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LTCI Watch: Medicaid

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In my area, Medicaid managed care plans and Medicare Advantage special needs plans are openly advertising on the radio that they offer long-term care (LTC) benefits.

Private insurers are getting run through the Wall Street wringer right now over a need to increase reserves for private long-term care insurance (LTCI) obligations.

In relation to the amount of reserves the insurers have already built up, the contributions are modest. The increases amount to a few percent of the total reserves. The increases just look big in comparison with quarterly revenue totals, because the insurers have done such a good job of building the reserves over time.

If the Federal Reserve Board would just lighten up on regulation enough to let bankers lend money to individuals and companies that actually need money, and hence get bond yields up further away from zero percent, the LTCI issuers would be making out like bandits. 

The habitually angry people would be getting angry at the LTCI issuers for profiting handsomely off of the hides of vulnerable elderly people in need of long-term care (LTC) services, rather than getting angry at the issuers for giving elderly people too big of a discount on the LTCI coverage they’ve been using.

Now state and federal governments seem to be rushing to wash their hands of anything to do with the private LTCI issuers and put the members of the Silent Generation and the Baby Boomers in the hands of Medicaid and Medicare managed plans.

The insurers and other entities that run the LTC-benefits-offering plans are happy because they’re in the startup stage of getting into that business. They’re getting cash now to set up new programs. They can hire friends as consultants; rent freshly painted offices; hire friends to develop websites; hire brochure printers; and spend the afternoon drinking coffee, listening to witnesses from advocacy groups, and drafting mission statements and best principles frameworks.

Many of the people developing these programs are intelligent, well-meaning, down-to-earth people who understand the challenges they’re up against and sincerely think that the course they’re taking is the best course society can take under the circumstances.

But the challenges are enormous. Aside from the puddles of money in the Medicare Part A hospitalization trust fund, which is already on track to run dry in about 15 years, how many of the Medicare and Medicaid programs have been backed by governmental entities with the foresight, financial resources and political will to set aside exactly how much money to fund future LTC benefits obligations?

Roughly none. They aren’t 5 percent short of what they need. They’re about 100 percent short, with no huge flow of cash coming in.

The bad public LTC benefits program scenario doesn’t involve people living two or three to a room in dingy, depressing nursing homes, when they’d rather be living at home. That would actually be a pretty good scenario.

The real middle scenario probably involves cots in airplane hangars. The fancy new agencies with the fancy mission statements will be lucky if they can offer clients one twin cot per client, rather than making the clients share the cots.

The bad scenario is too depressing to think about. 

When the people setting up the new managed LTC benefits programs go to conferences and public hearings, they should be careful to make scrapbooks, so they have something nice to look at when reality rolls in.