U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

74–686 PDF 2001

S. HRG. 107–106

LONG-TERM CARE: WHO WILL CARE FOR THE

AGING BABY BOOMERS?

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

WASHINGTON, DC

JUNE 28, 2001

Serial No. 107–9

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING

JOHN B. BREAUX, Louisiana, Chairman

HARRY REID, Nevada

HERB KOHL, Wisconsin

JAMES M. JEFFORDS, Vermont

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

BLANCHE L. LINCOLN, Arkansas

EVAN BAYH, Indiana

THOMAS R. CARPER, Delaware

DEBBIE STABENOW, Michigan

JEAN CARNAHAN, Missouri

LARRY CRAIG, Idaho, Ranking Member

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

PETER G. FITZGERALD, Illinois

JOHN ENSIGN, Nevada

CHUCK HAGEL, Nebraska

MICHELLE EASTON, Staff Director

LUPE WISSEL, Ranking Member Staff Director

(II)

C O N T E N T S

Page

Opening statement of Senator Russell Feingold ................................................... 1

Statement of Senator Thomas Carper ................................................................... 3

Statement of Senator John Breaux ........................................................................ 4

Statement of Senator Larry E. Craig ..................................................................... 17

PANEL I

Hon. Tommy G. Thompson, Secretary, Department of Health and Human

Services ................................................................................................................. 5

David F. Durenberger, Chairman, Citizens for Long-Term Care ........................ 24

Carol V. O’Shaughnessy, Specialist in Social Legislation, Congressional Research Service ....................................................................................................... 68

Robert B. Blancato, Executive Director, The 1995 White House Conference

on Aging; and President, Matz, Blancato & Associates, Inc. ............................ 87

(III)

(1)

LONG-TERM CARE: WHO WILL CARE FOR THE

AGING BABY BOOMERS?

THURSDAY, JUNE 28, 2001

U.S. SENATE,

SPECIAL COMMITTEE ON AGING,

Washington, DC.

The committee met, pursuant to notice, at 11:20 a.m., in room

SD–226, Dirksen Senate Office Building, Hon. John Breaux (chairman of the committee) presiding.

Present: Senators Breaux, Feingold, Carper, and Craig.

OPENING STATEMENT OF SENATOR RUSS FEINGOLD

Senator FEINGOLD. We will call the committee come to order.

The chairman, Senator Breaux, is on his way from the floor and

is very involved with the patients’ bill of rights. He will be here

shortly, but I would like to begin the hearing.

This is the first in a series of hearings that Chairman Breaux

has called on the subject of long-term care, and I am just delighted

that he has done this. I can’t imagine an issue that is more important for the future of our country, and I commend him for taking

this step.

I am especially pleased, of course, to have the honor of starting

this hearing because the first witness, Secretary Thompson, who I

still prefer to call Governor Thompson, is the very first witness.

There is no more appropriate witness that we could have here

today than the Secretary.

I have worked on long-term care issues for nearly 20 years now,

first as a member of the Wisconsin State Senate, where I chaired

the Aging Committee for 10 years, and now as a member of the

U.S. Senate and this committee. And when I was elected to the

State Senate in 1982, Senator Thompson was already a distinguished legislator and a part of the leadership in the State assembly.

Four years later, he was already overseeing the State’s long-term

care programs as our Governor. The State experience in long-term

care he brings with him to his current position is extremely valuable, because it is really at the State level that most of the work

on long-term care reform has been done.

As Secretary Thompson will attest, long-term care is not a partisan issue, at least it has not been in Wisconsin. The reforms we

have been able to enact in Wisconsin, and especially the Community Options Program, which is the centerpiece of those reforms,

was very much a bipartisan effort.

2

The program was actually begun under Governor Lee Dreyfus, a

Republican Governor. It was greatly expanded under Governor

Tony Earl, a Democrat, and then further expanded and fostered

under then-Governor Thompson.

This kind of bipartisan political consensus should not be a surprise. Members of both parties in State government know all too

well what we face. They know that the current system is a train

wreck waiting to happen.

In Wisconsin we saw the train wreck beginning to happen earlier

than other States, in large part because we had so many nursing

homes. And the prospect of an exploding Medicaid budget actually

motivated policymakers to initiate some structural reforms to help

alleviate the problem.

And let me emphasize, however, that Wisconsin has been able to

buy itself some time because of those reforms but not completely

avoid the coming crisis.

States cannot rely solely on their own resources to tackle this

problem. A sustainable solution can only come with fundamental

Federal reforms of our long-term care system.

In previous Congresses, I introduced legislation that I believe is

a sustainable solution based on Wisconsin’s long-term care reforms.

It allowed States to provide those needing long-term care with the

kind of flexible, consumer-oriented, consumer-managed services

that we have seen in Wisconsin that will actually lower long-term

care costs.

It paralleled the long-term care reforms that had received bipartisan support during the larger health care reform debate of the

early 1990’s, reforms that were the result of a multiyear effort by

long-term care reform advocates.

Long-term care reform has not been on the national agenda in

a serious way, in my view, since that time. With the exception of

a few improvements, such as the family caregiver provisions included in the reauthorization of the Older Americans Act, we have

only really treaded water at the Federal level, and we have left

States to fend for themselves in this area.

Despite this lack of support, some States have done some wonderfully creative things with the resources they have.

And in this regard, Secretary Thompson deserves a great deal of

credit for the work done in Wisconsin to create the Family Care

Program, which utilizes existing Federal Medicaid waivers to package together a much more flexible system of long-term care services. This is something I think other States will want to examine,

and I want to touch on that with the Secretary later.

So let me again thank the chairman for calling these hearings.

Long-term care reform has been a long time coming. It has been

7 years since the Senate has considered it in a serious way. I hope

we will not wait another 7 years before finally taking action.

With that, I am delighted to turn to my friend and the Secretary,

Tommy Thompson.

Secretary THOMPSON. I wonder if Senator Carper would like to

make an opening statement?

3

STATEMENT OF SENATOR THOMAS CARPER

Senator CARPER. Well, I do, but I don’t want to delay Governor

Thompson’s testimony.

But I do have—let me just do this first thing.

I just left the Senate floor. Senator Breaux was awaiting the outcome of the vote on his amendment. He said: I don’t want to leave

until I am sure what is going to happen.

So he should be along very, very shortly.

Let me just say welcome to my old colleague—I shouldn’t say old

colleague—my former colleague. [Laughter.]

And it is great to see you, great to be with you. And I wish you,

as you know, all the best in your new job.

All right, if the chairman were here, I would thank him—or

ranking member—for calling today’s hearing. And I certainly thank

our witnesses, including our lead-off witness, for testifying.

It seems like the most important issues do not always receive the

most attention, either here in the halls of Congress or from the

media. And I think it is great that this committee today is shining

the light on a potential crisis and one that is under appreciated but

is very serious nonetheless.

And as I get older—I am 54 this year—I continue to appreciate

more the seriousness of this issue.

I often say that our health care system in this country resembles

what I describe as a patchwork quilt and one that, for that matter,

is fraying a bit at the edges for many of our people.

If our system of health insurance is a patchwork quilt, I think

it is fair to say that our system of long-term care is a crazy quilt.

[Laughter.]

As Senator Durenberger will testify later on, ‘‘There is no national cohesive long-term care system,’’ in this country. And Senator Durenberger will also attest this makes what system we do

have, ‘‘inefficient, inequitable, and often ineffective.’’

Most Americans believe that Medicare will cover their health

care needs when they retire. Most Americans don’t know if they

end up in a nursing home, Medicare won’t cover the cost. Most

Americans don’t know that the single largest payer of long-term

care, Medicaid, requires that people effectively impoverish themselves in order to access public assistance.

I have seen firsthand the high cost of long-term care. My mom,

who is almost 79 years old, today lives in a terrific nursing home

in Ashland, KY, where she battles Alzheimer’s disease and requires

constant care to maintain her quality of life.

As the father of two young boys, I also worry that our children

will someday face the same problems as our generation, my generation, ages.

The cost of long-term care will be a growing burden for our nation to bear. In the absence of reform, I question whether we can

carry that burden.

The magnitude of this challenge suggests the needs for some significant Federal response.

At the same time, as a former Governor who made use of a Medicaid waiver to expand options for home and community-based

long-term care, and to help people stay out of institutional care

wherever possible, I know that sometimes the best thing the FedVerDate 11-MAY-2000 13:45 Oct 05, 2001 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 74686.TXT saging1 PsN: saging1
4

eral Government can do is to give States and local communities the

flexibility that they need to meet local needs.

