[Senate Hearing 107-689]
[From the U.S. Government Publishing Office]
S. Hrg. 107-689
LONG-TERM CARE FINANCING:
BLUEPRINTS FOR REFORM
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
JUNE 20, 2002
__________
Serial No. 107-27
Printed for the use of the Special Committee on Aging
U. S. GOVERNMENT PRINTING OFFICE
81-856 WASHINGTON : 2002
___________________________________________________________________________
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SPECIAL COMMITTEE ON AGING
JOHN B. BREAUX, Louisiana, Chairman
HARRY REID, Nevada LARRY CRAIG, Idaho, Ranking Member
HERB KOHL, Wisconsin CONRAD BURNS, Montana
JAMES M. JEFFORDS, Vermont RICHARD SHELBY, Alabama
RUSSELL D. FEINGOLD, Wisconsin RICK SANTORUM, Pennsylvania
RON WYDEN, Oregon SUSAN COLLINS, Maine
BLANCHE L. LINCOLN, Arkansas MIKE ENZI, Wyoming
EVAN BAYH, Indiana TIM HUTCHINSON, Arkansas
THOMAS R. CARPER, Delaware JOHN ENSIGN, Nevada
DEBBIE STABENOW, Michigan CHUCK HAGEL, Nebraska
JEAN CARNAHAN, Missouri GORDON SMITH, Oregon
Michelle Easton, Staff Director
Lupe Wissel, Ranking Member Staff Director
(ii)
C O N T E N T S
----------
Page
Opening Statement of Senator John Breaux......................... 1
Statement of Senator Ron Wyden................................... 30
Statement of Senator John Ensign................................. 31
Panel I
Hon. John Rockefeller IV, a U.S. Senator from the State of West
Virginia....................................................... 33
Hon. Howard Dean, Governor, State of Vermont..................... 45
Hon. David Durenberger, Chairman, Citizens for Long-Term Care
Coalition, Washington, DC...................................... 52
Carol O'Shaughnessy, Specialist in Social Legislation,
Congressional Research Service, Washington, DC................. 91
Steven Chies, Vice Chair, American Health Care Association,
Washington, DC................................................. 113
Appendix
Statement for the Record submitted by the American Association
for Geriatric Psychiatry....................................... 129
(iii)
LONG-TERM CARE FINANCING: BLUEPRINTS FOR REFORM
---------- --
THURSDAY, JUNE 20, 2002
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The committee convened, pursuant to notice, at 9:32 a.m.,
in room SD-192, Dirksen Senate Office Building, Hon. John
Breaux (chairman of the committee) presiding.
Present: Senators Breaux, Wyden, and Ensign.
OPENING STATEMENT OF SENATOR JOHN BREAUX
The Chairman. The Select Committee on Aging will please
come to order. This morning, we have a very distinguished panel
of witnesses who we are very anxious to hear. I am joined by
our colleague, Senator Wyden, and other Members of the Special
Committee on Aging will be with us in just a moment.
I would just point out in opening remarks that our
committee has the responsibility to look ahead and see that, as
a nation, we are prepared to handle the long-term care needs of
the pending age wave of the 77 million baby boomers.
Unfortunately, our country, arguably the strongest nation in
the history of the world, still lacks a comprehensive long-term
care system, and that is why this Committee on Aging has
devoted 13 separate hearings in the 107th Congress to the issue
of long-term care, examining what is currently available in our
country, how we finance long-term care, and what we still need
to do to guarantee a wide range of quality, affordable services
to all disabled and elderly persons.
To capture the highlights of all the expert witnesses who
have testified before our Aging Committee, we have produced a
Findings Report, which I have in my hand, which members have
seen and I think is available outside. This Findings Report is
kind of a road map. It is a road map on how we can hopefully
get from here to where we as a nation would like to be as far
as providing services to our nation's seniors.
[The Findings Report follows:]
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The Chairman. Today, we will be hearing from another group
of expert witnesses who will talk about reform options to pay
for a comprehensive long-term care system. Much good work has
already been done and we want to take advantage of that wisdom.
Other witnesses have come up with new approaches that are
worthy of our time and attention, and equally important is the
chance to learn what other developed countries around the world
are doing to finance their long-term care service, as well.
While we have talked about this issue in terms of billions
of dollars that are spent each year on services and the
institutional bias that exists and the unmet need for the
services that exist, what we really need to remember is that
the issue of long-term care is very personal for individuals
and their families and their relatives and their friends. It
affects each and every one of us and our families at some point
in time. It will affect all of us, if it already has not done
so.
I would just like to read a short copy of a letter that I
received which is really typical, unfortunately, of many of the
hundreds and hundreds of letters that this committee has
received from families around the country expressing their
concern. This one is from a constituent of mine from Louisiana,
and she says, ``My name is Frances Stevenson. I am 73 years old
and I live in Napoleonville, LA, with my husband, Dave. Dave is
76 years of age, is insulin-dependent diabetic who has had
several mini-strokes, high blood pressure, dementia, and has
had a feeding tube since May 1999 when his blood sugar elevated
above 400. He wears diapers and must be bathed and changed at
least twice a day. I must monitor his blood sugar at least
three times a day, must bathe him in the evening, change his
feeding bag daily, give medicine, insulin, and tend to his
oxygen tank.''
``Last May, Dave had surgery to remove his gallbladder, and
at that time, he spent several days in an intensive care unit
and a few more days in step-down. Home health care is allowed
to come in for a few weeks at a time after each stay in the
hospital and then I am on my own. My family helps me as often
as they can, but each of them have jobs. My son is an Army
officer stationed in Washington, DC. He gets to come home only
about once a year. I have tried to get the VA to give us some
aid since Dave is a World War II veteran. He served in the
Marines for 5 years.''
``I have been paying for an aide to come in and bathe him
every morning for the last 4 years. Dave and I worked very hard
throughout our whole lives and we felt that we would be all
right in our later years. I can barely make ends meet with the
costs of medicine, insurance, diapers, pads, bandages, a
nursing aide, et cetera. The Council on Aging put Dave on a
program in February, but that will end in a few weeks. He had
24-hour sessions of respite care, 34 hours of personal care,
and 18 hours of sitter care.''
``I want him to be cared for at home because I know that is
where the best tender loving care will be given. I need home
health care and someone to help with home living. Please give
us some help.''
I think you would agree with me that this story of one
person from Louisiana is far too typical of literally hundreds,
and indeed thousands of Americans throughout this country as we
struggle with the process of aging. If it is bad today, I would
only point out that by the year 2040, we are projected to be
spending some 75 percent of our nation's entire financial
budget on Medicare, Medicaid, and Social Security. If we have
problems today with about 40 million Americans over the age of
65, we can only wonder what it will be like when 77 million
additional baby boomers become seniors who are going to be
living a lot longer than their children would have expected.
So we have a challenge that I think is not insurmountable,
but it indeed is one of the biggest issues facing us as a
nation. Hopefully, this report will move us toward the process
of looking at what we have done in 13 hearings and hopefully be
able to come together in a bipartisan fashion to determine what
some of the answers are.
I am delighted that I am joined by my two colleagues, who I
will introduce in just a minute. I want to recognize a group of
intern teachers that we have from Louisiana who work in our
office for a short period of time to try and learn a little bit
about how Congress works. Hopefully, being at our hearing today
will give them a little sense of how hearings work in the U.S.
Senate.
I would recognize Senator Wyden for any comments that he
might have.
STATEMENT OF SENATOR RON WYDEN
Senator Wyden. Thank you, Mr. Chairman.
The first question, of course, that comes up when somebody
talks about long-term care is can America afford such a
program, particularly now with the war on terrorism, the claim
on funds in a variety of areas. I think that is going to be the
key question.
To me the question is not can America afford it, the
question is can America afford not to do it, given this
demographic tsunami that is coming. I think the answer is
clearly yes. People can go through $40,000 a year easily on
long-term care now. Given the population trends that you have
outlined, it is obvious that the costs are just going to get
worse.
So I would like to just touch very quickly on a couple of
areas that I think are particularly important as we explore by
way of trying to lay out a structure for new public and private
partnership.
The first area that I feel very strongly about is making
much more aggressive use of waivers so that programs at the
State and local level can stretch the public dollars that are
available for long-term care. One of the things that I am
proudest of, when I came to the House after 7 years as Director
of the Gray Panthers--I had a full head of hair and rugged good
looks--Senator Rockefeller, who my guess is did not even know
who I was, helped me with a program that really helped to start
the assisted living field. It was a waiver program so that you
could use Medicaid dollars that were then earmarked for nursing
home care for home health care, and a number of States around
the country have used it. Governor Dean is going to talk today
about more aggressive use of waivers with home health and I
support what the Governor is talking about, as well.
However, I think we should also look in a multi-
disciplinary way at waivers. For example, I do not see any
reason why we do not allow waivers so that the VA, HUD, and
Medicaid, could not team up on some innovative approaches in
terms of long-term care. Those would be using existing dollars.
They could come out of the State and local level. This is an
area I will want to explore with our witnesses. So more
aggressive use of waivers would be a top priority for public
funds.
