THURSDAY, September 8, 2005
Session 3: Ethical Caregiving in
Our Aging Society III: Public Policy Perspectives
Robert Friedland, Ph.D., Director, Center for an Aging Society,
Monsignor Charles Fahey, Director, Third Age Center,
CHAIRMAN KASS: Thank you very much. Apologies to our
guests for this tardiness.
We reconvene on a session entitled "Ethical Caregiving in
our Aging Society: Public Policy Perspectives." We move in
this session from clinical practice to public policy. Once again,
we have invited two people very well-versed in the public policy
questions, both in terms of scholarship and in terms of practice.
Both of them have seen the recent draft of the report and have
been invited to reflect as they wish on our working relation to
ongoing activities and practices, possible suggestions for further
development and extension of this work, but also to help us identify
key public policy areas in need of attention and reform that we
might not have dealt with adequately at all.
We are very pleased to welcome Professor Robert Friedland, who
is the Director of the Center on an Aging Society, also Associate
Professor in Health Systems Administration at the School of Nursing
and Health Studies at Georgetown University, an economist by training
as I discovered. It's not absolutely clear from his writings
that he is only an economist, but he is an economist and then some.
We are also very pleased to have with us Monsignor Charles Fahey,
who is the Director of the Third Age Center and Professor Emeritus
of Aging Studies at Fordham University. As you can see from the
short and unduly modest biographical sketch that he has provided
us with, he has been in this business for a long time, was a charter
member of the Federal Council on Aging and was appointed by Presidents
Nixon, Ford, and Carter, the last of whom made him chair of this
council. He has done every conceivable thing. He has been working
on these matters.
Welcome to you both. We are grateful for your presence. The
procedure will be as follows. We will start with Professor Friedland,
and we will ask Monsignor Fahey to speak. If there are questions
for information in between the talks, we can have them then. Otherwise
we'll save the general discussion for the end.
Thank you very much. Professor Friedland, please?
DR. FRIEDLAND: Thank you very much. I am really delighted
to be here on a personal level. And from a professional level,
it is wonderful that you have decided to add this to your list of
things that you have taken on. This is an area that is neglected.
And it's terrific that an august body like you has decided to
think about these issues. As you know as well as I now, these are
very difficult issues.
So I would say that most of the public policy attention on long-term
care has really been about the formal part of the care. And you
have taken on the informal part. The formal care.giving is approaching
$200 billion per year. And maybe three-quarters of that is for
institutional care, nursing home care.
The specific concern is really the sustainability of Medicaid,
which is sort of getting all of the political attention, which currently
finances almost half of paid long-term care services.
In a recent report on Medicaid reform, the National Governors'
Association concluded that "Medicaid can no longer be the financing
mechanism for the nation's long-term care costs and other costs
for the dual eligibles."
The dual eligibles are in many ways the most medically needy of
our society. They are people who are on Medicare and whose incomes
and assets are so low that they're also eligible for Medicaid.
And, believe me, they need both because they need a lot of long-term
care and they need a lot of prescription drugs.
And, heretofore, Medicare didn't cover prescription drugs.
And so Medicaid was critical to this population, very small population,
six million or so people. And, yet, it has been a major concern
for governors worrying about their Medicaid budgets.
Certainly the lay of the land has been changed a little bit or
altered, if you will, by the Supreme Court finding in Olmstead,
has affected and in some sense added important ammunition, if you
will, to the efforts of states to expand home-based community services.
In fact, they were moving towards doing it anyways, but they have
accelerated that effort.
Most long-term is not provided in a nursing home. Most long-term
care is not paid-for care. Most long-term care is provided by family,
friends, and volunteers. It's provided mostly in people's
homes, where people live. And a relatively small percent of the
long-term population lives in an institution. Yet, as I've
said, institutions represents three-quarters of the long-term care
But in some ways, as difficult and fragmented as the system is,
really, these are the best of times that we have ever had in the
system. There has been tremendous growth in public money for long-term
care generally. In the '90s, for example, from 1991 to 2001,
the Medicaid spending on long-term care almost doubled, from 44
billion to 76 billion.
There has been a tremendous growth in home and community-based
care; in particular, as states try and rebalance their systems.
The systems are out of balance in this sense. All state Medicaid
programs must cover nursing home care. So it is a mandatory service.
They are not obligated to come home and community-based care.
When they do do it, they can set it up as a program across the state.
Only a few states have done that in personal care services. Most
states have done it through what is called Medicaid waivers, waivers
meaning some change, asking for permission to do something different
than in the rules.
So because the institutional care is covered, there has been a
bias in the system because help was available through the institution
but help was not available outside the institution. So there have
been tremendous efforts on the part of states to move care out of
the nursing home, particularly when they think, if they think, which
they all do — and I'm not sure it's true, but they
all think that it's cheaper outside of the nursing home.
What is true, though, is cheaper outside of the nursing home is
that you can buy smaller increments of care. You can buy a few
hours of care, instead of having to pay for the whole day of care
in a nursing home.
But this rebalancing has meant that, even in this period from
1991 to 2001, the expenditures in home and community-based care
in Medicaid have more than tripled, from 6.2 billion to 22.2 billion.
Now, I will point out that makes a big difference in the community
infrastructures, but most of those programs are waiver programs,
meaning that the state doesn't have to open it up for everyone
in the state. It could be set for a special population in the state.
It could be set for a special area in the state. That is what the
waiver means. It doesn't have to be statewide. It doesn't
have to be population-wide.
Most of that money, 75 percent of that money, in these home and
community-based waiver programs are actually for the mentally retarded
and developmentally disabled population. A very small percentage
of it is for the population that you focused on, which was the older
long-term care population, unless they fit into one of those other
All states have reorganized or looked at or reaffirmed or at some
level looked at how they organize the information referral systems.
The money from the Older Americans Act has helped to do that.
And persons at greatest risk, people basically 85 and older or
75 and older, had on average more children from which to tap for
assistance. They are, of course, the parents or soon to be the
parents of the baby boom. And so by definition, they had more babies
per woman. So these might be in some sense the best of times, even
though there's a lot we can say that is difficult and wrong
and inappropriate in the system.
It's fragmented. It's inefficient. There are a lot of
aspects that are unfair. No one is happy with the current system,
you know, not the governors, not the Medicaid directors, not the
federal officials, not the families, not the caregivers. There's
just nobody happy. It is much too victim-based.
There is not a pooling of either the access to care or a pooling
of the financial risks, like what to do and how to find care and
never mind how to pay for it, even if you're not going to pa
for it, even if it's going to be through family arrangements,
what to do, how to set it up. But there is just not enough risk
sharing in that enterprise of learning what to do.
Certainly people are living longer with chronic conditions and,
hence, face an increase in their lifetime risk of becoming dependent
Informal care is critical. I would say it's critical in all
aspects of health care. No one is in charge of the long-term care
system, at least, rightly or wrongly, in the medical system. There's
someone in charge. It's the physicians that are in charge.
They're even in charge of the hospitals that they don't
run. You know, they have a lot of authority. And that is an important
glue that holds things together.
But health care, even health care, even in the confines of the
six walls of the hospital, it can be pretty chaotic. I would call
it maybe organized chaos, but even in those situations, families
find that they need an ombudsman, someone in the family to make
things happen, even in the confines of that walled environment in
which the physician is in charge. long-term care is just chaos
underscored by anxiety and guilt.
So I would say that you need a caregiver in the hospital setting.
And the further away you move from a hospital and certainly as you
step away from where the physician is in charge, it becomes even
more fragmented and more difficult to negotiate.
So the primary caregiver is critical in this arrangement. The
primary caregiver is the one, usually the one, could be two, but
the one who takes the responsibility to organize the care. Maybe
they provide all the care. Maybe they don't provide all the
care. But someone has to be in charge of organizing the 24 hours,
especially if you're talking about an Alzheimer's patient,
that one needs to cover for.
They're often the one who provides the most care. It's
usually the spouse or adult child, more likely to be the wife, daughter,
or daughter-in-law. The importance of caregivers is directly related
to our failure as a nation to focus on the risks in a very serious
We need caregivers in the health care system. And, yet, we recognize
the value of the medical care system. And we have a very elaborate
system of referrals and moving patients from one part to the other.
And, still, it's messy, but we don't have that in the long-term
care setting. And so we have put all of that pretty much on the
And not facing this risk does not diminish the need or the cost
of the care, it's there. We pay for it other ways. We pay
for it in more suffering. We pay for it in more anxiety. We pay
for it in the well-being of the caregiver. We pay for it in the
well-being of the person receiving the care.
