[Senate Hearing 113-]
[From the U.S. Government Publishing Office]


                                                       S. Hrg 113-868

    THE FUTURE OF LONG-TERM CARE POLICY: CONTINUING THE CONVERSATION

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

                                 HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             FIRST SESSION

                               __________

                             WASHINGTON, DC

                               __________

                           DECEMBER 18, 2013

                               __________

                           Serial No. 113-14

         Printed for the use of the Special Committee on Aging
         
         
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                       SPECIAL COMMITTEE ON AGING

                     BILL NELSON, Florida, Chairman

RON WYDEN, Oregon                    SUSAN M. COLLINS, Maine
ROBERT P. CASEY JR, Pennsylvania     BOB CORKER, Tennessee
CLAIRE McCASKILL, Missouri           ORRIN HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island     MARK KIRK, Illinois
KIRSTEN E. GILLIBRAND, New York      DEAN HELLER, Nevada
JOE MANCHIN III, West Virginia       JEFF FLAKE, Arizona
RICHARD BLUMENTHAL, Connecticut      KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin             TIM SCOTT, Scott Carolina
JOE DONNELLY, Indiana                TED CRUZ, Texas
ELIZABETH WARREN, Massachusetts
                             
                             ----------                              
                  
                  Kim Lipsky, Majority Staff Director
               Priscilla Hanley, Minority Staff Director
                                CONTENTS

                              ----------                              


                                                                   Page

Opening Statement of Chairman Bill Nelson........................     1
Statement of Ranking Member Susan M. Collins.....................     2
Statement of Senator Joe Manchin, III............................     3
Statement of Senator Tim Scott...................................     4

                           PANEL OF WITNESSES

Anne Tumlinson, MMHS, Senior Vice President, Avalere Health......     6
Bruce Chernof, MD, President and Chief Executive Officer, The 
  SCAN Foundation................................................     8
Mark J. Warshawsky, Visiting Adjunct Scholar, American Enterprise 
  Institute......................................................    10
Judy Feder, Ph.D., Professor, Georgetown University McCourt 
  School of Public Policy and Fellow, Urban Institute............    12

                                APPENDIX
        Prepared Witness Statements and Questions for the Record

Anne Tumlinson, MMHS, Senior Vice President, Avalere Health......    38
Bruce Chernof, MD, President and Chief Executive Officer, The 
  SCAN Foundation, and Mark J. Warshawsky, Visiting Adjunct 
  Scholar, American Enterprise Institute, Joint Testimony........    45
    Questions submitted for Mr. Warshawsky.......................    49
Judy Feder, Ph.D., Professor, Georgetown University McCourt 
  School of Public Policy and Fellow, Urban Institute............    53

                  Additional Statements for the Record

Long-Term Care Commission Report.................................    60
AARP.............................................................   104
National Senior Citizens Law Center..............................   110
Richard P. Grimes, President and CEO, Assisted Living Federation 
  of America.....................................................   111
Richard J. Fiesta, Chair, Leadership Council of Aging 
  Organizations and Katy Beh Neas, Chair, Consortium for Citizens 
  with Disabilities..............................................   117
Howard Bedlin, Vice President for Public Policy and Advocacy, 
  National Council on Aging......................................   120
Tracey Morehead, President and CEO, Visiting Nurse Associations 
  of America.....................................................   122
The National Consumer Voice for Quality Long-Term Care...........   126
Bloomberg News Article...........................................   128

 
    THE FUTURE OF LONG-TERM CARE POLICY: CONTINUING THE CONVERSATION

                              ----------                              


                      WEDNESDAY, DECEMBER 18, 2013

                               U.S. Senate,
                        Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:15 p.m., in 
Room SD-562, Dirksen Senate Office Building, Hon. Bill Nelson, 
Chairman of the Committee, presiding.
    Present: Senators Nelson, Whitehouse, Manchin, Baldwin, 
Warren, Collins, Ayotte, and Scott.

       OPENING STATEMENT OF SENATOR BILL NELSON, CHAIRMAN

    The Chairman. Good afternoon.
    Long-term care is an issue that comes up repeatedly. It is 
an issue that many of us not only have a legislative interest 
in, but a personal stake, as well. Many of us have spoken in 
prior hearings about caring for our parents as well as planning 
for our own futures to alleviate some of the decisions for our 
children.
    Currently, about 12 million Americans have long-term care 
needs, and that number is rising rapidly. Across the country, 
middle-class families are going through the same tough choices 
on how best to care for elderly parents. Medicare and most 
traditional health insurance plans do not cover long-term care 
expenses, and while private long-term care insurance is 
available, most people do not have it because they see long-
term care as something that they will never need. Well, 
additionally, who is going to deliver long-term care services? 
Do we have the right workforce? With nursing home costs rising, 
some families are turning to assisted living facilities or 
trying to provide care at home. All of these situations raise 
additional questions and potential challenges.
    All of us have heard from constituents about the trade-offs 
that they have to make to provide care for their loved ones. I 
will give you an example. Karen from Englewood shared that she 
is a full-time caregiver for her 79-year-old mother, who is 
paralyzed after a stroke. She wrote that ``every cent I have 
goes into helping my mother at home.'' Her mother cannot cook, 
clean, or even wash herself. So, I am sure that many of our 
colleagues here would share similar stories because they are 
obviously quite common.
    More than half of the long-term care in this nation is 
delivered through family caregivers. CBO estimates that the 
value of such care is roughly $234 billion annually. And 
despite these enormous costs, most Americans have done little 
or nothing to prepare for their future long-term care needs, 
according to a recent study from the SCAN Foundation.
    So, our current system of providing long-term care is 
unsustainable for both the government and for families. CBO 
predicts that expenditures for long-term care are likely to 
increase from 1.3 percent of GDP to as much as 3.3 percent of 
GDP by 2050.
    But, as we continue to struggle to find ways to address it, 
let us not be naive to believe that we are going to find a 
solution in just one hearing, but we need to start. The panel 
that we have assembled will give us a wide array of ideas for 
us to debate as we strive to find a bipartisan solution, and so 
I want to thank our witnesses.
    I want to thank our bipartisan co-leader, Senator Collins, 
and Senator Collins, if you would share with us.

         OPENING STATEMENT OF SENATOR SUSAN M. COLLINS

    Senator Collins. Thank you very much, Mr. Chairman.
    As you have indicated, more than 12 million Americans rely 
on long-term care services and supports to perform the routine 
activities of daily living and to maintain their quality of 
life and their independence, if possible. I appreciate your 
calling this hearing to explore the options for improving our 
current long-term care financing and delivery system.
    As the Senate Co-Chair of the bipartisan Congressional Task 
Force on Alzheimer's disease, I am particularly concerned and 
sensitive to the complex care needs of Alzheimer's patients and 
their caregivers. I, therefore, particularly look forward to 
discussing ways to provide more support to the 62 million 
family caregivers who in 2009 provided an estimated $450 
billion in uncompensated long-term care, more than double the 
value of all paid long-term care.
    Long-term care is the major catastrophic health expense 
faced by older Americans today, and these costs will only 
increase as our nation ages. It is not just that there will 
soon be a greater number of older Americans, it is also that 
older Americans are living longer. Americans 85 and older, our 
so-called oldest old, are the fastest growing segment of our 
population, and this is the very population that is most at 
risk of the multiple and interacting health problems that can 
lead to disability and a need for long-term care.
    At the same time, declining birth rates mean that there 
will be fewer family members and paid caregivers to care for 
our nation's growing aging population. Today, there are 
approximately seven potential caregivers for each person over 
80, as this chart indicates. By the year 2030, there will be 
only four. And by 2050, the number drops to fewer than three. 
As a consequence, more people will have to rely on fewer 
caregivers.
    What does that mean? What are the implications for the 
quality of care that will be given? It is clear that we have to 
do more to support family caregivers and to recruit and retain 
a robust and competent long-term care workforce.
    While there is a need for both public and private financing 
of long-term services and supports, I do believe that we must 
do more to encourage Americans to provide for their own long-
term care needs. Many mistakenly believe that Medicare or their 
private medical insurance policies will cover the cost of long-
term care should they develop a chronic illness or cognitive 
impairment like Alzheimer's. Unfortunately, far too many do not 
discover that they simply do not have coverage until they are 
confronted with the difficult decision of placing a frail 
parent or loved one in a long-term care facility and face the 
shocking realization that they will have to bear the costs 
themselves.
    Americans should consider their future long-term care needs 
just as they plan for their retirement or purchase life 
insurance to protect their families. Private planning for long-
term care will not only provide families with greater financial 
security, but also will ease the growing financial burden on 
the Medicaid program and strengthen the ability of that program 
to serve as a long-term care safety net for those Americans 
most in need.
    Again, Mr. Chairman, thank you for calling this hearing and 
I look forward to hearing from our witnesses.
    The Chairman. Out of a spirit of beneficence and felicity, 
I would, in the spirit of the season, extend to our two most 
distinguished committee members the opportunity to say a word 
or two before we turn to our witnesses.

         OPENING STATEMENT OF SENATOR JOE MANCHIN, III

    Senator Manchin. Well, let me just say that, first of all, 
I appreciate, Mr. Chairman, you holding this committee, and 
Ranking Member Collins, because it is such an important issue.
    I come before you as a son, a grandson, and a former 
Governor that dealt with these matters very personally, and I 
can tell you, there is not a greater thing that we can do to 
add dignity and respect to a person's life as they grow older 
than to try to have them live an independent lifestyle.
    I will give you one story. My grandmother was 85 years of 
age. I used to stop and see her all the time. And one time I 
stopped and she was very, very lethargic and just kind of 
sitting there and I said, ``Grandma?'' And she said, ``Oh, 
everything is okay, honey.'' And I could tell something was 
wrong, so I told my mother. I said, ``Mom, you ought to go up 
and see Grandma again,'' because my mother always wanted her to 
live with us and she always wanted to be independent. And this 
one time, my mother went to visit her and she said, ``Okay, 
honey. I will come down and visit the kids.'' Well, then she 
stayed for 15 more years, lived to 100 years of age.
    [Laughter.]
    Senator Manchin. And the thing about it was that she was 
lonely. She had poor nutrition. She was trying to feed herself 
and she was not cooking properly, all of these things. And we 
just--do you follow me? It is right before your eyes and you do 
not see it, and then when you do, you see the difference of a 
life it makes.
    So, I took that with me when I became Governor, and the 
main thing I wanted to do is create programs that really drew 
attention to how people could live independently. We started 
some programs in West Virginia, I am not sure if other States 
had ever started them before. But I used my lottery funds and 
table games licensing fees and 100 percent went into my long-
term care for independent living, and we called it FAIR. And 
the FAIR program, basically all it said was, whatever you could 
pay, you paid. We helped you. We sent people in to let you live 
independently. A lot of people did not have family support. 
There is so much we can do, and government does not have to do 
it all, but we have to be the best partner they have ever had, 
and that starts from the Federal to the local levels.
    But we had a Lighthouse program to allow long-term care 
needs to remain in their home for as long as the health 
allowed, and then we had the FAIR program. That was Families 
with Alzheimer's In-Home Respite. You just need a break every 
now and then, just a break. So, there are some compassionate 
things that we can do and it does not break the bank to do it.
    I am just so thankful there are those of you who have 
dedicated your lives to helping those of us who have been on 
the front line. My mother is 91 right now, and if it was not 
for my sisters and my nieces, who take care of my mother, and 
around-the-clock care--we never put her in a nursing home, and 
that is not where she intends to be or where she wants to be, 
and most people do not. If they do not have the support, we 
have to give them that support that we can to live 
independently. You will help us do that and we look forward to 
your testimony.
    Thank you.
    The Chairman. Senator Scott.

