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that applying this strategy to all nursing home care. as well as to home care, has disadvantages. Namely, it would require substantial public resources and would provide unlimited protection of assets for people who could well afford to protect themselves through pri

vate insurance.

"Today ...m

we are faced, really, with two choices. We could moan, we can groan about the costs, say it's too difficult a problem to even begin to address. Or we can . . . Work toward developing a cost-effective, creative, responsive, and caring program to better address the problems of our chronically ill."

- Senator David Pryor

To target public resources most effectively, guarantee Americans of all incomes adequate protection, and achieve an appropriate balance between public and private insurance, the Commission recommends a limited social insurance approach. The Commission believes that federal social insurance for home and community-based care is essential to ensure the development of an adequate and efficient delivery system for these services and that priority in the use of public resources should go to disabled people at home or able to come home after short nursing home stays. People in nursing homes should be guaranteed an ample floor of protection, ensuring that no one-re. gardless of length of stay in the nursing home-- will become impoverished. All but the poorest should con. tribute to the costs of their care.

Building a Long-Term Care System

of protection against impoverishment-protection of $30,000 in assets (excluding homes) for individuals and $60.000 for couples-and protection of income for spouses, home maintenance, and a decent allowance for personal needs. Protected assets are approximately equal to the life savings of three out of five elderly people. People whose assets exceed the poor would not receive benefits until their unprotected assets were depleted. Income above protected amounts would be applied toward the cost of nursing home care.

3. Recognizing that many people will want additional protection for assets and income above levels protected for long stays—as well as for cost sharing obligations associated with other benefits-the Commission recommends measures to promote private long-term care insurance, subject to federal and state oversight. Promotion would involve clarifying the tax code to give long-term care insurance the same preferential tax treatment health insurance now receives. Oversight would entail standards for insurance policies, consumer counseling to evaluate policies, and penalties on insurers for failure to comply.

4. The Commission believes that all severely disabled persons--regardless of age, underlying disease or disabling condition-be eligible for public benefits, at home or in a nursing home. To qualify for longterm care benefits at home or in a nursing home, the Commission recommends that individuals meet at least one of the three following disability criteria: (a) need hands-on or supervisory assistance with three out of five activities of daily living; (b) need constant supervision because of cognitive impairment that impedes ability to function; or (c) need constant supervision because of behaviors that are dangerous, disruptive. or difficult to manage. Individuals assessed as severely disabled would be directed to a case manager for help in obtaining home care or assisted in obtaining a nursing home placement.

Based on these principles, the Commission recommends developing an integrated public program that would meet the diverse needs of severely disabled people and support private insurance for those seek: ing broader protection. The blueprint has nine parts.

1. The Commission recommends social insurance for home and community-based care and for the first three months of nursing home care, for all Americans, regardless of income. Individuals would required to contribute to the costs of care, with subsidies for people with low incomes. This protecti in would sustain resources and standard of living when people need long-term care, just as Medicare or private health insurance does when they need physician or hospital services.

5. To ensure that home care services support but do not replace family caregiving and are managed in a fiscally responsible manner, the Commission recommends relying on case managers to develop and oversee individual care plans. Within a federally determined budget, case managers would be free to allocate a broad array of services, tailored to people's needs and preferences. The Commission recommends that benefits include personal care, homemaker/chore services. shopping and other support services, day care (for disabled adults and children), respite services, and training for family caregivers, as well as skilled nursing and rehabilitative care.

2. For people with long nursing home stays. few of whom return home, the Commission recommends a foor

6. Under the recommended plan, both federal and state governments would be responsible for financing and administering public benefits. The Commission recommends that the social insurance portions of the public program be fully financed by the federal government. The federal government and the states would share finuncial responsibility for long nursing home stays.

