U.S. GOVERNMENT PRINTING OFFICE

64–898 cc WASHINGTON : 2000

S. Hrg. 106–533

LONG-TERM CARE INSURANCE FOR FEDERAL

EMPLOYEES

HEARING

BEFORE THE

INTERNATIONAL SECURITY, PROLIFERATION, AND

FEDERAL SERVICES SUBCOMMITTEE

OF THE

COMMITTEE ON

GOVERNMENTAL AFFAIRS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

MAY 16, 2000

Printed for the use of the Committee on Governmental Affairs

(

For sale by the Superintendent of Documents, Congressional Sales Office

U.S. Government Printing Office, Washington, DC 20402

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS

FRED THOMPSON, Tennessee, Chairman

WILLIAM V. ROTH, Jr., Delaware

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

GEORGE V. VOINOVICH, Ohio

PETE V. DOMENICI, New Mexico

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

JOSEPH I. LIEBERMAN, Connecticut

CARL LEVIN, Michigan

DANIEL K. AKAKA, Hawaii

RICHARD J. DURBIN, Illinois

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

HANNAH S. SISTARE, Staff Director and Counsel

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel

DARLA D. CASSELL, Administrive Clerk

INTERNATIONAL SECURITY, PROLIFERATION, AND FEDERAL SERVICES

SUBCOMMITTEE

THAD COCHRAN, Mississippi, Chairman

TED STEVENS, Alaska

SUSAN M. COLLINS, Maine

PETE V. DOMENICI, New Mexico

ARLEN SPECTER, Pennsylvania

JUDD GREGG, New Hampshire

DANIEL K. AKAKA, Hawaii

CARL LEVIN, Michigan

ROBERT G. TORRICELLI, New Jersey

MAX CLELAND, Georgia

JOHN EDWARDS, North Carolina

MITCHEL B. KUGLER, Staff Director

RICHARD J. KESSLER, Minority Staff Director

JULIE A. SANDER, Chief Clerk

(III)

C O N T E N T S

Opening statements: Page

Senator Cochran ............................................................................................... 1

Senator Akaka .................................................................................................. 2

Senator Collins ................................................................................................. 2

Senator Cleland ................................................................................................ 8

Prepared statements:

Senator Collins ................................................................................................. 23

Senator Cleland ................................................................................................ 35

Senator Akaka .................................................................................................. 37

Senator Levin .................................................................................................... 53

WITNESSES

TUESDAY, MAY 16, 2000

Hon. Charles E. Grassley, a U.S. Senator from the State of Iowa ...................... 3

Hon. Barbara Mikulski, a U.S. Senator from the State of Maryland ................. 5

Hon. Janice Lachance, Director, U.S. Office of Personnel Management ............ 10

ALPHABETICAL LIST OF WITNESSES

Grassley, Hon. Charles E.:

Testimony .......................................................................................................... 3

Prepared statement .......................................................................................... 29

Lachance, Hon. Janice:

Testimony .......................................................................................................... 10

Prepared statement .......................................................................................... 39

Mikulski, Hon. Barbara:

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 31

APPENDIX

Questions and responses for Ms. Lachance from Senator Cochran ..................... 48

Copy of S. 2520 ........................................................................................................ 55

(1)

LONG-TERM CARE INSURANCE FOR FEDERAL

EMPLOYEES

TUESDAY, MAY 16, 2000

U.S. SENATE

SUBCOMMITTEE ON INTERNATIONAL SECURITY,

PROLIFERATION, AND FEDERAL SERVICES

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS

Washington, DC.

The Subcommittee met, pursuant to notice, at 10:03 a.m. in room

342, Senate Dirksen Building, Hon. Thad Cochran (Chairman of

the Subcommittee) presiding.

Present: Senators Cochran, Collins, Akaka, and Cleland.

STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM

THE STATE OF MISSISSIPPI

Senator COCHRAN. The Subcommittee will please come to order.

We welcome our witnesses at our hearing today, which we have

convened to consider legislation to establish long-term care insurance programs for Federal employees and retirees, including members of the uniformed services.

We are very happy to have with us two distinguished Senators

as our first witnesses, Senator Chuck Grassley of Iowa and Senator

Barbara Mikulski of Maryland. They have both shown leadership

in this area and have introduced legislation on this subject which

will be considered by the Subcommittee this morning.

We know that long-term care insurance is very important to help

individuals meet their family responsibilities and plan for the

many challenges of caring for an elderly loved one. But few employers offer a long-term care insurance benefit to their employees and

only 8 percent of Americans currently have long-term care insurance policies.

So, by considering a program that will offer affordable long-term

health care is something that will be very important and beneficial

to those who work for and are retired from service for the Federal

Government.

As the Nation’s largest employer, the Federal Government can

serve as a model, too, for other employers across the Nation who

have employees with the same needs as Federal employees and retirees.

So we are at a point where we can do something that will have,

I think, some very important repercussions throughout the country

if we recommend legislation to the Senate on this subject.

2

1The prepared statement of Senator Akaka appears in the Appendix on page 00.

2The prepared statement of Senator Collins appears in the Appendix on page 00.

Our distinguished colleague from Hawaii is the Ranking Minority Member of the Subcommittee. Senator Akaka, I will recognize

you to offer any comment you would like to make at this time.

STATEMENT OF HON. DANIEL AKAKA,1 A U.S. SENATOR FROM

THE STATE OF HAWAII

Senator AKAKA. Thank you very much, Mr. Chairman. Senator

Cochran, I want to join you in welcoming Senator Grassley and

Senator Mikulski, who along with my good friend, Senator Cleland,

have worked so hard in getting us to where we are today.

I also wish to express my deep appreciation to Janice Lachance,

the Director of the Office of Personnel Management, for the tremendous job that she and her team has done in seeing these bills

through the legislative process.

I commend you all on your leadership, perseverance, and determination. I am proud to co-sponsor Senator Grassley’s bill, S. 2420

and S. 2218 offered by Senator Cleland. Both bills offer members

of the Federal family the opportunity of purchasing long-term care

insurance.

As the Ranking Minority Member of this Subcommittee, I am

hopeful that we will take quick action to move legislation to address the long-term care insurance needs of the 13 million individuals who will be eligible for this benefit.

Mr. Chairman, I will stop here and continue later.

Senator COCHRAN. Thank you very much, Senator. Senator Collins.

STATEMENT OF HON. SUSAN COLLINS,2 A U.S. SENATOR FROM

THE STATE OF MAINE

Senator COLLINS. Thank you very much, Mr. Chairman. I have

a lengthy opening statement that I would like to submit for the

record in its entirety.

