[Senate Hearing 111-64]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 111-64
 
                 HEALTH CARE REFORM IN AN AGING AMERICA

=======================================================================



                                HEARING

                               before the

                       SPECIAL COMMITTEE ON AGING
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                             MARCH 4, 2009

                               __________

                            Serial No. 111-2

         Printed for the use of the Special Committee on Aging



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html




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                       SPECIAL COMMITTEE ON AGING

                     HERB KOHL, Wisconsin, Chairman
RON WYDEN, Oregon                    MEL MARTINEZ, Florida
BLANCHE L. LINCOLN, Arkansas         RICHARD SHELBY, Alabama
EVAN BAYH, Indiana                   SUSAN COLLINS, Maine
BILL NELSON, Florida                 BOB CORKER, Tennessee
ROBERT P. CASEY, Jr., Pennsylvania   ORRIN HATCH, Utah
CLAIRE McCASKILL, Missouri           SAM BROWNBACK, Kansas
SHELDON WHITEHOUSE, Rhode Island     LINDSEY GRAHAM, South Carolina
MARK UDALL, Colorado
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado
ARLEN SPECTER, Pennsylvania
                 Debra Whitman, Majority Staff Director
             Michael Bassett, Ranking Member Staff Director


                                  (ii)




                            C O N T E N T S

                              ----------                              
                                                                   Page
Opening Statement of Senator Herb Kohl...........................     1
Statement of Senator Mel Martinez................................     3

                                Panel I

Statement of Thomas Hamilton, Director, Survey and Certification 
  Group, Center for Medicare and Medicaid Services, Washington, 
  DC.............................................................     5
Statement of Karen Timberlake, Secretary, Wisconsin Department of 
  Health Services, Madison, WI...................................    26
Statement of Holly Benson, Secretary, Florida Agency Fore Health 
  Care Administration, Tallahassee, FL...........................    31

                                Panel II

Statement of Henry Claypool, Washington Liaison, Public Health 
  Institute, New York, NY........................................    43
Statement of Melanie Bella, Senior Vice President for Policy, 
  Center for Health Care Strategies, Hamilton, NJ................    58
 Statement of Judy Feder, Senior Fellow, Center for American 
  Progress, Washington, DC.......................................    64

                                APPENDIX

Prepared Statement of Senator Robert P. Casey, Jr................    85
Testimony of Richard Grimes, the President and CEO of Assisted 
  Living Federation of America...................................    86
Written Testimony of Charles W. Gould, Chief Executive Officer, 
  Volunteers of America..........................................    89
Statement submitted by AARP......................................    94

                                 (iii)




                 HEALTH CARE REFORM IN AN AGING AMERICA

                              ----------                              --



                        WEDNESDAY, MARCH 4, 2009

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m. in 
room SD-562, Dirksen Senate Office Building, Hon. Herb Kohl 
(chairman of the committee) presiding.
    Present: Senators Kohl [presiding], Wyden, Udall and 
Martinez.
    Index: Senators Kohl, Martinez, Udall and Wyden.

        OPENING STATEMENT OF SENATOR HERB KOHL, CHAIRMAN

    The Chairman. Well, good morning to everybody. It's so good 
to see so many of you here today. I know many of you come quite 
a long distance to be at this hearing. So we express our 
deepest appreciation to each and every one of you who have made 
this trip to be with us.
    We're pleased to welcome everybody here to this first 
hearing on the issue of national health reform. Our message 
today is a simple one. Any serious health reform proposal must 
address long-term care. With America aging at a rapid rate and 
with the high and rising cost of caring for a loved one, it's 
crucial that long-term care services are addressed.
    Today we'll initiate a conversation about how we can work 
together to improve long-term care services while also taking 
steps to make them more cost effective. We all know family 
members, friends and neighbors who have struggled to recover 
from a bout of severe illness or a serious accident and need 
care for a prolonged period or even for the rest of their 
lives. These individuals need long-term care services and 
supports to help them with day to day activities.
    But let's be clear that the ultimate goal of long-term care 
is to allow older or disabled Americans to live as 
independently as possible. However, as we know, one size does 
not fit all. Given the variety of circumstances requiring long-
term care, any update to our current system must be flexible, 
and must offer choices tailored to everybody's needs. With the 
help of our outstanding witnesses today we're going to try to 
spark some creative ideas about how this can be accomplished in 
a way that will also get costs under control.
    Today we'll be focusing most of our attention on the 
provision of long-term care through Medicare, a Federal 
program, and Medicaid, which is administered jointly by the 
Federal and the state governments. Some states have expressed 
concern that their aging and disabled Medicaid populations are 
swamping their budgets. This financial strain will only worsen.
    Yet a handful of states, including my own state of 
Wisconsin, are addressing long-term care in a proactive, 
thoughtful manner. These states have made important strides in 
not only expanding the range of services, but also in 
controlling costs. Though it's not easy, it is achievable. It 
requires strong leadership and political commitment.
    We will hear today from HHS about a range of innovative 
grant programs that the Federal Government has created to 
provide several states with financial resources and incentives 
to broaden the range of Medicaid services offered to roughly a 
million people in their homes and communities. However, we need 
to make sure that our economic troubles do not lead to 
diminished services. The recently enacted stimulus bill 
provides states with an additional $87 million dollars in 
Medicaid funding. I believe some of this funding should be used 
by states to strengthen these popular and vital home and 
community-based programs.
    We also need to find ways to coordinate and approve care 
for the more than seven million beneficiaries who are eligible 
for both Medicare and Medicaid, which includes some of the 
sickest and the poorest of our citizens. The care that these 
dual eligibles receive is very often not coordinated well and 
is very costly. Today we'll examine ways to deliver more 
comprehensive and fully integrated care at a lower cost.
    We should acknowledge that the rising costs of health care 
and long-term care do not only affect the government. More than 
one-fifth of all long-term care spending comes directly out of 
the pockets of individuals and their family members. We also 
know that tens of millions of family caregivers provide long-
term care to loved ones every day, yet have little or no access 
to support for themselves. As part of our long-term care 
strategy, we need to provide support for family caregivers 
through entities such as the Aging and Disability Resource 
Centers which were pioneered in Wisconsin.
    On that note, I recently introduced bicameral legislation 
to expand education and training opportunities in geriatrics 
and long-term care for licensed health care professionals, 
direct care workers and family caregivers. Our country is 
facing a severe shortage of health care workers who are well 
trained and prepared to care for older Americans. This too must 
be addressed by the President and by Congressional leaders as 
they move forward with national health care reform. My 
colleagues on the Finance and HELP Committees do not have an 
easy task ahead. But my hope is that the lessons we learned and 
the ideas we generate in this Committee will be a resource for 
them.
    We thank our witnesses for being here. Before I turn the 
microphone over to the Ranking Member, Senator Martinez, I have 
a statement from Senator Edward Kennedy.
    He writes, ``A major goal of health reform must be to give 
our citizens a chance to lead full and independent lives. That 
means that reasonable health care should include services to 
help individuals maintain their function and prevent 
deterioration of their condition, just as it should cover 
services for acute illness and injury. So I join Senator Kohl 
in expressing the importance of including long-term services 
and supports in any health care reform initiative. I applaud 
him for holding this hearing today.''
    We thank Senator Kennedy for that inspirational message. We 
turn now to Senator Martinez from Florida who is the Ranking 
Member.

