Insurance fraud: "If they wait long enough... the policyholders will die."

The story in today's New York Times about long-term care insurance is a bombshell, evoking the heart-rending predicaments of frail 80-somethings paying years of long-term care insurance premiums only to be denied coverage for nursing home care when they are ailing. I recommend reading the whole article, but if you don't have time, this sentence, from the former senior executive at the National Association of Insurance Commissioners, pretty much sums it up:

"The bottom line is that insurance companies make money when they don't pay claims... They'll do anything to avoid paying, because if they wait long enough, they know the policyholders will die."

The article details the hours on the phone and reams of paperwork insurance companies demand, only to deny care. Knowing that most people won't sue, insurers prefer to settle out of court rather than risk that the details of their operations be revealed in the course of a lawsuit. On the other end, as DMI fellow Andrew Friedman so powerfully writes, the front-line workers actually doing the work of caring for the elderly also get squeezed in an effort to cut costs.