Tuesday, March 20, 2012

And The Hits Just Keep Coming

Elders in Minnesota got some rather disturbing news in the mail recently. The premiums on their long term health care policies have gone up, some by as much as 90%.

Premiums are soaring by 20 to 90 percent for thousands of Minnesotans who carry long-term care insurance, and many older people are struggling to figure out what to do. ...

The unforeseen premium increases have caused a rash of calls to state regulators and advocates from worried or irate older Minnesotans.

But the effect could go much further. It could dampen a new three-year effort by state agencies to convince more people to finance their own long-term care in old age. About 7 percent of nursing home residents have long-term care insurance. But about two-thirds are covered by Medicaid, which spends $3.5 billion a year on long-term care in Minnesota and whose rising costs present growing budget problems for the state.

And it's not just Minnesota which is being hit. Across the nation, premiums for the policies that pay for nursing home/rehabilitation hospital stays and for at-home health care givers are going up as well. Most of these costs are not covered by Medicare, which leaves elders with few options. They can either find a way to pay the increased premiums or they can spend their life savings down to zero and then hope to qualify for Medicaid. State governments are beginning to panic.

Is this just another example of health insurance companies making a grab for more dollars? Sadly, mostly not.

Insurers say higher premiums became necessary because people are living longer and fewer than expected are dropping their policies. At the same time, extraordinarily low interest rates mean insurance companies are earning less on investments that back the policies. For the most part, state regulators have agreed.

Some elders, using a little creative thinking, have changed the terms of the policy by lowering the number of years the policies would pay for the covered costs, say, from six years to two. Others are cutting back on other expenditures to pay the higher premiums. In both cases, the problem is being delayed, not solved.

The solution to this problem is going to be very difficult. Nursing homes cost at least $5,000 a month, much of which is not covered by traditional Medicare Parts A and B. A way to include more coverage of these expenses has to be found, and reducing payroll contributions is just not going to help matters. Costs themselves have to be contained at the provider level, something the ACA hopes to address, but whether the new law makes it through the Supreme Court challenge remains to be seen. Long term health care insurers are going to have to find ways to serve their customers better and more efficiently than they have. And the economy has to grow so that the premium investments yield more than they have the past five years.

Of course, other nations have found ways to solve this problem, primarily through a single-payer system or through nationalized health care. Apparently those options are still way off the table.

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