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LTC Bullet:

Can LTC Be Privately Financed?

Thursday July 22, 1999


The current issue (July/August 1999) of Aging Today-the bi-monthly newspaper of the American Society on Aging-features a point/counterpoint column entitled "Can Long-Term Care Financing Be a Private Affair?" On the "yes" side of the debate is Center for Long-Term Care Financing President Stephen A. Moses. Taking the "no" side is Dr. Robert L. Kane, director of the Center on Aging at the University of Minnesota and coauthor of a new book, The Heart of Long-Term Care. The following are excerpts:


"In a nutshell, we are caught in a catch-22. Since 1965, Americans have been able to ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need expensive help, and, if it becomes necessary, shift the cost to the government. But this option requires a Faustian bargain: To get the government to pay, one has to go to a nursing home. That system seemed to work all right until costs spiraled out of control and access to quality care sank in the 1980s and 1990s. Now it is hopelessly unable to cope with the increasing burden of a rapidly aging society.

"Adequate public financing will never be forthcoming to salvage the current system or to retrofit an even more expensive homecare and assisted living alternative. Our only hope is to attract more private financing. We have to remove the perverse disincentives that discourage people from planning ahead for LTC. We must replace them with positive incentives to save and insure against the likelihood of needing assistance in old age."


(Dr. Kane's article makes the usual arguments in favor of public financing of long-term care, but far more interesting are his concessions regarding private financing and long-term care insurance, which follow.)

"Private pay allows a person to buy more or better care, except in a few states that require services and costs to be identical whether payment is from a public or private source. Furthermore, private reimbursement may allow greater flexibility and choice. Private funds can be used to purchase a wider variety of services under more creative arrangements, while public funds cover only a limited set of authorized services. Much of the innovation in LTC has occurred in the private sector, such as assisted living and continuing care retirement communities.

"Beyond asset protection, the other reasons for considering private LTC insurance all relate to the quality of the package offered by Medicaid. In effect, the less attractive the Medicaid package, the more enticing private LTC insurance becomes….

"If we accept that LTC coverage is a good idea, the potential disagreement revolves around what form it should take. One approach would be to mandate that everyone hold some type of insurance but leave the specific source of coverage to individuals. Any policy that meets federal guidelines would be acceptable. Some people could opt to purchase coverage privately; others could join a government-sponsored program. Such mandated purchase could assure an adequate pool of healthy, low-risk buyers who could keep the price down."

If you would like to read the entire column, it is published on the ASA's web page at Alternatively, Aging Today editor Paul Kleyman has generously offered to provide a free copy of the newspaper. Just e-mail him at and specify that you would like to receive the July/August 1999 issue containing the Moses/Kane debate.