       STATEMENT OF SENATOR MEL MARTINEZ, RANKING MEMBER

    Senator Martinez. Thank you, Mr. Chairman. I wanted to 
welcome all of you who've joined us here today for this 
important hearing. I want to thank Chairman Kohl for calling 
this hearing and focusing attention on this very important 
issue. The issue of what we here at the Federal level can do to 
enhance and improve long-term care is a very timely subject.
    The issue of sustainable quality and long-term care in 
America is an important issue for most states. For states like 
Florida it's absolutely a vital issue. Looking at the 
demographic you will see the percentage of Floridians over the 
age of 65 is nearly 40 percent higher than the national 
average. The number of Floridians age 85 and older--those most 
likely to need more acute, long-term care services--is nearly 
two times the national average.
    With the annual growth of Florida's low-income elderly 
population at 80 times the national average, more focus has to 
be put on long-term care issues and ensuring that the elderly 
and disabled will be able to age with dignity and peace of 
mind. I believe Florida is a microcosm of what America will 
look like in the coming decades. So I look forward to working 
with President Obama and my colleagues in the Senate to address 
these issues in a bipartisan way.
    While reform is desperately needed, we also need to change 
the way reform has been talked about in the past. The 
discussions of Medicaid reform both here in Washington and in 
state capitals tends to involve only four options, cut 
eligibility, cut reimbursement rates, cut benefits or ask 
Congress for more money. Rather than remaining focused on these 
limited choices I think we should begin our discussion with a 
focus on what is best for patients. We must look for ways to 
improve the consistency and coordination of care to best assist 
this vulnerable population.
    Ultimately our goal should be to improve the health of low-
income Americans and ensure that those in need of services have 
access to the services they need. An improved Medicaid long-
term care program will be able to serve more people with better 
results. We should be giving state officials a range of options 
to pursue that will improve the delivery of care including 
support for innovations which prevent people in need of long-
term care from spending all of their savings and then have no 
other option but to go onto Medicaid to access care.
    I know that my state of Florida has been working on these 
issues and remains focused on finding new ideas to guarantee 
success. Florida has chosen to invest in initiatives focused on 
ensuring our elderly and disabled will be able to age with 
dignity. We must work to transform the health care 
infrastructure so that it is focused on the quality of life and 
on a person's needs rather than those of state or Federal 
accountants.
    We ought to build on the innovation occurring in some 
states and ensure patients are in control of how and where they 
receive services. Florida, like many states, has experimented 
with consumer driven and nursing home diversion models of care 
delivery with positive results and has saved money while 
flattening the growth curve for nursing home bed days. Florida 
has one of the original cash and counseling demonstration 
states and now has more than 1,000 consumers managing home-
based services to meet their long-term care needs. By focusing 
on what is best for each patient and providing flexibility, we 
can create a model that works for an aging population in states 
across the nation.
    I thank you for being here. I thank you for this hearing, 
Mr. Chairman. I look forward to hearing the testimony from the 
witnesses.
    The Chairman. Thank you very much, Senator Martinez. We 
will have the privilege today of hearing from experts as well 
as many experienced public officials.
    Our first witness today will be Thomas Hamilton from the 
Centers for Medicare and Medicaid Services. Mr. Hamilton is the 
Director of the Survey and Certification Group within the 
Center for Medicare and State Operations. He previously served 
as the Director of CMS' disabled and elderly health programs. 
In that capacity he led the development of Medicaid policies 
for low-income elderly and adults with disabilities. For 21 
years prior to joining CMS, Mr. Hamilton was one of the 
principal architects of the Wisconsin long-term care system.
    Our second witness today will be Karen Timberlake. She 
serves as Wisconsin's Secretary of Health and Human Services. 
Ms. Timberlake provides direction for the state's health 
agency, which is charged with ensuring the health, safety and 
well being of Wisconsin citizens while also emphasizing 
prevention and protecting consumers.
    Ms. Timberlake also chaired the Governor's task force on 
autism in 2004 and served on the state's group insurance board 
from 2000 through March 2007. We welcome you, Madame Secretary, 
and look forward to your testimony.
    Senator Martinez, our next witness is from Florida.
    Senator Martinez. Yes, Mr. Chairman. I want to very much 
welcome Secretary Holly Benson, who is here with us today from 
Florida. Secretary Benson is a great Floridian and a good 
friend, and someone who has a long and distinguished career in 
public service.
    She has served as Governor Charlie Crist's Secretary of the 
Agency for Health Care since 2008, February of 2008. She is 
also the former Secretary for the Florida Department of 
Business and Professional Regulation.
    Before serving on the Governor's Cabinet, she practiced law 
in her hometown of Naples. She is a graduate of Dartmouth 
University, and has her law degree from the University of 
Florida.
    Secretary Benson, we're so happy to have you here today. 
Welcome.
    The Chairman. Thank you. Mr. Hamilton, we'd love to hear 
from you.

      STATEMENT OF THOMAS HAMILTON, DIRECTOR, SURVEY AND 
    CERTIFICATION GROUP, CENTERS FOR MEDICARE AND MEDICAID 
                    SERVICES, WASHINGTON DC

    Mr. Hamilton. Good morning, Chairman Kohl, Senator 
Martinez. Thank you for initiating a national conversation 
about improving the nation's long-term care system. Such a 
conversation is very timely. Within 10 years the proportion of 
elderly people in this country is expected to increase from the 
current 13 percent to 16 percent and then to 19 percent a mere 
10 years after that.
    To draw forth the implications of this trend for our long-
term care system, the U.S. Census Bureau estimates that about 
4.2 percent of elderly people require help with activities of 
daily living such as bathing, dressing, toileting and 
ambulating. But, the need for direct assistance increases more 
than threefold to 14.4 percent for those aged 75 plus. Among 
the elderly it is precisely the cohort age 75 plus that is 
fastest growing.
    While the challenges are considerable, so too, are the 
opportunities for Federal leadership. So too are the 
opportunities for Federal partnership with States and with 
members of the aging and disability communities. We have seen 
such leadership and partnership before.
    In 1981, for example, Congress observed the pioneering work 
of a few States such as Oregon, Wisconsin and New York as they 
took initiative to demonstrate the feasibility of statewide, 
organized, community-based, long-term care systems. Congress 
subsequently enacted Section 1915(c) of the Social Security 
Act, otherwise known as the home and community-based service 
waiver program, to provide Medicaid matching funds and make 
such community-based systems a national possibility rather than 
simply a local phenomenon. More recently, Congress provided 
states with Real Choice Systems Change Grants, year after year, 
and enacted a self-directed services option for State Medicaid 
plans.
    Congress enacted the largest Medicaid demonstration program 
in history in 2005, the $1.75 billion dollar ``money follows 
the person rebalancing initiative.'' This initiative is helping 
States transition to the community more than 36,000 people who 
have been residing in nursing homes or other institutional 
settings.
    Have these partnerships with states made a difference? 
Unequivocally, yes. Consider, for example, the problem of 
institutional bias in Medicaid. In 1981 the national proportion 
of Medicaid funds devoted to community-based care ranged from 
10 to 20 percent. The rest was spent on institutional care. By 
2007, however, the community care proportion nationally had 
increased to 47 percent.
    Have these partnerships with states been cost effective? 
Yes. To illustrate this point, as the Chairman indicated, prior 
to my Federal career I had the privilege of directing the 
Wisconsin ``community options program'' from its start in 1981 
to 1998. During that time the elderly population in Wisconsin 
increased by 30 percent.
    But the Medicaid population in nursing homes declined by 17 
percent. Community options made a difference. An important part 
of the cost effectiveness of community programs is the greater 
involvement of family and friends in such programs, engendering 
a greater amount of control of the use of funds that the 
programs permit people who require long-term care, as in the 
programs indicated by Senator Martinez.
    As a colleague said to me in 1980 when we were first 
designing our program, I don't think we can go wrong trusting 
the cost containment instincts of 87 year old widows. He was 
right. A few years later I actually found myself visiting with 
an 87-year-old widow who went by the nickname of Frenchie.
    As we sat around her kitchen table in the trailer in which 
she and her husband had raised eight children--the trailer in 
which we were helping her age in place--her case manager asked 
her, Frenchie, ``how's that new prosthesis working out?'' 
Frenchie reached down and unsnapped her leg, plunked it on the 
kitchen table and said, ``it don't fit too good.'' [Laughter.]
    Mr. Hamilton. ``Well,'' beamed her young case manager, 
``we'll just get you another one.'' ``No,'' replied Frenchie. 
``You've given me enough. You spend that money on someone 
else.''
    In the January 2009 issue of Health Affairs, Steven Kay 
examined this very question of cost containment overall for the 
long-term care system and reached a similar conclusion about 
the cost containment effects of community programs nationally. 
Sadly there remain serious problems. While a few states devote 
up to 73 percent of their long-term care dollars to community 
supports, in many other states the proportion is less than 30 
percent. In one state it is a mere 13 percent.
    There are also serious challenges to the ability of some 
community programs to function as true, effective alternatives 
to institutional care. Nursing homes, after all, are obliged by 
law to offer care that is comprehensive and reliable, and 
operates in a system in which complaints are investigated by 
independent, trained individuals with authority to require 
correction if the complaint is substantiated. Effective 
community programs match those attributes and more. They tend 
to be comprehensive with a wide array of potential services and 
supports.
    These programs also tend to be organized and individually-
tailored programs, organizing what can otherwise be a confusing 
array of community services. They offer the beneficiary a 
coherent package of understandable supports tailored to each 
person's needs and preferences. They offer the ongoing help of 
a case manager to access the services they need and resolve any 
problems that might arise.
    Effective programs are community integrated. They promote 
active participation and community life and the maintenance of 
relationships with family, friends and community members. For 
younger people with a disability, they support employment such 
as helping with needed transportation to the job site.
    They are person centered. The programs make the elderly 
person, or a person with a disability, the center of services, 
funding and decisionmaking. This is the essence of ``money 
follows the person'' rather than the person being required to 
live where the money is.
    They tend to be cost effective and offer flexible funding. 
By maintaining the involvement of family and friends, providing 
flexibility in the use of funds in a manner that promotes cost 
effective solutions, and keeping decision-making close to the 
individual, community programs can provide very cost effective, 
long-term care that have helped states restrain the growth of 
Medicaid expenditures.
    Last, they tend to be quality committed. The programs have 
internal quality improvement systems, formal mechanisms by 
which complaints must be investigated. A formal system by which 
independent, trained individuals visit with program 
participants in their own homes to review the quality of care, 
first hand.
    Chairman Kohl, Senator Martinez, thank you for the 
opportunity to share these thoughts with you today. I would 
welcome any questions you may have.
    [The prepared statement of Mr. Hamilton follows:]


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    The Chairman. Thank you very much, Mr. Hamilton. Ms. 
Timberlake.

