Long-term care insurance is a racket. If you buy it, read the terms very carefully. Most policies are loaded with escape clauses and will end up paying only a small fraction of any eventual long term care costs.
But let’s say the LTC underwriters can pay out 10% more and stay in business. That would mean that in The OP’s “scam” scenario situation, instead of getting, say, $100,000 in benefits over two years, they could get $110,000. However, the inflamed wording suggests OP wants a lot more than his relative is getting, not a little bit more, like $300,000 over four years. That wouldn’t be possible to do in aggregate without charging a higher premium.
Things that insurance doesn't work well for: common events (e.g. routine medical care); non-randomly distributed events (that's why e.g. earthquake insurance in San Francisco is extremely expensive and has very high deductibles - if the Big One™ happens, it's going to affect everyone at the same time); inexpensive events (e.g. why insure a phone?)
I agree with this, but I want to clarify your language: insurance works very well for common events - what it doesn't work well for are predictable events (which is why insurance is a terrible model to apply to routine medical care).
The entire value proposition of insurance is to reduce (but not eliminate) uncertainty. If an event is perfectly predictable on a regular cadence, there's no value to insuring it.
Events that are common but have high variance are potentially worth insuring, for the same reason that a person whose earnings are highly variable (contractor, or tip-based work) might choose to use a service that evens outs those payments, even though it lowers their total take-home earnings (by charging a fee).
Yet, insurance is the only ethical model to apply to (routine) medical care. A society in which only the rich(est) can afford the medical care their specific situation requires and the rest is left to fend for themselves cannot be considered humane.
Well, "universal healthcare funded with taxes" isn't strictly speaking the system in most developed countries either. Most countries have a mixture of private and public models.
Going in descending order of population for EU countries:
* Germany: Mixture of private and public. Taxpayer funds cover about 75% of expenses. Private insurance can be used to cover the remainder.
* France: Mixture of private and public. Taxpayer funds only cover about 70% of expenses. Private insurance can be used to the remainder.
* UK: Arguably the most nationalized system, but still a heterogenous pool. NHS England ostensibly covers a little more than 90% of expenses, though it's complicated because the NHS sometimes subcontracts out to private management. NHS also has some of the worst ratings for specialized care (not routine care) among OECD countries, which is what other countries typically lean on private payments for.
* Italy: Mixture of private and public. The SSN doesn't cover 100% of expenses, and private insurance can be used to cover the remainder (or to pay for treatment in private practices). Similar to Medicare in the US, the SSN drives up reimbursements for private practices by setting minimum prices for private practices.
* Spain: Mixture of private and public. SNS doesn't cover all expenses, such as ambulances, dentists, pharmaceuticals, etc.
I could go on, but you get the idea. It's not really accurate to say that "the system in most developed countries has nothing to do with insurance", because most OECD countries require private payments for a non-trivial portion of care, and insurance is typically used to manage that portion of the costs.
As pointed out at the beginning of this thread, even in the US, health insurance is "insurance" in name only. Premiums are not set by actuarial risk (with the binary exception of smoking status).
That was the whole point of this subthread: there is no such thing as "actual healthcare insurance", because actual insurance is not a model that's applied to healthcare in any OECD country.
When mschuster91 said that insurance is the only ethical model it was not clear to me if he meant “insurance as in the US which is insurance in name only” or insurance as in “the model used in other countries which is not even called insurance”, hence me question.
Unless you're proposing that taxes are based on risk levels, rather than realized income, then what. you are proposing is neither a simple task nor a true insurance model.
If that's what you're proposing, then it's an interesting thought experiment, but not one that applies to anything currently practiced anywhere in the world - and it's also something that would raise a lot of ethical objections.
This is my complaint with referring to health insurance, a huge amount of which is b.s. What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax.
> What we have is an aging payment plan. We're all gonna get old, and it's gonna suck, and be expensive, might as well start paying now: oh guess what, you are, it's called Medicare payroll tax
That would be the case if the following were true:
* If Medicare's operations were purely funded by tax money, and
* If the taxes people paid were proportional to their expected lifetime costs-of-care
However, neither of these are true. Medicare's reimbursement rates are indirectly subsidized by private insurers (who then pass those costs on to privately-insured patients in the form of higher monthly premiums and copays). And of course, the taxes are based on income, not risk profiles.
1 - Sell people policies that they don't need, or are inappropriate to their situation.
2 - Charging wildly different pricing for similar policies.
3 - Invest insurance premiums completely inappropriately.
So I become skeptical, and (like many other things) believe I have to really dig in on the policies before buying one. Which means the sleaziness of the business has scared me enough that I'm probably underinsured now.