Trudy Lieberman
How are you going to pay for long-term care? That’s a question every middle-aged or younger Hoosier should be asking. There are few answers. The U.S. has made virtually no progress in addressing this looming crisis unlike countries such as Germany, the Netherlands, and Japan, which pay for care through social insurance programs.
There was a time in America in the late 1980s and into the early 2000s when thousands of people bought long-term care insurance sold by many insurance companies as the solution to paying for future nursing facility and home care needs. The financial press hyped the product, agents knocked on doors selling it like other kinds of insurance, and people shelled out big money for a policy. Today those who still have their policies are finding higher and higher rate increases making it hard for some to squeeze those larger premiums into their fixed retirement budgets.
What happened?
The demise of this product was predictable back in the late 1980s and early 1990s when I wrote three stories for Consumer Reports cautioning buyers. “We believe that some insurers will be forced into significant price increases,” the magazine reported and noted such a policy may offer “inferior coverage and its premiums may increase when you can least afford to pay more.” That is exactly what happened. Policies were underpriced, company income has been lower than expected, people are staying in nursing facilities for longer periods, and people who bought policies years ago are keeping those policies as they age.
The promise was if people bought a policy that paid a daily benefit for a nursing home stay (later some also covered home and community-based care), they could preserve their financial assets from a Medicaid spend-down. Medicaid is the payer of last resort for nursing home care in this country, but only after a person needing such care has spent down most of his or her assets on their care. In other words, buying long-term care insurance that paid some of the bills would save a person’s financial assets.
In some states people could buy a “partnership policy,” that met certain criteria and was considered a better quality product. The Robert Wood Johnson Foundation (RWJF), a prominent philanthropic organization, tried to spur the sales of this insurance by creating the partnership policies. If a person bought one of those policies and became eligible for Medicaid after using their insurance benefits, they could avoid having to spend down their assets to pay for care.
The partnership was not successful in getting large numbers of people to buy long-term care insurance. The coverage was expensive and there was little marketing behind them. By 2012 the foundation was “done with nursing homes and long-term care stuff,” said senior policy adviser Katherine Hempstead. “I don’t think anyone thinks that long-term care insurance can be part of the solution.”
Indiana along with New York, California, and Connecticut became the first states to embrace partnership policies. According to a spokesperson for the Indiana Department of Insurance, over 50,000 such policies have been sold, but only two companies are still selling them today. She told me that the partnership policies had enabled the state’s Medicaid program to save an “estimated” $164.5 million, but that “an actual dollar amount cannot be calculated.”
The spokesperson did direct me to in.gov/idoi/ratewatch/ Rate Watch, a useful resource that allows the public to learn about the rates that the state’s insurance carriers have requested. It includes rate information for long-term care insurance but also for health insurance and Medicare supplement policies.
I checked the site and found insurers were requesting huge rate increases in 2021 — one 401% for a Continental General policy and 237.5% for one of Metropolitan Life’s contracts.
“Obviously, this form of insurance is a failure if companies have to keep coming back to say they need more money and raise their premiums, which happens at the worst times in the policyholders’ lives,” said Bonnie Burns, a training and policy specialist with the nonprofit California Health Advocates, who has followed this product for 40 years.
Worst time or not, the 50,000 or so Hoosiers the state insurance department says still own these policies, have little choice but to keep them.