STATEMENT OF KAREN TIMBERLAKE, SECRETARY, WISCONSIN DEPARTMENT 
                OF HEALTH SERVICES, MADISON, WI

    Ms. Timberlake. Good morning, Chairman Kohl, Mr. Martinez 
and Committee Members. It's my pleasure to be with you today to 
talk a little bit about the future of long-term care. In 
particular what Wisconsin has been doing over a decade or more 
to really lead the way in this area.
    I also would like to take the opportunity to thank you, 
Chairman Kohl, for your support of our innovative ``senior 
care'' program which offers affordable prescription drug access 
for Wisconsin seniors. We look forward to a partnership with 
you and with the new Administration to make sure that that 
program continues.
    Mr. Hamilton has certainly set the stage for you well in 
terms of the demographic challenges that are facing Wisconsin, 
as they are every other state. What I think we have seen in 
Wisconsin-- not only the ``community options'' program that Mr. 
Hamilton spoke so eloquently about, but also our innovative 
Family Care and Family Care partnership and Aging and 
Disability Resource Center programs, is that we can, in fact, 
provide more and better care to our frail elders and to people 
with disabilities.We can do it in a cost effective way by 
focusing on four really key principles.
    One is consumer choice, making sure that individual 
consumers achieve their desired outcomes. How do they want to 
live? How do they want to work? How do they want to spend their 
time? That really is the center of what we try to do for people 
as we design their long-term care needs.
    Second, we focus on access. The ``family care program is in 
fact, a Medicaid state entitlement. It serves all who qualify. 
In Wisconsin we are well on our way to eliminating the 
thousands of person long waiting lists for home and community-
based services.
    Third, Family Care and related programs have an emphasis on 
quality. We want to make sure that as people are supported in 
the community that the care that they receive is of the highest 
quality, that their needs are met, and that we make sure that 
they are in fact achieving the outcomes that they desire for 
themselves.
    Fourth, Family Care is cost effective. We actually are able 
to serve more people. We're able to eliminate waiting lists 
within the confines of our Medicaid long-term care budget which 
right now accounts for more than half of the dollars that we 
spend on Medicaid. So while the proportion of spending on long-
term care in the Wisconsin Medicaid program is unlikely to 
change, the way those dollars are distributed is in fact being 
rebalanced from a heavy emphasis on institutional settings to a 
much heavier and growing emphasis on community-based settings.
    Family Care does all this by combining the dollars that are 
available to spend on long-term care services and certain 
health care services like home health care, skilled nursing 
care where it's needed, mental health services, physical and 
speech therapy, putting all of those dollars, if you will, into 
one purse that can then be used to design a care plan for each 
individual consumer. That care plan is designed with the 
consumer's engagement and with a multi-disciplinary care team 
that includes in every case a social worker and a registered 
nurse. Where the consumer has other needs, other experts are 
brought into that care team.
    So what we find is again, by putting consumer choice and 
consumer desired outcomes at the center, by bringing that 
multi-disciplinary care team together, we are able to identify 
the most cost effective ways of achieving the outcomes the 
individual member desires. For people who are dually eligible 
for Medicaid and Medicare, we also have in Wisconsin what we 
call the ``family care partnership'' program which takes the 
Medicaid long-term care services and also takes acute and 
primary care services offered under Medicare and bundles all of 
that into a capitated rate that can then be used to provide not 
only the long-term care services that people need, but also 
fully integrated care management of their medical needs as 
well. That similarly is providing excellent support for people 
with some of the most acute needs in our state.
    The front door to all of these services, if you will, is 
our network of ``aging and disability resource centers'' that 
many of you have mentioned. The benefit of these centers in our 
view is that they really emphasize prevention. So the goal of 
this effort really is to make sure that we can provide all the 
long-term care services that people need through the publicly 
funded system. But a secondary goal, which is just as 
important, is that we help people avoid needing those publicly 
funded, long-term care services for as long as possible.
    So we want people to remain healthy. We want people to 
remain independent. We want people to be able to make good 
choices about their own assets and how they might choose to 
support themselves.
    So anyone in Wisconsin is eligible to come to an Aging and 
Disability Resource Center to get basic information about long-
term care options that might be available to them. To get 
questions answered about prescription drug benefits, about ways 
to access good preventive services. They also can have a 
benefits counseling and assistance in enrolling in the various 
benefit programs that are available to this population. Then 
should they be eligible for Family Care or Family Care 
Partnership the Aging and Disability Resource Center will help 
them actually enroll in those programs. So we think that 
further expansion and further support of Aging and Disability 
Resource Centers would be an excellent focus for this Committee 
and for the Congress' work as it considers what to do with the 
future of Older Americans Act funding.
    So as we all know, and I think everyone in the room agrees, 
the future of long-term care in this country and certainly in 
Wisconsin is not about the nursing home of the future. It is 
about the community of the future. It really is a question of 
how can we make sure that we can provide the right care to each 
individual consumer in their home, if possible, in another 
community setting, if possible, while making sure that their 
health is maintained, and that their independence is maintained 
to the greatest extent possible.
    We, in Wisconsin, under Governor Doyle's leadership with 
Chairman Kohl's support, are very proud to be among the leading 
states in this area. I thank you very much for the opportunity 
to speak with you briefly today.
    [The prepared statement of Ms. Timberlake follows:]
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    The Chairman. Thank you very much, Ms. Timberlake. Now we 
turn to Ms. Benson.

