5 looks at a plan for protecting LTCI’s biggest beneficiary

3. The team says voluntary, unsubsidized programs are for the birds.

U.S. insurers now offer voluntary, unsubsidized LTCI.

The Favreault says the voluntary, unsubsidized versions of its products, which would be somewhat different from the LTCI products now available in the United States, would be expensive, would sell poorly and would do little to reduce Medicaid LTC spending.

Because the coverage would start out being expensive, it would appeal mainly to high-income people who suspected that they were at relatively high risk of needing long-term care, the team says. Adverse selection would soon drive the cost of the coverage even higher, and most of the people who did buy the LTCI coverage would be too rich to face much risk of ever qualifying for Medicaid nursing home benefits. 

Without any subsidy or purchase mandate, the back-end benefits version of the program might cut 2070 Medicaid LTSS spending by 1 percent. The front-end benefits version would cut Medicaid LTSS spending by about 0.1 percent that year, and the comprehensive version would have no noticeable effect, the team predicts.

The Favreault team does not talk about LTCI distribution, but one advantage of a voluntary, unsubsidized of program for agents and brokers is that, even if a government agency provided every penny of the coverage, the agency would need a large, energetic, well-compensated distribution force to sell its high-priced coverage.

See also: Policy group: Restructure private LTCI 

4. A mandatory LTC insurance program might do the most to cut future Medicaid LTC spending.

The United States has just gotten past a painful Supreme Court battle over whether Congress has the authority to make people pay for major medical insurance, but the Favreault team says mandatory purchase requirements can sharply reduce the per-enrollee cost of LTCI coverage, by getting healthier people into the risk pool.

The team predicts a mandatory version of the front-end benefits program would cut 2070 Medicaid spending 7 percent. The spending cuts would be 31 percent for the back-end benefits program, and 35 percent for the comprehensive program.

Medicaid already acts like a mandatory, government-run back-end benefits program: It pays nursing home bills for most people who have been in a nursing home long enough to use up their savings.

The Favreault team’s mandatory back-end program would, apparently, be a better-financed version of the Medicaid nursing home benefits program, and even the comprehensive program might be comparable to a more stable version of the current Medicaid nursing home benefits program.

If that’s the case, the LTCI producers who are used to competing with Medicaid today might find competing against the skimpy $100-per-day Favreault care benefit to be a snooze, as long as the government continues to permit the sale of private LTCI policies and insurers are willing to write the policies.

See also: PPACA: Sebelius Ponders CLASS Fix

5. A voluntary, subsidized LTC insurance might have a smaller effect on Medicaid LTC spending but be more efficient.

One weakness of a mandatory LTCI program is that many of the people who paid for the LTCI coverage wouldn’t need it, and many of the high-income enrollees would start out with a low risk of ever needing Medicaid nursing home benefits.

A voluntary, subsidized LTCI program would save Medicaid less money, overall, but it would be more efficient at having any of the extra money spent go toward reducing Medicaid spending, Favreault’s team says.

The voluntary, subsidized program would be efficient because it would tend to attract people at relatively high risk for needing long-term care, and the subsidies would help make the coverage affordable for the kinds of high-risk low-income people who are likely to end up using Medicaid nursing home benefits.

The analysts estimate the share of voluntary, subsidized program outlays going to reduce 2070 Medicaid LTSS spending would be 17 percent for the front-end benefits program, 45 percent for the back-end benefits program, and 48 percent for the comprehensive program.

If all other factors stayed the same, a shift to a voluntary, subsidized LTCI system could help agents and brokers, because the issuer, or issuers, would need someone to persuade consumers to pay for the coverage, and the subsidies would expand the percentage of consumers capable of paying the premiums. 

The ultimate impact of the shift on producers would depend on how other system features, such as rate review rules and issuer marketing strategies, affected issuers’ interest in working with producers.

See also:

Limelight strategist: The exchange force is real 

AHIP to NAIC: Well-Paid Producers Important to Exchange System  

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