The State of 21st Century Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities

This report is also available in alternative formats and on the award-winning National Council on Disability (NCD) Web site (www.ncd.gov).

Publication date: December 15, 2005

202-272-2004 Voice
202-272-2074 TTY
202-272-2022 Fax

The views contained in this report do not necessarily represent those of the Administration as this and all NCD documents are not subject to the A-19 executive branch review process.

Letter of Transmittal

December 15, 2005

The President
The White House
Washington, DC 20500

Dear Mr. President:

The National Council on Disability (NCD) is pleased to present to you our groundbreaking report, The State of 21st Century Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities.

NCD undertook research for this report because it has grown increasingly concerned about the (a) lack of a coherent national long-term services and supports (LTSS) public policy for all people with disabilities; (b) fragmented nature of service and support delivery systems, with uneven access and services provisions; and (c) LTSS costs of 22 percent or more of state budgets, which are fast becoming unsustainable. Additionally, NCD noted in undertaking research for this report that no single federal program, federal agency, or congressional committee is charged with the responsibility for the management, funding, and oversight of LTSS; however, 23 federal agencies are actively involved in LTSS using the NCD definition.

As reflected in this report, NCD believes that America needs a coherent and comprehensive framework for its LTSS policies, programs, and funding based on five interrelated assumptions. First, that people who are elderly and people with disabilities both desire and deserve choices when seeking assistance with daily living that maintains their self-determination and maximum dignity and independence. Second, the current financing mechanisms (public and private) will become unsustainable in the near future without significant reform. The system must be affordable to all Americans regardless of income levels and must consider opportunities to leverage public and private support in new ways without impoverishing beneficiaries. Third, there is an opportunity with the changing demographic picture of the United States to explore the possibilities of a universal approach to the design and financing of supports that is responsive to individuals under the age of 65, as well as Americans over 65 who may or may not have disabilities, without sacrificing individual choice and flexibility. Fourth, formal and informal caregiving must be sustained, including examination of family needs and workforce recruitment and retention challenges. Fifth, the approach to quality must examine consumer direction and control of resources in addition to traditional external quality assurance mechanisms.

NCD stands ready to work with you, members of your Administration, and the leadership in Congress in the months and years ahead as you work toward improving our nation’s LTSS system.

Sincerely,

Lex Frieden
Chairperson

National Council on Disability Members and Staff

Members
Lex Frieden, Chairperson
Patricia Pound, First Vice Chairperson
Glenn Anderson, Ph.D., Second Vice Chairperson

Milton Aponte, J.D.
Robert R. Davila, Ph.D.
Barbara Gillcrist
Graham Hill
Joel I. Kahn, Ph.D.
Young Woo Kang, Ph.D.
Kathleen Martinez
Carol Novak
Anne M. Rader
Marco Rodriguez
David Wenzel
Linda Wetters

Staff
Ethel D. Briggs, Executive Director
Jeffrey T. Rosen, General Counsel and Director of Policy
Julie Carroll, Senior Attorney Advisor
Joan M. Durocher, Senior Attorney Advisor
Martin Gould, Ed.D., Director of Research and Technology
Geraldine Drake Hawkins, Ph.D., Senior Program Analyst
Allan W. Holland, Chief Financial Officer
Pamela O’Leary, Sign Language Interpreter
Mark S. Quigley, Director of Communications
Mark E. Seifarth, Congressional Liaison
Brenda Bratton, Executive Assistant
Stacey S. Brown, Staff Assistant
Carla Nelson, Secretary

Acknowledgments

The National Council on Disability wishes to express its deepest appreciation to Michael Morris and Johnette Hartnett of the National Disability Institute NCB Development Corporation for developing this groundbreaking report.

Table of Contents

Executive Summary
Introduction
Findings
Recommendations

Chapter 1
The State of 21st Century Long-Term Services and Supports:
Financing and Systems Reform for Americans with Disabilities

Chapter 2
Future Market Demand and Understanding Costs of Long-Term
Services and Supports: Financing and Systems Reform for
Americans with Disabilities

Chapter 3
External Advisors and External Policymakers:
Recommendations for Action

Chapter 4
Moving Forward: Selected State Strategies for 21st Century
Long-Term Services and Supports: Financing and Systems Reform
for Americans with Disabilities

Chapter 5
Moving Forward: Local and Individual Strategies for 21st Century
Long-Term Services and Supports: Financing and Systems Reform
for Americans with Disabilities

Chapter 6
Recommendations for Incremental and Clean Slate Reform

References

Chapter 1: The State of 21st Century Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities
Table of Contents
Part I
Picturing the Problem

Part II
Charting the Course

Part III
Forecasting the Need

Part IV
Dragging Anchor

Part V
Introducing the Captain

Part VI
Meeting the Crew

Part VII
Fueling the Engine

Part VIII
Pushing Tugboats

Part IX
Harnessing Favorable Winds

Part X
Gathering Clouds

Part XI
Recharting the Course

Appendix 1.A

Appendix 1.B

Appendix 1.C

Appendix 1.D

Appendix 1.E

Appendix 1.F

Appendix 1.G

Chapter 2: Future Market Demands and Understanding Costs of Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities
Table of Contents
Part I
Introducing Research Purpose and the Rich Picture Story Line

Part II
Forecasting the Storm

Part III
Tracking the Storm

Part IV
Lowering the Lifeboats

Part V
Approaching the Iceberg

Part VI
Reviewing the Passenger Manifest

Part VII
Moving Toward Reform

Chapter 3: External Advisors and External Policymakers: Recommendations for Action
Table of Contents
Part I
Introduction

Part II
Approaches to Development

Part III
Expert Panel Discussion and Recommendations

Part IV
Conclusion

Appendix 3.A

Chapter 4: Moving Forward: Selected State Strategies for 21st Century Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities
Table of Contents
Part I
Introduction

Part II
Five State Case Studies

Part III
Conclusion

Appendix 4.A

Chapter 5: Moving Forward: Local and Individual Strategies for 21st Century Long-Term Services and Supports: Financing and Systems Reform for Americans with Disabilities
Table of Contents
Part I
Introduction

Part II
Conclusion

Chapter 6. Recommendations for Incremental
and Clean Slate Reform
Table of Contents
Part I
Introduction to Incremental Reform

Part II
Moving Forward—Improving the Current LTSS Ship

Part III
The New Millennium LTSS Model

Part IV
Ameriwell—The New Millennium LTSS Model

Executive Summary

Introduction
Long-term services and supports (LTSS) is not only an issue for older Americans but also for younger individuals with disabilities, and any LTSS financing and system reform efforts must consider both populations.

The current LTSS system is funded primarily by state and federal programs. More specifically, Medicaid is the primary payer of LTSS in this country. Medicaid paid for 45 percent of the $137 billion this country spent on LTSS in FY 2000. Yet, despite the amount of money that state and federal programs are allocating to LTSS, individuals and their families still pay out of pocket for nearly one-third of LTSS expenses.

Although the population of people who have disabilities and people who are elderly has indicated a preference for receiving LTSS in home- and community-based settings, a federal institutional bias exists. Presently, about 1.6 million people live in nursing homes, group homes, and other institutional facilities. At the same time, there are about 2 million to 2.4 million people on waiting lists or in need of some type of LTSS.

Options for LTSS are emerging. Aging and disability advocates are working with the health care industry to create a continuum of care, including such services as assisted living, adult day services, and home care. Governors have creatively used the Medicaid waiver process to increase home- and community-based services for people who are elderly and people with disabilities.

Although financing is the cornerstone of the LTSS issue, other issues are critical in building an adequate, seamless, and effective LTSS system to meet the increasing needs of aging baby boomers and the increasing numbers of individuals with disabilities who have LTSS needs. These issues include supporting family caregivers, addressing workforce shortages, improving the quality of LTSS services, and improving access to transportation and housing.

Recognizing, in particular, that the impending age wave of baby boomers will significantly increase the demand for LTSS in the coming decades, the National Council on Disability was interested in researching the issues of LTSS financing and systems reform. This report addresses those issues.

The development of long-term services and supports (LTSS) comprehensive policy will define the future economic independence of Americans with disabilities. Changing demographic and economic trends, here and abroad, will demand that the United States retool its programmatic and financial infrastructure to protect and promote individual dignity and independence of all Americans with disabilities. The development of sustainable and affordable LTSS public policy for the 21st century—funded through a unique combination of individual contributions, innovative private sector assistance, and public support—will provide a new security for Americans with disabilities to work and live independently. Although 20th century advances revolutionized the concept of health care and longevity for many Americans, increasing life expectancy by 30 years, they fell short in providing an affordable LTSS public policy for both the medical and nonmedical services and supports needed by many working Americans with disabilities. The United States is a world leader in extending life and eradicating disease, but it has failed to develop an LTSS public policy that truly integrates disability as a natural part of the human experience.

Few Americans think of LTSS for individuals under the age of 65 who are living and working in the community with significant disabilities. Many people do not realize that there is no LTSS public policy for individuals of moderate to middle income, whether over or under the age of 65. Private insurance is available for long-term care that, on average, is capped at a specific dollar amount, provides coverage for about three years, and is geared toward services and supports that cater to diseases of aging and not the needs of everyday working Americans with disabilities.