Everyone is at risk of becoming a caregiver, but access to information
and services is not even. Sometimes who you ask as the information
you are going to get will matter. Actually, very often the physician
is not the right person to ask. They may not know, but it's
the right starting point.
There is a very steep and uncertain learning curve. It's
amazing to me how many of my colleagues enter this who are professionals
in this field don't know what to do when it's their own
parent. It is, in fact, I suspect because of the other aspects,
but it's also really making these decisions now. So there is
a huge learning curve.
The consequences of all of this are not insured or well-mitigated
in any particular way. So it's psychologically exhausting,
physically exhausting, financially exhausting.
The caregiver of today, like the caregiver of the past, tends
to over-extend themselves to provide the care, putting their own
health, their marriage, their relationships with others, their future
financial security at risk.
So what are the public policy options? Well, looking back, what
policy options had been on the table? And if you go back 20 years,
you find that they've all been on the table. Everything has
been on the table.
Just looking at past six to eight years, most of the tension has
been a little more focused. So when I say "everything,"
everything from national insurance program for long-term care; that
is, full, comprehensive coverage, to minor incremental things, all
aspects have been discussed but never taken very seriously. That
is, it was never on the table in a way that it looked like it was
The past six to eight years, most of the focus has been on tax
credits for caregivers, more public incentives for the purchase
of long-term care insurance. I say more because there are incentives
now in the Tax Code, but these are to make it even more explicit.
And in the meantime, families are really struggling to figure out
what to do, how to do it, whether they are doing the right thing.
So if we talk about building on the current structure, then we're
talking about providing tax incentives to encourage future generations
to purchase long-term care insurance.
What's also on the table at the moment is something called
the Partnership with Medicaid, which is a way of using public resources
to encourage the purchase of long-term care insurance without having
to actually up front spend those resources.
If you provide a tax credit for insurance, then you are foregoing
tax revenues the moment that the person buys the insurance. If,
instead, you say, "We'll make a deal with you. Buy insurance.
And we'll change the rules for you for Medicaid if you need
it," then you haven't put any up-front public money into
it. The money if there is any money .. and I think there is ..
it's in the back end when you become eligible for Medicaid easier,
faster because you bought this long-term care insurance policy.
Those who promote it believe very strongly that the private insurance
will save Medicaid money. I think that's an empirical question
that will depend on a lot of factors coming together. And my best
judgment is it will cost Medicaid money, but it won't cost any
money right away because you won't be selling the insurance
policy to someone who needs Medicaid tomorrow. You'll be selling
the insurance policy to somebody who passes the underwriting screens
and isn't likely to use it. And, therefore, you use public
money to leverage private insurance. But I think it will cost money
later. But even if it does cost money later, it's not going
to be scored by CBO, the Congressional Budget Office, in a way that
is going to cost a lot of money.
So the Partnership with Medicaid, whether you're doing it,
proposing it for that reason, because it's not up-front public
money but it may be back-end public money and perhaps the possibility
of no public money or whether you ideologically believe that's
the way to go is getting a lot of attention.
There are five states that had permission through the federal
Tax Code to do it. Four states went ahead and did it before the
Congress, particularly Congressman Waxman, put a stop on it, on
states being able to do it.
So there are four partnerships. There are five states with permission,
four states who are doing it. And there is a desire on some ..
and this is being debated or could be debated. I don't know
what the agenda is going to look like after the hurricane, but could
have been debated in the next session as a way of expanding private
Something that has occurred at times could occur in a bigger way
is teach Medicare beneficiaries about long-term care coverage in
Medicare. The notion is that most people think they have full coverage
for long-term care.
The simple answer is they don't. The more complicated answer
is they sort of do, but they don't because what health insurance
covers and what Medicaid covers is as opposed to acute care and
looks like long-term care because it's in a nursing home. But
it's really a substitution for acute care, inpatient care.
You've got to tell people that they don't have good coverage
for long-term care, and maybe that will encourage them to do something
I think the difficult part for the government is to say, "We
don't cover it but don't have an answer of what to do about
it." You know, I think the political answer is "Buy insurance."
It may not be satisfactory. I don't know. It's a dangerous
position to be in. And the government has tried to do that without
being very explicit about it.
Provide more funding for information referral programs. These
programs are often poorly funded, certainly provide tax credits
to caregivers. Often that's linked to the incentives to buy
insurance as a political we're going to give something to caregivers.
We're going to give something to people by insurance. And that
will take care of the future. But the problem is both of those
things cost money.
Another possibility that has not been really talked about is providing
respite benefits through Medicare, that hasn't been really talked
about lately is provide respite benefits through Medicare.
Another thing that has not been talked about lately is to expand
Medicaid coverage of home and community-based care in a way that
is more congruent with the way we treat nursing home care.
Another thing that has not been discussed in a long time is requiring
employers to pay for some of the leave employees take to provide
long-term care. As you may know, employers of 50 or more employees
are obligated to hold the job for someone who is providing care,
but they are not obligated to pay except in California. But there
are mechanisms that could be put into place to do that.
Well, I would say that incremental changes are just that. And
there is a long list of activities either underway or in discussion
that could help support caregivers and could make a big difference
in one person's life.
I guess the question is, how much more would make a significant
difference or do we need more fundamental structural changes? I
guess you know where I am heading. I think without structural changes,
it is likely to be harder for caregivers in the future.
And I think, just to make a side comment about the report, you
have a sense there is a crisis now. I don't think we have seen
anything yet. I would call these the best of times. I mean, I
think when we get to the real crisis, these are going to look like
the good old days.
I think potentially further declines in mortality rates, faster
than declines in debilitating morbidity rates may increase the lifetime
rates of dependency.
After 2015, the numbers of people needing services are likely
to begin to increase faster than the supply of workers available
to provide services. This will result in relatively larger price
increases for all payers. And, of course, the big payer is Medicaid.
Medicaid is going to have bigger budget constraints or concerns
than they have now.
The same decline in fertility rates that has caused a slowdown
in the labor force also means less children per mother. So the
decline in fertility rates since the mid 1960s will mean far fewer
adult children upon whom to turn for assistance.
So everything that is great about our current system or unfair
about our current system may be worsened by 2030, imposing even
larger risks on caregivers.
So I think we ain't seen nothing yet given the fact that we
have the baby boom here for their parents. As difficult as that
is, the next generation isn't going to have the baby boom of
children behind them.
I think the key is to think about what kind of long-term care
system we want for our grandparents. And I often think about my
children, what kind of long-term care system do I want for my children,
because I don't expect to be here to take care of them when
they are old and really have more of a public dialogue about how
to sort out the role in which caregivers as adult children to our
own parents and as children, as adult children, ought to participate
in the care.
What we know is that parents do not want to burden their children,
but parents want to do everything they can for their own parents
and to the extent that they even can harm themselves and also the
person they are caring for. I mean, it's not always a healthy
situation in all circumstances, in all that care.
Let me make a few words about the potential for private insurance.
I have been writing and thinking about long-term care insurance
before there was a national market for long-term care insurance.
I am not exceptionally happy about the way that market has developed,
even though I have been a long-time champion of the notion that
long-term care is an insurable event.
But when I started writing about it, the national companies, the
big companies, were publicly denying that long-term care is an insurable
event. They said, "We don't know if it is an insurable
Well, they got into the business. And some of them decided it
was a mistake. But the private voluntary long-term care insurance
market is growing like gangbusters, particularly for a couple of
companies that have done really well. They're making a lot
But it's not likely to provide the impetus for structural
change in the next 25 years. The population covered is too small,
not growing fast enough to really make a fundamental difference
in the financing of the long-term care.
I think, more importantly, long-term care insurance is not like
health insurance. Health insurance, you can have a debate about
what is medically necessary. You can have a debate about the protocols
that one needs to go through or what kinds of steps you have to
go through to get a referral.
But in long-term care insurance, you're not buying coverage.
You're prefunding a risk that you choose to cover. It's
a great device, mostly because of the tax benefits, because other
people drop coverage.
So it's a great device for prefunding. You can do better
prefunding and through this instrument than on your own, but it's
not necessarily going to cover long-term care. So it is not going
to have a large role.
It currently is in the national income accounts as spending part
of long-term care. Most of those dollars are health care dollars
paying for cheaper than nursing home care, which is cheaper than
So most of the dollars being spent in long-term care through health
insurance is through private health insurance, not long-term care
So there have been disparate but small steps. But, for example,
some of the nursing home industry realized that they really have
to change. There has to be a paradigm shift in how they deliver
care, how they organize care. But there are just a few places that
are trying to do that.
Most of it is being done I think for the right reasons. The main
thing they're worried about is turnover, staff turnover. They're
trying to retain staff. And that is good for quality care.
