The Free Market Won't Fix Everything

There aren't many people who think it does, but a lot of people do believe that the free market is largely capable of solving health care problems, with some tweaking and monitoring by states or the federal government. Long-term-care insurance is a popular proposal for anyone who worries about health care expenses after retirement or near the end of life. However, years of premium payments on the policy might result only in frustration and impoverishment:

...thousands of policyholders say they have received only excuses about why insurers will not pay. Interviews by The New York Times and confidential depositions indicate that some long-term-care insurers have developed procedures that make it difficult — if not impossible — for policyholders to get paid. A review of more than 400 of the thousands of grievances and lawsuits filed in recent years shows elderly policyholders confronting unnecessary delays and overwhelming bureaucracies. In California alone, nearly one in every four long-term-care claims was denied in 2005, according to the state.

In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an 85-year-old woman suffering from dementia the wrong form to fill out, according to a lawsuit, then denied her claim because of improper paperwork. Last year, according to another pending suit, the insurer Penn Treaty American decided that a 92-year-old man had so improved that he should leave his nursing home despite his forgetfulness, anxiety and doctor’s orders to seek continued care. Another suit contended that a company owned by the John Hancock Insurance Company had tried to rescind the coverage of a 72-year-old man when he was diagnosed with Alzheimer’s disease four years after buying the policy.

Fraudulent business practices are always a problem. But as the article points out, these companies-like all health-insurance companies-have every incentive to avoid paying for benefits:

“The bottom line is that insurance companies make money when they don’t pay claims,” said Mary Beth Senkewicz, who resigned last year as a senior executive at the National Association of Insurance Commissioners. “They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.”

The incentives are all wrong. Policy holders have every incentive to pay and pay and pay for years, for the security of knowing that their medical expenses won't bankrupt them after retirement. Long-term care insurance providers have every incentive not to pay because the payments they don't make go in a shareholder's pocket. Even if a long-term care insurance provider conducts proper business practices, it still has every incentive to delay making payments, and in some instances, elderly policy holders will have to sue to get the benefits they're entitled to, just as many health-care insurance policy holders do when insurance providers improperly deny them benefits. Such an incentive keeps costs down-an important factor to the faith in free-market types-but it fails to adequately provide health care to many of those who pay for it in good faith, which is an important factor to the rest of us, and it results in wasteful and unnecessary litigation. And last but not least, there are the millions who simply can't afford it, just like the millions who cannot afford private insurance. What of them?

For what it's worth, the shift in tone about health care extends to the issue of long-term care for the elderly. Any talk of making health care universal includes the issue of coverage of the elderly, and many ideas are premised on the expansion of Medicare benefits that are already provided to about 42 million elderly Americans. All the Democratic presidential candidates have signed onto the idea of universal health care, but details are lacking in their programs at this stage of the primary process. As the races up, we can expect to hear more details about their respective plans, and how they plan to deal with issues like long-term and end-of-life care.