             OPENING STATEMENT OF SENATOR TIM SCOTT

    Senator Scott. Thank you, Mr. Chairman.
    I can tell that the holiday season has begun. We are 
sitting Democrat-Republican-Democrat-Republican. This is an odd 
thing for us in the Senate, so this is wonderful----
    The Chairman. I am feeling lonely over here.
    [Laughter.]
    Senator Scott. Yes, sir. Yes, sir. I just did not want to 
get to your left, sir. It is not good for me, from South 
Carolina, to be to your left.
    The Chairman. You are welcome anywhere, any time, Senator 
Scott.
    [Laughter.]
    Senator Scott. Thank you very much. We will figure it out 
in the second half.
    I will tell you that for me, as Senator Manchin has talked 
about, the issue of long-term care is certainly an issue that I 
take seriously and have had to experience personally. I think 
through my grandmother at 77 when she passed on April 29, 2001. 
She had both Parkinson's and Alzheimer's, and for the last 
seven years of her life, my family--thank God for my 
grandfather and my mother and my aunt who spent an inordinate 
amount of time taking care of her at their home.
    Fortunately, we had the resources to do so, and 
unfortunately, there are a lot of folks of color, specifically, 
when you look at the demographic breakdown of who could stay in 
a home and who cannot, unfortunately, minorities pay a heavy 
price for not having the resources and the adequate time to 
care for their loved ones. And so we had a unique experience in 
a very special way.
    I think it is a wonderful opportunity to care for those who 
took care of you. There is an old saying that you are twice a 
child, and unfortunately, we have experienced that in this very 
powerful picture of those of us who have had the opportunity to 
care for our loved ones. And that is why this issue is 
incredibly important for our country.
    My second experience has been as a guy in the insurance 
industry for the last 23, 24 years, where I sold long-term care 
policies, and I understand the ADLs and the activities of daily 
living and how many people have not been properly educated on 
the opportunities to make a decision when you are young enough 
to make that decision so that the payoff is that you do not 
exhaust all your resources trying to get down to that $2,000 or 
$3,000 level where Medicaid kicks in. In South Carolina, that 
expense has been $1.2 billion Medicaid has put out trying to 
help folks who have exhausted all of their resources.
    So, to have that conversation about where we are going as a 
nation and how this government can play a role--an important 
role--I think is a very important decision. Thank God for a 
Chairman and a Ranking Member that have the foresight to put us 
in this position, and I look forward to having a robust 
discussion about the future opportunities and creativity in the 
marketplace that will provide the type of resources and future 
planning that gives us real hope that more Americans will 
retire and then live for the rest of their time in retirement 
with dignity, to include the last years of their life.
    Thank you.
    The Chairman. Thank you.
    We are going to start with Ms. Anne Tumlinson. She is a 
Senior Vice President at Avalere Health. She will set the stage 
on what the current landscape is like.
    And then we are going to hear from members of the Long-Term 
Care Commission. They are going to share. Dr. Bruce Chernof, 
the President and CEO of the SCAN Foundation--Dr. Chernof 
served as the Chairman of the Long-Term Care Commission. Dr. 
Mark Warshawsky--we are going to hear from Dr. Warshawsky, 
Adjunct Scholar at the American Enterprise Institute. He is the 
Commission's Vice Chairman.
    And then Dr. Judy Feder, one of the Commissioners of the 
Long-Term Care Commission. Dr. Feder is a professor at 
Georgetown Public Policy Institute and a fellow at the Urban 
Institute and also served as the Pepper Commission's Staff 
Director under my former colleague, of which I was the 
President of the Claude Pepper fan club----
    [Laughter.]
    The Chairman. [continuing]. And she served for Claude 
Pepper.
    And, by the way, I mean, there was an example. For those of 
you who were not here in Washington in that era, Claude Pepper 
and Ronald Reagan would go to it. But at the end of the day, 
they were personal friends, where then they could work it out 
together.
    And one of the great examples of that, also with the 
leadership of the Speaker, Tip O'Neill, was when Social 
Security was within six months of becoming bankrupt in 1983. 
They said, we are going to take it off the table so that you 
cannot hit your opponent over the head with it. They appointed 
a blue ribbon panel. They made the recommendations on what to 
do, sent it to the Congress. We passed it overwhelmingly. And 
it made Social Security actuarially sound for the next half-
century. That was 1983. So, those folks knew how to get along.
    Ms. Tumlinson.

  STATEMENT OF ANNE TUMLINSON, SENIOR VICE PRESIDENT, AVALERE 
                             HEALTH

    Ms. Tumlinson. Thank you. Chairman Nelson, Ranking Member 
Collins, and members of the committee, thank you very much for 
holding this hearing and especially for the opportunity to 
testify today about the future of long-term care policy.
    So, the perspective that I am about to share comes from my 
work over the past 20 years, first at the Office of Management 
and Budget as the person responsible for the Medicaid budget, 
and also the last ten or 15 years consulting to nursing home 
providers, assisted living providers, and working with a number 
of my colleagues here on the panel analyzing the budgetary 
impacts of a whole variety of ideas for reform, including the 
CLASS Act.
    So, I just want to start by saying, as many of you have 
already noted, we spend well over $200 billion, but we pay for 
very little care. We depend on over 60 million Americans to 
provide most of the care, and they provide it unpaid. And they 
do this because most Americans are not insured against the 
financial risks of long-term care and they really want to avoid 
a Medicaid nursing home bed.
    So, the long-term care system is woefully under-financed 
for the job that it has to do now and for the job especially 
that it has to do in the future. All of the other problems that 
we talk about--the delivery system, the workforce, the quality 
of care--all of them stem from this fundamental fact of under-
financing.
    So, I am going to make three points to just frame out our 
discussion today that I hope will help you all in the work that 
you are doing in the future and that will make our discussion a 
very interesting one. So, I am going to start with something a 
little bit controversial, and hopefully, the former Governor 
will not come across the table at me.
    The problem that we have to solve, in my opinion, most 
primarily, is actually not one that is a Medicaid budget 
problem, and I worked on the Medicaid budget for many years and 
I do not see this primarily, actually, a Medicaid budget 
problem. It is an issue, of course. States have to pay for, 
they have to fund their Medicaid programs, and there are people 
entitled to services under those programs. And Governors and 
State governments are going to face huge challenges as the 
population ages. That is definitely true.
    But the real issue is that in managing these challenges, 
even more of a financing gap is going to be created, and that 
gap is going to have to be filled, as it currently stands, by 
families through their own personal finances and through unpaid 
caregiving.
    Long-term care is actually shrinking as a percentage of the 
Medicaid budget. It is at its lowest percentage in two decades. 
Over the last ten years, Medicaid long-term care spending has 
grown at an average annual rate of less than five percent a 
year.
    And it is true that we will have many more older Americans, 
as I said, but the larger concern is that in preparing for 
these demographics, States are doing very smart and logical 
things from a budget perspective and they are already 
demonstrating that they can and they will exercise the 
budgetary levers that they have to both reduce the number of 
people who receive Medicaid long-term care services and the 
amount that they spend per person and they are going to do it 
in all settings, not just nursing home.
    And, in fact, we see that reflected already in the growing 
interest among States in moving people into managed care for 
their long-term care services and out of fee-for-service. In 
other words, relative to the number of people who are going to 
need long-term care in the future, there is going to be a lot 
less Medicaid to be spread around and among those people.
    So, secondly, my second point is that the inability of 
Medicaid to keep up with the growing demand points, in my 
opinion, to the real problem, that the under-financing of long-
term care creates and contributes to enormous economic 
insecurity, which is already a major problem in this country, 
and this is a big part of it. And it is an insecurity for the 
majority of American families and when they think about what 
they might be facing in the future.
    So, when they are faced with this crisis, most Americans, 
what they do, as many of you noted, is they cobble together a 
variety of resources to provide what they can. Less than two 
million of the 12 that we have talked about today who need 
long-term care are actually living in a nursing home, and that 
is because the rest live in the community where Medicaid 
dollars are the scarcest and where a third of all American 
families report providing some type of caregiving. A third of 
all American families are now providing some level of 
caregiving.
    When they provide this care, they do it at a rate of 20 
hours per week, and that time is spent doing the really hard, 
physically and emotionally challenging work of caregiving, and 
they do it while 75 percent of them are holding down another 
job.
    And we know from industry data that over a million people 
are paying privately right now for assisted living or some 
other type of senior housing, and it costs $42,000 per year, on 
average. This is not just for rich people. These services are 
being financed through the sale of homes, through contributions 
from adult children. And providers tell me that their residents 
exhaust their resources while in assisted living and have to 
move into a nursing home to continue their care under Medicaid, 
because Medicaid does not cover assisted living.
    Very little of this, by the way, is captured in our 
national data. We do not have a good way of getting a handle on 
these expenditures.
    So, after years of working directly with providers, 
analyzing data, my conclusion is that it is much more likely 
that Medicaid right now is generally viewed as something to be 
avoided rather than as a mechanism to exploit for wealth 
protection. And as someone whose job it was to work on 
improving the efficiency of Medicaid, to find scorable Medicaid 
savings, and who was not shy about it, I might add, I am 
telling you that there is not much here to suggest that we have 
enormous opportunity to further tighten Medicaid. In fact, it 
is quite the opposite.
    My final point, and this is probably the least popular 
point that will be made here today, is that even when people 
are educated about the risks of long-term care, and even when 
they are presented with the long-term care insurance policies, 
and even if we manage to do that for many Americans, we will 
not truly address under-financing without requiring everyone to 
participate in the risk pool. I say this after, by the way, 
being a proponent of expanding coverage through voluntary 
private approaches and analyzing the budgetary impacts of 
these.
    I learned from that experience, and I am now of the view 
that in order to adequately protect Americans against the risk 
of long-term care need, in order to correct for the under-
financing problem that we currently deal with, some part of the 
solution of the future must be mandatory participation. We have 
this vigorous debate over private versus public insurance 
options, but it does not really mean anything because neither 
works very well in actually covering enough people when the 
participation is optional.
    It is an important debate, the debate between public and 
private, for sure, but not one we should be having without 
facing the reality of what it will really take to protect 
Americans, and in doing so, we will address the Medicaid budget 
issues in the process.
    I look forward to your questions. Thank you.
    The Chairman. Thank you.
    Dr. Chernof.

