Cavalcade of Risk #137: Call for submissions

Our favorite health care economist, Jason Shafrin, hosts next week's CavRisk. Entries are due by Monday (the 8th).

NB: We're now using this submission tool: The BC WorkAround

Once there, you'll be asked to provide:

■ Your post's url and title
■ Your blog's url and name
■ Your name and email
■ A (brief) summary of the post ("Remarks")

At the bottom of the form, you'll see a drop-down menu; simply select "Cavalcade of Risk" then press "Submit" and you're good to go.

And PLEASE remember: ONLY posts that relate to risk (not personal finance tips and the like).

HOSTING BLEG: We're currently scheduling for Fall Cavs. Just drop us a line to claim yours.

Thanks!

Survey says: LTCi on the rise

Got an email the other day from Broker World magazine [motto: "You really don't want to see our swimsuit issue"] announcing that they'd published "the industry's most comprehensive Individual Long Term Care Insurance Survey." This was, in fact, the 13th consecutive such polling. My interest piqued, I asked for (and received) a .pdf copy of the article for review. Details on how you, too, can get a copy are at the conclusion of this post.

In the event, I turned to our resident LTCi guru, Herman Bruns, for assistance in noodling through the article (which ran to 28 pages). We were primarily interested in the first 8 or so, which digested and analyzed the results, which were based on the responses of the 18 carriers which participated (out of only 25 companies that market LTCi in any serious way). The results were interesting, but there were only a few real "surprises."

First, overall sales of LTCi increased last year; it's estimated that the industry sold about 6% more policies than in 2009, with a corresponding 10% increase in premium dollars. This tracks with our own experiences: as Boomers (and immediate pre-Boomers) hit their senior citizenship, there's an increased awareness of the need for these plans.

Claims data was even more interesting: total claims hit over two-and-a-half billion dollars. Of these, home health care (and adult daycare) accounted for about 40%, nursing home care a tad under that, and assisted living facility-related claims came in under 25%.

One reason cited for the near-equal distribution of home health and nursing home claims is the large number of older policies, which typically pay only for the latter; as these "age off" the books, look for that distribution to be more home health-weighted.

We're big fans of the Partnership Program; the study found that, had this program been fully implemented in all 58 states, over two-thirds of the plans sold would have been Partnership compliant.

We're not such big fans of the newly-minted CLASS Act, but the article claims that it's "stimulating workplace sales" as more front-line workers become aware of the importance of long term care coverage. This may also explain the apparent shift toward less expensive product designs (no doubt underscored by John Hancock's recent, and highly publicized, rate increase on many existing plans).

Herman and I were both rather startled by this chart:

The top two carriers held 54% of the market; both of us expect this to change as the aforementioned John Hancock reaps the results of its rate hike (which is not to say that it was unjustified, or even necessarily a "bad thing"). But what really had us scratching our heads was who held the #3 slot: Northwestern Mutual. This carrier, while financially solid as a rock, is not known for price competitiveness, and we marveled at its much-higher-than-expected results.

While it's tempting to label LTCi as "insurance for old people," the average issue age continues to hover at around 58 - not exactly ancient. That makes sense, of course: one's old enough at that point to have accumulated enough assets to be worthwhile protecting, yet young enough that the premiums aren't a huge drag.

Finally, the buyers' "gender gap" was surprising:

"58 percent of buyers are women, but 71 percent of single people who buy are female."

This makes sense, as well: like it or not, there's a much greater likelihood that a widow's going to need long term care than a widower (lot's more of 'em).

Obviously, there's a lot more information in the article itself:

"The complete findings have been published in Broker World Magazine's July 2011 edition. To receive a free, no obligation subscription to Broker World Magazine, compliments of DAI, please click here."

[Hat Tip: Dean Dumond]

What Were They Thinking?

A few weeks ago, physicians were once again faced with the possibility of Medicare Cuts based on the Sustainable Growth Rate (SGR) - that was adopted in the Balanced Budget Act of 1997. Since the SGR went into effect, each year physicians are threatened with a pay cut from Uncle Sam. This time it is close to 30% for year 2012.

