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, Georgetown University

Monsignor Charles Fahey, Director, Third Age Center, Fordham University

 

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 expenditures.

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 categories.

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 on others.

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 way.

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 family.

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 real.

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 insurance.

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 else.

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 event."

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 of money.

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 inpatient care.

So most of the dollars being spent in long-term care through health insurance is through private health insurance, not long-term care insurance.

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 care.

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 bond rate.

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 it."

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 administrative structures?

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 lives.

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 people.

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 in retirement.

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 element.

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 otherwise do.

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 area.

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, actually.

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 bed.

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 services.

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 that process.

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 in.

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 time.

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 we're sharing.

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 will.

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 will.

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 stuff.

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 burden?

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 families.

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 sense.

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 interesting, too.

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 discussion.

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 Fahey?

(No response.)

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 a bearing.

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 say that.

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 them down.

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 full reason.

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 to get.

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 consumer choice.

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 reasons."

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 premium.

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 up.

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 care.

CHAIRMAN KASS:  Sorry.  Father Fahey still wants to respond to Rebecca's question and anything that has happened since or before.

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 things.

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 it.  Okay?

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 minimally decent?

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 nationally.

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 care.

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.)