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Join the Center for Long-Term Care Reform. Help us fight for rational LTC policy reform. Receive our daily email publications. Get a user name and password to our Members-Only Zone. Only $150 per year. Mail your check to Center for Long-Term Care Reform, Inc., 2212 Queen Anne Avenue North, #110, Seattle, Washington, 98109. Contact Damon at 206-283-7036 or damon@centerltc.com if you have questions. Join the team!

READ STEVE'S BIO

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Updated, Monday, April 16, 9:18 AM (Pacific)

Seattle—

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LTC E-ALERT #18-015: LTC NEWS AND COMMENT

LTC Comment: Do you spend hours searching the internet for useful articles, key data, and relevant reports to keep you on the forefront of professional knowledge? Do you lose business because you’re blindsided by clients or competitors who learn critical information before you do? Here’s an antidote:

LTC Clippings: The Center for Long-Term Care Reform notifies subscribers to our LTC Clippings service daily of information you need to know. Each message contains only the critical facts about new publications: a title, representative quote, a link to the original, and our analysis in a sentence or two. To inquire or subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. Read testimonials by satisfied subscribers here. To subscribe online, please click here.

LTC E-Alerts: Once a week, we compile our daily LTC Clippings into a summary, email it to Center for Long-Term Care Reform members, and archive it in The Zone, our password-protected members-only website. Center members also receive our weekly LTC Bullet op-ed. To join the Center and receive all these benefits and more, contact Damon at 206-283-7036 or damon@centerltc.com.

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Report identifies seven ways to prevent dementia
Improper payments, bad data threaten access to long-term care, GAO health leader testifies
How Growing Inequality Is Altering The Long-Term Care Policy Battlefield, While Tightening The Financing Knot
Breakthrough: Researchers fix Alzheimer's gene
Is There Such A Thing As Normal Aging?
Kaiser Study: Nursing homes have fewer residents, but those residents need more help
Group Defends Stand-Alone Long-Term Care Insurance With Infographic
Older Pre-Retirees Worry a Lot About Social Security: Gallup
New way of defining Alzheimer’s aims to find disease sooner
Beyond mystery meat
Do You Have What It Takes? A Workbook in Preparation for Caregiving
Why Americans' Life Expectancy Is Getting Longer
Arthritis: Long Term Pain May Require Long Term Care
The deeper cause behind the school strikes: Teachers are competing with the elderly

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"LTC E-Alerts" are a feature offered by the Center for Long-Term Care Reform, Inc. to members at the $150 per year level or higher. We'll track and report to you news and analysis regarding long-term care financing, service delivery, and research. We hope The LTC E-Alerts will help you attain and maintain a high level of knowledge and competency in this complex field. The Center for Long-Term Care Reform, Inc. is a private institute dedicated to ensuring quality LTC for all Americans (www.centerltc.com).

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Updated, Monday, April 13, 10:26 AM (Pacific)

Seattle—

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LTC Bullet: LTCI’s Responsibilities

LTC Comment: Today’s guest author, LTCI specialist Gene Cutler, asks what responsibilities LTC insurance producers, distributors and carriers have to current and future clients, after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, whose revolutionary “Range of Exposure” tool projects clients’ likelihood (joint for a couple) of spending $100,000; $250K; $500K or over $1,000,000 on LTC, based on their personal characteristics. Claude offers ways to educate clients and reduce “Ping-Pong” in the LTCi sales process. Help clients compare Combo vs. Stand-Alone LTCi easily and make informed final LTCi decisions in 15-20 minutes! Change work-site LTCi from a series of proposal deliveries to a single interactive consultation! Claude is the lead author of Milliman’s annual Broker World LTCi Survey & a past Chair of the Center for Long-Term Care Financing. For questions or references, reach Claude at 913-403-5824 or claudet@targetins.com. ***

***LTC CLIPPINGS: Following are a couple of our recent “LTC Clippings.” To subscribe and receive the clippings by email once or twice per day, contact Damon at 206-283-7036 or damon@centerltc.com. ***

4/11/2018, “Is There Such A Thing As Normal Aging?,” by Bruce Horowitz, Kaiser Health News

Quote: “Drawing on their decades of practice along with the latest medical data, Gill and three geriatric experts agreed to help identify examples of what are often — but not always – considered to be signposts of normal aging for folks who practice good health habits and get recommended preventive care.”

LTC Comment: If you’re older, read this article to see how you’re doing in comparison to others. If you’re younger, find out what you have to look forward to!

4/10/2018, “How Growing Inequality Is Altering The Long-Term Care Policy Battlefield, While Tightening The Financing Knot,” by Karl Polzer, Health Affairs Blog

Quote: “For many years, long-term care (LTC) policy makers have tended to fall into two warring camps: those favoring expanded social insurance, and those wanting tighter Medicaid eligibility criteria to incentivize people to plan for and buy LTC insurance. Both sides have warned of looming financial catastrophe as the Baby Boomers move into retirement and more than double the population needing care. Disagreement has resulted in a policy stalemate. The vanguard of the Boomer generation is less than 10 years away from beginning to drive up demand for LTC, and the country is unprepared to pay for it. It’s time that the policymakers stepped out of the old trenches. The war they’ve been fighting is largely obsolete.”

LTC Comment: Congratulations to longtime friend and fellow LTC policy plodder Karl Polzer for publication of this piece on the Health Affairs Blog. Read it for sure, but keep in mind that as pessimistic as its message is, the reality is much bleaker. None of the interventions he mentions would mitigate the impending LTC financing crisis significantly. Such proposals address only symptoms, not the cause, i.e. easy access to Medicaid LTC benefits after the insurable event has already occurred. I address that cause and propose a realistic solution in How to Fix Long-Term Care Financing, published last July by the Foundation for Government Accountability and the Center for Long-Term Care Reform. Read it for balance.

LTC BULLET: LTCI’S RESPONSIBILITIES

LTC Comment: I’ve known Gene Cutler and followed his career for over 20 years. He is one of the top LTCI producers in the country. When someone like Gene becomes concerned about how his industry is treating customers, he bears hearing. So here’s what Mr. Cutler wants to say to you and ask. Contact him directly to reply at gene.cutler@acsiapartners.net and copy ltcbullets@centerltc.com to keep us in the loop as we’re interested too.

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“What are LTCI’s Responsibilities to Customers?”
By
Gene Cutler

I have been a long term care specialist exclusively since 1994. I’ve placed well over $7,000,000 of business with the major carriers, some of which are still writing LTCI and some no longer accepting new business.

I frequently hear from clients I’ve written well over 20 years ago to update me. They say they’ve “become that person you were there to introduce me to … the one I didn’t want to meet.” They reassure me that the reasons for taking out this coverage have become clearer and more meaningful, validating not only their worries at the time but also my efforts to awaken them to long-term care risk.

We gave good advice back then. We should be there again as industry evolution and adjustments require our clients once more to make difficult decisions. They need our guidance and recommendations, which have proven so right.

I’m looking for suggestions from those of us who have made it our mission to help clients confront the unavoidable and disconcerting challenges that long-term care planning resolves. Specifically, I seek reassurance that when care needs arise, long-term care providers will be there as promised.

As our industry has evolved and companies have stopped accepting new applicants, our existing clients need to feel confident they will receive the benefits their policies promise. This is true now more than ever, as necessary rate adjustments have been approved and implemented.

The challenges for policyholders arise when they receive notifications pronouncing 50, 65, 80 percent + increases--unexpected and unwelcome--typically stating an increase on page 1 followed by multiple pages rationalizing why and offering options--scripted by attorneys and actuaries--that are too often more confusing than clarifying. In this situation, customer support is critically needed to clarify and advise, but carriers have downsized or outsourced channels, ultimately causing additional frustrations.

As writing/servicing agents, we are all motivated, willing and able to console, explain and advise clients if and when we are notified in advance and provided with the options. Some carriers do notify us ... some don’t. If a policyholder can’t get through to the carrier and/or frustration leads to a potential lapse, the agent should be there to help the client maintain the original objectives of the plan with appropriate modifications. But that can happen only as long as the carrier notifies the agent of an impending lapse.

Long-term care insurance carriers have declined in number from over 100 at one time down to perhaps 15 now. Some were up to the task of guiding their insureds through these difficulties initially upon departing the business, while many have clearly reduced policyholder services. Some never intended to notify the agent of impending lapses, prompting if not encouraging higher lapse rates.

Is that part of their business model? Where are the State Departments of Insurance and the regulators? NAIC? Tax incentives and LTC Partnerships were intended to emphasize financial concerns and transfer this risk into the private sector, yet a blind eye to this unfortunate behavior will bring it right back to states and the federal government.

I’d like to believe that the initial intentions of both producers and carriers when we encouraged these transactions were and remain honorable and supported as policyholders approach potential claims. I’d like to feel that companies still in the game maintain the commitment they advertise in marketing promotions, and that they will enable us, as the points of contact for the industry with their insureds, to support policyholders’ rights with confidence and sincerity. Our clients deserve no less.

Major carriers still want us to promote other products on their behalf, such as Life/Health/Annuities, etc., as we once did their LTCI products. They emphasize their customer support, as they once did for LTCI, should problems arise or claims occur. Are we as comfortable and confident as we once were that we will be able to give that support?

What can we do?

Think about calls you’ve handled recently, or wished you could have handled better. Express your concerns through your wholesalers. Make recommendations to your clients based on your confidence and experience with the carrier.

I’ve heard it said many times that LTCI specialists have a passion about their work that other specialists don’t exhibit. Our passion arises from the satisfaction of listening to and then addressing a client’s worst fears. It is justified and reinforced as years go by. In the end, those clients and their families understand and express appreciation for the value of our advice. That instills the confidence in each one of us to continue.

It would be nice to believe our carriers feel the same.

Gene Cutler, Master Agent, ACSIA Partners, gene.cutler@acsiapartners.net

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LTC Comment: Gene Cutler isn’t the only source of LTCI industry self-analysis and self-criticism. We’ve noticed a lot of healthy introspection among thought leaders in the business lately. Another example is Ron Hagelman’s excellent recent columns in Broker World. We highlighted one of them in LTC Bullet: The Medicaid Prevention Business. Here’s an excerpt from another, titled “Monday Morning Quarterback” in the magazine’s March 2018 issue.

All our futures in long term care insurance must now be guided not by our past success of a mere 8 million policy owners after 20 years, but by the 54 million we failed to encourage to “do the right thing.” The truth is we have been looking at this from the wrong end of the telescope. It was not how big and simple that was needed—it was how small and customized to the actual circumstance and dimensions of the most likely claim experience! The corollary truth is that for too long our goal has been to replace as much risk as possible with insurance. The affluent have always done just that and I see no reason for them to stop. Our goal should have been how many can we save from the intrinsic inadequacies of government dependence. How little is needed to maintain the freedom of choice that comes from remaining a private pay patient?

I wish I could say we’re seeing the same kind of modesty and self-review among the advocates of government financing. After all, they created the mess we’re in with inadequate retirement, health care and long-term care funding. But they only advocate more entitlement spending, which further anesthetizes the public to financial risk and loads the country with unprecedented debt. Doing the same thing and expecting a different result is, in a word, nuts.

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Updated, Monday, April 9, 10:26 AM (Pacific)

Seattle—

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LTC E-ALERT #18-014: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

2 Big Financial Shocks That Most Retirees Face
Understanding the Hidden $1.1 Trillion Welfare System and How to Reform It
The National Debt Grew by $1 Trillion in Just Six Months
Insurers likely to add and trim senior living benefits, thanks to relaxed Medicare rule
All-cause mortality is increased for older adults with sudden loss of wealth in the US
Caring for elderly parents can put a dent in your budget
The Long-Term-Care Insurance Dilemma
Insurer that cheated seniors raising rates again
Why you shouldn’t bother with memory or brain health supplements
What You Need To Know About Social Security and Medicare Changes for 2018
DNA and Long-Term-Care Insurance
U.S. government sets 3.40 percent hike in 2019 payments to Medicare insurers

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Updated, Friday, April 6, 11:45 AM (Pacific)

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LTC Bullet: The State of LTCI: Myths, Facts and the Wall Street Journal Article

LTC Comment: Tired of reading misguided and bad information in media coverage of long-term care insurance? MAGA’s Brian Gordon offers a much-needed reality check by rebutting the infamous “Wall Street Journal article” with facts, after the ***news***.

*** Those who attended the closing session (The Coming Revolution in Long Term Caregiving: The Future is Now!) at last month’s ILTCI conference know that technology and robotics will play an increasingly substantial role in caregiving going forward. However, in the meantime, caregiving continues to affect real people in real ways. Here are two recent articles we sent to our Clipping Service subscribers that deal with the current and forthcoming caregiving challenges we face. To inquire about our Clipping Service, contact Damon at 206-283-7036 or damon@centerltc.com. Please enjoy these sample clippings:

4/4/2018, “Caring for elderly parents can put a dent in your budget,” by Sarah O’Brien, CNBC

· Quote: “The biggest monthly expenses for caregivers are medicine and medical supplies ($273), food ($159) and personal-care items ($151).

· About half of current and past caregivers did not know in advance that they would be stepping into that role.

· In advance of finding yourself in that situation, whether expected or not, it's worth having a conversation with your parents about how they envision their care if they reach a point where they no longer can care for themselves.”

LTC Comment: Sound advice.

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3/26/2018, “As Trump Targets Immigrants, Elderly Brace To Lose Caregivers,” by Melissa Bailey, Kaiser Health News

Quote: “Nationwide, 1 million immigrants work in direct care — as CNAs, personal care attendants or home health aides — according to the Paraprofessional Healthcare Institute, a New York-based organization that studies the workforce. Immigrants make up 1 in 4 workers, said Robert Espinoza, PHI’s vice president of policy. Turnover is high, he said, because the work is difficult and wages are low. The median wage for personal care attendants and home health aides is $10.66 per hour, and $12.78 per hour for CNAs. Workers often receive little training and leave when they find higher-paying jobs at retail counters or fast-food restaurants, he said.

LTC Comment: Politics + demographics = LTC - TLC. ***

ltc Bullet: The State of LTCI: Myths, Facts and the Wall Street Journal Article

LTC Comment: Recently we, at the Center for Long-Term Care Reform, celebrated 20 years in operation. In those 20 years, we’ve published over 1,200 LTC Bullets and have all of them archived on our website by date and by subject. One of those vital subjects we call “Reality Check: The Facts on LTCI.” This is where we store over 120 LTC Bullets, dating back to 1998, that address inaccuracies and faulty data that abound in media coverage of long-term care insurance. Lately, with the abundance of LTCi-related inaccuracies, faulty data and bad advice in the popular press, we’ve added a lot of “Reality Check” LTC Bullets to our archive. Today, we add one more. This latest addition is a guest LTC Bullet by Brian Gordon, president of MAGA Ltd., a CLTCR corporate member. We wish to thank Brian Gordon and MAGA for their role in protecting people from the risk and cost of long-term care. Reprinted with permission is Brian Gordon’s piece: “The State of LTCI: Myths, Facts and the Wall Street Journal Article.”

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“The State of LTCI: Myths, Facts and the Wall Street Journal Article.”

by Brian Gordon

By now, you've probably read Leslie Scism's Wall Street Journal article, "Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice." The "awful choice" in question is Ms. Scism's assertion that today, LTCI policyholders must either 1) accept large premium increases or 2) drop their coverage.

We found this gloom-and-doom argument-that there is no other reality and no other options-to be misleading and incomplete. Most disturbingly, it invites consumers to throw up their hands in despair, rather than encourage thoughtful long term care planning.

On the plus side, this opinion piece sparked an important conversation, eliciting a range of responses. Here is our rebuttal to some of the key points in the WSJ editorial.

WSJ: Today, LTCI insureds have two bitter choices: pay stiff premium increases or forfeit coverage.
Fact: Those facing increases (not everyone is) have multiple solutions available to them. Most LTCI insureds can keep their policies inforce and premiums down simply by modifying their benefits-solutions known as "landing spots." For example, we've recommended to clients that they reduce their inflation rider benefit-say, from 5% to 3%-or shorten their benefit period, resulting in little or no premium change. Most clients are receptive and it's worked very well.

WSJ: LTCI carriers made a huge pricing mistake and now their insureds will pay for it forever in the form of steep rate increases.
Fact: It's true that when actuaries first priced LTCI 40+ years ago, they made some mistaken assumptions-not uncommon with brand new insurance products. They assumed more insureds would drop their policies than actually did so, and they did not foresee a decade of historically low interest rates. Combined with larger-than-anticipated claims that lasted longer than expected, it resulted in "a perfect storm." As a result, older LTCI policies have seen larger rate increases as more claims are paid on older policies.

However, in recent years, carriers have corrected their pricing. Consider this: rate assumptions made in 2014 were based on 16 times as much actuarial experience as those made in 2000. Companies are more informed. We do prime clients purchasing traditional LTCI today to expect some modest rate increases, just like their car and health insurance.

WSJ: When an insured's LTCI premiums increase, they're getting a raw deal.
Fact: Actually, a reason some insureds' LTCI premiums have increased is because they got way too good a deal in the first place. In some cases, they received incredibly valuable protection at what we now know was unsustainable premiums. Many older LTCI policies offered such generous benefits-for example, lifetime coverage-that they cannot be purchased today.

WSJ: Since hybrid/combo LTCI products are costly, they aren't worth consideration.
Fact: To dismiss the entire spectrum of hybrid/combo LTCI policies wholesale is disingenuous. (In WSJ's 50+ paragraph article, only a single paragraph addressed hybrid policies, which now are nearly as popular as traditional LTCI policies.) Yes, premiums are higher-because hybrid products by their nature include additional benefits, such as life insurance or an annuity. However, they can also offer guaranteed premiums and peace of mind-for some clients they make excellent sense.

WSJ: With such limited choices, why bother with long term care planning at all?
Fact: Americans face a proven likelihood of needing long term care at some point, and Medicaid is a solution intended for only the poorest individuals. To forsake long term care planning altogether may be shortsighted, particularly for families with enough assets to engage a professional financial planner. Between traditional LTCI policies, hybrids and the option of self-funding or partially self-funding one's long term care risk, there are numerous long term care funding solutions available.

If you'd like to explore this topic further, we suggest reading the recent Forbes article, "Why the WSJ Is Wrong about Long- Term Care Planning," by Jamie Hopkins, the Co-Director of the American College's New York Life Center for Retirement Income and an Associate Professor of Taxation at the American College. And if you'd like to discuss this further with us, please don't hesitate to get in touch.