STATEMENT OF BRUCE CHERNOF, M.D., PRESIDENT AND CHIEF EXECUTIVE 
                  OFFICER, THE SCAN FOUNDATION

    Dr. Chernof. Thank you, Mr. Chairman, Ranking Member 
Collins, and members of the committee.
    Dr. Warshawsky and I are pleased to be here today to 
present the vision and recommendations of the Long-Term Care 
Commission, and I want to begin by saying I am going to walk us 
through the highlights of the report, but this is work that 
Mark and I did together and it comes from a spirit of 
fundamental bipartisanship, which we think is the way forward. 
So, again, I am going to make some opening comments on behalf 
of the whole report and Mark will make some specific comments 
to follow.
    As all of you know, the Commission had a very compressed 
timeline. We were set out with a six-month schedule, and after 
going through the appropriations process, we had roughly 100 
days, somewhere between 90 and 100 days, to do our work. In 
that work, we actually had four public hearings with 34 
witnesses, over 100 submissions of public testimony, and nine 
working sessions.
    On September 12, as required by the law, the Commission 
voted by a bipartisan nine-six majority to issue the final 
report as the broad agreement of the Commission. I want to 
provide you with an overview of the Commission's work process 
and the development of the final recommendations.
    I want to begin by saying that the Commissioners were a 
talented, knowledgeable, and really diverse group of people, 
and our expectations as Commissioners were that we would 
identify as much common ground as possible and establish that 
as a foundation for moving forward on long-term services and 
supports issues, that the discussion and areas of agreement and 
disagreement would be evidence-based, and that we would be open 
and willing to challenge accepted thinking where we could not 
find substantial evidence.
    We are really pleased with the collegiality and the amount 
of common ground reached. This makes the point that addressing 
long-term services and supports issues is not an intractable 
problem. This is something that we can work on in a bipartisan 
way.
    In the process, each Commissioner was asked to submit 
proposals. All proposals for discussion are included in 
Appendix A of the report. Commissioners then selected the ideas 
they felt merited the most attention, and this subset was 
discussed and developed as potential recommendations. Proposals 
that could not achieve broad agreement were not included as 
final formal recommendations.
    Let me state clearly that developing a thoughtful, 
comprehensive report in 100 days is an important success in and 
of itself and a direct result of the Commissioners' dedication.
    Let me provide you an overview. So, the report itself is 
framed by a clear call to action. We think it is very important 
for the general public to understand this need, and that broad 
agreement for a shared vision for the problem that we are 
trying to solve together. The shared vision, then, really 
serves as a framework that supports 28 specific 
recommendations.
    Let me touch on a few key points of the vision. It starts 
with the notion that we must have a fiscally sustainable and 
effective long-term services and supports delivery system. It 
is built on concepts of person- and family-centered care. It 
provides individuals with supports and services in the least 
restrictive environment appropriate for their needs. It is 
delivered by a well trained and adequately supported array of 
family caregivers and paid workers.
    And, finally, the comprehensive financing requires an 
approach with really three prongs: A balance of public and 
private financing to ensure the most catastrophic expenses; 
encouraging savings and insurance for more immediate long-term 
services and supports costs; and, finally, providing a strong 
safety net for those without resources.
    Now, the 28 recommendations, I could take you all through 
them and we do not have the time for that. So, what I would 
like to do is kind of box them up and highlight them for you in 
a way that is useful in our discussion today. The three key 
areas are service delivery, workforce, and financing.
    With respect to service delivery, I think it really all 
hinges on the recommendation that we start with a better 
balance of community-based and institutional care choices. 
Finding that right balance is really important since most folks 
want to be and should be in the community.
    Other recommendations include: A single point of contact. A 
uniform and standardized assessment that is used by all 
providers, and that it actually engages the family and 
individuals themselves. Accelerating the development of a new 
generation of quality measures that includes home and 
community-based services and the experience of the individuals 
receiving care. And, finally, promoting payment reforms that 
focus on outcomes rather than settings.
    With respect to workforce, central to this set of 
recommendations was a variety of recommendations focused on 
improving training and support for family caregivers, including 
identifying a family caregiver in the chart and assessing the 
family caregiver as part of the care planning and the care 
team. Other important workforce recommendations included taking 
on the scope of practice and delegation, integrating direct 
care workers more effectively in teams, and encouraging States 
to improve standards for home care workers.
    Finally, in financing, given the 100 days, the Commission 
did not have a single recommendation on financing but did 
outline a common vision, as I have already noted, and then 
identified two different approaches that could be the basis for 
a broader discussion, one focused more on public social 
insurance solutions and the other based more in private market 
solutions.
    Now, I will say, when you look at both of those approaches, 
there are some really interesting commonalities that sort of 
bring them together and are ripe for further work. I will say 
that the public policy details, the costs and funding 
mechanisms for both approaches remain to be specified, and many 
Commissioners felt it would require considerable new data, 
design work, and careful analysis of costs and consequences 
before a fiscally responsible proposal could be put forward.
    Finally, there were five specific recommendations relative 
to Medicare and Medicaid.
    Next steps, which is, I think, one of the things that 
brings us here today, the Commission felt very strongly that it 
is critical to have a follow-on body for the Commission to pass 
along the baton for critical economic modeling work that is 
still needed and not complete. We also called for a 2015 White 
House Conference on Aging in partnership with the National 
Council on Disability to focus on long-term services and 
supports issues.
    With that, I really want to thank the Commissioners for all 
their hard work, all our staff, who really gave up their summer 
to get us a product done on time. I want to thank Mark one more 
time, because his knowledge, leadership, and engagement 
throughout this process was really important. We worked as a 
team from day one, and I think that is going to be critical to 
get this job done.
    Thank you. Finally, I want to thank you for the opportunity 
to testify today.
    The Chairman. Thank you.
    Dr. Warshawsky.

  STATEMENT OF MARK J. WARSHAWSKY, VISITING ADJUNCT SCHOLAR, 
                 AMERICAN ENTERPRISE INSTITUTE

    Mr. Warshawsky. Thank you, Chairman Nelson, Senator 
Collins, and members of the committee. My name is Mark 
Warshawsky and I would like to add to Bruce's discussion my own 
views on the financing issues in more detail.
    The Commission did reach a consensus at a high level on the 
need for personal savings and insurance coverage and 
significant government support for the lower-income population, 
but we did not agree on structures or proportions. At least 
some of the divergence arose from a lack of empirical clarity 
on several aspects of the problem, which we tried to address in 
the Commission, but we did not have enough time and resources 
to resolve them.
    In particular, I am referring to our debates on whether 
Medicaid is now an LTC insurance program for the middle-income 
or even higher-income households, whether there is significant 
capacity of working-age adults with severe functional 
limitations to participate in the labor force, and how to 
improve the private insurance market.
    Focusing on the older population, some have expressed the 
view that Medicaid is now a program just for the poor, but I 
see that there is significant extent of Medicaid coverage for 
those who are solidly in the middle-income and above groups in 
their working years and through retirement. Evidence presented 
to the Commission as well as our understanding of the Medicaid 
eligibility rules indicated that in many States, significant 
housing, retirement, life insurance, and spousal assets are set 
aside in considering Medicaid eligibility, and many people who 
are in the middle-income group and above do, in fact, get 
Medicaid benefits.
    Still, there is much to learn about how significant is 
spend-down. What is the true extent of gamesmanship in Medicaid 
eligibility? What would additional efforts by the States bring 
in through estate recovery? And how much do the elderly care 
about leaving bequests or having expanded care options beyond 
what Medicaid currently provides?
    Some of us believe that one way to find out answers to all 
these questions is to set up an option for a Medicaid carve-
out, whereby upon retirement, individuals would have the choice 
of receiving a lump-sum payment from the government for a 
significant portion of their expected value of their Medicaid 
benefits. This would be most for the poor, little or nothing 
for the best off. Retirees would use the payment to purchase 
private permanent long-term care insurance of the desired 
benefit design in the place of Medicaid coverage.
    Turning to the working-age population with functional 
limitations, what little we heard and discussed indicated 
conflicting views about the extent of the capacity of return or 
to continue to work if significant supports were to be provided 
without the intended Medicaid requirement for impoverishment. 
To my understanding, past experience and data here is not 
encouraging about that capacity. But I did, and we all 
supported the Commission's recommendations to create a 
demonstration project and to assist States to achieve greater 
uniformity in State Medicaid buy-in programs for LTSS. 
Hopefully, we can learn much from these projects and changes.
    But even assuming that the results are positive, it is 
likely that the indicated policy changes will be costly. In 
light of the severe fiscal condition of the nation, we must be 
willing to prioritize needs, such as by tightening the 
currently loose eligibility standards for workers above age 50 
to qualify for disability insurance in Medicare.
    Finally, there was a disagreement about the possibility to 
improve the functioning of the private long-term care insurance 
market. We all agreed that, currently, it is a mess, but there 
was lesser consensus on the ``why's'', which, of course, leads 
to the prescriptions put forward.
    In my view, the problem is mainly one of inadequate demand 
arising from the crowd-out effect of the Medicaid program and 
also a lack of public understanding. At the same time, there 
are problems on the supply side, partly stemming from the 
restrictive State rules on insurance policy design and Federal 
tax law.
    So, some of us proposed the following. First, provide a tax 
preference for long-term care insurance policies through 
retirement and health accounts, and we feel that in terms of 
the savings from Medicaid, this would cover the costs of lower 
tax revenues.
    Second, we wanted to support combination policies, such as 
a life care annuity. Such products would marry immediate life 
annuities to long-term care insurance, allowing individuals to 
finance their care as well as their retirement. Combining long-
term care insurance and life annuities would decrease the 
combined cost and considerably ease underwriting standards, 
enabling more seniors to afford and obtain coverage.
    I would also like to note that although five of the six 
Republican Commissioners voted in favor of the report of the 
Commission, we all stated that the Commission's recommendations 
should not increase an existing budgetary commitment to health 
care faced by both State and Federal Governments. Likewise, we 
believe that raising taxes to fund additional entitlement 
commitments is unwise, especially given recent tax increases to 
pay for the ACA.
    In closing, I want to echo Bruce by stating my appreciation 
for the tremendous effort of my fellow Commissioners. They did 
the impossible and produced an important product on a very 
tight schedule. I also want to thank Bruce for his incredible 
leadership. He was a great partner who worked diligently to 
install trust and create an environment conducive to 
collaboration and dialogue.
    Thank you.
    The Chairman. Thank you.
    Dr. Feder.