But their main focus is on delaying turnover, staff turnover,
which, as I said, is good for quality care, but there is no other
real attention outside of the nursing home on how best to deliver
The topic in the last 20 years has moved from the front page,
which was all about the disasters, mostly fire and safety code disasters,
in nursing homes to the style section, which provides opportunity
for a broader discussion, but it really hasn't taken off in
any meaningful way.
So far I don't think there's been enough of that kind
of discussion to provide permission in my view. What policy-makers
need is permission to lead on this. What they can easily say is,
"I care about it, but it costs too much money." And then
that is the end of the discussion.
I think if we really care about caregivers, we need to value them.
The starting point in a small way would be to talk about tax credits
in a different way.
Families with the same income should not pay the same taxes if
one family is providing care and the other is not. We should view
that as an equity issue, not as a sort of financial payment or incentive
for people to provide care. They're going to provide the care
as best they can.
And the $3,000 is not going to make a huge difference in whether
someone leaves their job or not. Okay? It will affect the low-income
person. I don't want to minimize it, but to talk about it in
the way it has been talked about doesn't value the caregiver.
If we talk about that it's the fair thing to do, it's
the right thing to do from an equity, tax equity, perspective, then
at least we're beginning a discussion in the right sort of tone.
There could be real meaningful expansion of resources for information
referral and training, training of the nonprofessional family caregiver,
how to lift without hurting yourself.
Another possibility or route for that could be a respite care
for caregivers of any age provided through Medicare. It will not
break the bank of Medicare and certainly perhaps a discussion with
employers about paid time off for work for caregivers. It could
be financed through taxpayers, but it's real money. But there
are ways of doing it.
And if we do these kinds of things, all of these are incremental
at some level. But they acknowledge that we do value caregivers,
what they're doing.
I appreciate what they do, and I very much appreciate having the
opportunity to talk to you about this topic.
CHAIRMAN KASS: Thank you very much.
Questions for information? Dan Foster?
DR. FOSTER: One question about the private long-term insurance.
You pointed out that the amounts are usually pretty small. What
is your assessment of given the financial viability of such insurance
plans and companies?
Do projections suggest that this really is viable or is this a
way of getting a significant amount of money and then coming up
six years, eight years, ten years from now saying, "Well, we're
bankrupt because we can't pay that"?
DR. FRIEDLAND: I think they are absolutely viable as a
business enterprise because of the way they are structured. The
risk is not on the company. The risk is on the individual. The
risk is inherent by what you decide to purchase.
You basically say, "I am going to buy a $200 a day policy."
And maybe it's going to have an inflation protection in it,
but the inflation is pre-prescribed five percent per year, regardless
of what the real inflation is.
So that is just money. And actuaries are very good. It is surprising
to me, actually. I went to one of the meetings with the actuaries.
And I was shocked that they had miscalculated the long-term federal
And, as a result .. here is an example of why this is a great
business model. As a result, they can raise the premiums. So if
you mess up on something as .. you know, I was shocked because I
would have thought the bond rates, maybe because I am an economist,
would have mattered a lot. Since you're talking about holding
on to this pool of money and investing in it for 30-40 years, the
long-term bond rate matters a lot. And, for some reason, they hadn't
sort of thought about that as much in their models.
But, at any rate, they have a way out. If they mess up, if the
bond rate turns out to be a lot lower than they expect, if the lapse
rate, which turned out to be; that is, the people who buy the policy
and drop it, if the people hold on to the policies longer than they
expect, which also occurred, they go out. They can raise the premium
for the class.
They can't raise it for you because they don't like you
or they don't like the color of your eyes. They can raise it
for the entire class of policy.holders.
So, in other words, if they mess up on the premium, they can charge
everyone who bought it and say 10 years from now, "You know,
we have to raise the premiums another $100 a year."
They do do that. There are some that have been raised. The belief
was they purposely lowballed the premium. I can't say that
they really did, but there were a couple of class action suits that
were settled when the premiums went up 700 percent.
CHAIRMAN KASS: Still questions of information, rather
than expand to discussion. Robby and then Frank.
PROF. GEORGE: Thank you.
Yes. I wanted to follow up on Dr. Foster's question about
the insurance companies; really, two quick questions asking for
clarification in your opinion.
The first is you noted that a couple of companies had made a lot
of money. have they made a lot of money because they are offering
a quality product to the consumer or are there other reason?
And the second thing is, there are I gather from what you said
a couple of companies making a lot of money, but a lot of other
companies found that they couldn't. What accounts for the shake.out
that leaves us with only a couple of companies that are really,
I gather, viable? And are we now going to have a monopoly effect
as a result of that?
DR. FRIEDLAND: Well, I think we do have a monopoly effect
already, even though there are more companies than I have portrayed.
I mean, there are many companies. Most of the market is dominated
by a couple of companies.
I think it is absolutely viable from their perspective. Your
question was, are they selling better products? You know, as you
know, when you buy this laptop computer today, it's obsolete
a couple of years from now. But you know that going on and you
don't really care because five or six years from now, you'll
buy another one.
It's a harder thing when you buy a long-term care insurance
policy and the policy design is changed because you only buy a long-term
care insurance policy once. It's a lifetime decision.
There are very few products that you buy for the lifetime. Even
your house, you probably buy more than once, buy more than one house.
You know, you use the equity in your house to buy another house.
But you can't do that with a long-term care insurance policy.
Are there good policies out there? I don't know what "good"
means. You're asking somebody to look at their current circumstances
and make a decision about whether their adult children will be alive,
whether they will still have a spouse, what their circumstances
would be 30 years down the road.
Can you buy more bells and whistles? Can you buy more comprehensive
coverage? Yes. Can you buy nonforfeiture coverage? Yes. All
of these things add lots of money to it. But you're basically
just buying money. You're not buying coverage. I'm going
to buy a $500 a day policy.
And what excludes Mayberry and whether or not you get any money
back if you stop making premiums may be a part of the policy. But
you pay for that money. So I think it's a good deal in the
sense that if other people drop the policy, then, and they bet that
correctly, then the premium isn't going to go up and those people
do very well.
So I can't answer your question. They are not insuring the
risk. They are insuring what you define to be the risk. And they
do a very good job at that.
CHAIRMAN KASS: Frank, still for information?
PROF. FUKUYAMA: Partly for information. Maybe
it expands the discussion a little bit, but from what you've
said, it just sounds like we are piling up a really large future
social liability that is unfunded currently given the sources of
how we pay for this.
Now, one it seems to me straightforward solution is .. you want
to expand the pool of risk. Some very straightforward way of doing
this would simply be to mandate a kind of means.tested mandate that
everybody buy insurance for this, which would drive down the average
cost for everybody. And it doesn't affect the balance sheet
of the government because it's all privately paid for. So it's,
in effect, forcing people to save.
Can you just talk through the politics of that? I elan, who is
going to object to that? What coalition of interest groups is going
to shoot that down? And what kinds of arguments are they going
to use against that kind of an approach?
DR. FRIEDLAND: Well, I think, actually, the insurance industry
would be opposed, I think, to a mandatory .. I think that, you know,
they have no desire to cover everybody. They just don't. They
want to cover those that are going to be able to continue the payments,
those that are lowest risk.
I mean, there are a lot of ways of doing very well and doing good
for people, too, without necessarily covering everyone. So I think
one aspect of the politics might be the industry itself being a
little frightened about the government saying, "You've
got to cover everyone, and you've got to have these rules about
I mean, can I exclude people who have had a heart attack? Is
there governmental oversight in the rates that I charge? So I think
they would be very nervous about a mandate for private insurance
that would involve government oversight about how they do their
business? Does it have to be a standard benefit package?
So they want to freedom to design it and sell it. On the other
hand, they want government effort in getting people to want to buy
it; i.e., the tax incentive. You know, give me more tax incentives,
and I can then make it easier to sell.
It's a very hard product to sell. It requires an agent sitting
down with a couple at their kitchen table. It's a very expensive
product to sell that way because you usually have to do a couple
of visits. And then, of course, you have to pay the commission.
I think from the public side, there may be groups that are opposed
to the mandate of private insurance. Why not use a social insurance,
they might say? Why run it through that commission system? Why
run it through those various structures, of which you would have
The commissions are not insignificant. If you've got salesmen,
they're competing with why my product, as opposed to another
product. And that might be good because it gives consumers choice,
but then if the government is forcing you to do it and subsidizing
the low.income people, I would imagine the government might want
to say something about what it is that is being sold and how it
is being sold. And the private sector might resist that.
CHAIRMAN KASS: Let's hold further discussions and
turn the floor over to Father Fahey. Thank you very much.
