State Long Term Care Insurance Scam

New Orleans        A piece in the Wall Street Journal by Jennifer Levitz and Kelly Greene confirmed an unsettling trend we have seen coming into the ACORN Centers in some of our offices.  The ACORN Centers provide tax and benefit services for low- and moderate-income families in our cities.  In several situations tax counselors have been looking at whether or not there are possible medical deductions for long term care health insurance and have been mystified at why some families that currently or in all likelihood are eligible for the public Medicaid program would be paying the premiums for extra nursing home coverage.

    The article made the scam a bit clearer and indicated the problem is more widespread.  Part of the push comes from a push by 14 different states (including California, Iowa, Nebraska, Virginia, South Dakota among others with another dozen waiting in the wings to rev these programs up) that are creating “marketing partnerships” with the long term insurance industry.  The industry is giddy with excitement about the success of this program because they are getting governors to sign the letters on letterheads that either are (or appear to be) official and then routing all of the inquiries to a company that scoops them up.  

    The states’ are pushing these programs because this is a huge-ticket item, and they are trying to offset the costs of their Medicaid programs.  So the states are entering into the scam in order to try and reassign costs despite the fact that this is a clear entitlement program funded by state and federal dollars.  People of higher means may want and desire such coverage, and perhaps it has some merits for them.  Where the scam comes in though is in marketing to low and moderate income families, especially those that are eligible for Medicaid and likely to be so and thereby victimized by a product that also seems predatory from these reports.  The federal Governmental Accounting Office (GAO) in a recent study determined that the partnerships were “unlikely to result in Medicaid savings.”

    The reporters unearthed cases where the premiums were going from the introductory rate of a little more than $100 a month quite quickly to over $400 per month.  Families unable to pay the bump were being pushed to drop some of the more important features of the insurance including inflation protection.  

    When asking how this mess could have happened, not surprisingly perhaps, President Bush lifted the ban on these kinds of public-private shenanigans with the insurance industry as a feature of the 2006 Deficit Reduction Bill.  And, perhaps this should not be a surprise either, but the unpredictable inquisitor in this area is once again our old friend, Senator Charles Grassley of Iowa, who has queried ten insurance companies about the ways and means of how they have processed claims (NOT!).  

    We need to nip this in the bud in the dozen that are waiting in the wings and make sure at the least that there are disclaimers and warnings involved.  We need to talk to the fourteen already walking this road about stopping this scam!

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