“If they wait long enough… the policyholders will die.”
CROSS-POSTED FROM THE DMIBLOG
The story in today's New York Times about long-term care insurance is a bombshell, evoking the heart-rending predicaments of frail 80-somethings paying years of long-term care insurance premiums only to be denied coverage for nursing home care when they are ailing. I recommend reading the whole article, but if you don't have time, this sentence, from the former senior executive at the National Association of Insurance Commissioners, pretty much sums it up:
"The bottom line is that insurance companies make money when they don't pay claims... They'll do anything to avoid paying, because if they wait long enough, they know the policyholders will die."
The article details the hours on the phone and reams of paperwork insurance companies demand, only to deny care. Knowing that most people won't sue, insurers prefer to settle out of court rather than risk that the details of their operations be revealed in the course of a lawsuit. On the other end, as DMI fellow Andrew Friedman so powerfully writes, the front-line workers actually doing the work of caring for the elderly also get squeezed in an effort to cut costs.
While stories of sick and confused elderly citizens in need of care they can't afford is particularly egregious, long term care isn't the only part of the insurance industry that operates on the business model of delay and denial of coverage. The same practice inflates costs for health insurance and auto insurance.
Issues of long-term care impact not only the elderly but their middle-aged children, struggling to finance exorbitant nursing home and home health care bills for their parents even as they try to make ends meet in their own households. Combining the cost of caring for frail, elderly parents with the effort to save for one's own retirement and pay for the skyrocketing cost of college for children has all the makings of a perfect storm, occuring against the backdrop of a weakening housing market as rates rise on millions of adjustable rate mortages. In other words, the middle-class squeeze tightens another notch, and the insurance industry profits.
At the least, much stricter federal regulation of the insurance industry is imperative. But the deeper question is whether we can afford to continue putting decisions about necessary care and medical treatment into the hands of an industry that profits most when care is denied. As Paul Krugman suggests in his column today we may finally be approaching the point where we are fed up with being thrown to an ever-harsher market where middle-class and aspiring middle-class familes are forced to assume mounting levels of individual risk of poverty and untreated illness. We may finally be ready to raise taxes on those who have benefited most from our economic system and accept our obligation as a society to provide care -- whether it's medical treatment, or care for the elderly, disabled, or children -- to all those who need it.