Congressional Budget Office Recommends New Savings Program To Fund Purchase Of Long-Term Care Insurance

Congressional Budget Office Recommends Savings Program To Enable Americans To Purchase Long-Term Care Insurance

To aid the incoming 111th Congress and the Obama Administration, the Congressional Budget Office (CBO) has just released a 235-page report outlining 115 budget options for health care reform. The report expands on one the CBO's regular reports to the House and Senate Committees on the Budget. The authors claim the report presents ideas for reducing "and in some cases, increasing" federal spending on health care, altering federal health care programs and making (in again their words) "substantive changes to the nation's health insurance system.

When it comes to the long-term care section according to Jesse Slome, Executive Director of the American Association for Long-Term Care Insurance, most of the changes will increase spending adding costs to an already strained federal program.

One proposal would require workers to contribute a percentage of their pretax wages to an individual account reserved specifically to pay for long-term care insurance. In the Congressional Budget Office’s estimation, a contribution of 1.2 percent of income subject to the Social Security payroll tax would meet the option’s funding requirements. Non-wage earners, such as stay-at-home spouses, would not be covered under this option.

Under the proposed plan, the accounts themselves would be administered by a federal entity, which would invest them in Treasury securities. The money in the account would be the property of the individual and would be part of the individual’s estate if he or she died before turning 65. At age 65, the balance of the account would be required to be used to purchase the most generous long-term care insurance policy available given that balance.

Here is a summary of the other proposals and some preliminary estimated costs:

1. Increase States' Flexibility to Offer Home- and Community-Based Services Through Medicaid State Plan Amendments. This option would increase Medicaid’s spending by an estimated $2.7 billion over the 2010–2014 period and by $8.1 billion over the 2010–2019 period.

2. Make Home and Community-Based Services a Mandatory Benefit Under Medicaid. This option would increase Medicaid spending by approximately $20 billion over the 2010–2014 period and by about $90 billion over the 2010–2019 period. That estimate incorporates a reduction in nursing home spending as a result of a modest decline—compared with current law—in the number of Medicaid beneficiaries who receive care in nursing homes and a subsequent increase in the number of individuals receiving home or community-based services.

3. Increase the Federal Matching Rate for Home and Community-Based Services and Decrease the Federal Matching Rate for Nursing Home Services. This option would increase Medicaid spending by about $8 billion over the 2010–2014 period and by about $13 billion over the 2010–2019 period.

4. Clarify Medicaid's Definition of Permissible Asset Transfers. This option would explicitly define which types of transfers are permissible. Because the rules are ambiguous, states tend to interpret them narrowly. This option would clarify that the following types of transfers are permissible:
Providing financial assistance to a family member for educational expenses;
Assisting a family member with medical expenses;
Assisting a family member facing a financial crisis, including a failing business or family farm;
Assisting an individual who is a caregiver for a family member or person with whom he or she lives; or
Donating funds to a church, religious organization, or charity.
Implementing this change would increase mandatory federal spending by about $2.6 billion over the 2010–2014 period and by $6 billion over the 2010–2019 period.

5. Increase the "Look-Back" Period for Transfers of Assets in Medicaid. This option would further extend that period from 60 months to 84 months for transfers made on or after October 1, 2009. Transfers made prior to that date would be subject to the 60-month look-back period. The look-back period would increase to 84 months over time, with the option generating its first budgetary effects in year six of the 10-year period from 2010 to 2019—that is, after 60 months had passed. Therefore, this change would have no effect on federal spending until 2015; over the period from 2015 through 2019, it would reduce spending by approximately $220 million.

6. Implement Policies That Encourage the Use of Advance Directives. Provided that appropriated funds were available, implementing those activities would increase federal discretionary spending by about $60 million over the 2010–2014 period and by $110 million over the 2010–2019 period. There would be a savings to Medicare of about $30 million over the 2010–2014 period and $100 million over the 2010–2019 period resulting from the portability of advance directives.

Here is the link to access the full report click on this link or paste the following address into your Web browser. The long-term care provisions are contained in Chapter 10 that actually begins on page 193. http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf