[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                  PLANNING FOR LONG-TERM CARE
_____________________________________________________________________

                     HEARING

                   BEFORE THE

          
          SUBCOMMITTEE ON HEALTH
          
                  OF THE

   
          COMMITTEE ON ENERGY AND

                  COMMERCE

         HOUSE OF REPRESENTATIVES

        ONE HUNDRED NINTH CONGRESS

                SECOND SESSION

                    ________

                    MAY 17, 2006
                    ________

              Serial No. 109-100

                    ________

   Printed for the use of the Committee on Energy and Commerce









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                      COMMITTEE ON ENERGY AND COMMERCE
                         Joe Barton, Texas, Chairman                  
Ralph M. Hall, Texas                         John D. Dingell, Michigan
Michael Bilirakis, Florida                    Ranking Member
  Vice Chairman                              Henry A. Waxman, California
Fred Upton, Michigan                         Edward J. Markey, Massachusetts
Cliff Stearns, Florida                       Rick Boucher, Virginia
Paul E. Gillmor, Ohio                        Edolphus Towns, New York
Nathan Deal, Georgia                         Frank Pallone, Jr., New Jersey
Ed Whitfield, Kentucky                       Sherrod Brown, Ohio
Charlie Norwood, Georgia                     Bart Gordon, Tennessee
Barbara Cubin, Wyoming                       Bobby L. Rush, Illinois
John Shimkus, Illinois                       Anna G. Eshoo, California
Heather Wilson, New Mexico                   Bart Stupak, Michigan
John B. Shadegg, Arizona                     Eliot L. Engel, New York
Charles W. "Chip" Pickering,  Mississippi    Albert R. Wynn, Maryland
  Vice Chairman                              Gene Green, Texas
Vito Fossella, New York                      Ted Strickland, Ohio
Roy Blunt, Missouri                          Diana DeGette, Colorado
Steve Buyer, Indiana                         Lois Capps, California
George Radanovich, California                Mike Doyle, Pennsylvania
Charles F. Bass, New Hampshire               Tom Allen, Maine
Joseph R. Pitts, Pennsylvania                Jim Davis, Florida
Mary Bono, California                        Jan Schakowsky, Illinois
Greg Walden, Oregon                          Hilda L. Solis, California
Lee Terry, Nebraska                          Charles A. Gonzalez, Texas
Mike Ferguson, New Jersey                    Jay Inslee, Washington
Mike Rogers, Michigan                        Tammy Baldwin, Wisconsin
C.L. "Butch" Otter, Idaho                    Mike Ross, Arkansas
Sue Myrick, North Carolina
John Sullivan, Oklahoma
Tim Murphy, Pennsylvania
Michael C. Burgess, Texas
Marsha Blackburn, Tennessee
                         Bud Albright, Staff Director
                        David Cavicke, General Counsel
          Reid P. F. Stuntz, Minority Staff Director and Chief Counsel
                                     _________



                            SUBCOMMITTEE ON HEALTH
                           Nathan Deal, Georgia, Chairman
Ralph M. Hall, Texas                          Sherrod Brown, Ohio 
Michael Bilirakis, Florida                      Ranking Member
Fred Upton, Michigan                          Henry A. Waxman, California
Paul E. Gillmor, Ohio                         Edolphus Towns, New York
Charlie Norwood, Georgia                      Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming                        Bart Gordon, Tennessee
John Shimkus, Illinois                        Bobby L. Rush, Illinois
John B. Shadegg, Arizona                      Anna G. Eshoo, California
Charles W. "Chip" Pickering,  Mississippi     Gene Green, Texas
Steve Buyer, Indiana                          Ted Strickland, Ohio
Joseph R. Pitts, Pennsylvania                 Diana DeGette, Colorado
Mary Bono, California                         Lois Capps, California
Mike Ferguson, New Jersey                     Tom Allen, Maine
Mike Rogers, Michigan                         Jim Davis, Florida
Sue Myrick, North Carolina                    Tammy Baldwin, Wisconsin
Michael C. Burgess, Texas                     John D. Dingell, Michigan
Joe Barton, Texas                               (Ex Officio)
  (Ex Officio)
  
  
















 
                                  CONTENTS

                                                                   Page
Testimony of:
  Stucki, Dr. Barbara R., Project Manager, National Council 
    on the Aging ...............................................     14
  Wiener, Dr. Joshua M., Senior Fellow and Program Director, 
   Aging, Disability and Long-Term Care, RTI International......     25
  Ignagni, Karen, President and CEO, American Health Insurance 
   Plans .......................................................     33
  Jenner, Greg, Executive Vice President, American Council of 
   Life Insurers................................................     46
  Thames, Dr. Byron, Board Member, AARP.........................     53
  Conner, Scott, Vice President, Products and Health and Safety 
   Services, American Red Cross.................................     97
  Wright, Dr. Larry, Director, Schmieding Center for Senior 
   Health and Education.........................................    103
  Inagi, Candace, Assistant to the President for Government 
   and Community Relations, Service Employees International 
   Union Local 775..............................................    110
Additional material submitted for the record:
  Older Women's League, submission for the record...............    120









                          PLANNING FOR LONG-TERM CARE 


                                WEDNESDAY, MAY 17, 2006

                               House of Representatives,
                            Committee on Energy and Commerce,
                                Subcommittee on Health,
                                                    Washington, DC.


The subcommittee met, pursuant to notice, at 2:05 p.m., in Room 2123 
of the Rayburn House Office Building, Hon. Nathan Deal (chairman) 
presiding.
	Members present:  Representatives Deal, Ferguson, Burgess, 
	Brown, Pallone, Eshoo, Capps, and Allen.
	Staff Present:  David Rosenfeld, Chief Health Counsel; Ryan 
	Long, Counsel; Brandon Clark, Policy Coordinator; Chad Grant, 
	Legislative Clerk; John Ford, Minority Counsel; Jessica McNiece, 
	Minority Research Assistant; and Jonathan Brater, Minority 
	Staff Assistant.
Mr. Deal.  The committee will come to order.  The Chair recognizes 
himself for an opening statement.
	We are here to address aspects of long-term care planning 
	which, if we addressed it in totality, we would take a very 
	long time to do so.  There are certainly dozens, if not more, 
	issues surrounding the provision of and the payment for long-
	term care, which certainly deserve our attention.  I believe we 
	can all agree, however, that the magnitude of the task must not 
	dissuade us from taking on this important and timely subject in 
	manageable increments.
	Last year, this subcommitteeï¿½s hearing on long-term care 
	financing set in motion a process which resulted in significant 
	reforms, the implementation of which we are monitoring closely 
	to ensure adherence to Congressional intent.  I hope this 
	hearing today will set the stage for additional progress through 
	a bipartisan effort this time around.
	Long-term care is one of the most significant demographic and 
	fiscal challenges of this century, and of particular importance 
	because of rapidly aging populations.  In 2000, there were an 
	estimated 9.5 million people with long-term care needs in the 
	United States, including 6 million elderly, and 3.5 million 
	non-elderly.  These numbers are projected to grow dramatically 
	in the coming years, especially after 2030, when the Baby Boom 
	generation begins to reach 85.  The senior population, 12.4 
	percent in 2000, is predicted to rise to 20.6 percent by 2050, 
	the fastest growing share being in the 80 plus.  It is 
	projected to rise from 3.3 percent in 2000 to 8 percent in 
	2050.  This population, which is most likely to need long-term 
	care services, is projected to more than triple, from about 
	9.3 million to 33.7 million people nationally.
	Today, we will examine how the private marketplace is 
	addressing long-term care planning, often in partnership with 
	the Government.  One recent example is the Deficit Reduction 
	Actï¿½s expansion of long-term care insurance partnerships, 
	which states are eager to establish with Federal guidelines 
	on implementation.  I support even greater collaboration to 
	promote long-term care insurance, as well as to explore new 
	ways of bringing home equity into the financing equation on 
	the front end, in order to expand care options, and to 
	forestall, or at least minimize reliance on scarce public 
	resources.  To this end, I plan to introduce soon a bill to 
	create demonstration projects for States to develop innovative 
	programs for individuals who will utilize home equity on 
	qualified long-term care services to retain a greater amount 
	of the assets than otherwise permitted should they 
	subsequently apply for Medicaid.
	Today, we are also examining the critical role of caregiving 
	and its challenges for both caregivers, as well as those who 
	train caregivers.  Most impaired persons who reside in the 
	community rely largely on donated care from friends and 
	family.  In 2004, the Congressional Budget Office estimated 
	that replacing donated long-term care services for seniors 
	with professional care would cost $76.5 billion, and this 
	number does not even account for the cost of replacing 
	donated care provided to persons with long-term care needs 
	under age 65.  Another analysis in 1997 estimated that the 
	value of donated care for people of all ages who had 
	impairments, measuring it as the foregone wages of caregivers, 
	to be at $218 billion.
	We need to better address caregiving and caregiver challenges 
	to ensure public dollars are used efficiently and effectively, 
	and to support American families struggling to do right by 
	their loved ones.  To this end, I support the concepts behind 
	the Lifespan Respite Care Act of 2005, sponsored by 
	Mr. Ferguson of this subcommittee and several other members 
	of the Energy and Commerce Committee.  The bill seeks to 
	address the physical, emotional, and financial problems that 
	impede caregiversï¿½ ability to deliver care now, and to 
	support their own care needs in the future, and to delay and 
	possibly even obviate the need for costly institutionalization 
	in both instances.  Although easily and often mischaracterized, 
	targeted and accountable respite care programs makes sense.
	I am now pleased to recognize my friend, Mr. Brown, for his 
	opening statement.
	[The prepared statement of Hon. Nathan Deal follows:]


Prepared Statement of the Hon. Nathan Deal, Chairman, Subcommittee on 
Health

The Committee will come to order, and the Chair recognizes himself for 
an opening statement.  
Addressing all aspects of long-term care planning could keep us here 
almost indefinitely.  There are dozens if not more issues surrounding 
the provision of and payment for long-term care which deserve our 
attention.  I believe we can all agree, however, the magnitude of the 
task must not dissuade us from taking on this important and timely 
subject in manageable increments.  Last year, this Subcommitteeï¿½s 
hearing on long-term care financing set in motion a process which 
resulted in significant reforms, the implementation of which we are 
monitoring closely to ensure adherence to Congressional intent.  I 
hope this hearing today will set the stage for additional progress 
through a bipartisan effort this time around.
Long-term care is one of the most significant demographic and fiscal 
challenges of this century and of particular importance because of 
our rapidly aging population.  In 2000, there were an estimated 9.5 
million people with long-term care needs in the U.S., including six 
million elderly and 3.5 million non-elderly.  These numbers are 
projected to grow dramatically in the coming years, especially after 
2030 when the baby boom generation begins to reach 85.  The senior 
population"12.4% in 2000"is predicted to rise to 20.6% by 2050; the 
fastest growing share, 80+ ("oldest old") is projected to rise from 
3.3% in 2000 to 8% in 2050.  This population, which is most likely 
to need long-term care services, is projected to more than triple 
from about 9.3 million to 33.7 million nationally.
Often overlooked by policy experts and media, approximately 
one-third of long-term care expenditures pay for services for 
non-elderly people.  In 1994, about 3.4 million adults aged 18 to 
64 and 400,000 children below the age of 18 used long-term care 
services.  The majority of those people lived in community-based 
settings (homes or group residences).  In general, people who are 
younger than 65 are likely to be impaired as a result of conditions 
such as developmental disabilities and mental illness (although they 
may also suffer the kinds of physical problems that older people 
experience). Common causes of impairment among children are 
respiratory problems and mental or neurological conditions such as 
autism.
Today, we will examine how the private marketplace is addressing 
long-term care planning often in partnership with government. One 
recent example is the Deficit Reduction Actï¿½s expansion of long-term 
care insurance partnerships which states are eager to establish with 
federal guidance on implementation.  I support even greater 
collaboration to promote long-term care insurance as well as to 
explore new ways of bringing home equity into the financing equation 
on the front-end in order to expand care options and to forestall or 
at least minimize reliance on scarce public resources.  To this end, 
I plan to introduce soon a bill to create demonstration projects for 
states to develop innovative programs for individuals who utilize 
home equity on qualified long-term care services to retain a greater 
amount of assets than otherwise permitted should they subsequently 
apply for Medicaid.  
Today, we are also examining the critical role of caregiving and its 
challenges for both caregivers as well as those who train caregivers.  
Most impaired persons who reside in the community rely largely on 
donated care from friends and family.  In 2004, the Congressional 
Budget Office estimated that replacing donated long-term care services 
for seniors with professional care would cost $76.5 billion, and this 
number does not even account for the cost of replacing donated care 
provided to persons with long-term care needs under age 65. Another 
analysis, in 1997, estimated the value of donated care for people of 
all ages who had impairments"measuring it as the forgone wages of 
caregivers"at $218 billion.
We need to better address caregiving and caregiver challenges to 
ensure public dollars are used efficiently and effectively and to 
support American families struggling to do right by their loved ones.  
To this end, I support the concepts behind the Lifespan Respite Care 
Act of 2005 sponsored by Mr. Ferguson and several Members of the 
Energy and Commerce Committee.  The bill seeks to address the 
physical, emotional, and financial problems that impede caregiversï¿½ 
ability to deliver care now; to support their own care needs in the 
future; and to delay and possibly even obviate the need for costly 
institutionalization in both instances.  Although easily and often 
mischaracterized, targeted and accountable respite care programs 
make sense.
At this time, I would also like to ask for Unanimous Consent that 
all Committee Members be able to submit statements and questions 
for the record.
I now recognize the Ranking Member of the Subcommittee, Mr. Brown 
from Ohio, for five minutes for his opening statement.

	Mr. Brown.  Thank you, Mr. Chairman.
	I appreciate your having this hearing and your interest in 
	long-term care planning, but with all due respect, the 
	Republican leadership in Congress, pure and simple, lost 
	their credibility on this issue last year, when they tried 
	to cut $43 billion, and succeeded in cutting $26 billion 
	from the Medicaid program.  In my home State of Ohio, there 
	is a waiting list of almost 1,400 people for home and 
	community-based care.  There are no minimum staffing 
	requirements for nursing homes, because the nursing homes say 
	they canï¿½t afford them.  Nurses who serve disabled Medicaid 
	beneficiaries are facing a cut in pay.  There is a nursing 
	shortage, and Medicaid is cutting nursesï¿½ pay.  That is the 
	fast track to a crisis.
	Ohio is not alone.  No State Medicaid program has been spared, 
	yet there is no talk among Republican leadership of reinvesting 
	the $43 billion back into the Medicaid program.  There is no 
	sign of remorse when the Congressional Budget Office estimated 
	that one-third of the Medicaid savings would come from taking 
	coverage and benefits away from Medicaid enrollees.  There was, 
	however, an inexplicable air of righteousness when these 
	Republicans chose to get some savings by cracking down on asset 
	transfers, never mind that some of those dollars would come by 
	kicking some impoverished seniors out of nursing homes and 
	denying others access.  Never mind that many seniors knew 
	nothing about Medicaid when they contributed to their 
	grandchildï¿½s education, or helped a child pay catastrophic 
	medical bills.  They transferred assets, so tough luck.
	A Congress who treats the elderly like guinea pigs when it 
	comes to Medicare Part D, and treats them like criminals when 
	it comes to Medicaid, is not a Congress you can trust when it 
	comes to long-term care planning.  The Bush Administration 
	revealed its true colors when, earlier, it tried to block grant 
	Medicaid.  If you canï¿½t trust an Administration that tries to 
	starve our Nationï¿½s insurer of last resort, then who can you 
	trust?
	More than 4.2 million Americans rely on Medicaid for long-term 
	care services.  In Ohio, the income cutoff for long-term care is 
	$6,300 per year.  Private long-term care insurance premiums are 
	about $1,000 for healthy 65 year olds who purchased the coverage 
	when they were 55.  Premiums are twice that for healthy seniors 
	who wait until they are 65 to purchase coverage, and 7 times that 
	for seniors who wait until they are 75 to purchase coverage.  
	Anyone who believes this country can do without a long-term care 
	safety net needs a primer on U.S. poverty rates.  Long-term care 
	isnï¿½t discretionary.  The Federal Government should fully fund 
	Medicaid long-term care, which will stabilize our long-term 
	care safety net.
	Until we responsibly address current and near-term needs, 
	planning for future long-term care coverage is an exercise void 
	of any legitimacy.
	Thank you, Mr. Chairman.
	Mr. Deal.  I recognize the Vice Chairman of this subcommittee, 
	Mr. Ferguson, for his opening statement.
	Mr. Ferguson.  Thank you, Mr. Chairman, and thank you for 
	holding this very important hearing, and thank you for your 
	kind words about my bill, the Lifespan Respite Care Act.
	The words "long-term care" first bring to mind nursing homes or 
	chronic care facilities, or costly hospital stays and arduous 
	medical treatment, but the conversation about long-term care 
	doesnï¿½t begin until we mention the Nationï¿½s family caregivers. 
	They are the first responders in taking care of our elderly and 
	disabled of all ages.  That is because most of our elderly or 
	chronically ill family members are being cared for at home.  
	Some estimates say that family caregivers provide 80 percent of 
	all long-term care in the United States.  If a monetary value 
	were to be placed on this care, family caregivers are providing 
	support and direct services to their family members a sum valued 
	at $306 billion annually, more than twice of what is spent 
	nationwide on nursing home and paid home care combined, and an 
	amount comparable to Medicare spending in 2004.
	In my home State of New Jersey alone, there are nearly a 
	million caregivers who provide care valued at almost $8 billion 
	annually.  If we donï¿½t recognize this fact and consider the 
	needs of family caregivers, their ability to continue to 
	provide this level of support may well be jeopardized if, as a 
	Nation, we donï¿½t rally on their behalf.
	While most families take great joy in helping their family 
	members to live at home, it has been well documented that 
	family caregivers suffer from physical and emotional problems 
	directly related to their caregiving responsibilities.  Three-
	fifths of family caregivers recently surveyed reported fair or 
	poor health themselves, and caregivers are 46 percent more 
	likely than non-caregivers to report frequent mental distress. 
	Among some elderly caregivers, the mortality rate has been even 
	reported to be 60 percent higher than non-caregiving 
	populations.  The simple things we take for granted, like 
	getting enough rest or going shopping, become rare and precious 
	events.  Family caregivers often miss their own doctorsï¿½ 
	appointments, or fail to deal with other family crises, because 
	of their overriding commitment to caregiving to their loved one.
	Today, as a part of this discussion on long-term care, I want 
	to continue our discussion about respite care with our 
	panelists. Respite care is a modest, low-cost service that 
	simply provides a temporary break for the enormity of constant 
	caregiving, but the benefits reaped are enormous.  Respite 
	care, the most frequently requested family support service, has 
	been shown to provide family caregivers with the relief 
	necessary to maintain their own health, and bolster their 
	family stability, keep marriages intact, and avoid or delay 
	more costly nursing home or foster care placements.
	The legislation that I have introduced, that Chairman Deal 
	referenced, the Lifespan Respite Care Act, would help set up a 
	network of respite care services to help caregivers and their 
	families receive the help that they need.
	Mr. Chairman, I want to thank you again for your leadership on 
	this issue, and for holding this important hearing today, and I 
	look forward to working with you to work on behalf of caregivers 
	and families.
	I yield back.
	Mr. Deal.  I thank the gentleman.  Mr. Pallone is recognized for 
	an opening statement.
	Mr. Pallone.  Thank you, Mr. Chairman.
	I had originally prepared a different statement for todayï¿½s 
	hearing, but decided to change it, after a visit this morning 
	from a couple of my constituents whose parents had suffered from 
	ALS, more commonly referred to as Lou Gehrigï¿½s disease.  I 
	wasnï¿½t present at the meeting, because of a committee markup, 
	but my staff asked me to share their concerns.  Three young 
	women came to share their stories in my office about their 
	parents, who were inflicted with this terrible disease that 
	left them completely debilitated.  One woman described the 
	effects of the disease as being "buried alive slowly over the 
	course of a few years.
	And the reason I bring this up is because during this meeting, 
	one woman, who couldnï¿½t have been older than 25, sobbed in my 
	office as she described how she had to quit her job as a teacher 
	in order to take care of her father after he was diagnosed with 
	ALS.  She described the unfairness of the situation and the 
	tremendous pressure placed on her as she became her fatherï¿½s 
	primary caregiver.  She also spoke of the frustration her father 
	experienced as he became helpless and had to rely on his 
	daughter to have the most basic needs met.
	The questions she raised in our meeting are questions this 
	committee will need to consider when we talk about long-term 
	caregiving.  Who will need it, who will do it, and who will pay 
	for it?  These questions will become incredibly important over 
	the next 30 years, as the number of persons aged 65 or older, 
	those most likely to be in need of long-term care services, is 
	projected to double, yet these questions are just as important, 
	if not more, for those who are disabled as they are for the 
	elderly.
	And Mr. Chairman, the demand for long-term care in the future 
	is expected to rise substantially, placing tremendous strains 
	on Federal and State budgets that are already strapped for cash. 
	While the budgetary impact of long-term care is concerning, I 
	believe it has often been misused as a rallying cry to gut 
	Medicaid, which explains some of the harmful changes my 
	Republican friends enacted last year.  I fear the new rules laid 
	out in the Deficit Reduction Act could leave many innocent low-
	income families, who never intended to game the system, with too 
	few options to access the long-term care they need, and end up 
	costing the program even more.
	Now, Mr. Chairman, as we discuss planning for our Nationï¿½s 
	future long-term care needs, it is simply not enough to worry 
	about how to finance such care.  There are other serious problems 
	that we face, such as the availability of caregivers.  Until now, 
	unpaid family caregivers, like the women in my office today, 
	have supplied the bulk of long-term care.  According to the 
	Administration on Aging, an estimated 22 million Americans are 
	providing uncompensated care at any one time.  It has been 
	estimated that replacing such informal long-term care services 
	with professional caregivers would cost between $50 billion and 
	$103 billion annually.
	And Mr. Chairman, I think that we have a very serious problem 
	on our hands that requires real solutions.  That is why I thank 
	you for calling todayï¿½s hearing, and look forward to hearing 
	the testimony from our witnesses.
	Thank you.
	Mr. Deal.  I thank the gentleman.
	At this time, I would like to ask unanimous consent that all 
	Members be allowed to submit their opening statements for the 
	record.  Without objection, so ordered.
	Ms. Eshoo, you are recognized for an opening statement.
	Ms. Eshoo.  Thank you, Mr. Chairman, for holding this hearing 
	today.
	The issue of long-term care is something that will affect every 
	American in some way, shape, or form.  I know that there are 
	members of this committee that have been involved in the care 
	of family members, myself included, and you donï¿½t know what 
	this is until you are faced with it yourself.  Because at best, 
	there really is a patchwork of things that are out there. There 
	really isnï¿½t anything that is comprehensive, and very few 
	Americans, perhaps the numbers are rising now, and we will get 
	into that in the Q&A, but really very few Americans have long-
	term care insurance policies that can then step up to and meet 
	what the needs are.  As I became more involved in this, with 
	the care of my father and then my mother, I inquired with 
	friends of mine about the policies that they had bought for the 
	region that we live in.  They really didnï¿½t buy the kind of 
	coverage they needed, and of course, it varies across the 
	country what the costs are, but certainly in the Bay Area, it 
	is an expensive place to do business.
	And I was reminded by a very dear friend of mine, who is much 
	younger than I am, that long-term care is not just about the 
	elderly.  She was in a river rafting accident, and had to be 
	airlifted from a very remote place, because that is where you 
	go river rafting, it is not in the middle of the city, and 
	required quite extensive surgery on her leg, her ankle, and 
	when she finally came home, she required five weeks of 
	recovery care, and it cost her a bundle of money, 24 hours a 
	day, so she went out and shopped hard for a long-term care 
	policy, which reminded me of my own vulnerabilities at the age 
	that I am at.
	So, this is an issue that we not only need to explore, but to 
	understand very well, not only what is out there, what is 
	affordable, what isnï¿½t, are there public policy directions 
	where we can move in order to make this more accessible for 
	people, and also, in terms of the system that we already have, 
	does it need to be updated?  Are there parts of Medicare that 
	need to be reshaped, so that in-home services can be enjoyed, 
	in terms of reimbursement, where often the only reimbursements 
	are now in a hospital setting.
	I think that we have a lot of work to do on this, and I want 
	to commend my colleagues for their opening statement, both 
	Mr. Fergusonï¿½s and Mr. Palloneï¿½s, because I think they have 
	touched on a lot of things.  But this is very large, it is very 
	broad, it is very deep, and for those of us that are sitting 
	here talking about it, it is going to affect us, too.  So, it 
	is in all of our interests to have a system that is going to 
	speak both publicly and privately to all Americans.
	So, I look forward to the testimony that is going to be offered 
	today, and thank you, Mr. Chairman, for holding the hearing.
	Mr. Deal.  I thank the gentlelady.  Ms. Capps is recognized for	
	an opening statement.
	Ms. Capps.  Thank you, Mr. Chairman, and I, too, thank you for 
	holding this hearing today, and thank our witnesses for being 
	part of it.
	And you know, we spend a lot of time in this body, but in our 
	country as well, as more and more people are aging, thinking 
	about retirements, later years.  We have debated Social 
	Security this year.  We have had the Medicare Modernization 
	Act, and we are trying to enroll people and so forth, but 
	very seldom do we really sit down and talk about long-term 
	healthcare, and I am glad for this hearing for that reason.  
	I think it is the choir in here that we are all kind of 
	speaking to.  Whether we have individual differences, we are 
	here because we agree that this is a topic that needs to be 
	addressed, and that is the most significant part of todayï¿½s 
	hearing, in my opinion.
	We should be really intensifying our efforts in this 
	direction, but there is so much else on our plate.  Yet that 
	has been the problem.  I think it was about a year ago, we 
	had one other hearing on this.  We have pieces of 
	legislation here and there, but what we do need to 
	acknowledge is what we all spend time thinking about as we 
	grow older, as we live with loved ones and family members 
	who are facing really tough decisions, because of certain 
	lacks in our communities, in our society, both in programs 
	and opportunities, resources, and the rest.  But these have 
	to do with the kind of life we envision having in our older 
	age, having security for independent living, whatever that 
	setting might be, having adequate housing and assistance. As a 
	nurse, I have often worked with my colleagues in discussing a 
	continuity of care as people become less able to care for 
	their own needs in whatever that setting would be.
	So I am looking forward to a serious discussion of ways in 
	which we can empower people to plan for the long-term care 
	that they and their loved ones know they are going to be 
	needing, if not needing immediately.  It is on everybodyï¿½s 
	mind.  We should be encouraging young people to prepare for 
	this, and there is long-term healthcare insurance, so that 
	people can have greater freedom to choose, but 
	unfortunately, so few people can take advantage of this, 
	the only opportunity that I know of to really kind of look 
	ahead, and do the kind of specific planning for long-term 
	care needs.
	That means that we have an obligation here in this body, 
	and this subcommittee has an obligation, I believe, to work 
	together to develop a greater safety net, call it whatever 
	we want to call it, for seniors and others who really look 
	to us to provide some of their needs for long-term healthcare.
	We are way behind in this country, from countries in Europe 
	and other places, in our care for elderly, and I think it is 
	time we catch up, and as Frank Pallone and Anna Eshoo, my 
	colleagues, have illustrated, it is not just about turning 65 
	and older.  Those with severe impairments, developmental 
	disabilities from a very young age, will not have had time to 
	sign up for long-term healthcare, or any kind of insurance.  
	They probably do not have the assets for this.  Who is looking 
	out for their needs?  They deserve to be cared for, too, and 
	we canï¿½t simply turn this burden over to family members, who 
	arenï¿½t really equipped always to provide for the best quality 
	of care.
	So we have a burden, we have a responsibility, we also have 
	an opportunity.  We have an opportunity to provide the right 
	kind of leadership in this place, that calls upon the private 
	sector, that calls forth the programs and agencies that do 
	exist in our communities, that want to be partnering with us. 
	None of us can do this alone, but the leadership really has 
	to come from this place, and I call it a moral responsibility 
	of society to care for those who are in situations where they 
	cannot care for themselves.
	Thank you.  I went past my time.  I am sorry.
	[Additional statements submitted for the record follows:]

Prepared Statement of the Hon. Barbara Cubin, a Representative in 
Congress from the State of Wyoming

Thank you Mr. Chairman.
Today we have an opportunity to take a closer look at long-term care 
for individuals unable to manage for themselves even the most common 
daily activities many of us take for granted.
As Medicaid is the largest source of government payment for long-term 
care, the issue presents a tremendous fiscal challenge as our 
population ages.  Often overshadowed by problems facing Social Security 
and Medicare, long-term care expenditures are projected to go up from 
$195 billion in 2004 to $540 billion by 2040.  These numbers could be 
even larger if impairment prevalence increases.
This is disturbing considering that no more than 10 percent of 
seniors in our nation currently have long-term care insurance.  The 
number of individuals annually enrolling in these plans tripled to 
900,000 from 1988 to 2002, but more can be done.  I hope our panelists 
today will help shed light on options at our disposal to encourage 
planning among our middle-income earners, helping them avoid Medicaid 
dependency.  
From using reverse mortgages and home equity loans to help todayï¿½s 
seniors deal with the cost of long-term care, or using targeted tax 
incentives to encourage enrollment among our future seniors, there 
are potential market-based solutions that may ultimately prove to 
be more efficient and cost-effective than relying solely on public 
funding. 
Today weï¿½ll also have the opportunity to discuss issues relating to 
caregivers and caregiver training.  As our population ages, the 
demand for these workers, and the hands on support they provide, will 
go up.  
We have over 70,000 Medicare beneficiaries in Wyoming out of our 
population of half a million.  Our total number of seniors is even 
higher.  Wyoming is truly a frontier state when it comes to access to 
healthcare, and we are home to plenty of seniors who currently face 
challenges in receiving reliable care.  
The last thing a Wyoming senior should have to worry about is whether 
there will be someone to take care of them when the time comes.  I 
will look to our panelists today for guidance on what we can do on 
the federal level to foster a favorable climate for this profession, 
and the seniors it serves.
Thank you Mr. Chairman.

Prepared Statement of the Hon. John D. Dingell, a Representative in 
Congress from the State of Michigan

Currently, more than ten million Americans need long-term care 
services, and this number will only grow larger as our population ages. 
Planning for long-term care is an important and complex issue that 
should be carefully examined by the Committee.  I thank the Chairman 
for calling this hearing, and thank all of the witnesses who are here 
to today to share their knowledge.
Much of todayï¿½s hearing will focus on long-term care planning for the 
elderly, and several questions need to be addressed.  First, where do 
the disabled fit in?  Private market solutions advanced by some of the 
witnesses will offer little aid for those living with disabilities. 
These individuals are unlikely to even qualify for a long term care 
insurance policy.  And few of those living with disabilities have home 
equity that would enable them to tap reverse mortgages as an option.  
I hope that as we move forward on this matter we do not forget the 
millions of younger Americans with disabilities who have long-term care 
needs.
Second, what about those with limited financial means?  While private 
market solutions have a role to play in helping meet the growing need 
for long term care, those solutions are most accessible to those with 
higher incomes.  I believe we should also look at building a strong 
public foundation for long-term care for those who cannot afford 
private options.  
Third, how accountable will private market solutions be?  Health and 
welfare security is too important to be left solely to private industry 
with a profit motive.  As we examine private options, it is critical 
that we have standards in place to ensure that consumers can obtain 
quality products, at affordable prices, that they can depend upon when 
needed.  There will need to be a strong public role in overseeing the 
operations of the private market. 
Fourth, what is the real cost of the private market solutions?  Today 
we will hear about how barriers can be eliminated so that more people 
will be encouraged to purchase long term care insurance and reverse 
mortgage products through changes in the tax code.  Unfortunately the 
tax code is often an inefficient way to encourage these kinds of 
actions. 
It accrues benefits to primarily wealthier individuals, and 
inefficiently targets those resources with benefits often going to 
those who have already purchased such coverage.  Public programs can 
be more efficient at targeting our scarce resources where they are 
needed. 
Fifth, does planning for long term care at a national level include 
ensuring there are enough care-givers to meet the growing demand?  As 
we will hear in todayï¿½s testimony, there is already a shortage today, 
and it will only grow worse as the baby boomers age.  A majority of 
long-term care is provided informally, which means care is provided 
for free through family or friends.  It is important that we take time 
to understand what options might be used to expand the use of trained 
and interested informal caregivers.  But informal care is not the 
answer to a workforce shortage that is already reported by a majority 
of States.  A paid care-giver workforce is important to supplement 
informal care or provide respite for informal caregivers.  We need to 
ensure that these caregivers receive adequate wages and benefits if we 
hope to fill this shortage.
Finally, how can we as a Nation plan for long-term care without having 
a strong safety net in place?  Medicaid is an essential component to 
any realistic discussion of long-term care, and we should be talking 
about strengthening it.  The Deficit Reduction Act took us in the wrong 
direction.
This country needs to have a coherent long term care policy.  I thank 
the Chairman again for holding this hearing and thank the witnesses for 
being here to educate us about this important issue.

	Mr. Deal.  It is all right.
	I am pleased to introduce our first panel today, on the topic 
	that is the issue of discussion, that is, planning for long-
	term care:  Dr. Barbara Stucki, who is Project Manager of the 
	National Council on Aging; Dr. Joshua M. Wiener, Senior Fellow 
	and Program Director, Aging, Disability, and Long-Term Care, RTI 
	International; Ms. Karen Ignagni, who is the President and CEO 
	of American Health Insurance Plans; Mr. Greg Jenner, Executive 
	Vice President, American Council of Life Insurers; and 
	Dr. Byron Thames, Board Member, AARP.
	Ladies and gentlemen, we are pleased to have you here.  We 
	have your statements that are made a part of the record, and I 
	would ask you in the 5 minutes that we allot to each of you to 
	try to summarize those issues, and hit the high points for us, 
	and with that, Dr. Stucki, we will recognize you first.  Pull 
	that a little closer, and probably press the button to make it 
	work.
	Dr. Stucki.  There.  Is that working?  Yes.
	Mr. Deal.  Pull it a little closer.