I would like to make just a few comments. I want to start by

thanking you for holding this hearing on this important issue, and

also commend Senator Akaka and yourself, Mr. Chairman, and our

two colleagues for their leadership on this issue.

I am also pleased to note that we will be hearing from the Director of the Office of Personnel Management, Janice Lachance, who

is from the State of Maine, so I am sure she will have a lot of wisdom to share with us on this issue.

This is such an important issue. Long-term care is the major catastrophic health care expense faced by older Americans today.

These costs are only going to increase as the baby boomer generation ages.

We know that nursing home costs range from $40,000 to $70,000

a year, so a chronic illness requiring long-term care can easily

bankrupt a family and result in taxpayers having to pick up the

tab through the Medicaid program.

Unfortunately, many Americans mistakenly believe that Medicare or their private insurance policies will cover the costs of longVerDate 11-SEP-98 13:00 Jul 06, 2000 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 64898.TXT SAFFAIRS PsN: SAFFAIRS
3

1The prepared statement of Senator Grassley appears in the Appendix on page 00.

term health care should they develop a chronic illness or a cognitive impairment such as Alzheimer’s Disease.

But, if they don’t have specific long-term care insurance, that

isn’t the case. Too many Americans don’t discover that they lack

this kind of coverage until they are faced with the prospect of placing a frail parent or a loved one in a nursing home and then face

the shocking realization that they will have to cover the costs

themselves.

During consideration of the patient’s bill of rights I offered an

amendment which was adopted by the Senate to expand the tax deductibility of long-term care insurance to encourage more Americans to purchase it.

This provision, which is currently pending in conference, would

permit individuals who purchase long-term care insurance on their

own without an employer subsidy to deduct 100 percent of the

costs.

I am also very pleased to have joined Senators Grassley, Mikulski, Cleland, and Akaka last month in introducing the Long-Term

Care Security Act which is before this Subcommittee today.

I want to mention that I first became interested in this issue

when a former colleague of mine at Hudson College talked to me

about the enormous burdens that his family was facing when his

sister, a retired civil servant, was placed in a nursing home and

they discovered that they had no coverage.

So, I think it is a common occurrence and indeed the legislation

before us would help over 43,000 Mainers and their families who

would be eligible for the long-term care coverage provided under

this legislation.

So, again, I want to thank you, Mr. Chairman, for shining a spotlight on this important issue. I do hope that we will move legislation through the Senate this year. Thank you.

Senator COCHRAN. Senator Grassley, you may proceed.

STATEMENT OF HON. CHARLES E. GRASSLEY,1 A U.S. SENATOR

FROM THE STATE OF IOWA

Senator GRASSLEY. I thank Senator Mikulski for being here with

me as we speak about this bill. Her presence, as well as references

already made by Members of this Subcommittee to this being a

consensus bipartisan approach have been well-stated and I won’t

repeat those.

We all know how expensive long-term care is. As chairman of the

Committee on Aging, we have had lots of hearings on this issue.

This sort of insurance bill is one way to help meet those costs because long-term care is so labor intensive and expensive.

I am interested in easing the fears associated with the long-term

care. Insurance is an important way to build peace of mind. Longterm care insurance is increasingly available. It allows individuals

to buy a policy that will cover their costs if they need long-term

care.

The younger the person, the lower the premium, so it pays to

plan early. Despite its value, long-term care insurance is just now

4

catching on. You said, Mr. Chairman, only 8 percent. That is probably 8 percent more than 10 years ago.

The spark hasn’t turned into a flame. Many Americans don’t realize that there are products available. Sometimes they presume

incorrectly that the government is going to cover their long-term

care insurance. That obviously can happen through Medicaid, but

first there’s a process of impoverishing one’s self to take advantage

of that, which isn’t a very good situation for those who are left behind.

So, the question for policy makers is: How do we promote longterm care insurance? It makes sense to start with large employers.

The Federal Government is an example. Insurance premiums are

often group-based, the larger the group paying the insurance, the

cheaper the rates for each participant.

The Federal Government should help its employees to get longterm car insurance being a good employer. The bill that Senator

Mikulski and I introduced would put the Federal Government’s

purchasing power to work. This legislation allows the government

to negotiate group rates for long-term care insurance.

Our bill would offer Federal employees a way to buy long-term

care insurance for themselves and their families at affordable, reasonable rates.

From every indication, Federal employees would welcome this opportunity. Then, I am not going to read three examples that I have

from constituents in my State that show how they would benefit

from this, but that will be included in the record.

These Iowans deserve credit for being aware of and informed

about the potential financial risk associated with long-term care.

Today, there are more than 20 million families who are caring

for a family member at home with long-term care needs. Compare

this number to just one million nursing home residents. Clearly,

families are the experts when it comes to long-term care. These

families know first-hand about the financial and emotional challenges that accompany long-term care.

Unfortunately, in far too many cases families are unprepared to

cover the cost of long-term care and find themselves facing financial devastation. We need to learn from these experiences and we

need to take steps now to help families better prepare for long-term

care.

The enactment of this bill that we are discussing today is an important first step. As a leading employer, we have the opportunity

now to help millions of American families plan responsibly for their

retirement and gain the security that is necessary for achieving a

high quality of life in retirement years.

But there is a subsidiary benefit of this legislation that I want

to emphasize: The Federal Government can and should set an example for other employers as to the importance of long-term care

in the lives of American families everywhere.

Mr. Chairman, I thank you for holding today’s hearing. I look

forward to continuing to work with the bipartisan consensus group

and expanding that group so that we can provide long-term care

for Federal employees and set an example for other employees

around the country.

Senator COCHRAN. Thank you, Senator Grassley.

5

1The prepared statement of Senator Mikulski appears in the Appendix on page 00.

Senator GRASSLEY. If it is not going to make anybody mad, I

would like to go visit with Senator Lott now. I’ve got an appointment with him.

Senator COCHRAN. I am sure he would benefit from your visit.

Senator MIKULSKI. Is that how we are going to do a bipartisan

prescription drug benefit?

Senator COCHRAN. Thank you, Senator, for being here to help us

understand this legislation. You have been a strong leader as chairman of the Committee on Aging and in other ways you have been

a proponent of this legislation. We appreciate your leadership.

Senator GRASSLEY. Thank you, Mr. Chairman.

Senator COCHRAN. Senator Mikulski.

Senator MIKULSKI. Mr. Chairman, I want to thank you for this

hearing. Working with Senator Grassley on this bill has really

been, I think, what bipartisan cooperation is all about.

