Can private long-term care insurance really do much to help the United States pay the baby boomers’ home care, adult day care and nursing home bills?
The debate has been cooling and flaring since 1989 and 1990, when the Pepper Commission was looking into the possibility of creating a universal Medicare long-term care benefits program.
Advocates of a universal public long-term care program see private insurance as an option that could, at best, pull a small number of the richest, healthiest boomers away from depending on government help, and could, at worst, hurt efforts to set up a stable public long-term care program.
Related: LTCI: Is It the Answer?
Today, now that private long-term care insurance issuers are suffering from a combination of low interest rates and inaccurate underwriting assumptions, the longtime critics of the private insurers are dismissing the possibility that the private insurers can make enough of a comeback to do much good.
Some long-term care services analysts say, for example, that many ordinary Americans are just too sick for private plans to cover them with affordable, profitable long-term care insurance coverage.
But Thomas McInerney, the president of Richmond, Virginia-based Genworth Financial, a major long-term care insurance writer, says private insurers can return to health and play a major role in helping the United States cope with the aging of the boomers.
McInerney argued last month in San Diego, at a session of the National Association of Insurance Commissioners’ Long Term Care Innovation Subgroup, that state insurance regulators, federal policymakers and others must work with companies like his to maximize the role private insurance plays.
“Current and future government entitlement liabilities are not sustainable,” McInerney told members of the Kansas City, Missouri-based NAIC.
Federal entitlement programs alone have about $100 trillion to $120 trillion in unfunded liabilities, and only half of baby boomers have more than $100,000 in retirement savings, McInerney said.
Individual taxpayers now generate only about $3 trillion to $4 trillion in tax revenue per year, and there is no realistic way for those taxpayers to cover the cost of the debt, the unfunded liabilities and new long-term care benefits programs, he said.
For a look at how McInerney said policymakers could help get the private long-term care insurance market back in shape to fill in the long-term care funding gap, based on the text of his NAIC meeting remarks, read on:
Thomas McInerney (Photo: Genworth)
1. Think big
Only about 8 percent of U.S. adults now have private long-term care insurance. McInerney said the percentage should be 20 percent to 30 percent.
Even if 60 percent of older Americans still needed government help to pay long-term care bills, “increasing the number of private policies by a factor of three to four would dramatically reduce required government funding,” McInerney said.
Related: How do we fix private LTCI?
McInerney would like to see Genworth competing against many more carriers. (Photo: Thinkstock)
2. Get more runners on the track
Genworth is one of about 14 carriers still writing stand-alone long-term care insurance in the United States.
McInerney said regulators should loosen up the rules to get more than 100 carriers back selling stand-alone long-term care insurance policies, hybrids that combine other types of products with long-term care benefits, or both stand-alone products and hybrids.