STATEMENTS OF DR. BARBARA R. STUCKI, PROJECT MANAGER, NATIONAL COUNCIL 
ON AGING; DR. JOSHUA M. WIENER, SENIOR FELLOW AND PROGRAM DIRECTOR, 
AGING, DISABILITY AND LONG-TERM CARE, RTI INTERNATIONAL; KAREN IGNAGNI, 
PRESIDENT AND CEO, AMERICAN HEALTH INSURANCE PLANS; GREG JENNER, 
EXECUTIVE VICE PRESIDENT, AMERICAN COUNCIL OF LIFE INSURERS; AND 
DR. BYRON THAMES, BOARD MEMBER, AARP

	Dr. Stucki.  Okay.  Here we go.  Good afternoon, Mr. Chairman 
	and members of the subcommittee.  My name is Barbara Stucki.
	Over the past 13 years, I have been conducting research on 
	private-sector financing for long-term care.  I currently 
	manage the Use Your Home to Stay at Home Initiative for the 
	National Council on Aging.  I would like to thank you for 
	providing the NCOA the opportunity to testify about the need to 
	include home equity as an essential element of long-term care 
	planning.
	The recent passage of the Deficit Reduction Act, which includes 
	limits on home equity for Medicaid eligibility, sends a strong 
	message to Americans that housing wealth will now be part of 
	the long-term care financing mix.  Americans want to continue 
	to live at home as they grow older, even if they need help with 
	everyday activities, but many impaired, older homeowners are 
	unprepared for the financial challenges that can come with a 
	chronic health condition.
	This is true not only for cash-poor seniors, but also for 
	middle income families who often struggle to pay for the extra 
	cost of help at home.  Today, there are two main planning tools 
	to deal with these challenges.  One option is to buy long-term 
	care insurance, which often occurs before retirement.  The more 
	common approach is to rely on income and savings, and hope for 
	the best.  When seniors rely on this pay-as-you-go strategy, 
	they often need to turn to Medicaid.  Tapping home equity offers 
	a third alternative that fills an important gap.
	By taking out a reverse mortgage, impaired older homeowners can 
	convert a portion of their home equity into cash, while they 
	continue to live at home for as long as they want.  Reverse 
	mortgages have many unique features and strong consumer 
	protections that make these loans an important option for 
	impaired elders.  In addition, reverse mortgages do not require 
	the borrower to make monthly payments, so borrowers are not at 
	risk for losing the house, as they could be with a conventional 
	mortgage loan.
	What is the potential of reverses mortgages for long-term care 
	as a planning tool?  In 2003, the median home value among 
	seniors was over $122,000.  Over 80 percent of people aged 65 
	and older are homeowners.  We estimate that over 13 million 
	older homeowners are candidates for using a reverse mortgage to 
	pay for long-term care.  Of these, about 5 million either 
	receive Medicaid benefits, or face the financial risk for 
	needing government to help with long-term care.
	Encouraging the use of home equity can help to rapidly reduce 
	the need for government assistance by strengthening an elderï¿½s 
	ability to age in place.  The proceeds of a reverse mortgage are 
	tax free, and can be used to pay for a wide array of unmet needs, 
	including help with daily activities, home repairs and 
	modifications, and transportation.  This flexibility offers an 
	important new way to supplement and strengthen Medicaid and 
	private insurance, by first providing resources sooner to keep 
	small problems from becoming a major catastrophe.  Second, by 
	increasing flexibility in the household budget, to help seniors 
	cope with the financial ups and downs that often come with 
	declining health and ability, and third, by strengthening the 
	ties of reciprocity that underlie the networks of informal 
	support for elders.
	Despite the potential of reverse mortgages, older Americans have 
	not been using their substantial housing assets to pay for aging 
	in place.  Instead, home equity is usually liquidated by selling 
	the house, often in a crisis situation, to pay for nursing home 
	care.  We believe that there can be a better way.
	To encourage more effective use of home equity, it would help to 
	create a new public/private partnership demonstration program for 
	reverse mortgages.  Under this partnership, homeowners with 
	moderate incomes who use a certain portion of their home equity 
	to pay for home and community services could be allowed to 
	protect some or all of their assets from Medicaid spend-down 
	requirements.  There are similar initiatives already underway 
	to create such incentives for aging in place, such as the 
	Reverse Mortgage Incentive Program that is being considered in 
	Minnesota.  Efforts such as these indicate State interest in 
	this type of approach, and can provide guidance for the 
	development of a partnership program.
	Another important resource is the new National Clearinghouse 
	for Long-Term Care Information.  NCOA would like to thank the 
	committee for creating the Clearinghouse to educate Americans 
	about long-term care.  It will be important that the 
	Clearinghouse include information and decision support tools to 
	help elders and their families make wise decisions on the use
	of home equity and reverse mortgages.
	In conclusion, NCOA believes that reverse mortgages have the 
	potential to be a powerful force for systems change.  With over 
	$2 trillion tied up in the homes of older Americans, home 
	equity can help to rebalance our Nationï¿½s long-term care 
	delivery system, integrate financing for housing and supportive 
	services for seniors, and create new opportunities for 
	public/private partnerships.
	With supportive public policies, appropriate incentives, and 
	careful protections, the voluntary use of reverse mortgages 
	offers an additional option for impaired older Americans to 
	take action today, and to use their existing resources more 
	effectively.
	Thank you.
	[The prepared statement of Dr. Barbara R. Stucki follows:]

Prepared Statement of Dr. Barbara R. Stucki, Project Manager, National 
Council on Aging

Good afternoon, Mr. Chairman and Members of the Subcommittee. My name 
is Barbara Stucki. Over the past 13 years, I have been conducting 
research on private sector financing for long-term care.  I currently 
manage the Use Your Home to Stay at Home Initiative for the National 
Council on Aging (NCOA). I would like to thank you for providing the 
NCOA the opportunity to testify about the need to include home equity 
as an essential element of long-term care planning. 
Americans want to continue to live at home as they grow older, even if 
they need help with everyday tasks (termed "age in place"). Many 
impaired older homeowners, however, are unprepared for the financial 
challenges that can come with a chronic health condition. This is true 
not only for cash-poor seniors, but also for middle-income families 
who often struggle to pay the extra cost of help at home. When family 
budgets become strained due to unexpected long-term care expenses, 
impaired elders often turn to Medicaid for support. Due to the high 
cost of nursing homes, elders who get help in institutional settings 
are especially vulnerable to spending-down to Medicaid.
We believe that reverse mortgages offer important opportunities to 
rapidly reduce the need for government assistance by strengthening an 
elderï¿½s ability to age in place. Over 80 percent of people age 65 and 
older are homeowners. For many older Americans, home equity is the most 
important financial resource to increase their resilience to the 
financial shocks that can come with declining health and ability. These 
added resources can help impaired elders to both avoid a costly crisis, 
and to plan ahead for these needs. Greater use of home equity among 
older homeowners has the potential to reduce their risk of needing 
Medicaid by:
Providing resources sooner to keep small problems from becoming major 
catastrophes.
Increasing flexibility in the household budget to help seniors to pay a 
wide array of expenses associated with aging in place, and to reduce 
the financial shocks that often come with declining health and ability. 
Strengthening ties of reciprocity that underlie the networks of 
informal support for elders.
Encouraging older Americans to use reverse mortgages to "age in place" 
also can offer a more effective and equitable approach to reducing 
taxpayer burdens for long-term care than limiting Medicaid eligibility 
or benefits. With over $2 trillion tied up in their homes, home equity 
has the potential to help to rebalance our nationï¿½s long-term care 
delivery system, integrate financing for housing and supportive 
services for seniors, and create new opportunities for public-private 
partnerships. 

Home Equity - A New Resource for Long-Term Care Planning
Americans of all ages value their ability to live independently. But 
without careful planning, living at home with an impairment may be 
difficult. A serious fall or chronic illness can quickly drain hard-
earned retirement dollars. Maintaining adequate cash flow can also 
become problematic when the need for supportive services fluctuates 
from month to month. Families who are assisting elders with a 
progressive chronic condition, such as Alzheimerï¿½s disease, face 
considerable uncertainty in trying to budget funds to provide help for 
many years. 
Currently, there are two main financial strategies to deal with these 
challenges. One option is to purchase long-term care insurance before 
retirement, when a person is healthy and premiums are affordable. The 
more common approach is to rely on income and savings, and hope for 
the best. Most seniors today rely on this "pay as you go" approach, 
and often to turn to Medicaid and other public programs for assistance 
when they come up short.
Tapping home equity offers a third alternative for homeowners who could 
not prepare for this need with private long-term care insurance or 
savings (Figure 1). By taking out a reverse mortgage, older homeowners 
can convert a portion of their home equity into cash while they continue 
to live at home for as long as they want. To qualify, all owners of the 
property must age 62 or older. Borrowers do not need to make any loan 
payments for as long as they (or in the case of spouses, the last 
remaining borrower) continue to live in the home as their main 
residence. When the last borrower moves out of the home or dies, the 
loan becomes due.


If used wisely, reverse mortgages can pay for preventive measures and 
day-to-day support so that impaired elders can continue to live at home 
safely and comfortably for many years. As an immediate long-term care 
financing tool, these loans also have the potential to reduce the risk 
that impaired elders and their families will to turn to Medicaid in 
times of crisis. The following example highlights the potential benefits 
if a homeowner with $150,000 in home equity took out this loan:
Scenario #1: Janet Zibley (age 85) has arthritis, which makes it 
difficult for her to manage on her own. She pays a neighbor $1,000 per 
month to help around the house. But when she needs more assistance from 
a home health aide, her monthly bill for services can be over $3,000. 
At her age, Janet could receive $102,378 from a reverse mortgage. Her 
line of credit could cover monthly expenses of $1,000 for over 13 years, 
or $3,000 each month for over 3 years, at the current interest rate.
When an unstable health condition disrupts the family budget, it can be 
easy to come up short when it is time to pay the bills. A reverse 
mortgage credit line can help manage cash flow since the money is 
available when needed. Borrowers only pay interest on the amount that 
they use.

Strengthening the Safety Net
Shifting the focus of long-term care from the facility to the home has 
profound implications for the amount, timing, and sources of funding 
that will be needed. When a person develops a chronic health condition 
such as diabetes, arthritis, or Alzheimerï¿½s disease, aging in place 
means more that just staying put. They will need a place to live that 
is safe and fits with their abilities. As driving becomes difficult, 
it is important to have reliable and affordable transportation. Extra 
funds for family caregivers or for home modifications (such as a ramp 
or lift) can extend the time that an impaired elder can live at home.
One of the challenges of our current long-term care financing system 
is that it is based primarily on insurance approaches. Insurance 
works best to protect against catastrophic costs, such as nursing 
home care. However, this financing mechanism is not appropriate to 
deal with everyday expenses, such as weekly transportation to the 
doctor or help with household chores. These expenses can still be a 
big burden on the family budget, and can increase the risk for spend-
down among impaired elders on a fixed income. 
Reverse mortgages can supplement and strengthen insurance-based long-
term care financing strategies by offering older homeowners more 
flexibility to fill unmet needs and critical gaps in services. Proceeds 
from a reverse mortgage are tax-free, and borrowers can use these funds 
for any purpose. Borrowers can select to receive payments as a lump sum, 
line of credit, fixed monthly payments (for up to life in the home) or 
in a combination of payment options.
Home equity can be the "glue" that holds an elderï¿½s financial plans 
together when they have a chronic health condition. Consider the 
potential value of a reverse mortgage if a family that lives in a house 
that is in good repair and worth $150,000 took out this loan. They own 
their home free and clear of any debt: 
Scenario #2:  Tom and Jill Smith (ages 69 and 65) bought long-term care 
insurance that will pay for services when they need help with personal 
care (such as bathing, dressing, or eating) or supervision due to 
Alzheimerï¿½s disease. For now they can still manage on their own, but want 
to add a bathroom downstairs to reduce the strain of climbing the stairs. 
Based on Jillï¿½s age, the Andersons would receive $66,104 from their 
reverse mortgage. They could take $20,000 of the loan to install a new 
bathroom. They could keep the rest ($46,104) in a line of credit. These 
funds could be used to meet any additional expenses before they become 
eligible for services under their long-term care insurance policies.
This story highlights how people with a chronic condition can have a 
variety of unmet needs, even with good financial planning. 
Another limitation of Medicaid and private long-term care insurance is 
that they are designed to help seniors cope with a severe mental or 
physical impairment after it has occurred. In contrast, reverse 
mortgages can reduce long-term care risks by paying for a wide array 
of early interventions that help impaired elders avoid a crisis. A high 
proportion (46 percent) of older homeowners have a functional limitation, 
such as difficulty with climbing stairs or carrying groceries, that may 
make it hard for them to continue to live at home safely. While these 
impairments are modest, they can have serious consequences if they lead 
to bigger problems such as malnutrition or debilitating injuries. 

Potential of Reverse Mortgages
In the past few years, there has been a dramatic increase in the volume 
of reverse mortgages made nationwide, reaching over 195,000 loans originated 
in total. Low mortgage rates, combined with growing awareness of this loan, 
have significantly increased the popularity of reverse mortgages. 
Older homeowners can select from several different types of reverse 
mortgages. 
These include:
Home Equity Conversion Mortgage (HECM) - This program is offered by the 
Department of Housing and Urban Development (HUD) and is insured by the 
FHA. HECMs are the most popular reverse mortgages, representing about 
90% of the market.
Fannie Mae Home Keeper loan - Borrowers can receive more cash from these 
loans than with a HECM since the loan limit for this product is higher. 
Financial Freedom Cash Account loans - This product is beneficial for 
seniors who own homes that are worth more than $400,000 since there is 
almost no maximum loan limit.
As private residences continue to appreciate in value, their equity grows 
as a financial resource. The median home value among people age 65 and 
older in 2003 was $122,789. The amount that reverse mortgage borrowers 
can receive is based primarily on the value of the home, the type of 
loan, and the current interest rate. A HECM loan at todayï¿½s interest 
rate for a house worth $122,789 could range from $52,950 for a borrower 
age 65, to $67,261 for a borrower age 75, to $82,884 for a borrower age 
85. 
When the last borrower dies or moves out of the home, the reverse 
mortgage becomes due and needs to be paid. How much equity will be left 
at this point depends on the amount of money used from the loan, how 
long the loan was kept, interest rates, and any home appreciation.  If, 
at the end of the loan, the loan balance is less than the value of the 
home, then the borrower or heirs get to keep the difference. An important 
protection offered by reverse mortgages is that the borrower (or heirs) 
will never owe more than value of the home at the time they sell the 
home or repay the loan. This is true even if the value of the home 
declines. 


Based on our analysis of data from the 2000 Health and Retirement Study, 
we estimate that a total of 13.2 million (48 percent of the 27.5 million 
elder households) are candidates for using a reverse mortgage to pay for 
long-term care (Figure 2). These households would likely meet the 
requirements to qualify for this type of loan. In addition, they would 
likely receive a loan worth at least $20,000 based on their age and the 
value of their home. 
Medicaid and Reverse Mortgages
Until recently, policymakers have largely favored preserving the home of 
impaired elders. The passage of the Deficit Reduction Act of 2006, which 
includes limits on home equity for Medicaid eligibility ($500,000 or 
less, up to $750,000 at state discretion), now sends a strong message to 
Americans that housing wealth will be part of the long-term care 
financing mix. As a result, impaired elders who have a large amount of 
equity in their home will be more likely to consider using a reverse 
mortgage. The law explicitly allows elders to use this financing tool 
to reduce home equity to meet Medicaid eligibility levels. 
We believe that Medicaid could also benefit from voluntary initiatives 
to encourage impaired elders with modest housing assets to tap their 
home equity. An important target for these efforts are older homeowners 
who are most likely to turn to public programs for assistance. We 
estimate that among the 13.2 million households that are likely 
candidates for a reverse mortgage, about 5.2 million (39 percent) 
either receive Medicaid benefits or are at financial risk for needing 
government assistance (Figure 3). This vulnerable population includes 
distinct subgroups, each of which will likely respond differently to 
incentives for reverse mortgages.
Pre-Medicaid population - These elder households are important from a 
policy standpoint because their limited financial resources place them 
at greatest risk for turning to public programs should they need long-
term care. The group that may benefit most from incentives for reverse 
mortgages may be spend-down risk households. These households are 
primarily composed of "tweeners," elders whose financial resources are 
sufficient to pay for everyday expenses but not to handle substantial 
out-of-pocket payments for services and supports at home. These elders 
may be able to qualify for Medicaid by depleting their income and 
assets to pay for long-term care (termed "spend-down") in the 
community.
For many tweeners, home equity is their main financial buffer against 
substantial medical and long-term care expenses. For these elders, 
uncertainty about future health expenses can make getting a reverse 
mortgage seem like a risky proposition. Borrowers who spend their 
equity at an earlier stage will have fewer financial resources when 
they become more severely impaired. Tweeners might be encouraged to 
tap home equity by a public-private partnership program that would 
provide additional protections and help them to leverage their limited 
assets so they can stay home longer.


Medicaid long-term care beneficiaries - Though Medicaid beneficiaries 
may be receiving home and community services, additional cash from 
reverse mortgages can help cover unmet needs while providing greater 
choice and control over services. A significant challenge for these 
elders who live at home is the strict financial eligibility 
requirements for Medicaid Home and Community Based Services (HCBS). 
States that restrict the income available to HCBS beneficiaries, and 
limit spousal protections, often place these older homeowners at risk 
for moving to the nursing home since they are left with few resources 
to pay everyday expenses or to deal with financial emergencies such as 
a leaky roof.  
To increase the financial resilience of these elders, Medicaid could 
allow HCBS beneficiaries to supplement their benefits with the proceeds 
of a reverse mortgage. These additional funds could make a critical 
difference in their ability to pay for the expenses associated with 
living in the community. This approach could also provide additional 
support to family caregivers.
Implementing this strategy will require changes to limitations on 
supplementation under Medicaid. Currently, beneficiaries are not 
allowed to receive additional financial assistance from other sources, 
since Medicaid is seen as a payer of last resort. One option would be 
to develop a plan of care for beneficiaries that would include everyday 
expenses that could be covered by the loan. This approach to using home 
equity would need to be evaluated carefully, to take into consideration 
such factors as the presence of a spouse.
Our research indicates that only about 3 percent of older homeowners are 
Medicaid beneficiaries. This may reflect the fact that these elders have 
few financial resources, including housing wealth. However, recent 
research suggests that other factors may also be at work. In particular, 
older homeowners who face nursing home stays of 100 days or longer are 
more likely to sell the home than those who do not need such lengthy 
care in a facility.
Reverse mortgages could make it easier for Medicaid nursing home 
beneficiaries who still own a home to  transition from the facility to 
the community, if this is their wish. Loan funds could pay transition 
expenses and cover care management costs that facilitate a move from 
the institution to community living. These funds could also help 
impaired elders to pay for substantial home modifications and other 
assistance not covered by Medicaid, that can help them to stay at 
home. 

Expanding the Use of Home Equity Through Public-Private Partnerships
Despite the potential of reverse mortgages, older Americans have not 
been encouraged to tap into their substantial housing assets to pay 
for home and community long-term care services. Instead, home equity 
is usually liquidated by selling the house, often in emergency 
situations, to pay for nursing home expenses. 
Getting people to adopt new behaviors is never easy. This is especially 
true for reverse mortgages, since the idea of tapping home equity for 
aging in place is a relatively new concept. A new public-private 
partnership demonstration program for reverse mortgages would play an 
important role to identify the right kind of incentives and messages 
that will get older homeowners to take action. Such a program could 
expand the options for impaired older homeowners, and encourage them 
to tap the equity in their homes sooner to avoid a crisis. 
Elements of a partnership program for reverse mortgages. The model for 
this new public-private partnership program for reverse mortgages 
could be the existing Long-Term Care Partnership Program (LTC 
Partnership). The goal of the LTC Partnership is reduce Medicaid 
expenditures by encouraging the purchase of private long-term care 
insurance as a way to delay or eliminate the need for policyholders to 
rely on Medicaid. Individuals who buy designated  partnership policies 
are allowed to protect some or all of their assets from Medicaid spend-
down requirements, should they exhaust their insurance benefits and 
need public assistance for long-term care. Under this program, 
policyholders must still meet Medicaid income requirements.
A similar approach could be used to encourage older homeowners with 
moderate incomes to take out a reverse mortgage to fund their long-term 
care needs rather than relying on Medicaid. Under this type of 
partnership, borrowers who use a certain portion of the equity in their 
homes to pay for home and community services could receive more 
favorable treatment under Medicaidï¿½s asset rules. One issue would be 
whether borrowers would still need to meet Medicaid income requirement. 
Impaired older homeowners who participate in a reverse mortgage 
partnership program would likely need these funds to help them to 
continue to live at home once they qualified for Medicaid.
In developing this type of public-private initiative for reverse 
mortgages, there will be many issues that go beyond the framework of the 
LTC Partnership. These include:
Determining which types of expenditures, including paying for such items 
as a new furnace or support for family caregivers, qualify as "long-term 
care services" to meet  Medicaid requirements under the partnership 
program.
Monitoring the use of reverse mortgage funds, to ensure that they are 
being used appropriately.
Determining the amount of home equity that would meet the program 
criteria to receive more favorable treatment of assets under Medicaid. 
Identifying the loan payment options (lump sum, line of credit, monthly 
payment) that will be allowed under the reverse mortgage partnership 
program.
Prioritizing access to services and supports under a state HCBS program 
for participants in the reverse mortgage partnership program who want 
to continue to live at home.
One of the benefits of a reverse mortgage is that they can currently be 
used for any purpose, including to pay for a wide array of services and 
supports, as needed. This flexibility will also create additional 
challenges to ensure that the loan funds are being used as intended 
under the partnership program.
Example from Minnesota. Many of these issues were recently tackled by 
policymakers, along with aging and housing experts, in the State of 
Minnesota, who developed a model reverse mortgage incentive program 
targeting older homeowners at risk of needing nursing home care. This 
effort was conducted as part of an ongoing study that is being funded 
by the Assistant Secretary for Planning and Evaluation (ASPE) and the 
Administration on Aging (AoA), and directed by NCOA and the Lewin Group. 
The proposed program, which is being considered by the Minnesota 
Legislature, would combine education and counseling, with reduced 
reverse mortgage closing costs and assistance in the home through the 
stateï¿½s Alternate Care program. Older people with modest value homes 
(worth up to $150,000) who need supportive services that are not paid 
by government programs would qualify for reverse mortgage incentives. 
These would include up to $1,500 to pay the upfront mortgage insurance 
premium for a HECM loan, and reduced servicing fees. To qualify for 
help at home under the Alternate Care program, program participants 
would need to use up the proceeds of their reverse mortgage loan, or 
spend substantially all of the payments from a reverse mortgage to pay 
for services for a period of at least 24 months or in an amount of at 
least $15,000. Besides help at home, these services and supports could 
include basic shelter needs, home maintenance, and modifications or 
adaptations, necessary to allow the person to remain in the home as an 
alternative to a nursing facility placement. Participants would be 
required to spend the proceeds of their loan according to their 
individual spending plan. Those who used home equity to qualify for 
Alternate Care program would not be required to pay a monthly 
participation fee for the program, nor would they be subject to an 
estate claim by the state for the services they received.
Minnesota believes that the program would add another layer of access 
to services and supports for this vulnerable population. In addition, 
the program could free up some public resources and may influence 
when and where these elders access public assistance in the future.

Reducing Loan Costs
Many seniors are deterred by the substantial upfront costs of reverse 
mortgages. Today, a 75-year-old HECM borrower with a home valued at 
$150,000 would have to pay $6,000 in closing costs on a loan worth 
$83,490. These closing costs (the origination fee paid to the lender 
and the upfront mortgage insurance premium required by HUD) represent 
a significant amount of the money that could be available to pay for 
long-term care. Additional costs include other loan-related fees 
(such as title search and inspections) and any repairs that the house 
may need to meet minimum HUD requirements. 
To help reduce their long-term care expenditures, state Medicaid 
programs could be allowed to subsidize mortgage insurance, origination 
fees, and other closing costs for long-term care beneficiaries. Such 
incentives could make this financing option more attractive to elders 
with limited liquid resources, including Medicaid beneficiaries who 
live in the community, and increase the amount of funds available to 
them. 
The costs associated with taking out a reverse mortgage become even 
more critical for impaired elders. These seniors are likely to be 
older and poorer than typical reverse mortgage borrowers. It will 
be important for the Department of Health and Human Services to work 
with HUD and the mortgage industry to identify ways to reduce the 
cost of HECM loans for this vulnerable population. 

Strengthening Consumer Protections
The market for reverse mortgages will continue evolve rapidly over 
the next few years in response to growing consumer interest in these 
loans.  How these changes unfold will hold significant policy 
implications for our aging society. With so much wealth tied up in 
the home, the decisions that older homeowners make about this 
financial asset can significantly impact our nationï¿½s ability to 
balance public and private funding for long-term care and to 
respond to consumer preferences for aging in place. The public 
sector will need to play an active role to ensure that these 
developments include strong consumer protections and appropriately 
serve the needs of older Americans.
Despite the promise of reverse mortgages, few older homeowners are 
interested in tapping home equity for long-term care, often due to 
a lack of understanding about how these loans work. An important 
new resource to help address this barrier is the establishment of 
the National Clearinghouse for Long-Term Care Information, as part 
of the Deficit Reduction Act of 2006. NCOA would like to thank the 
Committee for creating this resource to educate Americans about 
long-term care. It will be important that the Clearinghouse 
include information and decision-support tools to help elders and 
their families make wise decisions on the use of home equity and 
reverse mortgages as a planning tool for aging in place. 
A unique feature of reverse mortgages is that all borrowers must 
first meet with a HUD-approved reverse mortgage counselor before 
their loan application can be processed or they incur any costs. 
The main objective of this counseling is to educate potential 
borrowers about the appropriateness of these loans to address their 
financial needs and situation. We commend HUD for its recent efforts 
to expand counseling to address the unique needs of older homeowners 
who are considering a reverse mortgage so they can continue to live 
at home. The AoA is also playing a key role in providing the 
infrastructure for more in-depth counseling on reverse mortgages for 
aging in place through its Aging and Disability Resource Centers.
Ongoing discussions and joint actions by government, industry, and 
the private nonprofit sectors will be critical to overcome a wide 
array of barriers to the use of reverse mortgages, and to create a 
substantial "win-win" for government and consumers in the near 
future. Close collaboration between CMS, AoA and HUD should be 
encouraged as part of Federal policy, to achieve this goal. 

Conclusions
As the population ages and the pressure on state Medicaid budgets 
rises, it becomes increasingly important to find effective ways to 
improve our long-term care financing system. Funding the growing 
demand for long-term care is a major national challenge that will 
require increased spending by both the public and private sectors. 
Reverse mortgages have the potential to be a powerful force for system 
change, and to expand the boundaries of what is possible in using 
private funds to finance home and community services. Using this asset 
as a planning tool for aging in place could significantly enhance the 
resilience of older Americans to the financial risks of long-term 
care. If used wisely, a reverse mortgage can help borrowers to live 
with independence and dignity for many years. With supportive public 
policies, appropriate incentives, careful protections, and innovative 
products, the voluntary use of reverse mortgages may offer additional 
options for impaired older Americans to take action today, and use 
their existing resources more effectively. 

	Mr. Deal.  Thank you.  I mispronounced it.  It is Stucki. 
	Dr. Stucki.  Stucki.
	Mr. Deal.  I am accustomed to the Stuckeys from Georgia.  
	You will have to excuse my pronunciation.
	Dr. Wiener.
Dr. Wiener.  Mr. Chairman and members of the committee, thank you 
for this opportunity to discuss one of Americaï¿½s greatest challenges, 
the financing and organization of long-term care.
	My name is Joshua M. Wiener.  I am a Senior Fellow and Program 
	Director for Aging, Disability, and Long-Term Care at RTI 
	International, a nonprofit, nonpartisan research organization. 
	I have conducted research and policy analysis on long-term 
	care since 1975.  In my testimony today, I would like to make 
	six points.
	First, the aging of the Baby Boom generation will dramatically 
	increase demand for long-term care, but it will not be 
	unaffordable.  The likely increase in demand for long-term care 
	has led some observers to forecast an apocalyptic situation, 
	where the financial burdens become so great that they will be 
	unbearable for our society.  But, though nobody knows the 
	future for sure, this doomsday scenario seems unlikely. 
	According to the Congressional Budget Office, total long-term 
	care expenditures for older people are projected to increase 
	from 1.3 percent of the gross domestic product in 2000 to 1.5 
	to 2 percent of the GDP in 2040.  My own, earlier projections 
	are in this range, although I would put them slightly higher 
	today.  Within a healthcare system that is already 18 percent 
	of GDP, these changes are relatively modest.
	Second, the United States faces a serious problem recruiting 
	and retaining high quality long-term care caregivers. This 
	will be discussed in detail by the second panel, but the key 
	point is that, although there is some possibility for 
	technological fixes, long-term care is fundamentally a hands-on 
	service provided by people, not machines.  Over the long run, 
	there is a major demographic imbalance between the number of 
	people likely to need long-term care services and the number of 
	people available to provide those services.  The ratio of 
	people aged 20 to 64, the working age population, to the number 
	of people aged 85 and older, the population most likely to need 
	long-term care services, is projected to decline from 37.8 in 
	2000 to 11.4 in 2050.
	Third, private long-term care insurance can play more of a role 
	than it does today, but most older people cannot afford the 
	policies.  Over the last 20 years, a small but growing market 
	for private long-term care insurance has developed.  At the 
	same time, a substantial body of research suggests that the 
	affordability of private long-term care insurance is a major 
	barrier to its growth.  That affordability is a problem should 
	not be a surprise.  According to a study by Americaï¿½s Health 
	Insurance Plans, the average premium for a good quality policy 
	with inflation protection and non-forfeiture benefits, for 
	persons who purchase at age 65, was $2,862 in 2002. The 
	premiums for a married couple are well over $5,000 per year 
	for a good policy.  At the same time, the median income for 
	households headed by persons aged 65 to 74 was only $34,243 
	in 2004, and declined sharply with increasing age.  Thus, even 
	with generous assumptions about the willingness of people to 
	pay, private long-term care insurance is very expensive for 
	most older people.
	One possible strategy to make long-term care insurance more 
	affordable is to make it a tax deductible expense, a strategy 
	which President Bush and the insurance industry has endorsed. 
	The problem, at least for the elderly population, is that the 
	effective Federal tax rate is so low that for that $2,862 
	premium, for the median person in the elderly population, that 
	would decrease the premium by $43, not enough to make a 
	difference.
	Fourth, private long-term care insurance requires tougher 
	regulation, especially related to inflation protection.  A 
	major gap in existing regulation of private long-term care 
	insurance concerns how inflation is addressed.  Most policies 
	in force today do not automatically adjust for inflation over 
	time.  Instead, they provide a fixed dollar maximum benefit 
	per day in a nursing home, or a visit by a home care provider. 
	Inflation can have a devastating impact on the purchasing 
	power of the policies.  For example, at 5 percent annual 
	inflation, a $100 per day benefit in a nursing home at age 65 
	would need to pay $265 per day at age 85 to maintain the same 
	purchasing power.
	Fifth, tapping into home equity can help, but most people with 
	disabilities do not have much home equity.  In 2002, median 
	home equity among older persons with any disability was 
	$56,956, and only $35,640 for persons with severe disabilities.
	Sixth, and finally, while the private sector can play a larger 
	role, long-term care is predominantly a public responsibility 
	in the developed world, and unless we consider proposals that 
	are far more radical than what has been put on the table so 
	far, the public sector is likely to continue to pay for the 
	large majority of costs for people who need long-term care 
	services.
	Thank you.
	[The prepared statement of Dr. Joshua M. Wiener follows:]

Prepared Statement of Dr. Joshua M. Wiener, Senior Fellow and Program 
Director, Aging, Disability and Long-Term Care, RTI International

The financing and organization of long-term care for older people and 
younger persons with disabilities needs reform.  Although long-term 
disability is a normal life risk and nearly half of all older persons 
will spend some time in a nursing home, the need for long-term care 
comes as a surprise to most Americans and their families who have to 
cope with it (Spillman and Lubitz, 2002).  With very little public or 
private insurance against the high costs of nursing home and home care 
available, users of long-term care incur very high out-of-pocket costs. 
As a result, Medicaid is the principal source of financing for 
long-term care, even though many of the users were not initially poor. 
Although most persons prefer home and community-based services, the 
vast bulk of long-term care expenditures are for institutional care.  
Finally, with the aging of the population, demand for long-term care 
will increase in the future, placing financial pressure on public 
programs and private resources.
	Despite these problems and the fact that long-term care is the 
	third leg of retirement security, public policymakers have not 
	given it the attention it deserves.  We have had substantial 
	debates about how to assure income security (Social Security) 
	and health care (Medicare), but not how to make sure that 
	people receive high quality long-term care in a way that is 
	affordable to them and to society.   
	In my testimony today, I would like to make six points:
The financial burden of long-term care will increase as the population 
ages, but, by itself, it will be manageable.ï¿½ 
The U.S. faces serious labor force problems regarding how to recruit and 
retain high quality workers to provide this care.ï¿½
Private long-term care insurance can play more of a role, but older 
people cannot afford it. ï¿½
Long-term care insurance needs stronger regulation, particularly 
related to inflation protection.
Home equity conversions can help, but most people with significant 
disabilities do not have much home equity. ï¿½
Long-term care is predominantly a public responsibility throughout the 
developed world and is likely to remain so. ï¿½

The aging of the baby boom generation will increase demand for 
long-term care, but it will not be unaffordable by itself.
	The need for long-term care services affects persons of all 
	ages, but the prevalence of disability increases sharply with 
	age.  The Census Bureau projects that the population age 85 and 
	older, the population most likely to need long-term care 
	services, will increase from 4.3 million in 2000 to 20.9 
	million in 2050.  About half of all persons age 85 and older 
	had a disability in the community or are in a nursing home 
	(Johnson and Wiener, 2006).  Although there appears to have 
	been a decline in disability rates among the older population 
	over the last 20 years (Freedman, Martin and Schoeni, 2002), 
	the large increase in the number of older people due to the 
	aging of the baby boom generation ensures that the demand for 
	long-term care services will rise.  Some analysts estimate 
	that the obesity epidemic and the resulting diabetes will 
	offset past declines in disability rates and that disability 
	rates will increase again in the future (Lakdawalla, 
	Battacharya and Goldman, 2004).
	The likely increase in demand for long-term care has led some 
	observers to forecast an apocalyptic situation where the 
	financial burdens become so great that they are unbearable for
	our society.  Although nobody knows the future, this doomsday 
	scenario is unlikely.  According to the Congressional Budget 
	Office (2004), total (public and private) long-term care 
	expenditures are older people are projected to increase from 
	1.3 percent of the Gross Domestic Product (GDP) in 2000 to 
	1.5 to 2.0 percent of GDP in 2040.  These projections are in 
	line with my own earlier projections (Wiener, Illston and 
	Hanley, 1994), although they probably should be somewhat 
	higher because of the workforce issues discussed below.  
	Ultimately, we will have to pay long-term care workers more 
	to induce them to provide services.  Within a health care 
	system that is already 18 percent of GDP, these changes are 
	relatively modest.  Moreover, many other countries, such as 
	Sweden, Japan, Germany, and England, already have populations 
	that are much older than ours without unduly dire results 
	(Organization for Economic Co-operation and Development, 2005).  
	In sum, long-term care is sure to be a larger financial burden 
	on public and private burden in the future.  However, the 
	increase, by itself, should not be so large as to immobilize 
	public initiatives to make the system better.  The question is 
	more one of political will than economics.  The issue is 
	complicated, however, by the fact that long-term care mostly 
	affects the same populations that uses Medicare and Social 
	Security, both of which have substantial long-run financial 
	problems.  