We all know that this is a complicated issue. That is why hearings like this one are so important. I look forward to hearing from

our witnesses, and I am especially pleased to welcome Governor

Thompson.

STATEMENT OF SENATOR JOHN BREAUX, CHAIRMAN

The CHAIRMAN. Thank you, former Governor Carper and former

Governor Thompson, and thanks to the committee for getting started.

I was on the floor with an amendment. We were just kind of

waiting on the outcome of it. And——

Senator CARPER. Well, what happened?

The CHAIRMAN. It passed. [Laughter.]

If it had failed, I wouldn’t have shown up. [Laughter.]

But, no, it passed, and we are happy.

I won’t delay the Secretary’s statement any longer. And I do

want to say that this committee is particularly concerned about the

questions that longevity bring to us as a society and us as a Congress in particular.

I have often said that the good news is that people are living a

lot longer; the bad news is that people are living a lot longer.

And what I mean by that is that we certainly are happy that

medical technology and science has allowed life expectancy of

women to be almost 80 years of age and men almost 75 years of

age, and that is good. But it also presents society an incredible

number of problems on how we take care of those people in their

golden years.

It is not enough for people just to live longer; they also must be

allowed to live better. And I think that is the real challenge that

we have.

And when you look at the fact that most of the Federal dollars

that are spent on helping seniors, in terms of how they spend those

years, so much of it is spent in institutionalized care, which I think

is not necessarily the best way to be spending those dollars.

I mean, what you have done in your State, in Wisconsin, as a

leader, is something that is very important to the rest of the country to hear about. And we are spending anywhere from $40,000 to $80,000 a year

in putting people in nursing homes. I seriously question if that is

the best procedure for the majority of senior citizens in this country.

We have 77 million baby boomers who are rapidly approaching

that period of time when they are in their golden years. So we are

going to have a lot more people living a lot longer. I mean, that

is the huge challenge that we face as a society.

And this hearing is really to try and hear, Mr. Secretary, what

you did in your State and what your ideas are about what we

might be doing as a Nation under your leadership as Secretary of

Health and Human Services, and what we might do as a committee

and as a Congress to try and help you to reach that goal of allowing people to live longer but also allowing them to also live better

lives.

5

So we are happy that you are here. We apologize for the delay,

and happy to hear from you.

[The prepared statement of Senator John Breaux follows:]

PREPARED STATEMENT OF SENATOR JOHN BREAUX

I have called for this hearing-the first in a multi-part series on long-term care in

an effort to provide a forum for examining the potential crisis we face given the

changing demographics in this nation. Advances in medical technology ensure that

most of us will live into our 70s and 80s. When one pairs that fact with the statistic

that there are 77 million baby boomers who are aging, it is apparent that there will

be increasing demands on our long-term care system in the next couple of decades.

I am especially grateful to Secretary Thompson for taking the time out of his busy

schedule to be here with us today. The Secretary was committed to finding innovative solutions to funding long-term care when he was Governor of Wisconsin and

he brings that same commitment to his new capacity. I look forward to hearing

about the federal initiatives that I know that the Department of Health and Human

Services has commenced in an effort to support states in their long-term care efforts.

I believe today’s hearing will provide an opportunity for all of us to gain an improved understanding not only of the current status of long-term care services and

how they are financed but also a sense of what the future is likely to behold. We

all know that the population aged 85 and older is the group most likely to need assistance with daily living. Whereas in 1998 there were 4 million Americans in that

age group, the U.S. Census Bureau expects that number to jump to 7 million by

the year 2020-a vivid illustration of the new demands that will be placed on the

system in the near future.

I feel that the time is ripe for a call-to-action on the issue of long-term care-and

that is the purpose of today’s hearing. Policymakers, providers and consumers need

to partner to determine the most appropriate avenues for reform. Today’s hearing

will provide all of us with a better sense of what this nation’s long-term care population is facing and I look forward to subsequent national dialog on this issue so

vitally important to America’s seniors.

STATEMENT OF HON. TOMMY G. THOMPSON, SECRETARY,

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Secretary THOMPSON. Thank you so much, Chairman Breaux.

And let me just start out by thanking you for your leadership

and your vision. Congratulations on your amendment.

And the nice thing about being in front of you, Senator Breaux,

is it gives me an opportunity to thank you for your leadership in

so many issues. And this issue is probably the most important one

of all the ones that you have taken such strong and passionate

leadership. And I just want to take this opportunity to thank you

and compliment you.

My good friend, Russ Feingold, truly was a leader back in Wisconsin on aging problems. He was the chairman of the Special

Committee in the State Senate, and he led the efforts on our very

good and comprehensive Community Options Program so elderly

citizens could stay in their own home, and he also took a very

strong and passionate leadership on Alzheimer’s.

And I am sorry he is not here so that I could compliment him

in person. But I am sure that somebody will tell him that I said

nice things about him. And they are well-deserved, and I want to

applaud him.

Senator CARPER. I will tell him. [Laughter.]

Secretary THOMPSON. And, Senator Carper, it is always a pleasure—it is difficult for me to call you Senator, because—I know it

is difficult to get over the word ‘‘Governor.’’

6

Senator CARPER. I still call people on the phone, I say, ‘‘Hello,

this is Governor Carper,’’ and they say, ‘‘Oh, no, it isn’t.’’ [Laughter.]

‘‘Wait a minute. What happened?’’ But I thank you so very much

for your friendship and partnerships on so many efforts that we

have teamed up together on in the past, and I am sure we will in

the future. And I thank you so very much for being here.

This hearing is so important regarding the long-term care needs

of our Nation’s elderly and our disabled citizens.

In 1900, a person born in the United States could expect to live

49 years from birth. In the course of the past century, we have

added nearly three decades to the life expectancy of a newborn.

Three decades is also about how long we have had Medicare and

Medicaid. These programs have served millions of Americans very

well. Yet as the population of older Americans has grown and as

the possibilities for new kinds of long-term care have increased,

Medicare and Medicaid have pretty much remained the same as

when they were first begun in the mid–1960’s.

And I know that, Senator Breaux, you have taken a leadership

in this effort, and I absolutely compliment you on that.

For example, Medicaid will pay for your care in a nursing home.

But if a State, like Delaware, Wisconsin, Louisiana, wants to pay

for respite care—that may help keep families together and be a

better alternative—it has to come to Washington, DC., for a waiver.

That just doesn’t make any sense to me, and I am sure it doesn’t

make any sense to you.

It is time to modernize Medicare and Medicaid, to customize

them to meet the wide array of needs of our growing population of

senior and disabled Americans.

And one of the key elements of this modernization is the transformation of long-term care.

Long-term care used to be limited almost exclusively to nursing

homes, as you mentioned, Senator Breaux, which consumed a substantial amount of the Medicaid budget. Now long-term care can be

provided in a wide range of settings and today accounts for onequarter of total Medicaid long-term care expenditures.

There are more choices than ever for persons who are elderly or

have a disability, and I think that is great. But I think we can do

a much better job.

The States are providing long-term care with the aid of about

250 home and community-based waivers from the Department of

Health and Human Services. These waivers provide approximately

$7 billion of care, funding that enables the State governments to

serve more than 1 million people. We are working with a few

States to pilot waivers that allow for a much more positive, complete, coherent system.

Public service at every level of government must do a better job

of preparing for the future. That is why the proposals outlined in

the President’s New Freedom Initiative are so promising and encouraging.

The New Freedom Initiative is designed to break down the barriers faced by the 54 million disabled Americans. His proposals will

give our elderly and disabled the freedom to participate more fully

in the community and, yes, in the workforce as well, a goal that

7

everyone shares. And it is a goal shared by all three political parties: the independent, the Republican, and Democrat.

Mr. Chairman, we have no time to lose. Today the 35 million

people aged 65 or older account for about 13 percent of the total

population. It is projected that this population, or one in five, will

be age 65 or older in a few years.

Preparing for the future requires us to rethink the strategies of

the past. Innovative approaches to delivery of long-term care services have the potential to preserve the independence and enhance

the quality of life of all of our seniors, and be able to enjoy it in

a cost-efficient manner.

The Federal Government now provides 60 percent, nearly 60 percent, of the funding for nursing home care. Providing quality, costeffective care is going to become increasingly important as the baby

boomers age.