FR. FAHEY: I must admit to being almost speechless for
the first time in my life as I hear all of these things. And I
have all of these notes, and I say, "But I want to correct
what he had to say" or modify or whatever the case may be,
never correct but build upon.
And I would say at the outset I have been wandering around this
field since 1961. So I was there before Medicare and Medicaid and
actually was a participant in those discussions in one of my former
There are really a couple of things that tend to situate myself
at this moment. Some of you may know there is a relatively new
commission on quality and long-term care that comes out of the private
sector. It's chaired by, of all people, Newt Gingrich and Bob
Kerry. Present company excepted, it is a distinguished group of
The weakness of the commission is that few of them are really
into long-term care, but they are of such standing that if the commission
can get its act together, if we are able to, it could have significant
impact upon quality in the system as we know it or as our leaders
are very anxious to do, move forward to what should the system be
in the future.
The second, I work with the Milbank Memorial Fund as a program
officer. And among the things that fund does is try to bring together
decision.makers from the private and public sectors who would not
otherwise be able to come together. And one of the structures that
we have, we have a reforming state group, in which we have all 50
states, somebody from the governor's office, somebody from the
Legislative Branch, nonpartisan.
They create their own agenda. And we, in turn, program officers,
facilitate their conversations and try to follow through as they
define themselves of X states coming together to talk about the
cost of pharmaceuticals or what is on everybody's agenda at
this time: how do you pay for long-term care.
So all of those factors are a part of my being and thinking, in
addition to all the experience over time. But there is one other.
And I'm hesitant to do this, but I think I might. You've
got a piece of paper of 30 pages or something. I think everybody
has, at least what I was thinking at the time I wrote the paper.
It may not be what I think now but what I was thinking then.
I want to tell you another story, and that is of being a son.
I am 72 years old. Okay? When I go home tonight, I will write
a check to a long-term care facility for my mother, who is 97, had
her 97th birthday September the 3rd.
It will be the last time I write the check myself for the total
care because between my mother and my father, the cost has been
$400,000 in terms of their care throughout their lifetime. My father
died ten years ago, at 89, after a period of frailty.
So in a sense, it's atypical in that I am an only son and,
of course, atypical that I am a priest. But there are many times
that are so typical in this experience that it might be worthwhile
to talk about experience for a moment and abstract from it in terms
of some of the things that we are talking about but in flesh it,
if you will, just a little bit.
One of the first things, I'm not sure that you brought this
out in the report sufficiently, but you know we now have four generations
alive as normative and sometimes five. So we have two generations
Then you add on to that the change in the American family and
so on, divorce, remarriage, non.marriage, and you do a sociogram
through significant others in a lifetime. It really is fascinating.
Of course, that is part at the heart of all of this, who is responsible
for whom under what circumstances.
Honor your father and your mother. For heaven's sake, which
one? It's extraordinarily complex at the very most foundational
I suppose that's the second thing I want to state out of the
back. When I give talks, often the title of it is "It's
never been this way before." So the development of a third
age that is necessary neither for production or reproduction is
the first time in human history we have had it.
So neither culture nor social structures have kept up with the
realities. And, of course, public policy hasn't kept up with
the realities either.
So having commissions like your own is extraordinarily important
to delve into the very most fundamental aspects of this. Again,
we're in an epidemiological and demographic revolution caused
by all the stuff in public health particularly and so on.
So we're in a very different set of circumstances. And in
the broad sense, it's a huge economic issue, economics being
managing the household. So it's how do we manage the most fundamental
household, where the coin of the realm is love, guilt, responsibility,
and all of those things? And how dominant should that be in this
whole area of long-term care?
Of course, the second, economy is the mercantile, if you will,
the exchange of goods and services for money. What money does,
really, is to get somebody else to do something that they wouldn't
And so in this area particularly, what we do is we buy services
or places when the persons or the places to give care are not satisfactory
or not present.
So there is a great overlap between the two of formal,/informal,
paid/non-paid. And the great ethical issue is to some extent who
should bear the burden and under what circumstance, if you will.
Again, that is the third of the economies that we have to kind
of balance in all of this ethical reflection. And that is the political
economy in which the power is of the state to cause things to happen
through threat or through incentives or whatever they are. And
they are a huge actor in all of this.
So in our, your kind of reflection, here you have got the individual
and the socially significant people and their lives. Then you've
got state government overlapping. Then you've got federal government
overlapping. And then all of this is within culture.
And we have this changing scene of how are we going to sort all
of this stuff out with the change in the structure of the population,
which is extraordinary?
And, as Bob said earlier, what we're talking about is establishing
sustainable, predictable, fair structures that will be there over
time. Sometimes I think people sort of have in their mind we're
talking about those old people now. But what we're really talking
about is, how do we have just structures that are equitable and
adequate, through which we will all pass over time and that are
sustainable, if you will. And this is an extraordinarily complex
Now I want to go back myself for a minute, if I may. I grew up
in Syracuse, New York in a lower middle class area, older houses.
I remember when my parents bought it when I was in high school.
As we did things in those days, they paid $10,000 for it. I think
they had saved $9,000 through their whole lifetime before they bought
it, very small mortgage.
And they stayed there when I went wandering off to the seminary.
But a lot of their contemporaries died. But they were there. And
the younger families came in. That was in a sense good and bad
news. But they had sidewalks, and they had a front porch.
And they had a dog. And they loved the neighbors' kids.
And so as these younger families moved in, they didn't have
to worry about the kids coming home from school sick because Charlie
and Elizabeth were there. And they put the kids over their flowers,
and they loved to hold the kids. And they talk with the parents.
Geez, I came home one time. I was a priest. And here my parents
are talking with some couple about sex. Geez, they never talked
to me about sex. You know? And it just was amazing.
But my father began to become frail, multi-infarc dementia, many
TIA experiences, became less stable on his feet. Of course, this
is the same Charlie that would plow everybody's driveway and
everybody's sidewalk with his ancient snowblower in Syracuse,
which has more snow than any other big city in the whole world,
But what was then devolved was a sense of solidarity and reciprocity
because then as my father became more frail and would fall out of
bed, it would be the same tykes, now 18, 19, and 20-year-old, whom
my mother could call and they would come over and put him back in
Okay. Now, as my father becomes more frail, we have one bathroom
upstairs, to see him crawling down the stairs or, worse, crawling
up the stairs. You know? So then we got home care, home and community-based
That was great except when they didn't show up, you know.
And when you have a home care worker that doesn't show up for
somebody who is totally dependent, that's something else, especially
if that dependent person also has a frail wife.
So at some point I said autonomy be damned. And I said, "You've
got to move." Assisted living was the next, which was very
nice, lifesaver, very expensive but a lifesaver, if you will, because
they had cafeteria services and they had meals they could get, cafeteria
in the sense that they could hire just so much help as they needed.
It was good, but I remember being at an American Society for Aging
meeting in San Francisco, and I got a call. This is the long distance
caregiving. And the person says, "This is" so and so,
"Your mother fell and broke her hip."
"No. You mean my father."
"No. Your mother," my mother helping my father go to
the bathroom. He fell on her. So off I go, you know, to go through
And there was that period of my life when I'm running the
Third Age Center, being a world renowned professor and gerontologist.
And I'm sleeping on the couch with father in one room and my
mother in the other and me wondering who is going to have to go
to the bathroom first during the night and how I am going to manage
it. I learned a lot about being a certified nursing assistant.
It took the hard way. I almost broke my back doing it, but I learned
how to do it eventually.
Eventually my father became more and more frail. And we talked
about surrogate decision-making, here, there, in an institution,
frankly, that I started. He goes to a hospital, of which I am a
trustee. And he goes with a bowel blockage. And the wonderful
doctors there and I were looking. We said, "Geez, we'd
better admit him. And, you know, I don't know what we can do."
Then as they're wheeling him out on a gurney, having gotten
all of the information .. he's been in the hospital about ten
times, but, of course, they ask the stuff over and over again ..
they said, "Mr. Fahey, if your heart stops, would you like
to be resuscitated?" My father doesn't know whether it's
January or June or what it is. And he sort of mumbles, "Yes."
As they're wheeling him out, I, who am now in the Public Health
Council for the State of New York, knowing full well all of the
ramifications, say to the doctor, "If anybody touches him,
I'm going to break their arm." He doesn't read the
New England Journal of Medicine. Okay?
I could go through a whole series of experiences where I surrogate
decision-maker for mother and father, I a member of the Institute
of Medicine, I a trustee of all of these things, (a) psychologically
how hard it is; two, what knowledge you need; and, three, how you
have to negotiate the system at every step of the way, that in addition
to having surrogates, we have to have ways in which those surrogates
are able to be supported with knowledge, understanding, and how
they can be advocates for the people they're engaged and involved
My father was playing golf in his mid '80s. At least he was
going out with his little cart. And he and one of his buddies,
we never knew whether they were playing golf or whether they were
looking for golf balls because they loved to go around and look
in every ditch and so on and so forth.
