we should be heartened by the fact that there are really good models out there. some of them represented by folks on this committee. and that we should be building on what we know. so the notion that we're starting from scratch is certainly not accurate there are really good models, and we should build on those experiences. to dr. holtz-eakin's point, which i strongly agree with flexibility is really important. because how we're going to meet the needs of families and delivery systems is very locally based. it's based on the assets on the ground, on family structure and other kinds of resources. so the solution i think to your three points resides in organized accountable systems of care. that have the flexibility to meet the needs of families and are responsive to the assets that are available. and i would offer that those flexibility accountable systems have four key characteristics. the first is that they begin by focusing on the quality and coordination of care, the notion

of targeting the right services to the right folks is incredibly important. and how you get the efficiencies you're looking for. the second point would be they have rebalancing at their core, which means we are going to focus on helping folks stay in the communities of their choice. that we're going to work against the tyranny of the bricks and mortar. i'm a physician. i grew up in hospitals. i've cared for people in nursing homes. and bricks and mortar drives so much of the financing of health care. but what we're really talking is about a system that begins and residence with the focus being in the community. the third key point would be this notion of self-direction and choice. it's hard for clinical providers to do that. i hold myself amongst them. we really start by talking with patients and families about what they want, and then try to achieve that. that will often be the most cost-effective choice, and it will often be one that keeps the family, the individual, even when they're a patient, that they're in the driver's seat.

and the fourth characteristic is any of these changes really do need to be efficient systems. they need to generate cost savings that can be used to support the system that they generate outcomes that improve quality. so that notion that you measure that you're doing, that we're just not building systems that are more expensive because they're better, but we're building better systems that are actually more efficient and are much better stewards of the public resources that we use in these programs. >> thank you. dr. holtz-eakin? >> so i think the important thing to echo are there are models and examples that appear promising at the moment for in particular doing the coordination in many cases across what ever are traditionally separated long-term care and health services. my experience at cvo is successful small scale models don't always scale successfully. what i would urge you to do is think hard about scaling things up.

in particular if you're going to good past something that looks like a demo pilot. focusing on the states as a demo for scaling makes a lot of sense because they have the capability of running large scale programs like medicaid. they have flexibility in how they implement things, and you can learn from the different states' experiences. so i think a focus on the state level makes a lot of sense from that point of view. we also know that many states have been very successful in the health area using managed medicaid approaches with adequate quality controls for outcomes to the extent that we wanted to try some more coordination through that vehicle. i think that would be a sensible first step in this area and see what kind of results we actually get on larger populations. >> thank you. senator corker? >> thank you, mr. chairman, and thank all of you for your testimony. you know, as you look at the issue and just look at overall financing for health care in

general, i mean obviously a major train wreck that is out on the horizon. i was this weekend visiting a couple of neighbors in a long-term care facility. and it's just incredibly expensive. and all of us either have loved ones or friends or neighbors that have had alzheimer's. we see more and more of that coming. so the financing component of it is just incredibly difficult and a national issue moving to a national crisis. how are the private institutions that you have dealt with that are actually insuring long-term care on the private side, how are they actuarily doing? it seems to me it would be very difficult at this juncture knowing so many changes demographically, but also large occurrences of alzheimer's, obviously much larger costs, how in the world, how the private institutions fairing that are actually in the long-term care business? and are there concerns about

their solvency down the road? any of you want? i know some i don't have you don't really like private. so i'll ask you some public questions. >> i think we've seen both some private failures where they have not adequately managed those risks. some people leave the long-term insurance market as a result. but we've also seen some of the institutions both understand the interaction was medicaid better have, taken advantage of the partnership opportunities, offer policies that protect against up to 5% inflation risk to the beneficiary and still manage their finances well enough to stay in business. so, you know, there are still people in the business and being successful if we get more examples like opm where there are more employers providing the gateway to large pools of individuals buying this

insurance. i think they actually have a much brighter future. when you look at the sort of the kinds of things that matter for making private insurance more successful and a bigger part of this. and i want to emphasize for professor feder's sake, i don't think private insurance is going to pay every dollar going forward. most from families. that's the bulk of it. we got to get every dollar we can on private insurance because the demands on the public sector are going to be enormous. and we just have to do these things. i think awareness. start with awareness campaigns. thing is a lot of ignorance about this need late in life and who is going to pick up the tab. get whatever you can employer offer as part of the package so people can see it there and enroll. >> you mean in the cafeteria? >> if at all possible, yeah. >> it's not perfect for everything. deal with the medicaid coordination issue. there is a research literature suggesting that medicaid crowds out private long-term care insurance. i think it deserves serious consideration. it's not tennell oreason there

is trouble you. could consider some things for the tax code. none are magic bullets. since we have a saving need and a long-term care financing need, you know, products that combined annuities with long-term care insurance, innovative financial products that are favored by the tax code might be part of the solution. and, you know, if you go back to the literature on how do you get people to save or buy health insurance, you could have opt out. start with a private long-term care insurance as part of a package and then opt out of it if you don't want it. so none of those are in and of themselves fabulous. none of them are in and of themselves solve it, but i think all of them merit some consideration. >> senator corker, it's not that i don't like private long-term care insurance. >> i was going to ask you about public in just a second. >> i'd be happy to talk than as well. it's not that i don't like it. it's that it is and doug has couched his suggestions, suggestions. it's a neutral term advocacy.

