Tag: Medicaid

Pure Spite

By James Kwak

In my Atlantic column on Thursday, I wrote the following about the Roberts Court’s decision to allow states to opt out of Medicaid expansion without losing their existing Medicaid funding:

“What we are going to see is Republican-controlled state governments refusing to expand Medicaid out of bitter hatred toward President Obama and spite for the working poor who need access to health care.”

For those who aren’t up to speed, the deal is basically this. Medicaid is administered by states (which often outsource it to third parties), but the federal government sets certain minimum coverage requirements that states must meet in order to receive federal funding. Those requirements are pretty low, states can choose not to cover able-bodied adults without children, regardless of their income. The Affordable Care Act required states to dramatically increase their Medicaid coverage, with the federal government kicking in 90 percent of the additional funding required (100 percent in the early years).

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More on Long-Term Care Insurance

By James Kwak

After my previous post on the topic, a friend passed along a recent paper by Jeffrey Brown and Amy Finkelstein in the Journal of Economic Perspectives. I recommend reading it if you are interested in the topic because it provides a lot of good background information and explains some of why the market is the way it is.

They make some similar points to mine. For example (p. 138):

“First, the organization and delivery of long-term care is likely to change over the decades, so it is uncertain whether the policy bought today will cover what the consumer wants out of the choices available in 40 years. Second, why start paying premiums now when there is some chance that by the time long-term care is needed in several decades, the public sector may have substantially expanded its insurance coverage? A third concern is about counterparty risk. While insurance companies are good at pooling and hence insuring idiosyncratic risk, they may be less able to hedge the aggregate risks of rising long-term care utilization or long-term care costs over decades. In turn, potential buyers of such insurance may be discouraged by the risk of future premium increases and/or insurance company insolvency.”

They also show just how expensive private long-term care insurance is. By their calculations, the load on a typical policy is 32% (which means that the present value of benefits is only 68% of the present value of premium costs).  This is what you would expect in a thin market with a lot of adverse selection. (And one more note: The median cost of long-term care is a lot lower than in Massachusetts, the state I cited in my previous post. See this study to see where your state ranks.)

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