In the last decade, several companies have begun offering relatively inexpensive genetic tests to consumers. For as little as $100, these tests can help people trace their ancestry and, more importantly for present purposes, identify genes associated with certain health risks. But as the New York Times reported earlier this year, these tests pose some risks for long-term care (LTC) insurance providers. What does that mean for Medi-Cal?
Genetic Tests and Long-Term Care Insurance
Popular genetic testing kits that offer genetic-health reports read thousands of an individual’s genes that are related to known health conditions. One of those genes is called the APOE gene. This gene comes in three varieties, known as the e2, e3, and e4 alleles.
Individuals with the e4 allele are at a greater risk for developing late-onset Alzheimer’s disease, which, in turn, means they are at greater risk of needing long-term care as they age.
Genetic testing kits can identify what version of the APOE gene a person has. That’s good news for the individuals who learn of their increased risk. Knowing they carry the e4 version of the APOE gene, these people can better plan for their possible future needs.
But it’s not such good news for LTC insurers—or, rather, it’s not good news that the individual knows of his or her increased risk, but the insurer doesn’t. As the New York Times explains, this raises the possibility that people who know they are at an increased risk of developing Alzheimer’s will buy the insurance, and those who are at lower risk will not.
In that event, insurers may find that the risk pool for their LTC policies is sicker and more expensive than anticipated. If so, they may be forced to raise premiums or exit the market altogether. Analysts refer to this possibility as a “death spiral.”
What Does This Mean for Medi-Cal?
As I explained a few months ago, LTC insurance can be a good alternative to long-term Medi-Cal for those who can afford it. But what will it mean for Medi-Cal if it becomes more expensive because the pool becomes riskier—or insurers stop selling LTC policies altogether?
First, here’s what it doesn’t mean. You might think that these tests pose the same risks to long-term Medi-Cal as they do to LTC insurance, given that Medi-Cal and insurance serve a similar function. But the tests really don’t threaten Medi-Cal in that way. After all, long-term Medi-Cal is only available to the sick, so the risk of a “death spiral” doesn’t exist.
On the other hand, if LTC insurance becomes unavailable—or unaffordable for all but the wealthiest—then the influx of even more needy elderly could put a serious financial strain on Medi-Cal. This might lead to higher taxes to fund care for more Californians or lower benefits to constrain costs.
Ultimately, we just don’t know yet what direct effect these popular genetic tests will have on the LTC insurance market. As a result, we don’t know what indirect result it will have on Medi-Cal. Still, policymakers should be considering the potential effects and how best to respond. Like everyone else, the government must plan for the future.