LTC Bullet: New LTCI Report: Research or Propaganda?

Tuesday, June 8, 2010


LTC Comment: Is a newly updated report on LTC insurance by the Congressional Research Service really research, or CLASS Act propaganda? You decide after the ***news.*** [omitted]


LTC Comment: Today, we examine a Congressional Research Service report titled "Factors Affecting the Demand for Long-Term Care Insurance: Issues for Congress," prepared by Janemarie Mulvey and dated May 14, 2010. (A copy of a report with the same title and author, but dated May 27, 2009 is available online here. We could not locate the 2010 version online.)

What intrigued me about this report is that it "throws the book" at private long-term care insurance, listing and documenting every possible flaw and criticism, but offers the CLASS Act as a solution almost uncritically.

For example, consider this excerpt from the report's "Summary":

"A number of factors have adversely affected the demand for LTCI. The cost and complexity of LTCI policies have been cited as major deterrents to purchasing LTCI. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about potential problems with claims denials and heightened concerns about the future solvency of LTCI insurers in the current economic environment have further dampened demand." (p. i)

The body of the report elaborates in excruciating detail on all of these factors adversely affecting demand for LTCI. But it totally ignores the single biggest reason constricting demand for private long-term care insurance: the easy availability of Medicaid-financed long-term care after the insurable event has occurred. Brown and Finkelstein ( irrefutably documented that Medicaid alone--never mind all the other ways government pays for long-term care--crowds out 2/3 to 90 percent of the potential market for private LTCI. Ignoring Medicaid in this context is like overlooking a rhinoceros in your rumpus room.

So what does the report have to say about the CLASS Act?

Report: "The publicly administered LTCI program is intended to address many of the concerns in the private LTCI market." (p. 20)

LTC Comment: Oh, yeah? How? Following are excerpts from page 20 of the report followed by our comments.

Report: "Once established around 2013, employed individuals aged 18 and older could voluntarily enroll in the program."

LTC Comment: Why would people voluntarily enroll in CLASS but not voluntarily purchase LTCI?

Report: "CLASS enrollment would not be subject to underwriting, except for age, so coverage would be available to all persons who enroll, regardless of preexisting conditions."

LTC Comment: OK, I understand, CLASS won't price risk like private insurance. So sick people will join for sure. But why would healthy people participate?"

Report: "Premiums for the CLASS program are to be determined by the Secretary based on 75-year actuarial estimates of expected future use and expenditures."

LTC Comment: Wait a minute! You mean the Secretary decides premiums based on what the insurer, i.e. government, can afford? Where's the consumer protection in that, if, as is likely: CLASS uptake is inadequate; reserves are used for other government spending; and claims experience overwhelms?

Report: "After a five-year vesting period, eligibility for benefits from the CLASS program is based on the existence of a functional or cognitive impairment that lasts for at least 90 days and that is certified by a licensed health care practitioner."

LTC Comment: I have to pay indeterminate premiums for five years before I'm eligible for indeterminate benefits, but at least all I have to do is find some doc willing to certify my need. What about moral hazard?

Report: "Benefits to eligible recipients include a cash benefit of at least $50 a day, which varies based on the degree of the beneficiary's functional or cognitive impairment."

LTC Comment: At least $50? Can't you even tell me what the benefits will be before I sign up to pay premiums?

Report: "Other benefits include advocacy services, and advice and assistance counseling on accessing and coordinating LTC services."

LTC Comment: What assurance do I have that these services will actually be available when the time comes?

Report: "PPACA [Patient Protection and Affordable Care Act, aka "health reform"] also includes premium subsidies for workers with incomes below the federal poverty level and full-time students aged 18 to 21 who currently are working."

LTC Comment: So, as a healthy, privately insurable person, you want me to pay extra premiums so poor people and students can pay lower premiums? Sounds more like wealth redistribution or welfare than insurance to me."

This report reminds of the biblical query: "And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?" (Matthew 7:3)

Or more prosaically: It's the pot calling the kettle black.

How in the world can CLASS improve on private LTC insurance by charging higher premiums for lower benefits without protecting insureds by pricing risk and without protecting the insurer by limiting liability?

Answer: it can't and won't, but in the meantime unrealistic expectations for CLASS risk further anesthetizing the public to LTC risk and cost at the very time that the traditional social safety net for long-term care is most vulnerable.