Ninety percent of Americans do not have long-term care insurance, and many do not have the financial savings to cover the costs of aging. Few insurance products are available that cover the costs of providing services and supports targeted for individuals and families challenged with lifelong disabilities under age 65. A recent actuarial study found that Americans at age 45 are more likely to become disabled than to die, and yet we continue to insure against loss of life rather than against the risk of disability. There are no risk pools or insurance products designed to supplement the additional costs associated with living and working with a lifelong disability. There is little research or data that accurately captures what this means for planning the financial future of an individual born today with a lifelong disability.

Disability prevalence is rising in the under-age-65 population and, although it has decreased slightly for seniors, it will begin to rise sharply as the current senior population of 34 million doubles over the next 20 years. Inherently, most Americans think of LTSS as long-term care for seniors in nursing homes with severe chronic disabilities. This bias is a holdover from the 1960s, when Medicaid and Medicare were first established, and reflects a system of care that is outdated and no longer cost-effective. Although the movement today is to provide services and supports in the home and community through an array of waivers, more than 50 percent of Medicaid resources for LTSS continue to support individuals in nursing facilities or intermediate care facilities for the mentally retarded (ICF/MRs).

In 2001, the United States spent $1.24 trillion (or about $5,500 per person) on personal health care services, with 12 percent (or $151.2 billion) spent on LTSS. Although 70 percent of the 53 million Medicaid beneficiaries are children and mothers, more than half of the $276.1 billion spent in 2003 was for populations who are aging (15 percent) and with disabilities (15 percent). The predominant disability populations receiving Medicaid LTSS are those with mental retardation and developmental disabilities (MR/DD) and low-income seniors who rely on both Medicaid and Medicare. Between 9 million and 12 million Americans need help with activities of daily living (ADLs) and instrumental activities of daily living (IADLs), and 3.5 million are under 65 years of age. The literature also reports that 25 million individuals with chronic severe disabilities under age 65 are probably in need of some LTSS, but these individuals are often not counted or found eligible because of income or family assets, or they fall outside the realm of traditional functional assessments that use ADLs and IADLs as measurements. There is also confusion about what definition of disability should be used to assist policymakers in studying LTSS needs. Finally, LTSS are not portable and are highly dependent on the fiscal and budgetary priorities and obligations of each state.

In addition, about one-fifth of the U.S. population is uninsured or underinsured, with more than 18,000 American lives lost each year because of gaps in insurance coverage, at an economic cost between $65 billion and $139 billion annually from premature death, preventable disability, early retirement, and reduced economic output. Rising double-digit inflation costs for health care continue to confound state and federal efforts to reign in overall health and LTSS spending. The probability of sustaining future promises to current social policy and its beneficiaries is low if the demographics are correct: Fewer workers will mean lower payroll contributions and less money available to fund past and future commitments. The research suggests that the problem is beyond incremental reform and requires immediate attention.

A “rich picture” methodology was used to introduce the problem this report addresses. The picture captures the current health care and LTSS system. The field of management often uses a rich picture systems methodology, that is, “an innovative tool that encapsulates knowledge relevant to strategic reform.” For the disability field, the use of the rich picture allows people with intellectual impairments and other cognitive challenges to grasp the essence of the research through a visual representation and dialogue. The picture and narrative relied on the review of primary and secondary research documents; one-on-one open-ended interviews with key stakeholders in the disability, long-term care, and health care fields; review of congressional records and attendance at a number of hearings; and the convening of a national expert advisory panel on LTSS.

The setting for the rich picture is the ocean, with the current LTSS and health care ship heading toward an iceberg that represents the barriers and challenges to systems reform. The cast for this rich picture provided the substantive descriptions and main body of research and analysis about the barriers and challenges of navigating through the current system of LTSS. The presentation of the research in this format was purposeful so that the reader and the researcher could begin the voyage together with a snapshot of the problem. It was intended that a new picture would emerge as the researchers integrated the findings from the other chapters of the research. The final picture is a new ship, “AmeriWell,” that is designed to provide LTSS for all Americans regardless of income or category of disability through innovative funding from individuals and families, the private sector; and the Federal Government. AmeriWell will delink aging and disability populations from both Medicaid and Medicare that require LTSS to form a new LTSS program that provides services and supports to middle-and low-income Americans with disabilities.

The purpose of this research is to produce new knowledge and an understanding of current experience with and the future need for affordable LTSS for people with disabilities. The following findings provide a broad overview of the four areas researched for this report. Chapter recommendations are provided here in brief, but a detailed summary is available in chapter 6. All footnotes and references can be found in the original text, except where otherwise noted.

Findings

1. Little Political or Public Understanding of Current and Future LTSS Needs (Chapter 1)

A. There is little public or political interest in putting LTSS onto the national agenda, although state Medicaid spending represents 22 percent of overall state budgets and is fast becoming unsustainable.
B. Fifty-nine percent of Americans have given little or no thought to the issue of LTSS and the costs associated with aging or disability.
C. Most Americans do not understand the current system of LTSS, how it is funded, or who is eligible for services. Many people do not understand that Medicaid is the primary provider of LTSS for all populations—both young and old—and that eligibility is income sensitive.
D. The development of affordable LTSS is the missing link in making work a reality for many Americans with disabilities.

A. There is no single federal program or federal agency charged with the responsibility for management, funding, and oversight of LTSS at home and in the community. More than 20 federal agencies and almost 200 programs provide a wide range of assistance and services to people with disabilities.
B. There is no single entry point at a community level for individuals with disabilities and seniors to learn about and access service and support options.
C. There are multiple federal programs with varying policy objectives that embrace the values of consumer choice and independence in daily living, but there is no comprehensive, integrated delivery system that provides portability across states.

A. Twenty years of research and exercises in forecasting future visions for LTSS have failed to answer the following questions: What services should be guaranteed to individuals unable to provide for themselves? What protections from catastrophic loss, financial or otherwise, should be afforded, and, most important, who will pay? How is the current LTSS policy working, and does it meet the needs of today’s population with disabilities?

A. Positive forces for change began with the passage of the Americans with Disabilities Act (ADA) in 1990; they were followed by the Supreme Court decision in Olmstead in 1999 and the subsequent Administration actions in 2000, and continued to the present. They provide a platform to support policy and program changes for a long-term support system that embraces consumer choice to live in the least-restrictive environment at home and benefit from community participation.

A. Population demographic changes because of aging, reduced fertility rates, increased women in the workforce, and changing family makeup predict there will be fewer unpaid family workers and an increased demand for paid workers.
B. The role of government in addressing the challenges of the current formal and informal workforce is unclear.
C. The majority of LTSS workers providing paid care are often without health insurance and other employee benefits and experience frequent job turnover.

A. Most data for LTSS favors individuals age 65 and older with diseases of aging. Policymakers and researchers need accurate data to calculate current and future LTSS utilization and costs to develop a clear consensus as to who is to be covered by an LTSS system and how eligibility will be calculated.

7. Disability Definitions Need Clarification (Chapter 2)

A. Disability definitions range from a medical diagnostic approach to a functional assessment approach that uses ADLs and IADLs. There is no aggregated data on the overall costs and utilization rates using the NCD/AARP definition for LTSS that includes transportation, nutrition, and housing.
B. There are 38 million people under age 65 reporting some level of disability and, of this Group, 25 million have a specific chronic disability; however, many of these individuals are not eligible for LTSS.
C. Using the functional definition of disability based on ADLs and IADLs, the estimated population in need of LTSS under age 65 ranges from a conservative figure of 3.5 million to more than 10 million.

A. Regardless of the definition of the target population, there is clear and undisputable data that the number of people over age 65 with ADL and IADL limitations is growing and will double by 2030.
B. Twenty percent of people age 65 and over will require assistance with at least one ADL and 50 percent will require assistance by age 85. The number of people in need of assistance with two ADLs will grow from 1.8 million to 3.8 million by 2045.

A. The rate of disability has declined in the 65-and-older population, mostly for IADLs. It is less clear whether this decline is due to health improvements or environmental changes because of increased technology for durable medical equipment, including assistive technology. However, the rate of disability for individuals 85 years and older is expected to rise as this population triples over the next 30 years.

A. The rate of disability for individuals under age 65 is rising in diabetes, obesity, and mental illness. Little data is available that accurately predicts how this will impact future LTSS utilization, costs, and service delivery.
B. It is unclear what LTSS truly looks like for individuals under age 65 across disabilities and specific age groups for those working and living independently. The research shows that individuals under age 65 are heterogeneous and have specific needs according to gender, age, and type of disability that are quite different from individuals over the age of 65.

A. Individuals with two or more ADL limitations and personal assistance needs under the age of 65 estimated a shortfall of 16.6 hours of help per week and were more likely to be nonwhite, female, and living alone.
B. Paid personal assistance services go primarily to people 65 and older, and working-age people 65 and under rely more on unpaid personal assistance services.

A. Individuals with lifelong disabilities, such as Down syndrome, cerebral palsy, and mental retardation, are living longer and the impact on utilization of LTSS services and future costs is unclear from the current literature.
B. It is unclear what future services and supports, including access to housing, transportation, and nutrition, will be in most demand for people under age 65 with lifelong disabilities living and working in the community.

A. Black children are 13 percent more likely than white children to have a reported ADL limitation. A recent Government Accountability Office study confirmed that the black population has higher disability rates and lower lifetime earnings and shorter life expectancies than whites.
B. The issues of poverty, lack of insurance, and continued segregation from affordable and consistent health care will increase the future needs and costs for LTSS for minority nonwhite populations in the U.S., which are projected to make up 50 percent of the American population by 2050.