Then on the private side, where I know a number of Senators
had an interest, I would like to see us allow penalty-free
withdrawals from private retirement accounts for long-term
care. We allow those penalty-free withdrawals for a whole lot
of other stuff that America feels strongly about, like college
and saving for a home and that sort of thing. I would like to
see us take a look at penalty-free withdrawals from retirement
plans for long-term care so that we could shore up a little bit
of what is going on the private side in terms of saving for
retirement.
Finally, a third area that I know Senator Rockefeller has a
lot of history on, I would like to see us go back to explore
the idea of a voluntary Part C of Medicare. As all you know, we
have got Part A, the hospital portion, Part B, the outpatient
portion. We have talked over the years sort of sporadically
about a voluntary Part C of Medicare that could be designated
for long-term care, where perhaps government contributions
could be matched by private contributions, as well.
Your report in my view, Mr. Chairman, gives us a very good
outline. I am looking forward to having a lot of people at that
witness table who I have worked with over the years give their
views and working with you, and Senator Ensign has had a long-
term interest in this, as well, so I think we have got some
bipartisan opportunities here.
The Chairman. Thank you, Senator Wyden.
Senator Ensign of Nevada?
STATEMENT OF SENATOR JOHN ENSIGN
Senator Ensign. Thank you, Mr. Chairman. I will keep my
remarks brief. I am looking forward to hearing from the panel.
Anybody who has gone around their States--who has spent any
time at all looking into this issue-realizes that there are
some serious concerns not only today, but even more so into the
future. I think the demographics show as the Chairman mentioned
this morning, as we go into the future, that if we do not start
addressing this problem now, we are going to be behind the
biggest eight-ball that we could possibly imagine.
The continuum of care that is out there, and there are a
lot of innovative things being done in the continuum of care,
is such a big issue. This is because almost everybody is
thinking about their continuum of care as they are getting
older. Obviously, the closer you get and the more gray hair
that you get, or the less hair, whichever the case may be----
[Laughter.]
The more that we have the fear that we may be in a
situation where the care is not good. The care is something
that is not only inadequate, but sometimes neglectful. There
are a lot of people doing a lot of good stuff out there, but I
think a lot of people, as they get older, have a big fear of
the type of care that is going to be available.
So I think that this is an incredibly important issue for
us. Unfortunately, we are not getting enough younger people
thinking about the issue yet and I think that that is going to
be one of the keys. Government has an important role in this,
but the more that we can get the private sector involved and
get individuals when they are younger to start saving and
buying long-term care insurance--I think that that has got to
be a big part of the answer.
Then as innovative ideas come forward and we figure out the
best ways that we can use preventative medicine to keep people
out of assisted care, the better off that we are going to be.
This is because more people will be able to take care of
themselves. A great example of this is the physical therapy
cap. Now, there is a budgetary reason. If we do not get people
back to being more on their own or maybe in a less-intensive
health care situation, the more expensive it is for us and the
worse their quality of life is.
So preventative medicine, to me, as part of this whole
thing, has to be stressed, where we have dietitians teaching
diabetics and cancer patients and heart patients how to eat
better, not only how to shop for the food, how to buy the food,
how to prepare the food. We have got to have physical
therapists and speech therapists and occupational therapists
involved in these things and then communities and non-profits
involved. I think that if we look at this from a holistic
approach, I think that we are all going to be better off and
that is all going to be part of the solution for the future.
I appreciate the Chairman's interest in this issue. I think
you need to be applauded for this because this is such an
important issue.
The Chairman. Thank you, Senator Ensign.
You mentioned long-term care insurance. I would note for
the first time that the Federal Employees Health Benefit Plan
will be offering long-term health care insurance for the nine
million Federal employees, not only Members of Congress, but
also nine million others. As well, and I think that will be a
very important test to see how it works. It is already
available in the private sector and I think people are just
becoming aware of the need for it.
We have a very distinguished panel of witnesses, as I
mentioned. I will introduce them all collectively. It starts
with a very distinguished colleague who has a long history of
service in the health care areas. He chaired the Pepper
Commission a few years back which dealt with the question of
providing health insurance for the millions of Americans who
are uninsured, outlining a blueprint for the future.
Unfortunately, Congress has not really acted on those
recommendations. We still have about 44 million Americans who
have no insurance at all. We talk about Medicare not being
enough. There are 44 million Americans who have nothing and
that is still a problem and Senator Rockefeller was one of the
leaders on that Pepper Commission.
Howard Dean will be our next witness. He is back to the
Aging Committee. He has been before us on a number of occasions
with his ideas and suggestions. He is testifying on behalf,
really, of his own views, but also representing the National
Governors Association, which has really gotten involved in this
issue, and is incredibly important. We are looking forward to
his testimony.
Our former colleague of this committee, as well as, and the
Senate Finance Committee, David Durenberger, is back as
Chairman of the Citizens for Long-Term Care Coalition, which
has done outstanding work in trying to put together all of the
health care groups to address this problem collectively
because, really, we all have the same goal in mind. So your
work in that coalition is outstanding.
Carol O'Shaughnessy will be testifying. She has been around
on the Hill a number of times before this committee, and has a
real expertise in health care and aging issues in particular.
The work that they have done over at CRS, the Congressional
Research Service, which provides us with information, has been
most helpful.
Steve Chies is Vice Chairman of the American Health Care
Association, which is a federation of all of the nonprofit as
well as the for-profit assisted living facilities, nursing
homes, residential services, et cetera, who have a major role
in this area of helping us with long-term care. He also will be
testifying.
I know Senator Rockefeller has a busy schedule, so Jay, if
you would like to give your testimony, maybe we can ask you a
few questions and you can leave. Welcome to the committee.
STATEMENT OF HON. JOHN ROCKEFELLER IV, A U.S. SENATOR FROM THE
STATE OF WEST VIRGINIA
Senator Rockefeller. Actually, I do not have a busy
schedule, Mr. Chairman, but I am delighted that----
The Chairman. But you want to get out of here anyway?
[Laughter.]
We are glad to have you.
Senator Rockefeller. Thank you, Mr. Chairman, and both of
your colleagues here. I am very happy to be here.
We did, in fact, and Senator Durenberger was a member of
the Pepper Commission, which passed out a long-term care policy
11-to-4, and this was a very, very split commission
ideologically, but not split on the concept of doing long-term
care and doing it in a real and workable way.
We are delivering what I would say would be fiscally
irresponsible tax cuts for the next decades. Americans
throughout this country are dealing with other kinds of
problems, and that is when are they going to sell their homes?
When are they going to raid their savings, get rid of their
retirement benefits because of long-term care problems?
Families come in to take care of them, and then their assets
get depleted, exhausting personal resources, having to get rid
of properties in order to get people qualified for Medicaid.
So government coverage for nursing home care operates
primarily and substantially through the Medicaid program, which
is fraught with problems, as Governor Dean knows better than
anybody, and it is the safety net for the poor, always has
been, and is now grossly underfunded and States are suffering
because of unwise actions on our part here in Congress.
Medicare, and everybody knows this, is not designed to do
long-term care. It does lots of things, but it does not do
prescription drugs and it does not do long-term care and those
are probably two of the biggest needs in the country, along
with mental health coverage.
So accessing the Medicaid program, by definition, getting
into it requires impoverishing yourself. We know that, but it
needs to be said and said and said again. It has not changed
since the late 1980's when we were dealing with this. It is
still the problem of demeaning yourself and giving up what you
have.
We have serious issues of quality. We are faced with a
system which encourages care in institutions rather than homes.
People want to stay at home. I had a mother who died from
Alzheimer's and she wanted to die at home, or we wanted her to
die at home. She was not sure at that point where she wanted to
die, but we wanted her to die at home. That becomes an
enormously emotional things within families.
It was more than 10 years ago that this bipartisan
commission called the Pepper Commission issued its ``Call to
Action'' and nothing has really changed. We had three basic
concepts which we put forward. Home and community-based care
should be available and they should be affordable, that is No.
1. No. 2, those who need nursing home care for short periods
should have enough resources, $30,000 for a single person,
$60,000 for a couple, preserved intact in order to return home,
so they are not depleted entirely. That was true then, is still
needed now. No one should fear impoverishment if they must end
their lives in a nursing home. Now, woven throughout the
recommendation is the requirement that people would have to pay
some, according to their ability to do so. That seemed fair
then, the same now. So I want to talk just briefly about each
of those ideas.
First, a strong home care benefit was included in the
Pepper Commission recommendations because people who need long-
term care want to stay at home. They do not want to be in an
institution. They want to stay at home. Individuals with three
or more impairments--and we used to call those, and still do,
measures by acts of daily living, ADL, it is a way of measuring
how impaired people are--should be eligible for home care
services. Our expansion did not cap the hours of service, but
we did include individual budgeting caps set for each
beneficiary. The trick is to encourage informal caregiving
rather than to displace it, and researchers believe that a
strong home health care benefit would help on this.