8. The Commission recognizes both the urgent needs of the currently disabled and their families for public support and the time it will take to build a long-term care system. The Commission therefore recommends that the plan be put into place a step at a time over u four-vear period. The program would begin with limited home care benefits to relieve the burdens on family caregivers. Benefits would be expanded over the next four years, unul full coverage is reached. Nursing home coverage would begin in year two. Payment rates would be increased gradually over the subsequent two years to ensure adequate supply and quality of service

In administering benefits, the Commission seeks a balance between ensuring equal and adequate protection for all severely disabled. regardless of the state in which they live, and allowing Mexibility to tailor serve ices to diverse populations and communities. The Commission therefore recommends that the federal government contract with the states 10 administer the plan. The federal goveriment would be responsible for selling guidelines and adequate standards for this administration. The federal government would certify assessment agencies and develop standardized assessment criteria. set guidelines for certifying case managers and establish their budgets (described below), set guidelines for quality assurance and appeals procedures, and determine provider payment rates. Within federal guidelines, states would develop and certify case management and delivery systems, certify providers, establish review and appeals procedures, and enforce quality standards.

9. In establishing a long-term care system, the Commission believes it essential to assess the effectiveness of treatment, delivery, and management of services, and to explore means to prevent the need for long. term care services

The Commission recommends that the federal govern. meni move aggressively to contain costs and miligare human suffering by funding a research and development program aimed at preventing. delaying, and dealing with long-term illnesses and disabilities.

Research should encompass special problems of minorities; the development of outcome measures and practice guidelines, and evaluation and innovation in assessment, quality assurance, and service delivery mechanisms, especially in care at home.

7. The Commission recognizes that financial support for long-term care can be effective only if it promotes and ensures quality of care. Furthermore, to be sustainable over the long term, a program must be designed in a way that controls expenditures. The recommended plan therefore includes several measures to ensure quality and control costs.

Beneficiaries and Costs of the Commission's Long-Term Care Recommendations

The recently enacted nursing home requirements would apply to the recommended nursing home coverage, and standards would be developed for care in the home.

Alongside these standards, the Commission believes that case management, an integral part of its recommended home care benefits. plays a critical role in ensuring quality and managing costs. The Commission recommends that case managers allocate services and monitor service delivery within a budget set by the federal government. This approach would ensure fiscal constraint and the capacity to tailor services to individual needs and preferences.

The Commission's recommendations provide a blueprint for developing a national long-term care system. Home and community-based care would be available and affordable. People who need nursing home care for short periods would have their re. sources preserved intact to return home. And no one would have to fear impoverishment if they end their lives in a nursing home. People would contribute to the costs of care for all services subject to their ability to pay. They would also have broader access to private insurance to cover these costs. All Americans would benefit from the new public program. for it provides everyone peace of mind in the face of long. term care needs.

The Commission further recommends that the federal government establish provider payment mechanisms and determine appropriate rates. Prospective payment systems can be used to ensure access to quality care, efficiently delivered, and to control spending for care.

But long-term care is expensive-averaging more than $2.500 per month for nursing home care and over $60 a visit for in-home support. We cannot build a system that ensures adequate service to people who need it merely by shifting around the dollars we spend today. Neu' expenditures are required.

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Because more people would have access to better nursing home care under the Commission's program, nursing home use is also expected to increase. Under the recommended program, about 1.2 million people a year are expected to enter nursing homes. All would receive some public support. People who would have used the nursing home at their own expense or spent down to Medicaid in the absence of the new program would save $6.9 billion in out-of-pocket expenses, or about $3.000 per user. Under the recommended new public program, all 1.2 million nursing home entrants would receive coverage for the first three months of nursing home care. For almost half of all entrants, or 528,000 people, the three-month social insurance benefit would cover their entire nursing home stay. The majority of "long stayers" (425.000 entrants) would have their assets fully protected. A minority (79,000 people) would acquire asset protection during their stay (see Figure 6).

Although people would no longer be expected to devote all their resources to long-term care before they could receive public support, all but the poorest would be expected to contribute to the costs of care. Under the Commission's recommendations, individuals could be responsible for cost sharing equivalent to as much as $12 per home care visit or- for short stays—$15 per nursing home day. For long nursing home stays, they would contribute assets and income above protected levels. The Commission recommendations would facilitate the purchase of private insurance to cover these expenses, through both assistance and oversight to ensure adequate policies and favorable tax treatment for policies purchased.

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For the severely disabled elderly, new federal spending would be split almost evenly between home care and nursing home care ($15 billion and $16.8 billion, respectively). For nursing home care, the floor of protection against impoverishment would cost about $11.3 billion; broader protection for short stays would cost another $5.5 billion. For younger severely disabled, most of whom live in the community, almost all new spending ($9 billion out of a total $11 billion) would go to home and community-based care.