He finally had to go in a nursing home and finally died. Mother
was able to be sustained but now for the past three years has been
in a long-term care facility.
I mention again the cost. These are middle class people. My
father worked for one company all of his life. The company went
bankrupt. He had a bond with the company. That went down the drain.
His pension went down the drain. I'm still paying to that company
for her health insurance. Of course, I pay for the whole damn thing.
You know, the company doesn't put a nickel into it. They just
are a conduit for the whole thing.
Now, all of that is to say we have to in some way redefine what
we are talking about. And I would like to use a phrase that was
used this morning. Frailty is really what we're talking about.
And it's progressive intermittent frailty that accompanies inevitably
the third age, third age being a biologically based phenomenon that,
frankly, doesn't exist in most living things except human beings
because we're able to defy Mother Nature with all of our stuff
that we intervene with.
Of course, that's the big issue ethically. Science is not
its own end but, rather, has to be morally justified in how you
use the things of science, but that is another story for another
But here in this third age now, we are developing this capacity
to continue to live but at enormous costs: psychological; emotional,
if you will; opportunity; and economic. And the question is, how
do we share the burdens? Just society is one in which burdens and
benefits are shared by equals equally, by unequals equally, in accord
with capacity and need. This is what you're about and we're
all about is how are burdens shared and what is the burden that
Now, I say this because economically frailty costs substantially.
I mentioned our own middle class, our lower middle class. My folks
never earned a great deal. But it was only because of the appreciated
value of their house that they were able .. Social Security being
underneath it all and Medicare paying for stuff, and then they paid
a lot out of pocket. I knew how to shield and transfer resources
and all of that, but we didn't do it. They wouldn't do
it, and it was for them and hooray.
But here is the huge issue that we have coming along the way from
an economic point of view. We at Milbank with EBRI, the Employee
Benefits Research Institute, that knows more about pensions and
all of that stuff than any other entity in the country and is supported
by both labor and business, we were able to go to Oregon, Missouri,
and Massachusetts and to have access to the retirement programs,
defined benefit and defined contribution, of every single employed
person in those states.
Also, there is a derivative study now just going to be reported
on if it hasn't been in the past week in Minnesota. In this,
we were able to project forward against Social Security, same, better,
worse, with inflation, disaggregated by gender and by family structure,
what is the probability of current employed persons to have X percentage
of certainty in regard to having enough for decency.
Of course, guess who comes out with extraordinary risks? Single
women, whether single because of divorce, never married, or whatever
it is. But virtually everyone to have decency has to save more
than they are saving, but, of course, they aren't.
The other side of that, we aggregated it all to see, if you will,
the unfunded liability, just using it broadly, of states and the
Medicaid systems. I'll tell you. Our people in the reform
state groups are scared out of their wits because they see what
is coming down the drain.
This is a huge issue for us as the nation of how do we generate
sufficient resources over time to deal with this prolonged period
of retirement in which assets are sold, are diminished for ordinary
stuff, to say nothing of being able to sustain people who are in
need of the need for others.
I want to make another point in this regard of frailty. Already
the default system, as Bob has mentioned, is family, friend, neighbors.
People cobble stuff together to have decency. Frailty involves
a disequilibrium between internal capacity and external demands.
It's disequilibrium between external demands and internal capacities.
External stuff can either be good or bad. Internal stuff can be
good or bad.
For example, the Americans With Disabilities Act, when we passed
that, all of a sudden, disability was greatly reduced de facto,
not just definitionally, because we change the way in which we would
do stuff. You know, every sidewalk in the country has a cutout.
It makes it easier for all of us to deal with those things.
Unfortunately, in the frailty issue, I mention, again, extracting
from our home, they had to move largely because of having a bathroom
on the floor and no practical way to put one on the first floor.
Frailty is generated by the death of a spouse. Frailty is generated
because of my father's frailty and my mother, therefore, became
frail. Frailty is generated because of a loss of income, if you
So there are all of these externalities that in one way if we
look through the third age from a population point of view, there
are predictable things. But the way they play out is idiosyncratic.
That makes it very difficult to create entitlements because of the
difficulty of defining that which would trigger a benefit, if you
So that's just kind of a thought. What we're really talking
about in terms of government is what is the role of government:
public good, common goods. When it gets down to individual stuff,
what is the role of government in that regard? And that is if they
are going to have benefits, for whom?
You know, we have two different tracks we go for in this country.
And it's a mix. The one track is social insurance, in which
we all have a risk; the other welfare benefits. This is true in
this area, in which ironically for health part of long-term care,
we have Medicare and everybody is covered, for that which is really
the essence of long-term care isn't medical. It's basically
sustaining people. It's hugs, and it's getting people to
the bathroom. It's cleaning them up. It's all of that
Again, a little incident. I'll never forget my mother saying,
"For heaven's sake, I never thought I'd have my priest
son help me put on my bra." But that's really what we're
talking about. It's that kind of stuff. Who cleans up the
shit? You know, these are the kinds of stuff that we have to face
and deal with over time.
So it's what is the burden that we're trying to assess
and when do we want to intervene in that. And when government comes,
what form do we want to give it? And do we want to give it in services?
Do you want to give it in money? And who should bear the economic
I'm going to conclude with this hopefully not too disjointed
presentation to address something that you addressed. If you ask
Fahey what you should do, I think ultimately we need a social insurance
program and it's based on disability and it's money. And
you give people based upon a level of disability income. And they
cobble together what they need.
It probably would de facto mean that there would be .. I'm
saying "de facto," not technically .. coinsurance and
deductibles as a result of this, probably wouldn't meet the
total cost. So, therefore, there is still the principle of subsidiarity,
if you will. People would still be able and challenged to get long-term
insurance when you really talk to the long-term care insurance people.
They would see in many ways that their role would be complementary
to a social insurance program, rather than being the basic element
underneath it all. But I think that's the kind of thing.
And it's somewhat being done in Germany. Somewhat it's
being done in Japan as well. Again, disability, the degree of it,
deciding what the benefit would be; and then, secondly, that depending
on where you got it, it would be discounted. But it could go to
We have an interesting experience going on now, as I think you
reference in your work, called Cash and Counseling, which in some
ways that's what it is. It's welfare, but, in effect, what
it is, it gives people money and lets them .. do they need a car?
Do they need a ramp? Can they pay somebody not to go to work?
And it seems to be providing some pretty good stuff in Arkansas
and Florida. And there is some research being done in it on those
kinds of things.
So, again, how do we establish things that have sustainability,
adequacy, equity, reflect social solidarity, reciprocity, all these
kinds of moral words that we use? But we have to do it.
And I'll conclude with this. In our Commission on Quality
in long-term Care, in which we're struggling and sloveling along,
we recognize that our funding is ephemeral in that who knows how
long we'll have it and never are we going to be able to address
all of the issues that need to be addressed. There is a need for
structures that will be over time that look at these things in a
passionate dispassionate way if I can put those two things together.
As Bob can tell you and I certainly after all the scars of 40
years in the field, this is a field of advocates and of lack of
civility of people. The field of aging has so many oxes that get
gored, so many people with economic and psychological states in
it it's extraordinarily hard to have a conversation that makes
Everybody thinks their piece of the action is the piece of the
action. If you ever want a validation of the point the excellent
is the enemy of the good, it's all the people on the side who
say, "Well, if you only do this, then this will be good."
So, anyway, there are a few thoughts that I hope that might be
of value to think about. And read the paper. You might find that
CHAIRMAN KASS: Thank you very much.
The floor is open for discussion; first, I guess, for specific
questions to Father Fahey, but both papers are really open for general
FR. FAHEY: By the way, I should say one thing. It was
interesting. This was a public committee. Newt Gingrich, of all
people, said, "You know, this long-term care stuff, maybe we
ought to be sure that everybody who is employed when they go be
employed, that somehow that we mandate long-term care insurance,"
Newt Gingrich, no less, public. He said, "Oh, yeah. Not all
poor people can do it. We ought to subsidize the poor people, but
maybe then the risk pool is so big that it would be relatively inexpensive
to be able to deal with."
CHAIRMAN KASS: Questions? Comments? Robby had his hand.
PROF. GEORGE: Yes. Could I go back to the question that
I raised with Mr. Friedland earlier ..
CHAIRMAN KASS: Sure.
PROF. GEORGE: .. or do people have questions for Father
PROF. GEORGE: No one. Mr. Friedland, if I could follow
up on the economic questions I was asking. Those companies who
have done well out of this, have they done well while others have
failed because of a more efficient way of operating the long-term
care insurance business or were they the beneficiaries of peculiar
circumstances that enabled them to succeed and I gather succeed
handsomely while others have failed?
