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My 5-step long-term care plan

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A new presidency and a new Congress will be starting up in January, and they could revive efforts to do something about long-term care insurance, or something that’s just like stand-alone LTCI but happens to have a different name.

President-elect Donald Trump has offered access to group LTCI benefits at his core company for years.

Many Republicans have supported adding new LTCI tax breaks for years.

The kinds of highly progressive Democrats who support single-payer health care systems have opposed LTCI tax breaks with quiet, withering disdain, in part because of a sense that LTCI issuers were rotten to Claude Pepper and Ted Kennedy, and in part, possibly, because of a sincere belief that use of private insurance will always be too low to do much to help many of the older people with catastrophic long-term care needs.  

But progressive Democrats got a single-payer initiative onto the ballot in Colorado in November, and that measure lost, by a huge margin, even among Democrats, even though the measure had strong support from Bernie Sanders. Republicans now need support from a significant number of Democrats to get ordinary bills through the Senate, and the kinds of moderate Democrats who could bend are the same kinds of Democrats who, in the past, backed an improvement in the federal LTCI premium tax deduction.

Related: Senate gets LTC tax bill

So, what should Congress do about long-term care finance, if it can do something?

Here are my ideas.

1. Adjust unrealistic guarantees insurers granted in the past, and set clear, reality-based limits for all future insurance policy guarantees.

Some actuaries and consumer advocates thought that some LTCI issuers were setting prices at an absurdly low level, even back in 2000. Find out what the careful actuaries thought were an appropriate interest rate and consumer behavior assumptions back then.

Compare the careful actuaries’ assumptions with what the insurers actually used.

Insurers should have to eat the losses associated with the gap between their own assumptions and the careful actuaries’ assumptions.

But Congress, state regulators and others should work together to help ease the burdens between what the careful actuaries assumed and how difficult the situation for LTCI issuers actually turned out to be.

Congress should be especially generous about finding a way to help the issuers deal with prolonged low interest rates. The Federal Reserve Bank created a bond investment crisis for insurers by setting interest rates at absurdly low levels for years. The Fed effectively looted retirement income and post-retirement health care savings funds of all kinds to bail out homeowners with adjustable rate mortgages, and the U.S. Treasury. It’s time for homeowners and the Treasury to use some of what was looted from retirement savers to help the retirement savers.

2. Let people use individual retirement account and 401(k) plan savings to pay for long-term care insurance.

Many retirement planners hate this, in part because they know few workers have saved much for retirement. But we know that almost one-fifth of national gross domestic product goes toward health care. It seems logical to think that about one-fifth of retirement assets ought to go to pay for post-retirement acute care and long-term care insurance.

3. Help keep older workers in the workforce longer, by changing benefits rules and formulas to narrow the gap between the cost of benefits for older workers and younger workers.3. Help keep older workers in the workforce longer, by changing benefits rules and formulas to narrow the gap between the cost of benefits for older workers and younger workers. (Photo: iStock)

Most people who think seriously about buying LTCI coverage are over 45. Many people over 45 are reluctant to commit to paying premiums for insurance products because they are afraid of losing their jobs. One reason U.S. employers tend to discriminate against older workers is that employee benefits for older workers tend to cost more.

If the government could reduce the tilt, older workers might have more cash to spend on savings, investment and insurance products, and more confidence in their ability to keep up payments.

4. Make it easier for people and policymakers to understand what Medicaid is paying for nursing home care.

One reason the cost for private-pay patients is so high, especially in states like Alaska and Connecticut, is that Medicaid reimbursement rates are low. In Connecticut, for example, Medicaid pays less than $200 per day for a nursing home bed, and the actual cost is about $500 per day. 

One question about analyses that show private LTCI coverage will always be a smaller source of funding that Medicaid is whether many of the analyses reflect the probability that the Medicaid reimbursement rate is probably unsustainably low.

5. Think about long-term care costs when changing, repealing or replacing the Affordable Care Act.

In theory, increasing or decreasing people’s access to basic preventive health care could change the odds that people will develop catastrophic health problems and need long-term care. Congressional budget analysts need to try to estimate the effects of changes in health coverage and care access on nursing home spending when they are reviewing ACA changer and replacer measures.


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