By Cyril Tuohy
With the last of four scheduled public hearings now behind it, the U.S. Commission on Long-Term Care now faces the question of the best way to expand the availability and affordability of private long-term care to help pay for its exploding costs.
Private long-term care insurance will never be able to fully cover the nation’s huge and rising costs, of course, but private coverage can play a part in a multi-pronged approach to help seniors live out their final years with peace and dignity, and without straining family budgets.
On this, though, just about every expert who testified agreed: the U.S. can do better, much better, in meeting the needs of its senior citizens.
Long-term care expert and Harvard Medical School professor David C. Grabowski proposed five ideas for growing the long-term care market.
New regulation should simplify long-term care products, long-term care insurance should be blended or offered with health insurance, long-term care risks should be reinsured through public risk pools, the role of employers in offering long-term care coverage should be expanded, and lawmakers should reconsider the subsidy structure for long-term care insurance purchasing, he said.
Long-term care, he said, is “currently the largest source of unprotected, out-of-pocket spending risk for older adults.” He also said that long-term care insurance has remained “quite limited” over the last 40 or 50 years, with only 10 percent of U.S. adults covered through long-term care insurance.
Growing the long-term care insurance market from 10 percent to 20 percent without a major increase in spending would be “a huge policy victory,” Grabowski also said.
In 2011, the $19.3 billion shelled out by private insurers for long-term care needs made up just 6 percent of the $317 billion in total long-term care spending in the U.S. Medicaid, which spent $133.5 billion, or 42.1 percent of all long-term care spending, and Medicare, which spent $75.4 billion, or 23.8 percent of total long-term care spending, paid for the largest share.
If private long-term care insurance could double, that would mean less public spending or out-of-pocket costs to pay for the coverage.
Grabowsky was one of more than two dozen experts from around the country who testified over the past two months about the fractured nature of the long-term care system, and the piecemeal approach with which the federal government and the states have approached long-term care.
Another expert, Lane B. Kent, former president of Insurance Administration Services at UNIVITA in Minneapolis, suggested several other ideas to stimulate demand in an industry that has been hammered by fleeing insurers, poor claims experience and the complete disenfranchisement of the agents and brokers who sell long-term care products.
Kent said lawmakers should include alternative funding sources like penalty-free distributions from qualified retirement plans, standardizing supplements to and mandating the offering of long-term care by Medicare Advantage programs, modifying long-term care products, offering financial planning-linked benefit products, and selling long-term care insurance coverage through health insurance exchanges.
“Despite past and present challenges, however, there exist a number of workable ideas which would encourage product innovation and planning by consumers for successful aging even when faced with a dependency or disability,” he said.
Combination long-term care products purchased in conjunction with life insurance or annuities – life care annuities – are another possible answer, said Jason Brown, an economist at the U.S. Treasury Department.
In return for one or more premium payments at retirement, a life care annuity pays fixed, periodic payments. In the event of a disability, the coverage provides additional payment to help cover the costs associated with long-term care, Brown said.
Bonnie Burns, a policy specialist with California Health Associates, said it was imperative to make long-term care products more affordable for the middle class and to standardize the policies so that benefits and expenses are the same in every policy.
“I am not proposing that benefits packages be standardized as Medigap policies are, but I am suggesting the consumers shouldn’t have to decipher how one policy benefit is different from another company’s benefit for the same expense,” Burns said.
The long-term care solutions presented before the 15-member bipartisan commission came after testimony over the summer during which other experts painted a fractured, overlapping hodge-podge of poorly planned and uncoordinated services unevenly administered by states.
The commission, created under the American Taxpayer Relief Act of 2012, or the so-called “fiscal cliff” bill, is scheduled to report back to Congress in the coming months about the best course of action for long-term care reform.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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