     STATEMENT OF JUDY FEDER, PH.D., PROFESSOR, GEORGETOWN 
 UNIVERSITY McCOURT SCHOOL OF PUBLIC POLICY, AND FELLOW, URBAN 
                           INSTITUTE

    Ms. Feder. Thank you, Chairman Nelson, Ranking Member 
Collins, and members of the committee for the opportunity to 
testify before you today on a path forward for long-term 
services and supports.
    I appreciated at the outset, Mr. Nelson, your mentioning my 
service as the Staff Director of the Pepper Commission, which 
began about 25 years ago, so as you can see, I have been at 
this a long time and hope we will make some progress before I 
need long-term care. So, we definitely need to get on with it.
    But, the experience most recently as a member of the 
Congressional Commission on Long-Term Care is what I am 
testifying before you today on as well as my experience, and I 
can tell you, there is a lot of work to be done. Although 
policymakers are grappling with the challenges of assuring 
Americans affordable access to quality health care, we have yet 
to seriously tackle the equally important issue of long-term 
services and supports.
    Despite the continued political battle, even critics of the 
Affordable Care Act recognize the need for insurance to assure 
access to health care and protection against financial 
catastrophe. But there is much less acceptance of the need for 
insurance when it comes to another health-related risk, one for 
which virtually all Americans are uninsured, the risk of 
needing expensive help with basic tasks of daily living, like 
dressing, bathing, or eating, generally referred to as long-
term services and supports or long-term care.
    On the financing that is critical to building an effective 
long-term care system, the recently concluded Commission 
stopped short of recommendations. But five of us Commissioners 
felt compelled to step up, did not support the Commission 
report, and offered an alternative report explaining, as 
charged, why and how Congress should accomplish this goal, and 
I request that you include that alternative report that I have 
submitted with my testimony in the record.
    As you said, about 12 million people have a need for long-
term care today, and I would remind us, while this is the 
Special Committee on Aging, that five million of these 
individuals are under the age of 65.
    As you said, the vast majority of these individuals count 
on their families for help, but families can only do so much, 
and when people need paid care, whether at home or in an 
assisted living facility or a nursing home, its costs soon 
exceed most families' ability to pay. That is where insurance 
ought to kick in. But private health insurance does not cover 
long-term services and supports and few Americans have private 
long-term care insurance, which typically costs a lot, offers 
limited value, and is subject to premium increases that can 
cause purchasers to lose coverage they have paid into for 
years.
    On the public side, Medicare, which older people and some 
younger people with disabilities rely on for health insurance, 
does not cover long-term care. The Federal-State Medicaid 
program does serve as a valuable last resort for people who 
need long-term services and supports, but its protections, 
especially home care, vary considerably from State to State and 
become available only when people are or have become 
impoverished taking care of themselves, and I would have to 
take issue with Mark's comments because the evidence that was 
presented to us is that Medicaid is not a program for the rich. 
Its benefits are overwhelmingly going to low- and modest-income 
people.
    The need for expensive long-term services and supports is 
precisely the kind of catastrophic, unpredictable risk for 
which we typically rely on insurance to spread costs. These 
costs are obviously unpredictable for people under the age of 
65, and I think we all get that. Only two percent of that 
population needs services. They are almost half the long-term 
care population because it is a small percent of a very large 
number of people.
    But, the likelihood of needing long-term care and extensive 
expensive long-term care is also unpredictable for people when 
they turn age 65. An estimated three in ten people age 65 today 
are likely to die without needing any of these services, while 
two in ten will need more than five years--five or more years 
of service.
    And when we think about the risks in financial terms, half 
of the people turning age 65 today will spend nothing on long-
term care, depending on their families when they need it, while 
a very small percentage will spend hundreds of thousands of 
dollars.
    If, as you have indicated and is often claimed, we really 
want people to be financially prepared to manage this 
unpredictable catastrophic risk, we need to establish a 
reliable insurance mechanism, whether public or private or in 
some combination, to which they can contribute. It is easy for 
experts to agree that we need a public-private partnership, but 
the real challenge is what role is each sector going to play.
    To effectively spread risk and reach the broadest possible 
population, public social insurance that really spreads risk 
and everybody participated in, as Anne emphasized, must be at 
the core of future policy. Private insurance can play a 
complementary role, but even its proponents recognize that 
building future policy around a private market will, at best, 
leave eight in ten Americans uninsured.
    Public insurance can be designed in different ways. It can 
offer relatively comprehensive and defined benefits, like or 
even through Medicare. Or, it can offer basic cash benefits in 
a new program. And it can be funded in different ways, in part 
through taxes, like a surcharge on the income tax, and in part 
through savings from what Medicaid would otherwise have to 
spend, although I would emphasize what Anne said at the outset. 
Although there can be some savings to Medicaid, Medicaid is 
woefully underfunded and we need new financing to support a 
decent system in the future.
    Regardless of its specifics, a public or social insurance 
program will protect all of us at risk and require all of us to 
contribute.
    In closing, I want to emphasize that public insurance will 
not eliminate personal or family responsibility. Rather, it 
will make shouldering that responsibility manageable and 
affordable through private insurance, private resources, and 
family care. And no social insurance mechanism is likely to 
eliminate the need for an adequate public safety net, whether 
within it or through a continued, albeit smaller, Medicaid 
program.
    The enactment and implementation of the ACA demonstrates 
that it will not be easy to enact long-term care insurance, a 
public long-term care insurance program, but we should not kid 
ourselves. Without it, our policies will continue to fail 
people young and old, now and in the future, who need care. 
Building an effective long-term care insurance system with 
public protection at its core is the only way to enable 
Americans to prepare for the risks we all face, and building it 
is our responsibility.
    Thank you.
    The Chairman. Thank you.
    I am going to withhold my questions and I will do clean-up 
so that we can get to our members. Senator Collins.
    Senator Collins. Thank you very much, Mr. Chairman.
    About a decade ago, I authored legislation that became law 
to allow the Federal Government to provide a long-term care 
insurance program for Federal employees. It was not a 
subsidized program, but at least Federal employees would be 
offered that benefit and the advantage of a group program that 
they could buy into. And there have been some issues with the 
program, but one of them is that not many Federal employees 
signed up for the program, which really shocked me, because if 
you look at the demographics of this country, one would think 
that one at a young age can buy affordable long-term care 
insurance and thus be protected.
    I am curious, and Dr. Warshawsky, I will start with you on 
this issue because you talked about one of the reasons that the 
long-term care private insurance market is, quote, ``a mess,'' 
is inadequate demand. And I am wondering if most large 
employers offered this as a benefit, like Fortune 500 
companies.
    Mr. Warshawsky. My understanding is that about half of 
large employers offer it as an optional benefit. Very, very few 
will contribute to it, so it is an employee pay-all benefit, 
but about half will offer it. But I think the experience is 
similar to what you have indicated in the Federal Government, 
that many do not use it. I think even very large well-paid 
organizations, about five or six percent of their workers use--
purchase long-term care insurance, and I think there are a 
couple reasons for that.
    As I indicated in the testimony, and as we heard by an 
eminent economist, that Medicaid does represent a type of 
social insurance and it is a crowd out of private insurance, 
and that is a significant factor.
    Most other benefits, retirement benefits or health 
benefits, that are given by employers are tax advantaged, which 
certainly provides an enormous incentive to get the benefit. 
Clearly, long-term care insurance is not a tax-advantaged 
benefit.
    And I would say it is a difficult subject, to be frank. 
Although health has its downside, it has its upsides. 
Retirement is usually something that people look forward to. 
Long-term care, unfortunately, is a difficult subject. In my 
opinion, I think it is a subject which is best handled at the 
point in retirement, which is why I have proposed, and some of 
the Commissioners supported this, creating combination policies 
which would be offered at the point of retirement, such as the 
life care annuity.
    Senator Collins. I am very intrigued by that idea, and 
certainly if we made long-term care insurance tax preferred the 
way health insurance is, it seems to me you would see a larger 
uptake by employers and employees. On the other hand, we are 
all aware that that is the largest tax expenditure, if you 
will, that we have, with employer-provided health insurance. 
So, there is a cost to doing that, as well.
    I continue to believe, though, that another issue is that 
people are under the misimpression that, somehow, the Medicare 
program is going to cover them, or their normal health 
insurance, or their supplemental insurance program is going to 
cover them. And as people are living longer, and if you look at 
the statistics on Alzheimer's disease, which are truly 
frightening, the need for long-term care is only going to grow. 
So, I think we need to do a better job in making private long-
term care insurance available and attractive to people.
    Dr. Chernof, let me just ask one more question--my time is 
rapidly running out--and it has to do with home care. Most 
people I know would much prefer to receive home care rather 
than going to a nursing home, and yet we have a very outmoded 
definition for qualifying for home health care that has a 
homebound requirement. And that homebound requirement ignores 
the fact that we have made technological advances that allow 
people who have disabilities to leave their homes at times, and 
I am wondering what you think of changing the definition or 
qualification for the home health benefit so that it is based 
on the patient's functional limitations and clinical condition 
rather than on some arbitrary limitation on absences from home.
    I introduced a bill several years ago to change that. We 
were unable to get much traction for it. But it is my 
understanding that the Commission did address this issue, and 
if you could tell us what the Commission decided.
    Dr. Chernof. Certainly. Thank you for that question, 
Senator Collins. You know, let me start just as a physician for 
a second and a general internist. From my years in practice, it 
is all about function. We need to start there, because 
function, and function in combination with serious clinical 
illness, is what drives cost and actually what really puts 
pressure on families and systems. So, by sort of starting 
there, I think you get to the right answer, which is a slightly 
different answer than the one we have today. And you are 
correct that as the Commission as a whole deliberated, the 
homebound requirement was one of those areas that we thought 
really needed to be revisited.
    Now, let me say clearly on behalf of the Commission that I 
think people understand the risk that you do not want to create 
something that just radically grows a program and increases 
costs. So, this is something that would need to be done 
thoughtfully and it is about finding the new right definition 
that helps the right people get the right services in the right 
place. But the Commission as a whole, Republican appointees and 
Democratic appointees, came together to see this is a real 
place where there is a need for a new definition, one that is, 
frankly, more efficient, more effective, and more person-
centered.
    Senator Collins. Thank you.
    The Chairman. Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    This is an interesting panel, honestly, as it relates to 
the topic. You guys are certainly well educated on the topic 
and very passionate. I can see it in your eyes and maybe hear a 
little frustration in the number of years you have worked on 
this project without any actual progress. I certainly 
appreciate that. And you go from the mandatory, let us all get 
