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Life Health > Long-Term Care Planning

How do we fix private LTCI?

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Should the Federal Commission on Long-Term Care say anything to Congress about private long-term care insurance (LTCI)?

Some members of the commission were asking that question recently at a hearing on efforts to strengthen public and private support programs for people who need long-term care (LTC) services.

Some members of the commission, including Judith Feder, a Georgetown University health policy specialist, bristled at the idea of the government doing anything more — and especially anything more that would take resources away from Medicaid — for private LTCI programs.

In a question to some panelists who suggested that the government could expand private LTCI tax breaks, Feder asked pointedly about the incomes of the taxpayers that the tax incentives would help.

Judy Stein, who runs a Medicare law center in Connecticut, asked whether the government should create new LTCI purchase tax incentives.

“Or, do you think, if [the policies] were really valuable, they’d sell themselves?” Stein asked.

Bruce Chernof, president of the SCAN Foundation, a nonprofit group created by a nonprofit company that manages both acute care and long-term care for older people, also expressed skepticism about whether the commission ought to do anything about private LTCI.

“I don’t see why we as a commission have to own that burden,” Chernof said. “Are the products really there? Are we trying to save a market that doesn’t really exist?”

Earlier, during a hearing session on Medicaid, Marilyn Moon, a health policy specialist, said she has heard about the private LTCI market being in its infancy for 20 years.

“I don’t know when it’s going to grow up, but I’m not holding my breath,” Moon said.

David Grabowski, a Harvard LTC policy specialist, and Lane Kent, a home care administration executive at Univita, said they think private LTCI could help reduce the financial strain LTC costs have created for public health programs, and that the government needs to do something if it wants a private LTC product market to exist.

Grabowski said better-targeted federal tax incentives might increase the percentage of older people who own private LTC coverage to 20 percent — from about 10 percent today — and that the people who have the private coverage are more likely to be the people who otherwise would end up using Medicaid nursing home benefits.

Kent listed some practical steps the government could take to encourage middle-income people to buy private LTCI.

  • Let people use retirement plan assets to pay private LTCI premiums
  • Encourage acute care health insurers, including Medicare Advantage plans, to offer LTC benefit plans
  • Pass laws standardizing LTCI benefits packages so that consumers have an easier time shopping for coverage and understanding what they are getting
  • Persuade state regulators to be more accepting of new types of LTCI plan designs, such as high-deductible LTCI policies
  • Get the new Patient Protection and Affordable Care Act exchanges to sell LTCI products

Grabowski said insurers, regulators and others should get away from the idea that LTCI products have to have flat-rate pricing.

The industry adopted flat-rate pricing early on because it was relatively simple to analyze, but that approach locks insurers into unrealistic rates, gives the policyholders unrealistic ideas about how stable rates can be, and forces companies that want to increase rates to go through complicated rate approval processes, according to Grabowski.

“I think it actually backfired in a big way,” Grabowski said.

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