DR. FRIEDLAND: I don't really know if I know the answer
to your question. There are certain toe holds that make a difference.
For example, if you have an association plan and you're with
AARP, that's a big marketing device. If you get the contract
itself to all employees of the federal government, it's a huge
employer. Those efforts to get that, book a business as an access
to it as a sole right makes a huge difference.
I suspect that there are differences in the distributional mechanisms,
both in terms of the arrangements they have with agents, whether
they are their own agents or whether they are independent agents.
I suspect that, to some degree, that has a bearing. If you have
independent agents who are not pushing long-term care insurance
because it's harder to sell than life insurance, that can have
I don't have a good answer as to what makes a TIAA-CREF decide
this is not a good market to be in. I don't want to get in
this. I want to get out of this market.
You know, that's a reputable company. They're in it for
the members. And they decided that they would offer it to members.
And whether it was simply because members didn't buy or whether
the costs were too high to sell it, I don't know the answer.
FR. FAHEY: May I offer a thought or two also?
CHAIRMAN KASS: Certainly.
FR. FAHEY: The state governments are very much enamored,
some state governments, of the notion of long-term care insurance
as being one of the ways of relieving the burden of Medicaid. So
they're looking into it rather extensively.
From the company point of view .. and here I'll have to be
careful because I have been on the road for Met Life, which is one
of the ones that are successful, although they don't like to
have me talk because I often say long-term care insurance doesn't
make sense except for a rather narrow band of people economically.
It just doesn't make sense. They don't like to hear me
But from the insurer's point of view, in fact, we have 50
different states with 50 different sets of regulations in terms
of the marketing. It makes it very difficult for them.
So the degree, as Bob said, if you can book the business one place
in one set of circumstances, then it becomes economically viable
to be able to do it.
Now, on the other hand, the National Association of State Insurers,
whatever they call it, State Insurance Commissioners, they have
all kinds of questions about all of the long-term care insurance
in terms of its long-term viability, marketing practices in a whole
variety of areas.
PROF. GEORGE: Do either of you have thoughts about what
could be done by way of public policy to create economic incentives
and let competition do its part to make long-term care insurance
more readily available and affordable or, no matter what we do,
will you take the position, Monsignor, that it will still only make
sense as private long-term insurance to a relatively small segment
of the public who will need care?
FR. FAHEY: No. It isn't so much who need care but
who can afford it, for whom it makes sense. Once you're above
a certain economic level, you might as well insure yourself.
Once you look at what long-term care means, who uses it, how long
it is, what's the risk, the risk is relatively short for the
most expensive. Now, I probably talked about with my parents one
of the more expensive things, where you have a husband and wife
who live to be 97 over a long period of time. And so they spend
all their money.
But still it's only now with my mother. I don't know
whether she's going to live another day or not, but she goes
on Medicaid. So they spent all the money. It would have made no
sense except to me if I wanted to pay their premium if that would
have made economic sense. But it doesn't make any economic
sense for them to have gotten it and for most people above a certain.
Below a certain economic level, it does make ..
PROF. GEORGE: You can't afford it. I assume you can't
afford it below a certain ..
FR. FAHEY: They can't afford it.
PROF. GEORGE: Yes, right.
FR. FAHEY: Exactly. So it's a relatively modest place.
The second thing is how you sell it. It is very uneconomic for
an insurer to sell this stuff unless .. you see, most companies
won't sell it as a group policy. They may have it as part of
their cafeteria plan and just be a pass.through, but they're
not going to contribute to it, nor would the employees save for
the federal government constitute a group of shared risk. That
risk goes into the total risk. So it doesn't make it much cheaper.
So they don't like to even sell it that way.
They are just a few ideas anyway.
DR. FRIEDLAND: As pointed out, the place to make this happen
would be in the employer market, the employment.based market. You
know, we don't really have large penetration rates of health
insurance unless it's employer.provided. I mean, there's
just not that many people buying individual policies. The individual
market has its own set of issues.
So the employer.based market would be the place. At this point
or up until this point, there are very few employers that have been
willing to pay for it. And so what are they doing? They're
paying for the administrative structure. They're shopping around
on the part of employees. They're negotiating it. They're
opening up the administrative structure so that it makes it easy
to sign up and pass your paycheck to that insurance company.
Of course, you're going to have to stay with that insurance
company when you change jobs because you have bought it for a lifetime.
And so if the next employer offers it, you're going to turn
Even in the best of cases, where the employer really believes
in this and is really behind it and puts a lot of effort and makes
it the forefront of the employee benefits fair and all of that stuff,
the best they have ever gotten is a sign.up rate of 15 percent.
It's usually around two or five percent.
PROF. GEORGE: Why? Why?
DR. FRIEDLAND: I think, (a) some people do the math and
say, "It doesn't make sense"; (b) it's too expensive
for some people; (c) there may be some elements of denial involved
in that "I'll never need that because I will never be dependent
on others." So it's a combination of factors.
FR. FAHEY: Well, of course, Medicare covers it.
DR. FRIEDLAND: And, of course, Medicare covers it and/or
you think you might be able to .. some people seem to think that
people know about all the Medicaid rules and, therefore, could gain
Medicaid. But there are a lot of reasons. We don't know the
It's a hard thing to buy. I mean, just think about it as
a product. It's a hard product to buy. If you buy and they
improve the product ..
PROF. GEORGE: You're stuck.
DR. FRIEDLAND: .. you're stuck.
Now, I would feel differently about this discussion if long-term
care insurance covered long-term care. If it weren't just prefunding
a fixed dollar amount that you chose, then I think it would be a
very different kind of discussion.
It wouldn't necessarily be cheaper. Even if the pool were
bigger, it may not be cheaper because long-term care can be very
expensive but if you really insured the risk, which is not something
the insurance companies have been willing to do.
In part, I understand why. In the beginning, they didn't
know what the risk really was. So they said, "We're not
going to take a risk." The risk will be that .. I mean, there's
very little risk. The risk is that they don't earn the rate
of return in the marketplace with the pool of money that they have
that they expected. That is the risk that they take. And they
are professional money managers. You know, they manage life insurance.
Now, getting back to your other part of the question about who
does better, you know, some of it has to do with relationships with
agents. In farm states, people have very good relationships with
their insurance agents. In less rural states, they don't have
an ongoing relationship with their insurance agents.
PROF. GEORGE: Is that reflected in the sales?
DR. FRIEDLAND: Yes, very much so. So in farm states, you
find that the larger proportion of the population has it because
it requires essentially an individual trusting that agent to help
them, guide them in both not just that they need it but which policy
It's so complicated because it is the ultimate consumer choice.
You get to choose every aspect. Is it a 30.day waiting period or
90.day waiting period or zero.day waiting period? Is it one.year,
five years, lifetime? Is there an inflation protection adjustment
or not? Is it not for insurer benefit or not? You get to decide.
Is it $100 a day, $200 a day, $500? You get to decide, ultimate
So which one do you choose? When you buy auto insurance, which,
of course, you're required to in most states, I believe in all
states, you base it on the value of the car and whether or not you
want the collision. When you buy house insurance, you base it on
the relative value of the land and the house.
When you buy life insurance, you base it on current income standards.
And when your income changes or your dependents change, you change
your life insurance.
But you can't do that with long-term care insurance. You
buy it once. So I don't know if all the decisions not to buy
are rational or they're just so confused they don't make
the decision, but I don't know. I've been trying to understand
that myself, but I don't know the answer.
It's a very hard decision to make. It's a very expensive
decision. I'm not talking about the premium. You're paying
the premium for the rest of your life, assuming it doesn't even
go up. Of course, they have reserved the right in the small print
to raise the premium if they guess wrong on one of those factors.
And will you have the income when you're not working to pay
for the premium? Now, you're supposed to with the agents.
I mean, the National Association of Insurance Commissioners doesn't
dictate state law, but a lot of state legislatures have adopted
the kind of guidelines from the National Association of Insurance
Commissioners. So in most states, you have to talk to the client
or the customer about the feasibility of paying for the insurance
premium when you're not working anymore.
So they're supposed to go through a calculation of how much
they're going to be able to pay, but what if the premium goes
up and it's just a little more than you expected because you
didn't expect these other things to go up?
Some companies have done a great job in terms of marketing and
positioning and the relationship they have with their agents. And
maybe their distribution mechanism is more efficient and that's
why they stay in it.
I look at TIAA.CREF and say, "I think they got into it for
the right reasons, and I think they got out of it for the right
CHAIRMAN KASS: Rebecca Dresser?