in the boat together, to let us find some free market solutions 
for it. Certainly, I am going to follow more on the free market 
side, but I do realize that even with the best case scenario, 
if we could take it from Dr. Feder's two-in-ten to three- or 
four-in-ten, we could improve drastically the results of it.
    And having sold a couple of these policies, I will tell you 
that part of the challenge that we face, it seems to me, is 
that when you go into a large group, whether it is the United 
States Government or some of the larger groups that I dealt 
with, informing the individual who works for the company that 
the available benefit is there is a totally different 
conversation than getting them to sign up for that benefit. So, 
the real challenge is that when you have these large employers, 
unless you have enough agents or folks to help sell and market 
and motivate folks to take a second look at what the actual 
benefits package includes, it is very difficult to get people 
to sign up for something that they are uninformed about as a 
part of the process, and that is really one of the challenges.
    I would love to have Dr. Warshawsky--I am going to call you 
Mark because I am going to butcher your name the second time I 
say it----
    [Laughter.]
    Senator Scott. [continuing]. Talk about this part. So, I 
think the misinformation really takes away the motivation. So, 
the misinformation is that somehow, some way, your health 
insurance policy is going to cover this one day, and if that 
does not, then you become eligible for Medicaid and that will 
cover it. And they do not really understand that you have to 
exhaust all your resources before Medicaid becomes a part of 
it. So, there is a misinformation, in my opinion, that has to 
be addressed, number one. And there is a marketing opportunity, 
as well.
    And then when you look at the hybrid combination policies 
of annuities merging with long-term care, are we looking for an 
opportunity to have the balance in your annuity create a 
different actuarial basis to then reduce the actual rate for 
the long-term care insurance so as to make it more accessible 
to those in the public and then adding a tax preference to that 
in an attempt to actually then create more affordability and 
more access to it? Is that where we are going with it? Is it 
similar to, in fact--the longest run-on sentence in American 
history right now--is that similar, in fact, to what the life 
insurance companies have started doing with the ability to get 
some of your life insurance benefit before you expire, the last 
25 or 50 percent of your life, if you know what I am talking 
about?
    Mr. Warshawsky. I am familiar with those, yes.
    The Chairman. Senator Scott, you have adapted to the Senate 
very well.
    [Laughter.]
    Senator Scott. They said, sooner or later, I would like to 
hear myself talk, and I am getting closer to that place now, so 
yes, sir.
    [Laughter.]
    Mr. Warshawsky. Yes, we----
    Senator Scott. One part of that five-part----
    Mr. Warshawsky. Yes, I will try to address many of those. I 
think, and also in support of what Senator Collins indicated, 
there is ample evidence that there is great confusion about 
what the government covers or what insurance covers and what it 
does not. There have been surveys done by Professor Howell 
Jackson at the Harvard Law School, Jeff Brown at the University 
of Illinois. I mean, it is really a quite pervasive lack of 
understanding.
    And I think part of that is that there really is not a good 
structure right now. And in this, I think we all agree on the 
panel, you know, regardless of our viewpoints on other issues 
in terms of public-private emphasis, there is not a good 
structure. And I think part of the responsibility of government 
here is to create that structure in terms of our viewpoint in 
terms of emphasizing the private sector and private resources. 
That would include the tax incentive and it would also include, 
as we have indicated, encouraging the life care annuity.
    Now, it is not--the motivation there is a little different 
than----
    Senator Scott. What I articulated----
    Mr. Warshawsky. [continuing]. The life insurance product 
that you have indicated. Basically, just in brief, the 
advantage is you create pooling of populations that currently 
are excluded from purchasing long-term care insurance because 
they are in poor health or the insurance companies think they 
might be likely to become disabled, and, therefore, they cannot 
purchase the long-term care insurance. But it is precisely 
those people that would be attractive to the insurance 
companies in terms of the life annuity segment of a combined 
policy.
    If you combine the two, you attract both populations and it 
is fair to both populations because they are both getting a 
benefit that they would not otherwise, and it could be offered 
at a reduced cost. And, most significantly, it could be offered 
to pretty much everybody with very minimal underwriting, which 
is a great advantage in terms of creating the opportunity for 
more private long-term care insurance coverage.
    Senator Scott. To that end, with the life annuity hybrid, 
that would work pretty well for those folks who are typically 
in your moderate income level and higher, perhaps. But those 
folks who are struggling to make ends meet, the life annuity 
premium would probably be still significant.
    Mr. Warshawsky. It would be. It would be. It is for people 
who have some retirement assets.
    Senator Scott. I mean, clearly. Yes.
    Mr. Warshawsky. Yes.
    Senator Scott. Thank you.
    One final question, Ms. Tumlinson, on the mandatory--I 
wrote down what you said, but I have now written it on too many 
pieces of paper, so----
    Ms. Tumlinson. Right. On the idea that we need some type of 
mandatory enrollment into an insurance product in order to 
actually create economic security for most Americans.
    Senator Scott. So, from my perspective--I wish we had more 
time, but my time is about up--I am not sure, do you get five 
minutes or seven minutes in this committee?
    The Chairman. Well, given the felicitous nature of this----
    [Laughter.]
    The Chairman. [continuing]. Pre-Christmas meeting, please 
continue.
    Senator Scott. Thank you, sir.
    [Laughter.]
    Senator Scott. No other Chairman on any of my other 
committees would do that----
    [Laughter.]
    Senator Scott. [continuing]. So that is why I had that 
incredibly long, compounded, run-on sentence, unfortunately.
    Help me understand, because my perspective on our 
entitlements today is that we cannot afford the ones that we 
have----
    Ms. Tumlinson. Right.
    Senator Scott. [continuing]. And the construct that we work 
with is that we have--forget the trillion-dollar, you know, 
multiple, $17 trillion debt. That is nothing compared to what 
we are speaking to. The real challenge that we have with our 
pension plans, that are, to me, underfunded, our health care 
that we already are exposed to, so we are talking about a 
couple hundred trillion dollars--trillion dollars--of unfunded 
liabilities. And if we add in a new component, I just do not 
know how we can pay for this.
    Ms. Tumlinson. Yeah. No, no. That is a great question. I am 
glad you asked it, because I will tell you, it is--again, 
because of my professional background, the last thing in the 
world I ever imagined myself doing as a budget analyst is 
suggesting to anybody that we needed a new government program, 
as I was trying to control the ones that we had.
    But after looking at this for many, many years, and truly, 
you know, the idea--I have actually been a pretty big fan of--
you know, there has got to be a way we can actually work with 
the private long-term care insurance market to create both 
changes on the demand and the supply side that would, in fact, 
really give many more Americans a true opportunity to insure, 
because right now, it is my view that there really is not a--
you know, we say people are unprepared. Well, how can they 
prepare, really? It is not their fault they are not prepared.
    There is really--I do not have long-term care insurance and 
I know a lot about it, although my parents are----
    Senator Scott. I can get you good insurance.
    [Laughter.]
    Senator Scott. I know some agents that would help you 
today.
    [Laughter.]
    Ms. Tumlinson. Okay. Well, I should point out that, 
actually, my parents are signed up under the Federal long-term 
care insurance for Federal employees, so thank you for that. I 
really appreciate it, especially.
    [Laughter.]
    Ms. Tumlinson. But, I think that there are ways in which we 
can work with an insurance program so that it is financed in a 
way that is self-funding. And we worked on this a lot, 
actually, at my company when we were modeling the CLASS Act 
just a year ago. So, we were dealing with a situation where we 
were trying to analyze what the premium levels would be under a 
voluntary approach, and the big problem that we ran into over 
and over and over again was that you set the premiums low 
enough--if you set the premiums too high, you are not going to 
get enough people to enroll and you end up in this sort of 
actuarial----
    Senator Scott. Adverse risk selection.
    Ms. Tumlinson. Exactly. Exactly. So, the fact of the matter 
is, I have not been able to figure out a way to come up with a 
public policy that would do what we need, what this country 
needs, without going in that direction, and I really do think 
that we know enough now to set it up in a way that the premiums 
would cover, or the tax base or however it is that you choose 
to finance it, and there are so many different ways, could, in 
fact, pay for the benefits that we would expect to pay out over 
the years.
    But, you are right. It is a risk. I completely understand 
and agree with that.
    Senator Scott. My deer in the headlights look is not 
unauthentic. It is real.
    Ms. Tumlinson. Yeah.
    [Laughter.]
    Senator Scott. So, my office will call your office and we 
will figure out what in the world you just said, but----
    [Laughter.]
    Senator Scott. [continuing]. That will be great.
    Ms. Tumlinson. Right.
    Senator Scott. Thank you, ma'am.
    Ms. Tumlinson. Sure.
    The Chairman. Senator Baldwin.
    Senator Baldwin. Thank you. I want to again thank and 
welcome our witnesses today and also offer my gratitude to our 
Chairman and Ranking Member for bringing us together today. Not 
only do you recognize that the current system of long-term 
care, financing, et cetera, is unsustainable, but you have a 
resolve to continue to convene this committee to focus in on 
this and I appreciate that very much.
    I am hoping to maybe sneak in two questions for the whole 
panel, if I do not have too long of a run-on sentence. I am 
teasing.
    The first focus I would like to have is sort of the role 
and value of State innovation in this and looking at this at 
the national level. Obviously, we have to tackle and debate 
long-term care financing at the national level, but I know lots 
of things are going on in the States.
    In Wisconsin, we have a program called Family Care that 
currently operates in 57 of our 72 counties with plans to 
expand to all. And the gist of it is that it improves the cost-
effective coordination of long-term care services by creating a 
single flexible benefit. It includes a large number and range 
of health and long-term care services that otherwise would be 
available in separate programs.
    So, just as one example of what a State is doing, I wonder 
what we can learn from innovation that is going on in the 
States on how to address our long-term care crisis. I do not 
know if you all want to take a stab at it.
    Dr. Chernof. Well, maybe I will start on behalf of the 
Commission as a whole. I think when it comes to delivery system 
and workforce, the answer is, absolutely. While there are some 
things that can be done on the national level, care is 
delivered locally. They are delivered based on the kinds of 
providers and array of services you have in a community, in a 
city, in a State. And it is based on the kinds of needs and 
desires of specific communities and there is wide variation 
amongst the States.
    So, we, in conjunction with the Commonwealth Fund, produced 
a report card that the AARP Public Policy Institute looked at, 
or put out, looking at the performance of various States across 
the country, and Wisconsin was one of the top performers. It 
was number five in the country. It is the robustness and 
creativity and person-centeredness of those programs that 
really drives Wisconsin's results.
    So, are there opportunities to leverage State innovation, 
particularly when it comes to how we deliver services, how we 
support families, and how we address some of the kind of 
operational workforce questions? Absolutely. You know, the 
single biggest challenge in building teams, for example, the 
ability to delegate functions from doctors and nurses to other 
members of the caregiving team, is all State-based. That is all 
sort of professionally driven within State law. So, there are 
many opportunities and Wisconsin is a real leader in that.
    I do think the financing question, quite honestly, is one 
that sort of comes back to a Federal level----
    Senator Baldwin. Yes.
    Dr. Chernof. and I think this notion of a broader--finding 
the right framework, which is part of what our discussion here 
is today, the role of the Federal Government in providing some 