Community-based care could save individuals and families and

taxpayers and the government a substantial amount of money.

More importantly, it promises to help seniors more fully sustain

their independence and their personal freedom.

In addition, while today’s hearing is focused on community-based

alternatives to nursing homes, let me touch briefly on the subject

of nursing homes.

Nearly 3 million Americans spend at least some portion of the

year in our nursing homes.

Let me share some good news. According to the second annual

CMS report—that is the old HCFA, now Centers for Medicare and

Medicaid Services, CMS—their report on nursing homes quality,

several quality indicators point to some very positive emerging

technologies and trends.

For example, since 1998, there has been a 35 percent decrease

in the proportion of deficiencies for care problems resulting in actual harm to nursing home residents.

That is going in the right direction. Am I satisfied? No. Should

anybody be satisfied? No.

But nursing homes cited for immediate jeopardy represent fewer

than 2 percent of all nursing homes. Improper use of physical and

chemical restraints has also declined. And the problems of involuntary weight loss is on a downward trend.

This news is encouraging. Is it good enough? No, but it is encouraging, and we are going in the right direction, and we want to continue to build upon it.

But we face serious nursing home worker shortages that compel

us to look for creative solutions to this problem. To help us address

these issues, I have discussed with Labor Secretary Elaine Chao to

ask the Labor and HHS to work collaboratively to find effective solutions. Our staffs plan to meet early next week to map out a new

strategy that would join the DOL’s training dollars with nursing

programs supported by HHS.

I plan to investigate other cross-departmental opportunities to

see if we can address this nursing shortage on a governmentwide

basis.

We also are going to make a fresh examination of the Medicare

and Medicaid regulations to determine if current regulations actually present barriers to training needed workers.

8

And we are also working to identify and publicize promising

State-developed practices.

In Wisconsin, we have utilized the single-task workers for several years in situations that are safe and appropriate. So today I

am announcing that the Centers for Medicare and Medicaid Services will be providing administrative guidance to the States to enable greater use of single-task workers in transporting nursing

home residents from one area of the facility to another, under supervision and under training. CMS will issue a proposed regulation

to address other types of single-task as well.

But even with these improvements in nursing care, States are

still facing the barriers in the development and implementation of

community-based care systems, including the Medicaid program

itself.

Medicaid seems to have a bias toward institutional care, a bias

rooted in the experience of earlier years when nursing homes were

almost the only alternative. That is apparent in kinds of services

that are offered, as well as in determining the eligibility.

But institutional care is only one of several options. As Governor

of Wisconsin, I had the opportunity, under the supervision of the

Federal Government, to get a waiver to pilot another approach, the

Family Care, the Pathways to Independence Program.

As we redesigned our own State’s long-term care system, we introduced the Family Care benefit to our Medicaid programs. This

benefit offers State coverage of long-term care services for elderly

Wisconsin citizens, as well as other adults with disabilities.

Aging and disability resource centers were then established in

each participating county. Seniors, as well as others eligible for the

benefit, are now able to go to the centers to obtain program information, seek counseling and be enrolled in a care-maintenance organization, the entities responsible for managing those benefits.

The Family Care Program allows seniors to choose their own personal care setting and integrates personal and family as well as

physician assessments into a care plan, which is individualized for

each individual senior.

Its principles are simple: Give people the information they need

to make the positive decisions. Do it in a way that they can understand it, and in a one-stop shop environment so they can go there

and get the necessary treatments that they need. And make the

funds flexible so that they follow the individual, not the funds flowing to the institution, so they follow the person to the most appropriate setting, paying for what that individual person needs.

Another initiative, which is called the Program of All-Inclusive

Care for the Elderly, or PACE, also offers very good promise. PACE

operates from a managed-care model and provides comprehensive

and high-quality medical, social and long-term care services to the

frail elderly eligible for nursing home care. This helps these older

citizens maximize their autonomy as well as their continued community residence.

Finally, we should support those families that provide the majority of long-term assistance to the loved ones requiring help due to

injuries, accident of birth, disability, or long-term illness. Their efforts are providing those in need with what is usually the best care

available.

9

The Caregiver Support Program, which was recently announced

by our Administration on Aging, is a dynamic new initiative. And

I hope our efforts with community-based long-term care will continue to reveal additional ways that the Federal policies are able

to be made more family friendly.

Personal savings are going to become an increasingly important

component of long-term care financing as our elderly population

continues to grow. We must take the steps today that will encourage people to start saving for tomorrow.

Specifically, the president has proposed that individuals be allowed to deduct the cost of purchasing eligible, private long-term

care insurance. This will provide, hopefully, the incentive, or an additional incentive, for people to take greater financial responsibility

for their long-term care needs and will encourage the use of longterm care insurance.

By providing tax deductibility for policies that meet the eligibility

standards, quality long-term care insurance will play a larger role

in the financial security of older Americans. And by making such

incentives available, more employers will join the trend in offering

long-term care benefits to their employees.

This concept recognizes that individuals have a responsibility to

plan for their future and empowers them to do so with the help of

their employers.

Employer-sponsored long-term care plans would be subject to

ERISA and the protection it affords participants and beneficiaries.

We have also proposed allowing the taxpayers to claim an additional personal exemption for providing long-term care to qualified

family members who live in the taxpayer’s home. Providing such an

exemption would recognize the formal and informal costs to family

caregivers that provide long-term care.

Community-based care can be tailored to the needs of the individual and can maximize the independence of the men and women

who need assistance. It can also alleviate some of the burdens that

our family caregivers are currently facing, enabling more individuals to remain in their homes.

To get started on the enormous task at hand, I have asked Tom

Scully, the CMS administrator, to begin identifying issues that we

must consider as we evaluate how to improve our long-term care

service delivery system.

He will be reaching out to the States and to other parties, and

especially to this committee, with interests in long-term care, including ordinary citizens, medical associations, nursing facilities,

and senior citizen groups. Mr. Scully will discuss with these groups

the critical decisions that must be made as we determine how we

can best provide long-term care to those who need it.

We have taken some important steps in helping our States

transition to community-based care, and I can assure you that the

administration looks forward to working with you on a bipartisan

basis as we begin to equip our States for such a shift.

And so, therefore, thank you, Mr. Chairman, for your concern,

your passion for this important issue. And at this time, I am

pleased to answer your questions and those of other committee

members.

[The prepared statement of Secretary Thompson follows:]

10

11

12

13

14

15

16

17

The CHAIRMAN. Mr. Secretary, thank you very much for a very

detailed and very fine statement about the principles and things

you are trying to accomplish, as well as what you have done also

in your State of Wisconsin.

We have been joined by our ranking member, Senator Larry

Craig.

Senator Craig, do you have any comments you would like to

make?

Senator CRAIG. Well, Mr. Chairman, first let me ask unanimous

consent that my statement be a full part of the record.

The CHAIRMAN. Without objection.

[The prepared statement of Senator Craig follows:]

PREPARED STATEMENT OF SENATOR LARRY CRAIG

Good morning. I am pleased to join John today in helping launch what promises

to be a valuable series of hearings examining the challenges of assuring affordable,

accessible, and flexible long-term care to America’s seniors—particularly now, as the

first of the massive Baby Boom generation approach retirement age.

Medicare prescription drugs and Social Security may be getting more ink at the

moment, but the looming demands of our faltering long-term care system are perhaps of equal weight and concern. By the time all the Baby Boomers have retired,

in approximately 2030, more than 70 million older Americans will be in need of

some form of long-term care. And perhaps even more alarmingly, the number of

Americans 85-and-older, those most likely to need daily assistance, will nearly double by 2020.

As we prepare to meet this challenge, one issue of particular concern to me—and,

I know, to Senator Breaux—is the reality that despite decades of well-intentioned

talk, this country continues to devote the lion’s share of its limited long-term care

funding to institutional nursing home care, rather than to assisting seniors in living

independently in their own homes and communities. In addition to being more costefficient than nursing home care, home and community based care is vastly preferred by America’s seniors and their families.

When a mother or a spouse is only one bad fall away from permanent institutionalization, just a few hours of simple in-home assistance with difficult tasks can

make a tremendous difference, not only to the older person’s quality of life, but also

to his or her family and to the taxpayers. It is families and taxpayers, of course,

who often must shoulder the cost of long-term institutionalization—a cost that now

averages a staggering $40,000 per year per resident.

