| The Roosevelt Institute’s Jessica Forden on long-term care

| Shalini Kathuria Narang

| People are considered to need long-term care when they have trouble with daily functioning, often measured by some combination of difficulty with activities of daily living and instrumental activities of daily living, or cognitive decline. A new report titled How Long-Term Care Costs Drain the Middle Class and Deepen Intergenerational Wealth Inequality presents the economic challenges that often accompany this situation. (Learn more about the report.)

In this interview, author Jessica Forden—a PhD candidate in economics at The New School and a research fellow at the Schwartz Center for Economic Policy Analysis—discusses her findings.

Can you speak about the forgotten middle emphasized in the report?

Part of the reason why it [the report] focuses on the wealth impacts of long-term care costs, particularly to middle class families is to try to think about some of the macro level distributional impacts of long-term care costs, beyond just the individual narrative. The report is looking at how median household wealth amongst different groups is sorted. We look at low income, middle class and the top 25% and how that changes in a 20 year period—10 years before and 10 years after the onset of severe care needs. (Severe being defined as two or more activities of daily living difficulties, which is the typical threshold that’s used in Medicaid for determining an institutional level of care, meaning that you’re eligible to go to a nursing home or to get care covered in a home or community-based setting.)

The thing to highlight the most is, when we look and compare the middle class to the top 25%, what we’re seeing is that after the onset of care needs, the middle class faces a permanent wealth reduction. They end up at just about 42% of their original level, whereas for the top quartile of earners, they are almost back up to 100%. What we’re highlighting is a differential capability between folks in the middle and folks at the top [income bracket] to weather these types of costs. It’s part of this longer-term trend that we see of rising wealth and income inequality. The middle class is often called “the forgotten middle” when we talk about long-term care costs. The report overall is trying to make this macro level argument of what are some of the distributional consequences of a system that requires individuals to self-insure against their long-term care needs and in their retirement.

Can you elaborate on individual versus institutional responsibility?

We’re asking individuals to self-insure, when the fact is, even the folks who get paid to predict the cost, like the folks who work in the long-term care insurance industry, do not know. I’ve heard so much anecdotal evidence from folks of plans going back and raising premiums and allowing folks to get off plans or to just pay the increase in premiums, because they underestimated how much the long-term care was going to cost. If the folks who are getting paid to assess that risk themselves have underestimated the depth of those costs for the insurance plans, I don’t know why we would assume that individuals are going to sufficiently have either the knowledge or the understanding to assess that risk themselves. When we’re asking individuals to self-insure, such as by going through savings like 401(k), Flexible Spending Accounts, Health Savings Accounts, that’s not necessarily the best system. The part of this broader issue is asking individuals to self-insure, as opposed to treating this as a socially insurable risk that we need to think about at a more national or federal level.

Can you give me some examples of the anecdotes that you mention?

Anecdotal stories are about the limitations of the private long-term care insurance market. I spoke to this woman at an older worker center in New York who had long-term care insurance. Her husband had had two strokes. He was a very big man, and she was a very petite woman. It was very hard for her to provide the level of long-term care needs that he had, in terms of helping him get in and out of bed, get to the toilet, etc. They needed 24 hours or 40-hours-a-week long-term care help. When she went to draw on the long-term insurance policy, she found that she could only draw if she wanted Home and Community-Based Services. She wanted somebody from a home agency to come into the house and help her with those tasks. She had to go through one of two agencies that the insurance company worked with. Both of those agencies had rates that were higher than the market rate or higher than another rate that she could find at an agency that wasn’t affiliated with the insurance policy. What she found was that her coverage didn’t cover enough hours at the higher rate that she needed the long-term care coverage for her husband. She was in this bind where she could either go through and self-pay for long-term care at a lower rate, or just get part time care, and try to figure out between her and her adult daughter how to cover the gaps in ways that were sufficient.

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The long-term care insurance private market is indicative of this difficulty of predicting what the actual risks are for long-term care and how much that’s going to end up costing. It’s a very difficult market to navigate yourself, if you’re an individual, because to totally understand what the coverage is going to be, you might not actually know until you’re in the process of trying to get that coverage, and that’s when you find out. We have a system that requires self-insurance against a problem that even at the expert level is very difficult to get a full grasp on.

State governments have stepped up. Can you elaborate on what you find is being done right?

I think states are doing some good experimentation. It’ll be very interesting to see how the WA cares program (a state-level long-term Care Insurance Program in Washington state) works out. The research in the brief points that any sort of socialized level of help, getting that coverage is going to be helpful. I also think California is interesting. They have IHSS (In-Home Supportive Services). It’s a much more direct to worker or direct to agency model. There’s fewer opportunities for big private equity-backed companies to get involved in that system. Another avenue to explore is how California administers that program. It’s also interesting in the way New York has expanded their consumer directed program. It’s been a bit controversial recently, with the consolidation of the fiscal intermediaries. 

We need more state-level experimentation before we see what actually can work at a larger scale. What the federal level policy has been in the past has been sort of national long-term care insurance, or making home and community based services and institutional care available under Medicare. I think those are both really interesting ways to think about how we can socialize some of this risk management. It’s hard to say whether it’ll be good or not. That’s why I think the WA Cares example is going to be so important to see what those longer term outcomes are of a state level, socialized long-term care insurance policy. 

Some closing thoughts?

The report is so heavy in micro-level data, I really want to emphasize that part of the goal of the report is to ask, What are the macro-level consequences?. It’s a system that primarily relies on unpaid caregivers, and then secondarily, relies on individuals to self-insure, to cover the costs of paid caregivers, if we have support for the bottom, as we should, and we have folks at the top that can pay. We have this forgotten middle. It’s very important to think about the macro-level tendencies that arise from individual-level-oriented systems.

Shalini Kathuria Narang is a Bay Area-based independent writer and software professional. She writes about health, wellness, education and technology.