Analysts at the Urban Institute have used simulations to show that voluntary, unsubsidized long-term care insurance (LTCI) may have little effect on Medicaid long-term care (LTC) spending.
The simulations suggest that requiring people to buy LTCI, through a payroll tax, could lead to a big reduction in Medicaid LTC savings, Melissa Favreault and two Urban Institute colleagues wrote in a paper published in Health Affairs, a health policy academic journal.
“Any successful voluntary program must overcome several challenges, including price, perceived value, adverse selection (when those who purchase coverage have a disproportionate risk of claiming benefits), and moral hazard (when insured consumers may demand more care than those paying completely out of pocket),” the analysts write. “Voluntary insurance, especially if unsubsidized, is largely unaffordable for low- and moderate-income consumers.”
See also: Policy group: Restructure private LTCI
A mandatory program, in contrast, could enroll more than 95 percent of the population, the analysts write.
If the participants paid for the mandatory LTCI coverage through payroll taxes, that would increase payroll taxes by about 0.6 percentage points to 1.35 percentage points, the analysts estimate.
The analysts used a homegrown simulation system to look at how several different LTCI products might affect Medicaid LTC spending in 2050.
Today, private U.S. LTCI products offer “front-end” benefits or comprehensive lifetime benefits. The comprehensive policies pay benefits for as long as eligible claimants are getting eligible LTC services. Front-end policies pay for the first few years of LTC services.
In the United Kingdom, policymakers are setting up a public LTCI system that will offer “back-end” benefits, or catastrophic LTC benefits that kick in after claimants have been already been using LTC services for several years.
The analysts contend that voluntary, unsubsidized LTCI coverage will have only a tiny effect on total Medicaid LTC spending in 2050.