What he brought to the table in our conversation was his many

years and long-standing record on adequacy for the elderly, his experience on the Finance Committee, his belief that there needs to

be a relationship with the private sector, not a new government insurance policy, but linkages.

He was just a wealth of knowledge and a well of courtesy and

civility and I really do appreciate our mutual participation in this.

Senator GRASSLEY. You are very kind. Thank you.

Senator COCHRAN. Thank you very much. Senator Mikulski.

STATEMENT OF HON. BARBARA MIKULSKI,1 A U.S. SENATOR

FROM THE STATE OF MARYLAND

Senator MIKULSKI. Thank you very much, Mr. Chairman. I would

like to thank you and our Ranking Minority Member, Senator

Akaka, for holding this hearing and for all of the hard work on this

issue.

I noted the work of Senator Grassley as we took what was once

a national goal and turned it into national legislation.

I would also like to thank my colleague, Senator Cleland, because

of the expertise that he brought from the Armed Services Committee to our conversation about how we needed to have a larger

umbrella for not only Federal retirees but also the military retirees

as well, and brought that considerable knowledge.

Senator Collins’ work on the elderly has been well-known and

appreciated on both sides of the aisle. I think Senator Collins on

this very Subcommittee, sir, her work on dealing with senior scams

really was, I think, an outstanding effort.

Right now people have more money in their checkbook and their

checkbook is safer because of what Senator Collins did. This is

really what a bipartisan effort should be all about.

So, we look forward now that we’ve got our plan to present it to

you and hope that the Committee will act and we can take it to

our colleagues on the Floor. As you know, a parallel bill has passed

the House of Representatives and it would be just great if we could

have this bill done by Fathers’ Day. But, we will leave it to you

to act in your wisdom.

6

I like this legislation because it does four things: It enables Federal and military workers and retirees and their families to buy

long-term care insurance at a group rate. These rates are projected

to be anywhere from 15 to 20 percent below the current private

market when you buy it as an individual.

It would also create a model that hopefully private employers

could use to establish their own long-term care insurance program.

More importantly, or equally importantly, it will give help to

those who practice self help by offering employees the option to better prepare for retirement or the possibility of disability or chronic

illness.

In addition to that, it reduces the reliance on Federal programs

like Medicaid for the American taxpayer. So, this is a framework

that really could have a substantial impact on our Medicaid program and a substantial impact on American families. It will also

impact on the rate structures so that the private sector could flourish, but at the same time these policies could be more affordable.

This legislation gives choices, flexibility, hopefully financial security and peace of mind, and most of all, what we hope is affordability. Many people, when they are faced with a chronic illness

like Alzheimer’s or Parkinson’s, do not have many choices. They

are often forced to spend down to qualify for Medicaid or a spouse

devotes him or herself to the care of a loved one or an adult child

quits their job to care for an aging or ill parent.

Either way, the choices are quite Spartan and often quite expensive. I got into this whole issue because of two major factors that

occurred in my own life. My own dear father who saw to the education of my sisters and I was struck by the ravages of Alzheimer’s.

This is why we were so sympathetic to the First Family, Mr. and

Mrs. Reagan, and our first caregiver, Mrs. Reagan.

But not every one is the President of the United States and not

everyone has a daughter who is a U.S. Senator who could help sort

through this.

With my father, it would have been cruel to keep him at home

because he became so disoriented and it was so difficult for my

mother who herself was a diabetic and a person with angina. We

had to turn to long-term care. We sought a Chevy Cavalier, or

Lumina or Ford Taurus nursing home for our father. We first had

to make sure it was safe because with the loss of his cognitive ability, we wanted to be as protective of him as he was protective of

us.

So we did our homework. We followed the checklist for what

nursing home standards should be. We checked with the ombudsmen reports. We knew it was safe. Then we looked at the bill. It

was $3,000 a month in the late 1980’s, $36,000 a year.

My father was a grocer. Mother worked in the store with Dad.

Their legacy is not some big trust fund, but the respect of the people they served and the love of their children. We looked out for

our father, but we watched as the family had to spend down their

life savings.

As I visited Dad and talked with other people in the nursing

home, they were facing the cruel choices of spending down their life

savings, the impoverishment of the spouse at home, or going into

7

the funds that they had saved for their own children’s college tuition. That was the sandwich generation.

Well, we went to work and created the Spousal Anti-Impoverishment Act that at least provided a better safety net so you didn’t

have to spend down to $3,000 with a lien on the family home or

the family farm.

That was a down payment on long-term care, but unfortunately,

it was the only payment on long-term care.

So, we believe that if middle-class families could have the option

to purchase long-term care insurance, it would be the first safety

net and to give help to those who practice self help.

I support tax credits for long-term care insurance. That should

be a no-brainer and we should just pass it with other legislation

that Congress is working on.

But at the same time, when I was approaching my own 60th

birthday, an excellent insurance broker called me and asked, ‘‘You

talk all this about long-term care. What are you doing for yourself?’’

Well, I was going to roll the dice and hope Congress was going

to do something. Well, that and the Tooth Fairy might give dental

care. So, I felt I’d better get with the program here.

When I looked at the rates and used the kind of consumer education that I hope we make available to our Federal employees, I

saw that if I could buy long-term care insurance before my 60th

birthday, it would be one rate. Six weeks after that birthday, that

rate would have doubled. By the time I hit 65 it would have quadrupled, presuming no health status change.

All of us know that once you get past that 60,000 miles, you need

a lot of maintenance and a lot of little parts start to go wrong.

Well, my sparkplugs are still firing, and I have long-term care

insurance, and I could afford it. But I would like to make that

available for our constituency by starting with the Federal Government.

If we could create this large pool, let the private sector be best

at what they do, and we are best at what we do, which is providing

information and options, I think we could have a significant impact

on the very nature of making long-term care insurance available

and affordable to one group of people which we could then expand

to others.

So, this is why I would hope that we could pass this legislation.

I think that when we deal with the issues of long-term care we

really do need public-private partnerships.

We can’t have a new government program. I don’t think we could

afford to do it. But we can have a new government approach that

makes long-term care affordable, available and reliable.

So, having said that, I would like to just urge the movement of

our bill. I want to thank you for all of your courtesy and collegiality

and look forward to working with you all the way taking this up

to the bill signing.

Senator COCHRAN. Thank you, Senator Mikulski, for your excellent statement. It was not only persuasive and eloquent, but entertaining as well. We appreciate your leadership, too. I mentioned

that of Senator Grassley, but we know that you have been a leader

in this cause and the legislation before us is proof of that.