Today, the home health care benefit offers skilled care and
possibly home health aides on a part-time or intermittent
basis. Under current requirements, beneficiaries also must be
confined to the home, despite the fact that many could leave
home with assistance. So you get this question, if they are
home, they cannot leave. So 24-hour care is not covered, nor is
personal care covered, and if that is the only care a person
needs, we can do a whole lot better.
Today, in fact, I am going to be introducing legislation
which is the first step to improve home care, the modernization
of the benefit, which allows for increased mobility out of the
home. Let us not forget that the next step must be to change
the home care benefit fundamentally to allow those in need to
remain in the home and then to fix this bias that we have,
which we are, incidentally, curing in the Veterans
Administration where we have taken this on. We have made the
first change in long-term care in the VA system since the
1960's without a whole lot of fuss, not that they have
implemented it, but we have changed the law and they are in the
process of rules and regulations, getting people out of
institutions.
Second, the Commission members recommended coverage of
short stays in nursing homes regardless of income and we
allowed at that time, I think, David, it was about 3 months and
you did not have to pay. Income was not a factor. Most people
who enter nursing homes can return home and public insurance
for a 3-month stay provides the protection to do that.
At present, nursing home residents with any savings simply
do not qualify for Medicaid-financed nursing home care, and
under certain limited conditions, Medicare will pay some
nursing home costs for Medicare beneficiaries--this is
Medicare--but that is sort of the skilled nursing and
rehabilitation services caveat which does not get at the basic
problem.
So again, in this legislation, we are going to provide
options to nursing home care under the Medicare benefit that
would be payment for adult day health care. Paying for adult
day care will provide a measure of respite, will reduce the
bias toward institutionalization, and encourage people to stay
at home. The next step, obviously, will be full coverage of a
short stay in a nursing home without the condition of poverty.
Third, the Pepper Commission recommended a measure of asset
protection, and I discussed that. That is the idea that one in
four Americans who have to stay 3 months or longer, that you do
not deplete them. They can go to the nursing home, but you
allow them to keep $30,000 if they are single, $60,000 if they
are a couple, keep their assets. It is so horrible, what we do
to people.
In this legislation, we are going to give States the option
of whether or not to pursue and sell off the homes of Medicaid
recipients, and Governor Dean will probably have something to
say about this. It is something that can be done in the short
term. In the future, we will have to address the larger
problem, as I say, of spending down to poverty.
I was going to talk about the Pepper Commission is relevant
today, and you did. You basically said, Mr. Chairman, yes, they
are. It is just that everything is worse. The cost of nursing
homes has doubled, all the rest of it.
So I will close with a final thought. A long-term fix
cannot be done without the government. That, we have to
understand. We cannot ignore the government. The government is
already involved. We need the Federal dollar and we need
Federal leadership. The Pepper Commission concluded that
Federal action is, ``essential to change the nation's
fundamentally flawed approach to long-term care financing.''
End of testimony.
The Chairman. Thank you very much, Senator Rockefeller.
[The prepared statement of Senator Rockefeller follows:]
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The Chairman. I think if we have a question or two for Jay,
we can go ahead and do it now, if the other panel members do
not mind.
One of the things you put in your testimony that I find
very interesting and I think a lot of Americans do not really
understand is the chart that you put on the last page about how
things have changed just since the Pepper Commission, in terms
of the demographics of how this nation looks in the year 2000
as opposed to what it looked like in 1990. We have a 12 percent
increase in the number of people 65 years of age and older over
1990. We have a 38 percent increase in the number of people 85
years of age and older, which is the fastest-growing segment of
our population and therein lies part of the problem. There is a
17 percent increase, Senator Rockefeller points out, in people
living alone and a 70 percent increase in the total U.S.
expenditures on nursing home care just in that 10-year period.
I mean, those are astronomical numbers that are only going to
continue to get worse.
Jay, let me just ask one question, and that is you
mentioned the question of providing in the home health care
areas. You also recommend, I think, as the Pepper Commission
did, apparently, the coverage of short stays in nursing homes
by Medicare, and you point out, regardless of income. It seems
to me that we have to face a problem that we are looking at
prescription drugs for seniors which I support, but it is going
to come out of Social Security surplus. If we increase other
Medicare benefits like covering nursing home stays, it is going
to come out of Social Security surplus. We are rapidly spending
the surplus for retirement on these programs that are very,
very worthwhile.
It seems to me at some point we have to consider, with the
limited amount of money we have, are we, in fact, going to use
tax dollars to take care of the nursing home for Warren
Buffett? I am just using him as an example. I could probably
use the Senator.
Senator Rockefeller. Somebody else. [Laughter.]
The Chairman. I could probably use someone else as an
example, but it seems to me that as a nation, when we have
limited resources, we have to say, all right, we are going to
take care of those who need the help, but we are not going to
use tax dollars to subsidize someone who is financially well
off. Can you comment on that? I'm talking about means testing.
Senator Rockefeller. Yes, I would be happy to. I think your
point is well taken and adjustments like that could be made. I
remember I started something called the Golden Mountaineer
Discount Card program when I could not think of anything else
to sort of help West Virginia during the depths of the recent
recession and the legislature was all over my case because they
said, what do you mean? We have got all these rich people who
are going to be taken care of. So we did a little survey of
that and discovered about 2 percent of West Virginians
qualified as being wealthy and everybody else did not.
But that still does not answer your point, and your point
has merit and I can live with that. I think the important part,
however, is that when people need to go for a short period of
time, we talk about 3 months to a nursing home, that they
should not have to go through all of what you would otherwise
have to go through if you were going to qualify under Medicaid
for long-term care and have to strip down everything, you know,
get rid of your car, get rid of your house, all the rest of it.
So you sort of create this window for people who are short-
termers wherein you say, OK, you have got your 3 months based
upon your acts of daily living analysis and for that we are
going to go ahead and pick up the cost, not 6 months, not 5
months, not 10 months, but for 3 months.
Yes, that is social cost, and yes, we have budget problems,
and yes, we have terrorism, homeland security, and I cannot
help you in that, Mr. Chairman, except to say that if we are
talking about long-term care, these are the kinds of things you
have to do.
The Chairman. Thank you.
Are there any questions of Senator Rockefeller?
Senator Wyden. Just one. I think Senator Rockefeller has
done an excellent job in terms of outlining the history and I
think particularly your last point was important. This is an
area that absolutely must have a useful government role. There
are steps that can be taken in the private sector. I mentioned
one I am interested in, and that is the idea that you could
have penalty-free withdrawals from private retirement accounts
in order to pay for long-term care, so it moves toward what
Senator Ensign was talking about, which is trying to use the
private sector to the greatest extent possible. But there must
be a role for government here and the question is really
whether government is going to be smarter or whether the
government is going to continue to just sort of dawdle along.
My question for you, Senator, is given the history here,
why do you think that there has been commission after
commission and yet nothing seems to happen after the latest
report----
Senator Rockefeller. I think the answer to that, Senator
Wyden, is that Americans have a virtually unlimited capacity
for denial on certain very tough issues that have to do with
health care. We are also risk averse when it comes to health
care. We were made risk averse by two events. One was
catastrophic health care, which was a fantastic program which
the House shot down after all those people chased Danny
Rostenkowski down the street. We denied that from happening in
the Senate three times and finally had to give up, so that was
one. Then along comes the Clinton plan. Everybody goes
ballistic, and now we have become totally incrementalist.
In the process of that, we do CHIPs, but we cannot take it
on to the parents, so that we are sort of frozen, one, by risk
aversion, second, by always the excuse that this is going to
cost money, it is going to come out of Social Security, going
to come out of Medicare, et cetera. We have all these other new
things going on post-September 11.
But I think the most important thing that needs to be said
is I do not think there is a bigger health care problem in this
country that we have absolutely failed to deal with, face up
to, even discuss, because it does not make for a particularly
interesting discussion. You know, prescription drugs, you can
get into some really good battles. The verbal part is colorful
and all the rest of it.
Long-term care affects everybody at some point. It is the
most overwhelming health care problem, in my judgment, in the
country and is entirely unaddressed because it is considered
too expensive, it is considered too oriented toward the
government for whatever number of reasons, and so we choose
simply to deal with lesser problems, a little bit like mental
health, except mental health is now changing. People are
getting more friendly toward mental health. Nothing has
happened in long-term care except, as I say, what we have done
in the Veterans Administration, nothing.
Senator Wyden. I think your answer is a thoughtful one.
There is no question that part of this has just been being risk
averse and being unwilling to take on tough issues. I think the
one thing that I hope will be different now is that the country
does have a history of moving when there is a crisis on the
porch. In other words, you put it off if it looks like the
crisis is even three doors down the block. I think you and
others have laid out that the crisis is on the porch and I
commend you for all of your good work and look forward to
working with you.
Senator Rockefeller. Thank you, Senator.
The Chairman. The system is hanging on a string. I just
hope we do not have to wait for the string to break before we
do something.
Senator Ensign, do you have a question for Jay?
Senator Ensign. Yes. I actually want to explore with you
maybe just a little different angle because I think it is
something that we need to think about. The cases are so
individualized, and we have talked about the continuum of care,
as well, some type of short-term solution, and in my opening
remarks, I talked about the need for physical therapy and the
need for preventative medicine.