A. The prevalence of chronic disease and deaths caused by noncommunicable disease in the United States between 1990 and 2020 will increase from 28.1 million to 49.7 million, an increase of 77 percent.
B. Mental illness will rank number two after heart disease and replace cancer by 2010 as having a greater impact on death and disability. Medicaid is the principal public payer for mental health services and represents 36 percent of the $48 billion in spending. It is unclear what the future LTSS needs and costs will be for people with mental illness.

A. The current system of LTSS is designed for low-income individuals and is unsustainable under the current system of health care that has expanded Medicaid options to provide services and supports to an array of middle-income and uninsured individuals.
B. There are 57 million working-age Americans between 18 and 64 with chronic conditions such as diabetes, asthma, or depression, and more than one in five (12.3 million) live in families that have problems paying medical bills. Many are not eligible for LTSS services because they have assets above prescribed limits.
C. The number of chronically ill people with private insurance who spend more than 5 percent of their income on out-of-pocket health care costs increased by 50 percent, to 2.2 million people, in 2003.
D. The impact on LTSS costs are unclear for 6.6 million individuals with chronic care needs who are uninsured and go without needed care (42%), delay care (65%), or fail to get needed prescriptions (71%), but they will impact future need and costs without timely intervention.

A. Eligibility and service pathways to state Medicaid programs have expanded to meet the growing needs of 53 million low-income, middle-income, and uninsured acute care and LTSS beneficiaries, and reflect the growing challenges of economic downturns, increased health premiums, increased longevity, a low savings rate, and slower wage growth.
B. Twelve percent of $329 billion combined state and federal funds in 2005 was spent on LTSS.
C. Seven million individuals are dually eligible for full Medicare and Medicaid benefits and another 1 million receive assistance with copays and deductibles; combined, this represents 42 percent of all Medicaid expenditures.
D. The ability of states to respond to current and future LTSS needs is beyond their capacity and resources as long as health care costs continue to rise at double-digit rates.

A. Two-thirds of Medicaid spending is for population groups and services technically defined as optional, and 90 percent of all long-term care Medicaid services are optional. It is unclear how vulnerable people with disabilities are, with the majority of their services and funding falling under optional categories.
B. Seventy-five percent of home- and community-based services (HCBS) waivers are for people with MR/DD and are used to purchase LTSS. The other 25 percent are used for people with physical disabilities and older people. There are three small waiver programs that serve individuals with a primary diagnosis of mental illness, accounting for 0.2 percent of HCBS waiver expenditures. Further research is needed to explore the LTSS needs of the 25 percent population using HCBS.

A. Research is needed to further determine whether Medicaid administrative costs meet the federal basic guidelines that “costs be allowable, reasonable, and allocable for reimbursement under Federal awards.”

A. Forty-nine percent of the 45 million uninsured Americans are either self-employed or work for companies with fewer than 25 employees.
B. More than 50 percent of low-income employees of small firms with incomes below 200 percent of the federal poverty level are uninsured.
C. More than 2 million health care paraprofessionals report wages below the poverty line, do not work full time, and do not receive benefits.

A. Private LTSS insurance is targeted to individuals age 65 and older and often to specific disease categories. One insurance company reported that more than 50 percent of its LTSS insurance claims paid are for Alzheimer’s and other forms of dementia.

A. The risk of disability is higher than premature death and is higher for older people than younger, and females are more likely to become disabled than males. A 45-year-old individual earning $50,000 per year and suffering a permanent disability could lose $1,000,000 in future earnings.
B. The public overestimates the help that is available from public disability insurance programs—Social Security Disability Insurance (SSDI) and other state-mandated, short-term programs. Workers compensation benefits cover only disabilities caused by injury or illness arising on the job—only an estimated 4 percent of disabilities.

A. Congress needs sufficient data on LTSS costs and utilization for individuals across the spectrum of disabilities under age 65 to develop a sustainable and affordable LTSS policy.
B. Congress needs sufficient data that responds to the demographics that predict a decrease in the current population of informal caregivers (valued at $200 billion a year) and the impact of this trend on the development of a future LTSS workforce.
C. Research is needed on the different public and private cost-sharing scenarios that focus on the under-age-65 population with disabilities and the relationship between public financing and private insurance to develop affordable products that insure against future risk of developing or being born with a disability.

A. The global economic picture and changing demographics, in addition to the current U.S. federal budget deficit, raise new questions about the sustainability of current entitlement and social programs and their impact on beneficiaries with disabilities.
B. Current state and federal budget deficits and funding priorities jeopardize a patchwork system of services and supports that do not meet the current needs of the target population, let alone those projected into the future.

A. 44.4 million American caregivers age 18 and over provide unpaid care to an adult age 18 or older. Six out of 10 of these caregivers work while providing care; most are women age 50 years or older.
B. Jobs for nurses’ aids are expected to grow by 23.8 percent, while the employment of personal care and home health aides may grow as much as 58.1 percent between 1998 and 2008.
C. It is unclear how many workers (the “gray market”) are hired and supervised by consumers who pay for their own care, although the numbers are thought to be substantial.
D. Direct care workers (3.1 million) are in short supply and have nearly a 100 percent turnover rate in nursing facilities; home care agencies have annual turnover rates between 40 and 60 percent.
E. Direct care workers have low median hourly wages of $9.20 an hour and one-fifth (far more than the national average of 12 to 13 percent) earn incomes below the poverty level; 30 to 35 percent of all nursing home and home health aides who are single parents receive food stamps.

A. LTSS are not portable and cannot be moved with an individual from state to state, and current LTSS costs are not a customized response to individual needs.
B. Current costs reflect matching an individual’s circumstances to available services and supports, based on federal eligibility criteria, with degrees of consumer choice and direction that vary based on the state in which the individual lives.
C. The fiscal health of each state (and its ability to provide the necessary match to draw upon federal Medicaid resources) determines the scope and array of the current LTSS system for low-income Americans with disabilities and seniors.
D. The personal assistance service needs of an individual in California could be similar to someone living in Mississippi, and yet the availability of services and funding may vary dramatically.

A. It is unclear how Americans with lifelong disabilities under age 65 can become self-sufficient and economically independent through work and build careers without substantial LTSS reform that allows asset growth and more innovative public-private support for LTSS.
B. It is unclear how Americans with or without disabilities will provide for their own health care and LTSS in the future without changes in savings behavior and the development of insurance products that protect against the risk of disability.

A. Similar to the state findings, the advisory group encouraged moving any LTSS policy discussion away from the current medical status and disability type to a standardized assessment process to evaluate functional needs related to ADLs and IADLs.
B. There is a need to reevaluate financial eligibility criteria and develop an expanded benefits menu that organizes service options from a presumption of individual preference for remaining at home and in community settings. The panel, without describing benefits coverage in detail, recognized that different people have different needs. As a result, the benefits coverage based on functional assessment must be flexible, individualized, and comprehensive. Nursing home level of care should be shifted from an entitlement status to an option of last resort.
C. The system should offer more consumer choice and direction in determining needs, creating a service plan, and directing and managing provider selection and service delivery.
D. The system should provide incentives to support and encourage family caregiving, and consider tax incentives to help defray expenses of dependent care for LTSS.
E. Federal authorities should agree on key outcomes and a measurement system. Shared information and data collection and analysis across agencies in multiple settings should help improve understanding of cost-effectiveness based on different service delivery models. Performance outcomes should focus on wellness, productivity, inclusion, and independence.
F. The cost should be spread across all wage earners over a lifetime as part of a social insurance financing framework. Similar to the approach of social security and Medicare, individual needs will vary over a life span.
G. The system should decouple eligibility for benefits from current requirements of impoverishment for individuals and families.
H. The system should provide support and incentives to encourage family support and informal caregiving to be balanced with public funding and responsibility. Key outcomes should be defined on an individual and systems level that focuses on wellness, productivity, inclusion, and independence.

A. States have ongoing, intensive, comprehensive planning processes that involve a full range of stakeholders—from state officials to providers to advocates and people with disabilities themselves—and the commitment and support of the governor and legislature.
B. Planning includes realistic accounting of the state’s fiscal situation, availability of federal money, community partnership building, implementation of cost-limited regulatory changes, and benchmark settings to measure results.
C. States are experimenting with merging, consolidating, and combining nursing home and HCBS dollars to better allocate funds according to the needs of people with disabilities and developing single-point-of-entry systems at the local level to encourage easier access to LTSS.
D. States are experimenting with global budgeting that allows budgeting practices to blend (to some degree) institutional care and HCBS dollars and allows states the flexibility to respond to the preferences of people with disabilities to remain at home or in the community.
E. States are broadening HCBS to allow greater numbers of people with disabilities the opportunity to direct their own care (for example, hiring, training, and supervising their workers).

A. The Olmstead decision stimulated executive and legislative review of the current system of service delivery, unmet needs of target populations, and where the dollars are being expended.
B. Cross-agency planning is most effective when the consumer stakeholder voice is included as part of the process to develop recommendations for systems reform.
C. Structural changes have involved substantial reorganization to an umbrella department for multiple target populations with long-term support and service needs.
D. Expanded use of Medicaid waivers is common to broaden benefits and LTSS to subpopulations.
E. The most restrictive policy most frequently identified was the Medicaid institutional bias.
F. There remains confusion in the use of language regarding long-term care and LTSS.
G. All selected states have waiting lists for specific target subpopulations, although states may limit services and operate the waiver on less than a statewide basis.
H. Current budget challenges at a state level have compelled states to reexamine the balance between public and private responsibility for LTSS, evaluate approaches to target individuals based on an assessment of level of need, and seek to identify strategies that encourage coverage of supports through some type of insurance coverage and other private sector resource sharing.