MAGA Ltd is a LTCI pioneer established in 1975. The award winning MAGA team provides education to consumers, financial advisors and insurance professionals. Licensed nationally, they represent highly rated carriers for both Asset-Based and Traditional LTCI products. The Founder Murray Gordon, along with Brian Gordon CLTC and Peter Florek CLTC, have over 90 Years combined experience in the LTC Industry. MAGA clients have received millions of dollars in LTC insurance benefits thanks to their dedication to service.

For more info, call 800-533-6242 or email Maga@ltc.com. Visit our website at www.Magaltc.com.
We are located at 2610 Lake Cook Road, STE 250, Riverwoods, IL 60015.

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Updated, Monday, April 2, 10:31 AM (Pacific)

Seattle—

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LTC E-ALERT #18-013: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

'Aggressive' advance directive would allow patients to decline food, water at end of dementia battle
Automatic Adjustments Within Entitlement Programs: A Look at the Swedish Pension Reform Model
How much do retirees really depend on Social Security? Far less than you’d think
Why Are the New Hybrid LTC Policies So Popular?
Medicare’s condition-specific readmission measures are poor reflectors of hospital quality
How to figure out elder care for your aging parent
As Trump Targets Immigrants, Elderly Brace To Lose Caregivers
The power of biases
Key Points for Long-Term Care Insurance Purchases
Shift in Long-Term Care Planning Shapes ILTCI Meeting

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Updated, Friday, March 30, 2018, 10:11 AM (Pacific)

Seattle—

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LTC Bullet: Virtual Visit to the 18th Annual ILTCI Conference in Las Vegas, Nevada

If you couldn’t attend last week’s 18^th Annual Intercompany Long-Term Care Insurance Conference in Las Vegas, you missed out. But don’t fret. Your Center for Long-Term Care Reform has you covered. We attended and will provide our “Virtual Visit” of this must-attend LTCi industry conference after the ***news***.

*** HAPPY BIRTHDAY: The Center for Long-Term Care Reform will turn 20 years old on Easter Sunday. No April fooling. Steve Moses and attorney David Rosenfeld founded the Center on April 1, 1998. Today, our mission continues: “to ensure quality long-term care for all Americans.” We wish to thank our many generous supporters for their financial and moral support through the years. We could not have reached this milestone without you. ***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:

All LTC Bullets and E-Alerts
Access to our Members-Only Zone website and Almanac of Long-Term Care
Subscription to our Clipping Service
Email/phone access to Steve Moses for 24-hour turnaround queries

Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources.

Stay on the forefront of professional knowledge and help us fight for rational long-term care policy reform by contacting Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***

LTC Bullet: Virtual Visit to the 18th Annual ILTCI Conference in Las Vegas, Nevada

The 18^th Annual Intercompany Long-Term Care Insurance Conference, held March 18-21, at the Paris Hotel & Casino in Las Vegas, NV was another excellent industry event. Attendance was high at over 1,000 attendees, 60+ exhibitors and nearly 40 sponsors. An ample 45+ breakout sessions covered a diverse array of topics:

Actuarial
Legal, Regulatory & Compliance
Claims & Underwriting
Marketing, Distribution & Sales
Traditional, linked and combination products
Technology

These educational sessions combined with the high caliber of attendees, exhibitors and sponsors offered plentiful occasions for valuable learning and professional development, while receptions and meals provided many indispensable opportunities for networking with a diverse range of industry professionals. With Steve unable to attend the conference and Damon busy volunteering at conference registration, our coverage will be limited; however, we attended some sessions, mingled with attendees and received a sense for the state of the long-term care insurance industry.

Every year the Intercompany Long-Term Care Insurance Conference takes the pulse of the LTCi industry and offers direction forward. To that end, “A Matrix of Opportunities” was the tagline for this year’s conference and that optimism filled the agenda. According to the conference website’s homepage:

A quiet revolution is taking place in the long-term care insurance industry. More interest than ever is being focused on private sector solutions to the growing societal issues pertaining to long-term care. Planning choices for consumers are growing at a rapid pace. Insurance companies are developing new innovative approaches to providing long-term care liquidity at various life stages and insurance agents and financial advisors are showing renewed interest in talking to consumers about their long-term care planning needs.

With entitlements and social programs strained, longevity and healthcare costs increasing, caregiver supply decreasing and the age wave cresting, how we finance long-term care now and in the future is a demographic, political and fiscal Rubik's Cube. This year’s ILTCI conference contributed to solving that multi-dimensional puzzle by hosting the innovators who are offering new directions and products designed to save people from the risk and cost of long-term care.

The conference opened with keynote speaker, Vinh Giang, a business person and magician. From his profile:

Vinh’s mission in business and life is to share the psychology of illusion. He has devoted himself to understanding the ways in which people are fooled by illusions and by the tricks we play on ourselves. During his presentations, he demonstrates how this occurs.

By all accounts Mr. Giang’s presentation was engaging and the strong work ethic he espoused was something with which people in the long-term care insurance industry could identify.

Mr. Giang got the conference off to a good start. Next, we’ll provide a summary of some of the sessions we attended. We stuck primarily to the “Public Policy & Alternative Financing Solutions” and “Producers & Sales” tracks, but there were plenty of other worthwhile tracks to follow and sessions to attend. Access the complete conference schedule here for session information and presentation documents not provided below.

We’ll begin with three sessions focused on long-term care financing innovation:

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Session: The Case for Variable LTC Insurance
Track: Public Policy & Alternative Financing Solutions
Speakers: Joan Melanson, CLTC, LTCP - Long Term Care Partners, LLC - Director of Program Promotions / Marc Cohen, PhD - University of Massachusetts - Clinical Professor of Gerontology / Paul Forte - Long Term Care Partners, LLC - Chief Executive Officer / Roger Loomis, FSA, MAAA - Actuarial Resources Corporation (ARC) – Principal
Documents: Presentation, The Case for Variable Insurance - Final Contingencies

Highlights:

This session was a perfect example of top LTCi industry professionals offering creative innovation in the field of long-term care financing. From the session’s description:

The LTC industry has been dealing with the ongoing challenges of rate increases. But what if, instead of attempting to fine-tune the LTCI premium after the fact, we were to allow the benefit to fluctuate from the outset, such that it would track and reflect emerging experience over time?

Presenter, Roger Loomis, used an apt oil drilling analogy to describe this. When people seek to extract oil from underneath an ocean they don’t simply set up an oil rig, point a drill towards oil and hope for the best. They find out exactly where the oil is, point the drill and make countless corrections to the drill’s course until the exact destination is reached. The session continued by exploring the viability of using a similar approach to LTCi using a variable benefits design.

See the session’s documents for further details.

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Also in the vein of offering creative alternative financing solutions, we attended:

Session: Consumer View of New Long Term Care Combination Products
Track: Public Policy & Alternative Financing Solutions
Speakers: Eileen Tell, MPH - ET Consulting, LLC - Independent Consultant / John O'Leary - O'Leary Marketing Associates – President / Vincent Bodnar, ASA, MAAA - Genworth - SVP, Product Management / Cindy Malone - Maddock Douglas - Senior Vice President Research
Documents: Presentation

Session’s online description:

While consumers today better understand the risks and costs of needing long term care, there is a significant gap between awareness and action. The lack of viable solutions, from the consumer perspective, is a key factor. The social marketing literature defines two key elements needed for behavior change: (1) awareness of the problem and (2) offering solutions which consumers deem as viable and appropriate. Based on very limited product acceptance, current mainstream private LTC insurance products do not satisfy the latter component. Hence an interest in creating new and affordable coverage options for consumers. Two new product concepts – LifeStage and Retirement Plus – have emerged from the Society of Actuaries’ Think Tank as creative ways to combine LTC coverage with existing financial vehicles to create new kinds of combination products. This session reports on findings from consumer research to understand how well these new options might meet consumers’ needs. The research also includes a demand model to estimate market potential.

See the session’s documents for further details.

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Session: Home as a Strategic Asset for Retirement and Long Term Care Needs
Track: Public Policy & Alternative Financing Solutions
Speakers: Eileen Tell, MPH - ET Consulting, LLC - Independent Consultant / Amy Ford - National Council on Aging (NCOA) - Senior Director, Home Equity Initiatives and Social Accountability / Barbara Stucki, Ph D. - NestCare FPC - Cofounder and CEO / Sandra Timmermann - American College of Financial Services - Visiting Professor of Gerontology and Retirement Living
Documents: Presentation

Session’s online description:

Home equity represents a significant portion of the financial net worth of older adults, most of whom want to age in place in their current homes. Despite the importance of home equity as part of the financial portfolio, recent research shows that older homeowners do not understand the home equity release products available to them. They also do not know how to decide when and how to leverage home equity in addressing retirement concerns. Greater education and understanding could enhance affordability to buy long term care insurance or pay for in-home care through the appropriate use of home equity release options. This session summarizes new consumer survey findings on the topic and identifies new and improved home equity product options.

Here we have another session focusing on solutions for financing retirement and long-term care needs. Basically, the home is a “pot of money” that people can use to help finance the many costs associated with aging. However, homeowners are at odds with tapping their homes’ equity because they are stuck between an emotional connection to their home on one side and their financial needs on the other. Furthermore, it doesn’t help that home equity release products are poorly understood. This session helped to reconcile all the facets of the home equity dilemma and presented home equity as a viable retirement and long-term care planning asset.

See this session’s presentation for further details.

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THE HUMAN INTERFACE

Innovative products are nothing without innovative people to connect them with the right consumers. The next session we attended covered successful sales strategies to do just that.

Session: Return of the Jedi: Best Practices of the Masters
Track: Producers & Sales
Speakers: Terry Truesdell - National LTC Network - President/CEO / Matt McCann - McCann Insurance Services – Owner / Jim Dawson, CLTC - PNW Insurance Services - Agency Mentoring Leader / Melissa Barnickel, CPA, CLTC - Baygroup Insurance LLC - Accountant & Insurance Broker / Sally Leimbach, CLU®, ChFC®, CEBS, LTCP, CLTC - TriBridge Partners LLC - Senior Consultant for Long Term Care Insurance
Documents: Presentation

Session’s online description:

This panel discussion of leading producers and Jedi Masters will share the business practices that have allowed them to build large books of business and to maintain a steady flow of new business. When not fielding questions from the audience they will be sharing tried and true closing techniques, as well as the elements of a successful placement rate ranging from effective field underwriting and solidifying the sale to client communications and referral generation.

Highlights:

Sally Leimbach eschews stupidity in her sales strategy by flipping the KISS (Keep It Simple, Stupid) approach. She espouses KISUI: “Keep It Simple, Understandable and Intelligent.” Perfect. Everyone involved in the LTCi sales transaction is intelligent and should be treated that way.

Useful sales tips were provided in abundance from these experienced sales pros, but some session attendees shared their sales techniques as well. One attendee shared a crowd-pleaser something to the effect of: “2 out of 3 people will need long-term care. I already decided I won’t, so it looks like you will.”

See this session’s presentation for each speaker’s “Pearls” of wisdom.

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Branding and marketing are other key human elements in the sales process. The next session we attended employed the expertise of four more sales savants to explore the empirically successful methods they use to effectively brand and market their services.

Session: Building YOUR Brand
Track: Producers & Sales
Speakers: Denise Gott, MBA, CLTC - ACSIA Partners – CEO / Marilee Driscoll – Speaker / Honey Leveen, LUTCF, CLTC - Your LTCI Specialist – Owner / Betty Doll, MBA, CLTC - Doll & Assoc. Long Term Care Insurance Services - Owner/Broker
Documents: Presentation

Session’s online description:

In today’s world, everyone is connected to others electronically and your life is very visible. So, YOU have a brand that your client will see. Is it what you want? Learn from marketing experts how to create a positive brand that will attract clients. Also, covered are the latest methods of: creating/utilizing a website, generating new leads and referrals, utilizing social media, and general effective marketing techniques.

Highlights:

This session covered key elements such as logo format, design and size (keep it simple); how to choose a website domain; how to yield beneficial web search results; and how to keep in contact with your clients and prospects (newsletters). Ultimately, building a brand is a “get rich slow” process.

See this session’s presentation for further details.

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Closing session: The Coming Revolution in Long Term Caregiving: The Future is Now!

The conference closed with a shift from long-term care planning innovation to caregiving innovation. Caregiving is a dangerous job and with long-term care needs increasing and available caregivers declining, technology is the future of caregiving. Specifically, robots. Speakers, Jeremy Pincus, PhD and Marjorie Skubic, PhD, were not fantasizing about science fiction; they were describing the current technological advances in robotics and how they will fill the “caregiver void.” Will caregiving robots prove to be “Disruptive Innovation” for the long-term care industry?

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Final thoughts: What I take home from each ILTCI conference is a renewed sense of appreciation for the LTCi industry and all the talented people in it who devote themselves to protecting others from the risk and cost of long-term care. It’s a diverse group of attendees, but I’ve noticed that what draws many to the industry (and to these conferences) are personal long-term care experiences and the resulting desire to help others plan for their long-term care needs. Many thanks are due to Jim Glickman, everyone on the conference organizing committee, Meeting Masters, A/V crew, Paris hotel staff and, of course, all the sponsors, exhibitors, speakers and attendees for making this event exceptional. See you next time.

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Updated, Monday, March 26, 2018, 10:16 AM (Pacific)

Seattle—

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LTC E-ALERT #18-012: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

The LTC insurance conundrum: Slumping sales, but no shortage of demand
NAIFA Launches Center For Excellence In Long Term Care
Spotting Alzheimer’s Early Could Save America $7.9 Trillion
6.6% of those 65+ need help with ADLs, says CDC
Formal Cost of Care
Everything You Need To Know About The New Medicare Cards (But Beware Of Scams)
MedPAC: Congress Should Cut Medicare Rates for Skilled Nursing Facilities
Long-term care costs could reach $5.6 trillion by 2047: report
Why advisers should be offering critical illness policies
Dementia study links your risk with your fitness level
Skilled Nursing Occupancy to Keep Falling in 2018
How In-House Insurance Plans Can Boost Skilled Nursing’s Fortunes
New Technologies Help Seniors Age In Place — And Not Feel Alone
Americans Are Spending More But Planning Less For Caregiving
One State’s Quest to Introduce Long-Term Care Benefits
What the Rise of Medicare Advantage Means for Skilled Nursing
Looking At Tax Deductibility Of LTC Combo Policies
What influences older adults' preferences for care?

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Updated, Friday, March 23, 2018, 9:15 AM (Pacific)

Seattle—

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LTC BULLET: HAVE YOUR CAKE UNTIL IT EATS YOU

LTC Comment: Americans want to have their cake (entitlements) and eat it too, but trends show this cake will eat our economy first. Scary evidence after the ***news.***

HEADS UP! Ross Schriftman tells us: “We now have our 12 minute documentary of the making of the My Million Dollar Mom short up on our website at www.mymilliondollarmom.com.” Soon to follow will be the premiere of the movie on May 14. Check the film’s website to stay tuned for details and further information.

LTC BULLET: HAVE YOUR CAKE UNTIL IT EATS YOU

LTC Comment: We invite your attention to two excellent columns published recently in the Wall Street Journal.

The first, titled “Americans Want Big Government,” by William A. Galston, explains how Americans want more “free” stuff, but neither they nor their political representatives say how to pay for it.

The second, “Why America Is Going Broke,” by John F. Cogan, explains how our prodigious appetite for the unearned will come back to bite us.

Here are some telling facts from the Galston piece:

“In the NBC/Wall Street Journal poll last month, 58% of Americans—the highest share ever recorded—agreed that ‘government should do more to solve problems and help meet the needs of people,’ compared to only 38% who thought that ‘government is doing too many things better left to businesses and individuals.’”

What more should we be doing and for whom?

“A Pew study last month found majorities endorsing the view that government does too little to help young people, the elderly, the middle class and the poor.”

“According to the Kaiser survey, 40% of Americans favor more defense spending while only 19% want less. Seventy percent want more spent on education, while only 7% want less. The Spring 2017 Pew survey found broad support for increased spending on veterans’ benefits, infrastructure, scientific research, environmental protection and assistance to the needy.”

Sounds great, right? But don’t we have to pay for all this largesse? Why worry?

“Not surprisingly, surveys also register a steep decline in public concern about the federal budget deficit. In 2013, according to the January 2018 Pew study, 72% of Americans regarded deficit reduction as a top priority. By the beginning of this year the figure had fallen to 48%.”

Well, at least our public officials are addressing this issue head on. Not.

“Last December, President Trump signed a Republican tax bill that will raise the deficit by an estimated $1 trillion over the next decade, and the new budget will add to this figure. Based on data from the Congressional Budget Office, the Committee for a Responsible Federal Budget calculates that the budget deficit will rise from $800 billion in 2018 to $1.19 trillion in 2019, and will increase even more in 2020. If the spending increases for these two years are made permanent, the annual deficit will reach an estimated $1.7 trillion by 2027. And political pressure will make it nearly impossible to roll back these increases.”

Oh well, “eat, drink and be merry for tomorrow we die,” right?

“We do not know for sure. But we do know that when the next recession comes, the government will have few fiscal and monetary tools left to fight it. If annual budget deficits already exceed $1 trillion, and if the burden of the national debt is already at an all-time high, little room will be left for the antirecessionary measures that governments of both political parties have employed since the early 1930s.”

“The American people have told Congress how much government they want. Responsible leaders would now inform the people what it will take to pay for this much government. In the absence of such responsibility, our fiscal policy will remain on a collision course with reality. The only question is when the crash will come.”

The second article, by John Cogan, focuses on entitlements as the elephant of anti-austerity. First, the problem:

“President Trump’s budget estimates a deficit of nearly $900 billion for 2018 and nearly $1 trillion (with total spending of $4.4 trillion) for 2019. Its balance sheet reveals that the public debt will reach $15.7 trillion by October. This works out to $48,081.61 for every man, woman and child in the U.S. That doesn’t count unfunded liabilities, reported by the Social Security and Medicare Trustees, that are four times the current public debt.

“How did the federal government’s finances degenerate this far? It didn’t happen overnight. For seven decades, high tax rates and a growing economy have produced record revenue, but not enough to keep pace with Congress’s voracious appetite for spending. Since the end of World War II, federal tax revenue has grown 15% faster than national income—while federal spending has grown 50% faster.”