8

1The prepared statement of Senator Cleland appears in the Appendix on page 00.

In many ways we are going to be looking to you to help us get

this problem solved and legislation to the President, I hope, before

Fathers Day. Is that next month? I am a father, but I can’t keep

up with all these dates.

Senator MIKULSKI. It is June, about the weekend somewhere

around June 20. So, we have a lot of time.

Senator COCHRAN. That’s right. There are no excuses.

Senator MIKULSKI. Well, at least to move it to the Floor.

Senator COCHRAN. Senator Akaka, do you have any questions or

comments?

Senator AKAKA. Well, I want to thank Senator Mikulski for not

only her personal but glorious statement that supports what we are

trying to do. I want to thank you very much for your leadership,

too.

Senator MIKULSKI. You, too, sir.

Senator COCHRAN. Senator Collins.

Senator COLLINS. I just want to join my colleagues in praising

Senator Mikulski for her long-standing interest in solving this

problem. She has indeed been a real leader and she always brings

such good personal experience to put a practical face on the problems facing the Senate. So, I very much appreciate your leadership.

Senator MIKULSKI. Thank you.

Senator COLLINS. And your kind words.

Senator MIKULSKI. Thank you.

Senator COCHRAN. Senator Cleland.

STATEMENT OF HON. MAX CLELAND,1 A U.S. SENATOR FROM

THE STATE OF GEORGIA.

Senator CLELAND. Mr. Chairman, thank you very much. I just

want to say that I feel like Senator Mikulski, Senator Grassley and

I have been working on this long-term insurance question for a

long time.

But its time has come. Victor Hugo once said that an invasion

of armies could be resisted, but not an idea whose time has come.

I particularly am pleased to work with them from the point of view

of including the military personnel on active duty as well as military retirees and their families in this package.

With an aging American population, the need for elder care and

long-term care services is rapidly growing. At this time, Mr. Chairman, only about seven million Americans have long-term care insurance.

Long-term care insurance is relatively new and has only been

sold about 20 years. Many Americans do not realize that health insurance and Medicare do not cover long-term care needs and Medicaid covers these needs for only the impoverished with $80,000 or

less in assets and $50 a month in income.

It has also been reported that almost half of women in caregiver

roles, 41 percent, quit their jobs or take family medical leave to

care for a frail older parent or parent-in-law.

Consider in just 11 years the first wave of baby boomers turns

65. I am on the cutting edge of the baby boomers, so I am going

to be in that category. These Americans, having worked for some

9

30 years or more tell us they now fear retiring because they are

unable to pay for assisted living needs. They have good cause for

worry.

The emotional and financial burdens for the American family can

be staggering. Very few have had the opportunity to plan ahead.

We, the Members of the Senate, have the perfect opportunity in

this legislation to help so many avoid the potential long-term care

crisis.

The concept of long-term care insurance was introduced a decade

ago in the 101st Congress. Yet, each session this proposal has met

with barriers imposed by partisan issues and unanswered questions about how such a model would work.

With our growing numbers of retiring Federal and military employees, long-term care needs have increased as a national priority.

Hubert Humphrey once stated that the moral test of government

is how that government treats those who are in the dawn of life,

children, those who are in the twilight of life, the elderly, and those

who are in the shadows of life, the sick, the needy, and the handicapped.

As a disabled, 25-year old Vietnam veteran, I was able to come

out of the shadows of life with the help of the military and the VA

health care system and family and friends. But I can certainly understand the concerns of Americans facing the dilemma of longterm care.

Long-term care can be frightening and overwhelming when one

is unprepared with the needed resources. Among the many longterm care insurance issues, the main areas of debate have centered

around competition and the Office of Personnel Management’s role

in administering such a plan.

Through our bipartisan effort, Senators Mikulski, Grassley and

I have collaborated with OPM, the Department of Defense, potential beneficiaries, and the insurance industry in resolving these

issues by creating a Federal employer-based, long-term care insurance program which can be a model for the Nation and will allow

Federal employees, active duty members and military retirees and

their families to purchase long-term health care insurance at 10 to

20 percent of what the market rate out there is now.

The House passed this measure on May 10 of this year. I am

very pleased that this measure now introduced in the Senate as S.

2420, proposes the largest employer-based long-term care insurance

program in American history.

It includes Federal employees, members of the military services,

reservists, National Guardsmen and women, retirees, spouses, surviving spouses, parents, parents-in-law, and adult children.

This program has a potential of 13 million beneficiaries. It is my

hope, Mr. Chairman, that we not lose our momentum and pass this

measure soon. If enacted now, it will take at least 18 months or

as long as the Year 2002 for this program to be fully implemented.

Our plan proposes age-based premiums so each year we delay

the higher the premiums that beneficiaries will have to pay.

I urge my colleagues to move this proposal and pass the Federal

Employer Long-term Care Insurance Program. Let’s do more than

tell working Americans to weather the storm of long-term care.

10

1The prepared statement of Ms. Lachance appears in the Appendix on page 00.

Let’s change the climate for a brighter, more secure tomorrow.

Thank you, Mr. Chairman.

Senator COCHRAN. Thank you, Senator Cleland for your excellent

statement and your hard work on this legislation.

Senator Mikulski, thank you again for being here and leading off

our hearing today with Senator Grassley.

We are now pleased to have the Director of the Office of Personnel Management, Ms. Janice Lachance, as our next witness.

We have been working with the Office of Personnel Management.

Our staff members have met with staff members of that agency

and others to help prepare for this hearing and also to prepare a

legislative solution to the problem of long-term care expenses for

families who are involved with employees of the Federal Government, both military and civilian.

Ms. Lachance, welcome. We appreciate your being here and providing us with the statement which we have agreed to put in the

record in full.

We hope you will make any summary comments that you think

are appropriate. You may proceed.

STATEMENT OF HON. JANICE LACHANCE,1 DIRECTOR, U.S.

OFFICE OF PERSONNEL MANAGEMENT

Ms. LACHANCE. Thank you, sir. I am so grateful to all of you for

holding this hearing, but also, for all of the work that every one

of you has put in to get us to this point.

It is a truly remarkable collaborative effort among the administration, bipartisan Members of Congress and the Senate, and really, a broad range of stakeholders and the industry to get us to this

point. I am very, very grateful for all of you.

For too many in this country old age has become a time when

getting ahead amounts to barely staying even. We are all here to

change that for millions of Americans by building the kind of statutory framework that will provide long-term care insurance and security.

The fact that we are here today proves that people are coming

to terms with the very real fact that the population of the United

States is getting older and it is a population that will need longterm care options.

