Addressing the Nation’s Long Term Care Problem
As families face health care costs in retirement beyond what they could have ever imagined, politicians and other public officials grapple with the issue of long term care and the best way to approach it as a nation.
A Special Committee on Aging hearing held in mid-December revolved around this topic and whether or not an individual mandate is necessary to ensure the success of any reform. Public officials who served on the long term care commission met with senators and other health professionals to determine the course of action that will bring about the most success. Opinions on the subject vary as does input from both ends of the political spectrum, but there is one thing that all the panelists seem to agree on: something must be done to encourage long term care planning, and it must be done soon.
Whether or not a long term care insurance mandate is the right choice was hotly debated. Anne Tumlinson, senior vice president at health care advisory company Avalere Health, voiced her opinion during the hearing that a mandate is necessary for meaningful reform. Once opposed to the idea, Tumlinson now admits that it is the most viable option because without a mandate, little will change.
Susan Collins, a Republican senator from Maine, also understands the need for reform. Like most other conservatives, though, she is hesitant to promote an individual mandate, especially after the botched implementation of the Affordable Care Act. She knows firsthand just how difficult it can be to get people to acknowledge the risk of long term care; she was in charge of effecting a long term care insurance option for federal workers. The program didn’t gain much traction and she says the measly number of people who enrolled left her “shocked”.
Why the Low Enrollment?
Mark Warshawsky, vice chair of the federal long term care commission, points to denial as one of the main reasons people didn’t sign up for the program. Most people simply don’t like to think about themselves as old and especially not as frail or sick. This presents a major barrier when discussing the potential risk of long term care.
He also attributed the low enrollment rates to Medicaid, which many see as their fallback plan to cover the cost of long term care. Rather than an individual mandate, Warshawsky suggested a hybrid insurance product composed of a life annuity benefit and long term care coverage. This type of product would help manage risk, he claims, by expanding the risk pool and eliminating the need for a mandate.
A public-private system was another one of the options proposed by panelists to help address the nation’s long term care problem. Judy Feder, who also served on the long term care commission, suggested such a system that would include a basic means-tested government benefit. The president of Genworth, the largest long term care insurer in the country, recently voiced his support for a public-private system similar to the one Feder proposed.
Potential New System
In a recent Forbes interview, Tom McIrney expressed his interest in a public-private insurance product in which the government would assume the risk of catastrophic care. He said that he is currently talking to states about such a product, one for which the insurance company would cover the initial several years or several hundred thousands in benefits and after the benefit is exhausted, if necessary, the state would step in and provide unlimited benefit. As he put it, “It’s a win/win for everybody… It would mean more coverage and a broader [risk] pool.”
Broadening the risk pool is one of the major hurdles currently faced by the long term care insurance industry, who has had to raise premiums in the past several years due to a number of factors. Higher than expected claims rates is one of those reasons and this type of product would help regulate those statistics.
Current Options for Long Term Care
Because the original long term care insurance mandate was deemed unsustainable by the federal government, it seems far fetched that another mandate would replace it any time soon. Until people begin to understand the true risk associated with long term care, officials will be working to raise awareness about that risk and potentially introduce a new system to the marketplace that would ease the financial stress on all entities involved.
For now, though, long term care insurance and Medicaid remain the only two systematic methods of paying for long term care. Most people, caught off guard by the costs and the fact that Medicare won’t pay, end up turning to an unpaid caregiver or paying out of pocket for care. This situation is obviously not desirable and can create tension and familial conflict related to care. Considering the cost of long term care as part of a retirement plan is something more people need to begin doing, to save themselves the financial and emotional stress that comes along with a sudden long term care scenario.
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