Next, the cause:

“[A]ll—yes, all—of the increase in federal spending relative to GDP over the past seven decades is attributable to entitlement spending. Since the late 1940s, entitlement claims on the nation’s output of goods and services have risen from less than 4% to 14%. Surprising as it may seem, the share of GDP that is spent on national defense and nondefense discretionary programs combined is no higher today than it was seven decades ago.”

“If you’re seeking the reason for the federal government’s chronic budget deficits and crushing national debt, look no further than entitlement programs. … Since the early 1970s, entitlements have been the federal budget’s largest spending category, the sole source of the federal budget’s growth relative to GDP, and the primary cause of chronic budget deficits.

“Today, entitlement spending accounts for nearly two-thirds of federal spending. Defense spending still only accounts for about a sixth of the federal budget, even with recent increases. Defense spending could be doubled and it would still be only half what the federal government spends on entitlements. Significant reductions in the budget deficit can only be achieved by restraining the growth of entitlement spending.”

But, unfortunately:

“The president has ruled out any significant reform of Social Security and Medicare, the two largest entitlement programs. His budget shows that this year Social Security and Medicare expenditures will exceed the payroll taxes and premium payments dedicated to supporting them by $420 billion. Social Security and Medicare deficits will account for half this year’s total budget deficit.”

Maybe Congress will step into the breach. Well, no:

“The situation is no better at the other end of Pennsylvania Avenue. Democrats are getting domestic spending increases and Republicans are getting increases to the defense budget. Instead of offsetting higher spending with reductions elsewhere, Congress simply increased both defense and domestic spending in the recently enacted continuing resolution to fund the government. At the same time, by eliminating the need to vote on a debt ceiling this year and ruling out the reconciliation process for any budget bill, Congress signaled that it has no stomach for entitlement restraint.”

The future bodes ill:

“Social Security and Medicare expenditures are accelerating now that baby boomers have begun to collect their government-financed retirement and health-care benefits. If left unchecked, these programs will push government spending to levels never seen during peacetime.

“Financing this spending will require either record levels of taxation or debt. Economics teaches us that high tax rates reduce economic growth and living standards. History teaches us that high public debt aggravates economic volatility and makes a country’s financial system more prone to crisis.”

LTC Comment: OK, so where does this leave us? We’re on a collision course with economic disaster. Neither the public nor its political representatives have the stomach to confront excessive entitlement spending. But, in the end, we can’t have that cake and eat it too. The suffering when the inevitable end comes will be tragically greater than the need these entitlement programs sought to meet in the first place.

It fascinates and frightens me that America, founded in the spirit of freedom, independence and individual enterprise, could have deteriorated to its current state of collective self-deceit, authoritarianism, and dependency. I find a clue to how this happened in the Galston article’s opening sentence:

“In a well-functioning democracy, the people articulate their desires and grievances, and their elected officials shape these sentiments into sustainable policies. With this division of labor between citizens and representatives, democracy can be both responsive and responsible.”

That statement is fundamentally mistaken. It is not democratic politics that bring us sensible policies and prosperity. Political majorities will always vote themselves more free stuff until they run out of other people’s money.

That’s the fix we’re in now. And that’s why our founders and the Constitution they wrote tempered democracy with principled protection of individual rights and property. The Supreme Court’s failure to keep those principles inviolable has allowed government encroachment into economic spheres it was never intended to enter.

To wit: majorities of people demand more and more free stuff and their political representatives give it to them in order to remain in power. It’s a vicious downward spiral the awful bottom of which we’re nearing today.

What’s a better way? Get government out of the business of being the people’s nanny. Have confidence that most human beings, left to their own devices (as the founders intended) will not only survive, but prosper. The resulting economic bonanza would enable private charity to provide for the few who need help better than the bloated, ineffectual social programs the needy rely on now.

Why will this happen? In free markets, unencumbered by excessive government interference, taxation and regulation, people vote with their hard-earned dollars for what they want. Entrepreneurs anticipate what people may want. If they get it right, they profit. If they get it wrong, they lose and disappear. Investors choose which entrepreneurs to support with their hard-earned capital. Smart ones win; others lose. The only guaranteed winners in capitalism are consumers. They are the net beneficiaries of the many risks entrepreneurs and investors take.

There is no room for self-deceit, authoritarianism or government dependency in such a system. No unearned free stuff stolen from producers undercuts individual initiative. The resulting prosperity unleashes the natural human generosity to help those less fortunate. Everyone is better off. But, alas, don’t hold your breath.

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Updated, Monday, March 12, 2018, 9:15 AM (Pacific)

Seattle—

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LTC E-ALERT #18-011: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Using a Health Savings Account to Pay for Long-Term-Care Insurance
Per-bed SNF price plummets in 2017; NIC's cross-sector collaboration to support industry
Assisted living sets record for price per unit
Amazon extends discounted Prime memberships to Medicaid recipients
Why Long-Term Care Insurance Is a Bad Investment
Letting an LTC insurance policy lapse
CMS allots $30M for new quality measures
The 37 States That Don't Tax Social Security Benefits
As Trump Pushes Medicaid Testing, the Grading Falls Short
The Long-Term Care Insurance Market Evolves
How Many Seniors Are Living in Poverty? National and State Estimates Under the Official and Supplemental Poverty Measures in 2016
These 5 defensive moves can protect your money and wealth
Why the daunting economics of elder care are about to get much worse

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Updated, Friday, March 9, 2018, 8:43 AM (Pacific)

Seattle—

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LTC Bullet: Long-Term Care News and Analysis

LTC Comment: Center for Long-Term Care Reform Premium members have the option to receive our LTC Clipping Service and weekly LTC E-Alerts newsletters. Today, we’d like to share a sample of these members-only services with a wider audience. Our topic is the news this week, so we’ll keep our ***news*** section brief then dive straight in.

*** Some CLTCR staff will be attending the upcoming 18th Annual Intercompany Long-Term Care Insurance Conference in Las Vegas. In preparation for this vital and not-to-be-missed annual affair, we’ll skip next week’s LTC Bullet, but don’t fret: There’s over 1,200 LTC Bullets dating back to 1998 and archived by date and subject here. In lieu of anticipating and reading your Friday Bullet, why not have a look at our archive? If you need some direction, start by reading our LTC Bullets rebutting some of the unbalanced and negative treatment of LTCi in the popular press recently. To that end, we offer: Don’t Buy LTCI?!, LTCI Under Fire, LTCI Expert Fights Back and last week’s piece from Phyllis Shelton, It’s Time to Stop Bashing Long-Term Care. If that’s not enough, try our Reality Check: The Facts on LTCI section which compiles LTC Bullets dating back to 1998 that combat inaccurate media coverage of LTCi with facts and sound analysis. Enjoy. ***

LTC Bullet: Long-Term Care News and Analysis

Many Center for Long-Term Care Reform Premium members are familiar with our LTC Clipping Service, and from what we hear, get great value from this benefit of Premium membership.

For those who don’t already know, our LTC Clipping Service is an excellent way to stay on top of current and critical long-term care news without having to spend hours a day researching on the internet. We send our Clipping Service subscribers an average of 2-3 emails per workday with a must-read-article link, a pull quote and some brief analysis. We’re sensitive to the fact that we all receive too many emails, so we’re very careful to send along only the most important LTC news items.

As an added benefit and for convenient reference, we keep a running archive of the clippings we send in our new LTC Clippings Archive, dating back to January 2016. This archive is organized by LTC-related subject and sub-category. While CLTCR Premium members will continue to receive their LTC Clippings in real time, they and Individual members, have access to the Clippings Archive through our Members-Only Zone website. Here’s a breakdown of the Archive’s subject categories:

INSURANCE (Long-Term Care Insurance, Critical Illness Insurance, Hybrid and Miscellaneous (including alternative financing solutions))
LONG-TERM CARE (General, Cost, Assisted Living, Nursing Homes, Home Care, Caregiving, Veterans Affairs and Government Solutions)
MEDICAID (General, Medicaid Planning and Crowd-Out Effect)
MEDICARE (including Medi-Gap and Medicare Advantage)
SOCIAL SECURITY
ALZHEIMER'S DISEASE
POLITICS, LEGISLATION AND PUBLIC POLICY
ECONOMICS, DEMOGRAPHICS AND DATA
RETIREMENT PLANNING
HEALTH AND HEALTHCARE
OTHER

If you’re reading this, chances are you play a valuable role in protecting people from the risk and cost of long-term care and to that end we think the Clipping Service allows our subscribers to be more effective doing so. Based on their feedback, we think our subscribers feel the same. For example:

I depend on the clipping service to keep me abreast of all LTC breaking news. It is a huge time-saver and contributes to my overall sense of confidence and knowledge as a LTCi specialist. I really think the service gives me an “edge,” and helps keep me one step ahead of my competitors. Conveying the insights I gain from the clipping service often enables me to more easily and relevantly educate my clients on the importance of LTCi ownership. -- Honey Leveen

I LOVE receiving your clippings, because . . . I'm able to get the info quickly and can pass it on to my colleagues. Honestly, without your service, I probably wouldn't be aware of half of the things that you serve up to me, on a “silver platter" as the saying goes. Thanks for making my life so much easier! -- Susanne E. Howarth, Director of Long-Term Care, TBG West

Please find below a sample collection of clippings we’ve sent to our Clipping Service subscribers over the past two weeks. Read through them and if you think that receiving news items like these in real time would be valuable to you, please consider subscribing at the Premium membership level. By doing so, you can stay on the forefront of professional knowledge and help us fight for rational long-term care policy reform.

Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month.

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3/7/2018, “What influences older adults' preferences for care?,” MedicalPress

Quote: “The researchers found that support from family was the most important influence on care preferences for older adults. But people also usually formed their preferences based on a variety of factors. They also discovered that it was unusual for older adults to know their care preferences or to have a clear understanding of how they formed their preferences.

“The key findings of this study were:

· The level of support from families was the most important influence on care preferences. Often, older adults changed their preferences based on the concerns of family members or a wish to avoid ‘being a burden’ to others. This was especially true for preferences regarding the places where people wished to receive care (for example, at home versus in a healthcare facility).

· Older adults' experiences of previous illness and of caring for others also influenced preferences about their own future care.

· Being more seriously ill strongly influenced care preferences, especially for older adults who were aware that they were unwell.”

LTC Comment: Interesting that not being a burden on others and prior care-giving experience influence type-of-care preferences. Having LTCI would ameliorate both concerns and keep all options open.

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3/7/2018, “Using a Health Savings Account to Pay for Long-Term-Care Insurance,” by Kimberly Lankford, Kiplinger

Quote: “Q: Can I withdraw money tax-free from my health savings account to pay my long-term-care insurance premiums? If I can, is there a limit to the amount I can use? Does it have to be for a stand-alone long-term-care policy, or can it be for a life insurance policy with long-term-care benefits, too?”

LTC Comment: Click through to the article for the answers.

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3/7/2018, “Why Long-Term Care Insurance Is a Bad Investment,” by Jason Notte, TheStreet

Quote: “‘Mathematics work against [long-term care insurance] because most people will need long-term care eventually,’ Kibler says. ‘For insurance to make economic sense, the risk must be spread across a pool of participants.’”

“With other types of insurance, only a portion of the population collects, while the others continue to pay their premiums. That covers expenses paid out and keeps premiums manageable. However, since most buyers of long-term care insurance will eventually collect, Kibler notes that insurers will have to raise premiums. That will cause the healthier portion of the population to opt out, leaving a pool of less-healthy participants who all believe they will need to collect their insurance in the immediate future.”

LTC Comment: The argument here is specious and the nuance the author misses is that through LTCi some people will be spared catastrophic loss, others will be glad they never needed it and many people will fall somewhere in-between and have protection.

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3/7/2018, “Letting an LTC insurance policy lapse,” by Karin Price Mueller, nj.com

Quote: “Q, My husband and I are 84 and 85 and we have had long-term care insurance for 17 years. The premiums are going up too much and we are on a fixed income, earning a little over $30,000 a year. We have a good amount of other assets, and we're trying to decide if we should keep the insurance or cancel it.
-- Tough decision

A. As you know, long-term care insurance can be a very important part of your financial plan.

You shouldn't let the policy lapse without serious consideration.”

LTC Comment: Some welcome good advice.

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3/5/2018, “The Long-Term Care Insurance Market Evolves,” by Mark Miller, Morningstar

Quote: “It's a paradox: More Americans are worried about the risk that long-term care expenses can pose for their retirement plans, but few take action to protect themselves. The commercial long-term care insurance industry has never achieved mass market penetration levels, and sales have been falling steadily over the past five years. Chalk it up, in part, to consumer resistance. People are reluctant to spend thousands of dollars annually on insurance premiums for a long-term care need that might come far down the road, or not at all.”

LTC Comment: Some paradox! Medicaid has paid for the vast majority of all expensive long-term care since 1965. There’s no mystery why most Americans don’t worry about LTC costs until they need care after which it’s too late to do anything responsible like buy private insurance.

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3/2018, “How Many Seniors Are Living in Poverty? National and State Estimates Under the Official and Supplemental Poverty Measures in 2016,” by Juliette Cubanski, Kendal Orgera, Anthony Damico, and Tricia Neuman, Kaiser Family Foundation

Quote: “Payments from Social Security and Supplemental Security Income have played a critical role in enhancing economic security and reducing poverty rates among people ages 65 and older. Yet many older adults live on limited incomes and have modest savings. In 2016, half of all people on Medicare had incomes less than $26,200. This analysis provides current data on poverty rates among the 49.3 million seniors in the U.S. in 2016, as context for understanding the implications of potential changes to federal and state programs that help to bolster financial security among older adults.”

LTC Comment: We don’t know that SS and SSI have enhanced economic security and reduced poverty rates compared to what would have happened if those programs had not undercut the public’s sense of personal responsibility to save, invest and insure privately against the risk and costs of aging and retirement. Further, what matters is not that half of all Medicare recipients have incomes below $26,500. We have them covered with a wide range of government programs. What matters is how many people are getting those same programs, including Medicaid long-term care benefits, who have incomes far in excess of the median. KFF’s ideological bias is to over-estimate poverty in order to promote ever more government spending on the very programs that have created the problems it is claiming to fix.

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3/5/2018, “These 5 defensive moves can protect your money and wealth,” by Liz Miller, MarketWatch

Quote: “Every well-considered wealth-management plan includes an assessment of personal, property, and financial risk. Investments have risks that can’t readily be insured, so other risks must be managed in order to minimize threats to overall wealth goals. Fortunately, many of the personal risks that can threaten one’s wealth can be managed with proper insurance. Consider these five ways to reduce your exposure to risk:

“2. Consider long-term care insurance:

Studies indicate that at least one member of every couple living today is likely to need some kind of long-term medical assistance. Many people have the means to pay these expenses out of their wealth savings, but for many others, a long-term stay in a luxury care facility — due to dementia or some other debilitating condition — can derail their lifestyle or legacy goals. If you have any medical conditions or family history that make you particularly vulnerable to health risks, or you do not have the means to cover these costs, consider long-term care insurance options. This is relatively inexpensive insurance to add prior to age 50, but it can get pricey later in life.”

LTC Comment: A pretty good concept offering LTCi as a type of lifestyle insurance or even “portfolio insurance.”

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3/2/2018, “Why the daunting economics of elder care are about to get much worse,” by Patricia Smith, The Conversation

Quote: “When no relative steps up to serve as an unpaid caregiver when the need arises, families hire paid caregivers or move their loved one into a nursing home, where a private room may cost $100,000 or more per year. Medicare rarely covers nursing home stays, and eligibility for Medicaid coverage is limited, so institutional care like that is generally out of reach for all but the wealthiest Americans or those with long-term care insurance – which also costs a lot. … In the meantime, Medicaid and Medicare can make caregiving more financially rewarding by increasing the rates they pay for elder care, spurring the kind of salary growth for home health aides required to make the profession more attractive. And to ease the financial burden of caregiving all around, Medicaid and Medicare could ramp up benefits for care delivered in the home and in institutions and extend coverage to more people.”

LTC Comment: Typical balderdash: fix the LTC problem by spending more on what caused it in the first place.

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3/2/2018, Good data source referenced by Stephen D. Forman in the “LTCA Weekly Reader”

Quote: “RBC Wealth Management did a bang-up job on their new report, "Taking Control of Healthcare in Retirement." It's a readable mix of text, graphs and well-sourced information that points frequently toward long-term care. Pre-retirees reading its 20-pages will not only get a better handle on the magnitude of the challenges they face, but also an encouraging tour of the manageable steps they can take.”

LTC Comment: We thank Center friend and Corporate member Steve Forman of Long-Term Care Associates for this resource tip.

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2/27/2018, “Aerobic exercise slows cognitive decline in Alzheimer’s disease,” by Mary Gillis, Reuters

Quote: “Researchers assessed data from 19 studies conducted between 2002 and 2015 that examined the effects of exercise on cognitive ability in 1,145 people at risk of or diagnosed with Alzheimer’s disease. Nearly 90 percent were randomized controlled trials, which are the most reliable type of study.

“Results indicated that exercise - specifically, cardiovascular exercise - had a strong favorable impact, researchers reported in the Journal of the American Geriatrics Society.

“This study is the first to suggest that aerobic exercise may be more effective than other types of exercise when the goal is to preserve the cognitive health of older adults at risk of or with Alzheimer’s disease, Panza said.”

LTC Comment: It’s pretty gloomy here in Seattle, but I think I’ll go for a run later.

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2/27/2018, “Here’s a surprise source you can tap for long-term care services,” by Darla Mercado, CNBC

Quote: “It isn't every day that an older client might consult experts to help him become impoverished as he prepares for long-term care. Enter Medicaid planning, a corner of personal finance that brings together elder law attorneys, accountants and financial advisors to help seniors pay for nursing home care while protecting their family members.

“Those who participate in Medicaid planning work with attorneys, accountants and advisors to shift their wealth to trusts or annuities in order to qualify.”

LTC Comment: We hesitate to forward articles such as this that are basically advertisements for Medicaid planning and contribute to the overall desensitization to the need for responsible long-term care planning. However, people read articles like this when researching options for financing long-term care and it’s better to know when there’s a new one out there. For some balance, see also our recent LTC Bullet: The Medicaid Prevention Business, which features Ron Hagelman’s column from the latest Broker World.

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2/23/2018, “HSA use increasing among those under 65,” by Allison Bell, ThinkAdvisor

Quote: “U.S. residents’ use of public and private health coverage stayed about the same between 2016 and the first three quarters of 2017, but use of health savings accounts (HSAs) may have climbed 15 percent. The number of U.S. residents under the age of 65 who had HSAs increased to 17.9 million in 2017, from 15.5 million in 2016, according to new National Health Interview Survey (NHIS) data.”