The United States faces a serious problem recruiting and retaining high 
quality long-term care caregivers.
	Although some technological improvements are possible, 
	long-term care is fundamentally a hands-on service provided by 
	people, not machines.  The United States faces serious problems 
	in recruiting and retaining long-term care workers, a situation 
	that will only grow worse over time.  Nationally, turnover 
	rates for certified nurse assistants in nursing homes were 
	estimated to be approximately 78 percent per year in 2001, 
	which is likely to adversely affect quality of care (American 
	Health Care Association, 2002).  As a result of high turnover 
	and vacancy rates, providers incur substantial recruitment and 
	training costs (Leon, Marainen and Marcott, 2001; Pillemer, 
	1996).  Major reasons for the shortages include low wages and 
	benefits, a lack of career ladder, inadequate training and poor 
	work culture.
	Over the long run, there is a major demographic imbalance 
	between the number of people likely to need long-term care 
	services and the number of people likely to be available to 
	provide it.  The ratio of persons ages 20-64 (the working age 
	population) to the number of persons age 85 and older (the 
	population most likely to need long-term care services) is 
	projected to decline from 37.8 in 2000 to 11.4 in 2050 (Lewin 
	Group, 2002).  While this data are often used to illustrate the 
	potential economic burden of Medicare, Medicaid and Social 
	Security, they also have profound implications for the 
	availability of personnel to provide long-term care services.  
	It will be far more difficult to recruit and retain workers in 
	the future, and they probably will be more costly.

Private long-term care insurance can play more of a role, but most 
older people cannot afford it. 
	Over the last 20 years, a small but growing market for private 
	long-term care insurance has developed.  As of 2001, 
	approximately 8 percent of older people and far less than one 
	percent of the nonelderly population had some form of private 
	long-term care insurance (Johnson and Uccello, 2005).  Public 
	policymakers have been interested in promoting private 
	long-term care insurance as a way of increasing choices 
	available to individuals and reducing Medicaid expenditures by 
	middle-class beneficiaries.
	A substantial body of research suggests that the affordability 
	of private long-term care insurance is a major barrier to its 
	purchase.  Most studies found that only a relatively small 
	minority of the elderly population (generally 10 to 20 percent) 
	can afford good quality private long-term care insurance (see, 
	for example, Wiener, Illston and Hanley, 1994; Rivlin and 
	Wiener, 1988; Rubin, Wiener and Meiners, 1989; and Wiener and 
	Rubin, 1989). Projections suggest that these percentages will 
	increase, but that the bulk of older people will still not be 
	able to afford policies in the future.  Other research has 
	found higher percentages of older people to be able to afford 
	private long-term care insurance by assuming purchase of 
	policies with more limited coverage, by assuming that older 
	people would use assets as well as income to pay premiums, or 
	by excluding a large proportion of older people from the pool 
	of people considered interested in purchasing insurance.
	That affordability is a problem should not be a surprise.  
	According to a study by Americaï¿½s Health Insurance Plans, the 
	average premium for a good quality policy with inflation 
	protection purchased at age 65 was $2,346 in 2002; the average 
	premium for a good quality policy with inflation protection 
	and nonforfeiture benefits was $2,862 in 2002 (Americaï¿½s Health 
	Insurance Plans, 2004).  Thus, premiums for a married couple  
	approximate $5,000 per year for a good policy.  Premiums at 
	age 79 are approximately three times as much.  However, the 
	median income for households headed by persons aged 65-74 was 
	only $34,243 in 2004, and declines sharply with increasing age 
	(U.S. Census Bureau, 2006).  Thus, even with generous 
	assumptions about the willingness of people to pay, private 
	long-term care insurance is very expensive for most older 
	people.
	A number of policy strategies have been proposed to make 
	long-term care insurance more affordable.  One possible 
	strategy is to encourage purchase at younger ages, when 
	premiums are lower.  Premiums for a good quality policy with 
	inflation protection and nonforfeiture benefits purchased at 
	age 50 are half what they are at age 65.  While some 
	employers do offer these policies, they rarely contribute 
	towards the cost of the premiums.  In addition, people in 
	their 40s and 50s are concerned about their mortgage payments, 
	child care costs, college education expenses for their 
	children, and general retirement; they are rarely interested 
	in long-term care.  The marketing dilemma is that people are 
	interested in long-term care when they are older and cannot 
	afford the policies; at the age when they could afford the 
	policies, they are not very interested.   
	Another possible strategy is to make long-term care insurance 
	a tax deductible expense, a strategy which President Bush and 
	the insurance industry have endorsed.  This approach, 
	especially for the elderly population, is likely to be 
	ineffective because it would not substantially reduce the price 
	of the insurance.  According to the Urban Institute-Brookings 
	Institute Tax Policy Center, the median effective federal 
	individual income tax rate for elderly childless households 
	was 1.5 percent in 2003; for the older population as a whole, 
	it was only 7.3 percent.  Thus, for the median elderly 
	household, it would reduce the $2,862 premium cited above by 
	$43.  Since tax deductions benefit upper-income households 
	more than lower- and moderate-income households, this strategy 
	would also be regressive in terms of tax policy.  An earlier 
	analysis of proposed tax incentives (Wiener, Illston and 
	Hanley, 1994) found that these policies were expensive in terms 
	of lost revenue, but mostly benefited persons who would have 
	purchased policies without the increased tax benefits. 

Long-term care insurance requires tougher regulation, especially 
regarding inflation protection.
	The quality of long-term care insurance policies has improved 
	dramatically over the last 20 years and there are many good 
	products currently available.  Regulation by the states, 
	encouraged by the tax provisions in the Health Insurance 
	Portability and Accountability Act (HIPAA), deserves some of 
	the credit for pushing policies to improve.  
	A major gap in existing regulation of private long-term care 
	insurance concerns how inflation is addressed.  It is critical 
	to solve this issue because health care inflation, including 
	long-term care, is substantial and policies are typically sold 
	years in advance of when benefits are used.  Most states only 
	require that insurers offer a product where the indemnity value 
	increases by 5 percent per year.  Most policies in force today 
	do not automatically adjust for inflation over time; instead 
	they provide fixed dollar maximum benefits per day in a nursing 
	home or visit by a home care provider.
	Failure to have automatic inflation adjustments can have a 
	devastating impact on the purchasing power of the policies.  
	For example, at 5 percent annual inflation, a $100 per day 
	benefit in a nursing home at age 65 would need to pay $265 per 
	day at age 85 to maintain the same purchasing power.  The 
	longer the period of time between the initial purchase of the
	power and its use, the more important it is to have compound 
	inflation protection.  For example, a $100 per day indemnity 
	benefit purchased at age 50 would need to pay $551 at age 85 
	to maintain the same purchasing power. 
	Insurance companies often offer the insured the option of 
	purchasing additional coverage over time at the new attained 
	age instead of automatic inflation adjustments.  Since 
	disability rates are exponential by age, premiums quickly 
	become unaffordable.  To retain purchasing power, the premiums 
	at age 82 would be approximately ten times, in nominal dollars, 
	what they were at age 62.  The premiums will skyrocket over 
	time, but the incomes of the elderly will not.    
	It is not hard to understand why insurers resist regulations 
	requiring inflation adjusted policies"policies with inflation 
	protection cost are roughly twice the price of policies without 
	inflation adjustments.  Higher premiums mean lower sales.  
	Nonetheless, policies without inflation protection may not 
	provide substantial protection against the costs of long-term 
	care.

Tapping into home equity can help, but most people with disabilities 
do not have a lot of home equity.
	Inspired in part by the recent increase in home prices, 
	policymakers are increasingly interested in finding ways to 
	use home equity conversions to finance long-term care. 
	Typically, these mechanisms are home equity loans that do not 
	have to be paid off until the borrower dies or moves from the 
	house.  While there is little doubt that home equity accounts 
	for the vast majority of the wealth of the older population, 
	policymakers need to be cautious in how much home equity can 
	be used to pay for long-term care (Merlis, 2005).  In 2002, 
	median home equity among older persons with disabilities was 
	$56,956 and $35,640 for persons with severe disabilities 
	(Johnson and Wiener, 2006).  Restrictions on the amount of 
	home equity that can be used, closing costs for home equity 
	conversions, including mortgage insurance, and interest costs 
	substantially erode the amount of money available to pay for 
	long-term care directly.  Merlis (2005) estimated that for a 
	70-year old borrower, these costs could account for about a 
	third of the cost of the loan over 15 years. 
	Some analysts have suggested using home equity conversions to 
	purchase private long-term care insurance, which provides more 
	coverage than may be available though direct use of home equity 
	to purchase long-term care services. While the use of home 
	equity would marginally increase the proportion of older people 
	who can afford private long-term care insurance, it seems 
	unreasonable to expect that people will partly deplete their 
	major asset to purchase a product, one of whose major purposes 
	is to protect their major asset.  Moreover, individually sold 
	private long-term care insurance has very high overhead, due 
	to substantial marketing, commission, and profit costs.  Most 
	private long-term care insurance policies have long-term loss 
	ratios of 60 percent, which roughly means that 60 percent of 
	the premiums are used for benefits. Thus, the use of home 
	equity (with a "loss ratio" of 66 percent) to purchase a 
	private long-term care insurance policy (with a loss ratio of 
	60 percent) would result in only about one in three home equity 
	dollars providing benefits, which is an inefficient use of 
	funds.

Conclusion:  While the private sector plays a role, long-term care is 
predominantly a public responsibility in the developed world.
	The major focus of federal policymakers in long-term care 
	financing over the last decade has been to find ways to 
	increase the role of the private sector and to decrease the 
	role of the public sector.  Public sector financing currently 
	dominates long-term care, accounting for about two thirds of 
	long-term care expenditures for older people (U.S. 
	Congressional Budget Office, 2004). Moreover, approximately 
	78 percent of nursing home residents have their care financed 
	by either Medicare or Medicaid (American Health Care 
	Association, 2006).  The United States is not alone in this 
	large role played by the public sector.  In Ireland, New 
	Zealand, Japan, Australia, Canada, Germany, the United Kingdom, 
	the Netherlands, Norway and Sweden, long-term care is financed 
	primarily through public programs.  Only in Germany does 
	private long-term care insurance play a significant role, and 
	that is as an alternative for upper-income individuals to the 
	social insurance provided by the quasi-public "sickness funds."
While there is little doubt that private sector financing can play a 
bigger role than it plays now, it seems unlikely that private financing 
can become the dominant source of funding for long-term care without 
more radical and costly initiatives than are currently contemplated.  
Research suggests, for example, that the people who can afford private 
long-term care insurance are not the people who spend down to Medicaid 
(Rivlin and Wiener, 1988; Wiener, Illston and Hanley, 1994; and Rubin 
and Wiener, 1989). As a result, expansion of private long-term care 
insurance is unlikely to affect Medicaid costs more than marginally.  
Thus, federal policymakers bear a special responsibility to improve 
Medicare and Medicaid for the majority of the people who need and use 
long-term care services.
	Mr. Deal.  Thank you.  Ms. Ignagni.
Ms. Ignagni.  Thank you, Mr. Chairman, and members of the committee.  
It is a pleasure to be here.
	We took your challenge seriously to approach this issue in a 
	rather broad way, and with that in mind, we have tried to cover 
	four topics in our testimony.
	First, we provided data about the problem.  I think my 
	colleagues 
	have done a very good job of highlighting that.  I am only going 
	to touch on a couple of things that havenï¿½t already been said.
	Second, we discussed what our health plans have brought to the 
	Medicaid program, and the accomplishments there.  Third, we have 
	given you comprehensive information about the private market.  I 
	am delighted to talk about that, and I would like to point out a 
	couple of things.  And finally, we have ended with making seven 
	recommendations, which I will highlight.
	First, in terms of data, I think what puts the problem in 
	perspective, and the challenge, probably more properly stated, 
	is that over the next 25 years, the population over 65 will 
	double.  That is not the end of the story, however, because also 
	in the same period, the population over 85, most likely to need 
	long-term care will also double.  These individuals will have 
	multiple chronic conditions.  We already know that currently 
	20 percent of Medicare beneficiaries have at least five medical 
	conditions, accounting for approximately two-thirds of Medicare 
	expenditures.  So the challenge of dealing with co-morbidities 
	and various kinds of healthcare problems occurring together in 
	people who are aging will be even more significant over time.  
	This is clearly going to, as Mr. Chairman, you observed, and 
	your colleagues have observed, the members of the subcommittee, 
	put a strain on public programs, individual families, and the 
	healthcare system.
	Now, the policy question that you have articulated is how do we 
	find the balance between what the public sector role is, and 
	what is the private sector sole.  First, I think is a window 
	into uncovering the answer to that question.  We have taken a 
	look, and provided details now, in terms of the distribution of 
	expenditures for long-term care.
	Medicaid is covering 45 percent.  Out-of-pocket costs amount to 
	23 percent.  Medicare is covering 14 percent.  Private insurance 
	is covering 11 percent, but we have seen gains in that area. I 
	will highlight them in a moment.  The balance is from other 
	resources, individuals, et cetera.
	How much does it cost?  This is a very important part of the 
	conversation.  It hasnï¿½t yet been highlighted, but it is 
	roughly $71,000, on average, for a one year stay in a nursing 
	home.  That would be a private room, a little less for a 
	semi-private room.  That is an average, higher or lower, 
	depending upon the area of the country that you are from.  It 
	is $32,000 for a private room in an alternative living 
	facility, and that gives you a sense of the relative 
	distribution of the dollars.  It is $25 per hour, roughly, for 
	home healthcare services.  For aides, it is roughly half of 
	that, but that gives you a sense of the burden, potentially, on 
	families.
	We noted in the Kaiser Family Foundation research, there are 
	two widely held misconceptions.  One is that a third of the 
	population think nursing home care is approximately $40,000 per 
	year, so there is a major gap there, and also, most of the 
	population think that there is a public safety net that will 
	take care of them when they need care, notwithstanding their 
	income, and that is clearly not the case.
	So, as you think about policy approaches, we first wanted to 
	congratulate you, Mr. Chairman, and the members of this 
	subcommittee in moving forward on the first step, which is to 
	pass a partnership program.  We now know that 25 states are in 
	the process of developing partnership programs, and that is very 
	good progress since the enactment of the Deficit Reduction Act, 
	in a very short period of time.  The next step is for HHS to 
	develop regulations, a template, basically, to guide the States 
	in how they might submit planned amendments, so that they can 
	move very quickly.
	Before I turn to the private sector, I would like to just 
	highlight a couple of lessons that we have learned in the 
	Medicaid arena.  Our health plans are working very well for the 
	dual eligibles, who qualify for SSI, and others who need 
	long-term care needs.  We have described in our testimony 
	innovative programs that offer continuity of care, care 
	coordination, individually targeted, and customized care.  We 
	have described programs addressing fragmentation in various 
	programs, and how we put them together, in bringing services to 
	the public programs.  We have talked about the importance of the 
	special needs program, and we have made a specific policy 
	proposal about a potential adjustment under Medicaid, which I 
	will highlight as we wrap up our recommendations.
	In terms of the long-term care market, consumers with long-term 
	care now are seeing a very broad protection offered in the 
	market. It used to be primarily focused on nursing home care.  
	It is much broader today, in terms of home care, assisted 
	living facilities, et cetera.  They are receiving more personal 
	care support, which is important for families.  Particularly, 
	Mr. Ferguson observed the issue of respite care.  It is enabling 
	individuals to remain at home, which we know is so important, 
	and it is generating savings for Medicare and Medicaid.
	Also encouraging, Mr. Chairman, is that there is a growth in 
	the employer market.  I will highlight a specific 
	recommendation there.  We have discussed in our testimony 
	affirmative support for the NAIC guidelines with respect to 
	long-term care.  I want to highlight one.  We are often asked 
	the question about post-claims underwriting.  The guidelines 
	developed by the NAIC, which 30 States have adopted now, 
	prohibits post-claims underwriting.  We support that, and 
	believe it is not justifiable.  We are required under these 
	regulations to disclose any prior rate increases.  I might 
	note that 80 percent of the insurers that are operating in the 
	long-term care market have never had a premium increase.
	Lastly, there are very specific regulatory requirements with 
	respect to guidelines for suitability, to whom you might sell 
	long-term care insurance, who should not be offered long-term 
	care insurance.  I wanted to assure the subcommittee that we 
	are very comfortable with that, and very much supportive of 
	that. We have provided a great deal of additional information, 
	Mr. Chairman, about how private healthcare, long-term care 
	insurance works, what we can bring to the healthcare system.
	I would like to summarize by making seven recommendations.  
	First, we have had comments already about the above-the-line 
	deduction.  This is important, because it would put long-term 
	care on an equal playing field with acute care, and level the 
	playing field there, and not penalize individuals who purchase 
	long-term care.
	Second, I would highlight that three quarters of individuals 
	now who are purchasing long-term care in 2005 are purchasing 
	inflation protection, versus only 40 percent back in 2000.  We 
	have talked about flexible benefits programs, Mr. Chairman, and 
	the opportunity that should be accorded to individuals who want 
	to purchase long-term care insurance with flexible benefit 
	dollars.  If they do not use those resources in the FSAs, they 
	lose them now.  That is a very important place.  It can expand 
	the employer offerings, and that could be a very fruitful way 
	to expand long-term care.
	We have talked about removing barriers to Medicaid managed 
	care. We have talked about potential demonstrations.  We have 
	advocated for a Commission on Long-Term Care, to focus very 
	specifically on the issues that all of you have raised today.
	Finally, we have talked about a specific office to address the 
	unique resource issues with respect to workforce training.  
	Those are major issues that we need to get our hands around, 
	and finally, in long-term care, we need to talk about quality 
	performance measurement.  We have offered some observations 
	there, and we would be delighted, Mr. Chairman, to talk about 
	them in the Q&A session.
	Thank you.
	[The prepared statement of Karen Ignagni follows:]

Prepared Statement of Karen Ignagni, President and CEO, American Health 
Insurance Plans

I.	INTRODUCTION 
Good afternoon, Mr. Chairman and members of the subcommittee.  I am 
Karen Ignagni, President and CEO of Americaï¿½s Health Insurance Plans 
(AHIP), which is the national association representing nearly 1,300 
private sector companies providing health insurance coverage to more 
than 200 million Americans.  Our members offer a broad range of health 
insurance products in the commercial marketplace and also have a strong 
track record of participation in public programs.   
AHIPï¿½s members, who represent about 90 percent of the current long-term 
care insurance marketplace, share your commitment to meeting the long-
term care needs of our nationï¿½s aging population and we appreciate the 
opportunity to testify on this important issue.   We applaud Congress 
for enacting legislation earlier this year to expand long-term care 
partnerships.  We particularly want to thank members of this committee 
for your leadership on this critically important legislation.  
My testimony today will focus on five areas:  
Broadening the conversation on long-term care to recognize the continuum 
of health care services Americans will need throughout their lives;   
The importance of moving forward to implement the newly expanded long-
term care partnerships in a timely manner; 
The innovative strategies AHIP members are using to contain costs and 
improve quality in Medicaid; 
An overview of private long-term care insurance, including the financial 
protection it offers consumers and the cost savings it provides to 
Medicaid and Medicare; and 
Recommendations for additional policy changes that should be pursued to 
help more Americans secure protection against long-term care costs.   

II.	BROADENING THE CONVERSATION 
Our members urge the subcommittee to take an approach to long-term care 
that broadens the health care discussion to focus on the continuum of 
health care services that people need throughout their lives.  Our 
current health care system focuses primarily on treating episodes of 
acute illness, rather than managing chronic conditions.  This is true 
despite the fact that 20 percent of all Medicare beneficiaries - 
chronically ill patients with five or more medical conditions - 
accounted for more than two-thirds of the Medicare programï¿½s costs in 
2004.  Likewise, long-term chronic care management is a key cost and 
quality issue for Medicaid.  Our tax system also takes a narrow view 
of our nationï¿½s health care needs by orienting incentives toward the 
coverage of acute care benefits.  
The aging of the baby-boom generation - the 77 million Americans born 
between 1946 and 1964 - poses multiple challenges for policymakers.  
More men and women are approaching retirement than ever before and they 
will live longer into old age than any previous generation.  The U.S. 
Census Bureau estimates that between 2003 and 2030, the population age 
65 and older will increase from 36 million to 72 million, reaching 
twenty percent of the total population.  Meanwhile, the population of 
those aged 85 or older - the population most likely to need long-term 
care - is projected to increase from 4.7 million in 2003 to 9.6 million 
in 2030, and then double again to 20.9 million by 2050. 
In the next 30 years, more than half the U.S. population will be living 
with at least one chronic condition.  When narrowing this profile to 
seniors, Census Bureau data suggest that approximately 80 percent of 
seniors have at least one chronic condition, and 50 percent of those 
have two or more chronic conditions.  Chronic illnesses such as cancer, 
diabetes, Alzheimerï¿½s disease and hypertension exacerbate age-related 
health problems and increase the likelihood of needing long-term care. 
Currently, nearly half of all nursing home residents have Alzheimerï¿½s 
disease.  By 2050, the Alzheimerï¿½s Association estimates that 
14 million baby boomers, nearly one in five, will find themselves 
living with the disease.  We need to make major adjustments to address 
21st-century realities and our aging population.  At the same time, we 
need to explore a range of public-private partnerships that could make 
long-term care costs more predictable and expand service options for 
consumers.  
 	While Medicare and Medicaid already are burdened by high costs, 
 	public programs designed to meet the needs of the elderly will 
 	become increasingly strained in the years ahead.  One of the 
 	crucial questions facing policymakers, therefore, is how to 
 	create an appropriate balance between public and private 
 	responsibilities - between the obligation of government to 
 	provide a safety net for those who need it and the obligation 
 	of citizens to provide for themselves to the extent they are 
 	able to do so.

The Costs of Long-Term Care 
According to the Government Accountability Office (GAO), Medicaid 
currently pays for about 45 percent of all long-term care expenditures, 
followed by out-of-pocket payments (23 percent), Medicare (14 percent), 
and private insurance (11 percent).  Other public and private sources 
account for the remaining 7 percent.  The Congressional Budget Office 
(CBO) has projected that the cost of providing long-term care services 
nationwide to the growing elderly population will nearly triple in real 
terms over the next 40 years.  
The scope of the long-term care funding problem is particularly clear 
when costs are examined on an individual level.  Genworth Financial, an 
AHIP member, has been commissioning annual cost of care studies since 
2001.  The most recent study, based on information gathered in January 
and February 2006, includes the following findings:  
Nationally, the average annual cost for a private nursing home room 
(single occupant) is $70,912 ($194.28/day), reflecting a 2.2 percent 
increase over 2005 rates ($190.20/day).  The average cost of care for 
a private room in urban areas is 17 percent greater than in non-urban 
areas.  Louisiana has the lowest average annual cost for a private room 
($42,304), while Alaska has the highest average annual cost ($191,140).  
Nationally, the average annual cost for a semi-private room (double 
occupancy) is $62,532 ($171.32/day), a 2.3 percent increase over 2005 
rates ($167.44/day).  
Nationally, the average monthly cost for a private one-bedroom unit in 
an assisted living facility (ALF) is $2,691.20 (a daily rate of $88.48), 
reflecting a 6.7 percent increase over 2005 survey rates ($2,522/month). 
These rates do not include any one-time community or entrance fees.  
Approximately 33 percent of the ALFs surveyed charge a one-time fee, 
commonly referred to as a community or entrance fee, ranging from $50 
to $8,490, with a national average one-time fee of $1,369.68. 
Across all home health care provider types, the average hourly rate for 
home health aides is $25.32, a 13 percent increase over 2005 survey 
results.  The average hourly rate for homemaker services is $17.09, a 
3 percent increase over 2005 survey results.

These figures translate into financial obligations that few families 
have the resources to meet. 

Common Misconceptions 
At the same time, public attitudes about long-term care are skewed by 
three widespread misconceptions:  (1) that the risk of needing long-
term care is relatively remote; (2) that the costs of such care are 
considerably lower than is actually the case; and (3) that Medicare 
and Medicaid can fully provide care should the need arise.  
On each of these three points, the realities are dramatically different 
than the perception:  
The risk of eventually needing long-term care, far from being remote, 
is quite high.  Today, 44 percent of people reaching age 65 eventually 
will spend some part of their lives in a nursing home.  It will take 
time and public education to make Americans more aware of the risks 
associated with needing long-term care in old age.
A recent public opinion poll found that one-third of those surveyed 
believe nursing home care currently costs less than $40,000 a year - 
less than 60 percent of actual costs. 
Perhaps the most serious misconception, however, is that there is an 
adequate public safety net in place to protect those who need long-
term care.  The belief appears to be widespread that Medicare and 
Medicaid will somehow meet these needs.  The reality is that neither 
program offers adequate protection.

The Role of Medicare and Medicaid 
Medicare, the federal health insurance program for the elderly and 
disabled, is designed primarily to pay for acute care services provided 
by hospitals and physicians.  While Medicare does cover some nursing 
home care for patients following a hospital stay, its coverage is 
limited to 100 days, which by definition, excludes those who need 
ongoing assistance.  
Medicaid, the joint federal-state program for low-income individuals, 
does pay for long-term care - but only for those who have exhausted 
nearly all of their own resources.  Because Medicaid is a means-tested 
program, qualifying for assistance requires proving that one is 
impoverished, or nearly so.  
Another harsh reality is that becoming eligible for Medicaid can mean 
losing control over how and in what setting long-term care will be 
delivered.  Covered services vary substantially from state to state, 
as does the quality of care.  Some states that have been relatively 
generous about authorizing long-term care services at home have 
experienced runaway costs and have been forced to scale back such 
arrangements.  For many who rely on Medicaid, their only option is 
to enter a nursing home, even if they would prefer home care.
The recent expansion of long-term care partnerships, discussed in 
the following section, was an important step toward creating 
opportunities for individuals to purchase long-term care coverage 
and reduce the burden on public programs.  
III.	IMPLEMENTATION OF EXPANDED LONG-TERM CARE PARTNERSHIPS 
AHIP applauds Congress for expanding public-private long-term care 
"partnerships" under the Deficit Reduction Act of 2005 (DRA).  The 
Energy and Commerce Committee deserves special recognition for its 
work on this legislation.  The partnerships authorized by the DRA 
will allow many Americans to receive the financial protection 
provided by long-term care insurance while also ensuring that 
Medicaid will play a role in meeting the needs of those who require 
extended long-term care stays.  
Building upon the innovative partnerships that already have been 
implemented in New York, California, Connecticut, and Indiana, this 
legislation creates powerful new incentives for more Americans living 
in all states to prepare for the future by purchasing long-term care 
insurance.  Individuals who purchase partnership policies will have 
the added peace of mind of knowing that if their policy benefits are 
exhausted, the government will cover the costs of their continuing 
care through Medicaid without first requiring them to "spend down" 
their life savings and become impoverished.  
In recent years, sales of partnership plans in the four states that 
have operated them have steadily increased.  Between 1996 and 2004, 
partnership enrollment increased from 28,000 to 172,000.  Independent 
research indicates that partnership plans are attracting enrollees who 
generally would not buy non-partnership long-term care insurance.  
Further, research indicates that the partnership enrollees have lower 
incomes and fewer assets than other long-term care insurance purchasers.  

Next Steps 
While the passage of this legislation is a major accomplishment, the 
next step is for the Department of Health and Human Services (HHS) to 
move forward to develop the regulatory structures that will facilitate 
the implementation of partnerships in the states.  The expansion of the 
partnership program has the full support of the states and they are 
ready to launch once the regulatory requirements are established for 
approval of their plans.  To date, more than 20 states have enacted or 
introduced legislation that would enable their state to establish a 
partnership program.  We are working with our members, state officials, 
and others to develop a template for a fast-track process and 
streamlined application that states can use to amend their Medicaid 
plans to include partnership programs.  

IV.	THE SUCCESS OF PRIVATE SECTOR STRATEGIES IN MEDICAID  
While examining the private sectorï¿½s role in meeting long-term care 
needs, it is important to recognize that health insurance plans have 
made an important contribution toward helping Medicaid programs use 
their limited resources to expand access, improve quality, provide 
transportation services, and take other steps to better serve 
beneficiaries.  More than 20 years of experience demonstrates that 
Medicaid health plans increase beneficiary access to care and improve
outcomes, while ensuring that the federal government and state Medicaid 
programs receive the highest possible value for the dollars they spend 
on health care.
Increasingly, health plans are proving that integrated systems of care 
work well for beneficiaries who are dually eligible for Medicaid and 
Medicare, who qualify for Medicaid through eligibility in the federal 
Supplemental Security Income (SSI) program, and other beneficiaries 
with long-term health care needs.  Innovative programs in Minnesota 
and Texas demonstrate that Medicaid health plans effectively coordinate 
care for beneficiaries with long-term care needs.  Health plans 
operating in these states have shown that private plan techniques 
including care coordination, the design of individualized treatment 
regimens, and encouraging more community-based care improve health 
outcomes, reduce costs, and deliver high levels of patient 
satisfaction while maintaining high quality of care.  For example:
Health plans participating in the Texas STAR+PLUS program (includes 
dual eligibles and beneficiaries eligible for the federal SSI program) 
reduced emergency room visits by 40 percent and reduced inpatient 
admissions by 28 percent while promoting quality care.  The STAR+PLUS 
program saved the state $17 million dollars - in just one county - 
in the first two years.  
A CMS evaluation of the Minnesota Senior Health Options (MSHO) 
program found dually eligible beneficiaries had fewer preventable 
emergency room visits and were more likely to receive preventive 
services after enrolling in a Medicaid health plan.  MSHO enrollees 
report a 94 percent satisfaction rate with their care coordinators.

UnitedHealth Group, through its affiliate, Evercare, has worked with 
six states, including early efforts in Florida, Arizona and Minnesota, 
to develop a model that addresses the problems of fragmentation in our 
health and long-term care systems for people with chronic illness and 
disabilities. These programs pair a personal care manager with 
comprehensive services, including acute, nursing home, home- and 
community-based, behavioral health, and pharmacy care.  These programs 
have had documented success in reducing acute events, such as emergency 
room visits and hospitalizations, and allowing individuals to remain in 
their communities and avoid costly nursing home placement. 
Another AHIP member, UCare Minnesota, is improving the health and well-
being of beneficiaries through its participation in the MSHO program 
mentioned earlier.  To understand the value of this program, consider 
the circumstances of a 75-year-old resident of Ramsey County - "Mr. O" - 
who had diabetes and heart disease when he joined MSHO.  Before joining 
UCare, Mr. Oï¿½s health began declining further because he wasnï¿½t able to 
manage his own care and the basic activities of daily living.   He was 
hospitalized four times in the year before he joined UCare. 
Once Mr. O joined UCare, his health and life began to improve.  His 
care coordinator made sure that Mr. O had regular appointments with 
his primary care clinic.  She arranged for Meals on Wheels to bring 
healthy meals each day.  She also arranged for a skilled nurse to 
visit every other week.  The coordinator also had a home health aid 
come in three times a week to help him with personal care, such as 
bathing, grooming, and dressing.  In addition, the coordinator 
arranged for a service to help with homemaking and weekly chores.  Once 
Mr. Oï¿½s health and home life improved, so did his outlook on life.  He 
told the care coordinator that she is his "ray of sunshine" because of 
the help she has given him. 
As we see the benefits of this coordination, AHIP members are playing 
leading roles in many states in the effort to coordinate the Medicare 
and Medicaid programs for dually eligible beneficiaries.ï¿½ This type of 
integration has been discussed for many years and practiced 
successfully in a few areas.  Now, through the Medicare Special Needs 
Plans that were authorized by the Medicare Modernization Act of 2003 
(MMA), a growing number of plans are coordinating both acute care and 
long-term care services for dual eligible beneficiaries.  The addition 
of a prescription drug benefit to Medicare and the growth of Medicare 
Advantage availability across the nation have created new incentives 
for states to align care for dually eligible beneficiaries.  
States now have an opportunity to facilitate coordination and higher 
quality care for these beneficiaries, and AHIP members are uniquely 
positioned to bring their health care delivery competencies to this 
partnership.  By tailoring benefits, delivery systems, and provider 
networks to meet the specific needs of these vulnerable beneficiaries, 
Special Needs Plans can  provide access to high quality care without 
the disruptions that these seniors would otherwise encounter in 
accessing benefits from two separate programs.ï¿½ The early experience 
with Special Needs Plans indicates that this integration of benefits 
can succeed in providing beneficiaries with better health care across 
the entire continuum of services they need.ï¿½ï¿½
While this success is encouraging, we see certain challenges - for 
beneficiaries, states, and the Medicare program - arising from the 
differences in the benefits covered and the providers participating 
in the Medicare and Medicaid programs.  To ensure that Medicare and 
Medicaid integration continues to grow, it will be important to align 
incentives.  Later in this testimony, we discuss steps that can be 
taken to remove barriers and improve our nationï¿½s long-term care 
policy. One critical step for further integration of care for dually 
eligible long-term care beneficiaries will be to readjust the 
calculation of the federal upper payment limit (UPL) for supplemental 
payments made by states to publicly owned hospitals and facilities.  

