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LTCI Watch: Stockton

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One of the great principles underlying polite, rational political debate is that your bodily emissions probably have about as an intensely unpleasant odor as those of the next person’s.

However foolish other people sound to you may have a close relationship with how foolish you sound to the other people in the discussion.

It hit me that, for people interested in aging and long-term care (LTC), a corrollary of that is that, “Your financial boat is probably as leaky as that of the next person’s.”

Some supporters of private long-term care insurance (LTCI) tell me, with touching faith in private insurers, that private LTCI is a geat product, because a private insurance product will be so much more dependable than a government program, like the Social Security retirement program, or the Medicaid nursing home benefits program, that happens to be subject to legislative whims.

Many supporters of public LTC programs — especially the veterans of the private insurer-public program wars of the 1970s through the 1990s — testify at various government hearings that the government has to develop big new public LTC programs, or expand existing LTC programs, because consumers can’t really depend on the private LTCI carriers to commit to the market.

“Look at the premium increases!” the supporters of the public programs say. “Look at the market departures.”

One obvious response is that the supporters of public LTC programs strangled the private LTCI programs with rate restrictions that were a poor fit for a new, complicated market. Maybe it would be good if insurers and regulators could have found a middle ground between protecting insureds living on a fixed income and making an interesting product so difficult to write.

But another obvious response is that the private LTCI writers, Medicare managers, Medicaid managers and employer-sponsored retiree health benefits program managers are all in leaky boats.

Maybe some of the boats leak a little faster than others, but they’re all taking on water.

Just look at the U.S. Postal Service. Or look at Stockton, Calif. — a town trying to use the bankruptcy process to restructure its retiree benefits obligations.

One of the steps Stockton wants to take to improve its finances is to reduce contributions to the California Public Employees’ Retirement System (CALPERS).

The Postal Service and CalPERS are just engaging in the public program equivalent of raising their rates and pulling out of markets. 

Maybe some of these entities are better run than others, or at least more open about what and how they’re doing, but I don’t think there’s any magic free-market wand or public initiative that can keep the water out. The most attractive approach might be for everyone in all of the boats to be humble and share their buckets.

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