Ms. Gail P. Schaeffer is second vice president of retail long-term care for the John Hancock Mutual Life Insurance Company. Ms. Schaeffer is appearing before the subcommittee today on behalf of the Health Insurance Association of America. Representing the Blue Cross/Blue Shield Association is Ms. Mary Nell Lehnhard who is the organization's vice president of Government relations. Finally, we will hear from Ms. Gail Shearer, manager of policy analysis for Consumers Union. I want to welcome the three of you to our hearing today. Your prepared statements will be in the record in full. What we would like to ask of each of you is to limit your oral presentation to no more than 5 minutes. Ms. Schaeffer, why don't we start with you. STATEMENTS OF GAIL P. SCHAEFFER, CHAIRMAN, LONG-TERM CARE TASK FORCE, HEALTH INSURANCE ASSOCIATION OF AMERICA; MARY NELL LEHNHARD, VICE PRESIDENT, BLUE CROSS/BLUE SHIELD ASSOCIATION; AND GAIL SHEARER, MANAGER, POLICY ANALYSIS, CONSUMERS UNION Ms. SCHAEFFER. Thank you, Mr. Chairman. At the outset, let me state emphatically that the Health Insurance Association of America applauds the efforts of the Pepper Commission to bring about consensus on the issue of long-term care. The HIAA agrees that the situation we have currently with regard to financing of long-term care is intolerable. We agree that we need to correct the problem of individuals impoverishing themselves from the high cost of long-term care. We feel that the problem can best be addressed by a specifically targeted Federal program combined with private long-term care insurance rather than by a broad public program. The private long-term care insurance industry is a young industry but capable of enabling millions of Americans to provide for their own long-term care financing. Given scarce resources and competing national priorities for those resources, we believe that the Government should carefully target Federal funds to the neediest, with private insurance providing the solution for those who can afford and can access that insurance. We know that problems exist with private insurance, and we feel these problems must be addressed. However, we feel that this can be done within the current system without establishing an entirely new system of regulation. With regard to the specific proposals, the HIAA supports a number of recommendations in the Pepper Commission report. We support an expansion of the Government's role in ensuring the floor of financial protection in providing long-term care. We support the removal of long-term care from Medicaid and the establishment of a national program administered by States and localities. We support State responsibility for the control of costs, quality assurance, and consumer protection. We support clarifying the tax status of long-term care insurance to help reduce barriers to its development. We support the dissemination of nonbiased profession information on private long-term care insurance to educate con sumers about long-term care and options for financing it. And we support increased Government research in long-term care to find solutions which could ultimately reduce the need for and the costs of long-term care. However, the Commission makes a number of recommendations which HIAA believe are problematic. First, we do not support a social insurance program to cover unlimited home care and 3 months of nursing home care. The need for a Federal program must be weighed against both the inability of this country to pay for a social insurance benefit and the increasing number of people who will be protected in the future by private long-term care insurance. Given the growing number of people over the age of 65, the other extremely important national issues competing for scarce Federal dollars, and the emerging viable private market for long-term care insurance, we believe that any public expenditure must be carefully targeted to those most in need. Second, HIAA does not support the Government providing the broad protection of assets as does the Pepper proposal. In our own research to solve the problem we, too, felt that increasing the level of protected assets in the case of a nursing home admission was important. However, we found that the increased tax funding required by the asset thresholds proposed by the Pepper Commission would primarily benefit the people who can afford private longterm care insurance. The existence of the private market frees our financially strapped Federal Government to limit asset protection to those who most need it. The HIAA firmly believes that cooperative public/private financing and delivery arrangements should be promoted on an experimental basis. HIAA strongly supports the Robert Wood Johnson demonstration projects, one of which is in my own home State, Massachusetts, and we would urge passage of the Medicaid waiver legislation. Third, HIAA does not believe that Federal regulation of private long-term care insurance is warranted. Although the effectiveness of State regulation of this product has been questioned in recent months, HIAA believes that the States can act responsibly and timely in regulating provisions in the sale of long-term care insurance. Thirty-seven States have adopted the NAIC model act since the beginning of 1987. We are working to assure that the rest will follow. The existing State structure for regulating long-term care insurance shows that States are much better equipped to attend to both the consumer needs and the oversight necessary to regulate long-term care insurance. Mr. Chairman and members of the subcommittee, we believe that the current system for financing long-term care in this country is clearly unacceptable. However, by proposing a highly prescriptive national long-term care program, the Pepper Commission fails to build on the achievements already reached by the private sector. We believe the Government should target its limited resources to assist those who can least access and afford such protection. We look forward to working with you in this effort. [Testimony resumes on p. 108.] [The prepared statement of Ms. Schaeffer follows:] STATEMENT OF THE HEALTH INSURANCE ASSOCIATION OF AMERICA Mr. Chairman and Members of the Subcommittee, I am Gail Schaeffer, Second Vice President, Retail Long Term Care, John Hancock Mutual Life Insurance Company. I am appearing today on behalf of the Health Insurance Association of America, in my capacity as Chairman of its Long-Term Care Task Force. The Health Insurance Association of America represents 320 private health insurance companies which provide health insurance for 95 million Americans. We appreciate the opportunity to discuss the Pepper Commission recommendations with regard to long-term care as well as the private sector role in financing the nation's long-term care bill. At the outset let me state emphatically that the HIAA applauds the efforts of the Pepper Commission to bring about consensus on the issue of long-term care. The report makes a number of recommendations which HIAA supports. However, the report also makes several recommendations which HIAA cannot support. HIAA REACTION TO THE PEPPER COMMISSION'S RECOMMENDATIONS ON LONG-TERM CARE Positive Elements HIAA supports an expansion of the government's role in HIAA supports the removal of long-term care from HIAA supports state responsibility for the control of costs, quality assurance and consumer protection. HIAA supports clarifying the tax status of long-term care insurance to help reduce barriers to its development, especially in the employer group market. HIAA supports the dissemination of nonbiased, professional information on private long-term care insurance to educate consumers about long-term care and options for financing it. HIAA supports increased government research in longterm care which would ultimately reduce the need and costs of long-term care. Problematic Elements: The Commission makes a number of recommendations which HIAA believes are problematic. The O HIAA believes that limited public tax dollars should be targeted to those most in need. Providing a social insurance program to cover unlimited home care and three months of nursing home care is prohibitively costly and it fails to account for the growing number of people who can be covered by private insurance. need for a social insurance program must be weighed both against the increasing number of people who will be protected in the future by private long-term care insurance, especially employer-sponsored coverage, and against the ability of this country to prefund a social insurance benefit for a rapidly growing elderly population. HIAA believes that most persons should not rely on a HIAA believes that federal regulation of private longterm care insurance is not warranted. Although the effectiveness of state regulation against marketing abuses has been the focus of much debate in recent months, HIAA believes that abuses are the exception, HIAA believes that the states have acted responsibly The current system for financing long-term care is clearly unacceptable. Instead of pooling risks, it places each household on its own and Medicaid becomes the payor of last resort when household resources are depleted. This system, combining out-of-pocket outlays and welfare, features remediation and relief when prevention and planning would be preferable. As indicated previously, the government should target its limited resources to assist those who can least access/afford such protection. Private insurance products are not designed for, nor do they lend themselves as, financing vehicles for people who are already quite old, disabled, or poor. Providing care for this population should be the objective of the public sector, and |