HEARING - U.S. Senate Special Committee on Aging

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explore all alternatives to long-term care (e.g., assistance of
family members) and hence are more likely to use the coverage.
In other words, a person with custodial care needs who has
comprehensive nursing home insurance faces a different array of
choices than a person without such coverage. The existence of
the insurance coverage lessens the incentive to explore home
health care and other custodial care alternatives. Despite
these risks, a private market is emerging. But we don't yet
have information on what pricing policies, policy coverage
provisions, and underwriting practices insurance companies will
use to deal with these problems.
The experience with medigap policies -- averaging, as
noted above, loss ratios of only 60% -- is great cause for
concern. Can we honestly expect that long-term care policies
will have loss ratios more favorable to consumers than 60%? Is
it a wise expenditure of limited dollars of the elderly, and
subsidization from taxpayers, for policies returning 20%, 30%,
or even 60% of premiums in the form of insurance benefits?
Further the Report's reliance on education of consumers about
the risks of the high costs of long term care and on increasing
incentives to purchase private long-term care insurance is
inadequate. Further options should be considered. (See section
(C)(2) of these comments.)
(C) options Excluded from the Report
(1) Acute Care Coverage: The Report recommends that
Medicare be restructured to provide catastrophic protection