But what I want to explore with you is the family
responsibility. My grandmother, just turned 82 years of age. My
parents are in their mid-60's, and between myself and my
brothers and sisters, We are looking at the potentials for her
care. She is still living on her own and she still wants to
live on her own. However, if she did not want to live on her
own, we are in a position to be able to afford to do those
things. I agree with Senator Breaux as far as my grandmother
goes she should not be one of these people that are helped by a
government program. It should be some type of a means testing
for this. But I still want to use her as the example. Let us
just say we could not afford what we can afford. Maybe we are
questionable.
We know that older people, and you mentioned this, want to
stay in their own homes. My grandmother does not want to move
even into some of the wonderful private assisted living
facilities. She does not even want to go to that first step. I
have been to many of those places and they are absolutely
wonderful and I think she would actually like it there, but she
does not want to, so we are working with that right now.
But there is this mentality with younger people, in how
they are looking at this type of situation. It is a long way to
say this, but it is easy to just kind of ship grandma off, and
that is what I want to kind of explore. If we get more and more
into, ``Well, the government can take care of them, that
relieves me of my responsibility,'' that will we, in fact, be
setting up a situation where families will be taking less and
less responsibility for grandma or grandpa just because it is
easier.
It is hard work to take care of our elderly relatives. At a
certain point, you cannot do it with Alzheimer's patients. I
mean, you know that the family cannot do it. But there are a
lot of times where it is hard work, but that is what part of
life is. When you are a parent, you have children. Then when
you are a parent and you get older, you have got your parents
or your grandparents, and part of that is just the
responsibility as a human being to help in those situations.
But if there is a government program, you know what? We are
such a selfish society that we will just let the government do
it.
Senator Rockefeller. I am anxious to reply to that. I do
not think we are. I think we can be a society which ignores
problems and which denies problems, but I do not think we are a
selfish society. In fact, I think the families that you
referred to have, in fact, been the government because it is--
and I do not think that West Virginia is particularly unique,
but those who know Appalachia know that it is extremely family
oriented, but everybody can say that.
Kids come back. First of all, kids are dispersed all over.
I have three sisters. When my mother had Alzheimer's, they were
in four different States, all of them long ways away from where
she was. So they are dispersed. They did not used to be.
Families come back. I mean, the history of long-term care,
say where I live, is families coming back from Oregon, from
Ohio, from Kentucky, and they bring their kids for whom they
have been saving for college tuition money desperately, they
move into the house, they take the responsibility. They become
the government. They relieve the government. They do this
almost without exception, and then they get destroyed
psychologically, financially, emotionally by this process of
caregiving, which they cannot measure up to because of the lack
of respite care, because of the lack of experience, because of
the lack of people, because they are meant to be working, and
they get caught up in it.
My response would be somewhat the opposite, that the
American people have been bailing out the government through
their caregiving for all of these years. I am not saying that
the government has to do all of this. That is why we put in
that the people should pay something. Everybody should pay
something.
But, no, I do not buy that at all, Senator, that the
American people would choose the easy way out. I think people
do try. It is not Ozzie and Harriet anymore, and I recognize
that, but people are pretty serious about their parents when
they get in trouble and they are pretty willing to come back
and do everything that is required. As long as that happens,
there is less pressure on the government, and the explanation
of that is who talks about long-term care? You have got a group
of people here who are going to talk about long-term care, but
how often do you hear it discussed at your town meetings and
other things? People are talking about prescription drugs, they
are talking about other things, but they are not talking about
long-term care.
Senator Ensign. Just to conclude, I guess we will have to
agree to disagree. I think that there is some potential for
that, for what I laid out to happen. I agree with you, though,
it is very difficult on a lot of families depending on the
level of need. That is why I believe that there is a need out
there--a severe need--for more long-term care assistance.
I guess all I am trying to raise is cautionary flags that
we do not make it so easy, to not take responsibility. My
grandmother was incredible when my parents were divorced when I
was very young, letting us live with her for summer after
summer after summer while my mom was trying to save a little
money as a single mom, carrying change at Harrah's in Reno. I
will never forget what my grandparents did for us, and so
because of that, I feel a very, very strong commitment to her
to making sure that she is taken care of.
But in a situation where if the help can be like respite
care, when you see people with disabled kids or with parents or
grandparents or whatever it is, I think that is the way to go.
All I am saying is that when we are going forward, I think that
we need to be very careful that we do not just say, OK, here is
the benefit, you are relieved of all of your responsibility at
this time, instead of trying to set it up to where we can give
the help that is needed, but still the family has the
responsibility. That is all I am trying to raise as a point.
Senator Rockefeller. All I would say back, and I do not
want to abuse my time, is that that is, Senator, with all due
respect, kind of the classic way that legislation thereby never
takes place, because it is the cautionary flag. If we do this,
is there a chance that the government becomes a substitute for
the family? If people are disposed to worry about that
sufficiently, I guarantee you there will not be anything
happening in terms of a long-term care policy that works.
So that is what I would fire back at you. I mean, it is the
same thing, and the Chairman can remember this on Medicare
reform. I remember we had a vote in the Finance Committee and I
was one of two who voted against means testing. Now, should my
mother--obviously, she should have been means tested. But what
I did not want--the reason I voted against it, Senator, was
because I did not want Medicare reform, and the means testing
back at the time of this vote would have saved $3 or $4
billion, but it became sort of the way you defined, were you
serious about doing something about Medicare. Were you a
serious player in this intellectual and cerebral and emotional
argument. So if you were for means testing, that meant you
were, and it was $3 or $4 billion.
So it became an excuse, and what I do not want is the so-
called cautionary red flag that you raise, I do not deny that
possibility episodically, but I do not want it to become
something which then prevents us from dealing with what I
consider to be the largest most intractable health care problem
in this country.
Senator Ensign. Thank you.
The Chairman. Jay, thank you very much for your testimony
and for responding to a very interesting series of questions
and dialog. We thank you very much, and if you have to go back
to work, we will be happy to excuse you.
We will next hear from Governor Howard Dean. Howard, thank
you and all the witnesses for being patient.
STATEMENT OF HON. HOWARD DEAN, GOVERNOR, STATE OF VERMONT
Governor Dean. Thank you, Mr. Chairman. I want to thank the
Senator from West Virginia, who is very good on these issues
and has been for a long time.
I have written testimony which I will submit and I am just
going to go through some of the talking points.
In our State, we have 120,000 people on Medicaid out of a
population of 600,000. I did that on purpose. We insured 96
percent of all our children under 18, and of the 4 percent that
are not insured, 3 percent are eligible for the program. So we
essentially have universal health insurance in our State for
those under 18.
More than 50 percent of all Medicaid recipients, because we
have universal health insurance, are under 18. They use 14
percent of all the money. Out of the 120,000 people we have on
Medicaid, we have 2,500 receiving long-term care assistance.
They use nearly 50 percent of the money. This is an enormous
financial problem for the States, and since you match our money
in every State--different rates, obviously, for different
States--it is an enormous problem for the Federal Government.
We have actually done some of the things that you are
talking about doing. Let me make some suggestions. First of
all, I think the notion that you have to be very careful that
was raised by Senator Ensign is a very good notion. I agree
with Senator Rockefeller that we ought not to let cautionary
red flags prevent us from doing anything about this, but I
think if you create the wrong program, you are going to create
a need that is going to eclipse any ability to finance any of
this, so we have to do this right.
I am going to recommend two things, one of which we have
done. Institutions use up a huge amount of money. We do not
think we need any more nursing home beds in this country for
the foreseeable future, because if you do what we did, you will
not need it. We passed a bill about 5 or 6 years ago that
reduces the number of nursing home beds by 10 percent and we
think we can take another 10 percent of our nursing home beds
out. How can we do this with an aging population? Because of a
waiver.
Now, we do not want more waivers. What we want is a law
that allows us to do what we are doing without any waivers and
allows every State to do it. We have basically said, we will
take the Medicaid money that is going to skilled nursing
facilities and we will use it in assisted living facilities. I
think we are the only State in the country that uses Medicaid
in assisted living facilities, and more importantly, in home
health care. I think we have now 1,000 slots where we can take
care of people in their own homes and they can get Medicaid
assistance. The qualification is that you have to be eligible
for nursing home entry.
The Chairman. Do you have a waiver for both of those?
Governor Dean. Yes.
The Chairman. For home health care and for assisted living?
Governor Dean. Yes. So we are basically able now to use the
financing that we have to take care of more people. For every
Medicaid dollar that we get, we can take care of twice as many
people as we can if we did not have this waiver. So with the
money that we get, we can simply take care of a whole lot more
people.
Now, something like 30 percent of all the people in nursing
home-type care are, in fact, taken care of in their own homes
by using Medicaid dollars for skilled nursing care that needs
to come into the house, respite care, which I think everybody
agrees is necessary because families really do struggle when
they are taking care of their folks, and it really is not easy
on these people.
