A reader emailed me a copy of a David Lazarus column about long-term care insurance (LTCI) rate increases that appeared recently in the Los Angeles Times.
“For decades,” Lazarus writes, “the United States has relied primarily on private-sector companies to meet Americans’ health-insurance needs. One upshot is that tens of millions of people have been left uninsured. Another is that this country has the highest healthcare costs in the world… Now we face the prospect of millions of baby boomers entering their homestretch and placing unprecedented strain on the nation’s senior-care resources — and potentially not being able to pay for it.”
People who sell LTCI coverage are not happy with the article.
Lazarus writes about a serious problem — two California residents who believe they will have to choose between paying 90 percent more for their 10-year-old LTCI coverage, cutting back on coverage to keep the premium stable, or dropping the coverage.
Lazarus was writing a column, not a news story, and he did call the insurance company that issued the coverage for a reaction.
Some agents are saying policyholders should be happy they got coverage that turned out to be much more valuable than expected for such a low price for 10 years.
Well, sure. But the coverage was cheap during the 10 years the policyholders were unlikely to need the coverage. Maybe the policyholders would have decided to buy something fun, like a boat, if they knew how much the coverage would cost when they got closer to needing the coverage.
I think a better point to make is that acute medical care and long-term care (LTC) finance are two separate areas, for now. The United States looks bad when it comes to acute health finance but is close to the Organisation for Economic Co-operation and Development (OECD) average when it comes to paying for LTC services.
And the truth is that the United States actually does have a tattered LTC benefits program: Medicaid. LTCI producers will say it’s a safety net program for the poor, and that it doesn’t give people the ability to pass on assets to their children, but how many young members of the Silent Generation or baby boomers will really have any financial assets to pass on to their children, anyway?
Most of us children of those folks are more afraid of inheriting bill collectors, repo men and homes out of “Hoarders: Buried Alive” than looking forward to inheriting much cash.
I think another important point to make is that the factors that have bedeviled issuers of private LTC insurance have hit hard at just about every entity, public or private, that has anything to do with any kind of post-retirement benefits.
Those factors include low interest rates, low growth in productivity, resistance to paying more taxes, increases in fuel and food costs and the use of the “peace dividend” to fight terrorism.