However, now we have the Debt Deal, which changes the game AGAIN. In the past years, Congress has either let the cuts go into effect and then rescinded them after the New Year or simply stalled the cuts for days, weeks, months, or the next year, without fixing the policy that determines how physicians are paid. But now the government has decided that it is best to penalize physicians:

“The White House has made it a selling point that the deal protects Medicare beneficiaries — and that any cuts would be limited to providers. But they haven’t talked about the consequences if doctors have their payments cut — like the possibility that more of them would stop seeing Medicare patients.”

There are so many things wrong here, where to begin:

Reality One: People are living longer, into their late 70’s and early 80’s. With Medicare enrollment at age 65, a person could conceivable be on Medicare for 20 years.

Reality Two: The majority of healthcare spending is at the end of life.

Reality Three: Payments to physicians have not changed significantly for over a decade. That includes all payments from all insurance companies, not only Medicare, because commercial insurance companies base their payments to physicians from the Medicare Fee Schedule.

Reality Four: America is facing a physician shortage.

My own practice is booked out for new patients 8 weeks and it usually takes an established patient at least two weeks to get in to be seen. We have increased our hours to accommodate more patients; however, the demand is greater than the supply. In a normal capitalist business, a greater demand would drive up prices, and profits, which would entice more people to get into that business, thus alleviating the demand and meeting the needs of the people. However, the government regulates how much physicians are paid through the Medicare Fee Schedule

Let’s review the purpose of Medicare: To provide Healthcare Insurance for the elderly so that they can continue to have access to healthcare professionals after they retire and, in theory, lose their employment based Healthcare Insurance. However, it that Insurance has determined that it will cut what it pays to physicians, then physicians will not be available to service the population that Medicare professes to want to help.

Reality Five: By sparing beneficiaries the reality of the cost of healthcare, the government is also sparing them the ability to see physicians, because physicians will close their doors to Medicare Patients.

In conclusion: The government cannot balance the budget on the backs of our physicians.

Health Wonk Review - Heat Wave edition

HWR co-founder Joe Paduda hosts this week's outstanding collection of insightful, yet wonky, health care-related posts.

Medicare Hospital Penalties

Medicare is monitoring hospital readmissions and they are not happy. Georgia Seniors on Medicare need to know their rights when they are admitted, and then readmitted to the hospital for the same medical condition.

If Medicare get's their way, hospitals could be held financially responsible for seniors on Medicare that may have been discharged too soon.

In an effort to save money and improve care, Medicare, the federal program for the elderly and disabled, is about to release a final rule aimed at getting hospitals to pay more attention to patients after discharge.

A key component of the new approach is to cut back payments to hospitals where high numbers of patients are re-admitted, prodding hospitals to make sure patients see their doctors and fill their prescriptions.

Medicare also wants to pay less to hospitals with higher-than-average costs for patient care. It has proposed calculating the costs by combining a patient’s hospital expenses with fees incurred up to 90 days after discharge.

In other words, if Medicare decides you were discharged too early the HOSPITAL, not Medicare, will be responsible for covering the cost of your care.

Medicare states that hospital readmissions cost Medicare about $26 billion over a 10 year period.

Now $26 billion might seem like a lot of money to you and me but Washington loses that much change in the sofa on a weekly basis.

Medicare’s penalties could be significant — and widespread. Almost 7 percent of acute-care hospitals — 307 out of 4,498 — had higher-than-expected re-admission rates for heart failure, heart attack or pneumonia, according to Medicare data. Under Medicare’s draft proposal, which it put out in May, penalties would start in October 2012 and hospitals with the worst re-admission rates eventually could lose up to 3 percent of their regular Medicare payments.

Hospitals with patients who cost Medicare lots of money during and after their hospital stays also could be hurt. Beginning in October 2013, these spending levels would count for a fifth of Medicare’s “value-based purchasing program,” which alters hospital payments based on a long list of quality measures.

This does not look good for Medicare beneficiaries either.

“The incentives we’re putting into place have created a whole new way to think about hospital care,” said Jonathan Blum, deputy administrator of the federal Centers for Medicare and Medicaid Services (CMS).

