November marks National Long Term Care Insurance Month. Unfortunately, the news on that front is grim: MetLIfe recently said it would stop selling long-term care insurance policies, while others among the dwindling number of companies still selling the policies have announced big rate hikes. In the case of John Hancock, the increase could be as much as 40 percent.
And considering that long-term care insurance policies can cost several thousand dollars a year, customers will feel the pinch.
What to do?
Here's one idea: The federal and state governments should follow up on successful ideas that allow reasonable sharing of risk.
The trouble with long term-care insurance is its basic economics. Many people drive for decades without filing a car insurance claim; and when lots of people pay premiums but comparatively few file claims, insurers can offer reasonably priced policies that fairly cover serious risks.
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But one in three people over age 65 likely will need long-term care. Couple that with the fact that modern long-term care is fantastically expensive, and you'll see why even a basic LTC insurance policy is going to cost a lot of money.
Lawmakers should respond, but not by paying for more Americans' long-term care. Instead, the government should encourage people to buy and hold private LTC insurance, expensive as it is.
That will cost some money, but the cost of not doing so is exponentially worse. For older people who lack insurance and have exhausted their own assets are not thrown on the streets. Instead, the federal and state governments pick up the full cost of their care.
That's why long-term care costs now are the fastest-growing element of the federal Medicaid program.
Both North Dakota and Minnesota already use one successful and well-thought-out plan: the Long Term Care Partnership Program. This program encourages people to buy insurance by promising to protect their financial assets if they do so.
Say you've accumulated $400,000 that you're hoping to pass on to your children. To fully protect it using a traditional LTC insurance, you'd have to buy unlimited coverage -- by far the most expensive policy.
But the Partnership plan lets you buy a $400,000 policy instead. Then, if you need long-term care for several years and you exhaust that insurance coverage, you'll qualify for Medicaid without having to "spend down" your savings.
The government gains because the private sector paid for the first $400,000 worth of care (and that's more than most long-term care recipients need). The individual gains because his or her assets are protected.
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That's the approach lawmakers should encourage.
Long-term care is a society-wide problem of a sort that demands society-wide solutions. Those solutions shouldn't involve a government takeover, but should instead be geared at encouraging people to use a private-sector solution: long-term care insurance.
-- Tom Dennis for the Herald