PROF. DRESSER: I was wondering if each of you could give
us 2 or 3 of your top priorities in terms of policy interventions
or maybe it's such a mess that you would have to have 20 priorities?
But you've given us a huge amount of information. And it's
really fascinating, but for people who aren't experts in this
field, what would you say is most important?
DR. FRIEDLAND: You know, there is a practical answer, and
then there is the pie in the sky answer. I think the practical
answer is to help change the language around the tax credit for
caregivers. You know, that is something that .. actually, I'm
going to take a big step back.
It has surprised me that the insurance industry has not gotten
the number one thing they want, which is above-the-line deduction.
What I mean by "above-the-line" is it's not itemized.
So it's above line 33 or so on your 1040 form for the insurance
I'm surprised in this Congress and this administration that
the insurance industry has had a tough time getting that passed.
I think part of it is because it's not a high priority, even
in a business-oriented Congress and White House.
It is very likely that will move. And it is usually tied to the
caregiver tax credit. And so maybe changing the language about
why we value caregivers might be a practical step that is doable
in terms of the discussion about that tax credit.
Will it change ..
CHAIRMAN KASS: I am sorry. I'm not absolutely clear.
I'm not absolutely sure I understand.
DR. FRIEDLAND: The credit?
CHAIRMAN KASS: No, no. What kind of language you were
recommending. Change the language from what to what?
DR. FRIEDLAND: I think it is being sold as a way of helping
caregivers. I think it should recognize that it will not help caregivers,
that it is an acknowledgement. Regardless whether the amount is
any different, we're talking nuance here.
It is an acknowledgement that caregivers deserve to be treated
differently if their income tax is the same as someone else who
is not a caregiver and we as a society recognize the value of caregivers
and, therefore, acknowledge it in the Tax Code and, therefore, provide
a tax break for being a caregiver.
That would be an easy first step. And it's a public discourse
of why caregivers matter. Then at least you could, at least through
this reporting mechanism, begin a dialogue about why caregivers
matter and why long-term care is in a mess. And, you know, caregivers
matter because long-term care is a mess.
And even if we did a better system of long-term care financing,
caregivers would still be a part of the picture. But we need a
desperate way. Desperately the next step would be more the pie
in the sky. I think the desperate issue is the nexus between paid
caregiving and family and how to figure that out in terms of meeting
the needs of families.
We don't do a very good job at that. Cash and Counseling
is an example where we can do a better job because we're not
relying on an agency where you're depending on someone bringing
someone in who does or doesn't show up.
But no one is really talking about expanding coverage in a big
way. And it doesn't seem like it's politically viable.
But maybe a discussion about why caregiving is so critical to the
system and why the system is so hard on caregivers could lead to
a discussion of why financing long-term care needs to be revisited
and needs to be improved.
DR. FOSTER: I wish that you would make it clear to me
why a $3,000 tax credit would in any sense really change the system
in terms of the discrepancy of the money that's needing. Do
you think that the caregivers would then enhance their care, spend
four hours taking care of mom, instead of two hours, because they
feel a sense? I mean, I'm just not following why.
I sense your love for caregivers, which I think is very, very
justified. I mean, I think a lot of them are heroines. I mean,
that's what they are. I guess most of them are women we have
heard, are heroines to do this.
But I think it seems to me that that would be a diversion from
the real problem. That is, the last point you made is how to subsidize
the care that cannot be given at home by having somebody come in
in real dollars, as opposed to a tax credit.
I just don't understand why you think that is so important
except to be sort of a slogan to say, "Well, we love caregivers."
DR. FRIEDLAND: Exactly. I don't think it's important
at all. I'm not in favor of it. But it's moving for political
reasons to placate certain parties.
DR. FOSTER: But then shouldn't our job be to say that's
not a very wise thing to do and we ought to go to the real issue?
What I'm afraid of is that it might be taken away from transcripts
here or something.
In fact, I got the impression that you were for this. You just
clarified that by saying, "Well, I'm for it in the sense
that it's moving ahead. It's moving ahead. Maybe we ought
to try to get it better."
But if what you just last said, you're not really for this,
and I just didn't want it to come out of here that the number
one priority would be that that's what we would work on, I would
say that your last statement would say we might notice that that
is something that is moving. And then that is not quite the way
that we ought to go.
DR. FRIEDLAND: It is moving because of what I find even
more difficult to accept, which is the public money to provide subsidies
for private insurance. That's the reason it is moving.
It is being put on the table as a way of placating those. And
I'm not one of those because I'm not a player that matters.
But for groups that care about providing a toe hold for the tax
credit, this becomes a starting point.
The reason it is being pushed on the table is because of what
I find even more difficult to swallow, which is giving people who
would have bought the insurance anyway the tax deduction or a subsidy
for their insurance.
DR. FOSTER: We have been talking about long-term care
here and Medicare. And there's a whole problem of Medicare,
which is not nearly as important the people who have spoken to us
say as long-term care. But if you were really just looking at the
problem as a social engineer, wouldn't you just say we ought
to combine these problems; that is, the failure of health care delivery
in the medical sense and the long-term care to say we need some
sort of a system that assures in this very wonderful and caring
company that people who can pay ought to pay and people who .. I
mean, you would expect somebody that was .. you know, somebody like
myself should not be funded for this because I could probably take
care of it myself, you know, long-term care, even if I live to be
97 or whatever, whatever it is.
I mean, it seems to me that even dividing up this issue is not
.. maybe it's just what you have to do, but it would seem to
me if you're looking at it, that it's bizarre if you're
trying to get the best possible solution for the country to say,
"Well, we have got a problem with people who can't get
Medicaid or Medicare. And we've got a problem with long-term
care" when I would say how can we reorganize society in such
a way that we can go through first age, second age, third age with
assistance to those who need it drastically and it probably in my
sense, even though the quantity of dollars may be higher, I'll
bet it would turn out to be cheaper than trying to do it broken
DR. FRIEDLAND: I couldn't agree with you more. I have
always been perplexed by the notion that if I have a heart attack,
it's fully covered and I don't have to worry about asset
transfers or anything but if I need the social support services
following that stroke or whatever that is, I'm in trouble.
I mean, I have never understood that. So I agree with you completely.
But the truth of the matter of the fact is that that is not the
way the public discussions are going. All of a sudden, the Congress
realized there was a risk that wasn't covered in Medicare called
prescription drugs. It wasn't a new thing, but it was discovered.
And, therefore, there was a movement because the timing was right
politically to expand Medicare into prescription drugs.
That time has not come for the other risk, which was long-term
CHAIRMAN KASS: Sorry. Father Fahey still wants to respond
to Rebecca's question and anything that has happened since or
FR. FAHEY: I think that this value of a commission like
your own is to help forward the public dialogue and as I in my halting
way was trying to even define what it is, the hurt, we're trying
to deal with.
We got to where we are, Bob averted to it, that the Medicare benefit
that is used partially for long-term care was merely to reduce hospital
days, kept people out.
When Medicaid was passed, they didn't have the vaguest idea
what it was going to do, you know, Curt Mills. Somebody said Mills
wanted to get his name off, Curt Mills. But it was very uncertain.
And then, of course, the states ticked it up and ran with it. But
it became overly medicalized right off the bat. So we have defined
long-term care, by and large, as a medical problem.
Nursing homes. What do they look like? You might as well have
had one architect make every nursing home in the whole United States.
Forty beds. Stack them up or make them go out long distances and
have nursing stations in the middle and so on and make sure they
have all of the characteristics and, again, make sure they're
safe. That's what the regulations say. And through the Medicaid
system, make sure people are rehabilitated. It doesn't say,
"make them comfortable" or "make sure they get hugs"
and things of that sort.
So I think it will take a while, but I think redefining what the
issue really is and how we try to address it is a .. and, as I say,
I think it is a question of progressive frailty over time that happens
differently to different people that ultimately gets to a point
where it is so costly that a person cannot reasonably be expected
to deal with it. And we ought to have a huge risk pool to deal
with that relatively small group of people who will be in that kind
of need over time.
So it's redefining, if you will, the problem and approaches
to it and not so much .. see, right now it's all provider-driven.
Who are the insurers? Who run the nursing homes? Who are the providers
of care? And it's their interests that tend to be paramount
in the political discussion, rather than the users of all of these
And it takes people of the knowledge, skill, commitment, and understanding
of yourselves to put this into the public domain for a different
kind of discussion.
CHAIRMAN KASS: Let me fumble my way to a question. Notwithstanding
the fact that family structures are not what they used to be or
neighborhoods of the sort that your parents lived in, at least for
lots of people, especially in big cities, not what they used to
be, it's still the case that not only our families, where the
families exist, the major providers, but that seems to be the ethos.