Initiatives such as the Older Americans Act Family Caregiver program, which I

strongly supported, and which this Committee recently examined, offer modest steps

in the right direction. But much more remains to be done. For example, a look at

efforts undertaken by many states—including Secretary Thompson’s Wisconsin—offers much in the way of encouraging innovation. I understand that state experimentation with long-term care solutions will be the focus of our next hearing, one I am

very much looking forward to.

Finally, I would just add that no serious review of our long-term care system will

be complete without a serious effort to simplify the current disjointed hodgepodge

of long-term care programs and benefits. Navigating the current maze of Medicaid,

Medicare, Older Americans Act, block grants, and other long-term care programs is

a daunting challenge even for well versed policy experts, not to mention seniors

themselves.

We have our work cut out for us, and I am eager to get started. Thank you.

STATEMENT OF SENATOR LARRY CRAIG

Senator CRAIG. Welcome, Mr. Secretary.

We are extremely pleased you are with us today. And I am extremely pleased that John has started a series of what I think are

most valuable hearings on the issue of long-term care.

And of course you have outlined some of the concerns, my concerns, about affordability and accessibility and flexibility and all

18

those kinds of things that really begin to fit as we recognize this

massive wave coming at us out there in our demographics.

I am part of that wave, ultimately, as many in this room are.

And if we don’t have the sense to shape it now or help begin to

shape it, I think it is a very, very real problem.

Obviously, Medicare and prescription drugs and Social Security

are the items that get the bulk of the ink today. But out there in

our future is this long-term care issue that you have clearly recognized and are beginning to take action on it.

I look at these numbers that, by 2030, 70 million older Americans will be in that status of long-term care, and then you keep

looking outward and seeing those numbers double, and it says to

us so loudly. And that is why we in this committee, I think, can

effectively use the committee as a bully pulpit, not only to get attention to and to help you all, but, most importantly, to dramatize

the importance of moving in this direction.

Mr. Chairman, I do have some questions.

The CHAIRMAN. OK.

Senator CRAIG. But let me ask you to proceed with questions,

and I will come back to them, because I am anxious——

The CHAIRMAN. That will be fine.

Senator CRAIG [continuing.] To see where the Secretary is going

and where we might assist him.

The CHAIRMAN. That will be fine. Thank you, Senator.

Let me start by asking maybe sort of a generalized question. I

am interested in, how do we as a Nation compare, if you know,

with how other developed nations treat their elderly?

It seems to me that in other countries that are developed countries around the world that it seems to be that there is more athome care for seniors then we do in this country. Is there any indication of what other nations are doing in this area that we can

compare with and get some ideas?

Secretary THOMPSON. I am sure there are, Senator. I am not that

familiar with what other countries are doing. I haven’t taken

enough study. I have certainly done a lot of study about what we

are doing in the United States, and I just don’t think we are doing

enough.

I think the way the system was set up in the mid–1960’s with

Medicare and Medicaid, it was very much, as you have indicated,

a bias toward institutionalized care, and we have continued to do

that.

And only recently in the 1990’s have we started to address alternative care, respite care, and stay-at-home, and setting up programs for that. And it is so much more important for us to continue

to do so, and to modernize Medicaid to allow us to provide for the

services at home rather than just an institutionalized setting.

And so I think that we have to do a better job. But I can’t point

to a country that is doing that much better job, but I am sure there

are some examples.

The CHAIRMAN. I think particularly in Asia it is sort of a cultural

thing that is very important. I like the idea.

I am one of the sponsors of the tax credit for long-term care insurance. I think that is a no-brainer; we should be encouraging

that.

19

I like the idea that you talked about; the Administration has proposed that taxpayers be allowed to claim an additional personal exemption for providing long-term care services to qualified family

members who live in the taxpayer’s home.

If you think about it, we do that for children. I mean, you have

the child tax credit if you are taking care of children. And now if

you want to encourage people to help take care of parents or perhaps grandparents in a home setting, is it not appropriate to also

have some type of assistance to provide for that?

And I think the concept of a grandparent credit, if you will,

whatever you want to call it, would be something that would be

good public policy.

Let me just ask, you talked about the waivers, that you have all

these States that have applied for 250 waivers to use their Medicaid dollars to do things other than just place people in nursing

homes, and you talked about home and community care and the

PACE program.

Explain to the committee exactly what do you mean when we are

talking about alternatives other than nursing homes, your community-based type of things that the department is allowing States to

use their money to do. What are we talking about them doing?

Secretary THOMPSON. Well, there are so many programs out

there.

There is the Cash and Counsel program, that has just set up a

waiver in four States, in which the money is going to be able to

be used for individuals to come in. And they are being counseled

and to be able to actually get the cash to purchase services in the

community.

There is the COP program, Community Options Program, in

which elderly citizens can make the option of staying home. It used

to be only with State dollars that you could do it, but then the Federal Government allowed us to come in and get waivers and to be

able to use the Medicaid waiver dollars to be able to purchase services.

And what I tried to do in Wisconsin is to set up so that caregivers in the Community Options Program are put into an overall

comprehensive program, where, if your uncle or aunt or your mother or father needed services, you would go to a central place and

get the information, and actually have the doctor make an assessment, have the parent or brother or sister or son or daughter make

an assessment of what that individual needs.

And then the community, that collection point, that center, would

purchase the services, whether it would be food, come in; maybe it

would be nursing home nursing care for 3 or 4 days a week; maybe

come in and just take care of the parent or parents one night a

week so that the son and daughter could get out and get away.

It depends upon the individual, but it makes it much more localized, much more individualized, and allows the dollars to follow the

individual instead of just flowing to the institution.

The CHAIRMAN. I take it, Secretary, now the State really has to

go through a waiver process to be able to use any of that.

Secretary THOMPSON. Absolutely.

20

The CHAIRMAN. And you would recommend that we would amend

the Medicare law when we are doing the reform and modernization, to not make that a necessary step?

Secretary THOMPSON. That is absolutely correct, and allow for

the flexibility to do so in order to get the job done, because States

have got a lot of things going, and we should allow and encourage

that kind of flexibility to look for alternatives to provide long-term

care.

The CHAIRMAN. You have given us two good ideas: change the

waiver process to allow more flexibility for the States and local

communities to do more; plus the so-called—I would call it the

grandparent tax credit for caring for people in the home, which are

two good, helpful ideas.

Secretary THOMPSON. I think it is good, common sense, Senator.

The CHAIRMAN. OK.

Governor Senator Carper. [Laughter.]

Senator CARPER. Thank you, Senator Chairman Breaux. [Laughter.]

Secretary Thompson, when you were chairman of the NGA, I

think you started something, really kicked into gear something

called Center for Best Practices to identify those practices within

the States which serve as laboratories and showed the way for the

rest of us.

Are there any States that come to mind, including your own, any

States that come to mind where they are doing an especially good

job, a creative job, in approaching these challenges? And how we

might incent those States, how we might spread that word, how we

might build on those successes?

Secretary THOMPSON. There are a lot of States doing a lot of

things, but I am not sure that any one State is doing everything.

Oregon has got some good programs and has taken a leadership

role in long-term care. Minnesota has got some good programs. Arizona has got a family care program like we have in Wisconsin.

Delaware has some programs.

The new Cash and Counsel waivers that were just granted, three

States and one more is coming in. I think it is Arkansas is doing

a good job under Governor Huckabee. I believe it is Florida and Arkansas have got these waivers.

But to point out the best State, besides Wisconsin. [Laughter.]

I would be a little bit hard-pressed to do that. But there are good

examples out there, and we should encourage that.

Senator CARPER. Are there any arguments against the kind of

change in waivers that you have called for?

Secretary THOMPSON. Am I against it?

Senator CARPER. No, are there any arguments—what would be

the arguments against doing what you have suggested?

Secretary THOMPSON. Well, you are going to have competition

from the nursing home industry, for sure.

And you are going to have competition and opposition from people that think the Federal Government should set all of the standards and make all the programs fit one mold.

I just don’t think that is the right—especially in this area. You

have to encourage a lot of things.

21

Louisiana, for instance, under Senator Breaux’s leadership, got a

nice waiver through at the beginning of the year for children. I

think about—if I remember correctly—3,900 children were able to

live at home, if I am correct about that waiver.

You know, if it was just the Federal Government, Louisiana

would not have been able to get that waiver. If we had just, you

know, a one-size-fits-all, Wisconsin could have not tried this Family

Care plan that I think is going to be a model for the country.

