Private long term care insurance can play a critical role in buffering Medicare and Medicaid against the cost of caring for the elderly.[@@]

Karen Ignagni, president of America’s Health Insurance Plans, Washington, made that argument here today at a hearing on long term care and Medicaid that was convened by Rep. Nathan Deal, R-Ohio, chairman of the U.S. House Energy and Commerce Subcommittee on Health.

Deal has been one of the leaders in efforts to establish an “above the line” deduction for LTC insurance premiums and let workers pay for LTC insurance with contributions to flexible spending accounts and cafeteria plans.

Private LTC insurance can save about $5,000 in Medicaid expenditures per policyholder and $1,600 in Medicare expenditures per policyholder, and that means policies already in force could save Medicare and Medicaid a total of about $30 billion, Ignagni predicted.

“These savings will grow as more people acquire policies and the average age of purchasers continues to decline,” Ignagni said.

AHIP wants to share ideas with the subcommittee about ways to help Medicaid and Medicare address the challenge of paying for long term care, Ignagni said.

Ignagni spoke at the hearing after Kathryn Allen, a Medicaid and private health insurance expert at the U.S. Government Accountability Office, who emphasized the need to keep long term care costs from swamping government health programs.

“We have been able to sustain these entitlements in the past with low Depression-era birth rates and a large post-war workforce,” Allen said. “However, absent substantive reform of entitlement programs, a rapid escalation of federal spending for Social Security, Medicare, and Medicaid is virtually certain to overwhelm the rest of the federal budget.”

The American Council of Life Insurers, Washington, issued a statement praising lawmakers for holding the hearing.

“Although ACLI is neutral on specific issues relating to Medicaid reform, we believe the broader use of long term care insurance will help decrease the future financial burden on the program by encouraging personal responsibility,” ACLI President Frank Keating says in the statement.

The ACLI is continuing to support the kinds of LTC insurance tax breaks Deal has been proposing, and it also is recommending that Deal’s subcommittee look for ways to expand the Long Term Care Partnership program. The program gives the states that have tried it the ability to encourage the purchase of private LTC insurance by giving private LTC insurance holders preferred access to Medicaid LTC benefits if private benefits are exhausted.

Links to written versions of statements delivered at the hearing are on the Web at http://energycommerce.house.gov/108/Hearings/04272005hearing1487/hearing.htm