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Around The Corner

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Those of us who are still true believers in long term care insurance have a couple of characteristics in common.

For one, we tend to be the eternal optimist type. You know, the solution is there and it’s right around the corner. The other characteristic is that this optimism has been maintained in the face of one disappointment after another–those many corners that have led to seeming dead ends in the sale and marketing of this vital product.

So once again, we’re coming to a corner–this time it’s the promise of the product’s wider dissemination in the market as a result of new long term care partnership programs in the states that are authorized by the Deficit Reduction Act of 2005, which was signed into law in February.

Until now, these LTC partnership programs have been extant in only four states–California, Connecticut, Indiana and New York. This was due to legislation in 1993 that closed the door on creating new such programs, leaving only those four. You have to wonder about this decision of Congress at that time and scratch your head: What were they thinking?

In any case, the four programs never really lived up to anyone’s high hopes (or even dismal expectations) for them and the total number of partnership policies ever purchased reached just about 212,000 at the beginning of 2005.

As an eternal optimist, however, my take is that while the number may not be great– OK, who am I kidding? It’s pathetic–at least that many people were protected who would not otherwise likely have been.

What is truly amazing is that the total number of people who ever received benefits from the policies was only 2,761! That amounts to only 1.3%! (All these figures are from the Government Accountability Office.)

In any case, looking around this next corner there really is reason to be hopeful. For one thing, the DRA really tightened up restrictions on Medicaid eligibility for long term care–for instance, lengthening the look-back period for asset transfers to five years from three. In other ways, too, the law has made it much harder for people to use Medicaid to take care of their LTC needs.

The hard reality, however, is these LTC needs are not going to diminish on a societal level; in fact, they are going to increase greatly as those who are currently seniors and those boomers who are reluctantly entering seniorhood continue to age and live longer than they ever expected.

We can expect the states to take up the partnership programs for one very good reason. Despite the greater restrictions in the DRA, the states still foot a hefty chunk of Medicaid expenditures. So, their self-interest would dictate finding a long-term solution to the problem that allows residents to take more personal responsibility for their LTC needs.

This message also will be reinforced by the federal government in the form of a long term care information center set up in the Department of Health and Human Services, which will serve at least partly as a cheerleader for the LTC partnership programs and the need for people to take personal responsibility.

The expectation that many states will embrace the partnership programs gives me cause for hope regarding the LTC insurance product’s future.

The other thing that always has sustained my hope is that once you have been personally touched by what the product can do, you almost inevitably become a true believer. With demographic trends going the way they are, the ranks of true believers can do nothing but swell as time goes on.

Steve Piontek



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