I think we all have our stories. I certainly have seen
people, particularly with Alzheimer's, who are otherwise
healthy but who are very difficult to take care of. If you try
to do that on your own without any kind of support, you are
basically asking for a situation where you and your family and
your kids get burned out as you are trying to take care of your
elderly parent whose Alzheimer's is deteriorating.
So these services are necessary, but even if you have
respite services and even if you have long-term care in the
home and skilled nursing care in the home and all these things,
you can still take care of twice as many patients as you can
inside a skilled nursing facility because the money is
reallocated.
Now, this is not to say we do not need skilled nursing
facilities. Of course, we do. This is a gradual aging process.
People who have serious conditions like Alzheimer's or many
conditions when you get to be in your 70's, 80's, and 90's,
these conditions are not usually reversible. So as folks
continue to transition, they do need more care and they do need
to go from home into assisted living or oftentimes into a
skilled nursing facility.
But right now, we put folks in this country into skilled
nursing facilities who do not need to be there and we do it
because everybody lives in Ohio and the mom is in Nevada and
they cannot come back and they cannot leave their lives and
they cannot, for most people, cannot decide they are going to
move to Nevada or move her to Ohio or whatever, and so they end
up in the nursing home.
The most common way people get in the nursing home is they
go into the hospital. They get sick. They do not need to be in
the hospital anymore, and then everybody wants to get them out
of the hospital. They cannot go home because we do not have the
back-up, so they end up in a nursing home. Once you are in a
nursing home, it is almost impossible to get out, because
basically what happens is that the level of care that a patient
needs will rise to the level of the institution that they are
in.
This is why I started off by saying, be careful what you
create, because if you simply create a long-term program that
stresses nursing homes, guess what? You are going to have a
whole lot more nursing home beds and you are going to be able
to take care of half the number of patients.
So the first thing I would ask for, Mr. Chairman, is a
program which actually eliminates the necessity for us to get
waivers and allow people and encourage States to put people in
their own homes with the kind of back-up care that is
necessary, augmenting the kind of family care that Senator
Rockefeller and Senator Ensign were talking about, because if
you augment the family care, most families do want to do the
right thing, but they cannot because it is just an overwhelming
task in many cases. You can eliminate the need for a skilled
nursing facility in many, many cases by simply supporting the
desire of families and the patients themselves to stay in their
own homes.
The next piece is more controversial. I am going to start
out speaking for the NGA, but let me just be really clear that
I really do not, because I am going to go beyond what the
testimony is. I believe we ought to have health insurance for
every American. That is something I have been very up-front
about for a long time as a physician. It is something that I
got into politics because of.
One of the pieces of that is this so-called swap which has
been talked about for many years, which is the notion that
States ought to be responsible for making sure all children, I
think up to the age of 22, get health care, and we ought to
have some flexibility as to how to do that and we ought to have
some financial responsibility, and then the Federal Government
ought to take over responsibility for all those over 65,
including dual-eligibles.
The numbers work very well. If you tell States they have to
insure everybody up to 22, they will yell and scream and say it
is an unfunded mandate, but it turns out that you are within $1
billion in the States' favor if the Federal Government, in
turn, takes over responsibility for dual-eligibles and nursing
home/long-term care.
So I would urge the committee to look at that, although
look at it carefully, because the biggest single problem here
is that States generally, I think, do a better job than the
Federal Government will be able to do in terms of inspecting
and regulation of nursing homes. If you have one enormous
entity regulating all the nursing homes in the country, I think
you are going to have some problems.
Now, you have problems in States. From time to time, there
is a big issue in one State where there is an investigation and
the people are being treated badly in nursing homes and so
forth and so on, but while that is going on in that State,
presumably 40 out of the other 50 are doing a very good job.
We do a pretty good job. We make mistakes and so forth.
Everybody makes mistakes. But I think having that flexibility
of somehow keeping the regulation at the local level and having
some partnership aspects, or at the State level, will serve you
and serve the Federal Government and, most important of all, of
course, serve the patients best.
But the biggest reason for the Medicaid costs being out of
control in this population is the institutional bias of the
program. The program is biased, heavily biased toward
institutional care and it makes it very, very difficult without
going through the hoops that are required in the waiver program
to get the OK to spend the same amount of money taking care of
more people in the area that they want to be taken care of,
which is their own home.
Let me just close by thanking you very much for doing this,
by saying this is a very difficult area, because when you are
talking about long-term care insurance, what you are talking
about is not making sure people get adequate health care, you
are talking about asset preservation.
We have long-term care insurance in this country. It is
called Medicaid. If you go to a nursing home in this country,
you do not get kicked out if you suddenly cannot pay the bills.
Most States--all States, as far as I know--prevent that from
happening. Medicaid simply takes over. The issue is, for
middle-class people, do you want to force them to impoverish
themselves and impoverish their spouse in order to survive in a
nursing home?
I am not trying to say we do not need long-term care
insurance. We do need long-term care insurance. But I think we
have to recognize that this is not an issue like universal
health care, where there are 40 million people who do not have
it and, therefore, they get bad care because they end up in the
emergency room after ignoring a problem for 3 months and it
ends up costing the system more money. This is an issue where
it is not access, where it is asset preservation. It is an
important issue. There is a role for the private sector here.
There is a role for the government here and I wish you good
luck in sorting it out.
The final word is that I think Senator Rockefeller is
absolutely right. This is an issue that somehow has been pushed
to the back burner for a long time. It is a major issue
confronting this country. It is certainly a major issue
confronting the budgets of all of our States, every single one
of which is in one form of deficit or another these days.
Medicaid is the biggest driver in the State budgets, all 50 of
our budgets, and in Medicaid, the biggest drivers are long-term
care and pharmaceutical prices.
So I think these hearings have been very timely. I know you
have put an enormous amount of effort and time into this and I
sincerely hope that you will get a bill that will give the
States more flexibility to spend both your money and our money
more wisely, cover more people in the circumstances that they
want to be covered, and also to be careful when you create a
long-term care program that it not have a bias that is contrary
to the wishes both of the patients and of those of us who end
up budgeting for the care. Thank you.
The Chairman. Thank you, Governor. As a medical doctor, you
certainly bring a unique perspective to this issue.
[The prepared statement of Governor Dean follows:]
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The Chairman. Next, we will hear from our former colleague,
Senator David Durenberger. David.
STATEMENT OF HON. DAVID DURENBERGER, CHAIRMAN, CITIZENS FOR
LONG-TERM CARE COALITION, WASHINGTON, DC
Senator Durenberger. Good morning. Thank you, Chairman
Breaux and members of the committee. Thank you for holding this
hearing today, but more importantly, thank you for your
continued leadership on long-term care issues. You will
eventually be honored for all 13 of those hearings. I greatly
enjoyed my years of service on this committee and I am honored
to be testifying.
As Chairman of Citizens for Long-Term Care, I have been
privileged to represent more than 60 national organizations
representing seniors, people with disabilities, long-term care
providers, labor unions, insurers, and other professionals.
Last year, this diverse group of organizations coalesced behind
the development of a national framework for reforming long-term
care financing. Among its recommendations was the strong
assertion that long-term care is an insurable event, and so it
requires an insurance-based solution as opposed to the current
welfare-oriented approach.
Today, we are releasing an analysis that provides a new
perspective on how policymakers should view long-term care
within the context of national entitlement program reform. In
short, it concludes that as the nation's population ages, it
has become increasingly clear the Nation needs an expanded
national financial security policy for access to both health
and long-term care just as much as it needs a national energy
policy or a national defense policy.
The major findings are: long-term care spending is growing
rapidly and the costs threaten Medicaid and family budgets. In
2002, 40 States anticipate budget shortfalls because of growing
Medicaid budgets.
Second, Social Security and Medicare reform will be
threatened unless long-term care financing is included.
Third, we must develop a national commitment to long-term
care financing that includes a limited social insurance cash
benefit, generous incentives for private insurance, increased
personal savings and some of the tax policy changes that
Senator Wyden mentioned, and a Medicare program better designed
to treat chronic illness.
Finally, the inclusion of long-term care in Social Security
and Medicare reform will increase efficiency, promote family
caregiving, increase private resources, lower the cost of care
per beneficiary, and better treat chronic illness, among other
benefits.
The fiscal challenges Federal and State legislators face
with the growing pressures on financing, on workforce issues,
and on the care quality have been articulated both by Governor
Dean and by the NGA's request for a Commission on Medicaid. Our
report makes the case for including long-term care financing
reform in the Social Security and Medicare reform dialog over
our nation's financial security goal.
In our judgment, the time to begin is now. The chairman
referred earlier to how do we deal with spending the surplus.
The reality, Mr. Chairman, is it is time to bring 1935 and 1965
programs into the realities of the 21st century. It is that
simple.
In the past, when health and income security of our seniors
and people with disabilities were threatened, society responded
with the development of Social Security in the mid-1930's, and
Medicare and Medicaid in the mid-1960's. These programs were
designed and built on what we knew in the early and mid-20th
century. But by the end of the 1970's, policymakers were well
aware of new realities and the need for change in the programs'
responsibilities.