in terms of recognizing that it's part -- it's part of the solution. it's not the solution. and my concern as we look -- as long as i've been working on this issue, and it's going to be -- it's getting close to long enough to need long-term care, it's been called the fledgling industry. it is very challenging for this industry to grow. and it's doing -- serving about the same number of beneficiaries today as it was 10, 20 years ago. it's just not growing. and several of the companies or certainly some prominent ones have stopped offering the product. i don't know that it's because they're going out of business, but they're having difficulty making money on it. and making it grow. because the way in which they keep from going out of business is that they set limits on the lifetime benefits and are careful in selecting their beneficiaries. and they when necessary increase the premiums even after people have been paying for many years.

so it is a product that particularly -- and i know that senator kohl has been quite interested in promoting strong quality standards for insurance. if it's a good product, it's good that people with means can afford it. but the number who can is modest. and the industry itself recognizes that. so my concern with a strategy to make it better. i don't -- i think making it better is great. i'm concerned with any strategy that would put, say, taxing incentives into it to support it. that's actually spending public dollars or forgoing revenues as doug well knows that they think if i'm choosing, i would rather see them strengthened for those least able to afford, not for those who are most able to afford, because we know historically that those subsidies do in fact make -- go to people who probably would have bought it anyway.

>> i do think we're in sort of a -- i think the environment here is moving more towards tax reform that doesn't incent, that actually does away with many of the $1.2 trillion in tax breaks that we give each year. so i understand that's a suggestion to maybe cause there to be greater uptake. at the same time i think the momentum right now is in a very different direction. and i think everybody acknowledges that. doctor? >> just to add one observation kind of more from a clinical place than either the folks on each side of me. i guess the challenge that i see in front of us is that we've failed as a country to kind of achieve a social policy goal of getting people to plan effectively for their long-term services and supports needs as they age. given that 70% of folks are going to need them. so even when you look at things like the partnership program, which is a nice incremental step, the reality is that it's an open question whether the partnership program actually

covers new people or whether it covers people who were predisposed to buy long-term care coverage, which is still a good thing. every person covered is a good thing. so those sorts of challenges suggest that what we have is kind of a boutique or a niche product. and that many of the solutions we've looked at sort of build in very incremental way. and i think the challenge or opportunity in front of us may be to look at larger scale sugarses to get us to broader forms of coverage, whether they're in the public or the private space. but we need to get to place that has people more engaged and that there are cost-effective choices in front of them. >> professor feder, i know that you i think were a pretty major champion of not necessarily the class act, but something like that where there was public financing in place. you know, if you look at where we are today where in today's dollars, the average american family are making average wages

puts about $119,000 into the medicare program over their lifetime in today's dollars. and that same family takes out of medicare over their lifetime in today's dollars $357,000, you really as we all know, you cannot make that up with volume. and yet a lot of volume is on its way over this next ten years in particular. i menoing that we're not particularly good at making those things work in the public sector, you know, we always want to give people what they wish without asking them to pay for it. i mean it's kind of the way politics have been in western democracies. is there a way for us to effectively design in your opinion a public plan that addresses the concern you're talking about, we're all talking about? >> i think there is. and i think that unfortunately, there is a lot of resistance to that at the current time. but let me just --

>> and i think a lot of it is because of the way we've handled some of these other programs. >> well, let me address that. first i think it's useful when we talked -- when we heard a couple of times accurately that 70% of people who are turning age 65 are likely to need long-term care. the reason that we're talking about insurance, whether public or private is because there is a lot of unpredictability for individuals about where they're going to fall. so on the 70%, it means 30% aren't going to need it at all. and i kind of think we may all root for that, live to a ripe old age and then say goodbye. healthy. that would be the best. but even within the 70%, about 17% use less than a year of intensive long-term care services. and the other end of the spectrum, excuse me, 20% use more than five years. so there is variation. and that's we talk about insurance, because savings alone, you can't do it.