Families today provide 80 percent of the long-term care needed

by older persons. If I could put that in perspective for you, you and

your family can reasonably expect to spend more time caring for an

older relative than caring for your own children.

This is an issue that is very, very dear to my own heart. I know

Senator Collins talked about the 43,000 Mainers who would benefit

from this.

There are two that I particularly care about. They are my parents in Saco. I think about how fortunate I am that they are living

long, full lives. But I do worry, as do all children my age, how they

are going to deal with the spiraling increases in long-term care

costs if and when they need it.

And how are all of us going to deal with the heart-wrenching

choices we are sometimes forced to make to provide the care and

11

comfort our loved ones will need in their later years. How can we

keep them from being crushed by debt because of illness? How can

we make sure they get the right care for their needs and that it

is quality care? How can we make sure they get all the long-term

care they need?

I would like to share with you, if you have a moment, a story

that illustrates this point. Earlier this year I received a letter from

the wife of a Federal retiree with 30 years of government service.

He was a veteran. Because the retiree suffered a series of strokes

that required extensive and very expensive hospitalization and

therapy, the couple exhausted their FEHBP benefits and decided to

apply for Medicaid.

Unfortunately, under Medicaid guidelines he was denied coverage because the family was over income and over assets. In fact,

their retirement income alone disqualified them from Social Security SSI and Disability.

Desperate for long-term care, the couple put their home up for

sale, sold their cars, and began using up their retirement income,

all in an effort to become poor enough to qualify for long-term care

coverage.

Now, we have already contacted their health plan and asked

them to look into other options to assist them right now because

they need the help right now. They and millions of families like

them will need the kind of care you are discussing here today for

many, many years to come.

As the Director of OPM, I can tell you that far too many members of the Federal workforce are in the very same situation, struggling with the challenges of caring for those they love who require

special medical attention over a long period of time now.

So, for some time OPM has been working with you and other

stakeholders to make long-term care insurance available for current and retired Federal retirees, military personnel retirees and

their eligible family members, in short, for the people we love.

Under H.R. 4040, OPM would have the authority to design a

long-term care insurance package that offers an array of long-term

care services to meet the needs of the broadest population possible.

This proposal would also provide the flexibility to contract for

benefits with one or more private carriers. This means that it

would give us the flexibility needed to obtain the best value for the

entire Federal family. Contracts will be awarded the right way,

solely on the basis of contractor qualifications, price, and reasonable competition.

By using the size of the Federal family, some 13 million people,

as leverage, we will be able to provide this insurance at group

rates, expected to be 15 to 20 percent lower than individual rates.

So, we believe it will be a very good deal, indeed.

Now, once this proposal is adopted, OPM intends to run a campaign to educate possible participants about the benefits of buying

this insurance and this particular program.

We will also solicit and evaluate potential insurers, choose a contractor, and then hold an open enrollment period. Our hope is that

by making private long-term care insurance available to the Federal family at negotiated group rates, we will once again serve as

a model to other employers across the Nation.

12

We will also heighten our Nation’s awareness of the growing

need for people to start planning for their own future long-term

care needs.

We believe the House bill and its companion Senate bill and S.

2218 all offer OPM the legislative framework necessary to launch

a successful long-term care insurance program.

I urge you to give these bills your earliest consideration and

reach consensus so that this legislation can be enacted as quickly

as possible.

Long-term care insurance will greatly enhance the quality of life

for both Federal employees and members of the Armed Services. It

will let them care for their aging parents and will let their children

care for them with dignity and financial security. It is the right

thing to do and it is the right time to do it.

At this time, Mr. Chairman, I will be glad to answer your questions.

Senator COCHRAN. Thank you very much, Ms. Lachance.

Under the S. 2420, your office is authorized to contract with one

or more qualified carriers to provide long-term care insurance policies. OPM is also required to ensure that each resulting contract

is awarded on the basis of contractor qualifications, price and reasonable competition.

Can you explain to us how you expect the contracting process to

work under these provisions?

Ms. LACHANCE. Certainly, sir, I will be glad to do that. We have

worked closely with a number of stakeholders and the insurance

industry to talk with them about their capability, their willingness

to participate in this program. We have found them to be a very

willing partner in all of this.

We spend a significant amount of time, once the legislation is

passed, consulting with all of these groups, deciding who would be

a part of this pool specifically, and then coming up with the proposal that insurance companies or a consortium of insurance companies could bid on.

At that point we will evaluate the proposals and sit down with

those who we feel are qualified and begin a negotiation process to

make sure those who we represent have the best possible deal and

the best benefits possible at the most reasonable rates.

Then, at that point only would we award the contract.

Senator COCHRAN. The legislation, S. 2420, also requires OPM to

ensure reasonable competition among insurance companies interested in bidding for long-term care insurance contracts.

How would you ensure that that occurs?

Ms. LACHANCE. Again, in working with the insurance industry,

we are going to make sure that all the insurance companies who

are interested in this will be at the table when we discuss the proposal, the prospects, the legislation, and work with them to ensure

that there is adequate competition and adequate notice of what we

are looking for so that they can come forward with their best possible products.

Senator COCHRAN. Included in the provision is the awarding of

a contract on the basis of qualifications as well. How will you judge

the qualifications of each contractor?

13

Ms. LACHANCE. We want to make sure that this is a program

that qualifies under the Internal Revenue Code for health longterm care benefits, so we are going to use the standards that they

use.

In addition, we are going to make sure that each insurance company who is involved in this can do business in all 50 States; that

they include adequate consumer protections in their proposal; that

they take on all of the risks; and that they promise to keep the

money that is collected from this program in a separate pool, separate from any other funds that they collect.

Senator COCHRAN. There are some private sector employers who

have long-term care contracts for their employees. Have you had an

opportunity to compare the process you just outlined to the process

used by private sector employers?

Ms. LACHANCE. We have. We have talked to some consultants

who have worked extensively with private sector companies who

have offered this, as well as the Department of Health and Human

Services who has extensive experience in this area.

We are looking at a similar approach, but obviously ours has to

be different because it is so much bigger. We feel it is important

to work with all of the stakeholders and make sure that it is the

kind of process that really results in the contract going to the best

company or companies and also that it has the best benefits for

those we represent.

Senator COCHRAN. I am going to ask you another question about

S. 2218, a companion bill that we are reviewing this morning along

with S. 2420.

Then I am going to yield to my good friend, Senator Akaka for

any questions that he might have.

But under S. 2218 OPM is authorized to contract with a primary

carrier with respect to the assumption of risk, no less than two carriers to act as re-insurers, and as many carriers as necessary to administer the program.

