California Insurance Lawyer Blog

In an annual report released October 17, 2008, the Centers for Medicare and Medicaid Services (CMS) predicted that during the next 10 years, spending on Medicaid for low-income seniors will outpace the rate of growth in the U.S. economy. See

This means, according to Health and Human Services Secretary Mike Leavitt, “that the current path of Medicaid spending is unsustainable for both federal and state governments. We must act quickly to keep state Medicaid programs fiscally sound.”

States are already struggling to keep up with Medicaid cost. In considering a second economic stimulus package, lawmakers are contemplating supplying federal funds directly to states to pay costs of running government programs, including Medicaid. The outlook for government long-term care assistance is increasingly more dismal.

This is frightening news given our aging population and the seeming increase in need for medical services. People who are fortunate enough to be able to afford health insurance, and long term care plans from quality providers will probably be okay, assuming their insurers pay benefits (which we know from experience is not always the case). Still those people represent only a small minority of our population. The future of health and long term care in this country is getting closer to a breaking point.

The full CMS report is available by following this link: http://www.cms.hhs.gov/ActuarialStudies/downloads/MedicaidReport2008.pdf.

In a little publicized but highly consequential move, Conseco Senior Health Insurance Company, a leading provider of controversial long-term care insurance policies, requested Pennsylvania Insurance Commissioner Joel Ario establish a new company, Senior Health Insurance Company of Pennsylvania, to manage its 150,000 or so long-term care polices as the company struggles to remain solvent. Click here to review documents and comments.

In a letter to Ario, California Insurance Commissioner Steve Poizner expressed his concern that creation of a new trust would have a detrimental effect on policyholders around the nation, including California, leading to “unaffordable rate increases and the eventual insolvency of the trust.” Poizner exhorted Ario to make no decision without conducting a public hearing, even though Pennsylvania law does not require one.

Bonnie Burns, of California Health Advocates, was even more to the point: “I am writing to you with alarm,” she began as she urged Ario to deny Conseco’s attempt to “dump” its LTC polices thereby “creating a virtual death spiral from which there will be no recovery.”

Joseph Belth, professor emeritus of insurance in the Kelley School of Business at Indiana University and editor of “The Insurance Forum,” closely examined Conseco’s proposal. He advocates Ario should not merely disapprove the plan, but also should immediately seize Conseco Senior Health Insurance with a goal of preserving the assets then selling or rehabilitating the company. This alternative, he believes, would avoid “the drastic alternative of liquidation.” See http://www.ins.state.pa.us/ins/lib/ins/conseco/034.pdf.

Futhermore, says Belth, Conseco’s plan “would lead to a series of substantial premium increase requests that would place state insurance regulators across the country in a difficult position. Approval of the requests would place a severe burden on policyholders, most of whom are seniors, and force them to make difficult decisions about whether to absorb the increases or discontinue the policies.”

What happens in Pennsylvania will have repercussion around the country. If Conseco is let off the hook, how many other LTC and disability insurers will attempt to evade responsibility? How many more policyholder might be forced to wait in line for a shrinking pool of benefits when they need coverage?

Insurance commissioners around the country need to step up to protect policyholders by finding alternatives similar to the one Belth proposes. And insurers need to take note: The Conseco dilemma is a case study in how not to run your business.

October is “Long-Term Care Planning Month,” according to founder Marilee Kern Driscoll, author of “The Complete Idiot’s Guide to Long-Term Care Planning.” She begins the celebration by exploring what each of the presidential candidates has to say about long-term care.

I use the word “explore” because apparently Driscoll couldn’t find much on the topic except what each candidate had posted his respective Web site. Typically, and sadly, long-term care is not one of the top 10 campaign issues.

Sen. Obama’s web site promises, among other things, that he will work to give seniors choices about their care, consistent with their needs, and not biased towards institutional care. That’s all well and good, Driscoll agrees, but won’t that have the dreaded “woodwork effect” pointed out in the 1980’s by Rep. Claude Peters: If the government Medicaid program started paying for long-term care where individuals wanted it (NOT in a nursing home), applicants for this taxpayer-funded program would “come out of the woodwork.”

Sen. McCain’s proposal is problematic as well, says Driscoll, and is essentially a rehashing of programs that pay for in-home care for the financially and medically needed. He has no new ideas about how to finance long-term care for the middle-class.

Driscoll concludes that Americans are going to “have to wait to find out exactly what, if any, long-term care reforms these candidates will champion.”

Long term care options issues are going to explode over the next two decades. Private insurance is one solution, but it is expensive, and as we know from the many cases we have and continue to handle, benefits are not always paid when they should be and lawsuits become necessary. Is a government solution the answer? Maybe, but we will have to see what real solutions might be proposed by the victorious candidate and his new congress.