V.	THE ROLE OF PRIVATE LONG-TERM CARE INSURANCE 
Approximately 10 million Americans have purchased long-term care 
insurance.  
According to an AHIP study, consumers with long-term care insurance are 
66 percent less likely to become impoverished to pay the costs of 
long-term care, and long-term care insurance reduces the out-of-pocket 
expenses of disabled elders.  Those with private long-term care 
insurance receive an average of 14 more hours of personal care per week 
than similarly disabled non-privately insured elders.  Another benefit 
of long-term care insurance is that it allows those with chronic 
illnesses and the disabled to remain in their homes.  Approximately 
half of patients and family caregivers interviewed by trained nurses 
and social workers said that in the absence of their long-term care 
insurance benefits, the patients would not be able to remain in their 
homes and would have to seek institutional alternatives. 
 	Long-term care insurance also can reduce state and federal 
 	Medicaid expenditures and federal Medicare home health 
 	expenditures.  According to the AHIP study mentioned above, 
 	Medicaid savings are projected to total about $5,000 for each 
 	policyholder with long-term care insurance and Medicare savings 
 	are estimated to exceed $1,600 per policyholder.  Aggregate 
 	savings to Medicare and Medicaid for the current number of 
 	policyholders are estimated at about $30 billion.  These 
 	savings will grow as more people acquire policies and the 
 	average age of purchasers continues to decline.

Types of Long-Term Care Insurance and Benefits 
Several types of long-term care insurance policies are available to 
consumers.  Most are known as either "indemnity" or "expense incurred" 
policies.  An indemnity or "per diem" policy pays up to a fixed benefit 
amount.  With an expense-incurred policy, consumers choose the benefit 
amount when they buy the policy and they are reimbursed for actual 
expenses for services received up to a fixed dollar amount per day, 
week, or month.
Many companies also offer "integrated policies" or policies with 
"pooled benefits."  This type of policy provides a total dollar amount 
that may be used for different types of long-term care services.  There 
is usually a daily, weekly, or monthly dollar limit for covered long-
term care expenses.  For example, under a policy with a maximum benefit 
amount of $150,000 of pooled benefits, the consumer would receive a 
daily benefit of $150 that would last for 1,000 days if he or she spent 
the maximum daily amount on care.  However, if their care costs less, 
they would receive benefits for more than 1,000 days.  
A number of companies offer "hybrid" products that combine long-term 
care benefits with another insurance product.  For example, one type 
of hybrid that links long-term care insurance to life insurance provides 
protection against long-term care expenses while at the same time paying 
a death benefit if the policyholder dies without ever requiring 
long-term care services.  
Consumers generally have a choice of daily benefit amounts ranging from 
$50 to more than $300 per day for nursing home coverage.  Because the 
per-day benefit purchased today may not be sufficient to cover higher 
costs years from now, most policies offer inflation adjustments.  In 
many policies, for example, the initial benefit amount will increase 
automatically each year at a specified rate (such as 5 percent) 
compounded over the life of the policy. 
Long-term care insurance policies contain a wide range of benefit 
options at moderately priced premiums.  For example: 
Long-term care insurance plans offer coverage of nursing home, assisted 
living facility, home health care, and hospice care.  On a case-by-
case basis, plans also provide certain alternate care services not 
listed in the policy (e.g., covering a stay in a special Alzheimer's 
facility or building a wheelchair ramp to allow the individual to 
remain in his or her home), subject to the policyï¿½s benefit limits.  
Other common benefits include care coordination or case management 
services, support with activities of daily living, medical equipment 
coverage, home-delivered meals, spousal discounts, and survivorship 
benefits.  Plans also commonly cover caregiver training to ensure that 
caregivers learn basic techniques for safely caring for patients in 
their homes (e.g., transferring patients from their bed to a chair).  
In addition, virtually all plans cover respite care, designed to pay 
for brief periods of formal care to provide relief to caregivers.    
Plans contain provisions that guarantee their renewability, have a 
30-day "free look" period, cover Alzheimerï¿½s disease, provide for a 
waiver of premiums once a claim is processed, and give policyholders 
the option of covering nursing home stays without limits or caps.
Age limits for purchasing coverage also are expanding.  Our members 
now offer individual policies to people as young as 18 and as old as 
99.  In addition, recognizing that consumers want to plan ahead for 
their long-term care needs, plans offer inflation protection for the 
dollar value of a purchased benefit at an annual 5 percent compounded 
rate, funded with a level premium that stays the same from one year to 
the next.  Companies also offer plans that have a non-forfeiture 
benefit that allows beneficiaries to retain some benefits if they 
lapse their policy.

The growth in employer-sponsored plans is especially encouraging. 
The average age of the employee electing this coverage is 45 - 
compared to an average age of 60 for persons who buy long-term care 
insurance outside of the employer-sponsored market.  To date, over 
2 million policies have been sold through more than 6,000 employers, 
and accounts for about one-fourth of the long-term care insurance 
marketplace.  
Premiums for long-term care insurance policies depend on multiple 
factors, including the entry-age of the policyholder and 
comprehensiveness of the benefit package selected.  At the same time, 
the subcommittee should be aware that average premiums have remained 
stable over time.  AHIP estimates that a vast majority of long-term 
care policies currently in effect today have never experienced a 
rate increase.  In addition, within the past few years there have 
been significant enhancements to long-term care insurance.  For 
example, prior hospitalization requirements have been eliminated and 
benefits have been expanded to include coverage in assisted living 
facilities, adult day care and home health care, in addition to 
nursing home care, thus giving buyers more benefits for their 
premium dollars.  

Examining Who Buys Long-Term Care Insurance 
AHIP recently commissioned a study, conducted by LifePlans, Inc., to 
identify who buys long-term care insurance in the individual market 
and understand what motivates them to do so.  Ten insurance companies 
participated in this study, representing more than 80 percent of total 
sales of long-term care insurance policies in 2005.  These companies 
contributed a sample of 1,274 buyers, 214 nonbuyers, and design 
information on 8,208 policies.  In addition, 500 individuals age 50 
and over were surveyed from the general population.  This study builds 
upon similar work completed in 1990, 1995, and 2000.  
The studyï¿½s key findings include the following:  
The average age of individual purchasers of long-term care insurance 
declined from 67 years to 61 years between 2000 and 2005.  Two-thirds 
of all individual long-term care policies sold are now purchased by 
people younger than 65.  The major demographic differences between 
buyers and nonbuyers are that the latter tend to be somewhat older, 
less likely to be employed, and have lower incomes than buyers of 
long-term care insurance.  In 2005, 71 percent of buyers had incomes 
exceeding $50,000, 13 percent had incomes between $35,000 and $50,000, 
and another 13 percent had incomes between $20,000 and $35,000.  
Buyers are almost twice as likely as nonbuyers to strongly agree that 
"it is important to plan now for the possibility of needing long-term 
care services."  On another key statement, nonbuyers are more than twice 
as likely as buyers to agree that "the government will pay for most of 
the costs of long-term care if services are ever needed."  Nonbuyers 
also were much more likely than buyers - 70 percent versus 14 percent - 
to underestimate the cost of a nursing home in their area. 
In examining the coverage offered by long-term care insurance policies, 
the study found a trend toward the purchase of comprehensive coverage. 
In 2005, 90 percent of policies sold were comprehensive (i.e., covering 
both institutional care and home care) - compared to 77 percent in 2000 
and 37 percent in 1990.  Over the past five years, the average daily 
nursing home benefit has increased by 30 percent.  In addition, more 
than three-quarters of buyers chose some form of inflation protection 
in 2005, up from 41 percent in 2000.
A highly significant finding from the 2005 study is that more than 
80 percent of current nonbuyers would be more interested in buying a 
policy if they could deduct premiums from their taxes.  Approximately 
three-fourths of nonbuyers said they would be more interested in buying 
long-term care insurance if they thought the government would provide 
stop-loss coverage once their private insurance benefits ran out or if 
they felt premiums would remain stable over time.   

Consumer Protections - Strengthening the Market
The adoption of robust standards for consumer protection has been vital 
in strengthening the market for long-term care insurance, and our 
members are committed to providing quality products, transparency in 
their products, and consumer choice.  We view these protections as key 
to giving consumers confidence, expanding the market, and providing 
viable solutions to work hand-in-hand with Medicaid coverage for the 
poor.  
In the past, there have been questions about post-claims underwriting. 
Our position is that this is never justifiable.  On the other hand, 
efforts to detect and prevent fraud should not be viewed as post-claims 
underwriting.  AHIP supports the strong stand taken on this issue by 
the National Association of Insurance Commissioners (NAIC).  We also 
support the NAICï¿½s most recent Long-Term Care Insurance Model Act and 
Regulations.  
To give the committee a broad picture of the value of the NAIC 
provisions, below are some of the key requirements:  
policies must be guaranteed renewable or noncancellable; 
limitations apply to the use of pre-existing conditions and prior 
hospitalization requirements; 
policies cannot limit or exclude coverage by type of illness, 
treatment, medical condition or accident; 
policies must contain continuation or conversion of coverage 
provisions; 
policies must provide numerous disclosures, including an outline of 
coverage and safeguards to prevent unintended lapses of policies; 
post-claims underwriting is prohibited;  
minimum standards are established for home health benefits; 
policies must contain suitability provisions that provide standards 
for appropriate long-term care insurance purchases; 
policies must offer inflation protection; 
policies must offer non-forfeiture of benefits and, if declined, the 
provision of contingent benefits upon lapse; and 
requirements address premium rate stability, including disclosure to 
consumers relating to rate stability.  

VI.		RECOMMENDATIONS FOR NEXT STEPS  
Above-the-Line Federal Income Tax Deduction for LTC Insurance Premiums
AHIP supports federal legislation to enact an above-the-line tax 
deduction for long-term care insurance premiums.  This legislation has 
been introduced in every legislative cycle since 1999-2000 and the 
current level of support reflects growing congressional interest in 
this issue.  
The proposal for an above-the-line tax deduction would allow taxpayers 
to claim a tax deduction regardless of whether they itemize their 
deductions and regardless of whether they have other medical expenses. 
For example, a person who pays $1,500 in premiums for long-term care 
insurance could reduce his or her taxable income by the full $1,500 
under this proposal.  
By contrast, current law allows taxpayers to deduct premiums for 
long-care term insurance only if they itemize deductions and only to 
the extent that their medical expenses exceed 7.5 percent of their 
adjusted gross income.  In other words, a person with an adjusted 
gross income of $40,000 must have $3,000 in medical expenses before he 
or she can claim any tax deduction for long-term care insurance 
premiums or any other medical expenses.  Because this threshold is so 
high under current law, fewer than five percent of all tax returns 
report medical expenses as itemized deductions.  An above-the-line tax 
deduction would eliminate this 7.5 percent threshold and allow all 
long-term care insurance policyholders to claim a tax deduction.  
AHIP estimates that an above-the-line tax deduction for long-term care 
insurance premiums would reduce premiums by about 19 percent and, 
additionally, increase the number of individuals purchasing long-term 
care insurance by 14 percent to 24 percent.  A strong educational 
campaign would further increase these projected growth rates.
As Congress considers federal tax incentives, we urge lawmakers to 
recognize that more than 20 states have enacted enhanced tax incentives 
for the purchase of long-term care insurance.  These states are: 
Alabama, California, Colorado, Hawaii, Idaho, Indiana, Iowa, Kansas, 
Kentucky, Maine, Maryland, Minnesota, Missouri, Montana, New York, 
North Carolina, North Dakota, Ohio, Oregon, Utah, Virginia, West 
Virginia, and Wisconsin.  These state laws have taken an important 
first step to enhance the affordability of long-term care insurance. 
By enacting an above-the-line tax deduction at the federal level, 
Congress can create a more powerful incentive - with the states 
working in partnership - for all Americans to protect themselves 
against the financial risk of long-term care needs.  

Offering LTC Insurance Under Cafeteria/FSA Options 
AHIP also strongly supports legislative provisions that would enable 
employers to offer long-term care insurance as an option under 
cafeteria plans and flexible spending arrangements (FSAs).  We urge 
subcommittee members to support inclusion of these provisions in the 
conference report for H.R. 2830, the "Pension Protection Act."  While 
we recognize that budgetary constraints may prevent Congress from 
taking action this year on other more ambitious proposals, we are 
confident that enactment of this legislation - despite its relatively 
modest price tag - would yield significant progress in increasing the 
number of Americans who protect themselves against the high cost of 
long-term care.  
Enactment of the cafeteria/FSA proposal goes hand-in-hand with the 
expansion of long-term care partnerships.  This legislation would 
make long-term care insurance more affordable to more Americans and, 
in doing so, help to ease some of the financial pressure that 
long-term care costs are imposing on Medicaid and Medicare.  At a 
time when state and federal budgets are severely strained by 
health-related costs, this provision offers a common sense solution 
for reducing this burden on taxpayers and helping more Americans 
prepare for their future long-term care needs.  
It is also important to recognize that employers are uniquely 
positioned to increase awareness about the value of long-term care 
insurance.  This provision would allow employers to include 
information about long-term care options in their employee benefit 
packages and help employees make sound decisions.  
Cafeteria plans, which allow employees to customize their benefits 
packages, and flexible spending arrangements, which allow employees 
to use pre-tax dollars to pay for medical expenses not covered by 
health insurance, are valuable employee benefit tools that can be 
made even more effective for American workers with enactment of this 
legislation.  Allowing employees to purchase long-term care insurance 
on a pre-tax basis through these popular employee benefit arrangements 
would allow more families to purchase coverage.  Moreover, this would 
put long-term care insurance on a level playing field with other 
employer-sponsored benefits - such as 401(k) contributions - that are 
not taxed.  
To date, more than 50 House members - 29 Republicans and 25 Democrats - 
have cosponsored bills that would allow long-term care insurance to be 
offered under cafeteria plans and FSAs.  We thank members of the 
subcommittee who support these bills.  We stand ready to assist you in 
promoting final passage of this new option for expanding access to 
long-term care insurance.  

Removing Barriers to Medicaid Managed Care 
The federal upper payment limit (UPL) program has proven to be a barrier 
to expanding Medicaid managed care to beneficiaries.  UPL programs 
provide federal matching funds for supplemental payments made by states 
to publicly owned hospitals and facilities.  UPL payments are based on 
the amount of inpatient services the public facility provides to 
Medicaid beneficiaries who are covered under the Medicaid fee-for-
service program.  Health plan payments to these facilities are not 
counted in determining the UPL payment, which creates a financial 
disincentive for states to meet beneficiary needs through Medicaid 
health plan programs - despite their proven ability to improve health 
care for the most vulnerable members of the Medicaid population.  
AHIP supports a solution that would allow states to continue to expand 
beneficiary access to effective managed care programs while continuing 
to support safety net providers and maintain funding levels for their 
Medicaid programs.  Medicaid health plan payments to public facilities 
should be included for purposes of determining the UPL payment.  This 
proposal is consistent with the manner other supplemental payments - 
for example, disproportionate share hospital payments and payments for 
graduate medical education - are currently made.  This proposal would 
remove the barrier that currently exists to expanding beneficiary 
access to systems of care that improve their well-being in a cost-
effective manner.  

Exploring Best Practices and Demonstrations   
To better meet the needs of the long-term care population, policymakers 
should explore opportunities to address the following priorities 
through Medicaid:  
maximizing consumer self-direction, independence and health in homes 
and communities; 
promoting models of coordinated, multi-disciplinary, continuous care 
and support across all settings and throughout the life spans (in 
contrast to a model of intermittent, episodic care); and 
emphasizing prevention for patients (risk assessment, early 
identification and intervention).

Creating a Presidential Commission to Address the Nationï¿½s Long-Term 
Care Needs 
This commission would make recommendations to Congress and the 
Administration for accomplishing a wide range of goals including:
exploring how to create a seamless long-term care continuum from acute 
to chronic care; 
exploring tax incentives to encourage individuals to take planning 
responsibility for their own long-term care needs; 
exploring how to redesign Medicaid to allow dollars to follow the 
person across all settings, ensuring that access to quality long-term 
care and services can be received in the settings of choice; and 
exploring the potential to increase utilization of technology 
(telehealth, monitoring devices, electronic medical records, etc.) in 
all care settings - particularly in rural settings.  

Establishing a Federal Office to Address Long-Term Care Workforce 
Issues 
A federal office should be established to address professional and 
paraprofessional long-term care workforce issues and provide 
recommendations to improve the recruitment, training, retention and 
practice of a strong long-term care workforce.  

Establishing a Quality Agenda for Long-Term Care   
Congress and the Administration, in collaboration with consumers, 
providers and other stakeholders, should establish a uniform quality 
agenda for long-term care and supportive services, including measurement 
and reporting across the continuum of services and settings, and 
performance-based payment, taking into account consumer satisfaction, 
health literacy, and progress in addressing disparities.  Recognizing 
the efforts underway by the Ambulatory Care Quality Alliance (AQA), the 
Hospital Quality Alliance (HQA), and the Pharmacy Quality Alliance 
(PQA), a similar public-private collaboration is needed to address 
quality challenges in long-term care settings.   

VII.	CONCLUSION 
We appreciate this opportunity to testify about these important issues 
and look forward to continuing to work with the subcommittee to advance 
policy solutions to help all Americans prepare for their future long-
term care needs.  

	Mr. Deal.  Thank you.  We are about to have a vote.  If we are 
	really lucky, we might get through with this panelï¿½s 
	presentations before we have to go vote.
	Mr. Jenner, you are next.
Mr. Jenner.  Thank you very much, Mr. Chairman.  I will do my best.  My 
name is Greg Jenner, and I am the Executive Vice President for Taxes 
and Retirement Security for the ACLI, American Council of Life Insurers. 
On behalf to the organization and its 350 members, I would like to 
express my appreciation for the invitation to appear before you today, 
and to applaud you for drawing attention to this very, very important 
issue.
	Much of what I am going to discuss today will relate to tax 
	issues.  I hope you will forgive me for that.  Tax is the world 
	that I functioned in most often.  Before joining ACLI, I was 
	Acting Assistant Secretary of the Treasury for Tax Policy. I 
	also realize that taxes arenï¿½t within this committeeï¿½s 
	jurisdiction, but most concerns about long-term care insurance 
	relate to cost and accessibility, and as you have heard 
	earlier--darn it--those issues are, to a great extent, 
	determined by the tax laws, particularly at the Federal level. 
	Okay.
	The need and cost of long-term care is ever increasing, and the 
	burden will become unsustainable over time.  Life expectancy 
	continues to increase.  It is compounded markedly by the graying 
	of the Baby Boom generation, of which I am a proud member. 
	Combine this with the rapidly increasing cost of health and 
	long-term care, and you have a fairly toxic mixture.  Recent 
	surveys show that about 65 percent of Americans have made no 
	plans whatsoever for their long-term care needs, even though we 
	know that a majority of the care is provided by family members 
	in the home.  One of the important features of long-term care 
	insurance is to pay for training of those family caregivers.
	Although the market is evolving for long-term care, most 
	Americans donï¿½t own such insurance.  There are impediments. 
	Those impediments include greater demands for competing 
	discretionary income, impediments to streamlined products that 
	lower costs, and lack of awareness of the need for long-term 
	care expenses.
	You in Congress will continue to play an important role. 
	Earlier this year, for example, you passed the Deficit 
	Reduction Act of 2005, that enabled all the states to enter 
	into long-term care partnerships.  That will ultimately ease 
	the burden on their Medicaid budgets, and on individual 
	consumers, who must now spend down their assets.  We thank you 
	very much for your help and support on this issue.
	Equally important is a provision that I would like to point to 
	today.  It is contained in the House version of the pension 
	bill now in conference.  It would eliminate an impediment in 
	the tax code that prevents companies from offering policies 
	that combine features of an annuity with long-term care 
	insurance.  Now, you may wonder why that is important. The 
	reason has to do with consumer attitudes towards insurance. 
	Most Americans recognize the need to insure against risk--
	health insurance, fire insurance, traffic accidents--but most 
	people have limited resources, and many arenï¿½t willing to 
	purchase insurance where the policy offers no accumulation 
	feature, where they canï¿½t save within the policy.  There is no 
	good reason that they canï¿½t, but the tax law right now prohibits 
	it, so we worked closely on this issue with the members and 
	staff of the Ways and Means Committee, and thanks to Chairman 
	Thomas and others, it is now included in the pension bill, at 
	least the House version of the pension bill.  We would urge you 
	to assist Chairman Thomas in getting that included in the final 
	conference report.
	The change would allow people to accumulate assets during their 
	working years.  When they retired, they would have an annuity.  
	They could use the annuity to pay lifetime income, or if they 
	needed it, long-term care services.  They would have flexibility. 
	It is an example of a win/win situation for consumers, and an 
	excellent example of how Congress and the private sector can 
	work together to facilitate innovation.
	As has been noted earlier, cost is a major reason people donï¿½t 
	buy long-term care insurance.  It has been called to your 
	attention about the proposal for the above, the line tax 
	deduction for long-term care premiums, and the proposal to 
	permit the use of employer-sponsored cafeteria plans, and 
	flexible spending accounts for that purpose.  These changes 
	would go far to help control rising costs and strains on the 
	Medicaid budget.  Individuals would have the ability to pay 
	privately, and have the ability to choose among various 
	features and care settings best suited to their needs.
	In conclusion, we believe that protection and coverage for 
	long-term care is critical to the economic security and peace 
	of mind of all American families, and that private long-term 
	care insurance is an important part of that solution.  ACLI 
	looks forward to working with this subcommittee to help all 
	Americans protect themselves against the high cost of long-
	term care.
	Thank you very much, Mr. Chairman.
	[The prepared statement of Greg Jenner follows:]

Prepared Statement of Greg Jenner, Executive Vice President, American 
Council of Life Insurers

My name is Gregory F. Jenner, and I am Executive Vice President, Taxes 
and Retirement Security, for the American Council of Life Insurers 
(ACLI).  The ACLI is a Washington D.C.-based national trade association 
representing more than 350 member companies that offer life insurance, 
annuities, pensions, long-term care insurance, disability income 
insurance and other retirement and financial protection products.  I am 
responsible for policy development, formulation and implementation with 
respect to all tax, pension and retirement security issues, and serve as 
the senior tax expert for and principal liaison on those issues between 
member companies and Congress, the IRS, and the Treasury Department. 
Prior to joining ACLI, I served as Acting Assistant Secretary of the 
Treasury for Tax Policy.   
We are delighted that this Subcommittee is addressing an important issue 
facing this nation - long-term care.  We applaud Chairman Nathan Deal 
(R-Georgia) and Ranking Member Sherrod Brown (D-Ohio) for drawing 
attention to this matter, and we are pleased to discuss with the 
Subcommittee the important role that private long-term care insurance 
plays in helping to provide the retirement security of millions of 
middle-income families, and what Congress can do to help those families 
prepare for their retirement.   

The Need for Long-Term Care and the Role of Long-Term Care Insurance
	ACLIï¿½s recently-updated study on long-term care in the "Baby 
	Boom" generation notes that about 55 percent of those 85 and 
	older require some form of long-term care, and about 19 percent 
	of all seniors suffer from some degree of chronic impairment. 
	By 2050, it is estimated that up to 5.4 million seniors will 
	need the services of a nursing home - the most costly form of 
	long-term care - and another 2.4 million will require home 
	health care.
	The cost of long-term care is high and increasing, averaging 
	$70,912 annually for a private room or $62,532 annually for a 
	semi-private room in a nursing home; $25.32 per hour for a 
	visit by a home health aide; and an average annual base rate of 
	$32,294 for the services of an assisted living facility.  Since 
	1990, the price of nursing home care has increased at an average 
	annual rate of 5.8 percent - almost double the overall inflation 
	rate.
Total annual expenditure on long-term care for the elderly is estimated 
to be $135 billion, which accounts for over 9.7 percent of total spending 
on health care for persons of all ages. This is roughly 1.2 percent of 
the U.S. GDP.  Of greater significance is that the elderly account for 
a disproportionately large percentage of total health care 
expenditures -- 36.3 percent of expenditures -- while accounting for 
only 12.4 percent of the population.  Because baby boomers are aging 
and the cost of care is increasing, total spending on nursing home care 
is expected to more than triple over the next 25 years and to increase 
more than five-fold in the next 45 years.  These increases will place a 
crushing burden on Medicaid and ultimately on taxpayers, most of whom 
are working-age adults.  Currently, there are about five working-age 
adults per senior, but by 2030, there will only be 2.9 - a 40 percent 
decline. This decline will occur while both the need for and cost of 
long-term care increase.
	At the same time, life expectancy has increased dramatically.  
	Unfortunately, increased longevity comes at a price:  the 
	likelihood that more seniors will require long-term care.  
	Given this increasing possibility that the typical senior will 
	require long-term care, and given the escalating costs of that 
	care, whether elderly boomers enjoy a comfortable retirement 
	or suffer economic hardship may depend largely on their 
	ability to afford such long-term care.  Most boomers have not 
	planned for this reality and face the prospect of paying large 
	sums out-of-pocket or relying on Medicaid.  A February 2006 
	survey conducted by Public Opinion Strategies found that 65% of 
	Americans have made no plans for their own or for family
	membersï¿½ long-term care needs.  Moreover, Medicaid currently 
	only covers the cost of long-term care after a senior has spent 
	down virtually all assets and retirement income.  Neither option 
	is very appealing and may leave seniors and their spouses 
	impoverished, with few long-term care choices.
	Private insurance currently pays for 8 percent of total nursing 
	home expenditures but 36 percent of overall health expenditures. 
	There is clearly a large gap in the financing of long-term care 
	services that private insurance can fill.  Our goal, as well as 
	the goal of Congress, should be to find ways for the average 
	consumer to plan for the ever-increasing need for long-term 
	care through the private sector instead of through government 
	programs.
	If three-quarters of individuals between the ages of 40 and 65 
	who can afford long-term care insurance were to purchase and 
	maintain a policy throughout their senior years, then by 2030,
	annual savings in Medicaid nursing home expenses would total 
	$19 billion, and annual savings in out-of-pocket expenses would 
	total $41 billion.  Given this, it is clear more needs to be 
	done to convince the Baby Boom generation of the need for this 
	type of investment NOW.

The Evolving Long-Term Care Insurance Market 
	Both the individual and group (employer-sponsored) segments of 
	the long-term care insurance market are evolving and growing.  
	The American Council of Life Insurers, with the assistance of 
	Americaï¿½s Health Insurance Plans, recently surveyed long-term 
	care insurance providers and found that:
The market has grown to nearly $7 billion in premiums, and now covers 
over 5 million people.
Between 2003 and 2004, the individual long-term care insurance market 
grew 7.5 percent and the group market grew 25 percent.
The amount paid out in claims has also increased, with carriers paying 
$2.1 billion in benefits in 2004, about 20 percent more than in the 
previous year.

Because private long-term care insurance is priced on the assumption 
that an individual will hold the same policy and pay the same premium 
until he or she needs long-term care, premium rates vary depending on 
the age of the policyholder at policy issue and the specific benefits 
and coverage chosen.  Additionally, younger candidates for policies 
are much more likely to pass underwriting screens than are older 
candidates.  For these reasons, consumers are encouraged to purchase 
insurance while they are in their 40s and 50s, when premiums are 
lower and more affordable.  The typical buyer of long-term care 
insurance is aged 55-60 (although the average age of those who enroll 
in group plans is in the forties), married, college educated, with an 
annual income in excess of $50,000.  Women are more likely to buy 
coverage than men. 
Although the market for long-term care insurance is growing, most 
Americans have not yet purchased this insurance protection.  
Impediments to even greater market growth include competing demands 
for discretionary income, limited incentives to purchase long-term 
care insurance, impediments to streamlined products that will lower 
costs to consumers, and the lack of awareness of the need to plan for 
potential long-term care expenses.	
Long-term care insurance products continue to evolve to give 
policyholders more choices and flexibility at the time they need care. 
When long-term care insurance was first offered, over 30 years ago, 
most plans only covered stays in skilled nursing facilities. Since 
the mid 1990s, more flexible care options and consumer protections 
have become available.  Today, most policies provide coverage for 
care received at home, in an adult day care facility, in an assisted 
living facility, or in a nursing home.  Additionally, plans are now 
guaranteed to be renewable, have a 30- day "free look" period, offer 
inflation protection, cover Alzheimerï¿½s disease, have a waiver of 
premium provision, and offer unlimited benefit periods.  Benefits 
are paid when a person needs help with two or more activities of 
daily living (such as eating, dressing, or bathing) or is 
cognitively impaired. 
Some of the innovative benefits and financing arrangements that
companies now provide include:
Caregiver training benefits that cover the cost of training a person 
(friend or family member) who will then care for the insured in the 
insured's home on an unpaid basis. The benefit is usually equivalent 
to five times the daily benefit and not subject to an elimination 
period. 
"Per diem" or cash benefits that pay without regard to cost of 
services or pay benefits in cash.  These benefits make it easier to 
understand and file claims and allow the claimant greater flexibility 
to utilize informal caregivers.  
Shared lifetime maximum benefit pools that allow a policyholder who 
uses up all of his or her benefits to tap into a spouseï¿½s lifetime 
maximum, or to leave any unutilized benefits at death to a surviving 
spouse.
Independence support benefits that pay for home modifications and 
personal emergency alert systems that would enable a policyholder to 
remain in the home for a longer period of time. 
Death benefits that will return all or a portion of past premium 
payments in the event the policyholder dies before utilizing long-term 
care insurance benefits.  
International benefits that pay for services received in a foreign 
country.   

Congressional Involvement in Long-Term Care Insurance Product 
Innovation  
The United States Congress will continue to play an important role 
encouraging the evolution of the long-term care insurance marketplace. 
Significant changes were enacted earlier this year and others are 
pending as we speak.   We look forward to continuing our excellent 
relationship with the House Energy and Commerce Committee and other
committees of the House to encourage greater flexibility and 
innovation in the long-term care marketplace.  


Long-Term Care Partnerships
	Earlier this year, Congress passed and the President signed 
	into law the Deficit Reduction Act of 2006.  That bill 
	expanded the ability of the states to enter into the Long-
	Term Care Partnership program, which will ultimately ease 
	the burden on state Medicaid budgets and on individual 
	consumers.  We thank and congratulate the members of this 
	Committee for their help and support.    
These public-private Partnerships, currently operational in four 
states, allow consumers to purchase long-term care policies whose 
benefits must be fully utilized prior to qualifying for Medicaid.  
Many states are now looking to utilize this new public policy 
opportunity by seeking approval from the Department of Health and 
Human Services for an amendment to their State Medicaid plan in order 
to implement a Partnership program.  Insurers anticipate that 
Partnership programs will provide a greater incentive to purchase 
long-term care insurance in those states that choose to participate.	
ACLI is currently working to implement these partnerships in all 
50 states and the District of Columbia.  This is an excellent example 
of an innovative program that offers a "win-win" opportunity for the 
states and consumers.      

Flexible Retirement Security Proposal
	I have been asked to focus primarily on innovations in long-
	term care insurance products.  It is my pleasure to call to 
	the Committeeï¿½s attention a proposal pending before the 
	Congress that we believe would have significant beneficial 
	effects on the marketplace.  That provision is contained in 
	the House version of the pension bill now in conference.
It comes as a surprise to no one that the tax code has considerable 
effect on the pricing of insurance products and the ability of 
companies to create innovative solutions that address the needs of 
consumers.  Provisions of the tax code prevent companies from 
offering policies that combined the features of an annuity with the 
benefits of long-term care insurance.  
Removing this impediment would likely result in increased utilization 
of long-term care insurance.  The reason had to do with consumer 
attitudes toward insurance.  Most Americans recognize the need to 
insure against risk, whether it is the risk of an early demise, a 
traffic accident, or the risk that a person will need long-term care. 
But most people have only limited resources, and many are unwilling 
to purchase insurance where the policy offers no accumulation feature; 
i.e., where the premiums paid are lost to the policyholder if the 
insurance is not used.  Without some sort of "savings" feature, 
consumers with limited resources often were not willing to purchase 
insurance, including long-term care insurance, even though they 
recognize its importance.
So why did the tax law prohibit long-term care insurance from offering 
an accumulation feature, such as an annuity?  Quite frankly, there was 
no good reason.  Therefore, we worked with members and staff of the 
Committee on Ways and Means to develop a provision that would permit 
the combination of an annuity and long-term care insurance in one 
policy (and clarify that life insurance and long-term care could also 
be combined).  That provision is in the House version of the pension 
bill now pending in conference.  We would like to thank Chairman Thomas 
for including it in the bill, and also thank Mrs. Johnson of Connecticut, 
Mr. English of Pennsylvania, and Mrs. Tubbs Jones of Ohio for their hard 
work and support.  We would also encourage the members of this Committee 
to actively support inclusion of this provision in the final pension 
conference report.  
	This proposal would create more flexibility and choice for 
	American consumers.  During working years, individuals could 
	accumulate assets in an annuity; at retirement, depending on the 
	needs of the individual, that annuity could be used to provide 
	lifetime income.  A long-term care insurance benefit within the 
	annuity would pay for long-term care services.  For the long-
	term care/life insurance combination, the life insurance would 
	serve its critical function of death protection, while also 
	being available to provide funds for payment of long-term care 
	costs. 
	Although life insurance, endowment and annuity contracts can be 
	exchanged without tax if certain conditions are met, currently, 
	long-term care contracts and riders are not included in the tax-
	deferred exchange provisions.  The law should be updated to 
	include long-term care contracts and riders among the permitted 
	tax-deferred exchangeable insurance products.
	This is an excellent example of the law unintentionally standing 
	in the way of innovation in the marketplace.  We will continue 
	to work with you in the Congress to remove such unnecessary 
	barriers to innovation.  We believe that, with your help, our 
	industry can adapt and accommodate the changing needs of the 
	American consumer.	 	 

