Social insurance initiatives to help finance long-term services and supports are gaining traction at the state level because “the costs of waiting around for something to happen at the federal level is exceeding the cost of trying to do something,” according to the author of a new report on the topic.

LTSS study cover page

Marc Cohen, Ph.D., co-director of the LeadingAge LTSS Center @UMass Boston, led a study exploring social insurance initiatives in six states: California, Hawaii, Maine, Michigan, Minnesota and Washington. “Learning from New State Initiatives in Financial Long-Term Services and Supports” interviewed key stakeholders in those states and described the proposed or adopted policy changes, identified common themes and delivered lessons learned to help inform policy development at the state and federal levels.

Medicaid is the largest public payer for LTSS, with roughly half of that money contributed by states. As the population ages and demand for LTSS increases, pressure on the financial system will continue to mount, according to the report.

The pandemic, Cohen told McKnight’s Senior Living, shined a spotlight on what happens across the senior housing spectrum when there is an underfunded service infrastructure. In an effort to ensure that other policy priorities aren’t pushed out, states are limiting Medicaid reimbursements and changing eligibility across the board. 

“It’s a simple blunt hammer to try and control costs,” he said. 

“States feel the pain most acutely, and this pressure has led a number of them to consider new ways to address the challenge,” Cohen said. “The overarching objective was to help state officials understand some of the different approaches that other states — which may be further along in their thinking and development — are taking in the areas of LTSS financing.”

Individuals, families and policymakers have been grappling for more than four decades on how to pay for LTSS. According to the report, of the adult population reaching age 65, 50% will have significant LTSS needs; for those who need to pay for care, average costs can exceed $250,000. Americans, however, are “woefully unprepared” to pay for their own care. 

In four of the study states, the median monthly costs for care in an assisted living community exceed the national average, the report authors found, and in all six states, the median monthly costs of home care and nursing home care exceed the national average. “This indicates a growing payment burden faced largely by families paying out-of-pocket or, on behalf of those who are poor or become poor paying for care, on the state’s Medicaid program,” they wrote.

“The resulting lack of preparation will only worsen in light of the increasing health demands brought on by COVID-19, as well as the economic upheaval resulting from the pandemic,” the report reads. “The need for solutions to address an inadequately financed and underfunded LTSS service system is critical.”

When it comes to long-term care, Cohen said that a lot of options are available, but there is a squeeze on the “caregiver generation.” The capacity of family caregivers is diminishing, private long-term care insurance is out of reach for more middle-income Americans, and Medicaid is under severe stress, he said. 

Social insurance approaches, Cohen said, provide a major infusion of dollars into the system to pay people a living wage, help them secure their own retirement, upgrade the level of infrastructure and move away from a welfare / social safety net system.

The risk of people becoming “long-term care-needy” is insurable. Similar to unemployment insurance, which can’t be used for something else, social insurance provides a dedicated funding source outside of the state budget that is targeted toward a set of needs, he said. 

“It’s a way to finally recognize that this system can no longer withstand this level of underfunding,” Cohen said. “That’s why progress is so critical for the whole industry.”

Housing providers could benefit from lower turnover rates, he said.

“If you know a person will have the financial wherewithal for support, they will stay longer and age in place longer,” he said. “That would be very important for providers.”

The study was conducted in cooperation with Community Catalyst’s Center for Consumer Engagement in Health Innovation and supported by the Robert Wood Johnson Foundation.