My crystal ball is still cloudy in terms of how long term care (LTC) will be impacted by the final provisions of the great health care debate. Chances are it will remain an issue left for another day.
But long term care cannot be ignored for long. The nation’s next great health care debate will focus attention on Medicare and Medicaid. LTC is such a large and growing component of these taxpayer-funded plans that you can’t discuss saving these programs without dealing with LTC.
The proposed CLASS Act (which gained favorable support from many influential organizations) probably gives a good sense of what’s likely to be the basis of proposed LTC plans. Unless the economy comes roaring back and Washington is again flush with taxpayer dollars, the best legislators will be able to accomplish is an underfunded, initially voluntary plan. In simple terms, get a plan in place, but kick the can down the road a bit further in terms of financial solvency.
Is this good or bad for long term care insurance? The answer - yes!
Some good outcomes
Such a significant change provides the industry with an opportunity to “retool” policies. As an example, level premiums really no longer serve the intended purpose (making products attractive for elderly buyers). In fact, they make insurance costly for younger buyers. LTCI supplement policies
(like Medicare Supplement) could gain traction. Finally, some producers are chomping at the bit waiting to compete head-to-head with a poorly financed, minimal-benefit government plan.
Some bad outcomes
Hearing about a new government LTC plan, consumers start to believe they have LTC “covered.” The 15-second media soundbites reinforce this impression. There is less consumer interest, smaller insurers exit the marketplace and the private market rapidly collapses. Stay tuned.