Tax Incentives
	Cost is a major reason why more Americans have not yet 
	purchased long-term care insurance.  Although product 
	combinations may prove to be an attractive alternative to stand 
	alone long-term care insurance for some individuals, an even 
	more broadly appealing and effective solution to the financing 
	of long-term care would be the passage of measures that reduce 
	the cost of long-term care insurance, particularly for moderate-
	income individuals, the persons who need the protection of long-
	term care insurance the most.  Partnerships and combination 
	products can only go so far to accomplish this.  If Congress 
	determines it is important that individuals of moderate means 
	are protected in this fashion, there are steps that can be 
	taken.
	Although not strictly a product innovation, we would encourage 
	Congress to provide individuals with a phased-in above-the-line 
	federal income tax deduction for the eligible portion of the 
	premiums they pay to purchase long-term care insurance.  This 
	would create a more even playing field between long-term care 
	insurance and health insurance (which we all agree is crucial). 
	In addition, Congress should permit long-term care insurance 
	policies to be offered under employer-sponsored cafeteria plans 
	and flexible spending accounts.  This benefit is allowable for 
	similar accident and health coverage and there is no strong 
	policy consideration to justify the exclusion of long-term care 
	insurance.  Finally, we would urge that individuals be 
	permitted to exchange tax free one qualified long-term care 
	policy for another long-term care policy better suited to the 
	insuredï¿½s needs. 
	Allowing individuals to pay for their long-term care insurance 
	premiums through cafeteria plans and flexible spending accounts, 
	as well as through flexible retirement security combination 
	products, will provide a range of options both inside and 
	outside the employment context.   Such measures could go far to 
	help control rising long-term care costs, rising long-term care 
	needs, and rising strains on the Medicaid budget.  Individuals 
	will have the ability to pay privately and have the ability to 
	choose a variety of services and care settings best suited to 
	their needs.  

Other Related Legislation
In this spirit, other members of Congress have been likewise engaged in 
the discussion of how to encourage individuals to plan for their long-
term care costs.  For example, Rep. Terry (R-NE), who serves on this 
Committee, has introduced a bill that would allow individuals to 
exclude from gross income distributions made from their individual 
retirement accounts, 401(k), or 403(b) plans that are used to pay for 
long-term care insurance premiums for themselves or their spouses. 
An optional federal charter for life insurers, including long-term care 
insurers, would also help long-term care insurance innovations reach 
consumers in a more timely and cost-effective manner.  Senators Sununu 
and Johnson recently introduced S. 2509, which would create an optional 
federal charter.  Today, it can take up to two years for an innovative 
long-term care insurance product to be approved in all 50 states and 
the District of Columbia and be sold nationally.   Consumers should 
have the benefit of a timely array of long-term care product choices 
that best meet their needs.  

Federal Government Long-Term Care Insurance Program
	The federal government and the states have also recognized the 
	need to educate individuals in the workplace about planning for 
	their future long-term care needs. The federal government, by 
	Act of Congress, has taken the lead and set the example for 
	other employers by offering federal employees and their 
	families the protection of long-term care insurance.  Through 
	this program, federal employees are able to help protect their 
	retirement savings from a long-term care event and will have 
	the choice of providing care for themselves or a family member 
	in the home, through assisted living or in a nursing home. 

Other Innovative Solutions
	Although we are focused today on innovations in long-term care 
	insurance, the nature of governance is that you (and we) will 
	likely be focused elsewhere tomorrow.  But solutions to the 
	pressing problems of financing retirement and longevity should 
	not be viewed as a snapshot.  Our industry is committed to 
	examining these issues on an ongoing basis.  As important, we 
	need to know that, if we develop an innovative idea, we can 
	come back to this Committee and win your support.  We, as an 
	industry, look forward to a constructive partnership with the 
	Congress in developing and implementing creative solutions to 
	this countryï¿½s retirement needs.

Private Long-Term Care Insurance:  An Important Part of the Answer
In conclusion, we believe that protection and coverage for long-term 
care is critical to the economic security and peace of mind of all 
American families.  Private long-term care insurance is an important 
part of the solution for tomorrowï¿½s uncertain future.  As Americans 
enter the 21st century, living longer than ever before, their lives 
can be made more secure knowing that long-term care insurance can 
provide choices, help assure quality care, and protect their hard-
earned savings when they need assistance in the future.  We also 
believe that the costs to Medicaid - and therefore to tomorrowï¿½s 
taxpayers - will be extraordinary as the baby boom generation moves 
into retirement, unless middle-income workers are encouraged to 
purchase private insurance now to provide for their own eventual long-
term care needs.  
Congress has encouraged the American public to insure themselves 
against the need to pay for long-term care by adopting the Deficit 
Reduction Act of 2006 and allowing for the expansion of LTC 
Partnerships.  Congress should build on that momentum by encouraging 
the development of innovative products such as combination annuity/long-
term care insurance products and life/long-term care insurance 
products.  Further, Congress should include long-term care insurance 
products in cafeteria plans and flexible spending accounts, and 
consider other tax incentives to encourage the sale of these products.  
Again, ACLI looks forward to working with this Subcommittee to help 
Americans protect themselves against the risk and high cost of long-
term care.     

Mr. Deal.  Thank you.  We have six votes coming up, and it will take 
at least an hour to do that.  Dr. Thames, I am going to go ahead and 
recognize you, and I think if we run from here to the floor, we will 
probably all make it.
	So, I recognize you, Dr. Thames, at this time.
Mr. Thames.  Thank you very much, Mr. Chairman.  I will stay well 
within the limits.
	It is important, our members feel, to remain independent in 
	later years.  It is an often overlooked component of retirement 
	planning, is financing those future long-term needs.  As our 
	population continues to age, we will increasingly rely on long-
	term care services to remain independent.  Therefore, we need 
	to do a better job of one, educating consumers about the 
	importance of planning for long-term care needs, two, ensuring 
	there is a range of long-term care options to choose from, and 
	three, providing better means of financing long-term services 
	and supports.
	Long-term care should be a critical part of retirement 
	planning.  AARP educates our members through publications and 
	other tools, but the challenge is great.  Denial of costs, 
	immediate financial needs, and other factors keep many 
	Americans from focusing on long-term care planning.  We have to 
	do better in the future to help Americans focus on this.
	Once individuals begin to plan, they discover their options 
	for paying for long-term care are limited.  There is no 
	comprehensive public system of long-term care, and very few 
	private options.  Insurance is costly, and not always 
	accessible.  Public programs are limited.  Caregivers are 
	strained, and costs of care can quickly outstrip personal 
	savings.  We need better options.
	Long-term care insurance has a limited role in financing long-
	term care, but it needs to be more affordable and accessible. 
	The Long-Term Care Partnership Program may offer a new 
	financing option to some, but strong consumer education and 
	other improvements to this program are important.  Increased 
	attention is being paid to the role that home equity could 
	play in financing long-term care.  Reverse mortgages could be 
	an option for some individuals, but the costs are still very 
	high.
	I will skip some of the examples we gave of up to $25,000.  We 
	need to remove the high cost barrier to the use of reverse 
	mortgages for long-term care, and given the limited experiences 
	most consumers have with reverse mortgages, a logical way to 
	test them is through a limited demonstration program.  Demos 
	could be designed to reduce borrower costs, a key reason that 
	people do not take out reverse mortgages.  Congress must begin 
	to look for options that allow Americans to pay for the care 
	they need in the setting of their choice.
	AARP is ready, willing, and able to work with members on both 
	sides of the aisle, the Administration, and all stakeholders, 
	to address the long-term care our country is facing.  Thank 
	you.
	[The prepared statement of Dr. Byron Thames follows:]

Prepared Statement of Dr. Byron Thames, Board Member, AARP

Mr. Chairman and members of the Subcommittee, I am Dr. Byron Thames, a 
physician and a member of AARPï¿½s Board of Directors.  Thank you for the 
opportunity to testify today.  Remaining independent in later years is 
a priority for AARP members.  Yet, if you ask the average person about 
retirement planning, one of the most critical components is often 
overlooked - how to finance future long-term care needs.  
Most of us donï¿½t want to think that we will ever need long-term care, 
but the reality is that as our population continues to age we will 
increasingly rely on long-term care services to remain independent. 
Therefore, we need to do a better job of educating consumers about the 
likelihood for needing long-term care, the cost, options, and the 
importance of planning prior to a crisis.  
We must also ensure that there are a range of long-term care options 
from which to choose.  Based on recent reports, sales of private long-
term care insurance policies have slowed and Long-Term Care Partnership 
programs in the original four states have sold relatively few policies. 
Reverse mortgages have high costs and are more expensive than home 
equity loans.
 	Americans also need a better means of financing long-term 
 	services and supports.    
Current financing options are often too expensive and too complex. In 
some cases, they are also tied to institutional care rather than a 
system that gives consumers what they want, such as self-directed care 
with cash payments to purchase services.  
We commend the Subcommittee for taking the first step by holding this 
hearing.  We urge members to look for positive ways to encourage and 
enable more persons to plan for long-term care.  
Our testimony today will focus on the need for broader education efforts 
and three financing options -- long-term care insurance, the Long-Term 
Care Partnership Program, and reverse mortgages -- and improvements that 
should be made to each to enhance their ability to be viable financing 
options for Americans.  

Consumer Education: A Critical and Ongoing Step
The first big challenge to planning for long-term care is public 
education. It is difficult to get many people to prepare for something 
so far in the future.  Yet the goal should be that we think of long-term 
care as a critical part of retirement planning.  We all should 
understand the likelihood of needing long-term services and supports at 
some time in the future; the types, costs, and availability of such 
services and supports; the options available to help plan and pay for 
such services; why it is in our interest to plan; and where we can go 
for further information and assistance about how to plan.  The recently 
enacted Long-Term Care Information Clearinghouse will be a new resource 
to help Americans plan for long-term care.  
AARP is working to educate our members about long-term care.  For 
example, our publications include articles on topics such as long-term 
care insurance, reverse mortgages, long-term care costs, assisted 
living, nursing homes, and innovative ways to receive services at home. 
We also use other tools to educate our members such as AARPï¿½s consumer 
guide to reverse mortgages, Home Made Money, and tip sheets on topics 
ranging from hiring a home care worker to purchasing long-term care 
insurance to choosing an assisted living facility.   
There are several obstacles that must be overcome in order for 
significant numbers of Americans to plan for long-term care.  First, 
from what weï¿½ve heard from our members, there is a great deal of 
resistance to thinking about long-term care.  For example, persons 
associate long-term care with nursing homes and/or insurance, and they 
believe that talking about the issue signifies sickness and/or a loss 
of personal control or independence.  Our members do not want to become 
a burden to their families.  They also want to have choice, and for the 
vast majority of individuals, this choice is staying in their homes.  
It is also not unusual to find individuals under the mistaken impression 
that Medicare covers long-term care, so they believe that further long-
term care planning is unnecessary.  Since individuals frequently have 
negative perceptions or misimpressions about long-term care, they are 
often discouraged from seeking out information, and in denial about 
their likely need for future services.  As a result, they will often 
wait until a crisis to act. 
On top of this, there are day-to-day realities that families across 
this country face.  Most families are focused on immediate needs -- 
making mortgage payments, saving for their childrenï¿½s college education, 
and paying for rapidly increasing health care costs.  Many in the 
sandwich generation are saving for their childrenï¿½s college education 
while also helping to pay for their parentsï¿½ long-term care needs. 
Thatï¿½s all before individuals save for their own retirement.  Under 
these circumstances, planning and saving for long-term care often falls 
to the bottom of the priority list.
When the day-to-day financial demands on many Americans are coupled 
with the negative perceptions about long-term care, there are 
significant challenges to engaging individuals in planning for their 
futures.  That is why it is important that long-term care be considered 
as a part of overall retirement planning. 

Current Options are Limited: Americans Need More Financing Options
Even once individuals get past their day-to-day demands and begin to 
look into planning for long-term care, they discover that their options 
to pay for long-term care are quite limited.  There is no comprehensive 
public system of long-term care available to most Americans and very 
few other long-term care financing options exist.  Long-term care 
insurance is limited and generally expensive.  According to Americaï¿½s 
Health Insurance Plans, in 2002, the average cost of a long-term care 
insurance policy with automatic inflation protection was $1,134 per year 
when purchased at age 50 and $2,346 per year if purchased at age 65.    
The Long-Term Care Partnership Program allows individuals who buy 
long-term care insurance policies under the program to protect a 
certain amount of their assets and become eligible for Medicaid if they 
meet all of Medicaidï¿½s other eligibility criteria.  The expansion of 
this program may provide a new option for some Americans to finance 
their long-term care, but public education is critical around this 
option and additional improvements should be made to the program.  
Public programs are also limited.  Medicare covers some home health and 
skilled care, but does not cover nursing home stays.  Medicaid - while 
a critical safety net for those with no other options - has income and 
asset limits that require impoverishment.  
For individuals who pay out-of-pocket for care, they often find that 
costs associated with years of care outstrip personal savings. The 
average annual nursing home costs were over $64,000 for a semi-private 
room and over $74,000 for a private room in 2005.  The average hourly 
rate for a home health aide in 2005 was $19, so as little as 10 hours a 
week of home health care would average close to $10,000 a year.
Many Americans rely on informal caregivers, such as family and friends, 
for the bulk of long-term care services.  According to an analysis of 
data from the National Long-Term Care Survey for AARP, over 90 percent 
of persons age 65 and older with disabilities who receive help with 
daily activities are helped by unpaid informal caregivers.  Two-thirds 
of those 65 years of age and older with disabilities who receive help 
with daily activities only receive informal unpaid help, up from 
57 percent in 1994.  But caregivers face many physical, emotional, and 
financial demands that often take a serious toll.  If caregivers do not 
take care of themselves or get the support that they need, they may no 
longer be able to care for their loved ones and may need someone to care 
for them.  
AARP believes that Americans need more options to plan and pay for their 
care.  Due to the limited options available today, Medicaid has become 
the default payer of long-term care.  One of the reasons that we 
strongly opposed the Medicaid changes in the Deficit Reduction Act was 
that the legislation took a punitive approach without providing 
alternative long-term care financing options for individuals.  We hope 
this hearing will be part of ongoing work in Congress to give Americans 
incentives and positive options to plan and pay for future long term 
services and supports that they may need. 

Long-Term Care Insurance
Relatively few older persons have private insurance that covers the 
significant cost of long-term care.  Many common long-term care needs 
(e.g. bathing, dressing, and household chores) are not medical in 
nature, do not require highly skilled help and therefore, are not 
generally covered by private health insurance policies or Medicare.  
The market for private long-term care insurance has grown in recent 
years, but its overall role is still limited.  Long-term care 
insurance pays for only about 9 percent of all long-term care costs.  
By the end of 2002, over 9.1 million long-term care insurance policies 
had been sold in the United States, with about 6.4 million of these 
policies still remaining in force.  Most policies sold today cover 
services in nursing homes, assisted living facilities, and in the 
home.  Typically, policies reimburse the insured for long-term care 
expenses up to a fixed amount, such as $100 or $150 per day.  To 
receive benefits, the insured must meet the policyï¿½s disability 
criteria.  Nearly all policies define disability as either severe 
cognitive impairment or the need for help in performing at least two 
activities of daily living (such as bathing and dressing).  Most 
policies sold are in the individual market.  
The cost of long-term care policies varies dramatically depending on a 
number of factors:  the consumerï¿½s age at the time of purchase, the 
amount of coverage, and other policy features.  Insurance companies 
can increase premiums for entire classes of individuals, such as all 
policyholders age 75 and older, based on their claims experience in 
paying benefits.  Older adults are more likely to have more long-term 
care needs and higher costs, thus higher premiums.  Other factors that 
affect the policyï¿½s premium include the duration of benefits, the 
length of any waiting period before benefits are paid, the stringency 
of benefit triggers, whether policyholders can retain a partial 
benefit if they let their policy lapse for any reason, (including 
inability to pay -- nonforfeiture benefit), and whether the policyï¿½s 
benefits are adjusted for inflation.  Individuals with federally 
qualified long-term care insurance policies can deduct their premiums 
from their taxes, up to a maximum limit, provided that the taxpayer 
itemizes deductions and has medical costs in excess of 7.5 percent of
adjusted gross income.  
Many of the reasons already outlined that cause individuals to not 
plan for long-term care also are reasons that individuals have not 
bought long-term care insurance policies -- denial, believing 
Medicare pays for long-term care, and cost. Some individuals are wary 
of long-term care insurance due to large premium increases and market 
instability, for example when insurance carriers decide to leave the 
market.  Further, some individuals are not able to qualify for long-
term care insurance due to underwriting.  For them and others, long-
term care insurance is not a viable option.
Consumer protections are a critical part of long-term care insurance 
policies.  Standards and protections for long-term care insurance 
policies could make them better products that consumers are more 
likely to buy.  For example, an individual who buys a policy in his 
or her 60s may not need long-term care for over 20 years.  Without 
inflation protection, the value of the insurance benefits can erode 
over time.  A daily benefit of $100 in coverage will not buy as much 
care in 2025 as it does today.  Nonforfeiture protection allows a 
consumer who has paid premiums for a policy, but can no longer afford 
to pay premiums, to still receive some benefits from the policy. 
Another important protection is premium stability to help protect 
consumers whose premiums increase above a certain threshold.  Long-
term premium affordability is an important reason why persons may 
drop long-term care policies or not buy policies in the first place.
The National Association of Insurance Commissioners (NAIC) has 
developed a Long-Term Care Insurance Model Act and Regulations that 
states can adopt to provide standards for long-term care insurance 
policies sold in a state.  NAIC standards include: inflation 
protection, nonforfeiture, required disclosures to consumers, minimum 
standards for home health and community care benefits, premium rate 
stabilization, and standards for what triggers benefits.  While all 
states have adopted some of the NAIC provisions, only about 21 states 
have adopted a critical provision on premium stability that protects 
consumers from unreasonable rate increases that could make their 
policies unaffordable.  
Legislation (H.R. 2682) introduced by Representatives Nancy Johnson 
(R-CT) and Earl Pomeroy (D-ND) updates consumer protections mandated 
by the Health Insurance Portability and Accountability Act of 1996 
and incorporates some of the consumer protections in the NAIC Model 
Act and Regulations.  AARP supports the standards for long-term care 
insurance included in this legislation.
  	Education is also critical for individuals to decide whether 
  	or not to purchase a long-term care policy, and if so, which 
  	policy best suits their needs.  To make an informed decision, 
  	consumers need to understand many things, including:  the 
  	terms that are used in policies, what the benefits are and 
  	when they start, what is not covered, what the consumer pays, 
  	and how they can compare one policy to another.  Different 
  	policies may use different definitions and make it hard for 
  	consumers to make an apples-to-apples comparison of long-term 
  	care policies.  Consumers who are considering purchasing long-
  	term care insurance need better tools to help them compare 
  	different policies to find which one is best for them. 
Finally, there has been some discussion of establishing a mandatory 
long-term care insurance program.  AARP urges caution about moving 
in this direction.  As cited above, long-term care insurance is not 
affordable to many Americans without some kind of subsidy.  Further, 
long-term care insurance is not available to many individuals with 
pre-existing conditions.  Therefore, insurance market reforms would 
be necessary.

Long-Term Care Partnerships
Prior to the enactment of the Deficit Reduction Act, the Long-Term 
Care Partnership Program was only operating in California, 
Connecticut, Indiana, and New York.  The Deficit Reduction Act (DRA) 
allows all states the option to enact partnership policies.  The new 
partnership programs do include some important consumer protections. 
Long-term care insurance policies in these new programs must meet 
specific criteria including federal tax qualification, specific 
provisions of the 2000 NAIC Model Act and Regulations, and inflation 
protection provisions.  Compound annual inflation protections will be 
required for purchasers below age 61 (states can determine the level 
of protection, such as 3 percent or 5 percent).  Some level of 
inflation protection will be required for purchasers between the ages 
of 61 and 75.  The DRA also requires the development of a reciprocity 
agreement by the Department of Health and Human Services to enable p
urchasers to use their benefits in other partnership states; however, 
states may opt out of this reciprocity.  
The expansion of the partnership program could mean that a significant 
number of individuals will have a new financing option available to 
them.  However, consumer education is absolutely critical.  In order to 
make an informed decision about whether or not to purchase a 
partnership policy, it is important for individuals to understand that 
Medicaid eligibility is not automatic.  Even though a partnership 
policy allows purchasers to protect a certain level of assets if they 
deplete their insurance benefits, individuals must first meet the 
stateï¿½s income and functional eligibility criteria in order to quality 
for Medicaid.  These criteria may change by the time individuals apply 
for Medicaid.  If individuals do not meet these criteria, they will not 
be eligible for Medicaid.  
If a long-term care policyï¿½s functional eligibility criteria are 
different than a state Medicaid programï¿½s functional eligibility 
criteria, individuals may have a gap in coverage after they use up 
their long-term care policy and before they qualify for Medicaid.   
In addition, once individuals qualify for Medicaid after depleting 
their insurance benefits, there is no entitlement to home-and community-
based services.  Thus, individuals may not be able to receive the home-
and community-based services that they were receiving under their policy 
under Medicaid.
As the federal government and states implement the partnership program, 
they should include strong consumer education, so that consumers 
understand what they get and what they do not get with a partnership 
policy.  There should be clear disclosure of current income requirements 
for Medicaid benefits and the stateï¿½s right to change those 
requirements.  Guaranteeing the types of services (particularly home-and 
community-based services) that the state would provide to eligible 
partnership policyholders under Medicaid would be a good improvement in 
the program.  States and the federal government should consider adding 
additional consumer protection standards, such as premium stability, to 
partnership policies.  Strengthening the reciprocity agreement would 
also benefit consumers and give them peace of mind if they anticipate 
moving in the future to another state that does not participate in the 
reciprocity agreement.  Further, states should monitor nursing home 
admissions to ensure that equal access is available to everyone on the 
waiting list, regardless of source of payments.  
Over time, it will be important to evaluate the results of the 
partnership program to determine its impact on individuals and the 
Medicaid program.  According to a Government Accountability Office 
review of the program, in the four original partnership states, about 
172,500 policies are in force and about 1,200 individuals are receiving 
partnership benefits.   Since the program began, about 250 
policyholders in all four states have exhausted their long-term care 
insurance benefits, and of those, about 120 have accessed Medicaid. It 
is unclear whether these persons using Medicaid would have likely spent 
down to Medicaid absent their participation in the program.  It is not 
clear whether the policies were purchased by people who otherwise would 
not have bought insurance, whether the partnership policies are a 
substitute for other long-term care insurance policies, and whether 
participants would have used Medicaid regardless.  Because partnership 
policyholders tend to be younger than other long-term care 
policyholders, it may be hard to assess the full impact of the 
partnership program on Medicaid for now.  It is possible that not 
enough time has passed for many partnership policyholders to have 
exhausted their long-term care insurance policies and become eligible 
for Medicaid.

Reverse Mortgages
Because of the large and growing amount of home equity held by some 
older Americans, increased attention is being paid to the role that 
home equity could play in financing long term care.  Over the past 
decade, more homeowners have begun using their home equity as a means 
of paying for long-term care services.  In some cases, they have done 
so by selling their homes and using the proceeds to pay for services 
in assisted living and continuing care retirement communities (CCRCs). 
Others have used home equity to retrofit their houses or to pay 
directly for home and community-based services.  
One of the tools increasingly used by people who want to tap into 
their home equity is a reverse mortgage, which is a loan against a 
home that requires no repayment until the borrower dies, sells the 
home, or permanently moves out of the home.  There are two basic types 
of these mortgages: public sector reverse mortgages that must be used 
for a single purpose, and private sector reverse mortgages that can 
be used for any purpose.  Public programs are offered by some state 
and local governments, generally at a low cost, and with income 
requirements.  Most of these programs are limited to paying for home 
repairs or property taxes, although Connecticut developed a program 
specifically for long-term care financing. 
Private sector reverse mortgages can be used for any purpose and have 
no income requirements. They are offered by private lenders and have 
high costs.  They include the Home Equity Conversion Mortgage Program 
(HECM) that is insured by the Federal Housing Administration (FHA) of 
the Department of Housing and Urban Development (HUD), as well as two 
smaller private programs.  Federally insured HECMs make up about 
90 percent of the private sector reverse mortgage market. 
To qualify for a HECM, an individual must: be age 62 or over; occupy 
the home as a primary residence; have paid off the mortgage or have a 
mortgage balance that could be paid off with proceeds from the reverse 
mortgage at closing; undergo required counseling; and live in a home 
that meets minimum HUD property standards.  According to a HUD study, 
HECM borrowers tend to be older, female, from a variety of racial and 
ethnic groups, live alone, and have lower incomes. 
The amount of money available from a private sector reverse mortgage 
depends upon:  the age of the youngest borrower; the value of the 
home; the median home value in the county; current interest rates and 
other loan costs; and the type of private sector loan.  Money from the 
reverse mortgage can be paid to the borrower as a lump sum payment at 
closing, monthly payments, a line of credit, or a combination of these 
methods.  Borrowers make no loan payments as long as they live in the 
house - an advantage for an older person who wants to remain at home 
rather than enter a nursing home.  The loans are paid back when the 
last living borrower dies, sells the house, or permanently moves away.  
Despite their advantages, reverse mortgages are not suited for 
everyone. The high costs associated with the loans are a real 
disadvantage - particularly to a lower income person with a modest 
amount of home equity.  The private reverse mortgage market is 
relatively new, and although still growing, consumers do not yet have 
tremendous choice.  And current private sector reverse mortgages are 
not available to anyone under the age of 62, which excludes their use 
as a source of long-term care financing for younger persons with 
disabilities.    

Using Reverse Mortgages as a Long-Term Care Financing Tool
Reverse mortgages could be an option for some individuals to pay for 
long-term services and supports, such as home health care, chore 
services, respite care, and home modification.  Home-and community-
based services help enable an individual to live at home, where most 
older adults want to be.  As the Subcommittee examines reverse 
mortgages, it is important to note in what ways they would be useful 
as a long-term care financing tool and in what ways they would not be 
helpful.  

High Costs of Reverse Mortgages are a Barrier to their Use
The high costs of reverse mortgages are a significant barrier to their 
use, including as a long-term care financing option.  During the past 
year, the average value of a home in the HECM program was about $255,000. 
The fees and other non-interest costs of a HECM on such a home in many 
urban areas can be over $25,000 over the life of the loan. The upfront 
costs would include $5,100 for the initial mortgage insurance premium, 
up to another $5,100 for the lenderï¿½s origination fee, and about $2,200 
in third-party closing costs. The average borrower in the program is a 
74-year-old single female.  If she lives to her remaining life 
expectancy (until age 86) and uses only half of her initial loan 
amount, she could also owe about $5,000 in monthly servicing fees and 
about $8,000 in periodic mortgage insurance premiums. 
So the total cost of the loan -- excluding interest -- could be about 
$25,400 over the life of the loan, which is greater than the average 
annual income of HECM borrowers. Most Americans would be highly 
reluctant to take out a loan in which the fees alone exceed their 
annual incomes.  But many older homeowners are faced with exactly 
this dilemma -- an attractive loan that meets their needs and is 
insured by the federal government -- but costs significantly more 
than they believe is reasonable or are willing to pay.
The substantial costs faced by an individual who chooses to use her 
home equity for long-term care can be illustrated in the following 
examples.  A 75-year-old HECM borrower in a $150,000 home who uses her 
HECM to pay for $3,000 a month in home care would pay a 53.2 percent 
total annual percentage rate if her loan were to end after one year. 
Because of the higher origination fees and mortgage insurance premiums, 
the same borrower in a $250,000 home would accrue costs at an effective 
rate of 72.3 percent at the end of the first year even though she 
borrowed the same amount of money for home care.  (See attached appendix 
for a more detailed analysis of the costs associated with reverse 
mortgages.) 
While the effective rates on HECMs go down over time, homeowners with 
disabilities are more likely to borrow for shorter periods with higher 
effective costs.  Moreover, the usage patterns that borrowers are likely 
to follow if they are using HECMs for long-term care are not reflected in 
current disclosure requirements.  As a result, required disclosures are 
likely to significantly understate the effective short-term costs for 
borrowers who need money to pay for monthly service costs.  

Reverse Mortgages and Long-Term Care Insurance - Critique of Existing 
Provision
In 2000, Congress included a provision in the American Homeownership 
and Economic Opportunity Act that waives the upfront mortgage insurance 
premium for individuals who get a reverse mortgage through HECM if all 
the available equity is used to buy long-term care insurance.  Consumer 
organizations - including AARP - have objected to the required tie to an 
insurance purchase and, to date, HUD has not implemented the program. 
Tying the purchase of long-term care insurance to a reverse mortgage 
is expensive for the consumer and not necessarily the best way to 
finance needed services for a number of reasons.  The homeowner pays 
all the costs associated with the reverse mortgage plus the premiums 
and cost-sharing associated with the long-term care insurance policy. 
Current disclosure requirements do not adequately ensure that 
consumers are fully informed of the total, combined cost of the loan 
and the insurance policy.  Over time, reverse mortgage costs can double 
or triple the total cost of purchasing long-term care insurance due to 
high upfront loan costs and the growing amount of interest charged on 
the loan.  (See attached appendix for examples of the costs associated 
with purchasing long-term care insurance with a reverse mortgage.)  
Another concern with tying a reverse mortgages to the purchase of long-
term care insurance is the lack of a requirement to disclose the risks 
related to long-term care insurance policy cancellation or lapses.  If 
an individual exhausts all available reverse mortgage funds for the 
long-term care insurance premiums and is no longer able to pay the 
premiums, the policy could be cancelled or lapse due to nonpayment. The 
insurance coverage would be lost; the borrower would owe substantial and 
growing debt on the home; and would no longer be able to pay for the cost 
of long-term care.
Finally, borrowers could only use the loan money to pay for insurance 
policies and not to directly purchase home-and community-based services 
or for home modifications that may better meet their needs.  Most older 
Americans want to remain in their homes and receive needed services 
there rather than be institutionalized.  Use of reverse mortgages may 
be one means of financing long-term care, but consumers should not be 
required to use their equity to purchase an insurance policy.  Rather, 
they should have the choice to use the equity for the appropriate 
services in their homes.  We are urging Congress and the industry to 
look for ways to reduce the high costs of reverse mortgages for all 
homeowners, and especially for older homeowners with disabilities, to 
enable them to remain independent in their homes.

A More Promising Approach
As the Subcommittee examines reverse mortgages, we believe that several 
principles are important to guide the consideration of reverse 
mortgages as a long-term care financing option:
Reverse mortgages should be a voluntary option and not a requirement.  
The high costs of reverse mortgages should be reduced, especially for 
those with long-term care needs.
Reverse mortgages should have strong consumer protections, including 
required counseling and protections against those who might take 
advantage of reverse mortgage borrowers. 
Consumers should be informed of the range of available long-term care 
financing options and their pros and cons (including costs), as well 
as the potential financial impact on a spouse, so that consumers can 
make an informed decision about the best option for them.

We encourage the Subcommittee to examine ways to reduce the costs of 
reverse mortgages for individuals with long-term care needs.  The high 
costs of reverse mortgages are the greatest barrier to their use for 
long-term care.  Specifically, we encourage consideration of a public-
private approach to reducing reverse mortgage costs for individuals 
with long-term care needs.  Congress could consider pursuing such an 
approach in place of the incentives to use reverse mortgages to 
purchase long-term care insurance that were included in the 2000 
housing legislation.
One approach might be to provide lower cost reverse mortgages to 
individuals with long-term care needs through a competitive 
demonstration program in selected states.  Such a demonstration might 
be done as part of the HECM program, and states would compete to 
participate based on their willingness to take steps to lower the 
costs to consumers.  States could choose to originate and service 
these lower cost HECMs and/or provide other subsidies and services to 
qualified homeowners.  HUD could have the flexibility to reduce some 
of the loan costs for eligible borrowers, especially the up front 
mortgage insurance premium.  Lenders and services could compete to 
participate in the program based on fees charged to consumers.  Such 
a program could be tried on a smaller scale and should include an 
evaluation of its effectiveness in reducing reverse mortgages costs, the 
use of reverse mortgages as a long-term care financing option, which 
segments of the population might be best served by using reverse 
mortgages to pay for long-term care, how reverse mortgages could help 
expand access to home-and community-based services, and how to give 
people more choice and control in how they receive long-term care 
services.  
Borrowers would be able to access their own home equity to pay for the 
lower-cost services they want that are tailored to meet their needs 
instead of waiting for estate recovery and liens to reimburse Medicaid 
for the institutional care they want to avoid.  Borrowers would also 
not be as limited in their choice of providers or services as they 
would be under Medicaid.  
The public sector has experimented with reverse mortgages relating to 
long-term care.  The HECM program also provides valuable experience 
that could be drawn on to establish such a program to allow older 
homeowners with long-term care needs to remain in their homes longer 
by using reverse mortgages to pay for services that they need to 
remain independent.  Such a program would create opportunities for the 
federal and state governments, the private sector, and consumer groups 
to work together to explore the potential of reverse mortgages to pay 
for long-term care.  