it's just not doable. so that's the first thing. on your medicare point, the problem there is rising health care costs. and if people are -- we start -- we contribute during our working years at the rate of growth we've seen on health care costs, first of all, we only contribute during our working years to cover part a, the hospital, the mostly hospital costs, which is only about half of costs. the rest we pay through premiums in general revenue. so that prefunding that there is such an imbalance is because we aren't controlling health care costs. and it's not that medicare is doing worse than the private sector. the whole system is not controlling health care costs. and if anything medicare is doing slightly better, has done historically in most of history slightly better in controlling costs. and now going forward, because we are moving toward more integrated care, we're looking

to have medicare lead the whole system in making that more efficient. so i wouldn't share a negative view toward medicare. i think we need to do better in all of our health care spending. and then what you're raising really -- >> i wasn't giving a negative view. i was just stating the facts. >> but -- but. >> i said three times as much as we're taking in. and i'm just saying as politicians, we have difficulty ace lining those things. i agree with you that both in the public and private side health care costs have not been controlled. i agree with that. i'm not making a differentiation between public and private. >> good. okay. >> we just haven't handled this program. >> as nation. >> or any other entitlement program particularly well. >> well, i'm not sure we agree on that, but that's okay. well can move on from that. what i would say is that what i thought you were talking about is looking for a way to prefund. >> that's correct. >> and i actually would be happy

to provide for the record a proposal that was developed by len berman who used to run the joint -- the urban institute at brookings joint tax center, and a colleague of his at the urban institute that actually put forward a design for the prefunding of services for that. i think that is-be done, challenging. prefunding at all, which medicare is never designed to be. that's what i was saying earlier. prefunding at all is challenging because we do when we take it in as a federal government, we tend to lend ourselves that money, and if we want to really put it away, that's a challenge for us. but i would be happy to share that proposal. >> i'd love to see it. thank you. sorry for taking so long. >> thank you so much. i know senator udall has to leave. would you like to ask a couple of questions, make a comment? go ahead. go ahead, senator mentz.

>> i appreciate it. very kind of you. mr. colman, right there, we all know that medicaid was never intended to be the primary provider of long-term care coverage, yet medicaid is the largest pair of long-term care services. with long-term care accounting for almost half of national long-term spending, as a former governor, i know that giving our states the plexability and resources they need to innovate is a first and critical step toward controlling spending in the medicaid program and improving long-term care outcomes. we will never achieve quality and savings with a one size fits all approach that ignores the differences and medicaid population from state to state. as you noted in your testimony, minnesota is applying waivers under medicaid to improve the way to deliver and pay for services and to make sure that services go to the most in need, which i agree with. with that being said, sir, what steps could congress take to

improve and increase the flexibility to states like west virginia and minnesota to maximize the value in long-term care in their medicaid programs? >> thank you for the question. i too believe that states can manage the programs effectively. and i think minnesota is an example of if you have the vision, if you have a goal, and if you plan appropriately, you can achieve that. but it takes some -- it takes some prerequisites. you can't have a community home system unless you plan to have a community home system, unless you have the infrastructure for communities to retain people of all ages in their communities. i think we have to not only move away from a one size fits all philosophy for all states will look-alike, but also that the waivers have to look identical. we've had this partnership with

the federal government that begins with the assumption that the institution because of the way the programs were initiated, the institution is the entitlement, and then you have to seek permission to do things differently which is always contrary to my thinking why we have to ask permission to do things differently that the consumer wants. again, i'll repeat. people want to stay in their homes. and that's what we're redesigning a system whereby the most expensive care, the most expensive services, the waiver so to speak will be available to those with the highest needs where it cannot be provided elsewhere. but beyond that, we want strategies to maintain independence. again, low-cost strategies to maintain independence. low-cost strategies to encourage

transition back to the community, and we've had some success with that, transition to communities from people who have been in nursing homes longer than 90 days are proving very successful. but successful. it take is a person by person strategy to achieve that outcome. we can't just declare that that's what we are going to do. it takes resources which is what minnesota is doing. so if we dispense with the waiver and then everyone has the full menu as opposed to targeting, based on individuals needs where in the system they best can use their -- >> you believe in waivers? >> i do, yes. >> same kind of comment. on the waivers, how do the states have a little bit more flexibility. and you believe that is important? >> thank you, senator. i just -- building on what was already said. i think that there needs to

be -- ale valid reliable delivery system in place. so to get from where you are to where you want to be really depends on the resources that are currently available and itch you didn't have everything you need, then you need to give the time to grow the resources. that's where to my mind, some of the flexibilities are really important. which is if you are going to encourage folks to remain in their home or community there have to be valid, reliable, observable, accountable, resources that can be there to help those families when they need that little bit of help. so, i think -- you know where the flexibilities come in. i do agree. moving away from, the only entitlement being the nursing home. actually getting to a place where folks get home and community based services as, as a right. not as a waiting list. but as a right. that's a huge step in the right direction. but then, and that is an

