Congress' Long-Term Care Deadline

Briton Ryle

Updated July 22, 2013

Remember the fiscal cliff that America was facing at the end of 2012? The U.S. government was quickly approaching the limit it could borrow – that dreaded debt ceiling. Republicans would not agree to raising the borrowing limit without some concessions from the Democrats.

Patient DoctorSo the Obama Administration agreed to scrap the Community Living Assistance Services and Supports Act, which would have used public money for long-term care insurance under the Obamacare program of health care reforms.

But the President and his government did not give up on long-term health care insurance entirely, organizing a new committee, the Commission on Long-Term Care, to formulate by October 1st a new plan to finally make long-term care insurance a reality.

With less than 10 weeks remaining to their deadline, what has the Commission been up to? What options do they have to work with? And what options do investors have to prepare for their own health care needs?

The Commission’s Challenge

Like any other problem the government tries to solve, it takes a long time just to get organized. The non-partisan Commission on Long-Term Care, comprised of 9 appointed by Democrats and 6 appointed by Republicans, only just convened its first meeting late last month. Eating up two-thirds of their time just finding themselves, they have less than three months to get something proposed.

The focus of the Commission is to find ways of financing the medical and non-medical needs of Americans suffering from chronic illness, not limited to the elderly alone, but extending to the infirmed across all ages.

Currently, Medicaid covers about 50% of long-term care costs for the poorest of the population and those on Social Security disability, while the Medicare insurance program for seniors over 65 funds only 100 days of nursing care.

The need for a more viable funding option is rising quickly as the baby boomers, already in their mid-sixties, are drawing down the current system with each passing year. Commercial long-term care insurance providers are unable to cope with the increasing pay-outs, finding no other choice but to raise premiums by 20% in 2013 over the previous year.

But not only does the Commission need to find ways of funding this ever increasing demand for ever more expensive long-term care, it needs to do it in a way that satisfies both parties enough for them to agree. Where the Democrats believe the government is in place to help citizens carry their burdens, Republicans feel the private sector could do a more efficient and less costly job.

The Commission’s chairman, physician, and public health expert, Bruce Chernof, expressed to Reuters that “’the most likely range of solutions is somewhere in that hybrid space’ that includes both public and private solutions”.

Considerations

At the heart of health care insurance reform lies just one basic goal: increase the participation of more citizens in order to collect more in premiums and thereby lower the reliance on public tax revenues.

To this end, the Senior Care Action Network Foundation (SCAN) and other health care experts believe there are basically three main ideas for the Commission on Long-Term Care to consider:

  • Limiting the health care options available and concentrating health care services, since the greater number of patients per service lowers its cost per recipient.
  • Adding long-term care coverage as a voluntary add-on to private Medicare plans, attracting more participants to pay into long-term care, especially those who don’t need it yet.
  • Adding long-term care coverage as a mandatory part of social insurance programs, a type of universal obligatory participation across the population, more akin to a general tax.

The more participation the government can encourage – or sometimes force – into the program, the more it would collect in premiums, lowering the cost per individual as the participation rate increases.

With a population over 316 million counted among the wealthiest on Earth, a hybrid mixture of universal health care with optional add-on protection is nothing America cannot handle. If Canada can do it with just 34 million people, the U.S. should be capable of so much more.

Preparing Oneself

Yet the spirit of the American citizen has always been to fight for himself and be dependant upon no one. The less one needs the assistance of others, the better off he’ll be, for you just can’t know ahead of time when any promised assistance will be reduced or entirely withdrawn.

The path to a healthier and happier old age has just three simple turns to negotiate. Take each turn skilfully, and you will find the road into retirement and old age a breeze.

  • Invest for your future: Knowing that health care costs will continually rise year after year, one must take it upon him/herself to invest wisely and build up a nest egg that will provide adequate income to cover living expenses – including medical – throughout retirement.

Knowing that the stock market has a historical bias to the upside over time, one should be well invested in solid companies that provide a nice mix of income and growth over time. Dividend income is usually as good as – if not better than – bonds, but with the added gains from capital appreciation.

Blue chip stocks such as AT&T (NYSE: T), General Electric (NYSE: GE), and Well Fargo (NYSE: WFC) provide yields ranging from the high 2% to 5%, better than government bonds. And in a rising interest rate environment to which the U.S. will soon be returning, solid financial stocks make for better portfolio building than bonds.

  • Insure yourself: When it comes to investing for your future medical needs, the most efficient way to go is to avail yourself of any coverage plan within your reach. Find out what public and private plans you qualify for, and sign yourself and your dependents up.

What is more, you can get a large portion – if not all – of your monthly health insurance premiums back by adding a few health care insurance stocks into that mix of investments noted above. The nation’s largest health care insurance providers have gained enormously from all the talk of health care reform over the past year alone, with Unitedhealth Group (NYSE: UNH) gaining over 30%, Wellpoint Inc (NYSE: WLP) gaining 40%, Aetna Inc (NYSE: AET) rising a whopping 73%, and Humana Inc (NYSE: HUM) climbing 23% over the past 12 months, each with a little extra padding of between 1 and 2% in dividends.

Over the years, the capital gains from these investments alone would offset your health insurance premiums, effectively giving you free health care coverage.

  • Take care of your health: Perhaps the greatest investment you can make is to take care of your health. Eat right and exercise, quit smoking, watch that heavy drinking, lay off the junk food, and learn to cook for yourself.

Heart disease is the number one killer in America, and obesity is one of the leading contributors to it. Not only will eating right and eating less save you money now, it will save you a ton of money later in life through lower health care expenses.

The war on health care costs, therefore, is a multi-front campaign with numerous allies needing to work together if they are to win the fight for a long and healthy life. While the government does what it can to make good health care coverage available to every citizen, there is much each can do to help their own cause. The more we do for ourselves, the less we will be affected should others fail to assist.

Joseph Cafariello

 

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