Long Term Care Chaos

A headline announcing that CalPERS plans an 85% rate hike for long-term-care insurance would be hard to miss.  If you did miss it, you may see it here: http://articles.latimes.com/2013/feb/21/business/la-fi-calpers-longterm-care-20130222.  I missed it until a friend brought it to my attention.  In an era of double digit health insurance premium increases, a number like 85% still has the power to shock.

What's the story?  First, the premium hikes are  not scheduled to take effect until 2015.  Second, they target perhaps 110,000 people who purchased CalPERS LTC insurance in its early days, from 1995-2004. Third, these 110,000 people purchased lifetime policies.

If LTC insurance is the most difficult to price, lifetime LTC insurance is the king of kings.  Forecasting twenty years into the future on the likely longevity of a population living ever longer into age and disability is, it turns out, very difficult. The same article reports that stroke and dementia have been the leading causes of claims, accounting for 44% of all payouts.

Dementia, in particular, can be hard to track on a disease path. Whether it is because we diagnose dementia earlier or because dementia is more prevalent in an increasingly aging population or even — because of the confluence of these two trends — we live ever longer under the diagnosis of dementia. We are awash in seniors with a dementia diagnosis and in need of long-term care in a variety of settings. Add to this that older women — caregivers of us all– are the most likely sub-population to be diagnosed with dementia and you will understand why the CalPERS spokesperson in the article more or less concedes that the take up rate for this insurance was too high for its business model and the renewal rate for this insurance was too high for its business model. That is how you get to an 85% premium hike.

My students are often astonished to learn that LTC insurance is considered part of health insurance in some other countries.  Seen from a different angle, of course it is beyond strange to realize that we segregate the care of those most likely to need long term care insurance into a distinct product marketed only to older people and likely to appeal only to the old and the farsighted near old. By farsighted I mean those who recall that — so far — everyone dies and that the more common path to death in modern America is one of slow decline from chronic illness and not sudden death.

All of this is playing out in front of a larger scenario where LTC insurance is cast as an optional health care benefit. Perhaps this is because an estimated 90% of all long term care is family-provided and overwhelmingly the work of women.

When I think about LTC insurance market failures I think about younger and middle aged woman stretched to the limit taking care of older women.  If there ever were a recipe for invisibility in public policy circles, this would be it.

But why 85% at once as a premium hike?  I wonder if it correlates with the demise of the ACA's CLASS Act.  Now that the government will not ramp up a LTC insurance program fueled by payroll-deduction designed default enrollment of every age and demographic group, LTC insurance is back as a product for the well off.  The vast majority of Americans could not afford these CalPERS premiums. Anyway, we Americans mistakenly believe Medicare offers LTC coverage.  It is, of course, Medicaid that offers LTC coverage but only at the cost of considerable impoverishment.

And the shibboleth that huge numbers of American seniors voluntarily impoverish themselves to supp at the banquet of Medicaid-funded nursing home care is just that.  It is statistically inaccurate, yet evocative to consider that more attention is spent advancing this scenario than in considering that nursing home occupancy rates are down. Elders are voting with their feet, sometimes at terrible risk to themselves and often at terrible risk to the health and finances of their senior themselves family caregivers.

Who — as one of my friends aasks — could possibly believe that gaming the system to obtain a Medicaid funded nursing home bed was some kind of victory?  Could such a theorist ever actually have visited a nursing home that accepts Medicaid reimbursement?