Conclusion
Just as Americans need to plan for long-term care, Congress must look 
for options that would allow Americans to pay for the care they need in 
the setting of their choice.  We urge you to move beyond all the long-
term care jargon and acronyms to focus on the individuals and families, 
such as the husband and wife who have lived in their home most of their 
lives and want to stay there, but need services and supports to help 
them remain at home or the widow who is suddenly on her own and needs 
help after caring for her husband for years.  
AARP looks forward to working with this Subcommittee, Congress, the 
Administration, and all stakeholders to help Americans plan for their 
future long-term care needs and give them more tools to do so.  We 
stand ready to work with members on both sides of the aisle to begin to 
tackle this important challenge.

Appendix
Analyzing the Cost of Home Equity Conversion Mortgages (HECMs)

The non-interest costs of a HECM loan for a borrower of average 
age (74) living in a home of average value ($255,000) can be about 
$25,000, assuming the borrower lives to the remaining life expectancy 
(12 years) prescribed by federal Truth-in-Lending disclosures for HECM 
loans. Table 1 itemizes the fees, all of which are charged to the loan 
at closing except for the monthly servicing fee and monthly mortgage 
insurance premium. 



Methodological Note: The total of ongoing costs actually paid on the 
loan presented in Tables 1-2 would differ from the amounts 
estimated for the following reasons:
The tables assume that the initial interest rate never changes over the 
life of the loan. But the interest on HECM loans is adjustable. So if 
the actual rate decreases, then ongoing interest and mortgage insurance 
premium (MIP) costs would be less, and if the actual rate increases, 
then ongoing interest and MIP costs would be more. 
The tables assume that the loan ends when the borrower reaches her 
remaining median life expectancy. But some borrowers will remain in 
their homes longer than that, and others will leave or die sooner. The 
total costs for longer-lived borrowers would be greater than the 
estimated amounts, and the total costs for those who leave or die sooner 
would be less.   
The tables assume that creditline borrowers withdraw 50% of their 
available loan funds at closing and none thereafter, which is the 
withdrawal pattern prescribed for HECM disclosures by federal Truth-in-
Lending law (as explained in the footnotes to Table 1). In reality, HUD 
research has found that creditline borrowers have withdrawn their 
available funds at a substantially earlier and greater rate. Since the 
amount of funds remaining available in a HECM creditline grows larger 
every month, this more aggressive actual withdrawal pattern would 
result in larger loan balances and, therefore, greater charges for 
interest and monthly mortgage insurance premiums.

The Cost of Purchasing Home Care & Long-Term Care InsuranceUsing a 
Home Equity Conversion Mortgage

The short-term cost of a federally-insured Home Equity Conversion 
Mortgage used to purchase home care is substantial. The table below 
shows the total annual average percentage rate on a HECM used to 
purchase home care at $3,000 per month for a 75-year-old borrower 
assuming three different initial home values.




The cost of long term care insurance (LTCI) purchased with a HECM 
includes the cost of the LTCI policy plus the cost of the HECM, 
which includes upfront fees plus monthly servicing, interest, and 
mortgage insurance costs. 
The table below assumes that a 62-year-old couple living in a 
$250,000 home is using a HECM to purchase a LTCI policy that costs 
$508 per month in May of 2006.  It also assumes an interest rate of 
6.48%, a monthly servicing fee of $35, an origination fee equaling 
2% of the home value ($5,000), $2,201 in 3rd-party closing costs, 
and -- to simulate a provision in current law that forgives the upfront 
mortgage insurance premiums if all of the HECM proceeds are used to buy 
LTCI -- no upfront mortgage insurance premium. 
The table demonstrates how the average total monthly cost of this loan 
would rise over time in 2-year increments. In particular, it shows how 
much the monthly cost of this HECM would add to the cost of the monthly 
LTCI premium being paid by this couple: 
Over the first two years, the loan adds 82 percent to the cost of LTCI. 
By the time the couple reaches age 70, the monthly cost of its HECM 
loan ($518) would exceed the cost of its monthly LTCI premium, adding 
102 percent to the cost of the LTCI premium.
At this coupleï¿½s approximate life expectancy (age 82), the monthly 
loan cost ($1,714) would add 337 percent to the cost of the LTCI 
premium, for a total monthly cost of $2,222.





	Mr. Deal.  Thank you.  Excellent job from everybody.
	We are going to stand in recess, pending these votes.  We will 
	be back probably in about an hour.
	[Recess.]
	Mr. Deal.  First of all, thank you all for your testimony, and 
	those bells will go away in a few minutes.  We did have a series 
	of six votes, and we are, I think, now going into recess, to 
	await further action of the Rules Committee.  But I will get 
	started.
	First of all, very interesting points of view have been 
	expressed here.  Obviously, the overall purpose of this hearing 
	today is to hopefully put aside political rhetoric and put aside 
	all the things that sometimes make judgments around here 
	difficult, and try to come to some real solutions.  I truly am 
	of the opinion that one of the solutions has to be a greater 
	penetration in the insurance market of long-term care insurance, 
	and I certainly agree with the two insurance company type 
	representatives who are on the panel, that some of the 
	incentives that are one, in the pension reform bill, that 
	hopefully the Senate will agree to that language, are steps in 
	the right direction.  I think the deductibility of premiums 
	would be a huge step in the right direction of encouraging 
	people to go ahead and make that determination.
	Some of you heard me say at one time that I think there are 
	phases of your life, and in the early stages, we buy life 
	insurance because we are afraid we wonï¿½t live long enough, and 
	then, once we cross the top of that mountain and on the other 
	side, we realize that we really need long-term care insurance, 
	in case we live too long.  So, I think hopefully, we will give 
	some incentives and some legislative encouragement to have a 
	blending of those products, whether it be an annuity that 
	Mr. Jenner talked about, an annuity that becomes transferable 
	to a long-term care situation.  Those, I think, are the 
	innovative type answers that we ought to be looking for.
	With that general comment, and I donï¿½t mean to overlook the 
	reverse mortgages, because I do think those are appropriate.  I 
	think we have a long way to go in terms of educating the 
	American public about what that product is, and I believe 
	Dr. Thames is the one who mentioned it, we have to be concerned 
	about front end costs that might be an impediment to that.
	Are there other things that are available, or should be 
	available, that we havenï¿½t touched on, to begin to make people 
	more personally responsible, because I quite frankly think we 
	are at a time where we can no longer continue to look to the 
	Government to be the only and exclusive source.  We have taken 
	some steps in the Deficit Reduction Act that would encourage 
	more self-sufficiency and private initiative, but what are some 
	other things that maybe we havenï¿½t talked about, and anybody 
	can jump in.  Yes.
	Ms. Ignagni.  Mr. Chairman, I think that the point that we 
	touched briefly, but didnï¿½t spend a great deal of time on, in 
	addition to the strategies that you just put on the table, the 
	flexible spending accounts, that has a modest cost associated 
	with it, relative to other strategies, and it would be the 
	second piece, I think, of a strategy, the first being the 
	partnership.  We are hoping that HHS now will proceed to 
	develop regulations that set the expectations with respect to 
	what the States need to do.  The states are ready, which is 
	very exciting, but I do think looking at strategies that could 
	be affordable, in the context of the current budgetary 
	discussion, so we wonï¿½t have to wait another year to lay down 
	another pylon.
	So, I think that should be given a great deal of consideration. 
	It is also the most affordable opportunity for individuals, 
	because you are pooling risk broadly in the employer context, 
	so it is a very good start from that perspective.  The above-
	the-line deduction levels the playing field, as you said, and it 
	provides an opportunity for everyone to purchase, in the same 
	way they purchase acute care.  So, I think that those are three 
	basic pylons that can be looked at very productively.
	Mr. Deal.  Okay.  Anyone else?  Dr. Wiener, you were a little 
	skeptical in your testimony about whether people would actually 
	buy long-term care insurance, even if it were a deductible, 
	above-the-line deduction.  And I heard your oral testimony in 
	the context of senior citizens who, because their incomes have 
	come down, and are not really paying a lot of taxes, that might 
	not be an incentive for them, but wouldnï¿½t it be an incentive 
	on the front end at early ages, where people are in their prime 
	years, and their tax rates are going to be higher?  Wouldnï¿½t it 
	be an incentive?
	Dr. Wiener.  It clearly would be more of an incentive at 
	younger ages, for exactly the reason that you said, that their 
	tax rates are higher.  The marketing problem for long-term care 
	insurance at that age group is what are 40 year olds and 50 year 
	olds concerned about?  Well, their mortgage payments, because 
	they havenï¿½t yet paid off their house, child care, saving for 
	college education for their children, saving for general 
	retirement, and so, in general, when policies have been offered 
	to employees, something in the range of 7 to 8 or 9 percent of 
	people have picked it up, so it has not been a very high 
	percentage.
	Clearly, if you made it cheaper, that would increase the 
	affordability, but I am not sure, I mean at age 50, for a really 
	good policy, you are still talking about $1,500 a year, so even 
	if you were to reduce that by a third, you would be talking 
	about $1,000 a person, $2,000 roughly for a married couple. That 
	is not an insignificant amount of money.
	So, the other problem, of course, is that the vast majority of 
	the tax laws will go to people who have already purchased 
	policies, rather than for people who are buying them new.  That 
	is almost always an inherent problem with tax incentives.  You 
	give money to people who have already done, or will already do, 
	what you are trying to induce them to do.
	Mr. Deal.  But we shouldnï¿½t penalize them for having made the 
	right decisions early on, I wouldnï¿½t think, either.  Yes, 
	Mr. Jenner.
	Mr. Jenner.  I am sorry, Mr. Deal.  Thank you very much.  You 
	could actually tailor a proposal, if you wanted to, to limit it 
	to newly acquired policies.  So, I mean, if that were the only 
	thing that were holding you back, you could say for new 
	policies only.
	Mr. Deal.  But I think that would penalize folks who made the 
	right choice on their own.
	Mr. Jenner.  You are absolutely right.  So, it is a balance that 
	you would have to strike, but--
	Mr. Deal.  I think Dr. Thames is right, though.  There has got 
	to be a lot of education, even on this issue.  Yes, Dr. Thames.
	Mr. Thames.  Well, I think we ought to just take a minute to say 
	something about the CLASS Act.  You know, where you would take, 
	and understand that I am not endorsing it entirely, I am not 
	even completely knowledgeable, except to say that anything we 
	do, I am sure the panel is aware, that this would have 
	everybody that is 18 years of age and older, who is working, 
	pay into a long-term care type product.  They could opt out, 
	but it would be automatically enrolled unless they did opt 
	out.
	Now, what we liked about it, from the AARP standpoint, is it 
	creates a large pool, and the large pool, of course, allows 
	you to get more stable rates and more affordable rates and 
	competition.  The problem is, we are not sure that enough 
	people would stay into it, to have it be a fund that would be 
	stable, and there for enough funds for people to draw from.  
	But it is an idea to look at, at least where people are funding 
	it when they are younger and in their working years, and get 
	enough insurance on the insurance people to have to work on that 
	thing to help us, and to educate them to the fact, this is 
	another program like Social Security, where you are going to pay 
	money in, but you expect to get a value out of it at the end.
	And of course, we feel, in general, that both public funds and 
	private funds ought to be in there together.  There will always 
	be people who canï¿½t work enough, or who are low enough income, 
	that we are going to have some kind of a safety net for them, 
	but there are a lot of other folks that if we get them in the 
	program young enough, like at 18, how much would they have to 
	put in there, if they are going to work until they are 62 or 
	65 or maybe longer, like many of our people do, maybe that kind 
	of an idea with insurance people is something that we ought to 
	be looking at.
	Mr. Deal.  Well, I know I have talked with some of you privately 
	about what I think insurance products of the future might look 
	like, and I think we are going to see, hopefully, a 
	hybridization of what insurance products look like, too, to deal 
	with that needing a life insurance policy the early part of your 
	life, and then moving to a point where you need long-term care 
	insurance in the latter part of your life.  The problem, of 
	course, even with life insurance policies, many people, like 
	myself, buy full life policies, whole life policies.  I will get 
	the terminology right in a minute.  And paying those premiums for 
	a life insurance policy past the point that you really believe you 
	need that life insurance policy any longer, there is a great 
	disincentive to do that.  If you could convert that premium you 
	are paying for the life insurance policy over to something you do 
	need, such as a long-term care policy, and have a blending of 
	that product, I think those are hopefully the kind of things we 
	might see in the future.
	I know we need to take some legislative steps to make that a 
	little more possible.  What else do we need to do beyond what 
	is in the pension reform bill?
	Ms. Ignagni.  I think, Mr. Chairman, you said something very 
	important.  If you build it, they will come.  You need not worry 
	about the private sectorï¿½s interest or ability to respond to the 
	challenge.  But there is a major barrier there, as you have just 
	stated, with respect to the incentives.  We favor acute care.  
	We disproportionately penalize people who want to invest in 
	long-term care for their future, and we donï¿½t, now, if you think 
	about just the flexible benefit side of things, people lose 
	money at the end of the year, or they buy four pairs of 
	eyeglasses.  We should be able to let people make their own 
	decisions.  Same with the above-the-line deduction.  We will 
	have products throughout the market that will do a number of 
	things that you have suggested, and some other things we havenï¿½t 
	already thought of.  The private sector has had a very positive 
	track record.
	The partnership program is an excellent start along those 
	lines.  You can already see 25 States in five months passing 
	legislation to get ready to proceed on partnership, when in 
	fact, once HHS acts, I donï¿½t think you even really need 
	legislation.  So, they are ready to go, and you are going to 
	see a number of very exciting products.  So, I donï¿½t think 
	you have to worry about that, but I think you have got your 
	finger on exactly what the problems are, the lack of clear 
	signals that this is on an equal playing field, and as we 
	expand and enlarge this conversation, it is no longer about 
	acute care in this silo, it is about breaking down those 
	barriers, and I think it is important.
	Mr. Deal.  Dr. Stucki, I think, to get you in on our 
	discussion here, our conversation, the steps we took, and we 
	got criticized for it, we were criticized in opening 
	statements from this subcommittee earlier today about some of 
	the things we did on asset transfers, because it is part of 
	an education process, and a reorientation of the role of the 
	Government in this whole issue.
	You know, quite honestly, I suppose if you took a poll of 
	most people, they would probably tell you that they think the 
	Government, under Medicare, provides long-term care coverage.  
	I think they really would.  In my constituency, I think that 
	would be very true.  We took a step, in the Deficit Reduction 
	Act, dealing with asset transfers, to begin to draw some clear 
	lines, say, you know, that is not the case, and we are going to 
	enforce it to make sure people are not taking advantage of the 
	system in that regard.
	And I do think one of the products that will get more attention 
	is the reverse mortgage.  What do you see the industry doing to 
	address some of the stated concerns, such as high front end 
	costs, high expenses associated with it?  What do you see 
	happening there?
	Dr. Stucki.  Well, I think there is a great deal going on, both 
	at the industry level, and with HUD, as well as some of the 
	initiatives that are being taken by States to address costs.  
	So, I think it is an across the board effort that is just going 
	on right now.  One of the major developments is that the 
	industry and HUD have developed a Reverse Mortgage Working 
	Group, which is really working hard to re-engineer the HECM 
	program, the Home Equity Conversion Mortgage, which now 
	represents about 90 percent of the reverse mortgage market.  I 
	think as part of that effort, they are beginning to see ways in 
	which they can restructure the room, in order to reduce the 
	mortgage insurance premium, and to reduce the servicing fees 
	set aside, so I think that is very much under discussion right 
	now.
	We also have to realize that as more people are getting into 
	considering a reverse mortgage and taking it out, that there 
	is a growing competition among various lenders, and in many of 
	the hotspots throughout the country, we are seeing that the 
	origination fee is dropping significantly.  So, already 
	consumers are benefiting from lower costs at that end.
	The program that I am working with right now, which is a study 
	that is being funded by ASPI and the Administration on Aging, 
	is working with selected States and communities to see what 
	they can do.  I touched on it in my testimony, that Minnesota 
	has actually crafted legislation that would create a reverse 
	mortgage incentive program, where the State would pay up to 
	$1,500 of the mortgage insurance premium, the up front costs.  
	They would help reduce the servicing fee set-aside, and they 
	would also provide some lower cost back-end protection for 
	those people once they use up their home equity.
	So, I think there is a great deal going on right now.  I think 
	we are going to be seeing a lot more lenders in the market, 
	who are coming in, who are offering new products.  We are 
	going to have more investors in the market, and all of that 
	is going to work, I think, within a real short time, to help 
	reduce some of those costs.
	Mr. Deal.  Ms. Capps, you are recognized for questions.
	Ms. Capps.  Thank you.  Sorry to come running in after our 
	voting session.  Dr. Wiener, I was hoping to address this 
	query to you.  Today, there have been points raised about a 
	number of tax-related provisions to enhance purchase of 
	long-term care insurance.  Changing the rules about the 
	combination of life insurance and long-term care insurance, 
	which is a provision in the pension bill, costs $8.6 billion 
	over 10 years, apparently.  The deduction for long-term care 
	insurance, as proposed by the Administration in 2004, was 
	estimated to cost $21 billion over 10 years.  Now, I donï¿½t 
	have an estimate on the cost of changing the rules for 
	flexible spending accounts, but I would imagine that anything 
	we do in the area of this sort of remedy is going to have 
	quite a cost attached to it.
	And my basic question to you, and then maybe some other 
	members of the panel would like to chime in, is if we focus 
	on the Tax Code, Dr. Wiener, is this really the best way to 
	ensure that we meet our citizensï¿½ long-term healthcare needs 
	in the future?  We could do that, but are there more 
	efficient and more equitable ways, perhaps, that we should be 
	addressing today?
	Dr. Wiener.  Well, prior to your coming in, we were discussing 
	some of the efficiencies of the tax deductions and other 
	things.  In my view, and based on the research that I have 
	done, tax incentives tend to be inefficient ways of trying to 
	motivate people to change behavior.  They mostly reward people 
	for doing what they would have done otherwise, and one can 
	argue that there is a social value in recognizing them, but if 
	you are trying to change behavior or meet peopleï¿½s needs, it 
	may not be the best possible way.
	The clear alternative is to do something of a more direct 
	funding, either by increasing funding for something like the 
	Administration on Aging, or trying to provide incentives 
	through the Medicaid program, or through the Medicare program, 
	to provide more home and community-based services, or to 
	upgrade services in nursing homes, or provide some of the care 
	coordination that is needed.
	So, I think that is kind of the choice that Congress has before 
	it.
	Ms. Capps.  I know.  We are skirting the edges, if you want, 
	from me, and I understand the motivation to encourage individual 
	incentives by making tax incentives, then, the individuals can 
	respond, and maybe the private sector can respond, as well.
	I am not opposed to that idea at all.  I am wondering if you 
	could push this a little further for me, and pardon me if I am 
	going over ground that has been covered, but are there ways to 
	use that idea of the reasons for people getting into tax 
	incentives, to leverage, to have a more service oriented 
	program, really to take on something new.  As Medicare was a 
	brand new idea when it first came forward, how could we do that 
	without making it sound like a real heavy, in terms of 
	expensive, but also, in terms of federally involved?  Is there a 
	way to do that which also could leverage the private sector and 
	individuals to respond in the same way?
	Let me start, again, with you, Dr. Wiener, because I think you 
	may have some ideas in this area.
	Dr. Wiener.  Well, actually, I--
	Ms. Capps.  You probably proposed them.
	Dr. Wiener.  Well, actually, I, as I think has sort of become 
	clear, I am not a fan of using the Tax Code to--
	Ms. Capps.  That is why I am thinking what is an alternative 
	that--
	Dr. Wiener.  Well, I mean--
	Ms. Capps.  --would not be too unappealing to a lot of my 
	colleagues. Dr. Wiener.  Well, let me suggest an alternative, 
	that on a grander scale, might work quite well, and that is 
	the Administration has proposed, as part of the reauthorization 
	for the Older Americans Act, the so called, what they are 
	calling the Choice Program, which among its other components, 
	would provide for coverage for home and community-based 
	services for a more moderate income group, that are in need of 
	nursing home level care, but have more in the way of income 
	than the current Medicaid standards.
	Karen talked about trying to get a balance between acute care 
	and long-term care, but it seems to me that the principal 
	imbalance we have is that if you are lucky enough, and I use 
	the word advisedly, if you have something like a heart 
	condition, Medicare will sort of pay an unlimited amount of 
	money, but if you are unlucky enough to get Alzheimerï¿½s 
	disease, then you have to impoverish yourself before the 
	Government will come in, and that is, I think, the kind of 
	dilemma that we face.  And clearly, for me, the question for 
	society as a whole, which the Chairman kind of alluded to, is 
	long-term care going to be fundamentally a private 
	responsibility, as it is largely here in the United States, 
	with only government help available if you are poor, or become 
	poor, or is it going to be a kind of broader social 
	responsibility, as it is in Germany and Japan, and some of the 
	other European countries.
	Ms. Capps.  That is a fundamental--I know I am treading on a 
	next series of time, but if--since it is just you and me, 
	Chairman, could I push this thought--
	Mr. Deal.  Go right ahead.
	Ms. Capps.  Thank you.
	Mr. Deal.  I am going to ask--
	Ms. Capps.  And I know other hands went up, but could I state a 
	real bias of mine, and it comes from being a nurse, but I am 
	just going to use my staff person, not the one sitting with me, 
	but in our office, who came back from being with her grandmother 
	for a few days, because she became ill.  She is in her 90s, and 
	the illness was quickly treated in the hospital.  It was maybe 
	flu, maybe pneumonia, whatever, but then came the big challenge 
	to the family of confronting the fact that she couldnï¿½t--she 
	had been living alone independently.  This is so universally 
	experienced.  Why canï¿½t we do some things together as a 
	society?  But let us not leave ourselves out, in the Federal 
	government, of providing the kind of assistance--no one wants 
	to go to a nursing home--why is that the only choice, when with 
	some assistance, so much cheaper, so much more respectful, for 
	dignity, so much more life enhancing, because I, at my age, I 
	want this comfort.  I know where everything is in my house--
	and it is so disruptive to all of a sudden have to move to a 
	very expensive facility, just because one of the Federal 
	programs will--and you have to spend down all of your assets 
	to do all the things that we donï¿½t like.
	When can we come, in this place, Mr. Chairman--because I donï¿½t 
	think the panelists are the problem--I think the responsibility 
	is in the Congress, to initiate an attempt to bring us all 
	together, we all want the best thing for our family members 
	and eventually, for ourselves, we are talking about ourselves, 
	to do the right thing in the community?  It is so clear that 
	we are not--it isnï¿½t there now.  And it is so--we are spending 
	so much money to do other things that are not in the best 
	interest.  Am I way off base?
	Mr. Deal.  Would you yield?
	Ms. Capps.  I will yield back.  Well--
	Mr. Deal.  Will you yield to me, and we will have some more 
	discussion here.  Well, thank you for yielding.
	I think we are sort of like that, I think it was the car 
	repair mechanic, says pay me now or pay me later, I think the 
	question, though, is who is going to do the paying?  Now, I 
	like the idea of incentivizing people to do it on their own, 
	and the reason being is we have two great examples of how we 
	have used the Tax Code to incentivize peopleï¿½s conduct, and 
	that is, we allow them to deduct their mortgage interest as 
	an incentive to own their own home.  It has been a huge 
	success.  We incentivize people to be charitable, by allowing 
	them to deduct their charitable contributions. Most charitable 
	organizations, churches, and others, would say they like that 
	pretty good.
	Now, I am told, and I was looking at the statistics I have 
	here, that if you add all public contributions for the cost 
	of long-term care together, it is somewhere in the 
	neighborhood of 71 percent public contribution.  That is, the 
	taxpayer is paying for about 71 percent of the cost of 
	long-term care, and that other, what, 29 percent is being paid 
	by the individuals.  Now, I donï¿½t know that we can sustain 
	that over the long haul.  I think we need to begin to tap into 
	that private resources as early as possible.
	Ms. Capps.  With all due respect, Mr. Chairman, doesnï¿½t that 
	indicate we are not doing it the right way, or very well?  
	Because I donï¿½t think reverse mortgages is going to be the 
	answer for everybody.
	Mr. Deal.  I donï¿½t either.
	Ms. Capps.  And I support your underlying premise, but I am 
	wondering if our panelists could jump in here, maybe--since 
	there are so few, you and me here, we can make the rules a 
	little more flexible.
	Ms. Ignagni.  Sure.  I would love to give you a quick response. 
	Oh, I am sorry.  Ms. Capps, I think you have made an important 
	point, which is that it is not a zero-sum game.  Let me give 
	you some recommendations, some of which we were talking about 
	earlier.
	One, the partnership program that was passed, what is very, 
	very clear, people who are not purchasers of long-term care 
	insurance, who have the resources to do so, have indicated loud 
	and clear, we have provided some information in our testimony, 
	that were there tax preferred incentives, they would do so. 
	So, that is point number one.
	Point number two is, back on the partnership.  That is going 
	to, I believe, create a great deal of excitement out in the 
	States, and really appeal to folks, because you have that 
	public/private, you have the back end Medicaid protection. 
	Consider this.  We havenï¿½t talked about this, Mr. Chairman, in 
	the discussion so far.  A number of our members wanted very 
	much to have their existing long-term policies, care policies, 
	considered partnership program policies with that back end. 
	That would provide more opportunity, more expansion, that is 
	another very realistic way to begin to combine the two.  The 
	flexible benefits accounts, you asked how much it would be, it 
	is 2.5 to 2.6, depending upon whom you ask, so that is the 
	score on that particular strategy, letting people purchase 
	long-term care insurance through flexible benefit plans.
	We have made a number of recommendations on the Medicaid side 
	that could be drawn out, the special needs population, the 
	upper payment limit.  This is now a disincentive for health 
	plans to participate on the SSI side, because states get 
	penalized if they--because our resources donï¿½t count for the 
	upper payment limit.  So, you could put together all these 
	strategies, get to the above-the-line deduction.  That would 
	make a big difference.  But Mr. Chairman, I think drawing 
	this out, you could have a very specific series of public and 
	private strategies that could work together.  You could dial 
	it back, depending upon how much by way of resources.
	Ms. Capps.  With all respect, could I say from my years of 
	being a public health nurse, and I have been a visiting nurse 
	as well, talking about reverse mortgages and tax incentives, 
	it is fine for the people it will work for.  They probably 
	could have managed some other way, even without that.  But 
	there is a huge number of people, many with disabilities.  
	Donï¿½t forget the people who need long-term care for--
	Ms. Ignagni.  That is why I made the point about the--
	Ms. Capps.  I understand that.
	Ms. Ignagni.  -public-sector strategies, too.
	Ms. Capps.  But some people never have had a mortgage, could 
	never buy any kind of long-term care insurance, and whatever 
	happened to the concept of providing, and much of it is not 
	highly skilled care, into the home, that for at least part of 
	it, we will have to have some public incentive, because the 
	private sector is going to need to make some kind of profit on 
	this, and if that even only works for a certain population.  
	I think we have to broaden our partnership, if we are going 
	to get past a certain set of our community.
	Ms. Ignagni.  And I think we can do that.
	Ms. Capps.  I think so, too.
	Mr. Deal.  May I, Mr. Chairman?
	Ms. Capps.  It is--you are the Chairman.
	Mr. Deal.  Why donï¿½t we--
	Ms. Capps.  Now that we have another member here--
	Mr. Deal.  Why donï¿½t we let the ones that would like to 
	respond to your question respond, and then, we will go to 
	Mr. Pallone for his questions.
	Mr. Jenner.  Ms. Capps, I want to correct a fairly serious 
	misconception about the long-term care combination proposal 
	that is in the pension bill.  It doesnï¿½t create a new tax 
	incentive.  It eliminates a tax hurdle that prevents this 
	combination, and therefore, all of the revenue loss associated 
	with that proposal is new take-up.  It is new policies being 
	written, people who are not buying long-term care now.  So, 
	we are not throwing money after people who would otherwise be 
	taking these policies up anyway.  We are creating the ability 
	for people who arenï¿½t buying the policies now to buy them. 
	So, that revenue loss is good stuff.
	Ms. Capps.  Broadening that circle is a great thing.  To me, 
	it is here, but somehow, we have got to get out here, too.
	Dr. Wiener.  Couldnï¿½t agree with you more.
	Ms. Capps.  So, yeah, sure.  Okay.
	Dr. Wiener.  I would like to just comment a little bit about 
	the long-term care partnerships.  Years ago, I learned a term 
	from Karenï¿½s husband, which was "that dog donï¿½t hunt."  And it 
	seems to me--
	Mr. Deal.  That is a good Georgia expression.
	Mr. Jenner.  Yes, I know it is.  You know, if you look at the 
	history for the last 15 years of the partnerships in the four 
	States that have had them, they have been flogging this idea 
	consistently for the last 15 years, and have put in a 
	substantial amount of resources from the Robert Wood Johnson 
	Foundation and others, much more than is going to be available 
	for most of the States that are talking about doing the 
	program, And the end result is that in the four States that 
	have a combined elderly population of 6.1 million, they have 
	sold about 175,000 policies in force.  So, it is a little 
	less--
	Ms. Capps.  Drop in the bucket.  But a drop.
	Dr. Wiener.  It is a drop in the bucket, and so, I think it 
	has basically not succeeded very well in the marketplace, and 
	clearly, if you extend it to 46 states plus the District of 
	Columbia, you will get more than 175,000, but I guess we will 
	get to see, because legislation has been passed, and we will 
	have a good social experiment, but it is hard to see what is 
	going to be so dramatically different in this new environment 
	that will allow it to take off when it hasnï¿½t attracted 
	people, or agents very much, in the past.
	And I think part of the problem is that long-term care 
	insurance is principally sold by trying to convince people 
	that Medicaid is a terrible program, and if you buy the 
	product, you will stay off, and what the partnership program 
	requires is kind of an 180 degree turnaround, and say you 
	know, Medicaid, not so bad, buy it, and you will get on 
	earlier than you would otherwise.  So, I donï¿½t think many 
	agents are willing to kind of change their line of attack, and 
	I think that has had a major impact, in terms of the number of 
	sales.  And I think the other part is, as Karen kind of alluded 
	to in part of her testimony, people who buy private long-term 
	care insurance do so for a variety of quite fuzzy and soft 
	reasons, to increase their level of choice, to be more 
	independent, and so on.  The partnership has been so 
	straightforwardly an asset protection program that it kind of 
	hasnï¿½t computed.  So, you know, we will get to see, but I think 
	there is reason, based on past history, to be skeptical on how 
	far the partnership is going to take us.
	Ms. Capps.  Mr. Chairman, could I make one comment, because I 
	have overused my time so far already, but I appreciate this 
	interchange, and I want to put myself on the record as being 
	very interested in us taking on this issue, as difficult as 
	it is going to be, because I think we have, well, I donï¿½t want 
	to use the word train wreck, but we have a combination of 
	aging population and an overloaded Medicaid--I mean, we canï¿½t 
	afford it, even without the Baby Boomers coming on.  I donï¿½t 
	think we have a very long window, this is not a luxury 
	conversation we are having today, and I would hope that there 
	would be a sense of urgency in our subcommittee, and I will be
	right there with you.
	We have avoided this topic, all of us, here in this place for 
	a long time, and I would like to be on the record as 
	expressing the urgency that it be something we do.  It is not 
	going to be easy, and maybe, we will just make some steps, and 
	we started some steps, but I think we have to push and push, 
	because it is before us.
	And now, I will yield back.  Thank you.
	Mr. Deal.  Okay.  Mr. Pallone, it is your turn.  We are not 
	going to give you as much time as Ms. Capps and I got.
	Mr. Pallone.  I apologize, Mr. Chairman.  I had another markup 
	that I had to vote on just for the last half hour, and I guess I 
	only missed the last couple.  I was here earlier when the panel 
	testified.
	I wanted to ask two questions of Dr. Wiener.  It is Wiener or 
	Wiener, I donï¿½t know, Dr. Wiener.
	Dr. Wiener.  Wiener.
	Mr. Pallone.  Wiener.  One is about reverse mortgages, and 
	then, the second one is just about long-term care insurance and 
	young people.  With regard to reverse mortgages, there are 
	millions of Americans who are under 65 with disabilities, who 
	are in need of long-term care services, but many of these 
	individuals have little home equity, because of their 
	disability, and many of these individuals with disabilities 
	may not be able to obtain or afford private insurance.  Could 
	you please comment on how well you think reverse mortgages and 
	private long-term care insurance will work for Americans living 
	with disabilities?
	Dr. Wiener.  Well, for younger people with disabilities, they 
	will be almost always medically underwritten out of being able 
	to buy private long-term care insurance.  If they are lucky 
	enough to work for a company that offers private long-term care 
	insurance through a group plan, they may or may not have to go
	through medical underwriting, but in general, they will not be 
	able to buy policies, and--
	Mr. Pallone.  And that is because, on the one hand, they donï¿½t 
	build up equity, and on the other hand, because they are young, 
	or on the other hand, they canï¿½t get insurance, right, because 
	of disability?
	Dr. Wiener.  That is correct.  And I think it is also worth 
	noting, as I certainly put forward in my written testimony, 
	that while there is a lot of home equity out there, if you 
	actually look at people with disabilities, they have much less. 
	For the elderly population, for which I have figures with me, 
	in 2002, the median home equity for people with any disability 
	was $56,000, and for people with severe disabilities, people 
	who need a lot of services, it was about $36,000.  So, that is 
	certainly better than nothing, but it doesnï¿½t necessarily take 
	you terribly far, especially after you deal with the up front 
	costs and rising interest rates.  
	In preparation for this hearing, I reviewed a very good paper 
	on home equity conversion by Mark Merlis, and he was talking 
	about interest rates of 5.5 percent.  If I could get my home 
	equity loan back to 5.5 percent, I would be a very happy man.
	Mr. Pallone.  Now, what about long-term care insurance for 
	younger individuals in general?  You know, you said, I think, 
	that it can be more affordable for younger people, because 
	they have more time to pay into their policy, but one of the 
	concerns I have is that with 46 million Americans without any 
	health insurance, and with families struggling to save for 
	retirement and higher education, is that really the best use 
	of peopleï¿½s money?  In other words, are they likely to invest 
	in that kind of a policy, when they are struggling to save for 
	retirement in general, and higher education courses.  Is it 
	really a best use of their money to buy long-term care 
	insurance, if they have these competing concerns?
	Dr. Wiener.  Well, I donï¿½t know that there is anyone on this 
	panel, including the representatives of the industry, that 
	would say that people should buy private long-term care 
	insurance over acute insurance, or save for their childrenï¿½s 
	college education.  I think you put your finger on an important 
	issue, though, and people have to make tradeoffs, and to the 
	extent that they are dealing with more fundamental issues, and 
	I would certainly put coverage for acute care insurance as part 
	of that, they are not going to be purchasing private long-term 
	care insurance.
	Mr. Pallone.  And the other thing I wanted to mention.  I donï¿½t 
	know if anybody--again, I missed the questioning, so in terms 
	of consumer protections, what kinds of consumer protections 
	would be necessary if someone was serious about buying a 
	policy?  In other words, should policies contain consumer 
	protection, inflation protection, protection from total 
	forfeiture if you miss a couple payments, a minimum daily 
	benefit, and flexibility to change, as new innovations in care 
	occur?  I mean, should those kinds of things be considered?
	Dr. Wiener.  Well, I think by far, the biggest gap in the 
	regulation of private long-term care insurance has to do with 
	inflation protection.  Long-term care costs have been going up. 
	Over the last 15 years, the price of nursing home care has 
	gone up on an average of 6 to 9 percent a year.  So, I donï¿½t 
	think, personally, that insurance companies should be allowed 
	to sell policies that donï¿½t increase with inflation.
	It is in the nature of that kind of product, that you are 
	buying it years in advance of using the services, and that 
	even modest inflation rates, the purchasing power of policies 
	erode tremendously, and that is especially true for employer 
	sponsored plans, where it could be 30 or 40 years between 
	initial purchase and use of the policies.  It seems to me that 
	that sort of portends that people have protection when the 
	purchasing power just evaporates over time.
	Mr. Pallone.  My time is out.  It is up to the Chairman if he 
	wants the other panel members to comment.
	Mr. Deal.  I think in light of the fact that you have raised 
	the issue, I think the others should be allowed to comment.
	Mr. Pallone.  Absolutely.
	Ms. Ignagni.  Mr. Pallone, I think you have raised a very 
	important issue about consumer protections.  In our 
	testimony, we noted some of the NAIC model protections. 
	They have been adopted by 30 States.  We fully support them, 
	and we are in the process of trying to get the other 20 to 
	adopt them as well.
	A number of issues, virtually all of them on your list, are 
	included in the model.  So, I think that is a very important 
	step forward.  Also, the data show that 70 percent of the 
	policies purchased in 2005 have inflation protection, versus 
	40 in 2000, and the reason that a person wouldnï¿½t want to 
	purchase inflation protection, there are some individuals 
	that do purchase this very late in life, and inflation 
	protection doesnï¿½t make as much sense as it would, quite 
	rightly, as you suggest, for the 40 or even 50 year old, 
	55 year old.
	A final point, Mr. Chairman.  Dr. Wiener made some points 
	about the partnership programs.  If it would be acceptable 
	to you, we would like to provide data to show what have been 
	the constraints existing in the four States in the 
	partnership programs, and why a number of the States now 
	are trying to change that regimen, and we have some very 
	productive data to report on that.  So, I didnï¿½t want to 
	take anybodyï¿½s time, but if that would be acceptable, we 
	would like to do that.
	Mr. Deal.  Yes, without objection.
	[The information follows:]



