James Kwak of the BaselineScenario does an interesting analysis of his quest to purchase long term care insurance on the private market, and concludes the only way to prevent its exorbitant costs and inability to comprehensively cover the elderly is to have the federal government get involved:
In short, the private market doesn’t provide good long-term care insurance—because it can’t. The insurance you can buy is really just a way of reducing the amount you’ll have to pay for long-term care; it’s a financial planning tool that tightens the distribution of your expected long-term net worth. My spreadsheet says it’s worth it on that basis, so I’m planning to buy it (although I’m not accounting for counterparty risk or the risk of future premium increases). But it isn’t insurance against extreme outcomes.
If we want real long-term care insurance, there’s only one place where we could get it: the federal government. The government can offer unlimited coverage and real inflation protection (benefits based on actual costs at the time you incur them) because it has the ability to absorb long-term financial risks. It can mandate universal coverage, eliminating adverse selection. Because it can raise premiums (or other taxes), it will not go out of business. (Those potential premium increases, however, do mean that it can’t offer a lifetime premium guarantee.)
Of course the Republicans would block anything resembling more interference in the health care market meaning Americans should look forward to higher costs, more risks and less coverage.
The Democrat’s consistent backing down to Republican demands means the ‘free market solves everything’ doctrine remains the modus operandi in Washington. I’m not sure that debating these issues does much good any more – it’s time for serious grassroots action to ensure everyone’s wellbeing later on in life. If we continue to allow the private insurance industry to price us out of health care, life is not going to be much fun for most people in their old age. If that doesn’t inspire serious action, I don’t know what will.
Ben Cohen is the editor and founder of The Daily Banter. He lives in Washington DC where he does podcasts, teaches Martial Arts, and tries to be a good father. He would be extremely disturbed if you took him too seriously.