Senator CARPER. About a year and a half ago, almost to the day,

my sister and I were down in Florida at my mother’s home. And

my mom, we had just moved my mom to this nursing home, I mentioned earlier, up in Ashland, KY, close to where my sister lives.

And we were going through my mom and dad’s home, packing

things up, a lifetime of memories. One of the things we came across

as we were going through—my dad died about a decade ago.

But one of the things we came across as we went through all

these boxes and things and papers and through the attic and all,

we found an insurance policy. ‘‘What is this?’’ It turned out to be

an insurance policy for long-term care that my mother had purchased several years earlier for herself.

And my mom was one of those people in Florida who got phone

calls all the time from others who were trying to sell her things—

a vacuum cleaner that I remember she paid three times more than

it was worth. [Laughter.]

Getting the roof replaced on the house, which was perfectly fine.

But she bought this long-term care policy, which was now about

to expire but lasted a couple of years.

You talked earlier about providing some incentives through the

tax code to encourage employers to provide and people to acquire.

I want you to just go back and just talk about this a little bit more.

My mom did it without the incentive, even without the encouragement of my sister and me. But it was a stroke of genius on her

part.

Secretary THOMPSON. Yes, it was.

Senator CARPER. But, what—could you go back and talk a little

bit more about the kind of incentives we need to provide through

the tax code for employers to offer and for individuals to take advantage of long-term care.

Secretary THOMPSON. What we need to do, Senator, we need to—

first off, we need to get information out there.

I don’t think we do a very good job of advising seniors, you know,

about what is available under Medicare, what is available under

Medicaid, what is paid for and what isn’t. And to tell them that

it is not—if they really want to do what is necessary, they need to

have a long-term care insurance policy. And we should be doing

more of that.

And, you know, until this committee started holding hearings, I

don’t think that subject was ever discussed. But to use the tax

code, you know, to be able to deduct it.

It is really an investment by the Federal Government, because

that long-term care insurance, as your mother had, it certainly

helps you and your sister, but it is also helping the Federal Government, because if she didn’t have that—or the State governments, through Medicare and Medicaid. It is just an investment,

22

you know, that is going to save the Federal Government future expenditures.

And so we should use the tax code to encourage them. We should

use it so that employers see this is an opportunity for them to give

expanded coverage for their employees, to be able to take care of

their employees, you know, in their retirement years.

These should be the best years for everybody. They should be beyond their worries. They have raised their children, paid their

debts to society. And they should be able to pick and choose where

they are going to live and be able to have the opportunity to have

long-term care insurance that is going to help subsidize and give

them the independence and the quality of life that they deserve

and that you certainly want them to have, Tom.

Senator CARPER. Do you have any idea if a dollar sign has been

put on this particular proposal, or the other one that you laid on

the table, with respect to what was the extra exemption for those

who take into their home——

Secretary THOMPSON. That is for the Caregiver program.

Senator CARPER. Any ideas what the price tag on those might be?

Secretary THOMPSON. I did have that figured, and I—but I will

send it to you, Tom.

Senator CARPER. Thank you.

Secretary THOMPSON. Thank you, Governor Senator. [Laughter.]

The CHAIRMAN. Thanks so much, Governor.

Questions, Senator Craig?

Senator CRAIG. Well, I think most of them have been covered.

Obviously, to create these kinds of flexibilities, waivers can be

granted now to some extent.

Mr. Secretary, are there other legal, structural obstacles within

the law that you think we ought to focus on, beyond creating new

components, as the chairman was delineating, from a tax credit or

deduction?

Have you scanned the law, as it relates to Federal involvement

today, to see what other obstacles might be out there that we could

reform or adjust to deal with this?

And of course with your, you know, Family Care Program in Wisconsin and the flexibility it gave, what might you suggest?

Secretary THOMPSON. Well, it took us 2 years to set the stage in

weekly discussions with the former HCFA, now CMS.

And then, once we had the knowledge base and the discussions

how far we could go, then the waiver only took about 90 days to

get approved, which is fairly rapidly, but it took 2 years of preparatory time to get there.

And the big obstacle always has been is that when Medicare was

set up, it was to pay for nursing care services in a nursing home.

And it never really realized or expected that our elderly were going

to live as long as they did or that there would be other alternatives—respite care in the community. And so the system pays for

the services in a nursing home.

And they now provide for home-care services, but you still get a

waiver for it. And Medicaid does not provide for respite care unless

you get a waiver. And so what you need to do, is you get the waiver.

23

We are very, very much—we are eager to give these waivers, because they allow for new alternatives. You have provided a grant,

you and the Federal Government, of $70 million for States to apply

for this money to make changes, and that is a wonderful program.

I went to the National Governors Conference and told them that

there was $50,000 planning grants and all they had to do was fill

out—and I made up a two-paragraph form that all you had to do

was sign. And out of the 56 States and territories, 54 have already

since February applied for the $50,000. And so we have only got

one territory and one State left to do it.

But it tells me there is a tremendous degree of excitement out

there at the local level that wants to do something in this area.

And that $70 million, I am sure, you know, when they get all their

applications in, is going to go very rapidly.

Senator CRAIG. Sure.

Secretary THOMPSON. And I think we are going to get some innovative ideas.

And I would like to come back to you with some of those ideas

and discuss with you, you know, how we are going to be able to

fund them and how we should be able to distribute this money.

Senator CRAIG. Good. Thank you.

The CHAIRMAN. Secretary, thank you very much. I think you

have been very helpful, and we clearly think your ideas that you

have suggested are very, very positive.

And this begins the dialog, which we do need a national dialog

on this issue, and your presence has been very helpful.

Thank you very much.

Secretary THOMPSON. Thank you.

The CHAIRMAN. We would like to invite up a panel, consisting of

our good friend and former colleague, former Senator David Durenberger, who is chairman of Citizens for Long-Term Care, which I

have had a chance to review their publication and find it to be

most interesting and very helpful; also, Ms. Carol O’Shaughnessy,

who is a specialist in social legislation for the Congressional Research Service, which is always very helpful to us; and Mr. Bob

Blancato, who is executive director of the 1995 White House Conference on Aging.

We welcome all of you.

And, Senator Durenberger——

Senator CRAIG. Mr. Chairman.

The CHAIRMAN [continuing.] Glad to have you back.

Yes, sir?

Senator CRAIG. Before David starts, let me apologize. I am going

to have to step out.

I also received the brochure and read it, and it is an impressive

concept. And I will look forward to further input on it.

But I apologize to the panelists.

The CHAIRMAN. It is a busy day, I understand.

Senator CRAIG. Command calls, but thank you.

The CHAIRMAN. We have several different things going on at

once, as you can imagine, and we certainly understand that.

David Durenberger.

24

STATEMENT OF DAVID F. DURENBERGER, CHAIRMAN,

CITIZENS FOR LONG-TERM CARE

Mr. DURENBERGER. Mr. Chairman, Mr. Mainstream, thank you

very much. It is a pleasure to be here.

Larry Craig, it is a pleasure to see you as well.

Let me begin by thanking you for the invitation to testify. I think

it is very significant. Not as an invitation to me but I think what

you propose doing here, now and in the future has a great deal of

significance.

It is good to be on the other side of the table. I already know the

answers to the questions, as well as the questions. [Laughter.]

Today I am not here representing the 4.5 million Minnesotans,

who actually invented what someone said earlier, ‘‘Republican,

Democrat, and Independent,’’ as in our Governor, but rather, represent a confederation of dozens of membership organizations from

aging, insurance, long-term care providers, disability advocates,

professionals, unions. We call it Citizens for Long-Term Care.

And I am here to briefly, on their behalf, offer a bit of history,

a word of encouragement, and a promise of help.

I have special respect for the members of, and in the role of this

committee, having served on this committee as well as on the

Finance and what is now called HELP Committee. The issues here

are complex, the stakes are high, the competing priorities are

many.

Change comes hard, but this committee is uniquely positioned by

its nature and its history to make the crucial contribution to longterm care reform.

Steven Covey creates two categories, which are instructive in this

context. They are dealing with issues which are urgent and important, and those which are not urgent but important.

As a member of the Senate, I always struggled with the idea that

if something was not urgent, it couldn’t be important. And I came

to realize that a tyranny of the urgent kept me from attending, as

you illustrated by your late arrival here today, to some very, very

important things. It is almost the plague of service in the Senate

and the Congress today.

