Why Did Trump Consider Reforming Long-Term Care Insurance?

Las Vegas's Estate Planning Resource

Two years ago, the Trump Administration quietly began a review of the nation’s long-term care (LTC) insurance system, focused primarily on ways to enhance private coverage.

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A Trump administration task force recently released its report on a review of the nation’s long-term care (LTC) insurance system. However, the group was unwilling to commit to any real changes to a badly broken system.

Forbes’ recent article entitled “The Trump Administration Thought About Reforming Long-Term Care Insurance. But Decided Not To” says the report only contained a few minor suggestions, and none will dramatically improve the ability of people to pay for the growing costs of the services and supports required by the elderly with disabilities.

The task force was comprised of senior officials from the departments of Treasury, Health and Human Services and Labor; and the Office of Management & Budget (OMB). The group’s starting point was a set of proposals by the National Association of Insurance Commissioners (NAIC)—which is an extremely cautious consensus document. Nonetheless, the Trump Administration wasn’t prepared to go as far as the NAIC in many areas. They were also reluctant to endorse reforms that might dramatically increase the number of Americans with some form of long-term care insurance.

The task force refused to endorse an opt-out model for employer-based LTC insurance, similar to the design many employers use to encourage workers to participate in 401(k)-like retirement plans. However, they did propose that the federal government do a better job of educating consumers about long-term care and the need to finance it. They also recommended that Congress should grant the Treasury the authority to lower the level of required inflation protection included in private LTC policies. Policies now must offer to increase benefits by 5% annually to qualify for special tax benefits (although consumers can choose less inflation protection). This move would lower premiums.

The task force also would like to see private insurers offer so-called incidental benefits to policyholders, before they become eligible for full benefits. This would allow insurers to help support the costs of home modifications, caregiver training, or information services early in a policyholder’s long-term care need. This could keep people healthier and safer, and lower costs in the long-term.

However, the task force didn’t endorse the plan. Rather, they said the idea should be further assessed and suggested Congress “could consider” changes to allow such a benefit. Aside from this, the group offered only general support for state efforts to make policies more attractive to consumers. The administration also didn’t endorse major new tax subsidies for buyers of long-term care insurance.

The task force’s biggest contribution may have been its finding that no public policy changes alone will fix private LTC insurance. There’s also more evidence pointing to a public social insurance benefit, the solution adopted by every major developed country in the world, except for the US and England. The group said combined with such a public program, private insurance might also have a future.