, so it's impossible to project what the level of participation
might be. Under CLASS, employers must opt in; if employers do, then
employees are automatically enrolled unless they opt out
* High percentage of
women in the work force--Regarding
the assumption that family members might be available to provide care, a
Civic Caucus member noted that 76 percent of women are in the work force
in Minnesota, probably highest in the nation. Women are the predominant
informal care givers, but it's difficult to see how more informal care can
be expected given high numbers of women already employed.
* Need for something like an IRA to save for
long-term care--A Civic Caucus member noted that just as IRAs
were introduced to stimulate people to put away more money for retirement
it would be good if something similar were devised to stimulate people to
put away more money for long-term care.
* Need to extend normal work years for
individuals--A Civic Caucus member suggested that people should
not automatically expect to retire as early as age 65 or receive Social
Security as early as 62. If they worked longer, they might stay healthier
and certainly would earn more money that could be used for long-term care
savings or insurance.
* Effect of spousal refusal to provide
informal care--Becker said that higher burdens on the Medicaid
system can occur if one spouse, having provided informal care, simply
decides to stop providing care for the other spouse. This is a federal
rule that has not been a problem in
but it's use is on the upswing in some states such as
Becker questioned whether this outcome (spousal refusal of care) is really
the sort of thing our public policy should be supporting.
* Suitability of Department of Human
Services' leading effort to obtain a federal waiver on Medicaid--An
individual or group that isn't tied strongly to the existing human
services system would seem to offer a better opportunity to design
innovative approaches to changing Medicaid, a Civic Caucus member
suggested. Thus, the member wondered, whether it is desirable--as
suggested by the Citizens League-- to have the Minnesota Department of
Human Services be in charge of developing proposed federal waivers on
* Value of tax credits for long-term care
expenses questioned--Responding to a question, Becker said that
tax credits on the surface are appealing, but they generally provide
benefit to more affluent individuals, not to lower-to-mid-income persons,
for whom better financing for long-term care is most needed. This
conclusion is supported by several research studies, she said..
* Perverse effect of promoting healthy living
habits--Keeping people healthy is certainly a way to hold down
medical expenses, but don't expect that that effort to reduce long-term
care expenses, Becker said. The studies say that overall health care
costs are higher, Becker said. At age 85, disabilities start to set in,
no matter what your income. Prior to age 85, disabilities and income are
correlated; health and income are related, she said.
* Mandatory insurance for long-term care
--Citing an experience in Hawaii, where mandatory insurance was tried,
Becker said such a move isn't desirable.
behalf of the Civic Caucus, Verne thanked Becker for meeting with us today
to provide excellent background on this important issue.