But one exception has been this committee. Over the years that

I am familiar with, going back to 1979, the people of America have

been extremely well-served by this committee. The leadership of

people like John Heinz, David Pryor, Chuck Grassley, before you,

and now you, Mr. Chairman, is really something that is in the nature of an undervalued national opportunity.

So God knows we need this kind of leadership now on this issue.

Citizens for Long-Term Care is an additional resource to the deliberation of ideas about long-term care issues. I dearly hope that

a rich dialog between all the viewpoints that Citizens represent—

and I will tell you, we represent every one of them will benefit from

your work.

Most of these people used to be adversaries in this business.

They have now found a way to come to make common cause and

to find common ground. And I think Larry Minnix from AAHSA

was in here to see you last week and delivered some of our reports.

We believe that we can be helpful to you, Mr. Chairman and

members of the committee, to create a work product that will lead

25

the Nation to a comprehensive approach to the most important social health and welfare issue of the next three decades.

Long-term care, as Governor Senator Carper said earlier, is either a patchwork or a crazy quilt of services, providers, caregivers,

and other supports that people have to access in times of crisis to

help them manage the crisis.

The greatest failure in long-term care is an antiquated public

policy that impedes personal planning, preparation, and decisions.

On the acute medical care side, we see an industry that has been

defined by advances and innovations in care because public policy

has placed a primacy on developing policies that help people address their medical needs. People are encouraged and they are supported in making advance decisions about financing their acute

care needs, even though they don’t know what they might be.

An overwhelming number of people in America have insurance,

a primary care physician, other important protections against catastrophic medical costs. And the medical profession has always had

a financial incentive to innovate. Public policy does not do the same

thing for long-term care.

In Minnesota, 95 percent of our citizens have health insurance;

94 percent do not have long-term care insurance.

Too often, people are forced to make their decision about longterm care in a crisis. When a loved one is faced with a need for

supportive care, we find that people are unprepared to address the

issues involved.

It happened to me with my dad; it happened with my mom.

They are unaware of what the most appropriate type of care is,

where to get it, and what other services might be available.

Finally, they don’t understand how to finance the needed care,

because they assumed it was paid for by Medicare, and they fail

to address the potential need for long-term care. People are forced

to make critical decisions in a time of crisis.

With all kinds of honorable intentions, government then steps in

to assist people, and we just heard that in the testimony. Whether

it is Federal or State government, government steps in to assist

people who are unable to pay for care themselves.

But in the end, the recipients, in a sense, become victims, not

only of poverty and a spend-down, but of the system which takes

away their ability to be anything but.

The goal too often is relief, not recovery. For many, especially

aged persons and families, the disablement of the spirit is as tragic

as the disability of Alzheimer’s, spinal cord injury, or cerebral

palsy.

Long-term care has been based on such a public assistance or

welfare model for too long. Society does not want to abandon the

disabled or the elderly. Our members in CLTC who represent people with disabilities recognize their members’ need for it, but they

believe there can be a better system.

The compassionate alternative is developing an insurance-based

system that supports all people in times of crisis.

And just for purposes of record, Mr. Chairman—I see my time

has expired—I need to, not to remind you so much as probably to

remind others that we have been here before.

26

Part of my comments relate to the dependence on State governments in this joint Federal-state responsibility. Yet Americans are

Americans wherever they may live. I have never been able to understand why their choices are limited by their place of residence

when it comes to long-term care.

President Reagan recognized that in 1982, and he proposed as

part of his New federalism program the Federalization of the Medicaid program. And you can imagine the consequence if we had

done that.

In 1985, Ron Wyden and I and John Chafee introduced long-term

care insurance tax reform.

In 1987 and 1988, as you will recall, we did the Medicare Catastrophic Act, and we included in there changes in the social insurance approach to long-term care.

In 1990, the Pepper Commission said you can’t do this on welfare, you cannot do this on savings; you have to build yourself a

social and a private insurance system.

So, Mr. Chairman, I cannot adequately express on behalf of the

millions of people that are represented by our 63 association members how grateful we are to you personally, to your staff, and to

the members of this committee for beginning this national dialog,

which I understand you will probably take across the country over

time. And we are all pledged to make it successful. Thank you.

[The prepared statement of Mr. Durenberger follows:]

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

The CHAIRMAN. Thank you, Senator Durenberger, very much for

your statement, but also for your long and continued involvement

in these types of issues. It is encouraging to see that once you leave

this place, you can still make a big difference. And we thank you

for that.

Mr. DURENBERGER. Thank you.

The CHAIRMAN. Ms. Carol O’Shaughnessy.

STATEMENT OF CAROL V. O’SHAUGHNESSY, SPECIALIST IN

SOCIAL LEGISLATION, CONGRESSIONAL RESEARCH SERVICE

Ms. O’SHAUGHNESSY. Senator Breaux, good morning, and thank

you for the opportunity to testify before you today. I have had the

pleasure of working with the staff of the Senate Special Committee

on Aging for many years.

Today, I will give an overview of long-term care consumers, providers, and spending, and will summarize my written statement.

Long-term care refers to a wide range of supportive and health

services for persons who have lost the capacity for self-care due to

illness or frailty.

You had asked about what kinds of services comprise long-term

care. Services range from care in nursing homes, assisted living,

and boarding care facilities to home and community-based services

through home health and homemaker services, adult daycare, and

home-delivered meals.

The cost of care is related to the type, intensity, and duration of

care that is needed by an individual, as well as the availability of

informal supportive services from family and friends.

Researchers and policymakers have debated the question of

whether or not home and community-based services are cost-effective. This question is very complex, and many factors must be considered, including how best to target home and community-based

services, the effective mix of services to divert persons from institutional care, and how to assist informal family caregivers in their

responsibilities.

I will say just a few words on a long-term care population. About

9 million adults receive long-term care assistance, but the vast majority, or 80 percent, are in community-based settings, not in nursing homes.

Persons aged 65 and older represent about 60 percent of all

adults who receive assistance, but the need for long-term care affects persons of all ages.

About 3.5 million adults receiving care are under age 65.

The CHAIRMAN. Let me interrupt you, if I can.

You said, 80 percent of the 9 million are in nursing home

facilities——

Ms. O’SHAUGHNESSY. Are in home and community-based settings, not in nursing homes.

There is a disproportionate expenditure. We are spending so

much money on institutional care, but really there are more people

in home and community-based settings, receiving care mostly from

family and friends.

The CHAIRMAN. I had heard it was even higher than that. I had

heard the figure 95 percent.

69

Ms. O’SHAUGHNESSY. Well, this data comes from the most recent

data from the national interview survey on disability.

The CHAIRMAN. OK, please continue.

Ms. O’SHAUGHNESSY. OK.

About one-third of elderly persons who receive care at home and

in community-based settings have severe impairments. That is,

they have limitations in at least three activities of daily living,

such as bathing, dressing, toileting, or getting around inside the

home. And without home and community-based support, these persons might require care in nursing homes.

The likelihood of needing care increases dramatically with age.

Over half of persons age 85 and older receive long-term care assistance.

However, regardless of age, persons are more likely to be in community-based settings rather than in nursing homes. And there is

a chart in the written testimony that displays this for you, chart

1.

The demand for long-term care, as we heard from the Secretary,

is expected to grow substantially in the future and will be driven

by the aging of the baby boom generation. Estimates show that the

number of elderly persons alone who need long-term care assistance could grow by 35 percent over the next 20 years and by 82

percent over the next 40 years. And in the testimony, chart 2 displays the growth and the need over the next several decades.

Rapid growth in the number of people over age 85 presents special challenges, because they have the greatest risk of needing care.

And demand will also increase as a result of the recent Supreme

Court decision in Olmstead and advocacy efforts on the part of

younger persons with disabilities.

These factors will present challenges for some long-term care

providers, who even now face difficulties in meeting demand for

services in certain areas.

I just want to make a point about the role of families and informal supports. Most long-term care assistance is provided by unpaid

family members, and almost 60 percent of the functionally impaired elderly receiving care rely exclusively on informal, unpaid

assistance.

Many have argued that while public programs should not and

cannot replace family caregiving, targeted initiatives to assist family caregivers are needed.

A number of Federal programs—and I have displayed them in

the testimony—support persons with disabilities. However, none

focus exclusively on long-term care.

It is as Senator Durenberger and the Secretary mentioned, is a

patchwork quilt of programs.

Many observers believe that the current system is flawed because of its overreliance on institutional care, the impoverishment

of many persons as a result of paying for care, the heavy reliance

on informal caregivers, and the uneven availability of home and

community-based services.

