They are right to worry. Federal data shows that about half the
people who turn 65 today will not have any need for long-term care.
But 27 percent will spend at least $100,000 lifetime, and about 15
percent will face costs over $250,000.
Yet we do not have a comprehensive national policy approach for
covering long-term care. Only the most affluent households can
afford to pay out of pocket, and private long-term care insurance
covers only about 7.4 million people, according to the National
Association of Insurance Commissioners. Many others will be covered
under Medicaid, which funds care only in cases where a patient’s
assets have been almost completely spent.
Congress has not addressed the problem, partly due to the highly
polarized atmosphere surrounding health policy. In the debate about
long-term care, the right wants private-market insurance solutions,
while the left advocates for public coverage through Medicare.
A new emerging approach is a hybrid that could bridge the partisan
divide. The core idea: make private insurance work better, but cover
the most extreme risk through a publicly financed insurance program.
The first set of recommendations was released recently by the
nonprofit Bipartisan Policy Center (BPC), and two other sets are
scheduled for release soon. All three are based on detailed research
about the United States' long-term care needs, insurance markets and
financing mechanisms by the Urban Institute and Milliman, an
insurance industry actuarial consulting firm.
The BPC report offers comprehensive recommendations for changes in
everything from Medicaid to delivery of care in home and community
settings. But two recommendations, in particular, point to promising
middle ground that could really help solve the long-term care
IMPROVE THE PRIVATE INSURANCE MARKET
BPC recommends creating a new class of “retirement LTC” that would
provide limited benefits - two to four years after a cash deductible
is met. Workers could use savings from their 401(k) plans to buy
insurance, and early withdrawals for that purpose (before age
59-1/2) would be penalty-free. The policies also would be sold on
federal and state health insurance exchanges.
Insurance policy choices would be boiled down to three basic
options. Premium design and inflation adjustments would be
standardized across all the plans; the key choices would be daily
benefit level, length of coverage and length of waiting period
before coverage begins.
Complexity is a key barrier to success in the current private
market, said Dr. Bruce Chernof, chief executive of the SCAN
Foundation, one of the funders of the research. “The social science
literature shows that when people have too many choices, they
[to top of second column]
The researchers believe these simplified policies would cost about
half of current private market insurance policies. The American
Association for Long-Term Care Insurance reports that typical annual
initial premiums for high-quality coverage currently range from
$2,035 for a single male buyer, age 55, to $2,580 for a single
female buyer of the same age. A married couple age 60 can expect to
pay an average of $3,560. Some rates have fallen over the past year,
the trade group reports.
CREATE A PUBLIC OPTION
The BPC also proposes shifting coverage for patients with lifetime
costs exceeding $250,000 to a public plan run by the federal
A catastrophic Medicare benefit would be costly. BPC estimates that
if 90 percent of Americans were covered, benefits paid in 2015 would
have totaled $411 billion, or about half the cost of Medicare’s Part
A (hospitalization) program. Some of that cost would be offset by
lower Medicaid spending, but a new revenue source would also be
needed - either an increase in the payroll taxes paid by workers for
Social Security and Medicare, or through a “general funding” source,
such as changes to the income tax or a consumption tax.
New taxes are a nonstarter in Washington today, and LTC reform is
not likely to move forward during this election year. But Chernof
sees 2016 as a good time to lay the groundwork for action next year.
“There is a really good opportunity to have a broad discussion about
what the future looks like for families during the campaign,” he
said. “And the first year of a new Congress is always an important
time for setting the legislative agenda.”
(The writer is a Reuters columnist. The opinions expressed are his
(Editing by Lauren Young and Matthew Lewis)
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