A. There is growing recognition that a fundamental shift in values is occurring as states move LTSS to the community and home and out of the institutions. Individuals with disabilities are being provided with more choices to live independently.
B. New housing models with cooperative organizational structures are providing a realignment of service and financial relationships at an individual and community level and recognize the importance of consumer choice and direction.
C. New economic models for managing assets include pooled trusts, supportive corporations, time banks, and child trust funds, and raise important questions about public versus private responsibility to create and manage a social safety net for individuals deemed in greatest need of long-term support.

Recommendations for Incremental and Clean Slate Reform (See Chapter 6 for full text and implementation lead for each recommendation)

1. Increase Policymaker Knowledge and Understanding of Public and Private Costs and Benefits of LTSS for People with Disabilities Under Age 65 and Their Families (Chapter 5)

A. The lack of data that presents a complete and accurate picture of the costs for LTSS for families with children or adults with disabilities was a key finding by NCD researchers. Despite multiple studies by the Congressional Budget Office (CBO) and other federally sponsored research centers on the costs of long-term care for seniors, the population under age 65 with disabilities has not been a priority. The traditional definition of long-term care identified acute care needs as well as nonmedical services and supports for seniors. Today’s definition of long-term care has changed to reflect the ongoing growth and integration of disability into mainstream culture. LTSS for people 65 years and younger is about many nonmedical services and supports, such as personal assistance, assistive technology, financial management, housing, transportation, and nutrition. How people are assisted in compensating for loss of ADLs will define their future earnings potential and economic independence.

2. Design and Implement a Multifaceted Action Plan of Monitoring and Oversight of State Activities to Meet Their ADA Obligations as a Result of the Olmstead Court Decision (Chapter 5)

A. The Olmstead Supreme Court decision in 1999 provides important legal support for states’ current efforts to rebalance their LTSS systems toward home- and community-based settings. The Administration, through an Executive Order and grant activities, has taken seriously the Court’s decision and mandated a state planning process to improve and expand community-based choices for people with disabilities. More than $200 million has been awarded by the Centers for Medicare and Medicaid Services (CMS) to states on a competitive basis to promote system changes. Despite these efforts, litigation continues to expand in class action suits. In more than 25 states, individuals with disabilities have been frustrated with the pace of change and the slow movement of funding away from nursing homes and institutional settings to communities.

B. The Office for Civil Rights at the Department of Health and Human Services (HHS) and the Justice Department have the responsibility to monitor and oversee Olmstead state plan implementation. As both agencies have done on numerous occasions in the past related to ADA, there is an opportunity to be proactive and design and implement an action plan that evaluates individual state efforts to meet the Olmstead community imperative mandate. Each state should be rebalancing its financing, reducing the number of individuals with disabilities residing in nursing homes, diverting others from entering nursing homes, and putting in place the infrastructure for expanded HCBS for individuals with disabilities.

3. Decouple Eligibility for Home- and Community-Based Services Under an HCBS Waiver from a Determination of Nursing Home Eligibility (Chapter 5)

A. It is necessary to remove the institutional bias in the Medicaid program to give Medicaid beneficiaries greater choice in how financial assistance is provided to cover a range of LTSS. The clear majority of stakeholders recognized the overwhelming consumer preference for HCBS. Two complementary options deserve immediate attention from Congress and bipartisan support.

B. The first option is to shift the HCBS program from its current waiver status to a state plan requirement. Eligibility would be delinked from nursing home eligibility and states would receive an increased federal match under their state cost-sharing agreement for services provided in this category as part of their Medicaid reimbursement for authorized expenditures. CMS would set guidelines for a functional assessment process and minimum threshold of services to be covered, including personal assistance services.

C. The second complementary option would be that federal funding follows the person from a nursing home to a community setting as part of a person-centered plan and self-directed budget. The Money Follows the Person (MFP) option would continue for a three-year period to help support successful community transition. Both options are currently part of legislative proposals before Congress. MFP and the Medicaid Community Attendant Services and Supports Act (MiCASSA) deserve to be the focus of hearings before the end of the year.

4. Increase Support for Families and Significant Others in Their Role as Informal and Unpaid Caregivers for Individuals with Disabilities Over and Under the Age of 65 (Chapter 5)

A. Eligibility for LTSS and the scope and intensity of covered services varies significantly from state to state. States have considerable discretion in determining who their Medicaid programs cover. Despite state variability in criteria for Medicaid eligibility and scope of benefits, in all states, individuals with disabilities are dependent on informal caregivers, including parents, family members, and significant others. The estimated benefit of informal caregiving exceeds $200 billion annually. Services should be designed to support, not supplant, the role of the family and actions of informal caregivers. Increased support for informal caregiving could be achieved through implementation of a complementary set of recommendations. There is a need to address the lack of portability from state to state for Medicaid LTSS.

5. Improve the Supply, Retention, and Performance of Direct Support Workers to Meet Increasing Demand (Chapter 5)

A. As part of the Olmstead guidance, CMS should issue an advisory letter to state Medicaid directors directing corrective action to achieve parity of compensation across the environments where direct support workers are located.

B. CMS should continue to fund demonstration projects to allow states to test innovative strategies to improve the recruitment, supply, retention, and performance of direct support workers.

C. Funding should be authorized for collaborative demonstration projects between the U.S. Departments of Labor and HHS that promote collaboration between community colleges and disability-related organizations to develop a high-quality set of competencies to be taught in a new support worker certificate program that expands supplies of quality workers to meet market demand in home- and community-based settings.

D. Worker cooperatives should be piloted and tested with the assistance of the Departments of Agriculture, Labor, and HHS to explore improved consumer-caretaker relationships.

6. Mandate Coordination and Collaboration Among Federal Agencies to Align Public Policy and Transform Infrastructure to Be Responsive to Consumer Needs and Preferences for a Comprehensive System of LTSS (Chapter 5)

A. Although Medicaid and Medicare dominate the landscape of funding authorities for LTSS, NCD researchers documented the complexity and fragmentation of multiple systems with different rules of eligibility and lack of information on access to and availability of resources. The fragmentation and coordination challenges carry over from the executive to the legislative branches of government, in which different committees in the Senate have different controlling authority than committees in the House of Representatives. Although Program Assessment Rating Tool (PART) reviews by the Office of Management and Budget (OMB) are incorporating common performance measures across agencies and programs, there is no focus on cross-department and agency collaboration. The nature of LTSS requires more than 200 programs and 20 agencies to improve their coordination of resources at the community level, where they will benefit the end-user. No single recommendation can respond to this significant challenge. NCD recommends that the appropriate agencies and congressional committees implement the following set of recommendations:

• Hold congressional hearings to evaluate possible options for improvement of multiple department collaboration to provide access to information and supports and services to meet the long-term needs of people with disabilities under and over age 65.

• Require the Department of Housing and Urban Development (HUD) and HHS to document current efforts and future plans to improve and expand the availability of affordable, accessible housing that is coordinated with services/supports, when needed. Establish an Interagency Council on Meeting the Housing and Service Needs of Seniors and Persons with Disabilities. (See chapter 6 for a description of the full role of the council.)

• Add to the PART performance criteria indicators that will evaluate documented outcomes from intra-agency and cross-agency collaboration to meet LTSS needs of people with disabilities. Consider possible financial incentives for agencies that document valued outcomes from LTSS system collaboration. Report annually to Congress on individual agency performance in this area.

• Issue a new Executive Order charging CMS to chair a time-limited workgroup (six months) on LTSS that includes representation by HUD, HHS, the Social Security Administration (SSA), and the Departments of Education, Labor, Justice, Transportation, Treasury, and Agriculture to identify policy barriers and facilitators to an improved comprehensive, coordinated system of LTSS for people with disabilities under and over age 65 that maximizes interagency collaboration, promotes consumer direction, and increases consumer choice and access to affordable supports and services in home- and community-based settings.

7. Improve and Hold States Accountable for Rebalancing Their Systems to Support LTSS (Chapter 5)

A. Study states that are having success with a global budgeting approach to move their LTSS system from an institutional bias to be anchored by HCBS and home- and community-based supports.

B. Develop a template in consultation with states to be used to evaluate and measure current expenditures for LTSS in institutional versus home- and community-based settings. Such a template would be developed jointly by CMS and CBO to allow for consistent, comparative benchmarking from year to year within and among states.

8. Increase Understanding of the Possible Relationship Between an LTSS Insurance Product and Publicly Financed LTSS (Chapter 5)

A. Congressional interest remains high to understand and explore further the possible relationship between the current market for long-term care insurance products and a reduced dependence on Medicaid and Medicare for long-term support needs. With the growing cost of Medicaid and Medicare documented by NCD researchers, there is growing interest in forging a new level of partnership with the insurance industry that explores both the expansion of product options and the possible cost savings to the public system. For people with disabilities under age 65, no such insurance product yet exists, and little is known about the risk factors in terms of potential utilization by the target population and how to achieve affordable pricing. Even with the adoption of several of the other major recommendations proposed in this report, it is unlikely that a revised Medicaid program will ever meet the needs of all people who are seeking LTSS.

