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LTCI Watch: What's Wrong?

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Alan Monheit, the editor of Inquiry, is asking whether the U.S. private long-term care insurance (LTCI) market is sustainable.

Inquiry, a peer-reviewed academic journal, is owned by Excellus Health Plan Inc., Rochester, N.Y.

Excellus, in turn, is a unit of Lifetime Healthcare Companies Inc., Rochester, N.Y. Lifetime also owns MedAmerica Insurance Company, Rochester, a company that sells LTCI in all 50 states.

The editors and publishers of Inquiry note that “the opinions expressed by any of Inquiry’s authors do not necessarily reflect the positions of Excellus Health Plan Inc.”

But it still seems interesting to see how worried someone who might have a little more contact with the private LTCI community than the average person is about the future of a market that a sister company is currently in.

In an article about the death of the Community Living Assistance Services and Supports (CLASS) program, Monheit writes that addressing long-term care (LTC) needs is essential.

“By any reckoning, the costs of formal and informal LTC are staggering,” Monheit says. 

Meanwhile, Monheit says, researchers recently have shown that only about 14% of U.S. individuals ages 60 and older have private LTCI coverage, and that private LTCI policies now pay for only 4% of U.S. LTC spending.

Consumers may guess wrong about how likely they are to need LTC, and, even if they understand the risk and can afford to buy LTCI, they may have concerns about what a private LTCI policy would really cover, whether the carrier would really pay the claims, and whether the carrier would even be in business when the consumer needed to file a claim, Monheit says.

Monheit cites researchers’ argument that, even if Congress gave consumers better LTCI tax incentives, consumers’ LTCI purchases might not increase very much.

The CLASS Act, a component of the Patient Protection and Affordable Care Act of 2010 (PPACA), might have been overly ambitious and unrealistic, but “its hasty demise should act as a wake-up call rather than a death knell,” Monheit says.

My view: Right now, there are private insurers still in the LTCI market, and it seems as if they ought to be given the room to try to keep that market going, if they want to do so.

The question is: Do they really want to do so? My suspicion is that every single individual in the LTCI units, from the CEO to the interns, is passionate about keeping LTCI operations going. Providing an LTCI policy that pays a valid claim as promised is one of the most noble things a private company can do. It’s an example of enlightened self-interest producing the best imaginable results.

But a lot of the LTCI units are part of bigger companies, and the executives at those bigger companies have to deal with rating analysts, bond holders, equity investors and others whose current idea of enlightened self-interest is to hide in a cave shielded against European bond defaults and use free money from one arm of the federal government to collect slightly higher interest rates from other arms of the federal government.

Perhaps we’re all doomed, anyway, and we could go to our Soylent Green processing plants after reaping modest profits, for awhile, by providing a few more years or decades of comfort and peace of mind to the elderly, or we could go to our doom by helping the federal government pretend to make its books sort of balance, after a fashion. It seems as if the analysts, bond holders and equity investors prefer to help the federal government keep the stability charade going to actually being in any business that doesn’t involve tablet computers or Facebook.

What if it turns out the parents of the private LTCI carriers don’t way to stay in the LTCI game?

And what if the Medicaid nursing home benefit program proves to be (as well know it must be) far flimsier than the private LTCI programs, and it collapses, too. What then?


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