In 1982, President Ronald Reagan proposed a new federalism
as his effort to clarify inter-governmental responsibility for
financial security. The heart of this proposal, endorsed by the
National Governors' Association and led by Dick Snelling, would
have made the Federal Government responsible for financing
supportive services for the elderly and for people with long-
term disabilities. State government would have taken
responsibility for the financial commitment to non-disabled
low-income individuals, those eligible for short-term public
assistance, or as we know it, welfare.
In 1990, under the direction of Senator Rockefeller, the
Pepper Commission made a recommendation that was much like the
CLTC recommendation, that there be an insurance premise under
long-term care financing. The need for long-term care would
exceed the ability of Medicaid State-Federal financing system
to keep pace with demand, and we said in 1990, you have to move
to an insurance system.
As a member of the Senate's Committee on Finance, I
participated in both of these efforts and I am well aware of
the politics of health and financial security. I am convinced
that President Reagan and the NGA were right in 1982, that the
Democrat and Republican House and Senate leadership on the
Pepper Commission were right in 1990. I am convinced the many
national long-term care associations who make up CLTC are right
today.
The combination of demographics and cost increases that are
driving calls for Medicare, Medicaid, and Social Security
modernization require we look for new solutions to address the
future needs of people with disabilities and our aging
population. We cannot expect our elected officials to undertake
the bruising political battles associated with Medicare and
Social Security reform only to have the same issues again
several years later in the form of long-term care financing
reform.
If Congress reforms Social Security and Medicare without
addressing long-term care financing, they will have missed a
unique opportunity to fully address the health and financial
security of society's most vulnerable members.
The important analysis that CLTC releases today represents
the consensus of nearly every association with a stake in
improving access to and the quality of long-term care services
and supports in this country. Despite the usual differences
between the many associations, they all share the belief that
long-term care financing must be reformed before the current
situation becomes more critical, and to that end, they
recognize they inherent reasonableness and the rationality of
integrating this issue with any entitlement reform discussion.
We hope the work that CLTC has produced helps generate much-
needed interest and understanding in this regard.
I thank you for the opportunity to testify and will be
happy to answer any questions.
The Chairman. Senator Durenberger, thank you very much for
your work as well as your testimony. It is very, very critical
to finding a solution.
[The prepared statement of Senator Durenberger follows:]
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The Chairman. Next, we will hear from Ms. O'Shaughnessy.
STATEMENT OF CAROL O'SHAUGHNESSY, SPECIALIST IN SOCIAL
LEGISLATION, CONGRESSIONAL RESEARCH SERVICE, WASHINGTON, DC
Ms. O'Shaughnessy. Thank you, Senator Breaux. Good morning,
Senator Breaux and Senator Ensign. Thank you for the
opportunity to testify. Today, I am going to take a little
different tack and talk about international trends for long-
term care financing, which I know you are interested in.
The first point is that population aging is a worldwide
phenomenon. The aging of societies over coming decades has
commanded the attention of policymakers worldwide and will have
dramatic implications on pension plans, income programs, and
health and long-term care systems. While growth of the elderly
population in industrialized countries of North America and
Europe is well recognized, developing countries are also
experiencing rapid growth in their older populations, predicted
to increase by two- to fourfold by 2030.
By 2015, in 9 of 11 Western European countries, older
persons will represent 18 percent or more of the total
population, and by 2015, an astonishing one-quarter of Japan's
population will be 65 and older. While the United States,
Canada, and Australia are relatively young by world standards,
a large growth rate will come in coming years, as members of
the panel have discussed.
These demographic factors will have immense impact on
public and private spending for pensions, social welfare, and
health and long-term care systems. Policy makers worldwide are
planning, or have already taken steps to change their long-term
care financing and service delivery systems. Although countries
differ in approach, many have recognized that the provision of
long-term care is one of three pillars of social support for
the elderly, along with retirement income and medical care.
Comparison among countries is challenging because of the
different economic and political circumstances of each country
and the nature of the social contract that each country shares
with its citizens. For example, two countries that have
instituted long-term care reform, Germany and Japan, have
certain characteristics that differ from other countries.
Germany has more than a century-old tradition of public
responsibility for health care of its citizens. Japan unlike
many other countries, has a long tradition of filial
responsibility for older family members. Older family members
usually go to live with their oldest son, with the daughter-in-
law providing most of the care.
A landmark study prepared for the Organization for Economic
Cooperation and Development, OECD, for its 29 member nations,
indicated that comprehensive reform to address the economic and
social implications of aging populations will be necessary, and
OECD noted that there is a limited window of opportunity for
many nations to take action.
Regarding long-term care, OECD recommended a number of
things that have been talked about in the hearings over the
course of the last year. First, OECD recommended that financing
schemes should be developed to share the financial burden
jointly by the working age and older populations.
Second OECD recommended coverage of catastrophic costs,
which Senator Rockefeller just spoke about; third, there should
be wide support for home care programs and family care rather
than institutional care, and, fourth, there should be a
harmonizing of long-term care services with health care policy.
A key challenge according to the OECD for its 29 member
nations is to develop systems that can provide chronic care and
improve the balance between health care and chronic care,
between family and formal care systems, and between medical and
social services. As in the United States, many nations have
found this very difficult to accomplish.
During the 1990's, a number of nations enacted major
legislation to change long-term care systems. Some details of
some of those systems are in my written testimony, but I would
like to highlight certain aspects of programs in Germany and
Japan that have drawn attention in the U.S.
In 1994, Germany created an employer-mandated social
insurance program where employer and employee share in a 1.7
percent tax on wages to pay for long-term care on a pay-as-you-
go basis. The program is a capped entitlement with maximum per
person benefits; it provides nearly universal coverage. Over 90
percent of persons in Germany are covered by the plan, and
eligibility for assistance is not related to income and assets.
However, the program was not intended to be fully
comprehensive. Cost sharing by recipients is a key element.
When costs of care exceed the benefit maximums, the difference
must be paid by the individual or his or her family, and if the
individual cannot pay, a means-tested welfare system kicks into
place.
The German plan provides both cash and services up to
maximum amounts for various multi-levels of care; home care
services are specifically designed to supplement family care.
Cash has been a predominant choice of long-term care clients,
but recent trends show that people prefer a combination of cash
as well as formal services.
Japan, which has a very large elderly population
implemented a social insurance program in 2000. The program
provides both home care and institutional care according to
five levels of need. As in the German program, benefits for
care are fixed, depending on the level of need that is
required, and public subsidies pay for one-half of the care.
The other half of the cost is funded through income-related
premiums and a flat 10 percent copayment by individuals. So
there is a mix of public-private funding in this program.
In summary, Mr. Chairman, reviews of various countries have
found some similarities in the goals of reform. These include
the following. Policymakers are attempting to find the right
balance between public and private responsibilities, as in the
U.S. Countries are striving to create a more balanced approach
to home and community-based care. In some cases, the desire to
control institutional care, as Governor Dean had mentioned, has
been a propelling reason for seeking out home and community-
based care.
Countries recognize the important role of unpaid care
provided by family and friends and a key feature of these
designs in various countries is to avoid creating, as Senator
Ensign was talking about, disincentives to family support and
to supplement the informal care that is provided. A number of
countries are developing systems that allow consumers greater
choice between services and cash payments, as we are
experimenting with in this country.
Responsibilities for administration are generally
decentralized. Also, in terms of financing, in some countries,
eligibility is based on need, not ability to pay. But on the
other hand, as in Germany and Japan, those reform programs
require individuals to pay for a portion of their costs, either
through fixed or variable rate schedules, either through
premiums or cost sharing.
Just to conclude, Mr. Chairman, Senator Rockefeller talked
a lot about adult day care programs; adult day care is a
blossoming industry in this country. We actually got the idea
for adult day care from Britain and from Russia in terms of the
experimentation that they had done, in the early part of this
century. This is an example of a model that we have transferred
from other countries.
So that concludes my statement. I will be glad to answer
questions.
The Chairman. Thank you very much, Ms. O'Shaughnessy.
[The prepared statement of Ms. O'Shaughnessy follows:]
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The Chairman. Our final witness will be Mr. Steve Chies.
STATEMENT OF STEVEN CHIES, VICE CHAIR, AMERICAN HEALTH CARE
ASSOCIATION, WASHINGTON, DC
Mr. Chies. Thank you, Senator. Let me also extend my thanks
to the committee for the substantial amount of time that you
have invested in examining the many aspects and future
implications of our nation's long-term care financing crisis.
As baby boomers approach retirement age, millions of
Americans will be confronted by the need for long-term care and
confounded by the inability to pay for the care that they will
demand. Consider this fact. The average cost of a year's stay
in a nursing home is in the range of $50,000, far too much for
many Americans to pay, and it is fair to say that in America,
the greatest long-term care risk that you face for financial
and societal is to stay in a long-term care facility, as
Senator Rockefeller mentioned.
It is also fair to say that the heart of the nation's long-
term care financing structure, Medicaid, is quickly becoming
one of the most underfunded government programs we have in
relationship to its mission and mandate. A recent report by BDO
Seidman showed that the Medicaid program is underfunding
skilled nursing care by approximately $3.7 billion in the year
2000.