B. Conduct a feasibility study of possible new insurance products and options regarding relationship to the Medicaid program to evaluate possible strategies to partner an LTSS insurance product with supplementary Medicaid coverage for people with disabilities under age 65. Consider price, benefit coverage, caps in coverage, and eligibility for Medicaid LTSS, and project market demand and needed incentives to share risk among stakeholders: the government, the consumer, and the insurance industry. The possible collaboration would include the assistant secretary for planning and evaluation (APSE) at HHS, CMS, and a private insurer.

C. Pilot test such a product or products to evaluate cost benefits to all critical stakeholders. Such a pilot must recognize that LTSS must be individualized to accommodate the needs and desires of the individuals receiving assistance and that the services and supports must reflect consumer preference for noninstitutional settings. Such an insurance product must achieve several objectives: It must be affordable, flexible, responsive to consumer needs and preferences, and sustainable over time with federal oversight.

9. Improve Consumer Understanding, Knowledge, and Skills to Develop a Person-Centered Plan and Self-Direct an Individual Budget (Chapter 5)

A. The Cash and Counseling Demonstrations and the Independence Plus Waivers have produced early positive findings of increased consumer satisfaction with the self-direction of individual budgets, the selection of support providers, and increased choice in development of person-centered plans. Individuals with disabilities and their families should be given the opportunity to plan, obtain control, and sustain the services that are best for them in preferred home- and community-based settings. For people with disabilities who have been given few choices in the past regarding services and supports and service delivery options, consumer self-direction requires information, education, and training to build the critical skills needed to make informed decisions.

B. Access to information about service options, streamlined procedures for determining eligibility for various public benefits, and new infrastructure will need to be developed to assist with programmatic and financial management.

C. Recommendations that recognize the principles of individual self-direction and responsibility for prudent and effective management of public resources are critical to the development of the LTSS system of the future.

D. The system should continue to provide competitive grants that establish Aging and Disability Resource Centers (ADRCs) in all 50 states that provide one-stop access to information and individualized advice on long-term support options, as well as streamlined eligibility determinations for all publicly funded programs.

E. The system should establish, with funding from CMS, a National Resource Center on Consumer Self-Direction that identifies and disseminates best practice information on person-centered plan development, self-directed management of individual budgets, and examples of multiple funders combining funds within an individual budget to achieve common negotiated performance objectives.

F. The system should require states, as part of their HCBS waiver implementation, to provide education and training to eligible Medicaid beneficiaries on effective and meaningful participation in person-centered planning, management of individual budgets, and negotiation with service and support providers.

G. The system should establish a cross-agency workgroup that involves CMS, the Administration on Aging (AOA), SSA, the Administration on Developmental Disabilities, HUD, the Office of Special Education and Rehabilitative Services at the Department of Education, and the Department of Labor to accelerate options for states to bundle and/or braid public funds within a self-directed individual budget with streamlined and accelerated eligibility procedures.

10. Continue to Educate People with Disabilities, Their Families, and Other Critical Stakeholders About LTSS Challenges in Public Policy and Practice and Document Further Consumer Needs, Costs, and Preferences for a Comprehensive, Accessible, and Affordable System (Chapter 5)

A. This report documents the current crisis and the impending “perfect storm.” It is a complex and confusing picture, not easy to grasp and even more difficult to change as we move forward. NCD must continue to put the spotlight on the critical set of challenges that in the next 20 years may touch more than half the population of our country. For people with unmet LTSS needs today, NCD must continue the public education process through outreach activities and direct discussion with the disability community and policymakers.

B. A series of audio conferences and a national summit of key leaders and stakeholders should be held to continue to document the findings and build consensus on possible policy and practical solutions.

Recommendations for Clean Slate Reform: Year 2049 (See Chapter 6 for full text and implementation leads and future model)

1. AmeriWell is a Prefunded, Mandatory, Long-Term Services and Support Model That Provides All Americans of Any Age with Coverage from Birth Based on Criteria of Risk and Functioning, and Not Category of Disability (Chapter 6)

A. AmeriWell delinks LTSS from Medicaid and Medicare, creating its own governing agency, regulations, oversight, and congressional committee.

B. The contributions of individuals and families, the private sector, and the Federal Government fund AmeriWell. A “penny pool” is established through private stock transactions to supplement LTSS costs for impoverished and vulnerable Americans previously served under Medicaid and Medicare.

C. Medicaid remains a primary safety net for mothers and children. Medicare continues to provide its health and acute care and limited home services to individuals 65 and older who are not Medicaid eligible or on SSDI.

Chapter 1

The State of 21st Century Long-Term Services and

Supports: Financing and Systems Reform for

Americans with Disabilities

Table of Contents

Chapter 1

Part II
Charting the Course

Part III
Forecasting the Need

Part IV
Dragging Anchor

Part V
Introducing the Captain

Part VI
Meeting the Crew

Part VII
Fueling the Engine

Part VIII
Pushing Tugboats

Part IX
Harnessing Favorable Winds

Part X
Gathering Clouds

Part XI
Recharting the Course

Appendix 1.A

Appendix 1.B

Appendix 1.C

Appendix 1.D

Appendix 1.E

Appendix 1.F

Appendix 1.G

Part I

Picturing the Problem

The “rich picture” methodology for presentation of the state of long-term services and supports financing and systems reform research.

Some people say that a picture is worth a thousand words. The field of management often uses a “rich picture” systems methodology, “an innovative tool that encapsulates knowledge relevant to strategic reform.” , , , It is often described in the management literature as a “soft systems methodology” for linking hard and soft facts in a cartoon-like representation to illustrate a complex problem simply and clearly. The following research is presented using the rich picture methodology to capture the current long-term care and long-term services and supports (LTSS) crisis. The picture and narrative rely on expert research from the past and present, as well as on one-on-one open-ended interviews with key stakeholders in the fields of disability, long-term care, and health care.

The setting for the rich picture is the ocean, with the current LTSS ship heading toward an iceberg that represents the barriers and challenges to systems reform. The “cast” for this rich picture will provide the substantive descriptions and body of research and analysis about the barriers and challenges of navigating through the current system of LTSS. The presentation of the research is purposeful, so that the reader and the researcher can begin the voyage together with a snapshot of the problem.

The purpose of this research is to produce new knowledge and understanding of current experience with and future need for affordable LTSS for people with disabilities. This research on the State of LTSS Financing and Systems Reform is the first part in a five-part series that will tell the story of the current LTSS system to set the stage for the exploration of future market demands and current gaps in supply; to explore promising state practices and challenges; and to picture what the 21st century’s comprehensive, consumer-responsive system might look like and make policy recommendations.

The research is based on five assumptions. First, people with disabilities, whether young or old, desire and deserve choices when seeking assistance with daily living that maintains their self-determination and maximum dignity and independence. Second, the current financing mechanisms (public and private) will become unsustainable in the near future without significant reform. The system must be affordable to all Americans regardless of income levels and must consider opportunities to leverage public and private support in new ways without impoverishing beneficiaries. Third, there is an opportunity with the changing demographic picture of the United States to explore the possibilities of a universal approach to the design and financing of services and supports that is responsive to individuals under the age of 65, as well as seniors with disabilities, without sacrificing individual choice and flexibility. Fourth, formal and informal caregiving must be sustained, examining family needs and workforce recruitment and retention challenges. Fifth, the approach to quality must examine consumer direction and control of resources in addition to traditional external quality assurance mechanisms.



Part II

Charting the Course

An overview of the context for systems reform and the challenges inherent in navigating the current waters for people with disabilities and seniors.

Historians will remember the last half of the 20th century for its legacy of public policy in health care, education, disability, and civil rights. It will fill the archives of history as to how a young country, barely 200 years old, grappled with developing and implementing equitable and just policy for all its citizens. Although the flurry of disability policy has waxed and waned with the political, economic, and social changes of the greatest century in history, it nevertheless started a critical dialogue about the rights and responsibilities of all people, of all abilities, toward each other.

The United States enters the 21st century with 35 million people over 65 years of age in relatively good health with independent lifestyles and less than 5 percent in skilled nursing homes. Not bad outcomes for a young country when one considers that, historically, only 2 to 3 percent of the world’s population has ever lived beyond 65 years of age. In less than a century, life expectancy in the United States has increased by 30 years. This phenomenon has also increased the life span of people with lifelong disabilities, such as Down syndrome and mental retardation. The increase in longevity is attributed to advances in technology, sanitation, education, health care, and the environment, coupled with an abundance of social and fiscal policy that has provided the first-ever experiment for how a democracy ought to work for its citizens of all abilities.

Over the second half of the 20th century, health care legislation evolved to help working Americans meet the rising costs associated with health care and living longer. The initial Medicare legislation was designed to insure seniors for acute care needs and short-term rehabilitation, and Medicaid was to provide health care for poor women, children, and people with disabilities. For people with chronic, long-term care needs, the nursing home became the primary option for care. In the 1960s, there was no companion legislation developed alongside Medicare and Medicaid that addressed the needs of LTSS. The civil rights debate was in full swing, but the debate about the rights of people with disabilities to services and supports outside a state hospital was in its infant stage. The education movement to integrate people with disabilities into the mainstream classroom was a decade away. It was assumed that families would provide the supports and services and housing for their own family members with lifelong disabilities; if they could not, the alternative was a nursing home or a state institution.

