When the CLASS Act, a part of the health reform law that would have begun to establish a national program to pay for long-term care, died two weeks ago, we urged that the media use its demise as a way to broaden the discourse on the topic. “There was scarcely a nod to the problem the act had been meant to address,” I wrote. To its credit, the AP moved a story that began to do that. Unfortunately, the story left a lot of information unreported and unexplained.
The lede of one version of the piece began:
The Obama administration’s decision to pull the plug on a financially flawed long-term care insurance plan is likely to worsen a dilemma most middle-class families are totally unprepared for.
So far so good, I thought. All that’s true. Then, after several graphs that establish paying for long-term care is a “critical issue” (as one source called it), the reportage veered into almost advertising territory for long-term-care insurance, a product that the insurance industry has struggled for three decades to sell. It has never moved into the insurance mainstream, and even with special tax treatment, long-term-care policies have remained a niche product. The AP acknowledged that only three percent of adults own a long-term-care policy. The AP also reported that experts say long-term care is the kind of problem insurance should be able to solve because it has to do with the mathematics of risk.
The story quoted Harriet Komisar, an economist at the Georgetown University Public Policy Institute. “Insurance makes sense when the odds are small but the financial risk is potentially high and unaffordable,” Komisar said. Long-term care is indeed unaffordable for most families, with nursing home costs running around $70,000 or $80,000 a year and more than $100,000 in some states. The trouble is that long-term care insurance is also unaffordable for many, and that’s why it has been such a difficult sale over the years. It’s not uncommon for families to spend $3000, $4000, or more for policies. I know one retiree who is spending $5200 a year for a mediocre benefit. And once you buy the insurance, it’s a bad decision to drop it, even when the premiums become difficult to pay. To make the policies affordable, people buy benefits that will be too small in the future when the cost of care rises. A policy that pays $80 a day for nursing home care may not help much when the daily rate is $200.
There’s another problem the AP could have explained. Even if people want to buy a policy and have the money to pay for it, they may not qualify. Long-term care policies will not be subject to the part of the health reform law that forbids insurers from turning away people with preexisting conditions in 2014. It will be business as usual for sellers of long-term care policies. If applicants have a condition that will likely result in a nursing home stay, they won’t get a policy, period!
The AP gave short shrift to other long-term care options. While the story noted that Medicaid is the default provider for long-term care and that families must go through the “wrenching experience” to qualify, it didn’t make the connection between the current assault on Medicaid in Congress and eligibility for nursing home assistance. Changes to Medicaid, such as giving block grants to the states, could result in making it harder for families to qualify for long-term care. What happens then? The AP noted “conservatives have called for private coverage, perhaps with tax credits to make it more affordable.” That, of course, is the model now in place for helping uninsured Americans buy health insurance. But with budget cutters in Congress ruling the legislative roost, is that really a likely possibility? And what would happen to people with preexisting conditions? Some discussion of this was in order.