	Dr. Stucki.  Yes, if I could make a clarification with regard 
	to reverse mortgages and younger people.
	We have to keep in mind that currently, only people aged 62 
	and older qualify for a reverse mortgage.  So, as a 
	possibility for the younger population, that simply isnï¿½t an 
	option.  So, that is one of the limitations that--
	Mr. Pallone.  Is that--I am sorry, with your permission, 
	Mr. Chairman.  Is that a legal prohibition, or just that is 
	what they sell?
	Dr. Stucki.  Well, we have to keep in mind that the most 
	popular reverse mortgage is the HECM, the home equity 
	conversion mortgage, which is a HUD program, so under the 
	HUD program right now, it is age 62, and all the other 
	products have adopted that same standard, at age 62.
	Mr. Pallone.  Theoretically, the ones that are private could 
	sell to younger people, but they just follow the model, the 
	HUD model.
	Dr. Stucki.  Well, again, one of the unique, I am sorry, one 
	of the unique features of a reverse mortgage is that it is a 
	non-recourse loan, which means that a person never owes more 
	than the value of the home at the time of the sale, even if 
	the value of the loan is higher than the value of the home.
	Now, what that means is, the way that works out is that to 
	provide that kind of protection, the amount of the loan that 
	is available at younger ages is going to be smaller than at 
	older ages, so the further down the line you push the age, the 
	lower the loan is going to be.  These loans, the reason that 
	we are talking about them for aging in place is because when 
	people are most likely to need long-term care, in their 
	eighties, is the time when they are going to get the most 
	benefit from a reverse mortgage.
	Mr. Pallone.  Thank you.
	Mr. Jenner.  May I just add, Mr. Chairman, that with respect 
	to inflation protection, Karen mentioned the NAIC model.  The 
	NAIC model mandates that the purchaser of insurance be offered 
	the option of inflation protection.  They need not take it, 
	but they must be offered it.  So, it is a question of whether 
	you mandate that, or whether you offer the consumer the choice.
	Mr. Thames.  Mr. Chairman.  May I please respond briefly to 
	Mr. Palloneï¿½s question with, and meld that with one of the 
	things that the chair has already demonstrated that he is 
	interested in, and that is the demonstration project.
	One of the things our testimony would show is that we are 
	interested in a demonstration project, in people with severe 
	disabilities, and those who do, indeed, have some equity.  We 
	would believe that you could do a demonstration project with 
	those people who have equity and are disabled, and that HUD 
	could, for instance, forgive some of the up front mortgage 
	insurance premium for those people, and lower the allowable 
	origination and servicing fees, and the lenders could compete 
	to participate in the program, again, lowering the 
	origination and the servicing fees they would charge, and 
	loan investors could also compete with the interest rate, in 
	decreasing it.  The State governments could be into the 
	program, because they could target supportive services to the 
	bars, paying the loan fees, providing information, referral 
	services, home modification grants or loans, care assessment, 
	and coordination services.
	What all of these do, then, is give what all of our surveys 
	show these older people with or without disabilities want.  
	They can stay in their homes as long as possible, and they 
	have choice about how they spend their money, and they would 
	have more of their money to spend on home and community 
	services, and in changing their home environment to make it 
	where they could stay longer there.
	Mr. Deal.  Well, thank you all.  I think this discussion that 
	we have had, and it has fortunately been a discussion, I wish 
	we could have more hearings that were more on this model.  It 
	is that we are facing great challenges.  The demographics of 
	an aging population present challenges.  It does require us 
	to think in new ways.  It does require us to be resourceful.  
	It does require us to use the resources both that are 
	available in the private hands of individuals, as well as the 
	resources of the Federal government, in a more responsible 
	manner.  We may be late in the game of deciding what direction
	to take, but we are in the game now.
	We did make some significant changes in the Deficit Reduction 
	Act, whether it be the partnerships that have been referred to, 
	or the incentives that we have provided now, that States can do 
	more community, home and community-based services without 
	having to get a Federal waiver to do so.  I think we are moving 
	in the right direction.  I appreciate very much the 
	contributions of this panel, and with that, we will let the 
	first panel go, and we will get to the second panel, if they 
	would come forward.
	Well, thank you all for your patience in waiting around for 
	us.  This is one of those days when votes do interfere, but 
	we are pleased to have you here.  This is a panel that is made 
	up, and I will introduce the people at this time:  Mr. Scott 
	Conner, who is Vice President of Products and Health and Safety 
	Services of the American Red Cross; Dr. Larry Wright, Director 
	of the Schmieding--is that close enough--
	Dr. Wright.  Yes.  That is perfect.
	Mr. Deal.  --Schmieding Center for Senior Health and Education 
	in Springdale, Arkansas; and Ms. Candace Inagi.
	Ms. Inagi.  Inagi.
	Mr. Deal.  That is good.  I did good.  Good for a Southern 
	accent, isnï¿½t it?  Who is Assistant to the President for 
	Government and Community Relations of the Service Employees 
	International Union Local 775 in Washington.
	Lady and gentlemen, we are pleased to have you, and we will 
	have your testimony made a part of the record, as the previous 
	panelï¿½s testimony was, and we would recognize each of you 
	for 5 minutes, and starting with Mr. Conner.

STATEMENTS OF SCOTT CONNER, VICE PRESIDENT, PRODUCTS AND HEALTH AND 
SAFETY SERVICES, AMERICAN RED CROSS; DR. LARRY WRIGHT, DIRECTOR, 
SCHMIEDING CENTER FOR SENIOR HEALTH AND EDUCATION; AND CANDACE INAGI, 
ASSISTANT TO THE PRESIDENT FOR GOVERNMENT AND COMMUNITY RELATIONS, 
SERVICE EMPLOYEES INTERNATIONAL UNION LOCAL 775

Mr. Conner.  Thank you.  Chairman Deal and members of the 
subcommittee, thank you for providing us the opportunity to testify 
today on such an important issue.  We at the American Red Cross 
commend you for your leadership in addressing the needs of the 
elderly in our Nation, and specifically addressing the needs that 
caregivers face.
	Recognizing that caring for a loved one is a very personal 
	experience, I am proud that the American Red Cross plays a 
	role in helping caregivers provide support to their loved 
	ones.  For 125 years, as of last week, actually, the American 
	Red Cross has been Americaï¿½s partner in preventing, preparing 
	for, and responding to disasters.  Annually, the Red Cross 
	responds to over 70,000 disasters.
	In addition, we train more than 17 million Americans each year 
	in lifesaving skills.  From first aid and CPR to babysitting 
	courses, the American Red Cross is committed to preparing our 
	neighbors for any disaster.  To that end, we have established 
	a program to prepare individuals on caring for the elderly. 
	In 2004, the American Red Cross began offering a family 
	caregiving course that covers the skills needed in 
	caregiving.  There are nine 1 hour modules that cover 
	subjects ranging from general caregiving skills to assisting 
	with personal care, eating healthy, and home safety.  
	Additionally, and importantly, we offer a course to the 
	caregiver themselves on caring for the caregiver.  Anyone that 
	has taken care of a loved one knows how taxing these services 
	can be.
	We are expanding this program by developing new ways to make 
	the skills available to more people.  The Family Caregiving 
	Reference Guide, to be sold in retail outlets, will come out 
	later this year.  Furthermore, we are working on developing an 
	enhanced website and offering online education.  We also 
	offer, for professional caregivers, a nurse assistant training 
	program, and together, we prepare a program for seniors that 
	includes disaster and health and safety emergency preparedness.
	We have a variety of other programs offered to benefit 
	caregivers.  These include Lifeline, which is a personal 
	response system, transportation services, where volunteers 
	help seniors get to appointments, volunteer shopping programs 
	for those who are disabled or shut in, community feeding 
	support, and in certain chapters, we have adult day care 
	centers.
	Our family caregiving skills training program is still fairly 
	small by our standards.  While we have more than 800 chapters, 
	we only delivered about 18,000 family caregiving modules last 
	year, and the reasons for this are several.  Many caregivers 
	simply do not self-identify, and they have very limited time 
	to attend presentations.  There is also, sometimes, a 
	financial issue.  New ways need to be found to help support 
	this.  We believe that the expansion of family caregiving 
	skills knowledge within the American public will help to 
	ameliorate the long-term care problem that we have been 
	talking about all afternoon, but families simply cannot do 
	it alone.
	To that end, we encourage the committee to consider three 
	critical areas.  First, awareness.  Large-scale health 
	communications programs to raise awareness of rewards of 
	caregiving, and encourage people to self-identify.  Members 
	of Congress can help promote caregiving programs in their 
	local communities, and we encourage each of you to do so.
	Second, resources and time.  Congress could consider public 
	policy that encourages insurance companies, again, what we 
	have been talking about this afternoon, and Medicare and 
	Medicaid to help pay for family caregiving education, as 
	well as requiring the healthcare industry to provide the 
	training.  Doctors in hospitals should prescribe caregiver
	education.  However, many healthcare providers will not 
	recommend education, unless it is covered by insurance.  
	Diabetes education is reimbursed, as is childbirth 
	education.  It is time that we reimburse for caregiving 
	education as well.
	And last, how to lessen the hardships of caregiving.  
	Continuing to provide for growth of all manner of
	nationally supported services and programs for caregivers, 
	such as the National Family Caregiver Support Program, 
	FMLA, and so many others.  Congress should also consider 
	economic support to families, be it through tax credits 
	or allowing education costs to be deducted on Federal 
	taxes.
	I thank you again for the opportunity to be here today.
	[The prepared statement of Scott Conner follows:]

Prepared Statement of Scott Conner, Vice President, Products 
and Health and Safety Services, American Red Cross

Chairman Deal, Congressman Brown, and Members of the Committee, 
thank you for providing me the opportunity to testify today 
before you on such an important issue.  I commend you for your 
leadership in addressing the needs of the elderly in our nation, 
and specifically addressing the needs that caregivers face.  I 
know that for many of us in this room, caregiving is an 
especially personal issue.  And I know that I am very proud 
that the Red Cross plays a role in helping caregivers provide 
support and comfort to their loved ones.  
I am also pleased to be here today because this hearing sheds 
light on an important program that the American Red Cross 
launched in 2004 to help better prepare individuals to provide 
caregiving services to their loved ones, as well as to train 
individuals to provide caregiving services.  
For 125 years, the American Red Cross has been Americaï¿½s partner 
in preventing, preparing for, and responding to disasters.  The 
American Red Cross is known from coast to coast for our response 
to more than 70,000 disasters annually, the vast majority being 
single family home fires.  We have more than 800 chapters spread 
throughout the United States and the territories, and we provide 
the nation with nearly one half of the blood supply.
As important, the American Red Cross trains nearly 15 million 
Americans each year in lifesavings skills.  From first aid and 
CPR, to AED training and babysitting courses, the American Red
Cross is committed to preparing our neighbors for any disaster 
that comes their way.  To that end, we established a program to 
prepare individuals on caring for the elderly.  

Services to Seniors
Seniors are critical to the mission of the American Red Cross.  
In fact, seniors comprise a large percentage of our volunteers.  
But when seniors fall ill, 78% rely on their own family members 
to take care of them.
A 2005 study showed that 36% of Americans mentioned the American 
Red Cross first when asked what organization should be involved in 
teaching home nursing in case of a pandemic.  This was 5 times as 
many people as the second most often selected organization.  
For family members who are confronted with an unforeseen 
combination of circumstances that requires them to step in and 
provide care, the American Red Cross Family Caregiving program 
prepares them to respond.  It is indeed a family emergency when a 
grown son or daughter finds themselves totally unprepared the day 
an elderly relative becomes sick.  A busy and full life one day 
is taken over with caregiving responsibilities the next.  For 
many days thereafter they may find themselves cleaning up 
hazardous environments, helping with personal care, and managing 
medications.  Recent research has brought to light that 
caregivers endure personal and financial hardships - trouble in 
their jobs and the decline of their own health and 
relationships.  These are some of the same kinds of things the 
American Red Cross volunteers face in disaster situations.  
Training makes a difference.
Our Family Caregiving program prepares families to respond in 
a manner to prevent hardship and further injury, keep basic
needs met, and keep their loved ones health stable under the 
guidance of the family doctor.  
Lay caregivers need training to deal with life-threatening 
emergencies - infection control, administering medications, 
moving a sick person without doing further injury.  In Family 
Caregiving we teach the emergency action steps (Check, Call, 
Care), responding to sudden illness, safe disposal of syringes, 
oxygen, medications, food safety, disposal of hazardous waste, 
and many other skills needed to keep people alive till the 
situation stabilizes. 

History of the Family Caregiving Program
The program was developed with funds from a private donor - 
Josephine A. Osterhout - whose estate provided money to Red 
Cross National Headquarters to "help the elderly in America."  
In 2001, before embarking on the Family Caregiving program, 
National Headquarters, in partnership with the National Caregivers 
Alliance and AARP, commissioned a national telephone survey of 
caregivers.  We learned that 22 million households are caring for 
a sick or elderly loved one.  We found that Josephine Osterhout 
was not alone in thinking that Americaï¿½s elderly could be helped 
by the American Red Cross.  
Our study also revealed that Americans see the American Red Cross 
as a logical source of information on Caregiving.  It was 
generally felt that the American Red Cross had a good deal of 
experience, either directly or indirectly, with caregiving -
Experience with Bloodmobiles transferred to developing 
transportation service for the elderly and disabled
Disaster relief efforts transferred to developing a respite care 
program  
Experience as a trainer in first aid and CPR, the American Red 
Cross was seen as having the expertise to produce caregiver 
training materials.
A reputation as being reliable and caring in an emergency would 
be a value in obtaining the trust necessary to have caregivers 
and their loved ones accept the services that the American Red 
Cross might provide.

Most adults receiving long-term care at home - 78% rely 
exclusively on family and friends to provide assistance. (Thomson, 
2004, Georgetown University).  Research has shown that providing 
care to elderly family members is a serious health risk for 
caregivers.  Studies consistently find high levels of depressive 
symptoms and mental health problems among family caregivers as 
compared to their non-caregiving peers (Family Caregiver Alliance, 
2003, L. Gray).  The caregivers that provide the greatest level of 
care often experience the greatest financial burden, including 
lost wages and missed work.

Red Cross Programs that Train Caregivers

Family Caregiving
The American Red Cross Family Caregiving program offers nine 
modules that help participants provide better care and gain an 
understanding of safety, nutrition, general care, and legal and 
financial issues.  Since each session is just one hour, the 
presentations can accommodate even the busiest schedules.
Our modular program design lets participants choose any 
presentation, in any order, and pay a nominal fee for only those 
they attend.  No matter which presentations are selected, 
participants enhance skills, reduce stress and build confidence.
Topics include:
Home Safety
General Caregiving Skills
Positioning and Helping Your Loved One Move
Assisting with Personal Care
Healthy Eating
Caring for the Caregiver
Legal and Financial Issues
Alzheimerï¿½s disease or Dementia
HIV/AIDS

In 2005 the American Red Cross delivered 18,000 Family Caregiving 
modules.  The program may be delivered by any American Red Cross 
Chapter, by Authorized Providers, or by any senior serving 
organization or community based organization.
The Family Caregiving program is currently being expanded to reach 
more caregivers by developing new ways to reach out to them such 
as:
New products:  Our new Family Caregiving Reference Guide to be 
released later In 2006 - a skills reference book with a DVD that 
will be distributed in retail outlets in addition to the American 
Red Cross Chapters.
Online programs to help train caregivers.

Nurse Assistant Training Program
American Red Cross had 12,000 nurse assistants enrolled in the Nurse 
Assistant Training program in 2005.  The program meets all federal 
requirements and complies with state regulations for training nurse 
assistants.  Additionally, it provides the participant with the 
knowledge and skills needed to appropriately care for individuals 
in the extended care setting as a nurse assistant.  
The purpose of the program is to provide information and skills 
enabling nurse assistants to provide quality care for residents in 
nursing homes, as well as supplemental information and skills that
will enable them to provide quality health care for clients at home.

Together We Prepare For Seniors
Together We Prepare is a program that includes presentations and 
materials provided by chapters to help seniors take key steps 
toward preparing for natural disasters and man-made emergencies.  
These steps include 1. Make a plan; 2. Build a kit; 3. Get trained; 
4. Volunteer; and 5. Give Blood.  For seniors, making a plan and 
building a kit are two key actions to prepare for all hazards.  
Additionally, the Red Cross developed a targeted resource for 
seniors entitled the "Disaster Preparedness for Seniors by Seniors 
Guide." Chapters often combine the Together We Prepare program 
with the Family Care Giving Program to provide basic preparedness 
information as well as skills for caregiving for seniors.  

Other Senior Serving Programs:
Local American Red Cross chapters throughout the US offer a wide
variety of services to seniors in their own communities such as:
Lifeline - Lifelineï¿½ is a personal response and support services 
system for seniors and the physically challenged.  It promotes 
independence, peace of mind and early intervention to those in 
need and for loved ones.  This Personal Emergency Response Service 
(PERS) is available 24-hours-a-day, 365-days-a-year. 
Transportation - Volunteers, many of which are seniors themselves, 
transport other seniors in need to medical appointments and other 
important trips.
Shoppers Programs - volunteers helping those who are shut in by 
going to the store for them.  
Community Feeding Support and Meals on Wheels
Friendly Visitor and Tele-Care programs - Volunteers who call each 
morning or pay a visit regularly to home bound, elderly and disabled 
seniors. 
Adult Day Care 

Challenges and Growth Opportunities for Family Caregiving Program
Although 18,000 Family Caregiving presentations have been done in 
2005, the American Red Cross has encountered challenges in 
implementing our Family Caregiving program. Some of the challenges 
include:
Caregivers do not attend chapter delivered training.
Initial low turnout
Sizeable initial resource requirements
Lack of grant funding to support initiatives
Caregiver issues
Self-identification by Caregivers
Time constraints

Overview of Challenges
In general we have found that there is a reluctant market for Family 
Caregiving Skills.  Caregivers do not self-identify, and do not have 
time to learn the skills of caregiving.  Yet the "work" of training 
Family Caregivers is likely to become an important concern in the near 
future because 78% of long term care is done by the family caregiver. 
There are roles the Federal government can play to address these 
challenges, and that will help to create an environment that expands 
family caregiving.  Families providing a greater percentage of the 
care their loved ones need offers a humane solution to the long term 
care issue and goes a long way to helping solve the nationï¿½s long term 
care problems.  But families cannot do it alone.  
I encourage this Committee to consider three critical issues:  first, 
a lack of awareness in communities across the country; second, the 
strains faced by caregivers with both limited resources and time; and 
third, the tremendous hardships of caregiving.  We offer three 
promising steps that will lead to an environment where family 
caregiving can grow:

1. Awareness: Large scale health communications programs to raise 
awareness of rewards of caregiving and to encourage people to self-
identify so they can get the help they need.  Members of Congress can 
help promote caregiving programs in their local communities, and I 
encourage each of you to do so.  
2. Resources and Time: Congress could consider public policy that 
encourages insurance companies and Medicare and Medicaid to help pay 
for family caregiving education for individuals, as well as requiring 
the healthcare industry to provide the training.  Studies show that 
people prefer to get health information from their own doctors.  
Doctors and hospitals should prescribe caregiver education, however 
many health care providers will not recommend education unless it is 
covered by insurance.  Diabetes education is reimbursed; as is 
childbirth education.  It is time that we reimburse for caregiving 
education as well.  Caregivers are an important component of the 
patient care team, and we ought to help insure that programs are 
available to meet the growing demand for caregivers in the United 
States.  
3. Lessening the Hardships of Caregiving: Continuing to provide for 
growth of all manner of nationally supported services and programs for 
Caregivers such as the National Family Caregiver Support Program, FMLA 
and so many others. Congress should also consider economic support to 
families, be it through tax credits or allowing unreimburseable 
education costs to be deducted on federal taxes.   

Mr. Chairman, Congressman Brown, I thank you again for the opportunity 
to be here before you today.  On behalf of the entire Red Cross, I 
thank you for your leadership in addressing this difficult issue, and I 
can assure you that the American Red Cross stands ready to support any 
efforts to promote and expand family caregiving services and support.  
At this time, I am happy to answer any questions you may have.  
	Mr. Deal.  Thank you.  Dr. Wright, you are recognized.
Dr. Wright.  Mr. Chairman.  I would like to thank you, Mr. Chairman, 
and other members of the committee for convening this hearing, and for 
the opportunity to address you on this important issue.  My name is 
Dr. Larry Wright.  I am a medical doctor and a geriatrician.  I have 
been in community-based geriatric medical practice for about 26 years, 
and the last 7 years, I have been the Director of a Regional Center on 
Aging affiliated with the Reynolds Institute on Aging, and the 
University of Arkansas for Medical Sciences.  I am also the Medical 
Director of a community-based hospital senior health system in 
northwest Arkansas with the Northwest Health System.
	My testimony today is based on my many years of medical 
	practice in geriatrics, and working with older adults and with 
	their families around caregiving issues, and my last 7 years as 
	the director of a nonprofit education program that has been 
	dedicated to developing an outstanding curriculum for training 
	home caregivers.  And we have now trained, at last count, over 
	500 caregivers to give the kind of care that I am going to 
	describe in my testimony.
	We believe that professionally trained in-home caregivers are 
	a key to keeping older adults at home for life, and helping 
	resolve Americaï¿½s long-term care crisis.  To create an open 
	environment in which a new generation of well-trained in-home 
	caregivers can flourish and help older adults stay at home for 
	life will require the removal of regulatory restrictions, the 
	development of a delivery system that matches caregivers to 
	those who need them, and a system for training professional 
	caregivers that is linked to a certification process that 
	assures qualified in-home caregivers.
	I would like to clarify that the in-home caregivers I am 
	referring to in my all remarks are the workers who give basic 
	care to older adults in order to stay in their home.  We are 
	really not talking about healthcare and medical care in this 
	regard.  We are talking about those, much like family 
	caregivers, but these hired caregivers who can give all sorts 
	of assistance, including hands-on assistance for people who 
	donï¿½t so much have skilled nursing needs at all, but have 
	dependency in some activities of daily living, and therefore, 
	need assistance with these basic needs.  This is not really 
	medical care, but what is often treated in the regulations as 
	if it is.
	Variously, these workers are termed direct care workers, care 
	professionals, and personal care workers.  Demographics demand 
	a shift from institution-centered long-term care to a new, 
	home-centered system.  We need both, an improved Medicare/
	Medicaid funded system of long-term care for the most 
	chronically ill, frail, and low-income seniors, and we need a 
	new alternative, a new home-centered system of long-term elder 
	care for seniors, both those of low-income, and those who can 
	pay privately.
	Keeping more older adults at home is the only way, we believe, 
	we can afford to care for twice as many elders living decades 
	longer, with more chronic diseases.  It may be Americaï¿½s best 
	solution to the long-term care problem, if we do three things. 
	Number one, we must improve the quality and availability of 
	in-home caregiving by developing professionally trained and 
	certified home caregivers, including family members, and a 
	new corps of volunteer caregivers, as well as these hired 
	direct care workers that I have referred to.  Currently, there 
	are no training requirements for independently contracted 
	workers that do in-home paid caregiving.  We must develop and 
	implement national standards for the education and training of 
	in-home paid caregivers, including a national certification 
	organization, and tie payment to successful training.
	Number two, we also need to review Federal and all State home 
	health regulations, and deregulate the in-home caregiving.  
	Again, caregiving, or personal care, as I am referring to, has 
	been made in the regulations too often synonymous with home 
	health, and has been tied to, therefore, the need for skilled 
	nursing, and the resulting regulations represent a barrier to 
	delivery of personal in-home caregiving to most Americans, 
	whether they qualify for Medicaid or they are private pay, by 
	any organization other than a home health agency.  Caregiving 
	is not healthcare, and should not be regulated like home 
	health.
	And number three, we should develop a comprehensive public/
	private delivery system of personal in-home caregiving that 
	applies all available resources, family, volunteer, private, 
	and public sectors, to integrated, home-centered, long-term 
	care delivery.
	In April, we at the Schmieding Center announced a partnership 
	between the Schmieding Center for Senior Health Education and 
	the International Longevity Center in New York, that 
	organization, headed by Dr. Robert Butler, widely regarded as 
	the father of geriatric medicine in this country, and the 
	first Director of the National Institute on Aging.  In this 
	partnership, we are launching a project, a national project, 
	for caregiving, in-home caregiving, and this project will 
	intend to include national research and consensus-building 
	among caregiving stakeholders, including organizations such 
	as the National Alliance for Caregivers, headed by Gail Hunt, 
	and other national caregiver organizations, as well as those 
	involved in policy and academics interested in the subject of 
	caregiving; and along with them, come to a consensus about 
	this issue.  Improving public awareness also, and developing 
	a national model caregiver curriculum for in-home caregiving, 
	along with pointing to the development of a caregiving 
	delivery model that can be replicated across America.
	So, we will continue to work toward these important goals, 
	and Mr. Chairman, I want to thank you for the opportunity to 
	present our vision of an achievable approach to home-centered 
	long-term care.
	Thank you.
	[The prepared statement of Dr. Larry Wright follows:]
Prepared Statement of Dr. Larry Wright, Director, Schmieding Center 
for Senior Health and Education

Improve and Refine Current Long-Term Care System
	We all agree we must continue to improve and refine the 
	Medicare/Medicaid-based long-term care system we have in 
	place.  Many improvements still remain to be made that will be 
	beneficial to older adults, particularly those older adults 
	burdened with the kind of serious chronic conditions that truly 
	require skilled nursing home care and, most particularly, 
	those without the ability to pay. 
	But we can never "improve" or expand nursing homes enough to 
	make them the preferred choice for most older Americans.  Even 
	if we could make nursing homes desirable enough, we canï¿½t build 
	enough new facilities to care for double or triple the number 
	of seniors who will need long-term care over the next 20-30 
	years.

Develop a Home-Based Long-term Care Alternative
	Baby Boomers increasingly demand that we change our system of 
	long-term eldercare from an institution-centered method of 
	long-term eldercare to a new home-centered system.   We will 
	need both:
An improved Medicare/Medicaid system of long-term care system for the 
most chronically-ill, low-income seniors
and a new alternative, a new home-centered system of long-term 
eldercare for all Baby Boomers"both those of low-income and those who 
will be private pay.

The demographics before us demand an alternative long-term care system 
that helps keep most elders at "home." Staying at home is what most 
elders and their families want. Keeping them at home is the only way 
we can afford to care for twice as many elders living decades longer 
than ever before. And it can be done"it may be Americaï¿½s best solution 
to the Age Boom of long-lived elders"if we do three things:
Review federal (and all state) home health regulations and de-regulate 
in-home caregiving; i.e., remove Personal Caregiving from home health 
regulations.
Improve the quality and availability of in-home caregiving by 
developing professionally-trained and certified home caregivers, 
family members, and a new corps of volunteer caregivers.
Develop a comprehensive public/private delivery system of personal 
in-home caregiving that applies all available resources"family, 
volunteer, private and public"to integrated long-term care delivery.

Separate Caregiving (Personal Care) from Home Health (Skilled Nursing)
	I am not suggesting that we change home health regulations. 
	Simply remove in-home caregiving (personal care) from the 
	home health regulations"except when in-home care is prescribed 
	by a physician as a medical necessity (skilled nursing).  Right 
	now the home health regulations are unintentionally blocking 
	access to in-home caregivers trained and provided through any 
	reputable agency. How can that be?  Current regulations do not 
	differentiate between skilled nursing and personal caregiving 
	under Medicare/Medicaid Home Health regulations--even when the 
	older adult does not need, qualify for, or receive Medicaid 
	benefits.
	Because we have intermingled in-home personal Caregiving with 
	Home Healthcare (skilled nursing) nearly all Americans, 
	including the 70 percent of older adults who do not qualify for 
	Medicaid benefits, are excluded from access to trained home 
	caregivers from any reputable agency even when they are private 
	pay.
	Just remove in-home PERSONAL caregiving from Home Health 
	regulations"except when prescribed by a physician.  Removing 
	the regulatory barriers to in-home caregiving may be the 
	single most important action you can take
to provide better access to better caregivers for most Americans, 
including the 70% who pay for their own homecare.  With this barrier 
removed, we can keep more elders at home for life, at lower costs, 
with more competition to provide professional in-home caregiving 
through professional caregiving agencies "both private and non-profit" 
and alleviate a colossal need.

Create A New Group of Professionally-Trained In-home Caregivers
	There is an urgent need for the professional training of 
	family, volunteer, and in-home paid caregivers, usually 
	independent contractors, as well as the need for geriatric 
	management services for families who are overseeing the care 
	of a loved one in the home. 
	A large, new cadre of independent contract, in-home direct
	care providers is required to meet this growing need.  However, 
	almost none of these care providers have received professional 
	training on how to care for an older adult in the home. 
	Elders are thus very vulnerable to improper care and the 
	family has no way to judge the competence of caregivers in 
	the home setting.
	Therefore, there is an urgent need for creating the standards 
	and structure for support of a professionally-trained community 
	of paid in-home caregivers who provide personal care and other 
	non-medical services to older adults in the home and who 
	understand the behavioral problems that may be present when 
	caring for an older adults with a dementing or other chronic 
	disease.  
	There are many barriers to the professional in-home caregiving 
	many families need:
Currently, there are no caregiver training requirements for independent 
contractors working as in-home paid caregivers.  There are no standards 
for training and no structure in place today to support independent
contractors working as in-home paid caregivers.  There is no well-
organized national organization or association that supports this 
evolving cadre of direct care providers to help establish caregiving 
as a career. 
There are caregiver training requirements set by Medicare/Medicaid 
regulations for personal care and home health aides working for home 
health agencies.  However, only elders who require skilled nursing care 
can qualify for personal care provided by a home health agency.  Such 
personal care must be prescribed by a physician and is available on a 
limited basis--not 24/7 for extended periods of time--as some families 
need.  This is not long-term care. Families cannot simply request 
personal care services provided by a home health agency. 
Nearly all families must contract privately with individual caregivers--
and they must find them on their own.  Most of the caregivers they find 
are untrained. Families sometimes receive lists of potential in-home 
caregivers from hospitals or health care agencies.  Sometimes they 
learn about potential caregivers by referral or through advertising. 
Many of the caregivers found through these means have a heart-to-serve, 
but they have no formal training and limited knowledge about caring 
for older adults in the home. 
In-home caregiving is not considered a career path. Caregiving is 
generally viewed as minimum wage work.  Currently there is no way for 
them to receive benefits, be bonded, receive further training and 
continuing education, etc.  They are typically among the medically 
uninsured, a real problem in our health care system today.  
As an independent contractor, the case load for an in-home caregiver 
varies and may not provide regular work; therefore, many in-home 
caregivers leave the field and seek other employment that is often 
more stable, better-paid, and may even include benefits. This 
environment results in families often finding it very difficult to 
find and keep in-home paid caregivers when needed. 
For-profit companies do exist that provide non-medical caregiving to 
older adults in the home, but few such companies exist that also can 
and do provide the physical and behavioral care that is often needed 
to care for older adults with dementia or other chronic, debilitating 
conditions. Many of the private companies require little or no 
training for the caregivers they hire.  When physical care is needed, 
most states have outdated regulations prohibiting any organization 
except a home health agency from providing that care. But if the 
older adult doesnï¿½t require skilled nursing care, they canï¿½t get the 
caregiving help they need to stay at home from any organization.  