It was not surprising that the 1960s Medicaid legislation covered institutional care and considered it the right response for seniors and people with disabilities with long-term needs. The movement to close state hospitals, ironically, began before the Medicare and Medicaid reform in the 1960s. Deinstitutionalization was viewed by some as an ethical and moral imperative indicative of the changing philosophy of care and civil rights for people with disabilities. However, others saw it as an opportunity to reduce state costs and take advantage of the new federal legislation that would provide states with resources for institutional care such as group homes, intermediate care facilities, and nursing homes.

Today, most Americans, whether with a lifelong disability or a short-term chronic illness, want to receive LTSS in their homes and their communities. In the early 1800s, the first health caregivers were women from local benevolent societies and churches who visited the sick and the indigent in their homes. In the early 1900s, hospitals and state institutions for people with mental retardation grew, and caregiving, although still very much home based, was provided by professionals like nurses, nursing assistants, and social workers. Today, the majority of formal and informal (paid and unpaid) caregivers who provide LTSS are still women. Since 1981, Medicaid policy revisited the home- and community-based notion of caring by offering waivers to states that allow federal-state Medicaid dollars to be spent on optional services rather than just on institutional and home health care. However, the use of waivers is optional and varies dramatically from state to state, and waivers serve less than 1 million low-income people needing LTSS.

It is estimated that between 9 and 12 million people over the age of 18 (459,000 under age 18) need LTSS for everyday self-care needs such as dressing, eating, toileting, shopping, paying bills, or taking medication. Demographers predict that the senior population of 35 million will double by 2030 and, although disability rates have declined for this age group, will begin to climb as the category of the oldest of the old, 85 years and above, increases. The functional as well as chronic and acute care needs of people under 65 years of age are growing at a faster rate than for those over 65 years of age, in part because of improved medical technology, increased life expectancy, increase in asthma, higher prevalence of diabetes and obesity, and deterioration in a number of self-reported health statistics. Eighty percent of adults receive LTSS in the community in which they live, although 64.3 percent of the Medicaid dollars support caregiving for people in nursing homes and other facilities.

The United States spent about $1.24 trillion on all U.S. personal health care services in 2001, with 12.2 percent (or $151.2 billion) spent on LTSS. Medicaid was the major source of funding, followed by personal out-of-pocket pay, Medicare, private long-term care insurance, and a small group of other federal programs. The Congressional Budget Office predicts that the need for services and supports will only grow and that more than half of Americans will need LTSS at some point in their lives. The good news is that the need will be sporadic for most and long term for but a few. The bad news is that the current system is designed for low-income individuals who are nursing home eligible. There are many people with disabilities, young and old, who will never meet the stringent income and functioning requirements for care under the current system. It is ironic that poverty has become the criterion for receipt of LTSS when the United States spends about $5,500 per person on health care, 50 percent more than any other nation in the world.

Financial eligibility criteria for receipt of LTSS through Medicaid require that individuals have extremely low assets and income to receive services. Although demographers and economists have forecast the current crisis, few Americans have saved enough to support any serious long-term care needs. More than 50 percent of Americans have no access to company pension plans, and only about 10 percent have long-term care policies. As many as 45 million Americans have no health insurance. Thirty-four percent of people with disabilities have incomes below $25,000 a year, and more than 60 percent are asset poor (have only enough money to survive for three months at the federal poverty rate). More than 22 percent of Americans are unbanked, which means they are not saving or investing for future long-term care needs.

Economists are exploring how the increased longevity and decreased fertility rates will ultimately affect overall the productivity rates of the American workforce and the ability of the American taxpayer to sustain current financing for the delivery of the current long-term care system. Although there is much debate about the economic health of a variety of our current entitlement programs, there is agreement that there is a growing imbalance between what the Federal Government will collect in future benefits and what it has promised to pay. Before the new prescription drug legislation of 2004, Comptroller General David Walker of the Government Accountability Office (GAO) said that GAO simulations for the year 2040 demonstrated that, without reform, federal income taxes could rise drastically and the nation could see a 50 percent reduction in current spending. Actuaries are challenged to provide insurance companies with lifetime cost projections for people with severe and chronic disabilities who are living longer. Insurance companies are nervous about predicting future costs for long-term care as health care costs continue to rise and the profile of the typical senior continues to change.

Although today’s delivery and design of LTSS are guided by a philosophy that is consumer directed and noninstitutional, the funding mechanisms are rooted in policy that is 40 years old and that favors “episodic responses to chronic and acute care needs rather than nonspecific causes related to old age or as a result of a lifelong disability.” Regardless of one’s philosophy or biases, the current system is fast becoming financially unsustainable. Even the generous federal waivers that make it possible for about 1 million Americans to receive services outside a skilled nursing home come without financial guarantees and are dependent on the fiscal health of each state. It is highly unlikely that states will be able to sustain many of these innovative programs without significant reform in the near future. The current health care system needs a “companion” system of services and supports that provides a constellation of consumer-driven options that are supportive, rehabilitative, medical, and affordable and ensures that people with disabilities and seniors have dignity and independence. The future of LTSS is the gateway to a new industry that has the potential to provide a menu of services that not only maintain or sustain activities of daily living (ADLs) as in the past, but also promote quality aging and healthier lifestyles for all people with disabilities.

Part III

Forecasting the Need

A snapshot of public perceptions creating the barriers and challenges to setting the course for long-term services and supports reform.

Confusion and Misperceptions

Many Americans (59%) report giving “very little thought” or “no thought at all” to the issue of long-term care (LTC), and one-third believe that, if they do need LTC services, Medicare or Medicaid will pay the bill. The National Endowment for Financial Education sponsored a think tank on the issues of LTC and concluded that many Americans are experiencing a “disconnect” from planning for the realities of LTC. A national study on LTC insurance found consumers confused about exactly what is meant by LTC—some thought it was an entitlement, others a personal responsibility, and still others were unsure whether it was about housing, services, or both. The study found that 25 percent of those surveyed believed that Medicare or Medicaid would pay for LTC; 34 percent reported that they would never need LTC insurance; and 68 percent reported they would purchase it in the future when and if needed.

A survey by the National Governors Association (NGA) found that 85 percent of Americans over the age of 45 have no public or private insurance protection against the cost of LTC, and states must adopt innovative strategies to encourage citizens to plan to finance their own LTC needs. The survey found that many people have the following common misperceptions about Medicare coverage for LTC costs:

• Unaware that Medicare covers only 100 days of skilled nursing care following a hospital discharge and does not contain a long-term component providing for extended community or intuitional care
• Widespread lack of awareness regarding the high costs associated with LTC
• Wariness about paying LTC insurance premiums to cover services that may not be needed for decades
• Unaffordable LTC insurance premiums for lower-middle-income people
• Lack of knowledge about the availability of other LTC financing vehicles such as reverse mortgages
• Limited options for lower-middle-income people to avoid spending down into Medicaid
• Lack of stigma or consequences for individuals choosing to spend down to Medicaid

Attitudes and Preferences

A survey of participants in a four-state Robert Wood Johnson Foundation partnership for the LTC insurance demonstration project measured attitudes of the participants about purchasing LTC insurance. The evaluation reported that individuals who did not have family members to count on for LTSS and who believed in self-reliance rather than government involvement were more likely to purchase an LTC insurance policy. Most participants were married, college educated, healthy, and had incomes between $50,000 and $100,000 and assets over $100,000. According to the Administration on Aging (AOA) Profile of Older Americans 2000, only 14 percent of family households with a head of household 65 years and older earned incomes between $50,000 and $74,000. Married seniors far outrank their single or never-married and divorced or separated colleagues. Only 4 percent of single or never-married individuals and 8 percent of the divorced or separated are age 65 or older. So attitudes about self-reliance versus government involvement for married well-off seniors are probably quite different than the attitudes of 32 million seniors reporting a median working income of $14,425, with 34 percent reporting a working income of less than $10,000 and 23 percent reporting $25,000 or more.

Postelection Views

America’s Health Insurance Plan (AHIP) reported its 2004 postelection survey findings regarding health care issues of 1,000 people who voted in the 2004 presidential election and found that 8 out of 10 people considered health care to be very important but ranked issues of values, Iraq, the economy, and terrorism before health care. Affordability of health care was considered important by 67 percent of respondents, and 27 percent were concerned about providing insurance coverage for more of the uninsured. Almost half reported that the health care system has features that work well and features that need significant changes. Eighty-three percent of voters were satisfied with their health insurance coverage, while only 15 percent were dissatisfied.

Finally, the Kaiser Family Foundation/Harvard School of Public Health Survey, January 2005, reported its findings on the Health Care Agenda for the New Congress. The most important issues or problems the President and Congress should deal with were the war in Iraq (27%), the economy (17%), and health care (10%). The Democrats listed health care as number three of five top priorities, and the Republicans ranked health care as number four out of five top priorities.