AHCA and NCAL have spent a great deal of time and resources
examining the nation's long-term care financing structure. To
assist us, we engaged the health policy experts of Abt and
Associates, a well known, highly regarded public policy
research firm based in Boston. Working with Abt, we developed a
sophisticated micro simulation model that we have been using to
test and analyze various approaches toward long-term care
financing reform, and here are some of our observations.
Because of demographic changes, Medicaid spending for long-
term care as a percentage of gross domestic product will double
during the first half of the 21st century. The continuum of
long-term care services will need to be greatly expanded to
meet the needs of aging baby boomers, and access to this
continuum is essential. Reliance on family caregiving will be
strained simply because there are too few family members
available to provide the care.
To address these challenges, we concluded the following.
Congress must not only continue to endorse and support the
growth of a long-term care insurance market through changes in
the tax code, but it must do so in a specific way to target
assistance to low- and moderate-income Americans to help them
purchase and maintain insurance. We believe a public-private
program should be created to help all Americans prepare for
their long-term care needs. Not only will this entail changes
in the tax code to promote long-term care insurance, but should
also include restructuring of our current patchwork system of
financing long-term care into an effective, efficient public
policy program at the Federal level.
Mr. Chairman, our research shows that a national voluntary
public-private program for financing long-term care is possible
and can provide better access to the range of long-term care
needs for Americans elderly and disabled. We believe it is
possible to ease the growing dependence on Medicaid with
policies to make it possible for a majority of individuals to
pay privately for care they receive in the future. This could
be accomplished by shifting the role of government from
government paying for care services to government helping
individuals and families plan for their long-term care needs.
Tax incentives can be an important component in shifting
the role of government. One incentive is the above-the-line
deduction now being considered by this Congress and supported
by you, Mr. Chairman, and other members of the committee. But
more importantly, we see a critical need for a refundable tax
credit, one that is targeted toward low- and moderate-income
Americans, those who have the greatest need for government-paid
long-term care services by Medicaid. If a major goal is to
reduce dependency on the Medicaid program, then we see this as
the best way to reach it.
Once tax incentives allow for greater reliance on long-term
care insurance, it becomes much more feasible to shift the
government's role of the coverage of long-term care to the
Federal level, thereby relieving the States of the increasingly
onerous budgetary burden. This restructuring will allow for the
coordination of both acute and long-term care services of the
elderly and long-term care for the disabled. Coordinating the
long-term care at the Federal level will eliminate today's
failed patchwork financing system, thus creating a more
efficient and seamless system for covering the care.
Finally, Mr. Chairman, the key element necessary to
establish the legitimacy and awareness of this program must be
public education. The comments from Senator Rockefeller really
hit home for me. A national effort designed to help individuals
understand the risk they face and what options they have. Once
they do, we believe they will choose to act responsibly and
plan for their long-term care needs.
That being said, we neither support nor advocate any system
in which individuals do not take some financial responsibility
for their care. This is the American way, and if you want to
control your destiny, you must take some responsibility. This
approach provides all Americans with the means to do just that.
AHCA and NCAL believe the components of this financing model
are viable and maximize the best the public and the private
sectors have to offer for the good of all.
This obviously cannot be implemented overnight but is
likely to take several years. This is why it is important for
all elected officials to recognize the severity of this
problem, just as you do, Mr. Chairman and the members of the
committee, and begin addressing this situation today,
regardless of what the final approach we ultimately decide on.
Again, thank you for this opportunity and for your
dedication to try to help the elderly and disabled in this
country.
The Chairman. Thank you very much, Mr. Chies, and all the
members of the panel for excellent testimony.
[The prepared statement of Mr. Chies follows:]
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The Chairman. Governor Dean, I think that the story in
Vermont has been unique and I think it has been highly
successful. I was really impressed with the fact that you said
that because of the waivers you have received, that you have
been able to essentially spend the same amount of money and I
think you had talked about actually covering almost twice as
many people with the same amount of money through the use of
alternatives other than just skilled nursing facilities. Do I
understand that correctly?
Governor Dean. That is true, although you have to throw in
cost-of-living, so it is not the same dollar amount, but it is
the same adjusted dollar amount. We can take care of twice as
many people outside a skilled nursing facility as we can inside
and they are just as sick.
The Chairman. You have had to come to the Federal
Government----
Governor Dean. Excuse me. They are just as sick as the ones
who would have been in. We are not talking about really ill
people who clearly need to be in skilled nursing facilities.
The Chairman. Now, you have come to the Federal Government
to request the authority to have those waivers, right?
Governor Dean. Right. I think the first waiver is not
uncommon--I am pretty sure there are other States that have
it--which allow us to spend Medicaid money on home health care.
We happen to have a fair number of slots. It is about a third
of all our slots.
The Chairman. You can also spend it for assisted living
facilities?
Governor Dean. Yes. That, I think, is relatively unique,
and certainly some of the members of the panel have more
expertise than I do, but I am not aware of another State that
has that, although there may be----
The Chairman. Your recommendation is that you should not
have to come to Washington to get the waivers, that the State
ought to have the flexibility to use the money as they see fit
within the options that are out there?
Governor Dean. Not only that, although I am never in favor
of Federal mandates. Certainly, anything that you can do to
push States to take care of the maximum number of people
outside the skilled nursing facilities and even assisted
living. Somebody mentioned the least restrictive environment.
That is what people want. People want to be in their own homes
if they can be.
Obviously, at some point, it does not make sense to spend
$250,000 keeping somebody in their own home when they could do
it for a good deal less in a skilled nursing facility. But for
most people, we can keep them in their own homes for about half
of what it costs to put them in a skilled nursing facility, and
they can be pretty sick, particularly if family is willing to
participate in their care, or able or they are present in town,
which is the case for most people.
The Chairman. Mr. Chies, you have heard Governor Dean's
recommendations. On behalf of your association, what do you
think about them?
Mr. Chies. We have supported waivers in the past and will
continue to support the waiver process. I think, Governor, I am
aware of at least 38 States that have similar waiver programs
for assisted living and home-based services, so it is being
done extensively out there and I think the Governor's
recommendations probably to allow States to do that on a much
more broader basis is probably indicative of what the States
are demanding out there.
The Chairman. So I take it what Governor Dean is suggesting
is that the current waiver process, whereby they have to come
to Washington and officially request a waiver to use Medicaid
funds for things other than skilled nursing facilities, that
that be made a sort of permanent waiver? I take it you are not
trying to get away from some kind of Federal guidelines----
Mr. Chies. No.
The Chairman [continuing.] Because that is not going to
happen. I mean, if we are going to have my State get 70 percent
of the Medicaid money, from the Federal Government, then we
want to make sure that we have a responsibility to see that the
money is being spent responsibly. I mean, this is a partnership
here. We do not just toss it up in the air and hope it comes
down and does good, but we have a responsibility to make sure
that we are doing what we intend to do. Do you support that
concept, Mr. Chies?
Mr. Chies. Yes. Mr. Chairman, I think you will find that
most long-term care providers would agree substantially with
what the Governor has presented here. I think the Medicaid
waivers is a short-stop effect here. It is not really where we
need to be as a society. We need to look at a much broader
program of getting people the resources and letting them
control it. The discussions from Carol about Germany and Japan,
about the ability for people to have cash payments to go out
and buy the service that they want makes a lot of sense from
our perspective and allow the marketplace to drive the quality
and the quantity of services that people receive.
The Chairman. Are your nursing home owners moving into
other types of long-term care facilities? If I was in the
nursing home business, I would be broadening my base of
operations as fast as I possibly could into assisted living
facilities and home health care, as well as the traditional 24-
hour-a-day, 7-day-a-week skilled nursing facilities. In some
States, there is a group of operators of nursing home
facilities operators that are very much against the being able
to use waivers for other types of facilities, because they feel
it takes business away from them. Can you comment on that?
Mr. Chies. I think that is a fair rendition of what is
going on in the field out there. I think the reason you will
see a lot of operators oppose assisted living is because of the
pinched State budgets we have had in the Medicaid program and a
concern that there will not be sufficient funding to adequately
care for the people that do require nursing home care. But many
long-term care providers who are in various segments of the
business--the organization I work for right now has a number of
assisted living and housing units and we believe they are very
compatible in terms of how you move people through a continuum
of providing care and services.
The Chairman. I thank you for that answer. I would just
suggest that all of them look to the future and that is where
some of the answer is going to be, not only from a service
standpoint, but also from an economic and business standpoint.
People are going to be demanding that type of care. They are
already demanding that type of care. So it is good to hear that
they are moving in that direction and that the association
essentially supports the waiver process that Governor Dean, I
think, has so well outlined for us.
Governor Dean. Mr. Chairman, if I might just add one thing,
just to make sure this does not get glossed over, because this
was a real point of contention between ourselves and the
industry when we did this, we did pass a bill mandating that
over a period of years we reduce the total number of nursing
home beds by 10 percent and we are now in the process of taking
it down another 10 percent and nursing homes, smaller, weaker
ones, have started to close.
The Chairman. That does not mean 20 percent less care.
Governor Dean. No.
