GE, one of our country’s industrial giants, is reeling from a multi-billion dollar loss due to the sale of a unit that sold long-term care insurance.
While you might chalk it up to poor planning on their part, you cannot deny the fact that it signals a bigger problem affecting all of us. There will be no way to pay for the care that a large number of aging Americans will need when they will be unable to care for themselves.
Many long-term care insurance companies have been suffering. The cost of care from things like dementia, continues to grow, and people have lived longer than the actuaries projected. A policy bought today is far more expensive per “pound of care” than one bought a few years ago.
Some experts feel that this simply is not a problem that can be solved by private insurance. Come mid-century, the United States will have 90 million people over the age of 65. Half of them will probably require long-term care. As of 2015, private insurance programs provide coverage to less than 10 percent of our population and their market share has been in decline.
Medicare only covers a short period of care after an individual has been hospitalized. Medicaid covers the indigent, but it is available only after people have exhausted their assets; and most people who are familiar with Medicaid services would prefer to never need them personally. Not to mention that dealing with Medicaid is a paperwork nightmare — confusing and protracted.
The challenge we face is to develop a safety net that will provide long-term care when people need it, without forcing people into the poorhouse and without placing an excessive burden on taxpayers. There is a huge economic incentive to get this right: the need for people to care for loved ones creates a drag on the economy; the cost of lost wages over the lifetime of caregivers has been estimated at $3 trillion.
At this moment, there are no answers… just questions.
About the Author:
Lorenzo Mejia and his wife, Mary Lynn Ryerson, are the owners of Acorn, a caregiver registry located in Chapel Hill.
They founded Acorn based on their experiences caring for his mom, who suffered with Alzheimer’s Disease. In 2013, he became a Qualified Dementia Care Specialist. In 2014, the Alzheimer’s Foundation named him the Dementia Care Professional of the Year in the United States.
Lorenzo is the founder of Dementia Friendly Orange County an effort to make local businesses more accommodating to people with dementia.
Lorenzo speaks often on dementia and the challenges associated with caring for loved ones. He has been interviewed by ABC News and National Public Radio. He is an advisor to Orange County’s OC-CARES Dementia Capable Community Project.
Fortunately, regulators do not allow any LTCi policy purchased today to use the old pricing assumptions. Additionally, to protect consumers purchasing policies today, 41 states have passed strict pricing regulations. These regulations have removed the profit incentive from rate increases. It forces long-term care ins. co.’s to lower their profits if they seek a rate increase.
Now this is good news and bad news. The bad news is that a policy purchased today costs more than a similar policy that was purchased 10 years ago. The good news is that since today’s policies are priced more conservatively and there is no longer a profit incentive in rate increases, today’s policies are less likely to have a large premium increase in your lifetime.