The U.S. System for Financing Long-Term Care is Crumbling

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On April 8, 2013, Posted by , In Caregivers, By ,, , With Comments Off on The U.S. System for Financing Long-Term Care is Crumbling

America’s system for financing long-term care is failing, and the window for creating a payment system that works is rapidly closing. That was the conclusion of a morning-long expert session sponsored last week by the SCAN Foundation.

While the participants differed on specific solutions, most agreed on four key issues:

  • The existing system for funding paid long-term supports and services is built on a wobbly three-legged stool: low private savings, an underfunded Medicaid program, and a hobbled private long-term care insurance market.
  • The solution must include an affordable way for Americans to prefund their long-term care costs. This could include tapping financial assets or home equity, or buying insurance (government, private, or some combination of both). Low-income people would require some form of safety net protection.
  • Any future system should finance high-quality long-term supports and services that are well-integrated with medical care. This is especially important since recipients of care services suffer from chronic disease or injury that often requires complex medical interventions.
  • There is currently no political consensus on how to do any of this.

That is where everyone agreed. Here is where they did not:

Several panelists focused on ways to enhance private insurance, where the market for traditional long-term care coverage has effectively collapsed. A paper by Marc Cohen of Lifeplans, Inc. and professors Richard Frank and Neale Mahoney of Harvard described a broad package of design changes that might make policies more attractive.

Their ideas include simplifying and standardizing insurance products, indexing premiums annually instead of requiring carriers to ask for big rate increases every few years, allowing insurers to sell high-deductible plans (where buyers could be responsible for as much as two years of LTC costs), and better educating consumers about the price of long-term care and the limited government resources available to pay for it.

They also propose industry-funded reinsurance pools that would protect insurers against unanticipated risks. Another suggestion: Require that companies over a certain size offer LTC insurance and force workers to buy unless they make an active choice to reject insurance. They also recommend new highly-targeted government subsidies, such as tax credits, to encourage moderate-income consumers to purchase long-term care insurance.

Insurance officials tell say privately that, even in the best case, perhaps 20 percent of Americans would buy voluntary LTC insurance. Perhaps another one-third have lifetime incomes so low that they can’t be expected to pay for their own care, either through savings or insurance, and will need some sort of public support.

That leaves perhaps half the country at risk. The challenge for policy makers and the market is to figure out what will work for them. The SCAN program was a great start, but much more needs to be done.

Source:  www.forbes.com

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