LTC Comment: Many will use the HSAs to fund the next generation of LTCI after Medicaid stops subsidizing the middle class and affluent.

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2/26/2018, “Are You Prepared To Live To Be 100?,” by Alexander Koury, Forbes

Quote: “Today, we are living healthier lives, which has increased our life expectancy and changed the way in which we should prepare to live well beyond our expectations. We are living in an age when medicine and technology are being designed to keep us living longer, and future developments will continue to push life expectancies higher. This is the new reality, and unless you choose to solve the problem now, you could outlive your money. Ask yourself, ‘How long will my money last?’ If you do not know, now is the time to figure out how you will get on track.

“Last, consider buying long-term care, and shop for a plan that fits your budget and your goals. If we go back to the example I presented earlier, long-term care may end up costing you as much as a $700,000 home. Imagine having to buy one for you and your spouse. These are things you should consider reviewing now before too much time passes. The older you are, the less time there is to make sure your financial plan is intact.”

LTC Comment: A pretty good article and reminder of the various costs associated with increasing longevity and how to prepare for them.

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2/21/2018, “Immigration Curbs Will Weaken Social Security,” by Howard Gleckman, Forbes

Quote: “President Trump has proposed deporting hundreds of thousands of immigrants and backed curbs on legal immigration into the US. The president’s aggressive views on immigration have generated intense debate over the past year, but much of that discussion has ignored a key issue: What immigration restrictions would mean for the long-term health of Social Security.

“A new study by my Urban Institute colleagues Damir Cosic and Rich Johnson finds that just one proposal—a Senate bill to reduce the number of permanent residency visas (green cards)-- would increase unfunded Social Security obligations by $1.5 trillion, or 13 percent, over the next 75 years. In the nearer term, it would accelerate by one year the date by which the Social Security trust fund is projected to be depleted—from 2034 to 2033.”

LTC Comment: This affects the long-term care industry because those would-be immigrant workers could fill positions as much-needed long-term caregivers and pay into Social Security and Medicare which are both connected to Medicaid via spend-through and reimbursement, respectively.

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2/18/2018, “1.5 Million Retirees Await Congressional Fix for a Pension Time Bomb,” by Jim Tankersley and Alan Rappeport, New York Times

Quote: “The sprawling agreement to boost government spending reached by Republicans and Democrats this month quietly included a step toward defusing what could be a financial time bomb for 1.5 million retirees and hundreds of companies in the industrial Midwest and the South. The deal creates a select congressional committee to craft what could effectively be a federal rescue of as many as 200 so-called “multiemployer” pension plans — in which employers and labor unions band together to provide retirement benefits to employees.
Many of these plans are hurtling toward insolvency in the coming decade, with benefits owed to retirees projected to swamp what the plans can afford to pay. The 16-member, bipartisan committee will have to come up with a solution and legislation by the end of November, which the full Senate would need to vote on by the end of the year.”

LTC Comment: Who’s going to bail out Social Security and Medicare?

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Updated, Monday, March 5, 11:06 AM (Pacific)

Seattle—

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LTC E-ALERT #18-010: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Good data source referenced by Stephen D. Forman in the “LTCA Weekly Reader”
Why the daunting economics of elder care are about to get much worse
When is the Skilled Nursing Wave Coming? Depends Who You Ask
Minnesota LTC pros apologize to public after abuse claims
Widows Got Bad Social Security Claiming Advice From SSA: IG Report
Aerobic exercise slows cognitive decline in Alzheimer’s disease
Here’s a surprise source you can tap for long-term care services
HSA use increasing among those under 65
Are You Prepared To Live To Be 100?
Alzheimer's Death Rate Continues to Rise: CDC

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Updated, Friday, March 2, 2018, 9:14 AM (Pacific)

Seattle—

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LTC Bullet: It’s Time to Stop Bashing Long-Term Care Insurance

LTC Comment: The title of this week's LTC Bullet says it all. Phyllis Shelton speaks her mind after the ***news.***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:

All LTC Bullets and E-Alerts
Access to our Members-Only Zone website and Almanac of Long-Term Care
Subscription to our Clipping Service
Email/phone access to Steve Moses for 24-hour turnaround queries

LTC Bullet: It’s Time to Stop Bashing Long-Term Care Insurance

LTC Comment: Many of you surely know Phyllis Shelton, but for those who don't, she's a highly regarded author, teacher and consumer advocate for LTC planning. She's a friend and member of the Center for Long-Term Care Reform and is passionate and prolific in her work helping to protect people from the risk and cost of long-term care. We enjoy following her work. We have all noticed a recent spate of negative and unbalanced media treatments of LTCi, so when we read her latest blog post, "It’s Time to Stop Bashing Long-Term Care Insurance," it resonated with us. The title says it all. If you're tired of reading articles that bash LTCi without context or an opposing view, read what follows.

Reprinted below with permission is "It’s Time to Stop Bashing Long-Term Care Insurance" by Phyllis Shelton. Get in touch and read more of her blog posts via her website: www.gotltci.com.

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It’s Time to Stop Bashing Long-Term Care Insurance

by Phyllis Shelton

Enough. Stop. The plethora of LTC insurance bashing articles has gotten to me.

These people aren’t bashing LTC insurance!

Mr. C. Vernon Duckett – he was able to take care of Helen, his most precious asset, with the best care possible AND continue to play golf four times a week for his own well-being.
Mary and Don – Don died the day before his 75th birthday after 10 years of Parkinson’s disease and Alzheimer’s. He paid just over $18,000 in premium before receiving about $530,000 in tax-free cash benefits. Mary has received two rate increases and is the first to tell you she will never let her policy go. (names changed to preserve anonymity)
Ella Keith spent her 65th birthday in the hospital, having suffered a major stroke. Her family was able to keep her at home for the next 15 years because her LTC insurance policy paid over $300,000, almost half.
Russell Polston – he is not only happy with how his wife’s claim was paid, but also the three year claim paid for another family member.

Rate Increases and Why the Sky Isn’t Falling

Yes, there have been rate increases. Long-term care insurance is “guaranteed renewable” which means it can never be canceled as long as you pay your premium in a timely manner. It also means there can be a “class” rate increase, which means on an entire class of people, not just on individual policyholders at the whim of the insurance company. Frankly, I struggle with why this is a big deal when I look at my health insurance going from $330 a month for my husband and me in 1993 to $1690 a month in 2016. I’m not a math whiz, but isn’t that FIVE times as much?

I’ve had people come to me with a 90% rate increase on long-term care insurance. After I compare what they can spend by age 80 vs. the benefits at that time, they peel themselves off the ceiling…I don’t have to do it for them. It’s all relative. Older policies were so underpriced that while a rate increase of 130% sounds terrible, it doesn’t even get the premium up to what is being charged today. Why were they so underpriced?

No one knew how to price for long-term care back in the 80s and 90s.
Companies thought many more people would let their policies lapse but most people don’t, even when they receive rate increases. They appreciate them for the gold they are.
People are living much longer today than anyone expected, which means they are more likely to have a claim.
Claims are lasting longer than expected, largely influenced by the really nice assisted living facilities that exist today but didn’t exist 30 years ago when I got in the LTCi business. The latest claims study (also from the Society of Actuaries) shows that women who need care longer than a year average 4.67 years and men 3.8 years, as opposed to 3.7 and 3.1 respectively. The average for all claims regardless of length has gone from 1.9 years to 2.5.
The cost of care is steadily growing. I project the cost of a “country club” assisted living facility at 5% compound as only 10% of the 80 million baby boomers are in their care receiving years. So if the current cost is $5000 a month today, that’s $21,000 a month in 30 years. Yes believe it.
The bottom fell out of interest rates as we all know back in 2008ish. When an insurance company prices for a 7% interest rate on reserves and gets 2-3%, you can imagine the impact!
Yes, there were a few bad apples that intentionally priced policies too low, accepted people in poor health and paid out higher commissions than other companies. They did this to steal market share, but it backfired on them. I warned agents away from them in my 20 training years.

So when you hear the annual premium for a 55 year old female as follows…

$5,700 (single)
$4,848 (part of a couple)
$3,992 (both issued)

…you fall over with shock. But when I tell you these premiums are buying a plan that will be worth $1.5 MILLION in 30 years, payable at $21,000 a month for six years, now what do you think? Even the highest one of $5,700 x 30 years equals only $171,000, vs. $1,500,000 in benefits. Will there be rate increases? Maybe, but there’s a huge difference between $171K and $1.5M. That particular company can pay dividends in the older years, thus offsetting the need for a rate increase.

The Society of Actuaries just came out with research that shows policies issued 2014 and later have been priced correctly for all the bad stuff that has hit long-term care insurance. (FYI, those of you who have had much larger rate increases most likely bought before 2000.)

Some people maintain 5% compound inflation is too aggressive. This article just came out today.

New estimates released today from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) and published online in Health Affairs project an average annual rate of national health spending growth of 5.5 percent for 2017–26, outpacing average projected growth in gross domestic product (GDP) by 1.0 percentage point.

LTC facility costs usually outpace overall health costs. Home care has been growing much slower but I’m seeing it start to pick up as more and more people need extended health care.

But What if I Never Need Care?

Listen to me. Walk around your neighborhood and ask every single household if their house has ever burned to the ground. Not many yes answers, right? Now ask if they know someone who has needed help longer than three months with bathing and dressing or with a cognitive impairment. That’s long-term care. How many people can you think of in that situation?

Do you honestly think people sit around and worry that they haven’t gotten their money’s worth out of their homeowners or auto policies? Just how do you want to “get your money’s worth” out of your long-term care insurance? Do you want to have a brain tumor, get hit by a drunk driver, have a major stroke…or maybe suffer with Parkinson’s or Alzheimer’s for 10 years?

If you never need care, count your blessings! It means you paid the annual premium for peace of mind.

!	You will die before you will know you never needed it, so you will always be glad you had it!

I see so many families who are SAVED by long-term care insurance and it cuts me to the quick to read the bashing articles. Let’s reward the hand full of companies that have weathered the pricing storm and stayed in the market. Some offer both traditional and products combined with life insurance and/or annuities. If you don’t have a professional who is well-versed in the latest LTC planning options today, I would be honored to help you. Click here for my questionnaire that will get you a no-obligation consultation.

Share this:

Phyllis Shelton is celebrating her 30th year in long-term care insurance as an author, teacher and consumer advocate for LTC planning.

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Updated, Monday, February 26, 2018, 8:21 AM (Pacific)

Seattle—

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LTC E-ALERT #18-009: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

How Did Life Begin? Key Alzheimer's Protein Has Surprising Tie to the Primordial Soup
1.5 Million Retirees Await Congressional Fix for a Pension Time Bomb
Heavy Drinking Is the Biggest Risk Factor for Dementia, Study Says
Senior living could lead cultural shift related to aging, report author says
Nebraska Senators Eye Incentive for Long-Term Care Insurance
Immigration Curbs Will Weaken Social Security
Michigan inching toward privatization of long-term care
Managed Care Payments Continue to Squeeze Skilled Nursing Providers
Future Retirees Will Be More Vulnerable to Market Shocks: CRR
Planning Smart for Your Clients’ Senior Caregiving Duties
Will This 1 Expense Prevent You From Living Your Dream Retirement?

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Updated, Friday, February 23, 2018, 9:04 AM (Pacific)

Seattle—

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LTC BULLET: THE MEDICAID PREVENTION BUSINESS

LTC Comment: What went wrong with LTC insurance and what should happen next? Ron Hagelman opines after the ***news.***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including:

· All LTC Bullets and E-Alerts

· Access to our Members-Only Zone website and Almanac of Long-Term Care

· Subscription to our Clipping Service

· Email/phone access to Steve Moses for 24-hour turnaround queries

LTC BULLET: THE MEDICAID PREVENTION BUSINESS

LTC Comment: Ron Hagelman’s column in the current issue of Broker World caught our eye. He argues the time has come to acknowledge how LTC insurance failed and to refocus its mission. Or put another way, he suggests we look beyond the product’s remarkable success, insuring eight million Americans, to contemplate how it might protect another 50 million! The secret to achieving that goal, he argues, is to pursue a more modest objective. Focus on helping people avoid the Medicaid trap, i.e. the risk of ending up by default on the underfunded welfare program that dominates long-term care financing in the USA.

Reprinted below with permission is Ron’s column. If you aren’t already a Broker World subscriber, become one now and read Hagelman’s “Last Word on LTCI” every month. I do.

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“The Last Word On LTCI...Process of Elimination”
By
Ronald R. Hagelman, Jr.
February 2018

The entire long term care/chronic illness industry must face the reality of our unsuccessful attempt to soften the economic and emotional blow of an extended need for care and to finally accept that many of our overly optimistic rationalizations about future outcomes may have been structurally flawed at inception. We must publicly and politically recognize the inevitable and potentially expensive nature of the risk for most Americans. The truth is we can now measure our failure. We currently have about 8 million brilliant consumers who bought policies, will keep their policies, and will maintain the freedom of choice and dignity of control of their own claims. Unfortunately the most recent numbers I’ve seen suggest that over the last 20 years we have left over 50 million behind. Those who could have and should have done something. Blame for the failure is irrelevant. Mistakes in pricing assumptions are hopefully, for the most part, just history. We now live in a world of closed blocks of premium continuing to fester from the weight of our own false assumptions. We have certainly learned that more of the same is hubris on steroids.

Frankly what is required is a little humility. Most claims are financially manageable and some extra “supplemental” insurance assistance can make a world of difference to a much wider audience. The goal for the affluent needs to remain that the best way to replace the risk with insurance. But the underlying need to maintain private pay status must become the industry’s new “Battle Cry!” Current claims analysis is definitive: 90+ percent are over in three years, 83 percent of all past claims reviewed would have been covered by $100,000. Stop asking, “How much insurance is enough?” The question is, “How little is needed to keep you free of government dependence?” Medicaid care is not necessarily bad, it’s just inferior. It is discounted care by definition. I apologize for repeating myself but the fact is that last year alone it was $7 billion short of the actual cost. Please do not misunderstand: God Bless Lyndon Johnson my fellow Texan. This country desperately needed a social safety net for those most in need of care. However, after a 20 year friendship with Stephen Moses, I am morally required to humbly suggest that: If those who could and should afford their own care did not artificially impoverish themselves and steal from those truly in need, the quality of governmental warehoused care would improve. I am happy to proclaim from the highest mountain top that “I am in the Medicaid prevention business and that I am ready, willing and able to make sure that never happens to those I care about.”

Our futures in long term care planning need to move to opposite corners of the decision making processes. We must openly recognize our failures. We can increase our sales success by refocusing our goals. More middle class Americans must understand that a little goes a long way to maintaining basic human freedom of choice. We must acknowledge all the dollars that can come into play at the point of claim and make absolutely sure we have added sufficient supplemental protection to keep those we care about in complete control of their own claim destiny. And we must acknowledge that the 90 percent we left behind still need our help at “The Point of Care” when it hits the fan, and then be prepared to do all in our power to leverage every available source of funding. Medicaid is wrong for those we love and it does take so little additional protection to guarantee personal control and freedom of choice. Eliminate absolutes, take no prisoners when placing some level of supplemental help, and do not forget all those we missed the first pass through the orchard.

Other than that I have no opinion on the subject.

Ronald R. Hagelman Jr., CLTC, CSA, LTCP, CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products. A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing "friend" of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman is president of Broadtower Insurance Solutions, a national IMO helping BGAs enhance LTCI production. Hagelman can be reached at Broadtower Insurance Solutions, Inc., 156 N. Solms Rd., New Braunfels, TX 78132. Telephone: 830-620-4066. Email: rhagelman@broadtowerinsurancesolutions.com. Website: www.BroadtowerInsurance.com.

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Updated, Tuesday, February 20, 2018, 8:34 AM (Pacific)

Seattle—

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LTC E-ALERT #18-008: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

FDA Sets the Stage for Earlier-Stage Alzheimer's Treatments
Six emerging housing trends in 55+ living communities
National Health Expenditure Projections, 2017–26: Despite Uncertainty, Fundamentals Primarily Drive Spending Growth
New AALTCI Guide Explores Section 1035 Exchanges for Long-Term Care Insurance Planning
How To Sell LTCi To Millennials For Their Parents
Trump officials face decision on lifetime limits for Medicaid
Operators Bearish on Future of Standalone Skilled Nursing Facilities
Here's the Latest on What Healthcare Will Cost in Retirement -- and It Isn’t Pretty
Trump administration drafting 'scorecard' for Medicaid changes
President's budget proposes Medicaid changes, affordable housing funding cuts
Skilled Nursing Operators Face Down ‘Unsustainable’ $2 Billion Cut

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Updated, Friday, February 16, 2018, 9:05 AM (Pacific)

Seattle—

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LTC BULLET: LTC CALCULATION

LTC Comment: We explore why socialism always fails, especially when applied to long-term care, after the ***news.***

*** SUBSCRIBE TO LTC CLIPPINGS: We scan the news searching for data, articles and reports you need to know about. Then we send you a brief email (like the one below) with title, author, source link, a representative quote, and our brief analysis. LTC Clippings help you stay at the forefront of professional knowledge. To subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

*** SAMPLE LTC CLIPPING: 2/14/2018, “National Health Expenditure Projections, 2017–26: Despite Uncertainty, Fundamentals Primarily Drive Spending Growth,” by Gigi A. Cuckler, Andrea M. Sisko, John A. Poisal, Sean P. Keehan, Sheila D. Smith, Andrew J. Madison, Christian J. Wolfe, and James C. Hardesty, Health Affairs

Quote: “National health spending growth is expected to average 5.5 percent per year for 2017–26 and to reach $5.7 trillion by 2026 (exhibit 1). Over the same period, growth in the nation’s gross domestic product (GDP) is expected to be 4.5 percent per year. This 1.0-percentage-point differential is expected to result in an increase in the health share of the economy from 17.9 percent in 20161 to 19.7 percent in 2026.”

