With a federal long-term care insurance program now shelved, the prospect for new federal action in the near-term is slim even as need for such services grows, industry observers and regulators said.
While the U.S. population continues to age as baby boomers move into retirement years, just 8-10% of Americans carry long-term care insurance, said Ron Calhoun , national health care practice leader at Aon Risk Solutions. While the Community Living Assistance Services and Supports program was a step in the direction of addressing that public policy problem, it had deep structural flaws, including a proclivity toward adverse selection that made it unsustainable, Calhoun said.
A March 2010A.M. Best report referenced federal proposals on LTC issues, including tax incentives for qualified policies and special LTC savings accounts. However, the current Congress has no appetite for taking up LTC legislation, said Jeff Lane , managing senior financial analyst for A.M. Best.
Amid congressional inaction, the outlook for long-term care insurance remains clouded by its lack of affordability and the challenge of accurately determining the cost of providing care, Lane said. With a sluggish market for the specialized product, some agents are stepping away from selling it, he said.
“The cost is so high. The most difficult problem with the product is the pricing,” he said.
Kansas Insurance Commissioner Sandy Praeger said in the current economy, “people aren’t going to make the decision to buy a voluntary product they don’t know if they’ll ever need anyway.”
The CLASS act, part of the federal health reform package, would have offered enrollees a benefit that, while a fraction of the estimated $75,000/year cost of nursing home residency, would have helped families cope with the costs of care, particularly services provided in the home. However, faced with the law’s requirement it be proved solvent over a 75-year period, the U.S. Department of Health and Human Servicesrecently suspended the program and reassigned its staff before a single dollar could be collected from potential beneficiaries (Best’s News Service, Oct. 14, 2011).
However, the Obama administration is not completely done with long-term care. In an Oct. 26 appearance before two House subcommittees, HHS Assistant Secretary for Aging Kathy Greenlee said a program to raise awareness of the need for long-term care solutions will continue. Also created by the Affordable Care Act, the outreach effort will cost $3 million annually.
A mix of actuarial and political concerns did in the CLASS program, Calhoun said. The political environment that had end-of-life counseling labeled “death panels” is not one prepared to address substantive LTC solutions, he said.
“It’s being celebrated by one side of the aisle as a victory,” he said.
It may be a political nonstarter, but CLASS could have been fiscally sustainable if it had been mandatory, not purely voluntary, Calhoun said. “Mechanically, it would have had more financial viability to it,” he said. “It will die an actuarial death if it’s voluntary because of adverse selection.”
Without CLASS, state Medicaid budgets will feel more of a strain, said Praeger, chairwoman of the National Association of Insurance Commissioners’Health Insurance and Managed Care Committee. Currently, half of state budgets for Medicaid — a federal and state-funded program that acts as a safety net for long-term care patients who have depleted their assets — go to long-term care, she said.
“The states will bear the impact and they don’t have the money for it,” said David Levy , chairman of theAmerican Association for Caregiver Education.
CLASS was flawed, but it was also bold and ambitious, said Jesse Slome , executive director of the American Association for Long-Term Care Insurance. “They at least tried something. There is nothing on the horizon,” he said.
(By Sean P. Carr , Washington Bureau Manager : firstname.lastname@example.org)