STATEMENT OF HOLLY BENSON, SECRETARY, FLORIDA AGENCY FOR HEALTH 
              CARE ADMINISTRATION, TALLAHASSEE, FL

    Ms. Benson. Thank you, Mr. Chairman, members, Senator 
Martinez. Thanks very much for the invitation to join you 
today. Ensuring access to quality care and empowering seniors 
with tools to manage their care have long been priorities in 
Florida. On behalf of Governor Crist, I would like to thank you 
for your partnership in our efforts.
    Today I've been asked to give you an overview of several 
programs in Florida, the Cash and Counseling Program, the 
Nursing Home Diversion Waiver and the PACE Program. The 
flexibility offered by these programs has served Florida well. 
It has allowed us to meet the needs of a diverse range of 
beneficiaries.
    Senator Martinez put the Florida problem in context. We're 
home to 18.3 million residents. Seventeen percent of our 
population is 65 or older as compared to 12.6 percent of the 
Nation as a whole.
    We serve 2.3 million Medicaid beneficiaries. Fifteen 
percent of them are 65 or older. They account for 27 percent of 
our expenditures.
    In order to meet the needs of the most vulnerable, Florida 
sought several waivers. Our goal in seeking these waivers was 
to empower Medicaid beneficiaries to have more control over 
their care. Provide them with the most appropriate and better 
coordinated care. Use taxpayer's resources most responsibly.
    The first program I'd like to discuss is the Cash and 
Counseling Program. This program gives consumers who qualify 
for home and community-based assistance with a personal care 
monthly allowance that they may use to hire workers and 
purchase care related goods and services. The pilot began in 
2000 as a Robert Wood Johnson grant and now serves over 1,100 
people.
    Mathematica Policy Research Institute conducted an 
independent evaluation of this program and they made a number 
of findings. But one of them is particularly important. 
Treatment group members those who purchased their own services 
were more likely than control group members to have their care 
needs met, to be satisfied with their care, and to report that 
the program had greatly improved their lives. This program has 
been successful in empowering our beneficiaries, increasing 
their satisfaction and containing costs. We're in the process 
of applying to expand enrollment in the waiver.
    The second program I'd like to discuss is the Nursing Home 
Diversion Waiver. It is broader than the Cash and Counseling 
Waiver and is designed to provide frail elders with an 
alternative to nursing facility placement by offering 
coordinated acute and long-term care services to frail elders 
in a community setting. Under this program, applicants 65 and 
older who are dually eligible for Medicaid and Medicare Parts A 
and B and who meet certain facility criteria, can choose to 
continue living in their own homes or in community settings 
such as an assisted living facility.
    The waiver provides case management, for acute care and 
long-term care services. All participants select a case manager 
who helps them develop a care plan with a nursing home 
diversion provider. These service providers are managed care 
organizations that are approved for each county.
    Florida's Office of Program Policy Analysis and Government 
Accountability reviewed the diversion program and found that 
the program successfully delayed participants entering nursing 
homes. It also found that participants who entered a nursing 
home for an extended stay had shorter stays on average than 
similar non-waiver clients.
    The final program that I'd like to discuss is the program 
of all inclusive care for the elderly, which I'll refer to as 
the PACE program. This program is a capitated benefit that 
features a comprehensive service delivery system and integrated 
Medicare and Medicaid financing. Within the capitated rate, 
providers have flexibility to deliver all services that 
participants need rather than being limited to those that are 
reimbursable under the Medicare and Medicaid fee-for-service 
systems.
    This program allows beneficiaries to continue living at 
home while receiving services rather than being placed in a 
nursing home. PACE organizations provide primary care, social, 
restorative and support services for Medicaid and Medicare-
eligible individuals aged 55 and older who meet nursing home 
level of care criteria. PACE programs provide social and 
medical services primarily in an adult day health center 
supplemented by in-home and referral services in accordance 
with the participant's needs.
    All Medicare and Medicaid services must be available, 
including personal care, acute care services, recreational 
therapy, nutritional counseling, meals and transportation. The 
services also include adult day health care, home care, 
prescription drugs, nursing home and inpatient care.
    PACE, nursing home diversion and consumer directed care 
represent three of the ways that we have used the flexibility 
you have granted us to meet the needs of our Medicaid 
beneficiaries. Through these programs we have allowed 
beneficiaries to design benefit packages that are more tailored 
to meet their needs and that are better integrated. We have 
allowed more beneficiaries to receive care in their homes and 
institutional settings. We've increased consumer satisfaction 
and we have not increased costs to taxpayers.
    Thank you, Mr. Chairman, Senators.
    [The prepared statement of Ms. Benson follows:]
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    The Chairman. Thank you very much, Ms. Benson.
    Senator Martinez, would you like to start the questioning?
    Senator Martinez. Thank you, sir. I appreciate that very 
much. I want to thank all the witnesses for the very good 
testimony you've given us today.
    I wanted to just maybe follow up with Secretary Benson and 
ask you, Secretary, how do you believe that the Federal 
Government can help to better support your community-based care 
initiatives through Medicare and Medicaid?
    Ms. Benson. Well, Mr. Chairman you all have done a really 
nice job of doing that. I think you have heard that we've had a 
lot of flexibility. These are just some of the programs that we 
have offered.
    Ms. Timberlake talked about some of the home and community-
based services. We've seen some great success with that. We 
have seen that by offering those kinds of services you can also 
decrease the cost of the Medicaid program.
    I think some of our concerns internally are how do we 
incentivize States to achieve those savings in our home and 
community-based services and share those savings with the 
Federal Government. So we look for ongoing partnerships in 
those efforts.
    Senator Martinez. You know I'm intrigued by the program 
that where you allow a case worker, a case manager, if you 
will. How is that working? Is that an experience, Ms. 
Timberlake, that you also have shared in Wisconsin? I mean, 
that to me seems to be a very, very good way of allowing an 
individual to have some flexibility in the way they get their 
care while at the same time keeping costs down.
    Ms. Timberlake. Right. Absolutely. I think one of the 
common themes that's cutting across all the health care reform 
discussions including the discussion of long-term care reform 
is about doing the best possible job of care management and 
case management.
    I think we all would agree that lots of money is being 
spent. The question is, is it being spent on the right services 
for people at the right time and in the right setting? So what 
we have found with Wisconsin's Family Care program and with the 
Partnership program is that it really is that inter-
disciplinary team that works with the individual consumer, and 
with a family member, if that's appropriate.
    As I said, it always includes a social worker and a 
registered nurse. Because even in the long-term care only side 
of the equation many of these consumers have health needs that 
need to be well managed and well addressed. So by putting that 
inter-disciplinary care team together, by working with that 
individual consumer, again at the level of goals and of 
outcomes that are desired to be achieved, the care team can 
then work through with the consumer what is the most cost 
effective way of achieving those desired goals.
    I'll give you a real concrete example. We had a consumer 
who was living independently in her own apartment. One day she 
came to her care team and said she wanted to move into a more 
expensive assisted living facility.
    The care team said well, why is that? It turns out that 
this consumer had a good friend who had previously resided in 
the apartment complex who had recently moved to the assisted 
living facility. She wanted to move there too, to be closer to 
her friend. The care team said how about if we arrange for 
transportation for you every day so that you can go and visit 
your friend. That was perfect for her, it met her needs.
    So that's a simple example, an easy problem to solve. Would 
that they were all that easy, but in fact it's a good 
illustration of this idea of focusing on the outcomes that the 
consumer wants and then putting the right people around the 
consumer to help think through how to get those desired 
outcomes.
    Senator Martinez. Any comment from you?
    Ms. Benson. I think Ms. Timberlake covered it very well. 
But I think that we've seen in all sorts of health care people 
generally know what's best for them. One size doesn't fit all.
    I mean, I think the Frenchie example was outstanding 
because frequently we find that our consumers consume less 
health care if they're given the power to control their care. 
So I think that we've covered it pretty well, Senator.
    Senator Martinez. Thank you. Mr. Chairman, I'll turn it 
over back to you.
    The Chairman. Thank you. Senator Udall, would you like to 
make a statement, or ask a question?
    Senator Udall. Thank you, Mr. Chairman. I too want to 
welcome the panel. Thank you for your very insightful comments.
    I did want to acknowledge the leadership of the Committee. 
This Special Committee on Aging will play an increasingly 
important role, I believe, as we all do something about getting 
older every day. I remember, Chairman Kohl, Robert Kennedy when 
he ran for President. We had been celebrating his legacy given 
that it was some 40 years ago that he ran for President in the 
1968 cycle.
    One of the criticisms of him was that he was too young to 
be President. He said well, I'm doing something about that 
every day. [Laughter.]
    We all find ourselves in that boat. I did want to ask you a 
question that I think the next panel will also address. Which 
is when you look at the long-term care insurance world and the 
incentives that we've tried as a Congress to put in place and 
that society has tried to put in place, would you give us a 
grade on how we're doing?
    I know that you interact in your various state programs 
with long-term care insurance policies. Maybe we can work from 
left to right and start with Mr. Hamilton and move across. 
Comments you have on ways to provide greater incentives for 
long-term care insurance and how important that is as one of 
the elements in a comprehensive policy?
    Mr. Hamilton. With regard to any form of social insurance 
there are hazards that people are trying to insure themselves 
against. There are benefits that they're trying to move toward 
as an alternative. So, one of the challenges for long-term care 
insurance is, what is it that people would get as an 
alternative to what they're trying to insure themselves 
against, and to the extent that people are really focused on 
being able to maintain themselves in their own homes, the 
challenge is that in the community system, you've got a 
disparate array of individualized services that are very 
difficult to organize. So what's so very important, I think, 
about what Secretary Benson and Secretary Timberlake are doing 
in their states, is actually using the Medicaid program as a 
foundation to build an organized system.
    So what individuals can purchase is not simply a little bit 
of home health care, a little bit of personal care, a little 
bit of transportation, but actually a package of coherent 
services that has the benefit of the case manager approach that 
Senator Martinez observed. So that there's a coherent package, 
it can come together, that makes long-term care much more 
feasible. In the early days of long-term care insurance, the 
only benefit was nursing home care. The policies didn't sell 
very well.
    But if you've watched the evolution of the long-term care 
insurance industry you've seen a broadening of the benefit 
packages, and it's becoming much, much more acceptable to 
individuals. So, the more of the infrastructure and foundation 
that the states can create through this partnership with the 
Federal Government, leveraging Medicaid, the more possible 
those social insurance models will become.
    Senator Udall. That's helpful. Secretary Timberlake, would 
you like to comment?
    Ms. Timberlake. The thing I would add to that is what we've 
seen in Wisconsin is that the sort of myriad of long-term care 
insurance options that are out there are often very confusing 
and very difficult for consumers to go through and to make good 
decisions about. So we need to be careful that just as we want 
to help people make good decisions about managing their own 
personal assets over time so that they avoid becoming our 
customers in the Medicaid program for as long as possible. 
Similarly, we want to make sure that we're helping them not 
purchase insurance that in fact they don't need and spend lots 
of money up front to avoid--as Mr. Hamilton says--a risk that 
in fact in a cost benefit analysis is not worth it.
    So I think that something we can work together on between 
the states and the Federal Government is making sure that we 
have very clear information for consumers and a very sort of 
methodical way to help people think through what those risks 
really are. What is the range of options for managing those 
risks and where long-term care insurance fits in that suite of 
solutions.
    Senator Udall. Thank you, Secretary Benson?
    Ms. Benson. Thank you, Senator. You know that majority of 
Floridians over 45 really don't understand long-term care 
coverage. AARP did a survey. They found that 74 percent of 
Floridians don't have any idea how much nursing home care costs 
on a monthly basis.
    Fifty-four percent assume that Medicare will pay for a 
long-term nursing home stay. So there's a real lack of 
information out there. You all worked in partnership with the 
states to give us the ability to do long-term care insurance 
partnership programs.
    Florida's legislature did the legislation to do that. My 
agency does that in partnership with the Office of Insurance 
Regulation. Our system went live in January 1, 2007. But we've 
only had 15,000 people take up this offer.
    I think you know that really in exchange for purchasing 
these partnership policies, if individuals later exhaust those 
benefits and apply for Medicaid long-term care services, they 
get to keep more of their assets than normally they would be 
allowed to when qualifying for Medicaid. I think all the states 
see a problem with people spending down their assets in order 
to qualify for Medicaid. So, you know, while we believe 
Medicaid is an important part of the safety net, if we can 
strengthen the private sector, it matters.
    Senator Udall. Yes.
    Ms. Benson. So in terms of what you could do to help the 
states, I think all states are facing these challenges with 
budget crunches, although you've just recently made a 
difference on that issue for many of us. But over the long-
term, it will be a challenge.
    So there are two things that I think would help. I think 
for all the states who are trying to encourage individuals to 
buy long-term care insurance, and then we're all in the 
campaign, might make a difference. I think in addition, looking 
to tax credits to help those individuals and incentivize them 
to purchase long-term care insurance, I think that would make a 
difference too.
    Senator Udall. Thank you very much, Mr. Chairman.
    Thank you.
    The Chairman. Thank you very much, Senator Udall. Mr. 
Hamilton, Wisconsin as you know is one of 40 states with aging 
disability resource centers. Is there a model for these centers 
that all states to follow or are there variants between what 
can and cannot be done from state to state?
    Mr. Hamilton. There's a variety of models and approaches 
that states are taking. There's certain common elements, one of 
which is to ensure that the aging disability resource centers 
can help organize the information about all of the options 
available to people. This has been an area of great partnership 
between the Administration on Aging who are represented here in 
the front row and the Centers for Medicare and Medicaid 
services. So the two agencies have combined resources to then 
partner with states to develop more and more aging and 
disability resource centers.
    At the present time these occur in particular geographical 
areas. But the goal is to broaden them. So eventually, more 
states can be on the road that I think Wisconsin is at, which 
is to have state-wide availability of Aging and Disability 
Resource Centers that are available to people regardless of 
income or assets.
    So, again, it builds that foundation that's available to 
the private long-term care insurance market as well as the 
public payers, so that every individual who needs long-term 
care is able to go to one good environment where they get good, 
free information about all of the choices available to them. In 
addition, in a really organized system, those Aging and 
Disability Resource Centers are interposed in the places of 
decision-making. Secretary Timberlake can correct me if I'm 
wrong but I believe that in Wisconsin, no one enters a home and 
community-based program or a nursing home without the benefit 
of that good, free information coming from the ADRC.
    The Chairman. Would you like to expand on that, Ms. 
Timberlake?
    Ms. Timberlake. I think that what we have seen is exactly 
as Mr. Hamilton has alluded to which is that the ADRCs are 
serving the entire range of consumers in Wisconsin. So it isn't 
just people who believe that they are or might become Medicaid-
eligible. It literally is any person who has a question about 
their long-term care needs, and benefits that might be 
available to themselves or a family member or a friend or a 
colleague who has a disability that they need some assistance 
with.
    Then at the other end of the continuum, the ADRC is in fact 
the place where people go through the eligibility determination 
process if in fact they are eligible for a Medicaid or 
Medicare-funded long-term care program. So as we have been able 
to open ADRCs across the state, we really are finding that 
we're addressing thousands of consumers questions every week. 
We believe we are doing good prevention as well as connecting 
people to the programs and services that they're eligible for.
    The Chairman. Thank you. Ms. Benson, would you like to make 
a comment?
    Ms. Benson. We don't have ADRCs exactly in Florida. We have 
moved down the path of aging resource centers. You know, 
getting old and navigating the senior care system is 
particularly difficult.
    I recently read that book, Nudge, that is out on the market 
that talks about the complexities of navigating Medicare Part 
D. So you all were great, and said we want to give people 
choices. But I think that in some states, the choices were more 
than 50 plans. You know, I had to sit down with my grandmother, 
and my father is a doctor, and while I'm Secretary of the 
Agency for Health Care Administration, and it was hard.
    I just outlined three programs for you today. But that's 
just a small sample of what we offer in Florida. So I think 
everything we can do to make sure we have infrastructure in 
place to help people make the right choices for them will 
really make a difference. We appreciate your leadership on that 
issue.
    The Chairman. Well, we thank you so much, all three of you. 
You've added a lot to the discussion. We appreciate your coming 
here. Thank you so much.
    Mr. Hamilton. Thank you.
    Ms. Timberlake. Thank you.
    Ms. Benson. Thank you.
    The Chairman. We will turn now to our second panel.
    We're pleased to welcome first Henry Claypool. Mr. Claypool 
is currently the Washington liaison to the Public Health 
Institute and a Senior Advisor for Disability Policy to the 
Administrator of CMS. During his time at HHS, Mr. Claypool 
played a key role in implementing policies to respond to the 
U.S. Supreme Court's Olmstead decision and expanding Medicare's 
coverage of assistive technologies.
    Next we'll be hearing from Melanie Bella who is a Senior 
Vice President of Policy and Operations at the Center for 
Health Care Strategies. In this position, Ms. Bella leads the 
organization's efforts to improve the quality of care for 
people with chronic illness and disabilities. She also serves 
as a health care advisor to the Kennedy School of Government 
Innovations in American government awards program. Previously, 
she served as Medicaid Director for the State of Indiana from 
2001 through 2005, where she championed a state chronic disease 
management program.
    Finally, we'll be hearing from Professor Judy Feder, who is 
currently on the faculty of Georgetown University's Public 
Policy Department, serving as Dean for three years. She also 
currently serves the Center for American Progress as a senior 
fellow. Ms. Feder is one of the nation's leaders in health 
policy and she's an expert in ways to improve our nation's 
health system. We thank you all for being here. We'll listen to 
you first, Mr. Claypool.