LTC Comment: Ben Franklin would remind us that spending beyond our means is problematical. But what’s really interesting about this latest iteration of CMS’s annual projection of the next decade’s national health expenditures is that it doesn’t mention long-term care! Oh, you can find “home health care” and “nursing care facilities” in the detailed tables, but LTC isn’t highlighted for consideration in the analysis as in past years. Nevertheless, nursing facility care is expected to grow from 3% annually in 2013 to 5.3% by 2026, topping around $261 billion in expenditures by 2026. Likewise, home health care, rising 5.1% in 2013 will be going up 6.7% annually by 2026 to $172.6 billion. Dramatic numbers, but evidently not worth highlighting in CMS’s analysis which focuses mostly on acute care. ***

LTC BULLET: LTC CALCULATION

LTC Comment: Why doesn’t socialism work? Why does “from each according to his ability to each according to his needs” lead inevitably to dysfunctional states like the Soviet Union and Venezuela. Why do socialists’ good intentions always end in disaster?

Socialism’s Fatal Flaw

The Austrian economist Ludvig von Mises answered these questions. He said the problem with socialism is that it has no means of economic calculation. It lacks data reflecting consumers’ preferences because it has no market prices. With no way to know who wants what based on their willingness to spend their hard-earned money, socialist economic systems must rely on decisions by some authority about what and how much to make. Sooner or later, such an authority unconstrained by market prices, destroys the economy by trying evermore desperate measures to fix it.

Here’s why. In a free market, people buy what they want and pass over products or services they prefer less. Entrepreneurs anticipate what people want and/or what they might want if a new product or service were created. Every purchase by a consumer is a bit of information for entrepreneurs. It says at this price for this item, the consumer would rather have the item than the money and the entrepreneur would rather have the money than the item.

Billions of transactions like that across a national economy provide invaluable information to investors, entrepreneurs and consumers alike. Investors gauge the economy’s direction and choose what kinds of businesses to support with their capital and from which to withdraw their support. Entrepreneurs who calculate correctly, prosper. Those who miscalculate disappear. The system is self-regulating with consumers the biggest beneficiaries. Consumers gravitate to the products and services that please them most, thereby voting, as it were, for more of this, less of that, and so on.

From this complex interaction comes, some say miraculously, order out of seeming chaos. Left to themselves, markets adjust to reward smart investment, punish careless or wishful thinking, and deliver the closest approximation to what consumers want and the greatest quantity of what they prefer.

A fully socialist economy lacks the data private markets deliver. When the government owns the means of production and people can only buy or bypass what the central planners decide to produce, there is no market to produce the data needed to choose rationally what should be produced and in what amounts. It takes a while for collapse to occur because socialist systems can rely temporarily on vestigial domestic markets or market data from freer systems elsewhere, but sooner or later economic miscalculation leads to rationing, price controls, suppression, repression and failure.

Interventionism

What about a third way? Can’t government intervene in markets to make them work better without destroying them entirely? Suffice it to say, poison in any dosage is still poison. It’s beyond my scope here to explain why interventionism leads directly, albeit more slowly, to the same disastrous outcome. Read Mises or other Austrian economists for that.

LTC Calculation

My purpose here is to draw the analogy to what’s wrong with long-term care financing. The government began interfering in long-term care services and financing many decades ago. But let’s begin this analysis in 1965 with the start of Medicaid and Medicare. Before then most long-term care was provided by families as now, only more so. When needs exceeded what families could provide, Mom and Pop care homes were the rule. Often churches and other philanthropic organizations provided help. Big commercial nursing home companies were far fewer than today. Assisted living didn’t exist at all. Most paid care came out of private pockets, not from government or insurance, whether public or private.

But by 1965, life spans were starting to expand into lengths that lead inevitably to more chronic illnesses of old age. The age wave was only just beginning, but it was clear something had to change. We’ll never know how long-term care services and financing might have evolved if the government had not stepped in to “fix” this increasingly inadequate pre-1965 system. But we can surely speculate. What if consumers had been left to their own devices in the sixties as more and more people began to need long-term care? What if we’d allowed a free market in long-term care services to find its way, generate market data measuring consumers’ preferences, and point investors and entrepreneurs toward inventing and financing better LTC mousetraps?

A Free Long-Term Care Market

As more and more people lived long enough to require long-term care, individuals and families would have realized they had to expect and meet such needs. Entrepreneurs would have offered home and community based services as it became obvious that people preferred receiving care at home and were much more willing to spend their own money for such care than to enter expensive institutional settings. When necessary to provide semi-acute or recuperative care, skilled nursing facilities would have persisted, but not as providers of custodial care, which is much more efficiently and humanely provided in smaller settings such as Dr. Bill Thomas’s Green Houses.

As time went on and more and more people needed longer and more intense, and hence more expensive long-term care, economic solutions would have evolved to pay the costs. Home equity conversion could have provided trillions of dollars to ensure millions of families had the money to afford top quality long-term care at whatever acuity level and venue they needed and preferred.

Gradually, as it became obvious that the risk of expensive long-term care was sufficiently great to warrant private insurance protection, as for other similar risks such as major medical, fire, or life, long-term care insurance products would have been offered. Those probably would have made some actuarial errors. But over time actuaries--in the absence of government-induced distortions like easy access to Medicaid and artificially low interest rates--would have discovered and corrected those errors leading to stable products as in other lines of insurance.

We would have ended up with a mostly privately financed long-term care system providing a continuum of care with most people getting care at home by families or professionals funded from personal savings and/or insurance. Assisted living as we know it now would likely have evolved much earlier than it did. Skilled nursing facilities would be far fewer in number having never provided custodial care for a majority of people in need of long-term care. Skilled nursing facilities would be much more closely integrated with hospital care and much more focused on easing the transition from acute care to health and recuperation.

What about the poor? Who would take care of them? We’d have many fewer poor to help without perverse incentives in Medicaid preventing people from planning, saving, investing or insuring for long-term care. For example, in the absence of Medicaid’s huge home equity exemption, many of the income-poor, house rich elderly would have better access to higher quality care by using the wealth hidden in their homes to stay in their homes. The genuinely needy who truly must have help would be served, as they were before the Great Society programs intervened, by fraternal organizations, churches, and other philanthropic organizations.

The Unfree Long-Term Care Market

What happened instead? Government intervened in 1965 and we can see the dysfunctional results all around us. Medicaid made nursing home care virtually free. The public stopped worrying about long-term care risk and cost. With a government created monopoly on long-term care, the nursing home industry exploded in size and lobbying power. As Medicaid expenditures, skyrocketed, reimbursements were reduced to compensate. With reimbursements less than the cost of care, access and quality plummeted. Private payers shrank in numbers when they had to make up the shortfall in Medicaid reimbursements. More and more people sought the advice of lawyers who could artificially impoverish them to qualify for Medicaid. Families tore themselves apart fighting over the spoils, i.e. Mom and Dad’s estate, as preserved by shifting the long-term care cost to tax payers.

Responding to these and other problems, well-intentioned analysts, public officials and politicians wracked their brains to find solutions. But invariably they made the problems their earlier interventions had caused, even worse. They capped bed supply when Medicaid costs exploded causing nursing homes to sue successfully for higher rates. Then they capped rates creating the fateful differential between higher private pay and impecunious Medicaid rates. When quality suffered, they demanded higher quality without providing adequate funding. Then, when quality didn’t improve, they imposed regulations and inspections that made quality care even more difficult to provide. The inevitable results were huge tort liability suits punishing hapless Medicaid nursing homes for providing the low quality of care the government was willing to finance.

Now, some 53 years after Medicaid arrived to fix long-term care, the “experts” want to add more government money and regulation. You can’t extinguish a fire by dowsing it with gasoline. More of the same intervention that caused long-term care’s problems in the first place will not solve them.

LTC Calculation

What should we do instead? Give the private long-term care services and financing markets some room to breathe. Back off government intervention enough to allow those markets to generate the kinds of data that investors, entrepreneurs and consumers need to chart a better course. What exactly might we try?

In “How to Fix Long-Term Care Financing,” I explained the problems created by government intervention much more thoroughly and I outlined the needed corrections in greater detail than I can do here. Check it out, but here are the key corrective measures we could take to reduce the negative influence of public policies on long-term care services and financing.

1. Return Medicaid to its true purpose as a long-term care safety net for the poor, not the primary long-term care funding source for all Americans.

2. Toward that end, eliminate Medicaid’s gigantic home equity exemption so that people have reason to access trillions of dollars of wealth to purchase quality long-term care.

3. Eliminate other eligibility loopholes, especially “spousal refusal” and “Medicaid-friendly annuities” that allow the wealthy to co-opt Medicaid funds that should go to the poor instead.

4. Re-direct gerontological research from focusing on alleged impoverishment to analyzing (1) how many Medicaid long-term care recipients own homes and with what values, (2) what their economic status was ten or twenty years before needing long-term care, when they still might have — with the right incentives and absent the existing disincentives — taken measures to prepare for long-term care and avoid Medicaid dependency, and (3) what happened to the wealth they formerly possessed and to what extent it was expended for long-term care or used or transferred in some other way.

5. Give state Medicaid programs more authority and flexibility to experiment with measures like these either by block-granting the program (less money, more flexibility) or by creative use of “1115 waivers,” a well-established means to try out new approaches.

In other words, little by little remove the counterproductive government interventions in long-term care which have prevented the free market from developing the data and sending the signals that consumers, investors and entrepreneurs need to make wise decisions.

Do this and we’ll see entrepreneurial creativity unleashed. We’ll see new products and services evolve that better meet consumers’ needs. We’ll see a flood of private funding flow through to long-term care providers raising access and quality for all. We’ll see fewer people dependent on public programs and therefore more public resources available for those who need them most. As more people have to spend more of their own money, including their home equity, on long-term care, we’ll see more of them planning earlier to prepare for long-term care risks and costs. We’ll see products like reverse mortgages and private long-term care insurance prosper as never before, bringing more jobs and tax revenue to the economy.

It boils down to a simple truth: don’t expect a different result until you stop doing what you’ve always done. Get out of the way and let “LTC Calculation” in a free market point the way to a better long-term care system.

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Updated, Monday, February 12, 2018, 9:04 AM (Pacific)

Seattle—

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LTC E-ALERT #18-007: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Americans Will Struggle to Grow Old at Home
Today's Massive Budget Deal Makes Big Medicare Changes
A Medicare Benefits Update Could Cut Medigap Sales: GAO
Long-term care insurance: Buyer beware
Genworth Faces Deal Resistance in Delaware
CDC data show how small, large assisted living communities differ
Too Few People Bought What You Sell: Treasury Economist
Trump administration considering lifetime limits on Medicaid benefits
American Independent Marketing Joins Integrity Marketing Group
Drinking alcohol can clear brain waste, study finds
The Rough Lives of Older Americans in ‘Nomadland’
U.S. Pays Billions for ‘Assisted Living,’ but What Does It Get?

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Updated, Friday, February 9, 2018, 9:50 AM (Pacific)

Seattle—

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LTC BULLET: LTC CAUSE AND EFFECT

LTC Comment: New Bipartisan Policy Center LTC report puts the services cart before the financing horse as usual. We explain after the ***news.***

*** IS THIS THE BIG ONE? As I write this (yesterday), the Dow Jones Industrial Average just dropped over 1,000 points after a similar fall last week. Could the reckoning we’ve predicted in these LTC Bullets be about to happen? (Probably not. Probably just a long overdue correction in the equity markets. But what if?)

The U.S. economy has been living on borrowed money … and time. The National Debt Clock shows us $20.6 trillion in the hole not counting $111.9 trillion in unfunded entitlement liabilities and $18.8 trillion in personal debt. The 2-year budget deal President Trump signed this morning spikes the federal budget deficit another $265 billion.

When it becomes obvious that the USA cannot pay back the debt it has already incurred, our lenders—money printers at the Fed, domestic bond buyers, China, etc.—will stop purchasing new debt and demand repayment of existing debt. When that happens, the Federal Reserve will have to make up the difference by printing more money and buying more bonds. That’s the same “Quantitative Easing” they did the last two times the U.S. economic bubble popped: 2000 and 2008.

Only this time, QE4 will have to be levels of magnitude greater than ever before. That means huge new increases in the money supply which is already at historically stratospheric levels. More money chasing the same amount or fewer goods is the definition of inflation. Inflation means the dollar is worth less. The biggest risk right now is that people will lose confidence in the dollar as it loses value. Who wants to loan a destitute Uncle Sam money at historically low interest rates when it looks less and less likely Sam will pay it back? What’s different this time is that we’re so much deeper in debt and interest rates are still so low that the Fed has very little room to lower them to goose the economy. A perfect economic storm is brewing.

If this is the big one, look for the things we’ve been predicting to play out sooner rather than later. Interest rates will continue to increase to the point where the U.S. government cannot meet its obligations even by pumping the debt limit higher and higher. Budgetary austerity will no longer be only a gleam in a few fiscal conservatives’ eyes. Revenue shortfalls will be a stark reality compelling major cutbacks in all federal and state spending programs, including the big three entitlements: Medicare, Social Security and Medicaid.

Medicaid specifically will no longer have the luxury to allow affluent people to shift the cost of long-term care onto taxpayers to the detriment of genuinely needy people. The central planners’ pipe dreams for new entitlements to fund long-term care (see the LTC Bullet below) will go up in smoke. Private markets will survive and prosper with the reduction of government interference. Smart investors know "the time to buy is when there's blood in the streets." (Baron Rothschild) Private money will flow into smarter investments. Entrepreneurs will seek and offer better LTC mousetraps. Consumers spending their own money, including their no-longer-Medicaid-protected home equity, will demand quality LTC in the most appropriate venues. Private long-term care insurance will revive.

Does it sound like I’m wishing for this to happen? Not exactly. It’s more like how you’d feel if a friend with a drug addiction were putting off treatment. The worst is going to happen sooner or later regardless. The longer we delay it with phony economic policies that hide the reality while making the underlying problems worse, the harder the consequences will be when they do occur. So, bring it on. Let’s work on fixing this mess instead of kicking the can even further down the road.

(These are Steve Moses’s opinions and do not necessarily reflect the views of any Center for Long-Term Care Reform members, sponsors or supporters.) ***

LTC BULLET: LTC CAUSE AND EFFECT

LTC Comment: Cause and effect are simple, straightforward concepts. When a cue ball hits the rack of fifteen, something happens. You don’t need Newton’s Third Law of Physics to understand that. In reality, causes have effects; not the other way around. So why do analysts studying long-term care always start with effects and never with causes?

The Bipartisan Policy Center’s latest in a string of reports on long-term care is a perfect case in point. “A Policy Roadmap for Caring for Individuals with Complex Care Needs” is paved with good intentions, but fraught with unintended consequences, because it seeks to fix America’s long-term care system without first explaining why it is so dysfunctional.

Following is the crux of the Bipartisan Policy Center’s report extracted from its “Executive Summary.” Let’s deconstruct and examine their “pathway” to improving long-term care. Here are each of the “Roadmap’s” key components followed by our comments explaining how BPC has everything backwards.

BPC’s Roadmap: “The pathway to improving the quality of care and controlling the cost of serving individuals with complex care needs must address the following issues:

“A focus on person- and family-centered care, that places a priority on understanding the care goals of families and delivering the services that support them;”

LTC Comment: Sounds good, but why aren’t person- and family-centered care already central to the long-term care system? Answer: Medicaid and Medicare made care providers, instead of patients, the customers of long-term care spending. Patients and families lack control and choice because public LTC financing removed them from the market. They don’t find and pay for their own care, so they have to take whatever the government offers. The many tweaks to our Rube Goldberg LTC system recommended by BPC in the pages that follow will only make it more complicated and expensive unless and until they address the cause, government interference in the market, ahead of its effects.

BPC’s Roadmap: “An emphasis on coordinating care to ensure that services work across programmatic silos and avoid unnecessary or duplicative care and costs;”

LTC Comment: OK, but why is care uncoordinated in the first place? Where did those programmatic silos that cause unnecessary or duplicative care costs come from? Answer again: Medicaid and Medicare. In a freer long-term care market, with less public financing, consumers would select services they want in venues they prefer. Entrepreneurs would vie to invent and provide services consumers favor. Investors would direct their capital investments toward what the public wants instead of what government spending incentivizes. Starting with the ruinous effects of public LTC financing and trying to fix them with more of the same is folly. Instead, recognize the cause and mitigate the damage it does.

BPC’s Roadmap: “Creating a path from medical-driven models that provide care based on what is reimbursed to person-centered models that provide what people need and want;”

LTC Comment: Again, the first question to ask is why we have medical-driven care models. The answer is the same: government interference in the long-term care financing system. That’s why people can’t get what they need and want. The way to fix the problem is to address the cause, not to tinker with the effects.

BPC’s Roadmap: “Support for family caregivers; and,”

LTC Comment: Why do family caregivers need support in the first place? By paying for most long-term care, Medicare and Medicaid convinced consumers they don’t need to worry about LTC risk and thus crowded out private LTC insurance. Medicaid diverted seniors’ biggest asset, home equity, from long-term care liability thus starving the service delivery system for private financial oxygen from home equity conversion. Decades of Medicaid’s institutional bias impaired development of a private home-care market to meet the public’s care preferences. Should we trust finding more “support for family caregivers” to advocates and defenders of the public financing programs that caused the shortage in the first place?

BPC’s Roadmap: “Efforts to identify financing strategies, both public and private, to support the delivery of LTSS.” (p. 5)

LTC Comment: Before they decreed that America needs a new compulsory, backend, payroll-financed, Medicare-cloned entitlement program to finance long-term care, the Bipartisan Policy Center should have given some thought to why long-term care in the United States is short of financing in the first place. Read “How to Fix Long-Term Care Financing” for the answer to that conundrum. Until you understand that answer clearly, tinkering with current financing models will only exacerbate their dysfunctionalities.

Closing LTC Comment: I encourage LTC Bullets readers to review the Bipartisan Policy Center’s “A Policy Roadmap for Caring for Individuals with Complex Care Needs.” What you’ll find is dozens of complicated recommendations for nips and tucks in America’s defective long-term care service delivery and financing system. What you will not find is any effort whatsoever to understand why the problems they’ve set out to fix exist in the first place. Consequently, the BPC has once again put the services cart in front of the financing horse and placed both on a pathway to further bipartisan political depredation.

Stay tuned for next week’s LTC Bullet. We’re going to explain why turning over any sector of an economy to central planners (like the folks at BPC) inevitably fails. Fundamental, incontrovertible economic principles are at work here. Once you understand them, the problems and the solutions for long-term care light up. Read “LTC Bullet: LTC Calculation” next Friday.