In terms of spending, the Nation spent $134 billion on long-term

care in 1999. And this represents about 13 percent of total personal

health care expenditures and amounts to slightly more than NaVerDate 11-MAY-2000 13:45 Oct 05, 2001 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 74686.TXT saging1 PsN: saging1
70

tional spending on prescription drugs. And in the testimony, that

is displayed on chart 5.

Of the total long-term care spending, 67 percent is for institutional care and one-third is for home and community-based services.

And if you look at the chart on your far right, it displays the

sources of long-term care funding. We see that Medicaid is the

major payer. Personal out-of-pocket spending represents about 25

percent, with Medicaid at 44 percent. And Medicare and private insurance play much smaller roles.

I will say a few words about Medicaid. Medicaid’s role, as we

heard this morning, is primarily through its financing of institutional care. And of total Medicaid spending in fiscal year 2000, 73

percent was for institutional care and just 27 percent was for home

and community-based care.

And if you look at the second chart, you see that Medicaid’s longterm care spending is still dominated by spending for nursing home

care, even though home and community-based services spending

has risen over the last decade very rapidly. In fact, home and community-based has risen seven times as opposed to about a doubling

in institutional care expenditures.

Many States consider their home and community-based waiver

programs, that the Secretary mentioned as key components in developing long-term care systems.

And despite the rapid growth, however, many analysts consider

the program to be only a partial step in providing comprehensive

long-term care services because of the restrictions on eligibility and

limitations in service availability throughout the Nation and within

individual States.

We have done some analysis of fiscal year 2000 expenditures and

found that at least half of the States spend most of their money

on institutional care in fiscal year 2000. Twenty States spent 75

percent or more of their Medicaid dollars on institutional care, despite the rapid increase in the waivers.

Changing the way long-term care is financed has drawn attention of Congress for more than two decades, and proposals have included both incremental and large-scale approaches. A wide range

of proposals has been advanced including social insurance, the tax

incentives that you mentioned, grants for expanding home and

community-based services, and combinations of these.

To date, Congress has taken incremental approach. Obviously,

the significant challenge for Congress is to reconcile the cost, as

well as the relative roles of public and private sectors, in ways to

assist family caregivers.

Thank you, Mr. Chairman, and I would be happy to answer any

questions.

[The prepared statement of Ms. O’Shaughnessy follows:]

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

The CHAIRMAN. Thank you, Ms. O’Shaughnessy.

Next, Bob Blancato.

Bob, welcome. Welcome back.

STATEMENT OF ROBERT B. BLANCATO, EXECUTIVE DIRECTOR, THE 1995 WHITE HOUSE CONFERENCE ON AGING; AND

PRESIDENT, MATZ, BLANCATO & ASSOCIATES, INC.

Mr. BLANCATO. Mr. Chairman, thank you. Nice to be here.

I commend you for calling these hearings on long-term care and

getting ready for the boomers. You are right, we do need a plan of

action. You will have my complete statement, so let me make five

quick points.

First, this is not a new issue, but there is new urgency. In 1977,

I began work with the House Select Committee on Aging. We held

hearings on long-term care. Fourteen years ago, our chairman,

Claude Pepper, went to the House floor with a long-term care

amendment.

In 1994, to prepare for the White House Conference on Aging, we

went to the American people to set the agenda. Their top priority

issue was comprehensive health care, including long-term care.

And at the conference, five of the top 10 resolutions were on longterm care.

Fourteen years ago, long-term care was an issue with some foresight; today it is one of urgency. The reasons are many.

Demographics is certainly one. Today our medium age is the

highest ever at 35.3. One key reason: Boomers between 45 and 54

grew by 49 percent between 1990 and 2000.

Second, Boomers and long-term care, public education, and personal experiences: Long-term care is not a mainstream issue compelling enough boomers into action. Why? In part because boomers

delayed planning for their future, in part because of denial about

aging.

Also, boomers have a false sense of security that Medicare will

take care of their long-term care. Public education and awareness

efforts must be intensified and improved. Before we tackle the complicated issues of financing and coverage, let’s get everyone on the

same page about what long-term care is, who pays now, and how.

I hope that the ongoing work of OPM dealing with the LongTerm Care Security Act will help educate boomers. This committee

should also look at the many private groups who are doing great

work in consumer education on long-term care. It must be a priority in the plan of action.

Maybe we just need a message. Americans, and especially

boomers, have always responded to messages. One message is, you

never know when.

My example, I have been a boomer all my life. I have spent more

than 25 years in national aging policy, including long-term care.

When did I focus on long-term care in a personal way? One year

ago, because of a long-term care health crisis affecting my mother.

My take away? The cost of care for her in 2001 dollars is staggering. What about 20 years from now?

Too many boomers wait for the crisis to land on the doorstep.

That is wrong. Crisis planning is an oxymoron.

88

Third, a call to action with a timetable: Let’s set a timetable to

move long-term care legislation in 2001. Top on the list is the bill

you mentioned, S. 627, the Long-Term Care and Retirement Security Act.

As president of Americans for Long-Term Care Security, we

strongly support this bipartisan bill and commend you, Mr. Chairman, for being an early cosponsor.

This is the kind of public-private incentive package that is needed. ALTCS views all the main pieces of this bill as critical; they

must all stay together and be passed together.

Also this year, let’s inventory all Federal programs in long-term

care. How many are there? Are they working? Can we achieve costsavings by reducing duplication? What successes can we build on?

Are there State and Federal programs that have produced what we

really need, long-term care service systems with a continuum of

care?

And as work on comprehensive Medicare reform continues later

this year, let’s move to a Medicare that does what boomers want

it to do: provide more long-term care coverage, provide more preventative coverage.

Fourth, family caregivers are key: Let’s keep emphasizing family

caregivers in all future long-term care policy. It was a strong start

in 2000 with the National Family Caregivers Support Program.

Long-term care affects many constituencies—boomers, seniors,

women, families, persons with disabilities. But the crosscutting

issue, especially for boomers, is family caregiving.

We need to build more policy around caregivers. And if we do,

we will get more of a buy-in from boomers.

It is not only a health issue, it also is an economic issue. In 1997,

a MetLife study revealed that caregiving costs American businesses

as much as $29 billion a year. That is a wakeup statistic.

And five, long-term care, a Federal investment: Future long-term

care policy decisions will take some political courage. It is easy to

score a bill, get shocked when it is high, and walk away. But with

some long-term care legislation, the question is, is it in fact an investment that will achieve future savings, especially for Medicaid?

You know, next year we celebrate the 30th anniversary of the

Older Americans Act nutrition programs. They were set up to help

at-risk seniors from having to be institutionalized because of poor

nutrition.

Has it worked? Absolutely.

Seniors have been in the congregate or home-delivered meal programs for 20 years or more. This means they are still in their

homes, still in the community, and not in nursing homes.

That was a new appropriation in 1972. It was a good investment.

The same thing with funds spent on research, especially Alzheimer’s research. These are good investments.

Our goal should be long-term care that features universality, financial security, service availability, a real commitment to quality

care, and a sensitivity to the needs of different constituencies. And

it should specifically change the existing funding bias of Federal

programs toward institutional care.

The time to act is now. Other timetables are not going to wait.

In 2010, retirees grow from 13 to 20 percent of our population. And

89

as you well know, in 2011, the first wave of boomers turns 65 and

are Medicare-eligible.

Mr. Chairman, certainly when it relates to boomers, long-term

care, it may not be our issue today, but it could be tomorrow.

Thank you very much.

[The prepared statement of Mr. Blancato follows:]

90

91

92

93

94

95

96

97

98

99

100

101

The CHAIRMAN. Thank you, Bob, very much.

I thank all three of our panelists for the beginning of what hopefully will be a national dialog on this issue, to better educate the

folks about the need for long-term care.

Bob, let me ask you, I mean, you have been a leader in this. Do

you have long-term care insurance?

Mr. BLANCATO. I do.

The CHAIRMAN. Congratulations.

Mr. BLANCATO. I just turned 50, I have to admit. That proves I

am not in denial about aging. [Laughter.]

But I did. I researched it, and I purchased it. And part of it was

motivated by the fact of my mother’s situation; they do not have

long-term care insurance, and the cost of care is quite staggering.

The CHAIRMAN. Let me ask anyone on the panel, is there a market out there now? Or is it an infant market? Or is it something

that you would find companies are interested in promoting and

selling? Or is it not a good market as is currently structured?