       STATEMENT OF HENRY CLAYPOOL, WASHINGTON LIAISON, 
        PARAPROFESSIONAL HEALTH INSTITUTE, NEW YORK, NY

    Mr. Claypool. Chairman Kohl, Senator Martinez, good 
morning. I'm Henry Claypool, the Washington liaison for PHI, 
which promotes quality care through quality jobs within the 
elder care disability services delivery system. Thank you for 
inviting me to testify today to share my perspective on the 
importance of addressing long-term services and supports in 
health reform efforts.
    My testimony is also informed by my personal experience as 
a former Medicaid beneficiary and as someone that continues to 
rely on the supports provided by direct care workers today. 
Frankly, without the assistance of others with routine and 
often intimate tasks, I wouldn't be able to be here today, much 
less work, pay taxes and lead an active life in my community. 
These services are, in short, are what enable many Americans 
like me to work and contribute to the nation's economy.
    The wages paid to direct care workers likewise spur the 
economy. Direct care jobs constitute a $56 billion dollar 
economic engine fueled by personal income that over three 
million direct care workers spend largely on locally produced 
goods and services in their community. That is why we believe 
health reform including long-term services reform must be an 
integral part of our efforts to restore and revitalize the 
economy.
    Therefore we applaud the leadership of the President, for 
recognizing that health reform is key to addressing the 
nation's economic distress and making it a priority in his 
budget proposal. We urge Congress to ensure that long-term 
services reform is addressed along with making affordable 
health insurance available to all Americans this year. If the 
needs of those who rely on long-term services and supports are 
not addressed in health reform, it is difficult to see how our 
country will ever effectively curb the rate at which medical 
expenses rise.
    We believe health reform must include: one, reforms to make 
more community based, long-term services and supports available 
to Americans in need. Two, efforts to build capacity and a 
direct care workforce which provide these critical community 
living services.
    Health reform should strengthen Medicaid long-term services 
by: one, ensuring that the Federal Government provides enhanced 
matching payments for long-term services and supports to 
gradually assume a greater proportion of the costs associated 
with long-term services. Two, require that states in return 
provide a certain level of service making it possible for 
beneficiaries to lead meaningful lives in the community. 
Enacting the Community Choice Act as part of health reform 
would be an important step in this direction. [Applause.]
    Three, streamlining eligibility rules to make it possible 
for beneficiaries to have access to community living services 
when they need long-term services and supports.
    Four, creating additional incentives for states to 
measurably reduce and gradually eliminate service access 
disparities that currently exist within states, across 
different groups of beneficiaries and throughout the country.
    A needed and complementary measure that should be taken is 
to create the public insurance program envisioned in Senator 
Kennedy's CLASS Act. [Applause.]
    This program would help individuals and family members 
safeguard their financial future against the economic 
devastation and hardships that often accompany the loss of 
certain functional abilities.
    Addressing long-term services program design and financing 
is only part of the answer. As you've recognized, Mr. Chairman, 
equal attention must be paid to building and strengthening the 
workforce needed to provide these services. In order to provide 
services and supports to an increasing number of Medicaid 
beneficiaries in the community and develop service delivery 
systems that are more cost efficient and effective in promoting 
positive health outcomes we need: one, to improve direct care 
worker compensation by increasing wages and ensuring access to 
affordable comprehensive health care for workers.
    Two, to upgrade training and advance opportunities for 
direct care workers by passing the Chairman's proposed 
Retooling the Health Care Workforce for an Aging America Act, 
an important next step which PHI is pleased to support.
    Three, explore new health management practices that target 
behavior, habits and daily activities of people with chronic 
conditions and the direct care staff that work with them, since 
these individuals often see each other every day. It is likely 
that with the right resources, consumers and workers together 
can reshape habits, and promote more healthy lifestyles.
    Mr. Chairman, I appreciate the opportunity to testify and 
be pleased to answer any questions.
    [The prepared statement of Mr. Claypool follows:]
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    The Chairman. Thank you very much, Mr. Claypool. Ms. Bella.