important piece of flexibility. but then what the states need to demonstrate is there is really a valid system that is there to meet the needs of folks as we make that transition. so i think what the states need to be able to demonstrate, ask for flexibility is that really is a demonstratable system. quality is being measured where there is a way of folks are having a problem, beneficiaries, can be addressed. we need to move away from the bricks and mortar. >> i've can quickly ask -- it's a common misconception that medicare covers long term care and many more simply never save for it or plan for it. for long term care services and supports. what do you think can be done or what should be done for us to educate the public. because there are so many people falling through, they have nowhere to turn to. >> i'll bow honest, i don't know there is a magic public education program. we have enormous problems in

federal programs and costs and difficult to educate the american public about the scale of the problem. there have been some, future initiatives, tom mentioned. the kind of things you have to look and see what successes we get from them. relatively small scale, if they turn out to be a good investment, you know do a project evaluation, they improved awareness, they don't cost much. that will be great. and, i think the more you can do through employer community, who are, are often very effective at -- reaching their -- their employees about various financial management issues. i think those are the two things to do. >> thank you. >> thank you, mr. chairman. >> thank you, senator udall. >> thank you, mr. chairman. thank you to the ranking member for holding this important hearing. i think this discussion has been important on a mcro-cosmic level. i have questions i want to

acknowledge, dr. cher nonoff yo are sitting between them. very astute staffs. thank you all for your great, spirited conversation. mr. coleman, let me turn to you and follow up on what the senator mentioned, with focus, and i will turn to dr. feder, in rural parts of the country in colorado we hatch eave, the eas part of our state is rural. we produce fuel, fiber, we hatch eastern reaches that are rural. what have you found that are unique challenges in providing long term services into the parts of the state. and then, dr. feder, i would look you to follow with how medicare itself could work with the dynamic. >> again, minnesota has -- greater minnesota also. where the population density is, a challenge in providing services to -- to older people,

old eer adults, and people with disabilities. what we found is we need flexibility. that -- again, relying upon the communities, and the community infrastructure, with which to base long term care services and supports, we need to acknowledge that drive time, the -- the differences that we need to accommodate in our policies to allow people to have some choice but they may not have as much choice. it is a challenge, but it can be done. we are also learning the value of technology. the fact that, every day there is more to be learned from how we can support people in their own homes, with the use of technology, via the internet, via other -- lifeline-like

systems and monitoring systems for people who are -- who are some miles away from -- from -- from services. >> dr. feder? >> yeah, i would reiterate that. i think reinforce the emphasis on technology to connect people to, who are -- who are dispersed to resources that can serve as supports and check, people who can check in on people who are -- impaired, and, be able to, i mean, skype is a wonderful thing. sure we got better than that. there are, i think mechanisms that can make people feel connected and supported and keep them connected to -- to care givers who are more likely to be care givers by which i mean medical technicians in urban areas. you asked about medicare. i think that -- medicare in terms of developing, integrated delivery systems. i think medicare is in the process of doing this.

we need not look to states, medicare, need not look only to states. medicare can do a great deal and is in this regard. by frying to support physicians practices, that are, small physician practices in rural areas. and using -- the personnel, who can serve several practices as care coordinators who are able to connect using -- both visits and technology. to people who are in their own homes. and enable them to -- to connect to resources for support. i think medicare can do a lot in that regard. >> you perhaps does be making house coalalls using technology without being on site? >> i am confident. it is not exactly the same. you could greatly enhance support for people in terms of mon titoring their conditions i terms of helping them, keeping track of people, so you know when a crisis is occurring. that's what coordinators what we

are looking at with social workers and nurses and -- and other professionals to help identify when people need interventions and try to connect them to the resources, the infrastructure, we are talking about, versus talking about, building, so that they can stay at home. it doesn't become a crisis. we don't have an unnecessary hospitalization. >> beoth my parents were stubborn. i won't be stubborn. my children will think i am flexible. they both wanted to live in their own homes in their later years, imagine that. they both took falls. there were not people there. both of them lay, in the bathroom and kitchen respectively for half a day or longer. and then, the result of the falls, then ended up in their, deaths ultimately. i wonder if there could be that sort of monitoring that although you have privacy concerns and so on. >> but we can do better. i don't think there is any question about that. you think of things that cause

unnecessary hospitalization, dehydration. having somebody checking in, you are eating properly, taking your medications all those things can very much improve quality of life. and quality of care for people. and prevent, of the use of ex-pensive services. >> yeah, dehydration, actually contributed to the conditions both my parents developed. let me go back to if i might. long term care insurance. i know, the doctor, you spoke to this. i know i have my pamphlet that i was sent sitting in my home office suggesting buy long term care insurance the i haven't responded. i keep thinking i will find a moment, where i will want to do that. mr. brian, i know that in the federal program. one long term care insurer, john hancock. what are you doing to think about attracting more carriers and then a little bit of time left i might ask the doctor how