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Ken Dychtwald

Learning from my mom and dad’s experience.
I grew up in the 1950s and 60s in a close-knit, hard-working family. My parents both worked full-time to pay the bills, send my brother and me to college while saving frugally for their own retirement nest egg. Still very much alive at 86 and 89, my mom and dad live in a retirement community in South Florida. I live 3,000 miles away with my wife and kids in California, while my older brother lives in New Jersey – near where we grew up.

Today, my dad has diabetes and heart disease and has been blind for a decade due to macular degeneration. While still sharp as a tack, and ready for a political argument 24/7, he can’t drive, read or handle many of the normal activities of daily living without a full-time aide. My mom – who remains the “heart” of our family – also requires ongoing assistance. She has COPD – which means she must spend three hours a day on a nebulizer. In the past several years, she has had a heart bypass surgery, a hip replacement and is grappling with memory loss.

Around a decade ago, when it became obvious that living independently in their home was becoming difficult, my brother and I grew concerned because we saw that age and chronic disease were starting to take a deep toll. We knew that Medicare didn’t pay for long term care and Medicaid was for the poor, so our anxiety was high. However, I was very relieved when my dad told me that they were going to activate the benefits of the long term care insurance policies they had bought five years before, to get the extra help they needed so they could continue to live independently.

The good news is they are currently living surprisingly normal lives in their own home, thanks to the services of their care coordinator as well as the terrific aide who comes to their house six days a week, helps manage their household, does the grocery shopping, prepares meals, takes them to their various doctors appointments, cares for them – and generally has allowed them to stay together in their home, just like they always wanted.

If not for their LTC policy, my folks (who have recently celebrated their 67th anniversary!) would most likely be living in some sort of institution – probably a nursing home. And because of their different conditions, they might have been forced into separate facilities. My brother would probably have given up his life in NJ to look after them, and my wife and I would probably be paying for their care which by now would have cost nearly $500,000 – a small fortune.

As a gerontologist, I know that paying out-of-pocket for eldercare can be very costly. The median cost for home care is $42,000/year and a private room in a nursing home costs on average $74,000/year (for information on the cost of care where you live, here’s a helpful resource: www.genworth.com/costofcare). Some people have to sell all their assets to cover the cost of LTC – and many others become impoverished while paying for LTC expenses. I recently read how some social workers are advising elder men and women to divorce their spouse should their partner’s health start to fail. By doing so, they can detach from the financial responsibilities of caring for their loved one – and have Medicaid pick up the tab. This is a shameful state of affairs.

My folks say that they purchased their policies so that they wouldn’t be a burden on us – and while we would do almost anything for them, we are thankful for their proactive decision to purchase their LTC insurance years ago.

The Coming Caregiver Crunch
Over the past century, life expectancy has vaulted from 47 to 77….and it continues to rise. But, the longer you live – the longer you’ll live. So a 65 year old today has an average life expectancy of nearly 85 years! For many, this is a terrific circumstance – more years to learn, work, play and enjoy time with those we love. However, with longer lives, there’s also the increased possibility of health problems along the way. Nearly 70% of all people over 65 will need some long term care in the years ahead. And we’re talking about our parents and soon us!

Today, three quarters of all care is provided informally by loving and supportive family members outside of hospitals, nursing homes and other institutions. This caregiving might involve grocery shopping, house cleaning or helping a loved one who is recuperating from surgery to bathe, dress or visit their doctor. Or, it might even require 24/7 care for a loved one with Alzheimer’s.

But there will soon be a shortage of family caregivers for four reasons:

1. Fewer children to provide care. Today’s elders had around four children per couple, while boomers have had only two.
2. Family members may not live nearby due to increased mobility and relocations.
3. Escalating numbers of singles without a spouse to care for them, due to rising divorce rates and widowhood (women outlive men by more than five years).
4. Highest rates – ever – of both middle-aged men and women working. And so, the adult daughter or son might need (or wish) to work.

Long Term Care is not necessarily a comfortable topic…even for a gerontologist!
So, when my wife Maddy and I stopped to think about it five years ago, we considered what might happen to our lives if sometime down the road we needed extended care. While we realized that there were costs associated with purchasing LTC insurance, the potential financial and emotional costs to ourselves and to our children of not purchasing them were far higher. Although my folks bought their policies in their 70s, we decided to buy ours in our early 50s, when the rates are lower and the likelihood of qualifying is far higher. And, we also took advantage of the special discounts for couples. In addition, because we are small business owners, around ¾ of our premiums turned out to be tax-deducible.

After 35 years on the aging front lines, my personal rationale for why purchasing long term care insurance makes sense:

1. To maintain independence and to avoid burdening your children – financially or emotionally.
2. To assure your ability to get quality care in the setting you choose.
3. To protect your retirement assets and stay in control of your money and your life.
4. To protect your spouse’s lifestyle and financial security, while you’re alive and afterwards.
5. To protect inheritance for your children and grandchildren.

While I don’t think everyone needs LTC insurance, I do believe that everyone should have a plan for how they’re going to be looked after should they needed extended care, and how they’re going to pay for it without burdening their family.

Joe Flower

If competition actually drives the cost of health care up rather than down, what would bring lower costs? What provisions in a “health reform act” would actually drop costs in health care? Let’s leave aside for the moment all the myriad other arguments – some might be seen as too much government intrusion, some would destroy the health plan industry, some would be cripplingly difficult for providers, and so on – and just focus on cost. Given the real structure of health care markets in the United States at this moment, what could be written into federal law and regulation that would actually reduce cost?