My questions are: How would the contracting process work under

this assumption of risk situation and does this create any particular problem for OPM?

Ms. LACHANCE. Mr. Chairman, we are probably more comfortable

with a program that is more flexible or as flexible as possible because it is something that has never been done before.

But we are confident that we could come up with a good product

for Federal employees and retirees, for the entire Federal family

with whatever bill is ultimately enacted.

We are comfortable with all the approaches.

Senator COCHRAN. Senator Akaka.

Senator AKAKA. Thank you very much, Mr. Chairman.

The Office of Management and Budget issued a Statement of Administration Policy prior to the House taking up its long-term insurance bill under suspension just last week.

There were several issues raised by the SAP that I would like

to ask you about today. One issue is the application of appropriate

accounting practices and principles to protect the interests of beneficiaries under the long-term care contracting program.

The question is, how will you assure that participating carriers

adhere to appropriate common practices and principles?

14

1The prepared statement of Senator Akaka appears in the Appendix on page 00.

Ms. LACHANCE. Thank you, Senator. We believe that there will

be enough information in the program to ensure the financial integrity of the contract and enable us to monitor how the program

is being administered.

Cost accounting standards, of course, are very important. That is

one way at getting at that information. But even without that provision in the bill, we believe we would still be able to have enough

information to do a good job on behalf of our beneficiaries.

Senator AKAKA. Our Federal work force average age is 46 years

old. Not only are they thinking about their own retirement, but a

good number of them are already caring for aging parents or relatives.

As you mentioned, about 80 percent of persons over the age of

65, who need assistance, receive help from relatives.

The question concerns appropriations. S. 2420 does not authorize

appropriations for the implementation and administration of the

long-term care insurance program. Rather, it uses the employees

life insurance fund for these purposes.

How will OPM limit exposure to the fund’s resources and maintain the distinction between the long-term care administrative account to be created with the fund and the fund itself.

Ms. LACHANCE. Certainly. We feel that either approach would

work well for us. We obviously would prefer an appropriation because that is the way we are all accustomed to doing business. But

we do feel as though we can set up the kind of accountability that

would allow us to keep track of every dollar that is taken out of

the life insurance fund to get this program launched.

The way the program is launched is going to be critical to its success. So, we are comfortable that having those resources at the

ready for us to invest in this kind of start-up and they will be critical to a successful program. We think we will be able to keep track

of every dollar and make sure that it is all reimbursed within the

first year by the carriers once the program is off the ground.

Senator AKAKA. Well, Mr. Chairman, I will give up my time for

questions here. May I ask that my full statement be added to the

one that I made earlier? 1

Senator COCHRAN. Absolutely, your statement will be made a

part of the record as will the statements of Senator Collins and

Senator Cleland. We thank you for your participation in this.

Let me ask you, Ms. Lachance, about this issue. Under S. 2420,

the master contract expires in 7 years. Under S. 2218 the contract

term is 5 years. What would be the procedure for making the transition to a new carrier or carriers in the event a change occurs at

the end of a contract term?

Ms. LACHANCE. Senator, I think what we would have to do at the

time the term expires would be once again assess how successful

the program has been. We are going to have help in that from

GAO, according to all versions of the bill.

We are also planning on spending a lot of time with our customers to make sure that they are satisfied, not only with the benefits, but with the service they are getting from the carrier.

15

Then we will be able to evaluate whether or not a change has

to be made and then we would go ahead with the open process and

the open competitive contracting process once again.

Senator COCHRAN. Is there any necessity for a statutory provision dealing with the termination by an insurance carrier before

the end of its contract period?

Ms. LACHANCE. In our conversations with the industry, we have

not really heard anything like that. I will be glad to double-check

that and get back to you for the record if we do think we need

something. But it has never been an issue that the insurance companies who we have been working with have felt that they could

not fulfill the terms of the contract.

INFORMATION FOR THE RECORD

There is no need for a statutory provision relating to the termination of

an insurance carrier prior to the end of the contract period. Termination of

contract provisions will be incorporated in the master contract and in implementing regulations. Both the contract and regulations will provide for

a notification period prior to termination of the contract and a continuity

of services provision.

Senator COCHRAN. What will OPM do to ensure that there are

no adverse consequences to policy holders when there is a change

of insurance carriers at the end of a term?

Ms. LACHANCE. We are going to make sure that all of the consumer protections that are in place when somebody buys a policy

or purchases a policy will stay in place throughout the life of their

policy.

People have to be able to plan. Obviously, there may be some

changes. The landscape of long-term care itself may change, so we

will want to keep up with that.

But we think there are some fundamental consumer protections

that have to be a part of every contract that we issue, no matter

who the carrier is. That will be what the customer is buying, this

policy, not necessarily a relationship with the particular contractor.

Senator COCHRAN. There are State laws and licensing procedures

and I am sure that they are different in some respects from State

to State.

Given the different capabilities of States to oversee insurance

carriers, how will OPM ensure that the qualified carriers are financially sound?

Ms. LACHANCE. We will be working continuously with them to

make sure they have the adequate resources to make good on

whatever promises they made in the process. That is going to be

an integral part of our role.

We want to work closely with Members of Congress and Congressional committees, as well as GAO, to make sure that this is the

best possible program it can be. Obviously, that is a fundamental

requirement for success.

So, we will be very heavily involved in making sure that these

companies have the resources they need to do this appropriately.

Senator COCHRAN. Given the financial conditions of a carrier that

might change during the contract, do you see any need for a requirement for OPM to guarantee the financial stability of a carrier?

Ms. LACHANCE. I don’t anticipate that, sir.

16

1The questions and responses from Senator Cochran appears in the Appendix on page 00.

Senator COCHRAN. What contingency or claim reserve requirements would OPM require of carriers who do not have adequate resources to fulfill their obligations to the policy holders?

Ms. LACHANCE. I know we would require adequate reserves as

we do in the FEHBP. However, I am not sure we have really come

to any specific conclusions on that, given the fact that we really are

just starting the conversations on this.

Senator COCHRAN. Senator Akaka, I have several other questions

to ask. I think I am going to submit some of these.1

If you have any other questions, I would be glad for you to ask

them.

Senator AKAKA. Thank you for this opportunity. I should tell you

about my State of Hawaii. Thirteen point two percent of the population at present are 65 years and older in Hawaii.

Although Hawaii enjoys one of the highest life expectancies, 79

years compared to a national average of 75 years, the State’s rapidly aging population will greatly affect available resources for a

long time. So, this issue is very important for my State.