 STATEMENT OF MELANIE BELLA, SENIOR VICE PRESIDENT FOR POLICY, 
        CENTER FOR HEALTH CARE STRATEGIES, HAMILTON, NJ

    Ms. Bella. Thank you, Mr. Chairman, Senator Martinez. My 
name is Melanie Bella. I'm the Senior Vice President for the 
Center for Health Care Strategies which is a non-profit health 
policy organization in New Jersey.
    We do considerable work with state Medicaid agencies. One 
of the main areas of our work has to do with integrating care 
for complex and special populations. So I'm delighted to be 
here today to talk to you.
    You've heard from Secretary Timberlake about one of the 
most innovative managed long-term care programs in the country, 
Wisconsin's Family Care. So I'm going to focus on two other 
areas of opportunity. One being fully integrated care for dual 
eligibles and the second being person-centered community-based 
home and community service programs for individuals.
    For many in the field of publicly financed care, myself 
included, fully integrated care for dual eligibles represents 
the most important and the greatest policy opportunity for 
health care reform that we could possibly tackle today. It's 
been pursued literally for decades with an evolution of 
programs, starting with PACE and On Lok, going into social 
HMOs, moving into Medi/Medi demonstration programs, now with 
the Special Needs Plans that have recently been created.
    The problem remains that very few people are benefiting 
from these types of programs. I want to just tell you a quick 
story about the type of person that needs this type of program. 
I'm indebted to a good friend, Bob Master, who runs a program 
called Commonwealth Care Alliance in Massachusetts which is a 
fully integrated program. One of his patients, and she's very 
representative, is a woman named Maddie.
    She's 77-years-old. She has diabetes. She has hypertension. 
She has depression and she suffered from multiple strokes. She 
has many different caregivers, has frequently been hospitalized 
and was facing institutionalization in a nursing home primarily 
because it was so difficult for her and her caregivers to 
navigate the fragmented system that she receives her care in.
    Thankfully, she found this fully integrated program, 
Commonwealth Care Alliance. Now instead of three separate 
identification cards, one for Medicaid, one for Medicare and 
one for her drugs, three different sets of benefits, three 
different provider networks, she gets all of that in one place.
    She has a multidisciplinary care team as Secretary 
Timberlake talked about. Her wishes drive her care plan. Some 
of the key components that Henry talked about and because of 
that, decisions are based on what she needs. She's been able to 
reduce hospitalizations and stay at home.
    So not only is it good for Maddie. It's cost-effective for 
both the state and Federal taxpayers. We need to get programs 
like that to scale.
    There are only 120,000 people like Maddie in fully 
integrated programs today. That's in large part because of the 
difficult financial and administrative challenges that exist 
between the Medicaid and Medicare programs. However there are 
many innovative states out there that are making great progress 
in these areas. I would call your attention to a little chart 
that shows you ten examples of what states are doing that have 
fully integrated programs.
    I also should mention although the primary driver for this 
is obviously getting consumers what they need and where they 
need the services, we're also spending a tremendous amount of 
money on the fragmented system for dual eligibles. There are 
only seven million full dual eligibles, out of Medicaid's over 
55 million beneficiaries. But they drive 42 percent of cost in 
total Medicaid expenditures and 24 percent of Medicare 
expenditures. In 2008 that will equate to about 250 billion 
dollars.
    So there is an imperative to do better for the people we're 
serving. There's a fiscal imperative to do better than we're 
doing today.
    So what could Congress do? You could dramatically 
accelerate progress in this area by requiring CMS to test ways 
to overcome some of the fragmentation in the system. There's a 
very innovative demonstration underway that North Carolina is 
pursuing that would address some of the financial misalignments 
between the two programs. It would be nice maybe even to get 
out of demo status and to have a certain core set of elements 
and safeguards in place to help push states along in this arena 
to fully integrate care while removing some of the barriers for 
doing so.
    I also want to talk about Medicaid's progress in home and 
community-based services. These actually have gotten to scale 
over the past 30 years, although more could be done. 
Development of HCBS is a tremendous example of states serving 
as laboratories of innovation, if you will.
    You've maybe heard of Vermont's program. It's called 
Choices for Care. It has established different tiers based on 
people's needs. For some folks nursing home care is no longer 
an entitlement, but there has been increased access to home and 
community-based services.
    Tennessee recently launched a bold new act to rebalance its 
long-term care system. Again, all of these efforts share the 
core features of increasing access to home and community-based 
services and decreasing institutional care. Small steps 
Congress has taken in the past including the Money Follows the 
Person, Real System Change grants and the Long-Term Care 
Partnership with CMS.
    Those things are great. More substantial changes are 
necessary which might include consolidating waivers, allowing 
states to manage HCBS services in totality. Modifying some of 
the outdated payment and benefit structures would allow 
innovation like this really to blossom across the country.
    So I appreciate the opportunity to share some of these 
ideas with you. I would gladly answer any questions or fill 
your ears with all sorts of little and bigger changes that 
could really make a difference in this arena. Thank you very 
much.
    [The prepared statement of Ms. Bella follows:]
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    The Chairman. Thank you very much, Ms. Bella. Ms. Feder.

