Excellent Discussion of Long Term Care
posted by Frank Pasquale
As someone who teaches in the health/insurance law area, I get a lot of questions about long term care insurance. Much of the literature in the area is turgid and forbidding for nonspecialists. Corporate brochures are long on promises and short on “worst case scenarios” that could easily befall those who misunderstand the “product.”
I commend the Diane Rehm show for hosting an excellent discussion of LTC here. Lawyers of a certain cast of mind will relish the calls in the last half of the program, featuring real life stories of recissions, pre-existing condition exclusions, hidden premium hikes, and all manner of ingenious fine print designed to keep profits high and payouts low. The CLASS Act would have addressed some of these issues. One of the triumphs of the “Anti-Obamacare” Tea Party movement was to get that repealed. Maybe they’re counting on 401(k)s.
June 2, 2012 at 11:05 am
Posted in: Disability Law, Health Law, Insurance Law
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Responses (5)
Sam Bagenstos - June 2, 2012 at 2:52 pm
Frank,
Thanks for calling attention to this important problem. The private long-term care insurance market is unravelling before our eyes, at the same time that folks on the right (and the soi disant “serious” center) have done their best to destroy the one meaningful effort at solving the problem through public insurance — an effort that was flawed, to be sure, but at least was a start. As a result, we’ll see more people impoverished as they get older and develop disabilities, and we’ll see more stresses on Medicaid (which will no doubt be used as further justification for cuts to that program, as well as Medicare and Social Security). Nice work.
Jimbino - June 2, 2012 at 8:01 pm
Like most of our problems, the causes and potential solutions are purely political.
I am 67, a non-believer in insurance of any kind. I have a modest home in Brazil, and I have come to the realization that, if I were in need of long term care, I could move into my home a young, single mother who would be happy to stay there, rear her kids and take care of me for a relative pittance. And I wouldn’t even have to marry her, though that is always a possibility, as many senior Americans, mostly men, have found happiness with a younger Brazilian wife.
The minimum wage in Brazil is now less than $350 per month. Depending on the level of care needed, of course, most any American receiving Social Security could afford to pay that, and for something less than $1000/month, he could even employ a single mother who is also a professional nurse, offering her a great opportunity to earn more than she would in her profession, which is underpaid and under-appreciated in Brazil.
Of course, there are Guatemalans, Hondurans, Salvadorans and others who would be available for the same. The barriers are purely political: why can’t a senior import a personal nurse from Guatemala to live in to take care of him in the US? Why are visas to Brazil limited to 6 months for non-residents?
Costa Rica offers a permanent visa to Americans who show $1000/month in income (like Social Security). Why should Americans pay such outrageous LTC fees here when there are so many cheaper alternatives? For the $5000+ per month charged in this counrty to care for a couple, 15 foreign caregivers could be employed! This is clearly a business opportunity, like medical tourism, for some American entrepeneur.
Tim Barnes, CLU - June 3, 2012 at 2:09 pm
The credibility of your opinions would be greatly enhanced if you shared facts and not revisionist history. The CLASS portion of the PPACA has not been repealed. It still stands but on December 16 of last year, President Obama’s Secretary of Health and Human Services declared that the provisions of CLASS were unfeasible. The only part of the PPACA that has been repealed is the mandate for small businesses to prepare 1099 forms for every vendor they paid $600 or more in the prior year. You are giving the Tea Party credit for something that never happened. If you are going to be part of the political spin machine, how can you be trusted to give facts about insurance matters?
Ann Marie Marciarille - June 5, 2012 at 3:09 pm
Jimbino,
Significant amounts of LTC are already being outsourced to Mexico and, to a lesser extent, to India. As Medicare-funded U.S.-delivered health care can be only a short trip away from certain parts of Mexico, I expect those entrepreneurs have the edge under current Medicare assignment rules and regulations.
Claude - June 6, 2012 at 7:08 pm
Contrary to what the professor might think, this comment is not written by a Tea Party member. I have primarily voted Democratic over the years, including voting for President Obama.
The Obama administration knew all along that the CLASS Act was fundamentally flawed. Richard Foster, the actuary of the Center for Medicare and Medicaid Services, spoke out about those flaws. When he and many others of us with expertise in this area pointed out the flaws, the Obama administration and most Congressional Democrats consistently said we were wrong despite since-exposed internal HHS staff commentary that we were right. (Note: it is good to encourage expression of differences of opinion among staff. Conscientious management can reach different conclusions, so I don’t think that expressing an opinion contrary to staff comments or Mr. Foster’s comments is necessarily damning. However, read on.)
The CBO also pointed out the flaws. They are forced to report results using 10-year cash flow analysis, which in this case, resulted in a presumption that money would be collected for the program for 10 years, but that not a single penny would be set aside in reserve for future claims. Using such accounting (which would land private industry accountants or actuaries in jail), the CBO was obligated to report a $72 billion “surplus” for CLASS (Senate version) in the 10-year period. The administration and almost all Democrats in Congress maintained that CLASS’s $72 billion “surplus” could be used to fund PPACA, claiming that PPACA would not add to our deficit. However, when the CBO reported the $72 billion, it also commented “Therefore, the programs would add to budget deficits in the third decade—and in succeeding decades—by amounts on the order of tens of billions of dollars for each 10-year period.” (The reason the quote refers to “programs” is because, at that time, there were slightly different versions of CLASS in the House and Senate bills.) PPACA proponents ignored the CBO’s warning, choosing to quote out-of-context, thereby misrepresenting CBO’s conclusion.
Immediately after PPACA passed, Kathleen Sibelius admitted that CLASS would not work as constructed. On the eve of passage, it was sound, but as soon as it passed it was not?? Under her leadership, HHS then tried to change CLASS in ways that undercut some of the documented intentions of the people who wrote the law. Legally, HHS was required to go back for Congressional approval if they wanted to change the law. They do not have the authority to do it themselves. When I challenged two HHS staff members who I respect a great deal, pointing out that they were proposing to violate the law, they responded that they understood that the law did not permit the changes HHS was intending and that their intended changes might therefore get blocked, but that they felt comfortable creating a program that violated the law because they were “making it better”. Ultimately, the Obama administration’s LTCi actuary in HHS concluded that the program was untenable. After his report was filed, the Obama administration mothballed the project.
If you are interested, you can go to the Rehm Show web-site to see my comments about some of the inaccuracies in that aired program.
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