Professional Custom Accounting: Give specific reasons why the governor’s policy may not work, pointing out specific problems that would likely arise.
The newly elected governor of a small state in which the elderly comprise 26% of the total population—twice the national average—is eager to fulfill his campaign promise. He had run for office on the slogan “long-term care for all.” The elderly in the state had overwhelmingly voted for him. Now in office about 9 months, his advisors tell him that providing long-term care services for all citizens in the state will be next to impossible because of high demand for the services. The governor, however, remains undeterred. The cornerstone of his proposed policy includes three things: (1) Develop a state-sponsored long-term care insurance plan. The insurance premiums will be income based, and will cost at least 15% less than a midlevel private long-term insurance plan being sold in the state. (2) Make it mandatory for all citizens, old and young, to purchase LTC insurance, either from the state or from a private insurance company. (3) Place restrictions on the use of nursing home and assisted living services in favor of community-based services.
Questions
1. Give specific reasons why the governor’s policy may not work, pointing out specific problems that would likely arise.
2. Will the policy work in a large state, everything else being equal? Give reasons.
