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LTCI Watch: Medicare, Part L

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Here’s a modest proposal: Let’s test the idea of a combination of Medicare vouchers and a kind of Medicare coverage exchange program by setting up a “Ryan plan” program for long-term care (LTC) services.

We could call the program Medicare Plan L and reward the private insurers that have stuck with the private-long-term care insurance (LTCI) market through these bleak times by giving them some kind of privileged position in the market.

Maybe we could reward the agents, brokers and wholesalers who’ve stuck with the LTCI market by putting them in charge of setting up and running the exchange, through some kind of mechanism that would enable them to make more money but do less work.

Maybe we could pay for Medicare Part L subsidies by closing the Medicaid nursing home asset protection quirks that many advocates of private LTCI love to hate.

Democrats could support this proposal because it could give middle-income and upper-income workers easier access to LTCI coverage.

Republicans might be able to support this proposal because Medicare Part L would be a lot like the Medicare Advantage acute health care insurance program, which Republicans and insurers generally say they like, and because it might divert some of the resources now going into Medicaid, and into efforts to help older people make themselves artificially poor, into supporting efforts to help workers buy LTCI coverage that would come as much from the private sector as possible, under the circumstances.

If Medicare Part L worked beautifully, that would provide some vindication for Rep. Paul Ryan, R-Wis.

Democrats used dark murmuring about how Ryan was out to destroy Medicare to make him look like some kind of hateful thug, but it just seems as if Ryan had a point that anyone could understand: Maybe we could do more to cut Medicare health care spending and increase Medicare payroll tax revenue, but, at some point, we have to find some kinder, gentler way to get the enrollees themselves to help hold down the cost of the extremely valuable coverage they happen to have. 

Maybe a Medicare Part L that adopted the Ryan plan approach could vindicate Ryan by staying solvent.

Really: Medicare Part L would just be a great big public or quasi-private LTCI exchange, with private insurers operating with some reinsurance help and a lot of marketing help from the government.

One challenge here is that, of course, this would involve a different kind of government involvement in the LTC market. But, who are we kidding? Governments and government-like institutions have been been involved with providing care for the old as long as there have been governments. Even Adam Smith thought that only a primitive, savage society would let the elderly and infirm die of neglect. He assumed as a matter of course that the beneficiaries of a free, or free-ish, market would provide for the support of the aged and infirm.

If we were encouraging or requiring working-age people to buy their own, private or quasi-private LTCI coverage through Medicare Part L, that would be more of a free-market-oriented effort than simply assuming that a huge percentage of older people will end up in Medicaid as a matter of course.

Relying on a Medicare Part L program would probably work better than relying on Medicaid because private insurers probably would invest their money more effectively, or, at least, further out of the clutches of Congress, than Medicaid program managers could. Maybe premium money flowing into a Medicare Part L program could be invested in business finance programs, infrastructure construction and maintenance programs, science and engineering education programs, elder care companies, dementia research programs, and other programs and companies that could improve the country’s ability to handle a big increase in the percentage of Americans who are over the age of 85.

The biggest challenge is that some private companies and producers have worked very hard to stay in the private LTCI market up till now, and they deserve our love, support and cash.

The managers of the insurance company LTCI units are probably doing whatever they can, from writing good white papers to wishing on rabbit’s feet, to get their companies to stay in the market.

The executives of the parent companies are probably having nightmares about the idea of leaving older people in the lurch, but also having nightmares about what low rates on high-quality bonds are doing to their portfolio earnings.

But, one interesting thing about all of this is that a lot of the producers and companies that have been active in the LTCI market are now trying to get into the Medicare Advantage or Medicare supplement insurance markets. If the producers and companies are already flowing into the Medicare universe, why can’t the LTCI products follow them in?

And, if the LTCI insurers were part of a Medicare Part L program, maybe the government would recognize that it has to start taking some responsibility for creating conditions that give LTCI carriers the ability to write LTCI coverage, or else make up for the poor conditions with subsidies, instead of acting as if the private LTCI carriers were just a bunch negligible yahoos.

Another possibility might be that the federal government could keep doing most of what it’s doing but simply make a big, long-term investment in existing private LTCI reinsurance programs, and somehow create a special class of government bonds designed to insulate private LTCI carriers and private LTCI reinsurers against big swings in interest rates that have nothing whatsoever to do with LTCI carriers.

Or, something else.

I don’t know if any of this work, and, again, I understand that the idea of letting the government intervene in a market in a new way is scary, but it’s not as if the LTC market is a particularly free market now. If we’re going to go cold turkey on government intervention, let’s start with healthy, working-age people who can fend for themselves, not with older people who have an inability to perform two or more activities of daily living.

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