My question is: Are there any estimates of how much the Federal

Government has lost in terms of lost time, employee absences and

lost productivity due to long-term related activities and expenses?

Ms. LACHANCE. I wish I had the answer to that, Senator. I really

don’t know. We try, as you know, to accommodate family situations. We try to be a model not only in this area but in the health

insurance area, but also in family friendly policies.

I know that people are very grateful and enthusiastic about those

benefits and flexibilities they have, but I am afraid I don’t have

that kind of estimate.

It is really through anecdotal evidence and people talking with

us about why they need leave under the Family Medical Leave Act,

for example, that we would know how much it is needed and how

much it is being used.

Senator AKAKA. How will the premium payments be handled for

policy holders who do not use direct deposit for their payroll or retirement benefits? Will this add extra costs to the program?

Ms. LACHANCE. I don’t think it would add extra costs, Senator,

because I think it is pretty routine now for us to be able to pay

our bills through some sort of debit system right out of our checking accounts. That is what I would anticipate would be established

for people who are not Federal employees or do not get a check or

compensation from the Federal Government.

Senator AKAKA. What happens to long-term care insurance policies for active Federal employees or members of the Armed Services who leave government employment or separate from the service? Will they be able to take the policies with them? If so, how

would that work?

Ms. LACHANCE. Yes, sir, they would be able to keep the policy

with them. We would just have to change the way they make the

monthly payment or the annual payment, however they have arranged to do that, and just make sure that they have some sort of

direct withdrawal from their checking account so that the policy

does not lapse. It would be paid directly to the insurance carrier.

17

Senator AKAKA. Well, it is essential that the Federal Government, as the Nation’s largest employer, offer its employees choices

to provide for their retirement by ensuring financial stability in the

future.

Long-term care insurance is one such option. There are already

some active Federal employees and retirees who have long-term

care insurance. Will these people be able to transfer their individual policies to the Federal group program?

Ms. LACHANCE. We are going to look into that, Senator. We are

going to do everything we can to make sure that people who already have a policy get the benefit of the money they have already

paid in.

It may depend on the individual policies, but we are going to

spend a significant amount of time to make sure that those who

want to switch over to the Federal plan get as much benefit out

of whatever amount of money they have paid in as premiums to

some other carrier or under some other policy.

Senator AKAKA. What about policy holders who begin to pay on

their policy but for any number of reasons, such as the inability to

pay or unforeseen financial expense stop paying the premium?

Are there protections for individuals who have paid into policies

and would they have a percentage of the money returned to them?

Ms. LACHANCE. I am not sure that there would be any money

coming back. But let me tell you about one of the consumer protections that we anticipate having in the program.

That is non-forfeiture protection. What would happen is the insurance carrier would work with that person to evaluate what the

value of the premiums that they have paid in is and make sure

that they have benefits equal to that amount.

So, there may be a shorter benefit period as a result, but they

will get benefits for what they have paid in. Nobody is going to lose

any money if they choose to walk away from the policy or decide

they can no longer pay for it.

Senator AKAKA. Would an insurer be able to cancel the policy?

If so, under what conditions?

Ms. LACHANCE. I could get back with you on the record for that.

The only reason that I can anticipate, and with the kinds of consumer protections that we are looking at, Senator, the only reason

that a policy could be canceled would be for non-payment of premiums.

Senator AKAKA. I see. Well, My final question, Mr. Chairman,

has to do with tax. Federal employees health insurance premiums

will soon be considered pre-tax income. Will long-term care insurance be offered under a premium conversation program whereby

employees can elect to pay premiums on a pre-tax basis?

Ms. LACHANCE. Unfortunately, the Internal Revenue Code specifically prohibits that, so we will not be able to do that. But that

may be the next phase of our effort, to provide long-term care for

Federal employees.

Senator AKAKA. Well, thank you very much for your responses.

I wish you well.

Senator COCHRAN. Thank you, Senator.

Ms. Lachance, one of the benefits of employer-provided group

long-term care insurance is that the premiums for the policy are

18

typically less expensive than the premiums for a similar individual

policy purchased on the open market.

We have heard this morning that the group rates under the Federal program are expected to be 15 to 20 percent lower than individual rates. How confident are you that OPM can achieve rates

that are 15 to 20 percent lower than the open market?

Ms. LACHANCE. I am very confident, sir. That estimate comes

from a number of sources. We have worked extensively with consultants and people who work in this area, experts who have consistently come up with this kind of discount rate for our program.

And we have talked with the insurance carriers who fully believe

this is doable.

So, we are excited about the prospect and we think it will make

a big difference in affordability for a number of people who might

have been putting off this decision.

Senator COCHRAN. Employer-sponsored long-term care insurance

is a relatively new concept in employee benefits. There is not a

great deal of experience with this insurance product.

As the product matures and develops over time, there is the possibility that the cost to the carriers of providing the insurance may

increase or decrease necessitating a change in premiums.

What will the process be for considering premium adjustments

during the term of a master contract with a carrier or multiple carriers?

Ms. LACHANCE. Our hope is to have that established in the initial

contract so that people will know what they are getting into when

they make this decision to purchase. I don’t have any specifics now

because we are really just in the discussion phase of this.

But we believe that we can come up with a way that is fair to

the carrier, but also gives the customer all of the protections they

need so that they don’t have to fear or be concerned about any

large premium increases.

In addition, we also want to make sure that we have a common

consumer protection in there that talks about contingent non-forfeiture, that if premiums go up too quickly or beyond a certain percentage, that in fact the beneficiary or the policyholder could stop

paying on the policy, could stop paying premiums, but still retain

some measure of benefits for the amount of money they have already paid in.

Senator COCHRAN. Will OPM take a role in negotiating these premium adjustments or adjustments in coverage? How will that be

handled?

Ms. LACHANCE. I believe we will be involved.

Senator COCHRAN. While the premiums for this program will be

paid 100 percent by the participants in this program, OPM will

have to create an administrative infrastructure to implement and

administer the program.

How many employees do you think it will take for OPM to administer the program?

Ms. LACHANCE. We run the Federal Employees Health Benefits

Program with what is considered to be just a handful of employees.

I am sure we could do the same kind of efficient job with this program as well.

19

Senator COCHRAN. Do you have any estimates on the cost of the

administration at this point?

Ms. LACHANCE. We are looking at about $1 million a year to sustain the program.

Senator COCHRAN. How does that compare with the Federal Employees Health Benefit Program?

Ms. LACHANCE. I will have to get back to you on that.

Senator COCHRAN. OK. You can answer that. That was a surprise question. My staff didn’t write that.