  STATEMENT OF JUDY FEDER, SENIOR FELLOW, CENTER FOR AMERICAN 
              PROGRESS ACTION FUND, WASHINGTON, DC

    Ms. Feder. Chairman Kohl and Senator Martinez, it is a 
pleasure to be part of the hearing you're having on such an 
important issue; the need for public action to improve long-
term care services and supports.
    We hear a lot today about the need for health reform as 
critical to restoring the nation's economic and fiscal health 
and that is a really good thing. But you know that we can't 
achieve health or fiscal security unless health and entitlement 
reform address the need for affordable long-term care. People 
who need health and long-term care don't distinguish between 
the two. They need both. Our Medicare and Medicaid programs 
devote substantial resources as you just heard to people who 
need both. We've got to fix both our health and long-term care 
financing systems and delivery systems to promote economic 
stability for our nation and our families.
    Unfortunately, ignorance about long-term care has long 
impeded effective long-term care policy. The facts are, as 
you've heard and can see today, that young as well as older 
people need long-term care, and that even among older people 
the need for extensive long-term care, extensive and expensive, 
is an unpredictable, catastrophic risk. Families are giving 
their all to providing the bulk of care at home that people who 
need long-term care are receiving.
    Contrary to what is sometimes claimed, the problem with 
today's long-term care system is not that individuals and 
families fail to take enough responsibility. Rather they just 
don't have enough to give. That's why we need better public 
support, support that spreads the risk and the burden of long-
term care financing rather than as in our current system, 
concentrating it so heavily on the people, the individuals and 
the families, who actually need care.
    As you've heard today, we are fortunate in that there are 
many ways to move forward. We can only do better. So let me 
give you very briefly four examples. Two focus on the low-
income population and improving Medicaid while lowering costs, 
which we've heard much about this morning. Two would phase in 
broad public long-term care insurance for the future.
    First on my list and on the list of many here today is to 
assure broader Medicaid support for care at home where people 
want to be rather than in nursing homes where they don't. There 
are lots of different proposals to do this in different ways. 
The Community Choice Act is one such proposal. [Applause.]
    Recent research suggests that, once established and 
accompanied by policies to reduce nursing home use, broad 
availability of home care through Medicaid programs can 
actually slow the growth of total spending on long-term care. 
If supported by Federal dollars, changes in Medicaid can assure 
better service at potentially lower cost no matter where people 
live in every state and within states all across the country.
    Second on my list, as Melanie has been talking about and 
affect in both Medicaid and Medicare, is to better integrate 
acute and long-term care for the Medicaid/Medicare or dual 
eligibles who depend on both. Dual eligibles are the poster 
children for what we can achieve in terms of coordinating acute 
and long-term care to promote better quality, reduce waste and 
gain greater efficiency in our health care system. Models exist 
using a single delivery system, as in Wisconsin as we heard 
earlier.
    We can build on and extend those models while remembering, 
as we've heard this morning, that it's not enough or can be 
actually not so helpful just to change financing. What we need 
is to assure that we're developing and supporting delivery 
systems that are really effective in providing quality care.
    For the future I've got two more options. Both would phase 
in public insurance protection across the income scale to 
prevent underservice or impoverishment for all Americans. One 
would add a long-term care benefit to Medicare for the future--
phased in, that is not available to current beneficiaries over 
the age of 60, and prefunded, that is, with contributions today 
put into a trust fund so that future elderly would be financing 
their own benefits--paying now to support future needs.
    A second option, the CLASS Act, would create a new long-
term care program--again starting with the working age 
population and financed through voluntary deductions from 
payroll. Unlike Medicare, the CLASS Act would provide a cash 
benefit, which we've heard about today as well, that would 
allow people maximum flexibility in using their dollars to meet 
their needs, supported by good public policies.
    Mr. Chairman, Senator Martinez, assuring efficient, 
adequate and equitable long-term care financing is part and 
parcel of building our nation's economic future and assuring 
economic stability. The need to address this problem will only 
grow as our nation ages and as younger people with disabilities 
live longer. Living longer is a good thing, if we match that 
accomplishment with policies that enhance the quality as well 
as the duration of life.
    Given the scope of the demographic changes before us, we 
cannot consider ourselves stuck with the inadequate long-term 
care system we have. We should consider ourselves on the ground 
floor of the long-term care system we want to build. Now is the 
time--with new national leadership, a powerful need to invest 
in rebuilding our nation's prosperity, and a new excitement 
about our nation's and our government's potential, to build a 
better future--now is the time to confront the policy, 
political and fiscal challenges of building a better long-term 
care system.
    I applaud your effort to do just that. I look forward to 
working with you to achieve it. Thank you. [Applause.]
    [The prepared testimony of Ms. Feder follows:]
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    The Chairman. Thank you so much. Alright. Senator Martinez, 
go ahead.
    Senator Martinez. Mr. Chairman, thank you so much. You're 
unusually deferential for a Chairman, but thank you. 
[Laughter.]
    Ms. Bella, I wanted to ask if you could enlighten us a 
little more on the case for fully integrated care for dual 
eligibles. I was very intrigued by some of what you had to say 
and for coordinated patient centered home and community-based 
services. It is enticing to consider that these two approaches 
will help better serve the vulnerable dual eligible population. 
It might even save money for the taxpayers.
    How do you recommend that the Federal Government approach 
this particular challenge and do you have any solution besides 
the current waiver system that's in place today?
    Ms. Bella. Well I could go on forever on that. So I'll try 
to be brief. Really the only option a state has today to do 
fully integrated care and it's actually virtually integrated is 
through the Special Needs Plan program created under the MMA. 
It that allows the state Medicaid agency to contract with one 
of those SNP plans. That plan is also serving that individual 
on the Medicare side. So that plan gets both streams of funding 
and is able to combine the dollars to provide all of the 
services from Medicaid and Medicare.
    While that's an interesting model and some of the plans are 
very good because they understand this population well, there 
are a lot of those plans that don't necessarily understand this 
population so well and/or there are a lot of places across the 
country where Special Needs Plans will never be an option.
    So for example, what I mentioned in North Carolina. North 
Carolina has decided to start providing care management to its 
dual eligibles. In the past, North Carolina hadn't done that 
because any financial benefit from that would accrue to 
Medicare. The state would be paying for these services but 
wouldn't be seeing any of the benefit.
    In partnership with CMS, North Carolina and the Federal 
Government have entered into an agreement to remedy some of 
that financial misalignment. As a result, all of the dual 
eligibles in North Carolina will get the services that will 
move toward an integrated benefit. So that's an example of some 
other alternatives that could be explored for states that are 
interested, particularly states with rural areas and some 
provider or plan challenges.
    I think at a minimum what you would probably find is 
consensus on the types of elements you want to see in an 
integrated care program. That has to do with patient 
centeredness, the multidisciplinary care teams, strong 
performance standards, consumer governance, and involvement in 
the benefit and in the structure of the plans.
    Those are elements that you could see would form some 
structure for what you would want to see in states across the 
country that Congress and CMS and states could work on in 
partnership to say these are the things that we expect to see. 
In return for seeing these we can eliminate some of these 
barriers or consolidate some of the authorities that it takes 
today to do some of these things.
    In return, again, for putting the bar pretty high at what 
we expect these programs to look like and for having a core 
level of accountability in performance standards and 
measurements and those types of incentives even getting rid of 
some of the barriers to doing that today. For example, some of 
these states, New Mexico for example, has a very innovative 
integrated care program. It had to get two different waivers to 
do that on the Medicaid side alone.
    Those two different waivers have different time periods. 
They have different financial tests. They require different 
paperwork. They require showing some cost demonstrations that 
don't take into account anything on the Medicare side.
    So without getting into too much detail, it's some 
administrative things like that that could be changed that 
would free up a lot of the inability for states to go forward. 
But then more broadly and, I think, a bigger vision would be 
working with consumers of these services, providers of these 
services, states and the Federal Government to establish those 
core elements and safeguards and providing incentives for 
states to implement such programs.
    Senator Martinez. Just to follow up. What type of front end 
funding do you envision to move toward a goal like budget 
neutrality for integrated care?
    Ms. Bella. Well part of the challenge today as has been 
demonstrated especially in some recent articles is, as you 
know, it costs money up front to get the money back. But until 
we make those investments we're never going to start getting 
the money back. So the way the Federal/state match is 
structured, states may need a little help getting over that 
initial funding hurdle.
    So, for example, I don't think we would be suggesting that 
the budget neutrality concept would change. But if we're 
looking at a five-year period, perhaps the Federal Government 
share is higher in the first years and the states' becomes 
higher in the fourth and fifth years. So on balance you get the 
same outcome, but you're helping states who have to spend a 
dollar before they can get the dollar.
    You're helping them get over that hurdle of the initial 
investment. There are other mechanisms that would allow states 
to count some of the savings that Medicare might experience 
through some of these programs for the Medicaid waiver cost 
effective test as well. So those are two examples.
    Senator Martinez. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Martinez. We're 
joined today by Senator Wyden from Oregon. Senator Wyden.
    Senator Wyden. Thank you very much, Mr. Chairman. I very 
much look forward to working with you and our colleague from 
Florida on this. I'm sorry that I've missed much of what has 
happened already.
    We're down in the Finance Committee talking with the 
Treasury Secretary on this very subject as well. I think what 
is so constructive about the leadership of you, Mr. Chairman 
and Senator Martinez and all of the people who have come here 
today is this helps ensure that long-term care is not an orphan 
in this health care reform debate. What has been so troubling 
about the discussions in the past is you see volumes and 
volumes written on everything except long-term care.
    I'm interested in doing following up on the good work of 
Chairman Kohl and Senator Martinez are exploring with the three 
of you some of the ways that we can actually start tomorrow at 
the Summit. Because we're all going to be at the White House 
tomorrow focusing on health reform making sure that our hope 
now of getting long-term care reform into the reform package 
goes forward. My real question, and perhaps we'll start with 
you, Ms. Feder, is financing the improvements that are so 
critical. In the Healthy Americans Act, the first bipartisan 
universal coverage bill we've had in the history of the Senate, 
we take two baby steps.
    One is we make improvements in the various public programs 
so that folks who need long-term care have more choices. I 
think that's critically important--to have flexibility, so if 
you're seeking adult day care or in-home services that you 
empower the individual and their families to be able to make 
those choices.
    The second thing we do is on the private side with respect 
to long-term care insurance. We put in place consumer 
protections for people who buy these private long-term care 
policies. A lot of them end up not worth the paper they're 
written on because inflation eats away any coverage.
    Can we take additional steps to make it more attractive to 
buy these policies? Now you have been at this for a number of 
years. I want to start with something that really began with 
somebody that you and the people on this panel admire very much 
from Senator Martinez's home state and that is the late Claude 
Pepper's idea.
    What Claude Pepper suggested on a number of occasions is 
starting a model so that people on a voluntary basis could 
start putting aside money for private, long-term care coverage. 
Perhaps through pools that would be organized by the 
government, so that the person who purchased it when they 
needed it would get more for their money. It would be private 
coverage.
    They would have private choices. But the money would be 
pooled, so that the older person when they needed it would get 
more for their money. You've been looking at these ideas for 
funding long-term care in the past. What about this idea of 
setting up a voluntary model that people could start setting 
aside money for at a relatively early age?
    Ms. Feder. Well, Senator Wyden, it's a pleasure to see you 
today. I appreciate your wanting to highlight long-term care at 
the Summit tomorrow, so it's not forgotten in the health reform 
debate. The ideas you've mentioned are important ones.
    I have some questions. I would have to look in greater 
detail at what Senator Pepper actually proposed, although I 
trust your rendition. Definitely the first part of it makes a 
great deal of sense, allowing people to put aside resources 
into a pooled fund. In fact that is the model that is included 
or embodied in the CLASS Act that Senator Kennedy has 
introduced.
    I think that putting it into a fund and relying then on 
building a public insurance program has more promise than 
trying to build private, long-term care insurance. Private 
long-term care insurance policies are there and will play a 
role in our system. But we've been calling them new kinds of 
policies for 20, 30 years and we know from the health insurance 
market--and looking at long-term care and acute care together 
helps us--that private insurance is a really risky basis for 
building a system. It's kind of why in part we're in the mess 
we're in today in terms of our health insurance system. We're 
having to stitch it together and make better rules.
    So my view is that the voluntary, approach say putting 
aside of funds and pooling of risk is a very good approach. But 
that if we want a strong foundation in long-term care, the 
public insurance system has to be at the core. Then the private 
insurance comes around it.
    Senator Wyden. Let me get your colleagues into this topic. 
Ms. Feder goes right to the heart of the philosophical debate 
here in the Congress. I think it is fair to say that I wouldn't 
have any Republican sponsors on the Healthy Americans Act if I 
had tilted this effort to the public side.
    What has attracted bipartisan support for the Healthy 
Americans Act has in fact been that it is largely a private 
delivery system which of course is what Members of Congress 
have. In other words, Ms. Feder has made a very good point. It 
goes right to the heart of this philosophical discussion about 
what's the right role for government? What's the right goal for 
the private sector?
    But there is a group of people who don't complain at all 
about their health coverage in this country and that's Members 
of Congress. They have private health choices. So as we try to 
grapple about this role of a public/private partnership, Ms. 
Feder is certainly right that there's an important role for 
government. We certainly recognize that for low-income people.
    How do you all see integrating private coverage and the 
public role? Mr. Claypool.
    Mr. Claypool. Well, building off Ms. Feder's comments about 
the CLASS Act, I think having a public insurance program like 
the CLASS Act really does build a very solid base. If 
individuals desire greater insurance they could seek a policy 
to wrap around the benefit that might be available to them 
should they need the CLASS Act. But it's vital to have a large 
pool that really is only available through a public program to 
make sure that we can safeguard, frankly, other Americans from 
what we're experiencing now in this country.
    Unfortunately, people are being economically devastated. A 
large public program may hold up better under the test that 
we're currently experiencing. I think Ms. Feder's comments 
about what we're witnessing in the health care arena also back 
that up.
    Senator Wyden. The only thing I would say--and let's go to 
Ms. Bella, is Members of Congress belong to large pools as 
well. I mean it is possible to have large pools and do that in 
the private sector. You see it with Members of Congress. I 
think that's what this debate is going to be all about.
    I mean you saw, particularly in the Presidential campaign, 
the debate about the individual market. I wouldn't send a soul 
into that broken individual market because you look at the kind 
of discrimination people face if they've had a preexisting 
condition or something like that. Nobody is talking about that.
    But Members of Congress belong to very large pools. They're 
in the private sector. They make choices among the various 
kinds of coverage that they have. As I say, there's a group of 
people in this country who don't complain a bit about their 
health care coverage. It's families of Members of Congress, Ava 
Rose Wyden, 15 months old, William Peter Wyden, 15 months old--
pictures available after the hearing on my I-phone. [Laughter.]
    They can get health care through a private plan, a private 
plan. So I just want to go to you, Ms. Bella. We're going to 
obviously follow up on this and Judy Feder, in particular, is 
just as good as it comes as it relates to these kinds of 
issues.
    Ms. Feder. Thank you.
    Senator Wyden. Finding this right niche on the public and 
private side is going to be key.
    Ms. Bella?
    Ms. Bella. I'm not sure how much I have to add to what my 
colleagues have said. My bias obviously is that you need to 
have a strong public system. I would argue that all of the 
markets are broken today.
    Senator Wyden. Sorry, I couldn't hear that.
    Ms. Bella [continuing]. That all of the systems are broken 
today.
    Senator Wyden. You won't get much disagreement on that.
    Ms. Bella. It is interesting when we look at the foundation 
for coverage expansion. In this country right now, we're 
looking at Medicaid. While Medicaid can certainly be shored up 
it is, as, you know, a vital anchor to the healthcare system. 
The market fails for some of the folks who need it the most if 
we rely only on, I think, some of the private choices that you 
and I might have.
    So I guess it's not mutually exclusive, obviously. It has 
to all be part of a well-functioning system. But at its core 
again, my bias is that a strong public system is what's going 
to really give us the foundation we need for those who need it 
most.
    Senator Wyden. Could I ask one other question, Mr. 
Chairman? How would you three propose paying for it?
    Ms. Feder. The proposals that are on the table that we 
talked about, the CLASS Act and the option that I offered this 
morning from our Robert Wood Johnson Project on a new Medicare 
benefit, propose different mechanisms of financing. In the 
CLASS Act it's voluntary deductions from payroll. The future 
elderly are paying for ourselves, as I said in my testimony.
    One other proposal was to redistribute resources whether 
it's general revenues or other sources now going to Medicaid 
and other spending to actually fund the benefit for the future, 
phased in--so that actual resources are built up in advance 
before the services are needed. I think you will find some 
promising potential funding mechanisms associated with these 
proposals.
    I can't resist one word about when you were talking about 
what Members of Congress have and Federal retirees or wives of 
Federal retirees have. In the health insurance system we 
absolutely can build on our private insurance system. That is 
what we've got. When you look at long-term care, as I said 
earlier, we're on the ground floor. We don't have to 
accommodate a system that already exists. We can build 
something that is a public/private partnership--inevitably--but 
that has public benefits at the core.
    Senator Wyden. You know what it is striking about this is 
it's almost a question of semantics as opposed to anything 
else, because what Ms. Feder has just described through the 
Federal employee system has a role for a public type of 
function. Because the government is playing a role in ensuring 
consumer protections and the like, and the people are getting 
private choices. So to some extent this is really about nailing 
down the details.
    You all have a very good case. I'm just hoping that after 
60 years of yakking about the subject and having wonderful 
people like the advocates we have here in the audience, that 
this is the time when the health care needle gets threaded. My 
sense is that, and I've talked with the Chairman and Senator 
Martinez about this, there's something of a philosophical truce 
coming about in the country.
    Both political parties have been right. Democrats have been 
right about the idea that you cannot fix this system unless you 
expand coverage. You've got to expand coverage to stop costs 
shifting and to meet these unbelievable human needs that we're 
seeing in areas like long-term care.
    Republicans have a valid point about how you can't turn it 
all over to the government. You can't just have a government-
run operation. That is why we're talking about things like the 
Federal Employee Health Benefit Plan that has a role for 
government and a role for the private sector.
    So you all are doing good work. Senator Kohl and Senator 
Martinez, you have two of the best allies in the business. 
Starting tomorrow, starting tomorrow at the Health Care Summit 
I want you three and the advocates who have come here today to 
know that we're going to have some advocates at the White House 
tomorrow prosecuting your case. I'm going to be one of them.
    Thank you, Mr. Chairman. [Applause.]
    The Chairman. Well to just sum it up: We'd like to ask all 
three of you health care reform, long-term care--what are the 
principles, two or three principles that we must not forget? 
Who is first? Ms. Feder?
    Ms. Feder. Everybody needs protection. We've got to have 
quality care. It's got to be affordable to all of us.
    The Chairman. Ms. Bella?
    Ms. Bella. I would say two. Fragmented, unintegrated, 
uncoordinated systems cost money and are bad for people. The 
second thing I would say is I would urge you to keep asking 
yourselves why are we talking about waivers to keep people at 
home or in their community when it's so easy to go into nursing 
homes?
    I think that's a fundamental question we have to ask 
ourselves.
    The Chairman. Thank you. Mr. Claypool. [Applause.]
    Mr. Claypool. I would echo Melanie's comments. I really do 
think we have a challenge in terms of integrating the delivery 
systems. As long as we keep long-term care separate from acute 
care, we're never going to be able to tame these costs. We 
really have to look at people holistically.
    Second, I think it does require to answer a question from 
Senator Martinez earlier an investment on the front end by the 
Federal Government to make sure that this happens.
    The Chairman. Thank you. Well, the importance of this topic 
is illustrated by the enthusiasm and the energy that all of you 
who've traveled to be here with us today have demonstrated. You 
make it very clear that this is a subject that needs our urgent 
attention. You can take, I think, a lot of conviction from what 
you've seen this morning in terms of what our witnesses have 
said as well as we Senators who are sitting up here have also 
said. We'll take care of your needs. That's a promise and a 
pledge that we make to you. Thank you so much for being here. 
[Applause.]
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]
                            A P P E N D I X