The Chairman. It means----
Governor Dean. It actually means 20 percent more care
because you take down 20 percent of the beds and you can add 40
percent more care capacity outside the system by using the
money. But this is not painless for nursing home operators. The
smaller ones cannot get into the health care business because
they are mom-and-pop organizations with maybe 30 beds. The
larger chains could, if they wanted to, and some of them have
done that and some of them have not.
The Chairman. David, you know the problem we struggle with
up here. We are trying to add a prescription drug benefit to
Medicare and we have got ranges from $1 trillion to $190
billion on how much we are going to spend in that area. We
still have 44 million Americans who have no health insurance at
all. At least if you are on Medicare, you have got about 53
percent of your health care being paid for through Medicare. If
you are one of the 44 million Americans who have no health
insurance, you are subject to emergency rooms as your principal
provider for health care in the country. Now we are talking
about long-term care.
The money is coming out of the Social Security trust fund,
and that is where it is coming from. You can say, well, I want
a $1 trillion drug program. I can write you a great drug
program for $1 trillion, free drugs for everybody, and some
would endorse that. But you have got to realize where it is
coming from. It is coming from your children and our
grandchildren's Social Security retirement.
All of this is a money problem as much as anything. Long-
term health care insurance, which Steve has endorsed and I
think I have introduced, is a refundable tax credit approach.
That is going to cost money. That money is going to come out of
Social Security retirement funds right now.
Do you have any suggestions? You have outlined some really
good suggestions. The question is, how do we pay for it? If you
had the answer, we would make you king for a day or maybe for
the rest of your life.
Senator Durenberger. First, if you take a look at this Abt-
produced study called Life Plan, I think it gives you an
example of how you might do this, if you want something other
than my opinion. There is an example of how, over time, we
might do it.
Second, and I am speaking only for myself, part of the
reason that we are all recommending dealing with long-term care
financing reform at the same time we deal with the others is
there are a lot of resources available. They may not all be in
the Federal Treasury, but the Federal Treasury decisions are
being run by our predecessors in 1935 and 1965, basically. So
you have to tackle the realities of that in the context of the
21st century. What do we know now compared to what we knew
then?
We have in retirement today, including myself, I guess,
although I am not retired, a huge amount of wealth that is
about to be transferred to another generation. We have
something like $14 trillion in home equity in America today. I
do not know what we have in savings and 401(k)s and (b)s and
all that sort of thing, and I think Ron Wyden already spoke to
that. Some changes in the tax code enable people to make
different decisions.
So the point of changing this from a ``wait until you have
got a problem and then make a decision'' to a system in which
we make the financial security decisions when we are young or
when we go to work, and then when the occurrence of need
comes--maybe within a year, you have a developmentally disabled
child, or 7 years from now, when like my mom, you have a
dementia called Alzheimer's, but you have prepared financially
for that eventuality and you have not waited until the need
arises to make these decisions.
That is why, when I listen to this conversation, with all
due respect to all my colleagues who are in government, much
better decisions are made by people in families than are made
by Governors, or Congressmen, or Tommy Thompson at HHS, or Tom
Scully at CMS, and the idea of an insurance system which is
partially social insurance, partially private insurance, the
idea of the Germany system, which, at Carol's suggestion, I
went over and looked at last week, is that families make these
decisions, and if they make them in advance, there are lots of
resources in this country, privately held as well as the
retirement plan surpluses, that can, over time, be committed to
meeting these needs.
The Chairman. Senator Ensign, any questions?
Senator Ensign. First of all, I just want to say thank you
to all of you. It has really been a terrific hearing and I
think some great suggestions here. Obviously, there are some
incredible challenges for us as policymakers up here.
Governor Dean, I think that your suggestion is probably the
easiest one of everything that has been talked about up here as
far as being able to do, and if the only thing we can do is
incremental, that is at least an incremental step we ought to
be taking. I want to try to work with you on that and the
Chairman trying to be able to do that in a bipartisan way. It
is short term but it has shown real progress. You have shown
leadership on this, and that it could be done across the
country.
Ms. O'Shaughnessy, I thought it was really fascinating,
some of the things that you were talking about. I am glad that
you studied them and I want to follow up with a question on the
experience. I was talking to Senator Rockefeller about the
family incentive. What have those other countries found,
because, for instance, Japan is famous for how they take care
of their parents, their grandparents. They are known all over
the world for how they revere the elderly. We sometimes are a
throw-away society for our elderly and that is the cautionary
flag I was trying to raise is that we do not encourage more of
that, but that we actually get more to the incentive of keeping
family to-family decisions and types of care as much as we
possibly can.
What has been the experience of Japan and Germany as far as
that? Has anybody looked at that aspect of it?
Ms. O'Shaughnessy. Well, in terms of Japan, with the
demographic factors and the lower fertility and increasing
number, I mean, 25 percent in just a few years of the total
population will be elderly, and what has happened is that women
in Japan going into the workforce more dramatically than
before--all these factors have put a huge amount of pressure on
the family structure there. So they recognized after some years
of thought, that they needed to incrementally assist
individuals through a formal care system.
I looked at it a little bit in terms of evaluation, which
the Japanese government puts out, and basically, they are
saying that people seem to be very satisfied with the care that
they are getting through the formal system, but, you know, you
still have this strong family network that has got to be there
just to serve the number of people.
Also in Germany, realizing that the German plan is not
comprehensive--it is universal but it does not provide
comprehensive coverage--the levels of care, I think the highest
they can pay, except for one exception, is something like
$1,400 a month for care. Most people are either at level one or
level two, so you are still relying upon the informal support
system a great deal even though you have a minimum benefit that
helps take off the pressure, and perhaps is for nursing care at
home that the families do not know how to do.
In terms of looking at countries, Austria and Australia
also enacted national family caregiver programs in terms of a
limited benefit. I think that is the way at least OECD sees the
issue going--enact programs that will assist families, not
supplant them.
Senator Ensign. Mr. Chairman, I will just conclude with an
observation. My son has a wonderful piano teacher and they have
a severely disabled son who is now about 16 years of age. A
couple of comments on them.
First of all, it is unbelievable to see the difficulties
that they go through with this child. He is the typical child
that most families would probably not be able to handle and
would institutionalize. A lot of families would, anyway. Maybe
not most, but certainly a lot of families would. But to see the
relationship with him and his siblings, who are younger, and
the way that they interact with him is awesome to see, and I
know that these kids are going to be better people because of
learning to serve him.
But also, watching mom and dad and financial hardships that
it has been on their family, there is no question about that.
They are making it through it. They are doing OK. But part of
the help that is really needed is a lot of what has been talked
about, here such as respite care.
I do not want to get away from encouraging people, and that
is the point I was trying to make, by setting up a system where
it is just easy. You know, just put them in an institution
where it is more expensive, the care and all that kind of
thing. Rather let us get people the help that they need so they
can stay together as a family with much home care as is needed.
If they need to go into a facility or whatever, get them out as
quickly as possible. But keep as much of the incentive there as
possible to keep families together.
I think, overall, if we set that out as one of our main
goals, I think that we can form the right policies up here to
take care of the problem that people are concerned about. The
problem of impoverishing themselves by going in and then once
they go into a facility they are stuck there, and they know
they are going to be there for the rest of their lives. We need
to go toward where they know that there is some hope, where
they are not afraid to get the help because maybe they can end
up worse than before; where they were actually a little more
independent and those kinds of things.
I think that if we put our heads together and not let
ideology get in the way we can get there. It is just a question
of how we get there, and I think that if we are willing to work
together, I think we can really come up with some policies that
will be good for the country and that will be more affordable.
I do not think any of it is affordable, especially with our
aging population. But it is a question of what is going to be
more affordable, and I think that doing the right thing and
trying to keep family as much together as possible and doing
the things like Governor Dean is doing, is a more affordable
way to do those things. You help more people and you keep them
in situations where the quality of life is better as well.
So I think, overall, all of those goals can work together
and I really want to applaud your leadership, Mr. Chairman. You
have really done a great job.
The Chairman. Thank you very much, Senator Ensign, and
thank you for being with us for the entire hearing.
I think today's hearing really represents a wake-up call to
America about the enormous challenge and the enormous problems,
but also at the same time the enormous opportunities that those
challenges present us in addressing something that is not going
to go away. The Congress can talk about it, but until we start
acting, the problem will only increase in its severity and the
challenge of helping to solve it.
Again, the Aging Committee has done a summary of all 13
hearings we have had with ideas and concepts, and hopefully, we
can build on that report that we have presented and move
forward aggressively with legislation to try to address this
problem. It is one of the top priorities, I think, that this
Congress should face.
I want to also recognize the son of Frances Stevenson, a
woman from Napoleonville in Louisiana. Her son, Major
Stevenson, is here and we thank him for attending our hearing,
and also, again, my wife and our teacher interns from Louisiana
who have sat through this long hearing and hopefully have an
idea of how their government works.
The panel has just been terrific. We thank each and every
one of you very much for your presentations, and with that, the
committee will stand adjourned.
[Whereupon, at 11:06 a.m., the committee was adjourned.]
A P P E N D I X
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