Noyan Hood’s topic today is very important, but I must say I came away from Stephen Moses’ study feeling that the utility of long term care insurance — in the present health care market — was somewhat oversold.
The fact is the premiums are so high and the benefits so slight — especially compared monthly five-figure nursing home bills — I am not certain I buy Moses argument that the public is generally unaware of this option.
It seems at least as likely that seniors and near-seniors are making a cost-benefit analysis that they can: a)be destitute in one-year without long-term care insurance given quality of life X before they need long-term care or b)be destitute in two-years with long-term care insurance given quality of life X-1 before they need long-term care.
This choice would still exist even were we to fix all the moral hazard problems of Medicaid funding long-term care, the hiding of assets, etc. Now it may well be that the cost of long term care insurance would come down were the pool of people buying it increase. But it seems that the tremendous cost of long-term care is always there to slap the economics silly.
I note that the same seems to be true of long term disability insurance as well. Premiums are so high and so narrowly drawn — even for gap policies which add onto existing employer-provided coverage — that it is far from a universally attractive product.
As with college education, the government is blindly throwing so much money into health care that rational pricing of benefits and risks is very difficult to discern.
