Urban Institute: Microsimulation Analysis of Financing Options for Long-Term Services and Supports
Overview
Type of Reform: Creating a New Program
Description: To assess alternative LTSS financing options and better understand how policy changes could expand the role of insurance. Compares outcomes under various program designs:
- A front-end public insurance benefit covering up to two-years of care.
- A catastrophic-only (back-end) program with a two-year waiting period.
- A comprehensive insurance program.
Sponsoring Organization and Key Author(s):
Sponsoring Organization: Nonprofit policy research organization. The Urban Institute conducts research and offers evidence-based policy solutions.
Key Author: Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson.
Impact and Action:
This was an important technical development that allowed several ideas (including ones explored in the Convergence collaborative and other proposals) to be assessed more rigorously and comprehensively than was possible before. The study has helped advance efforts to design workable and combinable LTSS proposals, including on Capitol Hill.
Program Details
Participation Criteria
- Report modeled both universal/mandatory and voluntary approaches.
- Adults younger than age 70 eligible to enroll in the new program (no individuals eligible
for benefits until age 65).
Conditions for Receiving Benefits Scope of Services
Individuals ages 65+ who:
Meet one of the following support needs:
- Need support with two or more ADLs.
- Have a severe cognitive impairment expected to last at least 90 days.
Meet one of the following employment requirements:
- Mandatory Approach: 40 quarters of employment covered by Social Security.
- Voluntary Approach: Premiums paid into the program for five years.
Scope of Services
LTSS in both the community and facilities, transportation, home modifications, family caregivers, etc.
Amount of Services
- Daily cash benefit of $100 (in 2015 dollars).
- Benefit limits based on the definitions of front-end and catastrophic protection periods.
Participant Financial Responsibility
Costs above $100/day would fall on the individual.
Elimination Period
- 90-day elimination period for the front-end and comprehensive program.
- Two-year waiting period for the back-end program.
Provider Requirements
Not specified.
Provider Payment Levels
Not specified.
Inflation Adjustments
3% inflationary adjustment per year.
Financing & Implementation
Revenue Source(s)
Varies by program type, as following:
- Mandatory Program: Payroll tax on employees, subject to a wage cap.
- Voluntary Program: Individual premiums. Subsidies available to low-income individuals financed by general revenues (incomes under 200% of poverty).
Total Program Costs
Varies by program type; costs to individual are as follows:
- Mandatory Program: Individual costs estimated at 0.6% of earnings for the front-end program; 0.75% for the back-end program; and 1.35% for the comprehensive program.
- Voluntary Program: Premiums depend on age and assumptions about participation rates. At age 45, for example, 2016 annual premiums range from $1,200 for the frontend program, $1,900 for the back-end program, and $2,400 for the comprehensive program. These would be roughly 3 times higher at age 65.
Program Administration
Not specified.
Private Sector Role
Not addressed.
Urban Institute, 2015: Microsimulation Analysis of Financing Options for Long-Term Services and Supports
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