leadership and thinking about that would be really important.
    States are where that care is delivered, and I think that 
there is a lot we can learn from and a lot of success out 
there.
    Ms. Feder. Senator Baldwin, I pick up on what Bruce said 
about financing because I think that really is, in many 
respects, the ballgame. I think we have seen a lot of 
innovation in some States, a move in many States toward much 
greater reliance on home and community-based care. That is 
encouraged through the Affordable Care Act, but needs more 
encouragement in terms of incentives to States to support that.
    But, as Anne noted at the outset, States are already facing 
enormous pressure on their Medicaid programs and are not--you 
cannot innovate your way out of budget tightness. There is--
even as we have seen improvements and innovation in some 
States, we see tremendous variation across States. That means 
that there is home and community-based care available fairly 
widely to some populations in some cases and very little, 
particularly to the elderly, in others. So, the States.
    And, while Bruce says care is delivered at the local level, 
so is medical care delivered at the local level. Delivery is 
between the person and the caregiver. But the financing is 
critical to making those services available.
    What we see at the State level, and again, I emphasize it 
at the outset, is that the States, in order to control their 
obligations, create waiting lists. It is not about State 
innovation and delivery. They farm it out to managed care plans 
that may or may not have any capacity and too often do not have 
the capacity or experience to deliver care. And so what it 
becomes is a shift of the risk and a decline in insurance 
protection rather than any kind of protection.
    And, finally, I would say, as we go forward, and I am happy 
to provide you--we did some analysis supported by the SCAN 
Foundation to look at the future demands and the importance of 
Federal financing, as Bruce said, for long-term care, that if 
you look at the aging population, in every State, the numbers 
of elderly and the share of elderly grows substantially. But we 
continue to see enormous variation across States. All States 
are squeezed, having fewer young people to support more old 
people, but again, tremendous variation.
    I can say and endorse what Anne said at the outset, that if 
we continue the financing that we have got, we already have 
tremendous variation and tremendous inadequacy in many places. 
That inequity and inadequacy is only going to grow if we do not 
create a Federal financing support.
    Ms. Tumlinson. I would just pretty much agree with 
everything that Bruce and Judy said.
    Mr. Warshawsky. I will just quickly note that the 
Commission did hear testimony on some of these State programs. 
Rhode Island came in. They have a Medicaid waiver, and many of 
us were very impressed by that program. It is both intended to 
improve care and to save on cost. Minnesota also came in and 
gave an excellent presentation, and that is on our Web site.
    Ms. Feder. But, it is also true that Rhode Island, when 
they talked about a waiver, it actually gave them more money, 
not less money, whereas what we are seeing about in Federal 
policy to change Medicaid, we are seeing a proposal to take a 
whole lot of money out.
    Senator Whitehouse. Mr. Chairman, as Rhode Islander 
present, we basically got paid to have a waiver, because I 
think the administration at the time wanted to encourage 
waivers, so they baited this one to get Rhode Island in. But, I 
do not think that is going to be the common outcome.
    The Chairman. You all are very progressive in Rhode Island.
    Senator Whitehouse. In so many ways.
    [Laughter.]
    The Chairman. Senator Ayotte.
    Senator Ayotte. Thank you, Mr. Chairman, and I want to 
thank the Ranking Member.
    I just want to also thank Paul Forte, who is here from 
Portsmouth, New Hampshire, who is someone who works in this 
area, and I appreciate him being here today on this important 
issue.
    I wanted to follow up on this issue of waivers because I 
think it is related, certainly, to the important issue that 
Senator Collins raised, which is how do we make sure that the 
definition fits to allow more community-based and home-based 
treatment so that we are allowing, obviously, people to stay in 
their homes longer, because the average cost for care in a 
nursing home is approximately $80,000 a year. So, I can see 
this being certainly important in terms of cost, but also in 
terms of people having a better quality of life.
    So, with regard to the waiver issue, is it--based on what 
the Commission found, are there--should we give States greater 
flexibility, particularly in this area, for innovative programs 
that are going to allow more flexibility on home and community-
based care, because I think that also fits in with this. 
Obviously, it would be defined by the overall Federal 
definition that we would come up with. But I see this as an 
area where perhaps States are going to come up with better 
ideas than what we would come up with in Washington.
    Dr. Chernof. Maybe I will start on behalf of the Commission 
and fellow participants can weigh in, as well.
    You know, this was a place the Commission actually gave a 
lot of thought to, and I think as we listened to the States, it 
was an area of real interest for us. I think the take-home 
message from that listening--or two things. One, there is a 
recommendation that talks really about simplifying the waiver 
process. There are so many different kinds of waivers. Those 
waivers often work in conflict with one another. Sometimes, 
they are just that far apart, but the problem is if you are the 
person caring for a family member that is in that little white 
space between those two waivers, you are in real trouble. You 
are not sick enough for this. You are not needy enough for 
that. You are too well for this but not sick enough--so, I 
think this notion of a much simpler approach to waivers was one 
that was endorsed by the Commission.
    I think the other concern that was raised in that, 
obviously, is the issue of individual protections, beneficiary 
protections, that the waivers actually deliver on the services 
that need to be provided. So, in that balancing test is how do 
you create the kinds of flexibilities so you get programs like 
some of the ones that we heard from, but also make sure that in 
the process of providing more flexibility that we are not 
actually losing services for those who need them and that there 
is adequate oversight.
    Ms. Tumlinson. If I may, just to follow up on that point, 
you know, my experience in reviewing waivers and thinking about 
ways in which the Federal Government could do a better job of 
giving States flexibility has been that, over the years, over 
the past, maybe, five to six years, we have seen, really, a lot 
of loosening of those restrictions, to the point where States, 
in fact, have a tremendous amount of leeway, and the degree to 
which people do not have access to home and community-based 
services has a lot more to do with budgetary issues and the 
need to keep waiver programs limited to sort of numbers of 
people and certain spending per person than it has to do with 
flexibility around the Federal requirements about what States 
can do.
    Mr. Warshawsky. Senator, with regard to cost and whether 
the waiver process, and particularly moving people from nursing 
homes to home care, would save money or cost money was debated, 
and we heard evidence on both sides, both from witnesses that 
came in, ones that said we would, in fact, save costs, but 
actually some of the Commission members themselves who are 
providers of long-term care services and supports were 
skeptical of that. They said, you know, the system pretty much 
puts people in the right spaces already. So, we did not hear a 
consensus in terms of whether that would be a cost saver or a 
spender.
    Senator Ayotte. Fair point.
    Ms. Feder. Just to build on that, I think we have got a lot 
of experience with home and community-based care over the many 
years that we have been trying to expand it, and I think that 
there is general agreement that we get better value for the 
dollar when we are able to serve people at home and not in 
institutions when they do not need them. But we have so many 
people in need that we frequently--we need to build those 
systems and we are under-serving today, so that when we offer 
more services at home, we actually serve more people, which is 
a good thing, but it costs.
    And with respect to the issue of flexibility and savings, I 
think that I have heard representatives of the Governors and 
the Medicaid directors say that flexibility is not enough. They 
have got flexibility. What they do not have are the dollars, 
and for many, many years, until recently, and I think that is a 
function of politics, Governors in both parties have joined 
together to call on the Federal Government to take over the 
long-term care responsibility for dual eligibles, for Medicaid 
beneficiaries who are also Medicare beneficiaries, recognizing 
that they are lacking the resources to do that job. It does not 
mean they cannot be involved, as we have said, in the delivery, 
and that there cannot be innovative delivery on the ground, but 
they are looking to the Feds for dollars.
    Senator Ayotte. Well, since I got one question in, but I 
appreciate all of your answers, I am going to submit some 
questions for the record and some of the follow-up on some 
things that you said. So, I appreciate all of you being here. 
Thank you.
    The Chairman. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman and Ranking Member, 
for holding this hearing, another important one.
    You know, it just seems like, to me, this is another 
example of how middle-class families are getting squeezed. It 
is hard enough for any family to put aside anything for savings 
today, given the squeeze on families, and now we expect 
families to save for retirement and for long-term care at the 
same time that many are absorbing the costs of caring for an 
elderly family member. So, we have just doubled up here.
    There is a growing conversation about the retirement crisis 
in America, and in the face of this, the lack of a basic safety 
net on long-term care is just more fuel to the fire on the kind 
of problems we are going to face. And, as you have made clear, 
retiring baby boomers are ill equipped to cover the full costs 
of their long-term care needs. You know, we have got fewer 
people--they have got lower savings as they hit retirement than 
their parents did. Only 18 percent have retired benefit plans. 
A third of all seniors have less, or as they approach their 
senior years, have less than a year's worth of income and a 
third have no savings at all.
    So, that leaves us with Medicaid as sort of the back-up 
program here, which can cover some of the costs, but the 
current system forces seniors to spend most of their assets in 
order to qualify. Every bit helps, but to qualify when they 
have got to sell off all their assets, this has other economic 
implications.
    So, where I wanted to start is to ask you, Dr. Feder, can 
you tell us a little about the financial instability that 
selling off assets causes our seniors.
    Ms. Feder. Well, thank you, Senator Warren. When people 
talk about seniors relying--ought to be relying on savings, I 
think that they are--to finance long-term care--I think they 
are insensitive to the variety of risks that come with getting 
older. There is the risk of--a concern about having adequate 
resources to cover your needs. You do not know how long you are 
going to live, so you have got to plan for that. There are ups 
and downs in what happens to your assets, as we have seen 
painfully with our recent economy, what has happened to 
resources in that period.
    There is the ability to deal--to assist your children in 
taking on their new lives and enabling them to do what parents 
did for--grandparents did for the now-parents, and dealing with 
the fact that we have got many young people, even those with an 
education, not able to get jobs, and so needing more assistance 
from parents as they age. I am a grandmother and am looking 
forward to supporting my grandchildren and encouraging them in 
their education and building their independent lives. And there 
is uncertainty all the way around.
    When people talk about relying on your assets in order to 
take care of those needs, what you are saying is that that is 
one lump, and when you use them, they are gone. So, you have so 
many risks, including--I did not even mention the health care 
risks and the uncovered health care costs that seniors face.
    So, you are using your assets--that is what you have got--
to protect you against a whole array of risks, and the 
catastrophic risk like a serious need for intensive long-term 
care is just beyond the capacity of this little--this nest egg, 
little or moderate, or in some cases larger, to take care of, 
and that is why it is so important that we need some kind of 
insurance mechanism to which people can contribute in order to 
give everybody security.
    Senator Warren. So, let me just build on that and frame the 
question a little bit differently and ask, if I can, Ms. 
Tumlinson, if you can explain why Medicaid is not a very good 
substitute for a predesigned, well-functioning long-term care 
