Long-term care insurance (LTCI) carriers and marketers may be doing pretty well from the perspective of someone who tries to look at the market from a long-term perspective.
The Employee Benefit Research Institute (EBRI), Washington, has publishing a shocking report showing that private LTCI — a product often dismissed as niche product, possibly akin to alien abduction insurance — was covering about 14% of new U.S. nursing home entrants in 2010, up from 6.4% in 2000.
About 13% of the home care users had private LTCI.
There were about two new nursing home users with Medicaid for every one new user with private LTCI, but that ratio is down from about five to one in 2000.
Sudipto Banerjee, an EBRI researcher, came up with those figures using data from the Health and Retirement Study, a series of surveys conducted by researchers at the University of Michigan.
As Jesse Slome of the American Association for Long-Term Care Insurance (AALTCI), Westlake Village, Calif., often points out, LTCI is a specialty product. To make much use of it, clients have to have enough spare income to pay for the coverage, be healthy enough to qualify to buy coverage, and be non-wealthy enough, or enthusiastic enough about the concept of using insurance to minimize risk, to consider using LTCI to pay for LTC rather than relying on their savings.
The clients also need to be realistic enough to have at least a little of an inkling that bad things could happen to them, too.
As the bus of the 3in4 Association, Kirkland, Wash., will be communicating to New Yorkers next week, 3 in 4 Americans need more protection against LTC costs — but it could be that private LTCI carriers have succeeded at getting their message out to some reasonably high percentage — 15%, 30%, maybe even more — of the people they have a reasonable hope of reaching.
Of course, many people who buy LTCI could never or would never qualify for Medicaid nursing home benefits. But, what if? What if desperate state Medicaid programs were having to pay 50% more for nursing home care than they already are? What kinds of additional screams of horror would we be hearing?
And it seems logical to assume that the people paying for care with private LTCI are paying more per bed than the Medicaid enrollees. Maybe the private LTCI patients are helping Medicaid programs stretch LTC benefits a little further by helping nursing homes engage in a little Medicaid-to-private-pay-patient cost shifting.
Stephen Moses argues extremely persuasively that the idea of letting middle-income and upper-income families use Medicaid to insure their estates is absurd. But it seems as if there always more demand for Medicaid care than there is money to pay for the care. Every little bit must help.
LTCI sales may not have taken off like a rocket, but that makes a fair amount of consumer sense. Who wants to be the first person to buy a complicated new insurance product? Most people would probably like to see other people be the guinea pigs. LTCI policies are just starting to pay enough benefits for enough people that a large number of ordinary people know about a relative paying for LTCI with private insurance. The best marketing vehicle for private LTCI is probably a happy LTCI claimant.
This could be a great time for LTCI sales — if the central bankers of the world will only find some way to create investment vehicles that insurers can use to fund long-term obligations, and not starve insurers of the long-term, respectable yield-providing fuel they need to keep the insurance factory running.