	We must break with the past and find new ways to create a 
	community of professionally-trained home caregivers--a 
	community with the shared standards and structure needed to 
	grow a large cadre of competent, compassionate, 
	professionally-trained in-home caregivers.  We suggest that 
	we Develop and implement national standards for the education 
	and training of in-home paid caregivers.
Create a national organization/association for the new generation of 
professionally-trained in-home caregivers, most of whom are 
independent contractors.  The organization will oversee the 
accreditation process of curricula used to train this cadre of 
caregivers, the certification/licensing process, the continuing 
education requirements to maintain certification, provide 
opportunities for group rates on medical and dental insurance, 
bonding, etc.  Family members needing in-home paid caregivers will 
then be assured that a caregiver certified by the organization has 
been professionally-trained in home caregiving skills, tested for 
competency, and is continuing to add new caregiving knowledge. 
Establish new in-home caregiving quality standards so that all third 
party payers, including CMS, require that all in-home caregivers 
must be members in good standing in the national professional home 
caregiver certification organization to qualify for reimbursement. 
All agencies or companies providing in-home caregiver services for a 
fee to families must meet the same membership, training, continuing 
education, and quality standards for their employees.
Allow, encourage, and incentivize a new type of in-home caregiver 
staffing agency to provide families with caregivers who are 
professionally-trained in the physical care and non-medical care of 
an older adult and who understand the behavioral issues that might 
arise.  Keeping the cost of caregivers placed through these agencies 
at an affordable level, while paying the caregivers a reasonable wage 
and benefits, would provide professional caregivers with career 
stability and provide families that need paid caregiving for a loved 
one with a reliable source for trained caregivers.

	Again, all in-home caregiving recommendations depend on the 
	removal of federal and state regulatory roadblocks to 
	professional in-home caregiving and geriatric care management. 
	In-home caregiving must be re-defined to separate it from 
	"home health" care (skilled nursing) and its restrictions. 
	Caregiving is not "health care" and should not be regulated 
	as is medical care.  

Develop a Comprehensive Public/Private Delivery System for Home-based 
Long-term Care.
	With regulatory barriers removed and with a program for 
	providing professionally-trained and certified home caregivers 
	(including family, volunteer, and paid) is operational, there 
	will still be a major issue of connecting older adults and 
	their families with the resources they need to stay at home 
	for life.
	A model has been developed for a comprehensive, integrative 
	delivery system combining public and private resources.  It 
	provides one-stop, one-call access to a community-based system 
	of eldercare that provides information, referrals, and 
	consultation to older adults and their families.  The tool kit 
	can be adapted as a private business, a non-profit service, a 
	community-based service, a faith-based initiative and more.
	It requires only the freedom from regulation so that the needed 
	services can be delivered.  There is great interest in pursuing 
	this model at the community level and I believe this is the 
	direction elder caregiving will develop over the next decade. 
	It is flexible, fundable, affordable, and compassionate.  (See 
	Exhibit 1: "Community & Faith-based Model to Help Older Adults 
	Stay at Home For Life")


	Mr. Deal.  Thank you.  Ms. Inagi.
Ms. Inagi.  Thank you.  Good afternoon, Chairman Deal, Mr. Pallone, and 
Mr. Allen.  My name is Candace Inagi.  I am Assistant to the President 
for Community Relations for SEIU 775, based in Washington State.
	We have about 28,000 caregivers who are family caregivers, 
	agency caregivers, and nursing home workers.  SEIU represents 
	1.8 million workers nationally, and is the Nationï¿½s largest 
	healthcare union.  775, which is, again, based in Washington 
	State, includes many family caregivers who are caring for 
	Medicaid beneficiaries participating in the Stateï¿½s program of 
	consumer-directed care.
	We face a national shortage of direct care workers.  At least 
	35 States currently report serious shortages of caregivers, and 
	for individuals with chronic needs, often the biggest barrier 
	is finding an available home care worker.  It would be a 
	mistake to think that the shortage of long-term care workers 
	is a temporary phenomenon, a function of the current business 
	cycle.  It is important to see the labor shortage for what it 
	really is, a rational response of people to a labor market 
	that often pays lousy wages and has no benefits.  The national 
	average for a direct care worker is only $8.18, but average 
	annual income for homecare workers range from $7,000 to $12,000 
	per year, since few can find full-time work.
	We can expect the current shortage to get worse.  The 
	traditional long-term care worker, women between the ages of 
	25 and 45, have more economic alternatives these day.  BLS 
	estimates that we will need an estimated 5 million additional 
	care workers to fill current vacancies, and meet the demand 
	for additional services.
	So, who will care for those with long-term care needs?  We 
	must support informal caregivers, and make it easier for 
	friends and family to help with household activities, 
	transportation, and chores that make it possible for those 
	with disabilities to stay out of institutions.  Homecare and 
	other kinds of non-medical assistance often require more 
	patience, strength, and sensitivity than technical skill.  
	Because long-term care is often the most intimate of hands-on 
	care, many people are more comfortable having, and actually 
	prefer having, family members provide those services.
	But informal caregiving is not the silver bullet to the 
	workforce shortage.  Trends like smaller families and greater 
	economic mobility among families impact the supply of informal 
	care.
	We cannot meet the demand for long-term care solely through 
	informal care.  Our dysfunctional healthcare system already 
	puts too much responsibility for long-term care services on 
	the family.  Medicaid and Medicare are enormously successful 
	at helping low-income and disabled individuals access 
	healthcare, but neither program is designed to address the 
	long-term care needs of millions of middle class Americans.  
	Medicare provides health insurance for seniors, as you know, 
	and the disabled, but benefits are time limited, and the 
	program excludes social supports.  Medicaid addresses the 
	long-term care needs of low-income Americans, but the income 
	eligibility requirements make it a program of last resort. 
	Many States have used Federal waivers to create home and 
	community-based services that substantially improve the 
	spectrum of long-term care choices available, but in most 
	States, the program has yet to shake the institutional bias 
	completely.  Washington State has done a very good job of
	rebalancing, so that we offer more home and community-based 
	services in place of nursing homes, but many States do not 
	have those choices.
	Unpaid or informal care complements paid or formal care, 
	since most consumers receive a mix of both over time.  Paid 
	care is an important source of respite for family members. 
	Paid care can also supplement the efforts of family members 
	during work hours.  Paid care can substitute for unpaid care 
	when individuals with multiple disabilities are physically 
	and emotionally too much for family members to handle, or 
	when family members simply burn out.
	I would like to shift gears for a moment and mention the 
	effort by several States to address the workforce shortage 
	through the creation of Medicaid consumer-directed care. 
	This arrangement, in which individual beneficiaries are 
	allowed to select, manage, and if necessary, dismiss workers, 
	offers beneficiaries greater autonomy and more choice. 
	Beneficiaries that take advantage of consumer-directed care 
	often have greater consumer satisfaction, because they get 
	the type of care they want when they want it, and no longer 
	are they stuck in bed waiting until an agency can provide 
	assistance.
	So consumer-directed programs can be problematic, too, 
	however.  Because the Medicaid beneficiary is the employer, 
	not the State that actually pays for services, workers are in 
	a very difficult position.  They are unable to increase their 
	wages or benefits, because their employer is indigent and 
	lacks the resources to make caregiving a sustainable job.
	SEIU has worked with Governors and policymakers in States 
	like Washington to develop a solution that allows for an 
	expansion of consumer-directed care.  We have created a 
	public agency--it is often called a public authority, or a 
	home care commission--that can serve as a co-employer for 
	the purposes of determining wages and benefits.  Consumers 
	retain the right to hire, fire, train, and supervise the care 
	provider, and the care is provided when, and in the manner 
	determined by the beneficiary.  But workers have a 
	co-employer, the State, with the resources to provide an 
	adequate wage and health insurance.  SEIU, representing the 
	workers, is then able to negotiate with States, acting as 
	the co-employer, for adequate wages and decent healthcare 
	coverage.  In California, Oregon, and Washington, the result 
	has been a significant expansion of the labor market for 
	direct care workers.
	And I want to say that really, when we are talking about 
	training and improving the workforce and meeting the needs 
	that we have before us, with Baby Boomers entering the 
	system, we have to look at wages and benefits and training 
	as a means to stabilize and professionalize the workforce.
	On the note of training, in Washington State, we have 
	problems with accessibility.  We are currently working with 
	the State to make sure that there is a program of training 
	that allows for portability of certification, so that you 
	can take that training certificate across various parts of 
	the long-term care continuum.  We are working with the State 
	to make sure that there are mentorship and apprenticeship 
	programs.
	But I think that I will close with the idea that in 
	Washington State, and this sort of puts an exclamation 
	point on the issue for the importance of training standards 
	across the States, is that a hairdresser is required by the 
	State to have 1,000 hours of training, a manicurist, 
	something over 600 hours, and a caregiver, just 32 hours.  
	So, on behalf of SEIU, I leave you with that thought.
	We appreciate the opportunity to express the concerns of 
	caregivers struggling to improve the care and quality of 
	life for their clients.
	[The prepared statement of Candace Inagi follows:]

Prepared Statement of Candace Inagi, Assistant to the President 
for Government and Community Relations, Services Employees 
International Union Local 775

Good morning Chairman Deal, Ranking Member Brown and other Members 
of the House Energy and Commerce Subcommittee on Health. My name is 
Candace Inagi. I am Assistant to the President for Government and 
Community Relations for Local 775 of the Service Employees 
International Union. SEIU represents 1.8 million workers nationally 
and is the nationï¿½s largest health care union.  
Local 775, based in Washington State, represents 28,000 home care 
and nursing home workers, including many family caregivers who are 
caring for Medicaid beneficiaries participating in the stateï¿½s 
program of consumer-directed care. 
We face a national shortage of direct care workers; at least 
35 states currently report serious shortages of caregivers. For 
individuals with chronic care needs, often the biggest barrier is 
finding an available home care worker.
It would be a mistake to think the shortage of long term care 
workers is a temporary phenomenon -- a function of the current 
business cycle. It is important to see the labor shortage for 
what it really is: a rational response of people to a labor 
market that often pays lousy wages and no benefits. The national 
average wage for a direct care worker is $8.18, but average annual 
income for home care workers ranges from $7,000 to $12,000 per year 
since few can find full-time work. 
We can expect the current shortage to get worse. The traditional 
long term care worker -- women between the ages of 25 and 45 -- 
have more economic alternatives.  BLS estimates that we will need 
an estimated 5 million additional direct care workers to fill 
current vacancies and meet the demand for additional services. 
Who will care for those with long term care needs? We must support 
informal caregivers and make it easier for friends and family to 
help with household activities, transportation and other chores that 
make it possible for those with disabilities to stay out of 
institutions. Home care and other kinds of non-medical assistance 
often require more patience, strength and sensitivity than technical 
skill. Because long term care is often the most intimate of hands-on 
care, many people are more comfortable having family members provide 
those services. 
But informal caregiving is not the silver bullet to the workforce 
shortage. Trends like smaller families and greater economic mobility 
among families impact the supply of informal care.  
We cannot meet the demand for long term care solely through informal 
care. Our dysfunctional health care system already puts too much 
responsibility for long term care services on the family. Medicaid 
and Medicare are enormously successful at helping low-income and 
disabled individuals access health care but neither program is 
designed to address the long term care needs of millions of middle-
class Americans. Medicare provides health insurance for seniors and 
the disabled but benefits are time-limited and the program excludes 
social supports. Medicaid addresses the long term care needs of 
low-income Americans, but the income eligibility requirements make it 
a program of last resort.  Many states have used federal waivers to 
create home and community based programs that substantially improve 
the spectrum of long term care choices available, but in most states, 
the program has yet to shake the institutional bias completely.
Unpaid or "informal" care complements paid or "formal" care since most 
consumers receive a mix of both over time. Paid care is an important 
source of respite for family members; paid care can also supplement 
the efforts of family members during work hours. Paid care can 
substitute for unpaid care when individuals with multiple disabilities 
are physically and emotionally too much for family members to handle 
or when families burn-out. 
I would like to shift gears for a moment and mention the effort by 
several states to address the workforce shortage through the creation 
of Medicaid consumer-directed care. This arrangement, in which 
individual beneficiaries are allowed to select, manage and if necessary 
dismiss workers, offers beneficiaries greater autonomy and more 
choice. Beneficiaries that take advantage of consumer-directed care 
often have greater consumer satisfaction because they get the type of 
care they want, when they want it. No longer are they stuck in bed 
until an agency decides to provide assistance.  
Consumer-directed programs can be problematic too. Because the Medicaid 
beneficiary is the employer -- not the state that actually pays for 
services -- workers are in an impossible position, unable to increase 
wages or improve benefits because their "employer" is indigent and 
lacks the resources to make caregiving a sustainable job.  
SEIU has worked with governors and policymakers in states like 
Washington to develop a solution that allows for expansion of 
consumer-directed care: creating a public agency (often called a 
public authority or a home care commission) that can serve as a 
co-employer for the purposes of determining wages and benefits. 
Consumers retain the right to hire, train, and terminate a personal 
care provider. Care is provided when and in the manner determined by 
the beneficiary. But workers have a co-employer -- the state -- with 
resources to provide an adequate wage and health insurance. SEIU, 
representing the workers, is able to negotiate with the state acting 
as the co-employer for adequate wages and decent health care coverage. 
In California, Oregon, and Washington, the result has been a 
significant expansion of the labor market for direct care workers. 
On behalf of SEIU, we appreciate this opportunity to express the 
concerns of caregivers struggling to improve the care and the quality 
of life for their disabled clients. 

Mr. Deal.  Well, thank you all.  I will get started.
	For the last about 8 and a half years, my wife and I have been 
	caregivers to our parents.  I am probably the only one on this 
	panel who had the pleasure and opportunity last night to put my 
	mother to bed, to take off her prosthesis, to put her teeth in 
	the right container and her hearing aid in the right place, 
	pull the covers up, and kiss her goodnight.
	I would have repeated that process this morning, had I not 
	gotten up, left at 5:30 to catch an airplane, so I could be 
	here with you.  Eight and a half years of caregiving takes its 
	toll.  But, since my mother will be 100 years old in six 
	months, I feel like that is the least that I could do for her. 
	My wifeï¿½s father, who also lives in the same house with us, 
	will be 93 in about less than 2 months.
	So, I know firsthand from whence I speak.  Caregiving is a 
	difficult job.  It is even more difficult to find someone who 
	can assist a family in doing that job.  Dr. Wright, I am very 
	intrigued with your testimony from the standpoint of the 
	project that you are working on for a model.  One of the most 
	difficult things that we have encountered is finding people 
	who can come into our home and do the day-to-day 9:00 to 
	5:00.  I have a joke saying that my wife and I work the 
	nightshift at the nursing home, because everything in our 
	life revolves around being there at 5:00, because that is 
	when the people that we have been able to hire go home, 
	and on weekends, it is up to us.
	It is very difficult to find people who will work, and we 
	canï¿½t get that national average of $8.  Ours is in the $10 
	range, plus we donï¿½t provide benefits, obviously, but just 
	finding somebody who is available.  The irony of it is that 
	of the three ladies that we have had work for us in the 
	last year, two of them have themselves been Medicare 
	eligible.  They are over 65, and it is very difficult to 
	find anybody at any age who is willing to do this.
	Now, I am intrigued also by your statement that we need to 
	get regulations out of the way, and I am totally in 
	agreement that what we are talking about, in most of these 
	in-home situations, is not medical care.  It is not medical 
	care in the context of what we think of as home healthcare, 
	either.  How do we go about that, and what regulations are 
	there, and whose regulations are they that we need to deal 
	with?
	Dr. Wright.  Well, I think it is primarily Federal regulations 
	about the home healthcare agencies, and that it basically, in 
	most jurisdictions in this country, most States for certain, 
	there has been no effort to get around this.  It results in 
	the fact that any agency that is not a certified home health 
	agency under Medicare, they may be a home care agency, or 
	they may a Center on Aging, like us.  We cannot send our 
	trained caregivers into the home to do anything but just 
	helper, chore sort of things.  In fact, for most, the specific 
	limitation is characterized by the admonition that you cannot 
	touch the individual.  So, we are talking about people who, 
	even when they have been through our training, 100 hours by 
	the way, if they are not working for a home health agency, if 
	they are working for anybody but themselves, if that 
	individual they are working for falls on the floor, they are 
	not allowed to pick them up.
	Now, you know, honestly, you know, if the family, this 
	individual, if you are contracting with an individual 
	contractor, of course, they can do anything, but then, if that 
	is the way much of the care is being delivered, this kind of 
	care is being delivered, there is no way to get, you know, we 
	do need this regulation, that is, we need standards to certify 
	these people, which in itself could incentivize people to 
	come in, but right now, even these organizations who, by the 
	way, then kind of double what it costs to the family, the 
	organizations that might hire these individuals, and provide 
	service to the family, or providing replacement if someone is 
	sick, and bond them, and that kind of thing, typically, they 
	will charge $18 an hour.  So, you havenï¿½t really helped the 
	worker or the family very much by doing that, but again, under 
	those regulations, those organizations canï¿½t let their workers 
	actually touch the patient and do anything.
	And they presumably claim to give some training, but in most 
	cases, what we have found is they hire these people.  They 
	give them a book, say if you canï¿½t find an answer in the book, 
	call the nurse who is on call for you, and they will try to 
	help out, and so, we are neither giving quality nor are we 
	giving access, and yet, a major, major part of the kind of 
	care is just what your family needed, and it usually happens 
	in a trigger event, like a hospitalization, where at the end 
	of that hospitalization, the doctor says either you will have 
	to be able to provide this care at home, or she is going to 
	have to go to a nursing home.  And then, the social worker 
	comes in, and says well, we have got a short list of people 
	that have done this kind of work in the past, and we will see 
	if we can get them in the next 24 hours.  And the family, under 
	that scenario, is happy just to have a warm body that will 
	show up.  They donï¿½t ask about training, and unless it just 
	happens coincidentally, that would be someone who is a retired 
	nurse, or used to be a CNA in a nursing home, they wonï¿½t get 
	any training.  And if someone has done this work long enough, 
	they think they are trained, even if they are doing all the 
	wrong things.
	So, to create this workforce, going forward for the long-term 
	care needs in home that we have, we have got to set some 
	standards, and in doing so, we also could develop a national 
	organization that might actually create some benefits for 
	these workers as well.
	Mr. Deal.  My time has expired, even though my questions have 
	not.  Mr. Pallone, you are next.
	Mr. Pallone.  Thank you, Mr. Chairman.  I wanted to ask 
	Ms. Inagi.  Inagi?
	Ms. Inagi.  Yes.
	Mr. Pallone.  Okay.  But again, I guess if anybody else wants 
	to comment, please feel free.
	First of all, today, we heard about a number of problems with 
	direct care workers: low wages, lack of benefits, coupled with 
	demanding work that is not always dependable, leads to high 
	turnover.  Basically, I just wanted you to tell me what is the 
	effect of such a high turnover rate on the quality of care 
	received by beneficiaries, and then, what recommendations do 
	you have to increase worker retention in these areas, and 
	reduce the high turnover rate?
	Ms. Inagi.  Well, I spoke a little bit to this issue earlier.  
	High turnover rates have every impact on quality care.  If you 
	think about Chairman Deal and his situation, or my own 
	situation, with my sister in providing her care, if I canï¿½t 
	rely on the person who I have hired to come in, and come in 
	consistently, that is a strain on not only the family, but the 
	client, who needs that stress the least in their lives.
	I think that when you are talking about improving turnover, 
	it comes back to the issue of what are we doing to improve the 
	workforce as a whole, with regard to wages and benefits and 
	access to training and mobility within the training program, 
	so that people arenï¿½t coming into a job where, perhaps, they 
	are making a little bit more than they can make at a hamburger 
	stand, or maybe making a little bit more, but they are coming 
	into an opportunity to be trained and move up through, perhaps 
	coming from a caregiver to a certified nursing assistant, and 
	then onward, and taking their training through the continuum 
	of care in other services.
	Mr. Pallone.  I had--I wanted--did you want to say something?  
	No.  Okay.  I just wanted to mention two possible, you know, 
	programs or changes that, you know, might be of benefit, so 
	if I could.
	One is from my district.  In my district, there is the 
	Visiting Nurseï¿½s Association of Central Jersey, the VNA as it 
	is called, recently implemented a Tele-Health program that 
	nurses can use to monitor patients, and this helps reduce the 
	demand on the VNA to provide care, and keeps the patients 
	actively involved in their care.
	Would any of you know about a similar model being adopted, and 
	the pros and cons of such a model?  I mean, the idea, from what 
	I understand, is that the patient gets a computer, and they 
	basically can interact with their caregiver, and it is like a 
	videoconference, essentially.
	Mr. Conner.  The one program that we have at the Red Cross, we 
	are affiliated with Lifeline.
	Mr. Pallone.  Yeah, I wanted to mention, you talked in the 
	beginning about your babysitting course, and my eldest daughter 
	took that course, and now she goes around and, well, she was 
	11 at the time getting babysitting jobs, because she is 
	certified by you guys.
	Mr. Conner.  She should be able to command a higher wage, too, 
	with that.  That is a real plus.
	Mr. Pallone.  At any rate--
	Mr. Conner.  And Chairman Deal, you are exactly the kind of 
	person, you and your wife, that we would encourage to take our 
	family caregiving program.  It is excellent, and teaches you all 
	the skills you need.  One program that we are very involved in, 
	and very proud of, is with an organization called Lifeline, and 
	it is somewhat similar to what you are talking about.  You may 
	have seen these services where you wear around your neck, or 
	around your wrist, a button, and it is connected to a call 
	center, this one happens to be in Massachusetts, and it is a 
	fantastic system.  If you fall, or something happens, you hit 
	that button, you are immediately connected.  They have, in 
	their computer, all the neighbors.  They have all the family 
	members, et cetera.  They can access 911 for you, so it is not 
	exactly the visiting nurses, but it is one way to be very 
	connected, and we really like that program.
	Dr. Wright.  I think these programs are being developed pretty 
	quickly.  I hear every time I go to a professional meeting, I 
	hear of a few others, and they are particularly addressed at 
	those healthcare needs of specific types of, especially 
	monitoring diabetes, or monitoring certain diseases.  At this 
	point in development, it doesnï¿½t address the basic caregiving 
	that we are talking about, but in terms of monitoring the 
	health status of, I think, they are very promising programs.
	Mr. Pallone.  I was just going to ask Ms. Inagi again, the 
	Washington State, there is this, in your home State, there is 
	this Washington State public authority with caregiver workers. 
	They have developed, under the State Medicaid program, an 
	innovative partnership with caregivers for the consumer-
	directed care, under Medicaid, that has this public authority 
	that acts as a co-employer with the beneficiary and helps them 
	manage.  Could you just talk about that a little bit?  I know 
	I am out of time, but maybe just quickly.
	Ms. Inagi.  Thank you for that question.  The public authority 
	acts as a co-employer, so that caregivers across the State 
	have the ability to negotiate for higher wages and benefits, 
	and other training standards, and other standards in 
	caregiving, like training.  It gives the opportunity for 
	consumers themselves to have a voice at the table.  It has 
	served to improve the standards of care, by making sure that 
	caregivers go through background checks, that certain standards 
	are met, that it has served to improve the quality of care for 
	consumers by developing a referral system that previously did 
	not exist, and is intended to be online and statewide.
	And I think that the most important contribution that we have 
	been able to see through this development is the beginning of 
	this professionalized caregiver workforce.  Again, caregivers 
	started off at just about $8.62 an hour, just a few years ago, 
	with absolutely no benefits whatsoever, no vacation time, no 
	sick time, so if they were sick themselves, they had to go to 
	work anyway, and put the client at risk.  And now, through the 
	public authority, workers have been able to, in the service of 
	improving care for their clients, negotiate for wages and 
	benefits.  They now have healthcare.  They even have dental 
	and vision, and are working towards better standards and 
	training as we speak.
	Mr. Pallone.  Thank you.
	Mr. Deal.  Mr. Allen, you are recognized for questions.
	Mr. Allen.  Thank you, Mr. Chairman.
	This doesnï¿½t want to come over toward me.  You have trained it, 
	Frank.
	Thank you all for being here today.  I just wanted to make a 
	couple of comments, and then ask a question.  I think that you 
	people may have covered this before, but when you look at 
	people, I think, too many people think Medicare is going to 
	take care of their long-term care, but in this country, that is 
	clearly not true.  About half of the revenues from nursing 
	homes comes from Medicaid, and then about a quarter was paid 
	out of pocket, 12 percent only by Medicare, and only about 10 
	percent was covered by private insurance.  So, I think the 
	issues, the broad issues that we are trying to figure out here 
	are where the burden of long-term care and planning should fall, 
	and whether Medicaid, which was designed to be a long-term 
	safety net for the poor, should really assume so much of the 
	cost.
	We have a new House Long-Term Care Caucus dedicated to working 
	in this area, and that is going to be chaired by Representative 
	Shelley Moore Capito, Earl Pomeroy, Nancy Johnson, and me.  And 
	we are going to be working in this area as much as we can to try 
	to develop some ideas.  I appreciate all that you have been, 
	that you said today.  I thought, Ms. Inagi, I would like a 
	couple of questions.
	My experience goes back to my father, who spent the last 2 years 
	of his life, or most of the last 2 years of his life, were in a 
	nursing home, so it wasnï¿½t a care at home situation that you 
	have been talking about in Washington, but it was a nursing 
	home, and I was struck by the staffing issues they had.  They 
	wound up, for reasons I am not quite sure, basically hiring 
	people from agencies, to whom they had to pay a great deal of 
	money, or at least they had to pay a great deal of money to the 
	agency.  Those workers were better paid than they could afford 
	to pay their own ongoing staff.
	And I donï¿½t know, it seems to me you have talked at some length 
	about this whole issue of improving wages and benefits for the 
	staff in nursing homes, and I think you have dealt with this 
	before, but the biggest barriers, one of them is funding.  Do 
	you have any suggestions, Ms. Inagi, or anyone else, for how 
	to structure the funding, so that ordinary staff for the 
	nursing homes actually get compensated at a level at which the 
	nursing homes can keep them?
	Ms. Inagi.  Thank you for asking that question.  We are doing 
	a lot of work this year, and hopefully in the years to come, 
	with good, responsible nursing home owners who are grappling 
	with just those questions.  Some private pay nursing homes can 
	afford to pay their workers better wages and better benefits, 
	just because of the fact that they are better resourced, while 
	the nursing homes who provide the lionï¿½s share of Medicaid 
	services really canï¿½t afford those same wages and benefits, 
	and at the same time, they are struggling with buildings that 
	are in disrepair, or that need improvement and modernization.
	Funding is the key.  We are working in the States to improve 
	funding, and make the case in our State that we need to look 
	at our vendor rates, and think more smartly about how we do 
	our Medicaid reimbursement systems.  Those are all incredibly 
	challenging situations that we are involved with, and I would 
	love to continue to work with your caucus, the Long-Term Care 
	Caucus, as we delve through some of these very issues.  We are 
	working very closely with the Governor, as well as, as we like 
	to call them, the techies at the different nursing homes, to 
	try and grapple with those questions.
	Mr. Allen.  If I could just add this.  Part of this is a State 
	problem.  Part of this is a Federal problem, but at both the 
	State and Federal level, the same thing is happening.  As 
	Medicaid costs go up at a rapid rate, and the feeling is we 
	canï¿½t deal with them, we here in the Congress are considering 
	ways to cut providers, to cut the reimbursement to providers, 
	and it is almost as if we treat hospitals and nursing homes 
	and every other provider the same way, and that leads to some 
	overpayments and underpayments in the system.  But also, at 
	the State level, when it comes budget time, the urge is to cut 
	payments to providers.  It is certainly what has happened in 
	my State of Maine.
	And you are working for the State of Washington, or in 
	Washington.  I mean, can you sort of describe for us how much 
	of this is a Federal issue, how much is a State issue, and 
	give us some guidance on that, and I would ask the same 
	question of the others who are here.
	Ms. Inagi.  It is all about the Federal issues.  We are all 
	looking to you, and are, at this point, very fearful about 
	those potential cuts.  We donï¿½t know how we will manage, but 
	it is driving some innovation, in terms of our looking at 
	programs like workerï¿½s compensation and Social Security, in 
	the sense that workers and employers both pay into a system 
	that would meet the needs of long-term care for the long 
	term, to put more money in where there is seemingly less 
	money every day.
	These are long-term solutions, not short-term solutions, 
	unfortunately.  But we want more money from you.  That is 
	what it comes down to.
	Mr. Allen.  Thank you.  Thank you all.
	Mr. Deal.  I am going to make a further observation and a 
	question, and I will extend the same time to both of you, 
	if you would like to participate in discussing this further.
	We are really talking about something that is two different 
	levels of what we are talking about here.  My situation is 
	with a mother and a father-in-law who are both retired 
	public schoolteachers, who are not, at 93 and 99, not 
	asking the Federal government or the State government for 
	a penny.  They have done it on their own, with the help of 
	their family, and we work at counter purposes here 
	sometimes.  If we ratchet up the reimbursement levels, as 
	Ms. Inagi would like for us to do, and that is certainly 
	a laudable and understandable position for the worker, if 
	we ratchet it up from the Government side, of requiring 
	training and certification, we ratchet up at the same time 
	the reimbursements that people are having to pay for those 
	services.
	If we do that, we create a disincentive for families like 
	ours, and many, many others across the country, to try to 
	do it themselves, and not make their parents a burden on 
	the State or the Federal government.  But because there are 
	limited resources, they can only do so much, and they can 
	only pay so much, and then, they are forced into the choice 
	of saying okay, well, we will just go ahead and make sure 
	that we make mom or dad Medicaid eligible, and we wonï¿½t worry 
	about the cost, because the Government is going to have to 
	pick it up anyway.  That is the dilemma that many families 
	across this country are in.  They want to keep their families 
	at home, in a home setting.  They want to be able to do it, 
	and yet, they are caught in this conflict.
	Now, my question is this.  As we in the previous panel talked 
	about trying to incentivize private systems, whether it be 
	primarily long-term care insurance, and some other alternatives 
	to funding for this kind of care, are most long-term care 
	insurance policies keyed to the same regulatory scheme that 
	State and Federal programs are, in terms of certification for 
	the individual?  I have looked at some policies, and they all 
	say you can pick your caregiver, et cetera, et cetera, but I 
	have a feeling that most of them, if you really would look at 
	the fine print, are keyed to being employees that are going to 
	be paid through the insurance policy, that are keyed to the 
	level of control that the Federal or State policies do.  Is 
	that right, Dr. Wright?
	Dr. Wright.  Mr. Deal, my understanding is that that is the 
	way it started out years ago, with the first long-term care 
	insurance policies.  My information is that most of the better 
	policies now do cover these in-home care workers without the 
	qualifying skilled nursing.
	Mr. Deal.  Which has a dangerous side to it as well, obviously.  
	And that is what all of you, I think, have expressed concern 
	about.
	One of the things I recently learned that my State is doing 
	through some programs in their State vocational technical 
	schools is they are beginning to offer, in some of these, a 
	limited training program for home healthcare workers, for 
	this kind of environment.  I think it is a 10 week course, 
	they told me, and they do get a certification of a sort.  I 
	donï¿½t know the extent of what that is.  Is that similar to what 
	you have been looking at?
	Dr. Wright.  That is similar to what we are doing, and I do 
	think the community colleges around this country are a great 
	resource for the kind of training, you know, the dissemination 
	of this kind of training.
	Mr. Deal.  Well, I do, too, and what we are also dealing with 
	is difficult to categorize sometimes.  There are individuals 
	who would like to do this kind of work, who would be willing 
	to accept this kind of work.  Many of them are in that 
	retirement stage of their life, but want to come back, and 
	need additional income, and are physically able to do so, 
	and I think we are going to have a continuing number of those 
	individuals past 65, who are going to be physically able to 
	do a lot of things, and this is one area where I think they 
	can be encouraged to participate.
	So, my concluding comment is, I want to thank all of you for 
	what you are doing.  I think you are on the cutting edge of 
	an issue that is going to mushroom substantially, and I thank 
	you all, and would urge you to share with this committee any 
	further developments, especially Dr. Wright, as you begin to 
	model this program that you are talking about, I think it 
	would be the kind of information that we would all like to 
	have.
	And I will stop, and Frank, I will let you, Mr. Pallone, I 
	will give you time to do it.
	Mr. Pallone.  I donï¿½t have any questions.
	Mr. Deal.  Okay.
	Mr. Pallone.  Thank you.
	Mr. Deal.  Well, thank you.  I appreciate your being here, 
	too, Frank.  Thank you for being here.  This has been a long 
	day, I know, for you, longer than you probably anticipated, 
	because of our votes, but we do appreciate your input, and 
	urge you to continue to supply us with information in the 
	future.
	And with that, the hearing is adjourned.  Thank you.
	[Whereupon, at 5:45 p.m., the subcommittee was adjourned.]

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