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The new program would serve some 2 million severely disabled elderly people at home every year, doubling the number who now receive paid support. For the 1 million people who would have purchased their own care in the absence of the public program, out-of-pocket savings in 1990 are estimated to be $900 million-about $1,000 per user.


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Long-Term Care Financing Modeí.

This count of people and dollars significantly understates the benefits long-term care coverage would bring. Families of the severely disabled would receive badly needed help in caring for their impaired loved ones. Employed caregivers, or caregivers who could be employed. would be better able to balance responsibilities at home and on the job. Employers would reap the benefits of a more secure and productive work force.

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Finally, and perhaps most important. all Americans would benefit from the security of knowing that if the need for long-term care should arise-for themselves, their parents, or their children-they would not be left to cope on their own. The nation would have a ystem to which everyone in need could turn for help.


The estimated new federal cost of the Commission's recommendations-health care plus long-term care for people of all ages--would be about $69.6 billion if fully implemented in 1990. Although some of these funds could be raised from reductions elsewhere in the federal budget, the Commission recognizes that new revenues will be necessary. To finance the new costs of the program entirely through new taxes in 1990 would require about $430, on average. from each nonpoor American adult. Various tax packages would spread the burden in different ways.

keep up with benefit growth. Contributions should come from people of all ages.


Congress called upon the Commission to recommend legislation to ensure all Americans coverage for health and long-term care. With this report, the Commission fulfills its task. Now the Commission calls for action from the Congress and the President to turn its recommendations into law.

The Commission's investigations leave no doubt that Americans' fears about their health care system are well founded. Without action people cannot rely on coverage they can afford or care when they need it.

The Commission not only documents the problems our citizens face; it puts forward workable solutions. In health care, we can build upon and strengthen the coverage we now have. In long-term care, we can identify priorities and build the coverage we now lack. We can build carefully and deliberately, one step leading to the next.

Universal coverage in an effective, efficient system is within our reach. We must act now.

Mr. PALLONE. Thank you, Mr. Edelstein. You immediately raise some questions to mind, but I guess we're going to go through the panel because I'm sure these other two individuals, who are both senior advocates, are probably going to raise some of the same questions I have.

The two people we've heard from, as you know, are basically pro fessionals working on health care issues, one State and Federal. The next two individuals are, I guess, in the category of advocates. I happen to know both of them and I'm sure some of you do as well.

The first person we have is Mr. Joseph Riordan, from East Windsor, who is President of the United Senior Alliance.


ALLIANCE Mr. RIORDAN. Good morning, Congressman Pallone. Thank you for giving me the opportunity to testify before the committee. I must say at the outset that I feel I am playing or listening to a broken record. At least six times in the last 3 weeks I have participated in discussions of health care.

Over the period of 6 years that I have been involved in senior activities, the same phrase has been repeated under different auspices and circumstances hundreds of times: "the health care is broken and it must be fixed."

Having said that much, let me attempt to address some of the problems that are embodied in the title of the hearing you are chairing today, which is “Rising Out-of-Pocket Health Care Costs for Older Americans: How Far Can Consumers Stretch Their Resources?"

The second part of the title applies to all consumers, paying an additional 40 cents a gallon for gasoline certainly has an effect on all of us.

I believe that all thoughtful senior citizens are willing to make reasonable necessary contributions to health care costs. We should remember that when Medicare was established, beneficiaries were to pay premiums that represented 25 percent of the costs of the program. This concept should not be altered. Some of the budget balancing plans that have been advanced talk about increasing that number to 30 percent. This represents an overturn of a commitment to older Americans.

Those of us involved in the Long Term Care Campaign always considered lifting the cap on earnings subject to the 1.45 percent tax as one of the ways to fund long-term care. It seems as though the conference committees will use this as a means of balancing the budget. This is a specific case of using funds that could be addressing health care costs to finance the wasteful practices of the last decade. Perhaps the cap should be extended further to counter the need for increases in premiums. Other dedicated taxes could also be considered.

There is often a shortage of nursing home beds, despite a requirement that a fixed percentage of beds be reserved for Medicaid patients. The result is that these patients remain in hospital, further increasing costs. Most patients prefer to remain at home in fa

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