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Life Health > Health Insurance > Health Insurance

LTCI Watch: Gaps

By Allison Bell

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Would-be policy shapers are starting to talk about what the next version of private long-term care insurance (LTCI) will look like.

See also: House panel considers public catastrophic LTCI proposal

One huge question is what role, if any, the government, should have in paying for long-term care (LTC) services.

Some fervent advocates of a free-market approach would say that the government often botches health care administration, and that taking cash from some people to provide services for other people, and especially for other people who have failed to take reasonable steps to provide for their own future, is just plain wrong.

Other people, who believe in a strong social welfare system, would say that society has an obligation to pay for, and the ability to pay for, LTC services for all.

I think that advocates of both of those positions can make a reasonable case for their views, but that the majority of people who think about the issue end up being somewhere in the middle. They don’t want society letting any people who truly need LTC services “dying on the sidewalk” for lack of access to care, but they will concede that government agencies do have problems with administering health care systems of any kind, and that raising enough revenue to pay for all of the services they believe the government should provide is easier said than done.

Most countries, including those described as having “single-payer” systems, seem to be coping with being in the conflicted, complicated middle by moving toward acute health care and LTC finance systems that look something like how the U.S. Medicare system really works.

The three most common options are:

  • Providing “universal coverage” programs that are similar to traditional, unsupplemented Medicare coverage. They come with big, growing gaps that can’t be filled with private insurance, either because of government laws, program rules, or insurers’ lack of interest in providing gap coverage.

  • Medicare Advantage-type programs, which let private insurers offer subsidized, full-blown alternatives to the government programs.

  • Medicare supplement (Medigap) insurance programs, which offer public program safety net coverage along with ready access to private gap-filling insurance products.

To me, it seems as if policy shapers decide that the government should have a major role in paying for LTC services, but should not be the only LTC payer. If this is the case, then copying the Medigap market is probably the best approach.

Today, the United States has what amounts to a skimpy universal LTC services program. Families that might be able to pay for a large chunk of members’ LTC services if they prepared in advance, assume that any members who do use LTC services will go broke quickly and get enough Medicaid benefits to pay for some minimal level of care. The problem with continuing with that universal coverage with huge gaps approach is that it seems that, if current demographic and health care trends continue, the gaps will get bigger and bigger. The scope and quality of the Medicaid-paid LTC benefits will deteriorate, the LTC drain will hurt the quality of Medicaid acute health benefits, and the damage to the quality of Medicaid the acute health benefits will hurt the Medicaid enrollees who are still in the community and increase the odds that they’ll need LTC services.

One alternative is a Medicare Advantage-style program. Insurers seem to enjoy selling Medicare Advantage plans. But one concern about a Medicare Advantage-type program is that the managers of the traditional program are competing with the alternative program. They have an incentive to smother the gap-filler program and saddle it with an unfair red tape program.

Another problem is that acute health care or LTC insurance programs that pay for a minimal level of catastrophic care are mainly providing coverage for hospitals, nursing homes and big group medical providers, not for the patients. Chances are that, most of the time, someone is going to provide that catastrophic care. In the long run, providers of public coverage alternative insurance may have an incentive to please the government and the providers, not the patients.

It seems as if a supplemental insurance approach helps consumers protect themselves against the modest level of risk that they can actually protect themselves against; makes it clear what the gaps are; creates a market framework in which smaller insurers can compete with bigger players; and gives the issuers an incentive to focus on meeting the needs of individual consumers, not on dickering with big institutional players and making pro forma efforts to check official quality-improvement form checkboxes.

See also:

AALTCI finds drop in prices for new LTCI policies

Earnings: Disability insurers feel (a little) breeze

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