If the concept is, like we are talking, in terms of prescription

drugs under Medicare, is to have the government help pay for the

premium to allow people to buy coverage insurance in a competitive market, can there be a market for long-term care insurance

that would be viable and workable and affordable?

Mr. DURENBERGER. Well, I will just make one comment, because

our recommendation was a restructuring of social insurance and

the incentives for private insurance.

We also made the decision that, as it relates to a previous question that you asked, it is pretty hard for Americans to go to some

other country. It is OK to learn from other country’s experiences,

but we really have to use an American system.

And in America, private insurance combined with social insurance is the tradition. It is usually bought at work, where you get

earnings and employee benefits and so forth.

So if you look at it from that standpoint, the places to look probably are at experiments which have taken place, I think, largely at

the State level. I know in Minnesota the legislature authorized the

State government, for employees of State government, and some

other public employees—to offer long-term care insurance. The employee would have to pay the premium.

The response was about twice what they expected. I think they

expected something like 5,000 or 6,000 people. And they ended up

with 12,000 or 13,000 people enrolling in the program. I think 3M,

on the corporate side, has had a similar experience.

But one of the things I am sure we find out, and you will find

out from OPM, is it takes an awful lot of analysis of what is longterm care insurance and what is long-term care insurance. And

that is one of the roles that an employer, as in a 3M, an employer

as in a Minnesota public employees, at the current time I think has

to play to sort out what is real need and what is the product that

is going to meet that need.

The CHAIRMAN. It may be that we are going to have the insurance folks come in and testify.

But when they provide long-term care insurance, what are they

providing the coverage for? Is it for coverage in a nursing home or

is it also in some of these alternative settings?

102

Bob.

Mr. BLANCATO. They’re beginning to cover a wider array of services than just nursing homes, assisted living coverage and some

home-care coverage.

And I think there is some merit in getting the industry here to

talk about the market, because the market is changing, the market

is growing.

The question is, is it growing fast enough? Maybe in their mind,

it isn’t. But I think it is growing in the sense that there is more

interest in it.

But I think that the real question is involved in your question.

The element of choice is going to be key to that market growing,

especially for boomers to go into it, because this is a different generation.

We are used to having more options and choices. And this is

going to be necessary for that industry to do. And I think a lot of

them are stepping up to do it.

But I think, as the Senator said, what happens in the interim

period—of the Federal employees, military personnel long-term

care legislation, and how OPM chooses the carriers and goes

through the process of selecting them, and the education process

that is involved—is going to be immensely important to the whole

future of long-term care insurance in this country.

The CHAIRMAN. Carol, do you have a comment?

Ms. O’SHAUGHNESSY. If I could, yes, if I could add something to

that.

It is a very fast growing market. I mean, I think the last data

I saw was something like 6 million policies have been sold. One of

the issues to look at is the issue of affordability of the premiums.

Some recent data from HIAA show that the average income of persons who purchased long-term care insurance is around, I think,

$42,500; in 1995 it was $30,000. And persons who purchase longterm care insurance tend to have higher assets.

So even if you were to increase the number of policies sold, one

would have to look at the people at the very low end of the income

spectrum, in terms of how to protect their income and offer protection for them as well. Affordability is the main issue.

The CHAIRMAN. We have Medigap insurance for prescription

drugs. Unfortunately, only the people who buy it are the people

who have to use high volumes of prescription drugs. Therefore, obviously, the cost is very, very high.

Is that the same thing that is true for long-term care insurance

now, do we know?

Ms. O’SHAUGHNESSY. In terms of?

The CHAIRMAN. That you only buy it—of course, I would think

that if you live long enough, you are going to need some type of

long-term care. It is a question of whether people believe that. And

younger people tend not to believe that, so you only buy it right

before you need it. And obviously it becomes very expensive.

Is that correct?

Ms. O’SHAUGHNESSY. Well, the recent data on the buyers of longterm care insurance show that there are certain characteristics and

demographic characteristics. I think the average age is 67. People

tend——

103

The CHAIRMAN. I mean, buying it at 67 will tell you something.

Ms. O’SHAUGHNESSY. Right. Exactly, exactly.

According to HIAA, people who are planners are more likely to

buy long-term care insurance. It is an issue for planning for the future.

It is not like we know we have Social Security, and we have that,

but what do we have to do to plan for our future needs.

The CHAIRMAN. It is an educational problem, too; I mean, I think

that what we have here is, I think, all of you have said that, and

the Secretary has said it. And not enough people know that they

are going to need it and realize they are going to need it.

And when they think they are going to need it, they think that

Medicare and Social Security pays for it.

Ms. O’SHAUGHNESSY. That is true.

The CHAIRMAN. And then, that is a real educational problem that

hopefully this Congress and this committee can help.

How do we get people to move into this market, Dave, without

just passing a long-term care insurance mandate?

I mean, the average age of people buying this is at 67, I mean,

that really is a problem right there. We ought to be buying it, you

know, just as we buy car insurance or anything else or health insurance, because it would be a lot cheaper if more people were in

the pool, obviously.

I mean, any thoughts about how we encourage people to get into

this much quicker?

Mr. DURENBERGER. I would like to make two observations. They

are both personal, as opposed to Citizens for Long-Term Care, because we aren’t at this point in our common ground yet.

First, I believe strongly that it is difficult to, in today’s confused,

crazy quilt, patchwork, whatever-it-is marketplace, to offer as an

affordable a product as could be offered, with all due respect, no

matter how good they are at it.

If you clean up the system, they are going to be able to offer—

the insurance industry will offer you a much more affordable product.

One of the important things there, as you and I have both gone

through in the early 1990’s, is what role is the social insurance system going to play? I mean, what if we knew what Medicare was

going to provide for at least 5 years and not, change benefits, coverage and eligibility as in subacute care every year?

How can you write a good, private insurance policy if you don’t

know precisely what the national policy on social insurance is going

to be? That is the first part of it.

The second one is this, and it is just a question I have that only

a few people can answer that I would like to ask the industry, and

that is: Why couldn’t you sell me or my children a disability policy

when I am 21, on my first job, that I can carry until I am, in my

mother’s case, 89 with Alzheimer’s? We have heard a lot of Alzheimer’s here today. I don’t know that that is unusual.

But why can’t I buy a policy at 21 that I can carry all the way

through? When I am young, what it does is replaces income to facilitate the growth of my family, because that is what I am doing

as an earner. When I am older, it helps to protect my assets.

104

That, I think, on the private insurance side, is a key question

that needs to be asked.

The CHAIRMAN. Well, you know, we are talking about, right now, about adding $300 billion in the budget-allocated amount to reforming Medicare by providing coverage for prescription drugs.

That is a huge amount over the next 10 years.

If we were to all of a sudden require that Medicare covered longterm care with some type of an insurance plan, like we are talking

about for prescription drugs, do any of you have a ballpark figure

about what we would talk about in terms of how much?

Ms. O’SHAUGHNESSY. Well, I guess cost estimates will obviously

depend on the range of services and numbers of people who would

be covered and the types of services. So it is hard to——

The CHAIRMAN. You say we spend; we spend more on long-term

care now than we do on prescription drugs.

Ms. O’SHAUGHNESSY. Slightly more than on prescription drugs.

One hundred thirty-three billion on long-term care.

The CHAIRMAN. So the question then becomes, is that a ballpark

cost for what it would cost us to do long-term care under Medicare?

Ms. O’SHAUGHNESSY. Well, most of that is from the Medicaid program. A small amount is from Medicare. It depends upon how you

shift those resources.

Mr. DURENBERGER. Mr. Chairman, you might take George Mitchell’s proposals from back in 1993, 1994, 1995, something like that,

and run them by CBO. And I think you will get a part of that.

The CHAIRMAN. Yes.

Mr. DURENBERGER. I forget which one he did, but it was like

Medicare is the catastrophic after 18 months and——

The CHAIRMAN. Well, I think that this has been very helpful.

And I think that this is a busy time for the Congress. We are

trying to finish up the patients’ bill of rights bill by today or tomorrow afternoon, and adjourn for the Fourth of July recess.

But this has been very helpful. All three of you are really expert

in this area, and I thank you for your participation. And we are

going to call upon you, if it is all right, in the future as we continue

this national effort and this national dialog.

Thank you very much.

This will conclude this hearing.

[Whereupon, at 11:53 a.m., the committee was adjourned.]

Æ