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Updated, Monday, February 5, 2018, 10:09 AM (Pacific)

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LTC E-ALERT #18-006: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

If Immigrants Are Pushed Out, Who Will Care for the Elderly?
CMS Tries to Flush ‘Sick Creep’ Out of Medicare Advantage Rates
CMS to Allow Non-Skilled Home Care Benefit in Medicare Advantage
What to Say Now About LTCI Rate Increases
A New Public/Private Long-Term Care Financing Plan
LTC Insurance Payouts Increased 6 Percent In 2017
70% of Senior Living Communities Don’t Offer Discounted Rents
Amazon, Buffett's Berkshire And JPMorgan To Launch Healthcare Company
CCRCs Gain Luster as Standalone SNFs Fade
What Will Senior Housing Look Like in 2028?
What’s Bad for GE Will Be Worse for America
More Than One-Third of People with Traditional Medicare Spent at Least 20 Percent

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Updated, Friday, February 2, 2018, 8:50 AM (Pacific)

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LTC BULLET: LTCI EXPERT FIGHTS BACK

LTC Comment: Bill Comfort, a seasoned veteran of many LTCI policy skirmishes, offers evidence and logic in response to the often uninformed media criticism of the product and its purveyors, after the ***news.***

*** BIG SONIA is not to be missed! It’s an inspirational film spotlighting the resiliency of Sonia Warshawski, a 4’8” holocaust survivor. I saw this movie last week in Santa Fe. It’s the right antidote if you’re feeling beaten down by life’s adversities (including the attacks on LTCI). This indomitable woman survived more than we can imagine and yet thrived, giving hope and inspiration to others. Click here for a trailer; here for a review; and here for a list of screenings. Special thanks to long-time Center friend and supporter Claude Thau and his wife Tina, for their non-profit financial support of this moving film. Claude says “You might like to inform schools, religious groups, and prisons, as well as friends. Schools or non-profits (for $300) and theaters can request screenings by submitting contact information at https://bigsonia.com/request-a-screening/.” ***

*** MORE MOVIE NEWS: Center member and LTCI producer/author Ross Schriftman reports his movie is cast: “Based on the book of the same name by Ross Schriftman, My Million Dollar Mom is a film about a mother diagnosed with Alzheimer's just as her son is offered his last chance to be elected to Congress. He must decide between his life-long dream and his mom's wishes to remain in her home under his care. The script for the feature film was selected as a semi-finalist in Story Pros' screenwriting contest in the drama category.” Read more and learn the cast here. ***

*** LTC E-ALERTS PRAISED: “I look forward to every E-Alert. A definite, mandatory read for anyone in the LTC market. Personally, I appreciate the time and effort that Damon and Steve put in everyday to keep us not only motivated, but ahead of the naysayers. It’s tough down here in the trenches especially when you get those negative WSJ articles. I ask a favor. Would you please send that latest article by Leslie Scism, from the WSJ, Jan 17^th 2018, on “Millions Bought Insurance….They Face an Awful Choice” I don’t subscribe to the WSJ but would like to see the article in its entirety…thank you.” Thank you, Randy Gallas, CLTC, LTCP, President, Long-Term Care Insurance Agency, LLC, for your support. We’re happy to help. ***

LTC BULLET: LTCI EXPERT FIGHTS BACK

LTC Comment: It seems like private long-term care insurance is always under fire. But the last few weeks have been worse than ever. Like shooting fish in a barrel, the media have been taking easy shots at the product and the people who manufacture, distribute and sell it.

We’ve covered the latest onslaught in (1) LTC Bullet: Don’t Buy LTCI?!, January 12, 2018, correcting errors in “Long-Term Care Insurance Is a Poor Buy, CFP Says;” (2) LTC Bullet: Three to Get Ready, January 19, 2018, responding to “Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice,” by Leslie Scism, in the Wall Street Journal; and (3) LTC Bullet: LTCI Under Fire, January 26, 2018, bringing you LTCI veteran Claude Thau’s comments on and partial rebuttal of the WSJ fusillade.

The latest article about LTCI that deserves mention and response is “What’s Bad for GE Will Be Worse for America,” by Timothy L. O’Brien of Bloomberg. This piece is much better than the earlier ones, but it does invite comment. We covered it this way in an LTC Clipping:

1/29/2018, “What’s Bad for GE Will Be Worse for America,” by Timothy L. O’Brien, Bloomberg

Quote: “General Electric’s multi-billion-dollar loss in a unit that sold long-term-care insurance is a blow from which the iconic company is still reeling. But it’s also a harbinger of a much greater challenge for society at large: paying to care for the growing number of Americans who can’t look after themselves. … [T]he debacle illustrates a troubling truth: Private insurance can’t handle this problem by itself. … Medicare covers only a short period of care after a person has been hospitalized. That leaves Medicaid, the state-administered program for the poor. But it kicks in only after people have burned through their assets -- precisely the outcome that insurance is meant to avoid. … The challenge is to design a safety net that will deliver long-term care when it’s needed -- without making people destitute first, yet without burdening taxpayers unduly.”

LTC Comment: Finally an article that recognizes the magnitude of the long-term care financing problem without casting blame. Good. On the other hand, it adopts the conventional wisdom that Medicaid LTC benefits are only available to the poor. If that were true, people would be eager to buy private LTC insurance at almost any price. The fallacy that only the poor get Medicaid stands in the way of a “safety net that will deliver long-term care when it’s needed -- without making people destitute first, yet without burdening taxpayers unduly.” We delivered the evidence, the logic and the solution in “How to Fix Long-Term Care Financing.”

What else in the Bloomberg editorial needs comment and correction? For that we turn to Bill Comfort of Comfort LTC, a highly regarded LTCI expert and trainer. Following are Bill’s comments on “What’s Bad for GE Will Be Worse for America,” by Timothy L. O’Brien, Bloomberg. We recommend that you click through to the article first, read it and then consider what Mr. Comfort has to say.

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Comments on “What’s Bad for GE Will Be Worse for America”
By
Bill Comfort

The overall point of the Bloomberg editorial (1/29/2018) is important: we need to look more deeply at how we fund long-term custodial care in America. However, the editorial perpetuates several significant misunderstandings:

The LTC business that is at issue with GE is NOT the direct pricing, issuing, and managing of LTC policies (that business was spun-off into Genworth in 2004), but rather the REINSURANCE of other companies' LTC business. In fact Moody's recently issued a report stating that because of the limited scope of policies backed by GE's reinsurance and GE's indirect ability to manage those blocks, that this is NOT a good example for the health of the rest of the overall LTCI industry.

LTC insurers did NOT miscalculate on how long people would live or how many would go on claim - the "claims rate" or percentage of policyholders who would claim - they have hit that pretty much on the mark. What they missed - dramatically - was the "lapse rate,” that is how many policyholders would keep the coverage in-force over the long term. If you expect about 33% (yes, that's the real number) of policyholders to claim but you have 2x to 3x more policies in-force than you predicted then you have made a huge pricing mistake, like 100%+. The unpredictable lapse "mistake" has contributed to about 50% of the pricing changes needed.

2.a. Most LTC companies in the 1990s priced a disability/individual health insurance lapse rate of about 7%. Interestingly AMEX LTC - the early leader that was acquired by GE Financial now Genworth - priced its lapse rate at 4.5% in 1994, which was thought to be extremely conservative at the time. Actual lapse rate for the LTCI industry: 2%; actual lapse rate for Genworth/GE/AMEX: less than 1%. No financial insurance product EVER had such low lapses; the closest is whole life insurance at 3.5%. This was unknowable and devastating.

After the lapse picture started to become clear, the claims issue was not more people (a greater percentage) going on claim, but rather that claims were lasting longer than expected. On average the durations were just an additional year or two (something like 33% to 50% longer for women, 25% to 33% longer for men), but when compounded against more than twice the number of people expected to claim this was disastrous. The claim duration mistake has contributed to about 30% of the pricing mistake, but again all of the elements compounded the individual “mistakes.” We now have 70-times more claims data than in just 2004 - it's approaching true "credibility" and not just an estimated assumption.

Finally, our historically-low for historically-long low interest rate environment put the final catastrophic spin into the perfect storm of LTCI rating problems. If long-term reserve earnings were priced at 6-7% (as they'd been for 60+ years in the industry), and all of a sudden new premiums and maturing reserves had to go into 3% bonds it's a problem.

The Good News: New business premiums today already have all of these more conservative realities priced-in. Looking forward, LTCI will be, must be, more rate stable.

A final note on the ability – or inability – to price long-term care as an “insurable risk.” I see this stated in many places – including an insinuation by Bloomberg – but it’s often said without evidence, and too often paired with the “fact” that “70% of people will need care.” Rhetorically then how could we possibly price and insure a risk that is very likely to happen?! This is where the constant harping on “70%” is so dangerous, because it’s not true – the 70% data assumes help with only one ADL and/or 4 IADLs (shopping, cooking, cleaning, transportation, bill paying, etc.), these don’t qualify for LTC insurance benefits. Using this standard, sure, 70% will need “some type of care,” but not Tax Qualified LTC Insurance-triggered care. One actuarial study from a few years ago showed that using TQ LTCI triggers (2 of 6 ADLs on at least a stand-by basis expected to last 90 days, OR continual supervision for a cognitive impairment) coupled with a 90-day EP would mean that about 33% (1/3) of policyholders could be expected to receive at least $1 in benefits; only about 20% (1/5) would receive benefits for more than a year. It IS an insurable risk, and it IS now being priced correctly.

Bill Comfort, CLTC® is the owner of Comfort LTC, a member of the National LTC Network, with offices in St. Louis, MO, and Raleigh/Durham, NC. Contact him at Bill@ComfortLTC.com or 314-821-5001

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Updated, Monday, January 29, 2018, 8:50 AM (Pacific)

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LTC E-ALERT #18-005: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Assisted living communities top nursing homes for caregiver pay
What's Wrong With The New RAISE Act To Help Family Caregivers
Out-of-pocket health-care costs likely to take half of Social Security income by 2030, analysis shows
This is the reality of being in a nursing home
How the Age Wave Will Transform Health, Longevity and Medicine: Ken Dychtwald's Keynote at the Exponential Medicine Conference
Latest Alzheimer's Flop Raises Doubts About 'Amyloid Hypothesis’
GE is under SEC investigation
Why The WSJ Is Wrong About Long-Term Care Planning
GE's LTCI Block Might Be Different: Rating Agency
The true cost of obesity to SNFs

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Updated, Friday, January 26, 2018, 9:41 AM (Pacific)

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LTC Bullet: LTCI Under Fire

LTC Comment: Analysis and commentary on the Wall Street Journal’s recent critique of private long-term care insurance by a leading LTCI expert follow the ***news.***

*** TURNABOUT is fair play: In the midst of LTCI criticism, it’s good to consider testimonials like this one addressed to Honey Leveen, the self-styled “Queen of LTC Insurance": “Hi Honey, one of the best days in my life was when you walked through my door and sold me my LTCi. That was almost 20 years ago. I never thought I'd have to use it. I will move to an assisted living facility shortly. Without my LTCi I could never afford it. I am grateful to you." Nancy S, Houston, TX, January 2018 Click here for additional client comments. ***

*** SAMPLE LTC CLIPPING: 1/22/2018, “Why The WSJ Is Wrong About Long-Term Care Planning,” by Jamie Hopkins, Forbes

Quote: “A recent Wall Street Journal article, “Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice,” has been circulating on the internet but for all the wrong reasons. The WSJ piece essentially falls into the ‘bad news sells’ category of reporting. While the article itself provides plenty of great statistics and touches on a very important topic, the article really misses the mark on two main points about long-term care insurance. Its ‘Woe is me!’ theme actually pushes people away from doing quality long-term care planning. Instead of lamenting past missteps, the article could have emphasized some of the new techniques for building effective and sustainable solutions to the budding long-term care crisis.”

LTC Comment: A good rebuttal of the WSJ attack on LTCI by Jamie Hopkins, whose credentials for the task are excellent. To wit: “I am the Co-Director of the American College’s New York Life Center for Retirement Income and an Associate Professor of Taxation at the American College where I helped develop the Retirement Income Certified Professional® (RICP®) designation. I also hold the Larry R. Pike Chair in Insurance & Investments. I’ve written about, and published, a variety of articles on retirement. I frequently write and publish law review articles dealing with retirement issues, such as long-term care, taxation of insurance benefits, and estate planning. I am extremely passionate about the retirement security of Americans and believe that a better prepared public can enjoy a more secure and fulfilling retirement.”

LTC BULLET: LTCI UNDER FIRE

LTC Comment: Private long-term care insurance has been on the receiving end of media criticism from the very beginning. But lately, the onslaught has seemed heavier than ever. One piece in particular, “Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice,” by Leslie Scism, published January 17 in the Wall Street Journal, struck a chord. Response from LTCI defenders was quick and frequent including our reply in last week’s “LTC Bullet: Three to Get Ready” and “Why The WSJ Is Wrong About Long-Term Care Planning,” by Jamie Hopkins in Forbes, which we cited in the LTC Clipping above.

But few participants in or observers of the long-term care insurance business are better equipped to review what’s right and what’s wrong in the current criticism than today’s Guest Bullet author Claude Thau. He’s directed a major LTCI insurance operation, been a leading distributor of the product for decades, and is a highly respected analyst and author on the topic. We asked Claude if we could share his recent review and critique of the WSJ article with you as today’s LTC Bullet. With his permission, that follows.

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For the most part, Leslie Scism’s Wall Street Journal article is accurate, however it leads readers to reach false conclusions. From my perspective, it is clear that:

Insurers are losing a lot of money on their old LTCi policies. Although it was clear from the start that LTCi was a risky business, the “perfect storm” problems that the insurers are experiencing was unforeseeable.
Both claimants and healthy policyholders cherish their policies (for good reason), hence will either stretch to pay the increased premiums or will reduce coverage to keep their policy in effect.
Price increases are a big problem for people who bought LTCi policies long ago and don’t have the cash flow to pay the premium increases.
People who can afford the price increases are getting a good deal, although they expected a much better deal. I think it is appropriate that the burden of the adverse experience is being split between the insurers and the policyholders, but choosing the right balance is subjective. I empathize with both sides, but more so with the policyholders.
The industry is not meeting its potential in helping to solve the country’s LTC financing problems. There are many reasons why the industry is not developing adequate market share. Some people blame the industry; some people blame various levels of government. However, human nature and other factors also contribute.
Despite the problems, a good number of insurers have stayed in the market or entered the market, offering good ways that many people can insure their LTC risk.
The price increases are taking a heavy toll on the industry, partly because media attention is focused on these older blocks, which causes people to be unduly wary of good opportunities to protect against LTC risk.
The problems of existing policyholders, while severe, are significantly less common than Ms. Scism suggests.
A key issue: How do we encourage insurers to develop coverage for new risks, particularly distant future risks (long-term care is much more risky for insurers than annual property and casualty risks such as cyber risks).

The industry is losing money because the insurers ARE paying claims¹. Insurers sometimes erroneously fail to pay a claim, but failure to pay a claim appropriately is not necessarily bad faith. I have generally succeeded in getting errors fixed or in explaining to the policyholder or family why the claim decision was right. The Independent Review process, which protects against some wrongly-denied claims, is rarely used, which suggests that claims are resolved fairly. To the degree that the July 2017 Milliman LTCi Survey was able to identify such appeals, independent reviewers supported insurers’ declines in nearly 90% of the cases², which also suggests claims are resolved fairly. A 2016 study³ found that 98% of LTCi claimants were satisfied with their claim payments and an earlier federally-funded study⁴ found large satisfaction as well. (Footnotes are below my signature block.)

Our society spawns a significant number of fraudulent insurance claims in every line of insurance, including LTCi. Insurers have a responsibility not to raise premiums in order to pay fraudulent claims. Their efforts to avoid fraudulent claims can contribute to (but not fully explain) frustrating claims processes (16% of claimants do not consider the claims process to be easy.⁵)

Ms. Scism wrote “some policyholders complain that it [the industry] has nothing to lose by denying legitimate long-term-care claims”. She failed to address that complaint appropriately. One of the key risks of denying a LTCi claim is the huge risk of a (possibly class action) law suit. In my view, insurers too often pay claims because the cost of defending a lawsuit would be expensive, even if successful. Perhaps that contributed to a federally-funded study concluding that insurers overpaid LTCi claims by 3.4%⁶.

Ms. Scism’s title refers to “Millions… Face An Awful Choice” and her second paragraph starts “Now, though, the industry is in financial turmoil, causing misery for many of the 7.3 million people who own a long-term-care policy, equal to about a fifth of the U.S. population at least 65 years old.” This sentence is inaccurate and misleading in several respects:

There were 47.8 million above age 65 as of July 2015⁷, obviously even more today. Dividing the “7.3 million” by 47.8 million produces less than 15% (still overstated), not “about a fifth” as she wrote.
She is including people below age 65 in the numerator but not in the denominator. If she did an apples-to-apples comparison, the ratio would be significantly lower than even 15%.
She is also including policyholders who no longer pay premiums (generally because they are on claim) and those who have purchased more recently-priced policies.
She wrote “Credit Suisse analysts tallied more than 4,500 rate-increase requests nationwide from 2009 to early 2017 by 16 once-big sellers of long-term-care insurance. The proposed increases affected hundreds of thousands of policyholders.” Even if all those “hundreds of thousands” are over age 65, the Credit Suisse data suggests probably less than 10% of people age 65+. Did she make any effort to reconcile the conflict between her statements and her Credit Suisse source?

Policyholders getting huge price increases is worthy of attention and discussion, but focusing solely on the plight of policyholders who bought LTCi long ago leads readers to infer that LTCi is not a good alternative for them today. The past problems have caused today’s products to be much more stably priced. Furthermore, Ms. Scism dismisses the popular combo products (“But such products are often costlier”), without mentioning that many of those combo products are entirely guaranteed, which protects against the “misery” she cites. By the way, of course it costs more if you add a potential death benefit to LTCi coverage. I believe articles about price increases on old policies should make strong efforts to explain that the situation is tremendously better today.