Ms. LACHANCE. You are allowed.

Senator COCHRAN. Surprise. It is not a ‘‘gotcha’’ kind of thing. It

just occurred to me.

Ms. LACHANCE. Happily, somebody who runs the program is here

and says it is $20 million to run the FEHBP.

Senator COCHRAN. That is more than a handful then; isn’t it?

Ms. LACHANCE. Well, that is also the entire cost. But we have

about 176 employees.

Senator COCHRAN. Given the varying financial resources of perspective enrollees and the potential eligibility of some for Medicaid

benefits, long-term care insurance may not be a sound expenditure

of funds for everyone.

In addition, some organizations recommend that long-term care

insurance not be purchased until an individual is 50 or 60 years

old.

What role will OPM and the participating carriers play to ensure

that all respective enrollees are furnished the necessary information to evaluate the advantages and disadvantages of obtaining

long-term care insurance?

Ms. LACHANCE. We plan an extensive education campaign, Senator. Every study that has looked at the take-up rates and how

long-term care insurance policies have been implemented includes

a very significant education process and information process.

So we want to use every medium. We want to make sure that

all of the benefits experts in the agencies across the government

have the information they need to answer questions.

We are going to use electronic media. We are going to use paper.

We are going to use every possible way to provide information to

those who have to make this important decision.

We expect a typical take-up rate which is about 3 to 6 percent,

although we would like to see it go higher than that. But I do believe that we will be able to provide the kind of education that people will need to make the kinds of choices that you are describing.

Senator COCHRAN. Under S. 2420, OPM has the authority to design the long-term care insurance package, including which benefits are offered. How will you design the benefit package?

Ms. LACHANCE. We have a number of hallmarks, Senator, and

values we want to make sure are reflected in this. First of all, we

want it to be as flexible as possible. We understand that there are

many different circumstances for those who need this kind of coverage.

We have talked a lot here about people who prefer to stay with

their families. Senator Mikulski described the situation where they

felt her father had to be in a nursing home. We want it to be as

20

1The questions and responses from Senator Cochran appear in the Appendix on page 00.

flexible as possible so that people can get the right kind of care in

the right setting at the time they need it. That is the first issue.

The second issue is to make sure that all of the appropriate consumer protections are included in the policy. We are using as our

benchmark the National Association of Insurance Commissioners.

They have done a lot of good work in this arena and have come up

with a set of standards that they protect the consumer.

We want to make sure this is the floor for what we design and

that the people we cover have at least those protections. Those are

the two principal points that we are going to try to achieve.

Senator COCHRAN. Will there be a lot of optional benefits as well

as required benefits to be provided by the carrier?

Ms. LACHANCE. That is typically how it works. I would suspect

that would happen in this case as well. People can buy a policy and

then choose to add on and pay extra for additional benefits they

feel they may need.

Senator COCHRAN. Senator Akaka, I am planning to submit the

rest of the questions that I have.1 If you have any other questions,

please feel free to ask them.

Senator AKAKA. I think she is answering so well. We have talked

about putting the greatest number of enrollees together to decrease

the cost.

In order to be successful in the Federal long-term care insurance

program obviously you would seek the greatest number of enrollees.

How would medical underwriting be handled under this program?

Ms. LACHANCE. Yes, sir. We have had a number of discussions

with the carriers on this. We would like to keep underwriting to

a minimum, at least a minimum for active Federal employees and

active members of the military.

Obviously, you have to balance underwriting requirements with

providing an affordable, quality product. So, we want to be as inclusive as possible while maintaining the product’s affordability.

We think we can achieve both because of the size of our community

and our family.

Senator AKAKA. Affordability is always a big question. In 1997,

the average annual private market premium for an individual aged

50, who purchased a base plan with no inflation protection or nonforfeiture benefit was $385, according to the Health Insurance Association of America. That same person, with inflation protection

and non-forfeiture benefit, would pay $1,110 per year. What is inflation protection and how is it computed?

Ms. LACHANCE. Inflation protection means that what you are

paying for today will have the same meaning and the same redemption value when you need the benefit, perhaps 30, 40, or 50

years from now.

We plan on offering it because we think it is important. What

you don’t want to do is fall into a trap where you are paying for

a certain amount of benefits, for example, $100 a day, and then by

the time you need the benefit, that $100 is meaningless.

21

We want to make sure people are informed about these choices

that they have. They will have to weigh their own individual circumstances to see whether it is worth it to them or not to purchase

this kind of inflation protection.

Senator AKAKA. Am I correct in assuming that any Federal plan

would have to have inflation protection and non-forfeiture benefits?

Ms. LACHANCE. Yes, sir. It is appropriate to assume that will be

part of the package that will be available for purchase.

Senator AKAKA. In order for the government’s program to be successful, there must be an adequate take-up rate. Employees must

feel comfortable with the products offered. How will OPM educate

employees and annuitants as to the need for long-term care insurance and an individual’s suitability for the product?

Ms. LACHANCE. We plan on having a very, very significant education campaign. We will be working with the Department of Defense to reach their communities and really try to get beyond the

typical borders that we have with Federal employees and retirees.

We are going to use every possible medium. We are going to try

to have an interactive tool on our Website that will walk people

through the suitability of the product and whether it is beneficial

for them to have this kind of insurance, and at what point in their

lives they may want to buy it.

We will be using traditional paper. We will use CD–ROMs. We

are going to train the trainer so that people who are involved in

this process who work at various agencies across government will

have the information they need to answer questions from potential

customers.

So, we plan a full court press on the education front, knowing

there is a direct correlation to the number of people who will ultimately purchase the policy.

Senator AKAKA. Again, I thank you very much for your responses. I can’t help but recall in your statement that long-term

care insurance is the answer to the kind of retirement problems

that we have today.

Ms. LACHANCE. Thank you.

Senator AKAKA. Thank you very much, Mr. Chairman.

Senator COCHRAN. Thank you very much, Senator Akaka, for

your participation in this hearing.

Ms. LaCHANCE, thank you and the members of your staff for

your hard work in helping acquaint us with this legislation, the

House-passed bill as well as your perspective on the provisions of

the Senate bills that have been introduced and that are the subject

of this hearing.

I am confident that what we have learned today will enable us

to report out a bill at an early date. We hope that we can work out

final legislation to submit to the President which he can sign and

provide a new program for Federal employees that will be very

beneficial to them and to their families.

Thank you very much. The hearing is adjourned.

[Whereupon, at 11:14 a.m., the Subcommittee was adjourned, to

reconvene at the call of the Chair.]

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