system. If you could just kind of summarize that for us.
    Ms. Tumlinson. Sure. Okay. Let me be thoughtful in this 
response. So, I think the primary--when you think about what 
Medicaid was really designed to do, it was not designed to--it 
is not designed to protect individuals against risk. It is 
really designed to be there when everything else has failed, 
which is really the opposite of insurance. Is that succinct 
enough?
    Senator Warren. Yes. No, but go ahead----
    Ms. Tumlinson. Okay.
    Senator Warren. [continuing]. Point out. That is a very 
good point----
    Ms. Tumlinson. Right.
    Senator Warren. [continuing]. And I think it is critical to 
understanding. A lot of people think, well, we have got 
Medicaid, so I will be okay if there is a problem out there. 
And maybe another way to say it is to ask, is this a 
sustainable path, that is, counting on Medicaid to be the 
safety net----
    Ms. Tumlinson. Right.
    Senator Warren. [continuing]. And, at best, only modest 
savings that people are putting aside during their working 
years.
    Ms. Tumlinson. Right. And I think when I think about it, 
also, from the perspective of what I see people doing in the 
marketplace right now, which is essentially using their savings 
to purchase something that will keep them from being on the 
Medicaid program eventually. In other words, it is not--in 
theory, what you would want an insurance product to do is to 
enable you to purchase the services that you need in the 
setting that is actually most appropriate for your needs, 
whereas a safety net program is really, again, kind of designed 
simply to absorb sort of in the most, you know, kind of 
custodial and warehousing situation, bare-bones funded. It is 
really, again, kind of the opposite of what you would expect an 
insurance product, a good insurance product, to do.
    And when my own parents, when I encouraged them to buy 
insurance, it was really--my dad said, well, my Federal pension 
will cover the cost of a nursing home, and I said, well, but 
would you not like to stay at home? Let us talk about, let us 
insure against being in a nursing home.
    Senator Warren. That is a nice point.
    Mr. Chairman, could I ask Dr. Chernof also to respond.
    The Chairman. Yes.
    Senator Warren. Dr. Chernof.
    Dr. Chernof. Thank you. Yes, I agree. I mean, I think that 
we have public policy that is--I have said this before, I will 
say it in front of all of you--we have public policy that is 
sort of perfectly built for 1972, and the reality is that 
Medicaid is a program that, in its inception, was predominately 
focused on women of childbearing age and their children. I 
mean, that was really its kind of constitutional core way back 
when. And the average life expectancy in 1965 was 69. As a 
physician, if I was in practice then, you would have just seen 
the first ICUs and CCUs. The likelihood of surviving a fairly 
morbid or mortal event, like a serious stroke or heart attack--
I mean, we were in a very different time and place.
    People are living much longer and will live with more 
serious chronic illness and functional limitations. The reality 
is, our public policy has not kept up with that, and the 
reality is that Medicaid--I agree with Anne's sort of 
description of the role of Medicaid, and I would just offer to 
all of you that the null hypothesis, if we do nothing, is 
incredibly expensive and that Medicaid will bear the burden of 
that, and it will bear the burden--I mean, we will all bear the 
burden. Families will bear the burden. States bear the burden. 
The Federal Government bears the burden in kind of an 
unstructured way.
    So, I think as you think about the work of the Commission, 
while we did not make a specific financing recommendation, and 
we are having kind of a broad discussion here about the ranges 
of ways that one might consider solving it, every single 
Commissioner thinks that there needs to be a solve, and I think 
this notion of a different model and one that actually 
addresses, confronts the long-term care need this country faces 
as a way of taking pressure off some of the public programs, 
and what would it really take--what would it really take to 
design a program that fundamentally actually shores up 
certainly Medicaid, but also Medicare, to a degree, because I 
will just say, as a doctor--my last point and then I will stop, 
I promise--you know, the night light in this system is the 
emergency room.
    So, I get the point that Medicare does not pay for long-
term care, but at the end of the day, when something happens in 
somebody's family and you throw up your hands, it is a trip to 
the emergency room, and I will tell you that the emergency room 
doctor takes one look at that person and says, upstairs we go, 
and then the process begins.
    So, I think what we are having together, us and all of you, 
is this sort of fundamental discussion about the need to think 
about a different structure to take on this issue in the 
process of shoring up our public programs.
    Senator Warren. Well, thank you. The questions addressed 
earlier to Ms. Tumlinson about how we are going to pay for 
this, you give us all the reminder, if we do not design a 
program, we are still going to pay for it. We are just going to 
pay for it in some really terrible ways, so thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, ma'am.
    Senator Whitehouse.
    Senator Whitehouse. Well, I hesitate to jump in, because as 
far as closing words go, what Senator Warren just said, if we 
do not do something, we are still going to pay for it, we are 
just going to pay for it in really terrible ways, is kind of a 
good closing salvo for the whole thing.
    But, I go after you----
    [Laughter.]
    Senator Whitehouse. [continuing]. So I get to go ahead and 
foul up what was a great closing.
    I did want to follow up with Ms. Tumlinson about what we 
are seeing in Rhode Island is people who have made the 
responsible choice, invested their money into a long-term care 
insurance policy, are now finding that the premium is going up 
pretty dramatically, to the point where, for some people, it is 
really no longer doable. And that is particularly frustrating 
because you have paid in all this time. You kind of have a 
connection to that policy, and to bail on it makes everything 
you have paid already look like money down the drain, which, in 
fact, it is.
    So, it strikes me that in terms of relying on the private 
sector to handle this problem, they are actually going the 
wrong way in terms of where the prices are headed and where the 
likely market share of affordable long-term care coverage is 
headed. Is that your feeling nationally----
    Ms. Tumlinson. Yeah----
    Senator Whitehouse. [continuing]. Or is that just what is 
going on in Rhode Island?
    Ms. Tumlinson. Oh, no. No. That is definitely national. 
And, again, not to beat this drum too much, but my parents' 
premiums went up quite a bit and that was in a really good 
program, in a really, you know, about the best run, I think, 
employer-based long-term care insurance program that exists.
    You know, I think it points to not necessarily that the 
private sector is not up to the task, but that we do not have 
enough people in the risk pool for it to be a stable financial 
bet for an insurance company, particularly when you are paying 
benefits on a set of products that are coming due 30 years 
after you have sold them. So, it is a very--you know, when we 
modeled this for the CLASS Act, it is an incredibly challenging 
thing to do. I mean, really, to the insurance companies----
    Senator Whitehouse. Out at the actuarial frontier?
    Ms. Tumlinson. Yes, it is. Exactly.
    Senator Whitehouse. Yes.
    Ms. Tumlinson. Yes. I wish I had thought of that. Yes. 
Exactly.
    [Laughter.]
    Senator Whitehouse. Well----
    Ms. Tumlinson. That is where we have been standing, and it 
is not very comfortable----
    Senator Whitehouse. [continuing]. Given the problems that 
they have, let me turn to Ms. Feder, and we have known each 
other for a while, so, Judy, welcome. Good to be with you. 
Thank you for being here.
    What do you think--you talk in your testimony about 
private-public models. What would a couple of what you think 
the most likely and sensible models look like very generally in 
terms of bringing private contribution and public participation 
into this?
    Ms. Feder. Well, as I said, Senator--and it is a pleasure 
to see you--that a public benefit has to be at the core. And 
what I have begun to consider and would like to see us spend 
more time on, and think there is some interest in, is thinking 
of a limited public benefit that would be available to people 
after a waiting period that would be determined--and I am 
thinking now of the retiree population, we would adapt it for 
the younger disabled population--but the waiting period would 
depend upon what your earnings, your lifetime earnings looked 
like at retirement so that would give a clear indication to 
families of what they were expected, what the whole they were 
expected to pay before a public benefit would kick in.
    It would give insurance companies, and I was interested to 
see recently that Genworth has been talking about----
    Senator Whitehouse. But, you would know in advance what the 
waiting period would be----
    Ms. Feder. What you will--that is right, what your whole--
--
    Senator Whitehouse. [continuing]. From the public program--
--
    Ms. Feder. Correct.
    Senator Whitehouse. [continuing]. And so you would have to 
buy the first months or years or whatever of it, and you would 
know that going on.
    Ms. Feder. Right, and people who had not earned much would 
have a shorter waiting period, and people who had earned a lot 
would have a longer waiting period. So, it would be adjusted to 
income.
    And what I think--Genworth is looking at something like 
this because the insurance companies, the insurance industry 
has the biggest problem when you--out on the actuarial 
frontier--with the tail, the biggest expenditures. And so 
there, essentially, you are giving them some protection at the 
back end. So, I think that is something to explore.
    I think it is very important as we explore options, there 
is another option, which is that you give a limited benefit up 
front, that everybody gets it. But that leaves the tail for the 
insurance industry to cover and that may be less comfortable 
for them. But, I think we need to look at these options and see 
what is it that the public sector can do and guarantee that 
creates some space for private sector innovation, and that is 
where I would like to see us explore.
    Senator Whitehouse. Okay. The last thing I will ask, and it 
is a question for the record, is if any of the witnesses have 
information on what you believe the government's present 
exposure to long-term care liability is right now as we speak, 
your null hypothesis model, Dr. Chernof, if you have any way to 
quantify what the cost is of that. That will help our 
discussion in terms of being able to try to work with CBO and 
other people to figure out--I mean, if we are going to pay for 
this to a degree anyway and there is a smarter way to do it, I 
would like to have that conversation, bearing in mind what the 
experts say, we are going to pay for this anyway.
    Mr. Warshawsky. Senator Whitehouse, I seem to recall that 
CMS at one point did a present value calculation, sort of a 
mini-Trustees' report for that number. I do not know if they 
continue to do it----
    Senator Whitehouse. I do not know, either. That is why I 
made it a question for the record.
    Mr. Warshawsky. Okay.
    Senator Whitehouse. If anybody who has information could 
get back, I would appreciate it, and I yield back to the 
Chairman and thank him and our wonderful Ranking Member for all 
their leadership on these issues.
    The Chairman. Well, it is not clear to me where we go. We 
have had two different opinions expressed. Dr. Feder argues 
that a public benefit is the answer. Dr. Warshawsky, why do you 
not give us an opinion by setting aside the financial and 
political difficulties. Why would not a public benefit help?
    Mr. Warshawsky. Well, those are very large set-asides, 
Senator.
    The Chairman. I understand.
    [Laughter.]
    The Chairman. Particularly in these times.
    Mr. Warshawsky. I think people need to be given choices. I 
think they need to design things as best fit their situation 
and to be given the support they need in a prudent way. So, 
certainly, there is a role for government, but I think they 
need to be provided as much in the way of choices and 
opportunities as they can, and that provides the right 
incentives, because we certainly do want people who can afford, 
and I think many can, to finance these costs and to insure 
these costs, that they do so and that it is not an unfair 
burden on others for that to happen.
    And, furthermore, I think they really do need--I think it 
is a strong possibility, a strong likelihood, that the private 
sector, with the right structure, would design different 
options and different policy designs that would appeal to 
different situations and different needs, which I think is 
really impossible for a public program to do.
    Public programs, in order at all to be efficient and to be 
able to be administered--and we are seeing this right now in 
the ACA--have to be very simple and have to be very 
straightforward. That is why Social Security works. If you 
