Long-Term Care with Mike Smith

In this podcast episode, Mike Smith recounts his early experience with long-term care insurance in the late 1990s after new regulations were passed. At the time, consumer interest was high but few actually purchased policies, assuming the government would cover costs.

However, over the next decade actuaries realized their pricing models were flawed. Policyholders weren't lapsing like projected, and expenses exceeded estimates. Many insurers lost money and left the market as a result.

The Options for Care
Smith outlines the main alternatives for long-term care: self-insuring through savings, relying on Medicaid/welfare after spending down assets, or purchasing private long-term care insurance upfront. He argues self-insuring is unrealistic given rising costs, and Medicaid comes with long wait periods and asset depletion requirements.

Insurance Provides Flexibility
Private insurance allows individuals to choose their preferred care setting and services. Smith believes it presents the best financial solution compared to the other options.

A Crisis is Coming
The episode notes 70% of Americans will need long-term care services at some point. However, only 1% currently carry insurance. With aging Baby Boomers, Smith predicts costs will skyrocket and strain the system within 5 years.

National Solutions are Needed
Several states are proposing payroll taxes or other pooled funding mechanisms. But Smith argues a nationwide approach through Medicare expansion may be the optimal long-run solution to financing this growing challenge.