Lack of Political and Public Will

The brief review above indicates that the issue of health care, not to mention the issue of LTSS, is not on the public or political radar. There is a disconnect from what people think and believe and what is actually happening in the states and, to some extent, what is happing on the federal level. This could be attributed to the fact that the LTC system is designed for low-income recipients, and surveys and polls reflect the views and perceptions of middle- and upper-income populations. However, with less than 10 percent of the American population purchasing LTC insurance, there is a question of how Americans are actually planning for their aging years. Even the large volume of research on the topic of LTC and LTSS reflects a high level of interest and importance by policy leaders, national think tanks, and major federal agencies. The misperceptions about the role of public programs in providing LTC for the average American are serious because they reflect a lack of planning and understanding of the issue. The lack of public and political will should be of great concern to policymakers advocating for people with disabilities and seniors in light of projected federal budget cuts for programs that many believe are growing at unsustainable rates, such as Social Security, Medicaid, and Medicare.

Durenberger (2003) writes that the LTC debate “lacks a strong wedge” because, unlike Social Security and its monthly check, there is no frequent reminder of the need for LTSS in everyday life. Most Americans believe that LTC “signifies an unstoppable decline that ends in death.” Many are in denial that LTC is connected to their financial security and should, in fact, be a part of their retirement portfolio. What salient issue will create the wedge is unclear, although the suggestion to link it to financial security is excellent and should be parlayed into retirement planning for every American.

In addition, Durenberger suggests clarity about what is important and what is urgent to include in the LTC debate. On the urgent side, he recommends the issue of reimbursement and the increased Medicaid matching rates that pushed many states into deficit. The Kaiser Commission on Medicaid and the Uninsured confirmed that 50 states and the District of Columbia implemented Medicaid cost-containment strategies for FY 2003 and FY 2004 and announced plans to make cuts in their Medicaid programs by limiting eligibility, cutting benefits, or restructuring prescription drug payment and coverage. State budget-cutters are reported as particularly targeting nursing home reimbursement rates, with Illinois implementing a 5.9 percent reduction in its nursing home reimbursement rates, and the Kansas Legislature reducing its nursing home budget by $8.9 million. On the important side of the debate, Durenberger recommends discussion of financing reform, systemic change, consumer-directed care, and housing. Although these are the issues most frequently researched, he suggests that they are not as critical to states’ current crises and immediate functions. Durenberger explains that the integration of the urgent and the important issues must be part of the wider national dialogue. The wisdom in this advice is obvious: If the current policy structure for LTSS is breaking the bank for states, alternative strategies must be introduced on a national level to supplement the states in meeting the demands of their aging populations. Although some states are moving forward with their own Medicaid reform, it is unclear what the outcomes will be. A case in point is the recent announcement by Governor Jeb Bush of Florida that his administration is proposing a transformation of the state’s $14 billion Medicaid program that serves 2.1 million vulnerable, disabled, and elderly Floridians. Medicaid spending since 1999 has increased 112 percent and, if reform is not made, there is a fear that it will collapse under its own weight. The reform efforts are defined as a patient-centered vision with three components: basic care, catastrophic care, and flexible spending.

Robyn Stone (2003) reinforces Durenberger’s proposition about the important issues when she writes that consumer choice has become the “mantra” of many policymakers, but is a “vacuous” promise at best in the absence of knowledge about options to make informed choices about LTC options. She asserts that communicating about public benefits requires money and a marketing strategy. Unfortunately, as seen in the welfare reform of the late 1990s, the lack of marketing information initially caused a significant drop in the benefit rolls for people receiving food stamps, Medicaid, and other programs because of the lack of knowledge or understanding of the rules and policies associated with the new law.

Joanne Silberner, a health policy correspondent for National Public Radio, writes that the problem with the current debate about health care and LTC is that it is an “endless debate” and is not newsworthy, and that the lack of media coverage is due to the lack of anything new happening. She compares the LTC issue with Medicare:

“Paul Kleyman, the editor of Aging Today, is quite passionate about issues of aging and LTC. He once complained to me that ‘the zookeepers in politics keep shouting that we have to worry about the pachyderm Medicare before we cover LTC.’ The editors at NPR concur. Medicare is a topic that we can cover because it is an issue with clear political agendas. LTC however, is more muddied, and it is not a pachyderm. So the media covers a budget fight, policy changes, bankruptcies, and scandals involving LTC.”

New Language and Definitions

The challenge for the architects of the 21st century’s LTSS system is not just about public perception and lack of media coverage but about language and actions. The current Administration’s assertive actions following the 1999 Supreme Court Olmstead decision has asked states to develop and implement plans for less-restrictive community options in care settings of the consumer’s choice. , The disability rights movement has spearheaded the rights of people with disabilities to live in the least-restrictive environment and has expanded the domain of membership in what was once perceived as an LTC system for people on social welfare and the old and frail. ,

The use of people-first language, the dropping of the “care” from long term, and services defined as “consumer directed” or “consumer centered” reflect a movement toward a more universal language and acceptance of the evolution of how we think about the multigenerational aspects of aging, disability supports, and services. Kane describes the transition of these slogans into policy, such as the Medicaid home- and community-based waivers, which use client-employed workers; or the Cash and Counseling Demonstrations, during which the Medicaid benefit is cashed out for those who opt for a monetary, although discounted, benefit. ,

Several models designed by the leaders of the self-determination movement for people with developmental disabilities demonstrated promising outcomes with consumer-driven budgets, which are now being tested across the age span in a few states. , The next generation of individuals with disabilities and older Americans will benefit because of the sharing and borrowing of language and policy across the aging spectrum and disability world that preceded current reform efforts.

The definition of LTSS covers a daunting range of issues, needs, and services. The Congressional Record Service defines LTC as “a wide range of supportive and health services for persons who have lost the capacity for self-care due to illness or frailty.” LTSS include much more than health care and is composed of a variety of services and supports essential to maintain quality of life with maximum dignity and independence for individuals with disabilities and individuals over and under 65 years of age. Services and supports include housing, transportation, nutrition, technology, personal assistance, and other social supports to maintain independent living.

Health Outcomes—Another Reason for Reform

Most LTSS are nonmedical and, when combined with the financing mechanisms that favor acute care and institutional care, it is like trying to fit a circle in a square. An examination of health outcomes for the current system may provide a rationale for why a new financing and delivery system is needed.

Why We Die Premature Deaths
30% genetic predispositions
14% social circumstances
5% environmental exposures
40% behavioral patterns
10% shortfalls in medical care
Longman, 2004, p. 99

A recent study produced by researchers from the Robert Wood Johnson Foundation surveyed decades of studies as far back as 1970 as to why people die premature deaths. The study found that 64 percent of premature deaths are due to nonmedical environmental or social or behavioral inputs. This is not surprising when one realizes that the focus of health policy over the past 40 years has not been on prevention or services and supports that could help people with disabilities maintain quality lives or help people with chronic illnesses stabilize conditions. Currently, only 3 percent of total health care expenditures in the United States are spent on well care, including preventive care. Although the United States spends 50 percent more than 29 other countries in the developed world for health care, its health indicators—such as infant mortality and life expectancy—do not reflect this. Although the United States surpasses all other countries in its spending (13 percent of its gross domestic product), 20 percent of Americans remain uninsured for health care services and 90 percent are uninsured for LTC insurance.

The LTSS debate may be seen as a political nonstarter when referenced by the media only in the context of disability and aging, but it underscores the unpreparedness of the current system to handle the biggest demographic challenge in the history of its young country. A textbook commonly used in health policy graduate courses concludes in its chapter on LTC that the subject is largely ignored for several reasons: a focus on the “cure rather than the care” in medicine today; the view of LTC as a low-status service within the health care system; the lack of sustainable and affordable financing mechanisms; and the psychological challenges of coping with a disability at the end of life—all these reasons perpetuate denial and lack of decision making about the problem.

Part IV

Dragging Anchor

An overview of the role of history in the evolution of today’s understanding and future forecasting of long-term services and supports financing and systems reform.

History as Prologue

June 1867
My view you know is that the ultimate destination of all nursing is the nursing of the sick in their own homes. I look to the abolition of all hospitals .. but no use to talk about the year 2000.
Florence Nightingale
(See Footnote 56)

In the 20th century, the United States Congress tried six times to pass national health care, but failed. A critical reason given for this failure was the lack of consensus that health care should be a right for all citizens in a free society, subsidized in part by the Federal Government. Nineteenth-century Americans fiercely embraced the idea of individualism and the belief that the working and middle classes never took money not earned. The only exception to this revered ideology was the military half-pensions that began during the Revolutionary War. The sentiment of the 19th century Victorian middleclass was unwavering, holding steadfast to the belief that “American greatness depended at the very least on idle and working-class Americans not accepting benefits they had not earned.” However, our 19th century forefathers did develop the concept of the truly needy and took on the responsibility (state and local) for funding the first poorhouses and institutions. The strong characteristic of individualism prevailed, however, and today’s social policy reflects the belief that poverty is an individual problem and not the result of an economic system. Unlike Western Europe, Canada, and Japan, the United States has never embraced the concept of universal entitlements and is last with respect to its public share of total health care expenditures when compared with other industrialized countries (45.4% public and 54.6% private), Canada (69.4% public and 30.6% private), and Japan (79.5% public and 20.5% private).

George Lundberg, MD, an editor of the Journal of the American Medical Association for 17 years, wrote that the failure of recent health reform efforts was based on an erroneous assumption that the American public would accept one level of health care across the board any more than it has accepted one mode of transportation or housing or fashion.

The current system of health care was designed more than 40 years ago and was the United States’ second major attempt since the passage of Social Security in 1935 in providing income security for its working seniors, poor mothers and children, and people with disabilities. Health reform efforts over the last several years have been described as “incremental” and reflective of the overall public and political opinion (see part III of this chapter) of the insured. However, what is notably absent from the current debate is reliable research that spells out the needs and perceptions about the current LTSS from the uninsured, underinsured, and people with disabilities.