Absolutely. Consider the following "new ways" to thnk about hospital care.

• Sorry, you are too sick, we can't admit you.


• For THAT condition the hospital across the street is a better choice.


• If we admit you and you return it is going to cost us money. Guido will make sure you never again have any complaints about your condition.


• You are well enough to go home now so we will just go ahead and pull the plug. The orderly will be around in an hour or so to roll you out.


• We no longer treat sick patients on Medicare. Come back when you have cash.

OK this might be a stretch but rationed health care wears many faces.

“The more hospitals realize they’re going to be held accountable, that’s where they are going to get creative,” Patel said.

That's a mouthful.

Medicare was never designed to cover all the cost of a hospital stay. The current Medicare Part A deductible is $1132 per admission for the first 60 days. If the hospital is not found liable for an early discharge, who pays?

Or if the hospital appeals the charge that they should be liable for any readmission, who pays until the appeal process is complete?

The answer could be that YOU pay.

How much money do you have in your bank to cover one or more readmissions?

Another sip of COLI

Also known as 'Dead Peasant Insurance," we last considered corporate Owned Life Insurance (COLI) plans almost 5 years ago, when we reported on their (apparent) demise. It seems, though, that George Romero must have been a life insurance mogul, because COLI plans are back in the news:

"Some state insurance regulators are looking into the idea of allowing tax-free exchanges of corporate-owned life insurance policies"

The problem arose out of the solution. That is, just because one couldn't sell new COLI plans, old ones didn't just fade quietly away. They stayed on the books (generating premiums and claims), but with little incentive to do much else with them. Some companies, looking at the cash values of these plans, recognized a treasure-trove of cash sitting idly by. In fact, some of these plans were beginning to self-destruct, as the internal costs ate up the cash build-up.

What to do?

One alternative is to roll the existing, poorly-performing policy into a new, presumably better-performing one. The problem is that old standby, "insurable interest." In this case, it's a legitimate concern, "because a COLI policy may insure former employees as well as current employees, and the employer may have difficulty re-establishing insurable interest on all lives covered by a COLI policy."

Not to mention medical insurability issues, but that's not addressed in the article.

So far, it's all talk, but we'll keep an eye out for any resolution (and any zombie life policies).

Rewarding Customer Service

Several years ago, I received as a gift a "gently-used" Sirius satellite radio, which I've rather enjoyed. The monthly fee is reasonable, although it basically follows the cable-tv model: 350 channels available, and I only listen to 2 or 3 (guess which kind?).

For the past two months, reception has been spotty; at first, I thought it was clouds or sunspots, but after checking with customer service, we eventually determined that the unit was reaching the end of its useful life, and needed to be replaced.

I'm on a month-to-month plan, and I have a unit that's "semi-permanently" mounted in the car [ed: "semi-permanently?" Isn't that like "sort of pregnant?"]. I was looking for a similarly configured unit to replace it.

Poking around the Sirius web-site, I found just the thing: a Stratus 6 (speaking of clouds). Priced at $50, it seemed a good choice. But when I clicked on it to order, I was told that it required that I switch to a 3-month payment plan, which I didn't want to do (if I chose "no subscription," the price jumped to $70!). I also felt that, as a long-time customer, the $15 "activation" fee needed to be waived.

So I called 'em up.

I spoke with "David," a very nice young man who tried very hard to meet my demands. He had no issues with waiving the activation fee, but told me that there was no way he could sell me the radio at the $50 price point if I insisted on staying with the monthly service plan.

At that point, I explained that, having lived the better part of two months without the service at all, I was prepared to just cancel and walk away altogether. But David was tenacious, and came up with a wonderfully creative solution that made everyone happy. He would keep me on the monthly plan, but give me a $20 credit on my account, to make up the difference. He then offered to credit the $4.89 sales tax on the new unit to my account, as well This was a terrific demonstration of outside-the-box thinking, and a true to commitment to great customer service. The new radio is on its way, and I am, in fact, a very happy customer.

Kudos, Sirius!