Best wishes,

Claude Thau
Director of Long Term Care Insurance Funding Solutions, Target Insurance Services
We're in it for the Long-Term... We Care^SM11020 Oakmont St., Overland Park, KS 66210
Phone direct: 913-403-5824; WATS line: 800-999-3026, x2241
claudet@targetins.com
Click here to connect with Claude on LinkedIn

¹ NAIC Experience Exhibit Reports through 2014 show LTCi claims compounded 12% per annum from 2001-2014. The author did not seek more recent information; growth clearly has continued albeit at a rate that the author can’t quote. See also the subsequent proof that claimants are satisfied, etc..
²Thau, Claude; Schmitz, Allan; and Giese, Christopher, Milliman LTCi Survey, Broker World Magazine, July 2017, p. 3 of the reprint.
³LifePlans, “Experience and Satisfaction Levels of Long-Term Care Insurance Customers: A Study of Long-Term Care Insurance Claimants”, September 2016, p. 14. “…only six percent of claimants had a disagreement with their insurance company about policy coverage, and the majority of these disagreements (65 percent) were resolved to the satisfaction of the claimant. Put another way, for every 100 people making claims under their insurance policy, only two are likely to have had a disagreement about coverage that was not solved to their satisfaction.” A table on page 22 shows that 70% of claimants were “very satisfied” with their policy, 27% were somewhat satisfied, 2% were somewhat dissatisfied and 1% were very dissatisfied. The lower satisfaction rate in this table appears to reflect the claims process as well as the amount paid, whereas the 98% statistic is related solely to the amount paid.
⁴ U.S. Department of Health and Human Services, Office of Disability, Aging, and Long-Term Care Policy (2006 and 2008). “Service Use and Transitions: Decisions, Choices, and Care Management Among an Admissions Cohort of Privately Insured Disabled Elders” (2006); “Following an Admission Cohort over 28 Months to Track Claim Experience, Service Use, and Transitions” (2008); “Care Management, Claim Experience, and Transitions Among an Admissions Cohort of Privately Insured Disabled Elders over a 28-Month Period” (2008). This study found that 14% of home care claimants, 5% of assisted living facility (ALF) claimants and 11% of nursing home claimants were dissatisfied. It differed from the 2016 study in that this older study dealt with people earlier in the claims process. Satisfaction apparently increases with time on claim, perhaps because the paperwork hassle is concentrated at claim initiation and because the monthly payment tends to increase and cumulative payments definitely increase.
⁵ LifePlans, “Experience and Satisfaction Levels of Long-Term Care Insurance Customers: A Study of Long-Term Care Insurance Claimants”, September 2016, chart p. 15 shows that 78% said it was easy; 15% said it was difficult and 7% did not know. Of those who expressed an opinion, 15/93=16.2% thought it was difficult)
⁶National Long-Term Care Insurance Claims Decision Study: An Empirical Analysis of the Appropriateness of Claims Adjudication Decisions and Payments, April 2010; Figure 5; p. 11 Total Paid/Total that should have been paid = Total Paid/((Total paid - (Amount that auditors would have denied – amount that auditors would have approved)) = $155,925,300/(155,925,300 – ($5,905,708 -$719,999)) = 3.4%
⁷ See https://www.census.gov/newsroom/facts-for-features/2017/cb17-ff08.html

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Updated, Monday, January 22, 2018, 9:39 AM (Pacific)

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LTC E-ALERT #18-004: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

One Day Your Mind May Fade. At Least You’ll Have a Plan
Long-Term Care Insurance Claim Payments Rise 6.4%
Only 7% of Caregivers Prefer to Work in Nursing Homes, Report Finds
Alzheimer's Association issues new guidance for dementia care in nursing homes
Mutual of Omaha plans to sell Medicare Advantage health plans in 2019
Home Care Agencies Often Wrongly Deny Medicare Help To The Chronically Ill
If you’re caring for Mom or Dad, your own retirement is in danger
Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice
Caring for young children and elderly parents, and wrestling with resentment
5 Notes on GE's $15B in LTCI Reserve Contributions
GE CEO Renews Pledge to Study Breakup After $6.2 Billion Stumble
Skilled Nursing Providers Sue Illinois Over Medicaid Rates

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Updated, Friday, January 19, 2018, 10:08 AM (Pacific)

Seattle—

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LTC BULLET: THREE TO GET READY

LTC Comment: Three seemingly unrelated Wall Street Journal articles this week are ominous for long-term care financing. Explanation after the ***news.***

*** SAMPLE LTC CLIPPING:

1/18/2018, “Long-Term Care Insurance Claim Payments Rise 6.4%,” by Allison Bell, ThinkAdvisor

Quote: “Long-term care insurance (LTCI) providers paid about $9.2 billion in U.S. long-term care claims in 2017, or about 6.4% more than they paid in 2016, according to the American Association for Long Term Care Insurance. . . . The number of people on claim increased 5.4% between 2016 and 2017, to 295,000, according to AALTCI.”

LTC Comment: Something tells me we won’t see these findings on the front page of the Wall Street Journal. ***

LTC BULLET: THREE TO GET READY

LTC Comment: “One for the money; two for the show; three to get ready; and four to go.” I recall that expression from my childhood. It came to mind as I contemplated three WSJ articles this week. They seem to bear no relationship to each other, but taken together they’re ill omens for long-term care financing. So, here we go . . .

Article number one is “How Millionaires Collect Food Stamps,” by Kristina Rasmussen, published January 15. She writes

Consider the food stamp program’s longstanding policy of “broad-based categorical eligibility.” You probably assume that food stamps go to poor people only. But this policy . . . allows state food-stamp programs to grant benefits to anyone who has moderately low wage income, regardless of net worth. A family with a seven-figure bank account can be eligible for food stamps.

Sound familiar? The same phenomenon occurs with eligibility for Medicaid long-term care benefits, only worse. Most assets are exempt from eligibility consideration, but even low-income isn’t necessary for Medicaid LTC, only cash flow insufficient to pay for costly nursing home care. For a complete explanation of Medicaid long-term care eligibility, why the affluent often qualify, and dozens of references to legal publications explaining how, see my monograph “How to Fix Long-Term Care Financing,” published by the same Foundation for Government Accountability that employs the food-stamps-article author Rasmussen.

Article number two is an op-ed titled “The Case for Medicaid Work Requirements,” by WSJ editorial board member Jason L. Riley, published January 16. He writes

[F]ew things are more important to America’s financial health than entitlement reform, and last Thursday the Trump administration backed state work requirements for recipients of Medicaid, which covers more Americans than any other health-care program. . . . In a major policy shift . . . the Trump administration told states that they could impose modest work or job-training requirements on childless adults without disabilities who receive Medicaid.

Imagine having to work or show signs you’re trying to find work before qualifying for free taxpayer-financed health care. Heaven forfend! Opposition was quick, widespread and strident.

But this was just a baby step in the direction of targeting Medicaid to the genuinely needy, because, as Riley observes, most Medicaid recipients are elderly, disabled or children, not able-bodied adults. A much bigger problem remains: gaping loopholes that trap many otherwise responsible affluent people on Medicaid unnecessarily. Specifically, the program’s huge home equity exemption--between $572,000 and $858,00 as of 2018--and its policy of allowing Medicaid-friendly annuities and “spousal refusal” create a slippery slope onto Medicaid for people who could, would and should have prepared privately for long-term care risk and cost.

A smart next step for the Centers for Medicare and Medicaid Services, which administers Medicaid, would be to apply the same “1115 Waiver” authority it used to enable states to impose work requirements on able-bodied applicants, to empower state Medicaid programs to reduce or eliminate the federally imposed home equity exemption and the annuity and spousal refusal dodges. I explained the need and made the case for such a move in “How to Fix Long-Term Care Financing.”

Article number three is a front-page, above-the-fold news article titled “Millions Bought Insurance to Cover Retirement Health Costs. Now They Face an Awful Choice,” by Leslie Scism, published January 17. She writes

Long-term-care insurance was supposed to help pay for nursing homes, assisted living and personal aides for tens of millions of Americans when they became unable to take care of themselves. Now, though, the industry is in financial turmoil, causing misery for many of the 7.3 million people who own a long-term-care policy, equal to about a fifth of the U.S. population at least 65 years old. Steep rate increases that many policyholders never saw coming are confronting them with an awful choice: Come up with the money to pay more—or walk away from their coverage.

Here’s how I replied to Ms. Scism:

“There is a critical aspect of the LTC insurance issue that your otherwise fair and well-researched article missed entirely.

“When LTC insurance carriers recognized their reserves were inadequate to pay future claims, they did the honorable thing. They raised premiums to ensure future claimants would receive full benefits.

“Compare that with the federal government’s failure to fund Social Security and Medicare adequately, leaving those programs with upwards of $100 trillion dollars in unfunded liability. What’s more, government policy actually impaired private LTC insurance.

“Beyond the reasons you cited for LTC insurance problems (actuaries’ errors regarding lapse rates and utilization, plus the Federal Reserve’s forcing interest rates to near zero, for which actuaries should not be blamed) there is another cause. Medicaid is the dominant payor of long-term care. Easy access to Medicaid for middle class and affluent people after they already needed care crowded out up to 90% of the potential market for LTC insurance, according to authors of peer-reviewed research published in the American Economic Review.

“In other words, government policy impaired demand for and profitability of private long-term care insurance, while itself, leaving most aging Americans vulnerable to social insurance and public assistance programs that are hopelessly unprepared financially for the coming age wave.

“It is a tragedy to blame private insurers and the dedicated people who’ve tried to make the LTC insurance product work for problems caused by poor public policy. Blame the culprits, not the victims.

“For a full explanation, evidence and documentation of these facts and this analysis, please see my monograph “How to Fix Long-Term Care Financing,” published by the Foundation for Government Accountability (also the source of yesterday’s WSJ op-ed about millionaires on food stamps, a very similar problem.)

“If you would like to follow up on these aspects of this complicated problem, please contact me.”

Steve Moses, President
Center for Long-Term Care Reform

LTC Comment: OK, let’s tie these three articles and the key points they make together. Article one exemplifies the problem. Perverse incentives in public policy lure affluent people onto welfare for whom our safety net programs were never intended. Article two shows an example of how public policy can be modified to discourage overuse of public assistance by able-bodied non-needy people. Finally, article three demonstrates how the private sector, in this case long-term care insurance, gets blamed for problems caused, exacerbated and prolonged by counterproductive government rules.

Takeaway: “There are people, who the more you do for them, the less they will do for themselves.” (Jane Austen, Emma) We’d better rid public policy of the pernicious tendency to do too much for too many or we’ll fail the few genuinely needy Americans who need help the most.

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Updated, Tuesday, January 16, 2018, 10:08 AM (Pacific)

Seattle—

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LTC E-ALERT #18-003: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

How Millionaires Collect Food Stamps
Anxiety: An early indicator of Alzheimer's disease?
Sad News, RIP Josh Wiener
Stan Hinden, Washington Post retirement columnist, dies at 90
Trump Administration Will Let States Require People To Work For Medicaid
How are Social Security benefits and the Part B premium changing?
Senior living might want to reconsider its superiority complex
Medicare Advantage Enrollees More Likely to Enter Low-Quality SNFs
Wisconsin considers tax-protected long-term care accounts
Millennials flock to nursing at twice the rate of baby boomers, staving off shortage

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Updated, Friday, January 12, 2018, 9:18 AM (Pacific)

Seattle—

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LTC BULLET: DON’T BUY LTCI?!

LTC Comment: Bad advice by the unknowing spread by the unwitting refuted by understanding after the ***news.***

***RIP, Josh Wiener: I’m forwarding with permission this announcement from the Long-Term Care Discussion Group of Joshua Wiener’s passing. Josh was a superlative and indefatigable researcher and author on long-term care services and financing. He was also a friend I’ll miss. Rest in peace.

“The Long Term Care Discussion Group is saddened to share the news with our members of the passing of our dear friend and colleague Joshua Wiener. Many of you may have heard the news. But friends and family have asked us to pass along information about the funeral and Shiva observance to be held to honor and remember Josh. He has been an important thought leader and innovator contributing so richly to our knowledge and understanding in the long term care field. He will be truly missed as a friend, colleague and as a scholar. The funeral will be Sunday January 14th at 10 am at Temple Sinai, 3100 Military Road NW, Washington DC, 202-363, 6394. Shiva will follow on Sunday, Monday and Tuesday evenings at the home Josh shared with his wife Susan Klinger at 5419 41st St, NW, Washington DC, 20015. When we know more about the family's wishes for memorial contributions or charities we will post it on the Calendar page of www.ltcdiscussiongroup.org.” ***

*** ILTCI EARLY-BIRD REGISTRATION deadline extended: When Inter-Company Long-Term Care Insurance Conference organizers announced the end of special early-bird registration fees effective January 11, we asked for an extension so that LTC Bullet readers could have one more chance to get in at the lower charge. They agreed. You can register here at the extended reduced rate through Sunday, January 14. Grab it. There is no better way to stay abreast of the LTCI business, meet its movers and shakers, and refresh your commitment to improving long-term care financing than to attend this annual industry convocation. ***

LTC BULLET: DON’T BUY LTCI?!

LTC Comment: Two of the long-term care experts I admire most brought the subject of today’s LTC Bullet to my attention this week. Both nationally syndicated columnist Terry Savage and Senior Care Investor Editor Steve Monroe forwarded the article “Long-Term Care Insurance Is a Poor Buy, CFP Says.” My first reaction was that this poorly reasoned diatribe against LTCI was unworthy of serious rebuttal. But evidently the purveyor, Henry Stimpson of Stimpson Communications, sent this item to a wide mailing list of financial advisors. So . . .

Start by reading the whole article below “The Fold.” Then come back to here, where I’ll address and correct several of the more egregious errors in the piece.

CFP Says: “Long-term care is a big financial risk, but unfortunately, it’s not one that lends itself to insurance.”

LTC Comment: Nonsense. The purpose of insurance is to replace the small risk of a catastrophic loss with the certainty of an affordable premium. Although most people will experience some need for long-term care during their lifetimes, relatively few require expensive care for an extended period of time. That’s why most real experts agree long-term care is an insurable risk. This fact has not been seriously in doubt since Mark Meiners’ path-breaking research in the 1980s.

CFP Says: “Long-term care insurance is an investment that doesn’t make sense,” she says. “It’s better to plan for long-term care on your own by saving and investing, and in some cases, using a trust.”

LTC Comment: Long-term care insurance is not an investment. It is a contract that permits an insured to transfer a risk to an insurer legally bound to compensate the insured if and only if the insured event occurs. The value of insurance is the financial leverage it provides against an unpredictable, unlikely, but possible calamity. Neither saving nor investing provide such protection. Even a high net worth can be wiped out quickly by long-term care for an individual or a couple.

CFP Says: “What about giving your assets to your adult children so you’ll be eligible for Medicaid? It can work for some people, but Kibler says there are a lot of drawbacks to that strategy.”

LTC Comment: Well, now we’re getting to the nub of the matter. So this is why she recommends “using a trust.” What exactly are the “drawbacks” of self-impoverishing to qualify for Medicaid?

CFP Says: “One big problem is that there’s a look-back period of five years on assets you gave away. If you apply for Medicaid within 60 months of transferring your assets, you’ll pay a prorated penalty based on the average monthly cost of care in your area, she says.”

LTC Comment: This is the “Medicaid trap.” You can avoid the transfer of assets problem by putting your wealth in a trust five years before you need care. But the problem with Medicaid is not that it is hard to get. Most people who require expensive long-term care get it paid for by Medicaid whether they’re poor or not. See my “How to Fix Long-Term Care Financing” for the evidence and the preferred solution. The problem with Medicaid is that it is a means-tested public assistance program, welfare, and has a dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias. The most important reason people need long-term care insurance is not to protect assets, but to ensure access to quality care at the most appropriate level if and when they need it. For that, they need to be able to pay privately.

CFP Says: “If your goal is to leave money to your heirs, consider buying a life insurance policy, she says. Term life policies are inexpensive for middle-aged buyers, but they’re costly for people above 65, who are usually better off with a whole life policy.”

LTC Comment: Life insurance, term or whole, gives no leverage against the small probability of an unlikely, but large long-term care expense, unless it’s combined with a LTC benefit. Such combination or hybrid products are a good choice for people concerned about possible future premium increases on traditional long-term care insurance. Most experts familiar with long-term care insurance doubt, however, that the traditional product is as vulnerable to premium increases in the future as in the past. Why is that? The Federal Reserve caused most of the problem with premium increases by forcing interest rates to near zero thus compelling LTC insurance carriers to make up for their handicapped reserves by raising premiums so they’ll be able to pay future claims. Now, finally, interest rates are headed back up so the pressure on premiums will abate.

Closing LTC Comment: Investment, even with historically high returns that are unlikely to continue indefinitely, is no substitute for the financial leverage against risk that insurance delivers. Implying that consumers can evade the dire financial consequences of a catastrophic long-term care episode by purchasing life insurance or putting money in a trust to facilitate Medicaid eligibility is inaccurate and irresponsible. Hopefully, readers will convey this message to Mr. Stimpson and CFP Kibler, thoughtfully and respectfully, but firmly and authoritatively.

---------------------------------- The Fold -----------------------------------

From: Henry Stimpson [mailto:henry@stimpsoncommunications.com]
Sent: Wednesday, January 10, 2018 4:17 PM
Subject: Long-Term Care Insurance Is a Poor Buy, CFP Says

Long-Term Care Insurance Is a Poor Buy, CFP Says
Better solutions: saving and investing, life insurance, and perhaps a trust

“Don’t buy long-term care insurance.”

That’s certified financial planner Melinda Kibler’s surprising advice.

Long-term care is a big financial risk, but unfortunately, it’s not one that lends itself to insurance. LTCI can increase rather than reduce risk in retirement, says Kibler, with Palisades Hudson Financial Group in Ft. Lauderdale.

“Long-term care insurance is an investment that doesn’t make sense,” she says. “It’s better to plan for long-term care on your own by saving and investing, and in some cases, using a trust.”

Mathematics works against LTCI because most people will need long-term care eventually. For insurance to make economic sense, the risk must be spread across a pool of participants, Kibler says. With other types of insurance, only a portion of the population collects, while the others continue to pay their premiums, covering expenses paid out and keeping premiums manageable.

Since the bulk of buyers will eventually collect, LTCI insurers will have to raise premiums. This, in turn, will cause the healthier portion of the population to opt out, leaving a pool of less-healthy participants who all believe they will need to collect on this insurance sooner than later.

“Instead of paying into a policy with rising premiums that may empty your retirement savings, it is better to plan for long-term care by saving and investing,” Kibler says.

The conundrum of long-term care is that people with few assets can “afford” it best. They’ll burn through their assets quickly and then Medicaid will pay for their care, she says. If one spouse needs care and the other doesn’t, Medicaid rules provide for a reasonable level of assets and income for the healthy spouse.

On the other hand, wealthy people don’t need the product because they have the money to pay for care.

It’s the bulk of people in the middle who are most vulnerable to long-term care costs, Kibler says. And for them, there are no magic solutions.