The dilemma is that American public policy, although based on social movements and general premises of reason and knowledge, has become homogenized and does not truly represent the needs of those who are marginalized, such as the poor and people with disabilities. , This “dilemma of difference” is found in traditions that lean heavily on universal imperatives that dictate what society ought to do, resulting in public policy that is “value neutral.” Richard Bringewatt, president and chief executive officer of the National Chronic Care Consortium, describes the challenge this way: “ The focus needs to be shifted from the needs of provider systems that were established in 1965 to the needs of tomorrow. There is no health policy in this country today—only budget policy.” The Consortium for Citizens with Disabilities—a national coalition of organizations working together to advocate for national public policy that ensures the self-determination, independence, participation, empowerment, integration, and inclusion of children and adults with disabilities in all aspects of society—is even clearer with its opposition to any Medicaid reform efforts that threaten the services and guarantees currently available under law to people with disabilities. The consortium and many of its members know that the dilemma of juxtaposing budget policy over social policy is that it ignores the human element and, in this case, people with disabilities and the primary purpose of the policy in the first place. Should the costs of providing personal assistance for a working mother who needs help in getting from her bed to her wheelchair every day take precedence over her need to provide for her family and manage her life? The dilemma of difference is that it sets aside an issue such as LTSS as belonging to “the other” and therefore reduces the sense of obligation or responsibility of the majority. This dilemma is also seen in the multitude of research articles reviewed for this report about the financing of LTSS reform. The “beneficiary story”—how changes in funding would affect people with disabilities and their everyday lives over time—is noticeably absent from almost all analyses. Without this information, policymakers and the public are only privy to half the story: the monetary side of the policy and not the human side about the impact of the policy on the lives of millions of Americans with disabilities.

Forecasting a future system of reform requires a look back at the patterns and trends that paved the way to today’s philosophy of caring and delivery of services and supports. The American system of health care has two distinct histories. The first, from the 1700s to the early 1900s, was based on a model for caring that was mostly a charity model, delivered by churches and benevolent groups and subsidized by local communities and state governments. Charity care was mostly nonmedical care given to the sick and indigent by volunteers and nurses in the home and the poorhouses. The second history began in the 1900s and is the for-profit health care model we have today, which is highly professionalized and focused more on cure and treatment than on care.

The following two sections will provide a sketch of the evolution of American culture and its impact and implications for navigating the current state of LTSS system reform for people with disabilities with the hope of “dragging anchor” and moving the dialogue for reform forward.

Evolution of American Culture and Its Philosophy of Caring—1800s

The underwriting of human life began in the United States in the 1830s as the first life insurance policy was written, signaling a major shift in American values. Never before had America found it necessary to insure a person’s life in the event of death. Mortality was high in the early 19th century (about 42 years) and the concept of life insurance buffered the frequency of death by providing financial security for young families left behind. In the 1860s, the average marriage lasted 15 years before one partner died. Today, by contrast, it is not uncommon for a married couple to celebrate a 60th wedding anniversary.
In the 1850s, Charles Darwin introduced the theory of evolution that forever changed the Puritan tradition. Scientific discoveries promoted new ways of thinking, such as the germ theory, sparking religious debate. If germs caused disease, what was the role of the Divine? Two thousand years of western thought on immortality and the afterlife were suddenly under attack. As with the evolution in the sciences, philosophy was experiencing similar challenges. Metaphysics and moral philosophy were shunned as knowledge of opinion and not knowledge of fact. A new breed of thinkers, weary of their European experience of superstition, bigotry, religious persecution, and barbarism, emerged with the skepticism of the ancients and the optimism of the newfound sciences. The Enlightenment fathers, as they called themselves, ironically produced many of the same philosophies they had crossed the ocean to leave behind. Immanuel Kant described his age as the “Age of Enlightenment, but not an enlightened age.”

The religious and social values of 19th century America began to change dramatically as religious clauses were dropped from wills that for centuries had been the measure of a man’s character as well as his financial worth. As this change occurred, the familiar Victorian deathbed scene with its personal attending clerics all but disappeared as the once-public hour of death became private. The tradition of burying the dead from home changed as the local cabinetmaker was asked to open up his parlor and assume the responsibilities for the care and burying of the deceased. By the 1890s, the death-care industry was born.

The first hospitals were primarily of a “religious and charitable nature” and provided care for the sick rather than medical cures. The growth in biomedical science and technology between 1870 and 1920 altered the purpose of the early hospitals and the type of services rendered. A new medical profession of trained professionals emerged and the number of hospitals grew from 178 in 1873 to more than 4,300 in 1909. In the 1840s, a few state mental hospitals were opened and championed by an extraordinary advocate for people with mental illness, Dorothea Dix, who was successful in garnering state support. , At this time, mental illness was considered treatable, and “moral treatment” consisted of work, education, and recreation. It was not long before the populations and expenditures grew and the standards of care declined. Institutions became warehouses and one of America’s worst legacies. It is important to note that the first institutions were often built in the country and away from mainstream activities. Originally, this was done to create a serene environment. However, similar to the placement of the early cemeteries away from mainstream cities, this created a stigma, that the people in institutions should be hidden and feared. Unfortunately, this stigma prevails to this day about many people with disabilities, even those not in institutions.

Although institutional care was gaining popularity during this time, 80 percent of Americans, whether ill, aged, or dying, were cared for in their homes, in contrast to today, when more than 80 percent die in institutions. The shift from home care to institutional care during the 1800s did mean new jobs with the growth of new industries and the emphasis on professional care. However, charity care survived well into the early part of the 1900s, predominately for health care. Insurance for health care was introduced in 1929, although it did not really take hold until the 1940s, when Blue Cross Insurance was introduced as a method to help pay for the support of hospitals.

Early Settlement and Pauper Laws

In colonial America, the early settlement and pauper laws were adopted to confine the movement of the poor and indigent from one town to neighboring communities, and it was considered illegal for people to move from one town to another without express permission of the town fathers. These laws dated back to the 1500s and were inherited from our European ancestors. Local laws favored towns regarding the wandering poor and people with mental illness or, as they were called then, the “mentally deficient.” It was not uncommon for local overseers of the poor to try to remove people who were “crippled, feeble, and mentally deficient” from the town budgets by marrying them off or removing them from the town under some technicality regarding their inheritance or the town’s settlement laws. It became increasingly difficult to monitor settlement and pauper laws as the population considered “mentally ill and mentally defective” grew.

The problem of housing for the poor and people with disabilities was addressed with the establishment of poorhouses or almshouses, and legislation allowed towns to tax citizens to build, purchase, or hire a house of correction or workhouse in which to confine and set their poor to work. For example, by 1834, in the state of Vermont, the first institution for the “relief of the insane” was initiated with a $10,000 grant from woman in New Hampshire, and the Vermont legislature, in an unprecedented gesture, appropriated $2,000 annually for fives years to help with the costs. The Vermont Asylum of the Insane (known today as the Brattleboro Retreat) was opened in 1836. It was not until 1921, however, that Vermont enacted laws in favor of the “crippled and handicapped,” almost 100 years after it provided funding for a state asylum for mental illness. It was not until 1884 that the state assumed total support for “mentally defective paupers” regardless of residency; by 1891, it had opened the Vermont State Asylum in Waterbury for the “insane.”

20th Century—From Charity Care to For-Profit Care

By the 1950s, a new for-profit system of health care had evolved as a result of advances in sanitation, specialization of medicine, and the further development of medical research, including discoveries such as insulin, antibiotics, and anesthesia. Federal legislation responded to the problems of employment for people with disabilities as early as the 1920s with the passage of the Federal Rehabilitation Act. The growth in the medical sciences, coupled with this legislation, encouraged the development of rehabilitation medicine for people with physical disabilities and influenced the quality of life immensely. In addition, the field of psychiatry grew and new medications for the treatment of people with mental illness advanced and precipitated the long overdue deinstitutionalization movement that began in the 1950s. The need for health insurance grew because of several of the following factors: as a response to poverty and the aftermath of the Great Depression in the 1930s; as a response to a collective bargaining agreement of the Federal Government that limited wage increases to workers but not fringe benefits during World War II; as a response to the passage of the Hill-Burton Act in 1946 that supplied funds to underwrite new hospital construction; and as a response to the passage of Medicare in 1965.

The evolution of care from the home to the almshouse to the state mental hospital to the private nursing home and now back to the home and community has one underlying theme: that is, historically, Americans have provided for the care of their family, loved ones, and the poor with disabilities. Primary resource documents on what the early charity care looked like were beyond the scope of this study. However, it is clear that the care was primarily comfort care with little or no medical oversight, and the first professionals on the scene, as early as the 1830s, were the visiting nurses or, as they are known today, the Visiting Nurse Association. However, the legacy of the state hospital continues today, with 60,000 people remaining in state mental institutions, compared with 559,000 in 1955. ,

As this brief review demonstrates, a new landscape for democracy emerged during this period in American history. The discovery of electricity; the inventions of the telegraph, photography, and the steam engine; the building of American railroads; and the opening of public schools, coupled with the religious and social revolutions, provided the foundation for Americans to negotiate their future responsibilities and commitments to each other. However,