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LTCI Watch: Chirp

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Earlier this week, executives of insurers that sell long-term care insurance (LTCI) talked about ongoing problems with interest rates and claims.

The trustees of the Medicare trust funds said the Medicare hospitalization fund might have some cash in it until 2030. That’s up from 2026. After 2030, if Medicare had to rely entirely on current revenue to pay benefits, it could pay only 85 percent of the anticipated benefits.

The trustees of the trust fund backing the Social Security Disability Insurance (SSDI) program said that fund is likely to go broke in late 2016 — just in time for the 2016 general elections. The trustees for that fund gave roughly the same estimated depletion date in 2012 and 2013.

Some commenters who, realistically, may well be actuaries or regulators who have vast volumes of statistics at their command, argue (even below some of the articles that run on LifeHealthPro.com) that insurers have had a hard time starting the private stand-alone LTCI market and may never quite get the products right.

Of course, National Underwriter — one of the publications affiliated with LifeHealthPro.com — ran articles for decades about the horrors of the European social insurance programs, and also about how extremely difficult writing medical insurance would be. In one sense, those columnists were right: Insurers really haven’t gotten major medical insurance quite right, after more than a century of trying. But you could argue that it’s done some good. Many people buy it.

I think one of the benefits of having a vibrant commercial health insurance market is that it creates communities of people who have a great deal of skin in the game. They have incentives to dissect every aspect of health care services finance.

Similarly, in the long-term care (LTC) world, the mere existence of the private LTCI market gives rise to surveys, marketing campaigns, efforts to mobilize armies of licensed agents and brokers to talk about the need for LTC planning, and securities analysts and actuaries who have a keen interest in thinking about why insuring against LTC risk is hard.

Example: The Federal Reserve Board has just decided to maintain the target Fed funds rate at zero to 0.25 percentage points. Kurt Karl, the chief economist at Swiss Re, says he thinks the Fed will soon be hinting at rate hikes — which could help improve LTCI business finances greatly. But, for now, “the Fed is waiting for confirmation of strong economic activity or inflation before it changes its tone on tightening,” Karl says.

That hissing you hear might be the air conditioner — or poison bond yield gas filling the room…

This week, a few wonks thought deep thoughts about the enormous Medicare SSDI trust fund reports. I think more visible analysts cried sell-sell-sell or buy-buy-buy when they heard executives talking about LTCI. Those analysts are chirping about the same carbon monoxide seeping into the bureaucratic lungs of the Medicare and Medicaid program managers. That chirping is good for us.