Some of these changes are massive, some would be invisible to those outside the industry, but all could be legislated or regulated, and all would “bend the curve” toward lower costs. Choose any you like, though some are “and” choices, others are “or” choices:

1. Single payer: Eliminates insurance company overhead, increases medical loss ratio (the percentage of dollars put in returned as medical resources) to perhaps 95%, and gives the government (probably some rate-setting commission) the power to dictate prices and availability, like Medicare on steroids.
2. “Robust” public option: All providers must take its payments as full payment, rates tied to Medicare rates (perhaps plus a percentage), Medicare rates decided by an independent rate-setting commission.
3. Limiting medical loss ratios: Many European countries dictate that health plans must return 85% or 90% or 92.5% of the premium paid in as medical services paid out.  U.S. health plans, in contrast, compete on (and brag to Wall Street analysts about) how low their medical loss ratio is. Some are as low as 60%.
4. Negotiating drug prices: Allow the government to negotiate drug prices for life-saving drugs.
5. Malpractice reform: Our adversarial system of dealing with malpractice costs us, directly, only about one half of one percent of medical spending. But the extra tests and unnecessary procedures of “defensive medicine” cost an estimated additional 3% – $60 billion per year, an amount equal to most of the cost of extending coverage to all Americans. And still most victims of real malpractice are left without any help or compensation at all, most actual medical mistakes pass without comment, and most of the few really “bad” doctors out there are still able to practice medicine unhindered.
6. More docs, more clinicians: Increase the supply of medical service by expanding medical and nursing school enrollments, reducing barriers for foreign medical school graduates, reducing internship requirements, and allowing nurses and techs to perform more procedures.
7. Bundling: Many parts of health care could be “bundled” into coherent products – a replaced hip, an uncomplicated birth, a cornea transplant, diabetes management – from diagnosis to re-hab, counting all imaging, drugs, everything. Payers should pay for these as single payments, just as you don’t pay the auto body shop for each sheet of sandpaper or quart of paint, but for the whole job. This would drive providers to discover the most efficient way to do it.
8. Publishing outcomes: There are comparable measures of quality that do not penalize places that take more complex or difficult cases. Establish standards and put all the statistics on the Internet.
9. Publishing prices: You want a new hip? Here’s what it costs at each of these institutions, here is their clinical quality outcome rating, here is their customer satisfaction rating, right there on the Internet. This is true competition that would drive down prices and drive up quality.
10. Banning discounts: Counterintuitive? Perhaps. Any CFO of a health care organization would tell you that their “master charge list” is a phantom made up only for negotiating discounts, and the discounts are all over the map – so no one can tell you what the “real price” of any part of health care is. This means that competing on price at all is very difficult, if not impossible. “Common carrier” rules in communications and transportation dictate that the price is the price, and the little buyer pays the same as the big buyer. This would massively transfer risk to the providers to get their costs under control and get their prices right.
11. Giving a premium to integrated “accountable care organizations:” All the organizations consistently put up by reformers as good examples of giving the most and best health care for the dollar, such as Mayo, the Cleveland Clinic, Geisinger, Group Health of Puget Sound, Kaiser, and Health Partners of Minnesota, are structured differently from the rest of health care. The doctors are on salary, or share profits in the whole enterprise. Many of these organizations are “capitated:” they cover everything for a set monthly fee. There is no encouragement to do anything unnecessary, and every encouragement (since they are in competition) to do whatever actually works for better health. They do good, conservative medicine in a collaborative team-based style. We cannot mandate the growth of such organizations, but we could give an extra 5% or so to encourage their growth.
12. Increasing subsidies for digitization, tied to productivity improvements: There are huge inefficiencies in the actual practice of medicine. No one can improve on them until the people running health care can actually track what they are doing, in detail. In something as complex as health care, that means total digitization, like any other business.
13. Subsidizing automation: Many things in health care would be done much more efficiently by automation, from lab work and pharmaceutical distribution to tracking inventory. Today’s system does little to encourage such automation – instead,it actually supports the inefficiency.
14. Standardization and checklists: Many parts of health care have established pathways that are clinically proven and widely published in the medical literature, yet followed only at the clinician’s whim. These are not matters for the doctor’s judgment, these are matters like washing your hands between patients, fully draping a patient for a central line placement, getting clear verbal confirmation from everyone in the surgical suite that they agree on who the patient is and what the operation is for. Standard pathways, and simple feedback mechanisms like checklists to make sure they are followed, are still not common practice in health care. If regulations made them mandatory, following them would save billions of dollars in fighting infections and having to re-admit patients to the hospital with problems that could have been prevented.
15. Warranties: You define the job and put a price on it, now back that with a warranty. Today, if I have an operation, and get an infection from the operation, or it has to be done over, the provider actually gets paid for taking care of the problem. With a warranty, I (and my insurer) would pay nothing. This would drive the risk for quality back on the provider.

Though politically some might characterize some of these choices as “radical,” none is “radical” in the real world of health care. Each has been proven, in practice, in some part of the current market, even single payer (think Medicare and the Veterans Administration). Each is practical, not just theoretical. Each could be done with current technology if we decided to do them. Most could be done without any massive new bureaucracy, just from a tweak here and there in the rules, undoing rules that have been set for the convenience and profit of payers and providers, and setting them instead to force them to compete on actual value for the patient and for the nation.

We could drive down the cost of health care while driving up quality and serving everyone. How much could it be driven down? The evidence (from other countries and from variations in our own market) says that we could do health care in the United States, with full choice and higher quality than today, for everyone, for half to two thirds of today’s cost.