Jim Wilson, oh, it's four or five meetings ago, regaled us
with the social science study in which Americans were asked when
the elderly are incapable of looking after themselves, who do you
think is responsible for their care. In the United States, something
like 85 percent said it's the family's responsibility.
That same question in Sweden produced an answer of 11 percent.
Now, that has something to do with differences of culture but
also differences of expectation in terms of government provision
of health care and other social welfare programs.
I take it neither of you are inclined to say that .. well, are
you inclined to say that this particular kind of notion of Americans
for personal responsibility and familial piety and responsibility
and add to that, at least in some quarters, a kind of suspicion
that the government ought not to be doing things that turn us into
more like Sweden with respect to this sense of at least local solidarity.
But it seems to me you are saying that we should, as much as possible,
support those people inclined to give care with respite care and
funds and safety nets and things of that sort. You're not in
a way trying to undermine that. You're trying to strengthen
At the same time, though, you're trying to produce a sense
of communal solidarity that isn't somehow family-based and individually
driven but in which people are supposed to somehow understand that
there are lots of people without families, that there are lots of
people who can't afford care or can't get this insurance,
they're not all the beneficiaries of faith.based communities,
which will reach out and send in caregivers one day a week or do
something like that.
So the question I suppose is, how does one in this particular
community mobilize support to think of these things not family by
family, me in mind for ourselves, but to adopt this kind of view
of at least a communal obligation for .. let's speak modestly
.. those who simply cannot do this for themselves and don't
have the kind of resources to do what is minimally necessary or
We're not very good at this in terms of communal discourse.
It's not been our way, though. You know, you have a hurricane.
And the generosity of the American people is astonishing. And,
yet, for the things that are not presented as catastrophes and emergencies,
that are simply the enduring problems of the same magnitude, it's
very hard, especially if you're not trying to turn this over
to the impersonal providers but wanting to somehow keep the personal
and familial focus on this.
How does one go about generating the kind of interest and sense
of communal responsibility to do what is modestly decent, not pie
in the sky? And where would you see the ability to mobilize the
interests and the political will to do this?
FR. FAHEY: You know, I am inclined to think that it already
happens substantially in areas which already have a sense of community
in which there is propinquity of interest and so on. You know,
being a parish priest, as I am. And I don't mean just faith-based,
but in Liverpool, New York, where I keep a robe and a parish, it's
small enough and it's big enough. It's an amazing amount
of solidarity that is there.
And, frankly, you mentioned big cities. In some ways, big cities
aren't so bad either because, at least from people, they've
got a doorman downstairs and they've got all kinds of stuff
within relatively easy.
Suburbs are the disaster, where there is no sense of solidarity
that started up. There are no sidewalks. There aren't communal
places for people to come together. They go to school one place,
church to another. They go to the mall over here and all of that.
So in some ways, it's the great American suburb, I think,
that's the problem and the gated communities, where, instead
of having the .. again, the sidewalk and the front porch, you've
got the barbecue pit in the back and you've got the garage in
the front. And nobody ever sees one another.
This is idiosyncratic is my own experience in many different places
as a priest. Where you have relatively small areas and where people
do stuff together, it's an amazing amount of solidarity and
help for the older person or the frail person or the person with
the disabled child. An awful lot of good stuff goes on. There
is something evil about size.
CHAIRMAN KASS: Then is your counsel that these really
are matters for state and especially local government and not even
local government but some local .. how does one mobilize from the
point of view of the national government, the kinds of changes of
incentives or the development of the kind of either social insurance
or welfare benefits that would provide the things that are, in fact,
needed in this area?
I think this is not unrelated to .. I'm trying in a more general
way to ask Rebecca's question, really sort of thinking more
FR. FAHEY: Is it a governmental issue? Is it a governmental
issue? You know, you separate out the functions of instrumental
health effective care and finances.
Obviously I think in terms of equity and adequacy that probably
the federal government with its ability to tax and do it across
states and so on is a place in which some sort of adequacy and equity
can be developed as far as finances are concerned, but in terms
of basic human interactions, I don't think that is the role
of government at all.
CHAIRMAN KASS: On the other hand, if you decide that Medicare
pays for this and not for that, you wind up having people brought
into .. we heard about this earlier. One changes the behavior of
people in terms of what it is that the community has agreed that
it will pay for in a system which was designed to deal primarily
with acute care, not terribly well.suited to the .. I mean, we are
aware of the problem.
The question is, how does one sort of mobilize the interests and
the political strength to provide these kinds of whatever it is
that the federal government can do unless one thinks it's really
not a federal government problem?
FR. FAHEY: I think the people are really going to push
the state government towards the federal government because they're
getting frightened to death.
The enormous liability of the states under these today, to say
nothing of tomorrow, I think it will see some realigning of the
notion, strictly the financial side of it, of states pushing very
hard for the federal government.
There have always been cross-subsidies. This is ironic. Medicare
has subsidized long-term care by paying more for those people that
are in long-term care. State government underpays for long-term
Now, Medicare is being .. they're taking away the subsidy
in the long-term care system. And the states are taking it away.
And, of course, all of this stuff about burdens, it's now being
shoved downward to families, to individuals, and so on, in a whole
variety of ways. Now, how we switch that around, I don't know.
DR. FRIEDLAND: I think in my mind, there is little question
that when it comes to the financing part, it has to be through the
funnel of the federal enterprise.
There's no question that the Medicaid programs now are on
the ground. They know who the players are. So they have the most
direct impact on the infrastructure.
But the infrastructure in home and community-based care is not
very well.developed, in part, because the way you get money as a
provider is to cater to Medicare, post.acute care, or post.acute
care in Medicaid.
So what the world could look like is not very clear because there's
been a very limited market for interventions that fuel .. my way
of thinking about it is for those with families, we're not going
to lose the family. The issue is, how can you sustain them to do
it longer and to do it right so that they don't give up or they
don't lash out, they don't inflict pain in their anxieties
or in their guilt or in their frustrations?
So I think in general, the family has to have control, but how
do we do that? We don't do this in federalism. If we give
money to the states from the federal government, we want a lot of
control over that from the federal government. If we give it from
the states to the family, we want a lot of control in it.
So I don't know how we get there. Cash and Counseling is
an example of where an experiment, a demonstration, for example,
where we have given the authority to spend the public money into
the hands of the family.
Now, perhaps the evaluations of that will be so successful that
families can be trusted and to use that money because it's really
about using money to integrate to the arrangements that you need
in your own family circumstances.
We don't have examples where that is. I concur. I don't
know that there is an easy answer. But I think given that we have
states with lots of effort but little resources and we have got
states with lots of resources and no effort, we need in terms of
funneling the money the federal government.
How the federal government can do it without putting their hands
on the rules on the state government completely and how the state
government can do it without putting all of the rules on the consumer
is an experiment in motion, in action now with Medicaid.
But there are very few examples of what where we let consumer
or family .. most of the focus, I think this is a big difference.
Most of the focus has been on the person who needs the care and
not the caregiver. So the beneficiary is never the caregiver,
but if we can change the language so that the beneficiary includes
the caregiver, then that helps.
FR. FAHEY: Let me make a comment, if I may. Also, must
of the help is through entitlements to individuals who are in need.
In some ways, what we are talking about are communities in need.
And while there have been some funds, community development funds,
or .. really, the Older Americans Act was meant to be this, but
it has never done that.
I know that several of the places that I am engaged in, upper
Manhattan, which is a Dominican sea, Dominican order, the country,
that much of what we're trying to do up in that area is to mobilize
that community as a community, sending a trustee down in the village.
Again, there is an amazing solidarity within the village of all
kinds of different people, all kinds of different backgrounds.
But what we're trying to do is get the bartenders and the
firemen and the postmen and the neighborhood stores and a whole
variety. And we're calling it the age.prepared community.
With Governor Kempthorne, we did some work out there in terms
of rural areas, which, again, using the word "cobble,"
that need to cobble stuff together that doesn't fit nice entitlements
but, rather, where somebody exercises leadership to facilitate people
coming together and do whatever needs to be done with whatever resources.
Again, it's not comfortable to give money out there with a
lot of strings attached to make that kind of thing happen.
CHAIRMAN KASS: Thank you very much. We are at the end
of this session. Thanks to both of you for an interesting and very,
very thoughtful discussion.
The Council members, all of us, who missed dessert, dessert is
upstairs in the Hospitality Room for anybody who would like.
Let's reconvene in 15 minutes, at 10 after 4:00. We'll
have an hour to have our last session.
(Whereupon, the foregoing matter went off the record at 3:55
p.m. and went back on the record at 4:24 p.m.)