California’s public-private partnership pushing long-term care insurance marches into its 14th year with steady, predictable growth, but state officials are a bit on the defensive lately in the face of increased scrutiny as similar partnerships spread to other states around the country. Critics and the media are questioning motives and tactics behind the programs.
“The department and the administration are frustrated and disappointed,” said Toby Douglas, deputy director of the California Department of Health Care Services. Critics and the media “miss the point, and they miss the value of these partnerships. What our program does is fundamentally take the guesswork out of purchasing long-term insurance,” Douglas said. “It separates good polices from bad policies.”
Douglas was reacting specifically to a Feb. 25 Wall Street Journal article detailing the spread of state-run partnerships and quoting critics who question the value of long-term care coverage.
California, one of the country’s first four states to launch public-private partnerships to promote long-term care insurance, started its program in 1994. Now 15 states are promoting LTC policies under marketing partnerships with the insurance industry, and more than a dozen other states have similar programs in the works.The Golden State Approach
In California, its partnership with five insurers has resulted in the sale of 92,264 policies.
“Our numbers have kind of stabilized now to about 12,000 policies a year, or an average of about 1,000 per month,” said partnership spokesperson Raul Moreno, a state employee.
California does not get a percentage of premiums or per-policy payments, but the state does charge each private partner an annual $20,000 administration fee.
“In our perspective, people would be buying these policies anyway,” said partnership director Brenda Bufford, also a state employee. “The state’s participation is a way to make sure people are educated and that these are good policies offered by strong, stable companies.”
California periodically invites proposals from long-term care insurers eager to join the partnership. The most recent request for proposals resulted in “10 or 12 applicants,” according to Bufford. The state chose five private partners — Bankers Life and Casualty, Genworth Financial (formerly GE Financial), John Hancock Life Insurance, MetLife, New York Life Insurance — and CalPERS Long-Term Care Program.
California’s program recently sent a pitch letter to some six million aging Californians urging them to consider purchasing long-term care policies. The letter has “California Department of Health Services” in large type across the top next to the state seal and Gov. Arnold Schwarzenegger’s (R) name.
The toll-free phone number on the letter is answered by an insurance call center in Illinois or Minnesota. The letter clearly has had the impact of state government correspondence, triggering reaction from critics who question the appropriateness of government’s role in pitching private insurance.Critics Say ‘Buyer Beware’
“That’s very worrisome,” said Betsy Imholz from Consumers Union. “I think it’s a really bad idea for government to be sanctioning private insurance companies. Especially when this particular kind of insurance is of such questionable value.”
Imholz, director of special projects and lead advocate on health issues at Consumer Union’s regional office in San Francisco, points to a Consumer Reports assessment of long-term care insurers in California that granted passing marks to only three of 47 policies examined in the study.
The long-term expense of long-term care, lack of drug coverage in the policies and questions about the financial viability of insurers are all areas of concern, critics say.
“If you start paying for insurance in your 40s and you live into your 80s, you’re going to be making payments for an awfully long time,” Imholz said. Imholz said drug coverage — often the most expensive part of care — frequently is not included in long-term policies.
But it wasn’t the value of the insurance offered, drug coverage or other shortcomings that caused so many policies to earn failing grades in Consumer Reports‘ survey. It was insurers’ long-term financial viability.
“Financial stability is where most of the policies fell short,” Imholz said. “I think there’s some question whether these companies are up to the task over the long haul.”
Imholz urges people to do a lot of homework before investing in an LTC policy. “Most of them are not a good idea. People should be very cautious.”
Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, agrees.
“There are a few problems with these partnerships, starting with a government agency acting as frontmen for big business,” Court said. “Another problem is the product they’re pedaling you is suspect to begin with. These policies aren’t great and they’re getting worse — more expensive and harder to cash in on. They keep moving the bar higher for determining when you qualify for coverage.”Are the Safeguards Adequate?
State officials said that the thresholds for receiving care are precisely stated and that independent third parties oversee the process.
“There are six activities of daily living used as measurement,” said Moreno. “You have to be unable to perform two of them to qualify for care in our program. Other non-partnership policies can have more stringent guidelines and require three.”
“When you assess people on activities of daily living — walking, dressing, feeding yourself — you’re looking at various grades of assistance needed. It’s not an all or nothing proposition,” Mark Helmar, California deputy director of long-term care, said.
To make sure those decisions are made appropriately, the partnership employs three “independent care management agencies to take some of those judgment calls out of the hands of the partnership members,” Helmar said.What’s the Government’s Role?
With life expectancy after age 65 jumping beyond 18 years (If you live to be 65, you’re probably going to make it past 83), how to care for seniors who can’t care for themselves is becoming a bigger question. The situation takes on an added urgency in the context of the baby boomers — the largest generation this country has ever produced — moving into retirement and old age.
When that mass of humanity can’t take care of itself, somebody else will have to step in. As it stands now, that will fall to the government through Medicare and Medicaid.
So far, the only kind of insurance government is willing to go to bat for is the kind of insurance that might save the government money. The federal government several years ago began actively promoting Medicare supplemental “Medigap” policies.
Now, as a result of pilot partnerships in California and three other states, along with passage of the Deficit Reduction Act of 2005, the federal government is urging states to encourage residents to buy LTC insurance.
Government’s primary goal in both these efforts is to reduce Medicaid and Medicare spending on aging citizens. So far there’s not much data to show if the effort is working, but there is some question about whether the strategy will pay off.
In a study released in May 2007, the federal Government Accountability Office found that the public-private partnerships are “unlikely to result in Medicaid savings.”