have--if you, in fact, give people choices through a public 
program, it is just administratively extremely difficult.
    The Chairman. And herein lies the dilemma, because it is 
another public program that we would be creating. But I can 
tell you from my experience--before I came to the Senate, I was 
the elected Insurance Commissioner of Florida, and the behavior 
of humans with regard to buying insurance, unless they think 
they absolutely need it, they are not going to buy it. And this 
is almost out of sight, out of mind. If you want to spread that 
base by getting the young as well as the old into it, it is 
going to be very, very hard to get people to buy this 
insurance.
    What do you think, Dr. Feder?
    Ms. Feder. I agree with you, Senator Nelson, and we have a 
lot of experience with that. I am always interested, when we 
talk about private insurance and long-term care, that we look 
at--we are at the same time looking at our experience with the 
non-group, the individual insurance market for health care, and 
we know that is a market that is riddled with problems because, 
in part, of a desire of insurers to avoid people with 
preexisting conditions and to limit their risk, and that is 
what you see unless you have everybody participating.
    And the idea that I was discussing with Senator Whitehouse 
that I put before the Commission and hope we will all consider 
in the future is that I think that there--is based on a view 
that we can better educate and help people prepare and help an 
industry respond if we do, as has been said--Bruce said it--set 
up a structure that creates some clarity about how you can 
prepare, so that if a public program takes on the tail risk in 
some ways and tells people, based on their resources, what they 
have to prepare for, you can better educate around 
participation and preparation.
    But that back-end Federal program is one, as Anne has 
emphasized, that everybody is participating in, whether through 
taxes or premiums or whatever we are calling it. It needs to be 
a shared risk in order to work.
    The Chairman. Dr. Chernof, I cannot help but smile, 
thinking about how you could get people to buy this insurance 
well ahead of time. You could have an individual mandate, and 
if that sounds familiar, we have just had quite a debate about 
that, and it was declared constitutional by the Supreme Court, 
but it is not easy.
    Let me ask you, on a completely different kind of subject, 
we have really had some problems in Florida with assisted 
living facilities basically taking advantage of seniors, 
nursing homes. Do you have any suggestions? I mean, we have got 
people that are starting these things up that are unlicensed. 
Obviously, they are breaking the law. But we are talking about 
the care and nurturing of our seniors. Did your Commission 
suggest any things that we ought to be doing?
    Dr. Chernof. So, you raise a really important question, 
Senator Nelson, and actually, as a Commission, this is not an 
area that we had a lot of focus on directly. I think, 
indirectly, we had a real concern that we do not really 
understand how to think about or measure quality in the space. 
It is--this is a space that has a lot of resources that are 
paid for privately or come out of--or voluntary services, so it 
lives in a different place than the rest of health care lives. 
And kind of our rubric, then, for both regulatory oversight, 
kind of quality control and integration, need a lot more work.
    But the Commission itself, to answer your question 
directly, did not specifically go into great detail about these 
sort of alternative forms of community-based support, their 
oversight and regulation.
    Ms. Feder. Actually, I think we had more testimony on that 
than you are remembering, Bruce. I think that we had a lot of 
discussion about--we had it on the workforce side, and we had a 
great deal of discussion and concern about--and we also--
actually, it affected--we had testimony as to problems, quality 
problems, in nursing homes as well as assisted living 
facilities. We have been--over the years, there has been a lot 
of policy effort to try to mitigate those, particularly on the 
nursing home side, but they persist, inadequate standards and 
poorly trained staff. And because Medicaid does not cover, does 
not finance assisted living facilities, there is a real concern 
about an absence of standards, as you say.
    So, I believe that we heard a lot of testimony, and I know 
in the alternative, our alternative report, we made 
recommendations about--we addressed it on the staff, on the 
training side. There has been an expose recently, a particular 
assisted living facility, of grossly inadequate training for 
staff while claiming to be offering specialized care for 
Alzheimer's patients, or residents. It was both embarrassing 
and appalling when you saw it on national TV and it is not a 
lone example.
    So, we did hear testimony not only about the need for, but 
examples of training programs--I believe the one that we heard 
from was in the State of Washington--both better standards and 
training for workers who--which is better for, obviously, for 
the patients whom they serve, and also creates better jobs 
accompanied by better pay for the workers who we are relying on 
to care for our families.
    Dr. Chernof. But I would say, and the Commission made many 
recommendations on workforce. Your specific question, Senator, 
was about sort of the oversight and regulation and management 
of these new delivery entities, and while we did hear a little 
bit of testimony in that space, that is not a place where the 
Commission made any recommendations. And the workforce piece is 
only a part of what it means to operate these different kinds 
of environments.
    From the health care perspective, the people are only one 
piece of it and the oversight of things like assisted living 
organizations and other kinds of residential care options that 
are sort of multiplying in front of our eyes, that is a 
completely different question, and the workforce is just a--is 
an important, but it is only one piece of that discussion.
    So, the question you raised merits a lot of careful 
thought, and candidly, the Commission itself did not get that 
far into the issue.
    The Chairman. Do you want to comment with regard to long-
term care for seniors who also have disabilities? Does the 
system work?
    Dr. Chernof. That is a great question, Senator Nelson, and 
let me back it up a step. The system we have now does not work 
well for hardly anybody. I do not think it works well for older 
individuals with serious chronic illness or functional 
limitations or cognitive impairment. It is a very fractured, 
very provider-centric system, and it leaves individuals and 
their families to do the care coordination, which is basically 
missing from most models and most systems of care.
    Now, we heard about some models that were better, and there 
are sort of paths to better processes of care. But the 
Commission lays out a whole series of recommendations of things 
that could be better.
    So, to your question, I think it is even harder for younger 
individuals. Many of the systems that serve them were actually 
not built for them. They may have been built for older people 
or built for a different population, and I think for younger 
individuals with serious functional limitations or cognitive 
impairments, they have their whole lives ahead of them. I mean, 
they have a different--they are in a different place in their 
life trajectory than an older person is and have different 
desires and family, work.
    So, I do think we have a long way to go and it is a 
particularly long way to go for younger folks with serious 
needs.
    The Chairman. Suppose we enacted a plan for private 
insurance. Then the question comes, who is going to regulate 
it? Would we turn it over to the State insurance commissioners 
or the State health regulatory agencies? Ms. Tumlinson.
    Ms. Tumlinson. Well, that is a good question. So, I think 
if we move in the direction of creating more incentives for 
people to purchase private long-term care insurance or try to 
reform the marketplace to improve demand and supply and all of 
those kinds of things, I mean, we would continue to regulate it 
at the State level the way that it always has been, but there 
has to be more of a Federal--there have to be more--more of a 
Federal role in kind of setting the bare bones sort of 
standards and, I guess you could call it parameters around 
which some of these policies would be designed and how they 
would work, because, fundamentally, the marketplace is not 
working, so we need some actual marketplace reforms, and I 
think those have to come from the Federal level. I think issues 
around the regulation, around the insurance pools and that kind 
of thing could continue to operate at the State level.
    Mr. Warshawsky. Senator Nelson, I will just point out, in 
the current set-up, regulatory set-up, obviously, the States 
have the main regulatory responsibility, but as part of tax 
issues, the Federal Government already does have some role in 
terms of design of long-term care insurance policies, and one 
would imagine that if there were additional tax incentives 
provided, just naturally it would go that there would be an 
increased responsibility.
    I will also note that one of the reasons for the increases 
in premiums is related to Federal policy, and that is the 
policy of the Federal Reserve Board with very low interest 
rates. Those policies were probably assuming six percent 
interest rates, which clearly we are nowhere near that.
    So, there is an interesting mix of Federal and State issues 
at hand.
    The Chairman. The Commission recommended that you remove 
the requirement that a patient must stay in the hospital for 
three days before they can receive services in a skilled 
nursing facility. Now, there are a few of us up here that agree 
with that. Can you tell us why you ended up recommending that?
    Dr. Chernof. Sure. I think that there was a sense that rule 
was created in a different time and place, and I would say that 
the Commission felt that what it needs to be is revisited. It 
does need to be replaced, but it needs to be revisited and sort 
of the model of care re-thought through, because the reality is 
length of stay has come down over time. We want--the goal 
should be to get people to the right care by the right 
provider. So, by having this three-day length of stay 
requirement, there are people who maybe could step down to a 
lower level of care sooner but are not able to access that 
level of care and/or are put in a higher level of care, because 
the higher level--or a different level of care, for example, 
acute rehab, which is actually more expensive than the skilled 
nursing facility might be.
    So, I think our call was for there to be an opportunity to 
revisit and remove that three-day length of stay and replace it 
with an approach that is more sensible and consistent with 
current care practices, again, being mindful that it was put 
there for a reason, which was really a cost control mechanism 
more than anything else, and that taking it away creates new 
opportunities. But, we do think in the current environment, it 
is not serving that cost control goal that it was originally 
put in place to try to achieve.
    Mr. Warshawsky. I will add that was a consensus of the 
Commission, and another element of it was that there has been a 
trend of patients being in hospitals, thinking they were 
admitted and never actually being admitted, and, therefore, 
that does not count even if they are in the hospital for five 
days. And that struck us as just plain wrong.
    But, it does raise the question of what is the mechanism 
that does control that next phase, as Bruce indicated, and we 
did not have enough time to figure out the replacement. But the 
three-day rule struck us as not the right one.
    The Chairman. We are going to include in the record an 
article by Bloomberg News that illustrates how difficult it is 
for seniors to be able to afford long-term care.
    This is our last hearing of the year, save for some unusual 
thing that we might be in session on New Year's Eve, like we 
were last year.
    [Laughter.]
    Senator Collins. Will you bring the champagne if we are?
    [Laughter.]
    The Chairman. As a matter of fact, you remember. New Year's 
Eve, we were all on the floor, and I spotted one of my dear 
friends in his tux sitting in the gallery, and I went over to 
him and I said, Charlie, what in the world are you doing here? 
He said, ``Jackie and I went out to dinner and we decided this 
was the best entertainment in town.''
    [Laughter.]
    Senator Collins. Except, perhaps, for the performers.
    [Laughter.]
    The Chairman. Well, you all have been great. Thank you. It 
is a tough issue, and so thank you for helping us get into it 
and start to peel back the onion. We appreciate it.
    Happy holidays. Merry Christmas. Happy new year.
    The meeting is adjourned.
    [Whereupon, at 4:08 p.m., the committee was adjourned.]


      
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                                APPENDIX

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               Prepared Witness Statements and Questions 
                             for the Record

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                  Additional Statements for the Record

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