                              ----------                              


           Prepared Statement of Senator Robert P. Casey, Jr.

    I would like to thank Chairman Kohl for calling this 
important hearing on Health Care Reform in an Aging America. 
For the first time in over a decade the Senate will be taking a 
close look at the American health care system and enacting 
reforms to help improve coverage, access, and quality of care 
for all Americans. Long term care will be an important part of 
this debate.
    Over ten million Americans need long-term services and 
support to assist them with the activities of daily living. 
That's 5 percent of the total adult population. The cost of 
this care is high. A year in a nursing home costs $70,000 on 
average. Assisted living facility expenses can be $36,000 per 
year, not including home health care aides who are paid about 
$29 an hour. These are astronomical costs that our older 
citizens are not always aware of or able to pay for. We've seen 
this first hand in Pennsylvania.
    The proportion of Pennsylvanians aged 85 and older--those 
most likely to need assistance in daily living--is growing at a 
rate 20 times faster than our overall population. We've seen an 
aging boom that most other states will not see for another 10 
to 15 years. We've also helped the 162,000 Pennsylvanians under 
the age of 60 that need similar assistance. I look forward to 
working with my colleagues in the Senate to turn dire 
predictions of financial disaster and human tragedy into a 
unique opportunity for change.
    Last year, the Penn State Center for Survey Research 
interviewed nearly 3,000 individuals to determine how prepared 
they were for long-term care. Nearly all believed Medicare will 
pay for their long-term care expenses. Over half believed they 
wouldn't need any long-term care services. This research 
reveals unreasonable expectations that could become a harsh 
reality when discussed with their families and health care 
providers.
    As we all know, while Medicare provides limited home health 
benefits after injuries or hospitalizations and some coverage 
for skilled nursing home care, state Medicaid agencies pick up 
the tab for 40% of long-term care expenses--and only after 
personal life savings are depleted. Financial and family 
pressures all too often result in nursing home placement even 
though over 90% of older citizens wish to remain in their 
homes.
    For these and other reasons, Pennsylvania has been a leader 
in federal-state partnerships to help seniors and consumers 
have more options--and more knowledge about these options--so 
they can plan ahead with their families. I look forward to 
hearing more about other state programs and other ideas from 
our impressive list of expert witnesses, so we can incorporate 
their work into the Senate's health care reform activities.
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