By Wallace Roberts
A new scientific measure was introduced at this year’s annual meeting of the Gerontological Society of America (GSA) that may have serious implications for how Americans are going to pay for long-term care. It’s called, “Not going to happen.”
At a symposium on the topic, Marc A. Cohen, chief executive officer of LifePlans, Inc., a research organization for private insurance companies selling long-term care insurance, painted a bleak picture for the role of the private sector in this field. He said there are only 11 companies now selling a meaningful number of long-term care policies while there were 102 in 2002.
The primary reason these companies stopped selling this insurance, Cohen said, was the increase in capital requirement – the amount of money the companies must keep in reserve accounts to cover claims. A total of 23 percent of the firms survey by LifeCare cited this as the single most important reason they dropped out of the market.
The other main reasons included lower than expected profits (19 percent), new senior management not interested in the product (12 percent), and revised assessments of the risk involved (12 percent).
Cohen said that when the dropout firms were asked about the likelihood of their re-entering the market, 40 percent reported that there was less than a 25 percent chance they would do so, and 36 percent said it was, “Not going to happen,” a term Cohen said sardonically, was “a new standard of scientific measurement.”
Consumers are not buying long-term care insurance primarily because the premiums are too costly, he said. Thus, despite the fact that private long-term care insurance is too expensive for most consumers, it doesn’t produce high enough profits, once the reserve requirements are fulfilled, to justify selling it. In economics, this is called market failure.
The failure of the private marketplace to produce a needed service or product normally is taken as an indication that there is a need for government to take on that role, but that possibility was pushed off the table last fall, at least for the time being, when Congress’s Long-Term Care Commission issued its report without making any recommendations on how to finance it, which was the main reason the commission was created.
During a press briefing at the GSA meeting, several of the commission members and staff conceded that the politics and logistics of establishing the commission set it up for failure with regard to recommending a publicly financed system to cover the cost of caring for elders and the disabled who are unable to perform two or more activities of daily living such as dressing and eating.
Related tip sheet
Covering long-term care: Programs, data and questions to ask
Speaking to a group of MetLife Fellows and health journalists, commissioners Judy Feder, Carol Raphael, and commission staff director Lawrence Atkins, Ph.D., provided some background on the failure of the commission to fulfill its primary mission of coming up with a sustainable system.
“We were given three months to do something people had been talking about for 30 years,” Atkins said. The commission didn’t have the time or money needed to produce cost estimates for a public or public/private insurance system and alternative scenarios for how such an insurance system could be financed.
He said the commission members had “sensitivity to the financing issue,” but that the chair and vice chair of the commission “decided at the outset to find as much common ground as possible” and, with six Republicans and four conservative Democrats on the 15-member commission, that meant there would be no discussion of any proposal that increased the federal budget.
Feder, an Urban Institute fellow and professor at the Georgetown Public Policy Center, said the decision to not make a recommendation on financing was a “cop-out” and a “fundamental failure” and paraphrased the New York Daily News headline over a story about the decision of former president Gerald R. Ford not to provide any financial aid to New York City in the mid-70s as it teetered on the edge of bankruptcy: “Long-term Care Commission to the Public: Drop Dead.”
Feder voted against the commission’s final report for this reason and was joined by four other commissioners in issuing a minority report that proposed two schemes for a mandatory public social insurance system that could be financed either with the savings from Medicaid (which now pays for long-term care for the poor) or by slightly increasing the Medicare withholding tax.
Feder and her minority colleagues are working with the advocacy group Consumer Voice to organize the equivalent of a White House Conference on Aging for 2015 with the financing of a long-term care public insurance program as the main agenda item.
Wallace Roberts is an award-winning independent journalist in print and radio with more than 30 years of experience specializing in public policy issues. His articles have been published in The American Prospect, The Nation, Saturday Review, New Republic, Boston Globe, Sacramento Bee and other publications. Roberts wrote this article with support from the MetLife Foundation Journalists in Aging Fellows program, a project of New America Media and the Gerontological Society of America.