“The best solution is to save up for care using a balanced approach, investing in a comfortable mix of U.S. and foreign stock funds and bonds,” she says.

A certified financial planner can run various scenarios and stress test them to show if you’re ready for retirement and can afford long-term care eventually. Kibler regularly runs such cash flow projections for her clients.

What about giving your assets to your adult children so you’ll be eligible for Medicaid? It can work for some people, but Kibler says there are a lot of drawbacks to that strategy.

One big problem is that there’s a look-back period of five years on assets you gave away. If you apply for Medicaid within 60 months of transferring your assets, you’ll pay a prorated penalty based on the average monthly cost of care in your area, she says.

Because of that disadvantage and the fact that you lose control of the assets you give up, Kibler doesn’t usually recommend giving away your money.

But if you do decide to, set up an irrevocable trust. Without a trust, your former assets could be lost if your child is hit with a costly divorce settlement, or has big debts he or she can’t pay, or is sued.

“A lifetime of savings could be lost quickly,” she says.

Have a lawyer who specializes in elder law and estate planning draw up the trust so it won’t jeopardize Medicaid eligibility, Kibler points out. Find a reputable lawyer, not one who’s engaged in fearmongering.

If your goal is to leave money to your heirs, consider buying a life insurance policy, she says. Term life policies are inexpensive for middle-aged buyers, but they’re costly for people above 65, who are usually better off with a whole life policy.

“Life insurance is a good way to leave assets to survivors,” she says. “It’s more predictable and has more reasonable costs than LTCI.”

In addition, you can set up an irrevocable life insurance trust (ILIT) to purchase a life insurance policy. As the beneficiary of the policy, the trust can protect the proceeds.

Palisades Hudson Financial Group is a fee-only financial planning firm and investment manager based Fort Lauderdale, Florida, with more than $1.4 billion under management. It offers financial planning, wealth management, and tax services. Its Entertainment and Sports Team serves entertainers and professional athletes. Branch offices are in Stamford, Connecticut; Atlanta, Georgia; Portland, Oregon; and Austin, Texas.

The firm’s monthly newsletter covering financial planning, taxes and investing is online at www.palisadeshudson.com/insights/sentinel. Social media: Twitter; LinkedIn; Facebook; Instagram.

Contact: Henry Stimpson, Stimpson Communications, 508-647-0705, Henry@StimpsonCommunications.com

[If you wish to unsubscribe, please reply…thanks.]

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Updated, Monday, January 8, 2018, 9:35 AM (Pacific)

Seattle—

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LTC E-ALERT #18-002: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Pfizer Ends Hunt for Drugs to Treat Alzheimer’s and Parkinson’s
What happens when retirement expectations meet reality
Genworth Says China Oceanwide Deal Is Moving Forward
Giving States A Tool To Improve Long-Term Services and Supports
A physician homebuilder tries to upend the nursing home industry — and give seniors back their independence
Investors excited about independent and assisted living: report
Gene Wilder's widow on what it's like to care for someone with Alzheimer's
New Tax Law Enhances Life Settlements Market
LTC Costs Continue to Rise in 2018, but Some Buyers See a Drop
CMS Mulls Ways to Address Improper Skilled Nursing Discharges
To Help Others, One Couple Talks About Life With Early-Onset Alzheimer's

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Updated, Friday, January 5, 2018, 9:18 AM (Pacific)

Seattle—

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LTC BULLET: THE LTCI ROLLER COASTER

LTC Comment: The LTCI industry’s lowest lows are history, but its highest highs lie ahead. Why and how, after the ***news.***

*** HEROES: I have a lot of them in the LTCI industry and at least two of them were in the audience for the speech recounted below. Author and super-agent Harry Crosby is one. Another is Barbara Franklin, a pioneer who shunned leads early and built successful businesses in two related fields, LTCI and reverse mortgages. Here’s her feedback on the speech and on our LTC Clippings service.

Hello Steve - It was great to hear your optimistic view from 40,000 feet today as I remain in the “foxhole.” Actually I am relatively optimistic too - currently have five (!) long term care policies (traditional) on my desk awaiting delivery. I’m talking a lot more about hybrids too! I spend the bulk of my time servicing current policyholders which I take very seriously. Thanks again for all of your work and especially for the articles and news pieces you send as LTC Clippings. I am complimented frequently by the “centers of influence” I communicate with on my ability to keep them informed. Little do they know I have a “secret weapon” in the form of the Center for Long Term Care Reform to keep ME informed. ***

***SAMPLE LTC CLIPPING:
1/3/2018, “LTC Costs Continue to Rise in 2018, but Some Buyers See a Drop,” by Melanie Waddell, ThinkAdvisor
Quote: “While long-term care insurance costs increased slightly in 2017, some coverage can be less expensive depending on the insurer, according to new data from the American Association for Long-Term Care Insurance. The 2018 Long-Term Care Insurance Price Index, an annual compendium of pricing prepared by the AALTCI, found that some costs have actually declined since a year ago.”
LTC Comment: Onward and upward.

Subscribe to LTC Clippings by contacting Damon at 206-283-7036 or damon@centerltc.com ***

*** ILTCI CONFERENCE special early bird registration discounts expire January 11. Jump on the special rate before it disappears. This year’s upbeat conference theme is “A Matrix of Opportunities.” The LTCI industry’s premier event convenes March 18-21, 2018 in Las Vegas, Nevada at the Paris Hotel. For details and registration go to iltciconf.org. Remember: “what happens in Vegas stays in Vegas” . . . unless it’s what you learn and the networking you do at this conference and put to work back home. ***

***ATTABOY: Hearty congratulations to Bob Vandy of Center-corporate-member Advisors Insurance Brokers (AIB), a New York Long Term Care Brokers, Ltd. (NYLTCB) Company, which just announced:

Robert M. Vandy, CLU, ChFC, LUTCF, CLTC, formerly Vice President, Marketing with the firm, has been promoted to President, effective January 1, 2018. Current President and CEO, Kevin J. Johnson, LTCP, CLTC, will remain at the firm, and focus his efforts in the CEO role, helping to provide vision and guidance to the AIB/NYLTCB management team, as they continue to build their brand as the preeminent provider of fixed insurance and annuity product and support to the insurance and financial services community. ***

*** ATLAS RISING: The Future of Applied Objectivism: Here’s another conference for which the early-bird registration rate is expiring soon (January 8!). Check out the details here. If you’ve ever been inspired by Ayn Rand’s Atlas Shrugged or The Fountainhead, this is a meeting not to miss. I’ll speak on “Objectivist Ethics: the Hazards of Morality” and there will speakers from the Atlas Society, Students for Liberty, Wikipedia, the Foundation for Economic Education (FEE), Freedom Fest, Reason, the Libertarian Party, Transhumanists, and Silicon Valley. Intrigued? This program happens over Presidents Day Weekend, February 16-18, 2018 in San Jose, CA, venue to be announced. I hope to see you there. ***

LTC BULLET: THE LTCI ROLLER COASTER

LTC Comment: I was privileged to address a large webinar audience brought together by Center-corporate-member GoldenCare this week. I thank the whole GoldenCare team for giving me that opportunity, for the critical work they do in pursuit of our common mission, and for the invaluable support the company has given the Center for Long-Term Care Reform for so many years. The speech I delivered follows.

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The LTCI Roller Coaster
by
Stephen A. Moses

We were way up; we came way down; and now we’re on the upswing again. What happened? Why? and What’s next?

That’s what I’m going to explain today.

I’ve been watching long-term care insurance for over 30 years. I saw it grow from a budding, small business opportunity into a big, thriving industry with over a hundred carriers, rapidly growing sales, and a promising future.

Then something happened. What?

Well, it was kind of ugly, wasn’t it?

Carriers had no choice but to increase premiums; consumers rebelled; negative press followed; companies started leaving the market; some specialized distributors expanded their offerings beyond LTCI; many producers looked for other employment opportunities.

It was brutal there for a while. But that’s all behind us now, right? There’s nowhere to go but up, and fast.

The LTCI industry has shown remarkable resilience and ethical leadership. LTCI’s best years are ahead of it. You’re in on the ground floor of a huge opportunity.

Whoa! Wait a minute? Say again?

Resilience?

Isn’t long-term care insurance on the ropes, struggling for survival?

Ethical leadership?

Aren’t private insurance companies, the profit motive and capitalism, in a word, greed, the source of all our problems? Think Bernie Sanders and Elizabeth Warren, not to mention all the academic studies insisting we need a new government entitlement program for long-term care.

LTCI’s best years are still coming?

Steve, are you out of your mind?

I don’t think so and I’ll prove all of this to you before I conclude my remarks today.

But first, let’s withdraw from the daily push and pull of industry challenges and personal professional trials. Let’s broaden our perspective. Let’s get out of the trees and look at the forest.

I’ve been surveying the forest of long-term care financing since 1981.

Back then, I worked for the HCFA, predecessor of CMS that now run Medicare and Medicaid.

I got interested in LTC when I found a program in Oregon that purported to recover 5% of Medicaid nursing home expenditures from the estates of deceased recipients.

That blew my mind. If Medicaid is welfare and you have to be poor to get it, how did a little state like Oregon recover millions of dollars from the estates of supposedly impoverished people?

I started researching Medicaid eligibility and found to my surprise that high income doesn’t disqualify as long as LTC costs exceed income. Most assets are exempt, so seemingly draconian spend-down requirements usually don’t matter.

This got me thinking. If you can ignore the risk of long-term care, avoid the premiums for private insurance, and shift the cost to tax payers if you ever need long-term care, why would people plan to save, invest or insure against the risk and cost of long-term care?

I predicted as much in national studies for HCFA and the HHS Inspector General in the late 1980s.

Despite some successes we’ve had in 1993 closing Medicaid eligibility loopholes and making estate recoveries mandatory and in 2005 capping the home equity exemption and unleashing the long-term care partnership program, the perverse incentives I identified over 30 years ago continue to obstruct the market for private long-term care financing.

I’m not going to dwell on this. It’s well-established in the peer-reviewed academic literature that Medicaid crowds out up to 90% of the potential market for LTC insurance.

If you want to learn more about all that, read just about anything I’ve ever written, most of which you can find on the handout you’ve been provided and on our website: www.centerltc.com.

Now if your reaction is “no wonder we’ve had problems, it must be hopeless” then you’ve got it all wrong.

The right way to think about it is “look at how successful we’ve been even dragging that ball and chain.”

And “just think what it will be like when those obstacles are out of our way.”

Well, now, I can practically hear you thinking: “OK, Steve, what makes you think those obstacles are going away?”

And, “incidentally, you’ve been predicting it would happen for a long time. So why not yet?”

Fair questions. First the why; then the why not yet.

Why do I think it’s inevitable that the government will have to stop crowding out private long-term care insurance?

In a nutshell, public expenditures, mostly for entitlements, have gone through the roof. The national debt has doubled in less than a decade and is on course to double again as quickly.

We’re on a course that Social Security, Medicare, Medicaid and other such programs plus interest on the national debt will consume all federal revenue within a decade or two.

Trees don’t grow to the sky, and neither do economies. As the late economist Herb Stein used to say “Trends that can’t continue, won’t.”

Now let’s relate this specifically to long-term care. What do we know for an absolute certainly?

The long-anticipated “age wave” is finally cresting and will soon crash on the U.S. economy.

Baby boomers began retiring and taking Social Security benefits at age 62 in 2008.

At age 65 in 2011, they turned the Social Security and Medicare programs cash-flow negative.

Boomers began taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts in 2016, depleting the supply of private investment capital.

They will start reaching the critical age (85 years plus) of rising long-term care needs in 2031, around the time Social Security and Medicare are expected to deplete their trust funds, forcing them to reduce benefits.

That’ll be a disaster for Medicaid, which depends on collecting most of the Social Security of its LTC recipients and on Medicare’s far more generous reimbursements.

Just to explain. When you’re on Medicaid, you have to contribute most of your income to offset Medicaid’s cost for your care. Half of the so-called “out of pocket” costs for nursing home care are really just spend-through of Medicaid recipients’ Social Security benefits. When those benefits decline as they’re expected to do in the 2030s, it will be a devastating loss to Medicaid that will have to be made up by increased taxes or even lower provider reimbursements.

LTC providers make profits on Medicare patients that help make up for losses on the majority of their residents who rely on Medicaid’s reimbursements that are on average less than the cost of the care. So when Medicare hits the wall in the 2030s, that will devastate Medicaid too.

Reduce either or both of those sources and Medicaid’s ability to fund LTC (and crowd out private LTCI) goes south fast.

In other words, there’s a perfect gerontological and economic storm coming and to see it on the horizon, all you have to do is look.

OK, so why not yet?

For most of the time I’ve followed long-term care financing, there has been a clear economic pattern.

The government would spend way beyond its means in good times, then a recession would happen. Budgets would get tight and suddenly politicians and bureaucrats would struggle to control costs.

That’s when we made progress closing Medicaid loopholes, requiring estate recoveries, encouraging private LTC planning, and supporting LTC insurance with programs like the LTC Partnership. We even had a shot at getting above-the-line tax deductibility or cafeteria plan coverage in some years.

But then the business cycle would turn. Tax receipts would go up; welfare rolls would go down and all of a sudden no one cared any longer about controlling spending, until the next downturn happened.

I’ve traced this whole history in detail in our latest major report titled “How to Fix Long-Term Care Financing.” You can find a link to it on the handout too.

Now, this economic pattern prevailed until the last recession, the Great Recession, the worst since the Great Depression.

That economic downturn ended in June 2009. But it didn’t cause serious constraints on government spending like earlier recessions did. Federal and state budgets continued to explode. We got no traction on reforming public policy to discourage Medicaid dependency and encourage responsible LTC planning.

What’s different? Why did Uncle Sugar have to behave with good budget sense before or face dire fiscal consequences, but he can spend with impunity now?

The answer is critical because it is the same reason that nearly ruined the long-term care insurance industry.

After each recent recession, the Federal Reserve forced interest rates artificially low, trying to encourage economic recovery.

What happened instead as a result of this exceptionally careless monetary policy is that with interest rates so low, the federal government was able to spend without the usual constraints.

The consequences have been very serious including economic malinvestment by businesses; individuals, families and pension funds chasing higher, but unsafe investment returns; expanding asset bubbles especially in real estate and stocks; greater wealth inequality; and an historically slow recovery with few wage gains for the working and middle classes.

We’re experiencing the biggest economic bubble in the history of the United States. When this bubble pops, like earlier ones created by similar but less egregious interest rate policies resulting in the internet bust of 2000 and the real estate bust of 2008, the consequences will be far more dire than what followed those recessions.

But our focus here is on long-term care insurance and that’s where the Fed’s artificially low interest rates caused tremendous damage to our industry.

Unable to get the returns on reserves that the actuaries originally anticipated, carriers had to raise premiums to compensate.

That led directly to the consequences we mentioned earlier: consumer rebellion, negative press, declining sales, company attrition, etc.

So, bottom line, folks. You have the government to thank for all the problems we’ve faced. Medicaid crowded out demand for your product. The Fed’s monetary policy of near-zero interest rates made LTCI unprofitable without premium increases that started the industry down a slippery slope.

But here’s the good news. There are only two likely outcomes going forward, both of which are highly favorable to the LTC insurance industry.

The Fed has begun to increase interest rates. As those increases ramify through the economy, which they are already beginning to do, the short term impact on the long-term care insurance business will be highly beneficial.

Having already taken the unpopular measures to adapt to lower returns on reserves, LTCI carriers will benefit directly and disproportionately from higher returns going forward.

They’ll be able to make marketing the product more attractive to distributors and producers than ever before.

If on the other hand, the government’s profligate monetary and spending policies drive the economy into a disastrous tailspin, the market for LTC insurance will rapidly expand exponentially.

That’s because Medicaid will have to stop being the primary payor for long-term care for the middle class and many of the affluent in addition to the poor. Eligibility loopholes will close. The home equity exemption will disappear. Medicaid planners, who artificially impoverish people to get them on Medicaid, will have to file for unemployment or seek other, more responsible means of gainful employment.

When consumers actually have to face the true risks and cost of long-term care; when they really do have to spend down their life’s savings; when their biggest asset, their home equity, is at risk; then they’ll see the value proposition in long-term care insurance much more clearly.

They’ll beat a path to your door instead of vice versa.

It’s been a rough ride, but it’s over. The evidence is all around us. Let’s close by returning to the points I made at the beginning. The LTCI industry is resilient; its ethical leadership is noteworthy; and its best years are ahead.

What do I mean by resilience?

I’m so proud of the industry I joined when I left government in 1989 to become research director for an LTCI marketing company.

You’ve shown amazing resilience.

You’ve stabilized the LTC insurance market against all the odds.

Faced with challenges to the market not of your own making nor your own fault, you’ve responded with creative new products and policies.

Carriers that stayed the course adapted to lower-than-expected interest rates and higher-than-expected utilization, positioning themselves for a bonanza when interest rates turn up.

Experts agree future premium increases, if any, will likely be moderate, thus relieving consumers’ concerns in that regard.

You AMGs, “altruistic masochistic geniuses,” who out of a passion for protecting your fellow Americans from the risks and costs of long-term care, have successfully sold this product even though the government was giving away an inferior alternative, you deserve high praise and our unstinting thanks.

More good news stories are being published, both warning of the consequences of unanticipated long-term care expenses and more-often-than-ever-before actually recommending long-term care insurance as the solution.

AALTCI just reported that “A couple in their 60s purchasing new long term care insurance coverage can expect to pay $3,490 for a potential benefit of over $666,000 in coverage should they begin needing care at age 85” and that “some costs have actually declined compared to a year earlier.”

New products linked with life insurance or annuities answer common objections such as “what if I don’t need it.”

Chronic illness policies bridge the features of traditional and combination LTC policies. Insureds pay an annual premium instead of a large single premium, but they’re still guaranteed to get all their money back over time whether they ever need long-term care or not.

In this new, exciting environment, opportunities abound to do well for yourself while doing good for others.

Want an example? Just consider the potential of Genworth’s expertise and experience informing and supercharging long-term care insurance in China, the world’s biggest market. China is doing everything wrong so far in LTC insurance; Genworth could set them straight.

What about my claim that you’ve shown tremendous ethical leadership?

Ignore the specious criticism you get for selling a product, making a profit, participating in capitalism and enjoying its fruits. That’s what makes the world go around and makes everyone in it better off.

Compare how your industry handled its challenges with the way the federal government has operated.

When you faced rising costs and declining revenues, caused as I explained by government policies to cut interest rates and pump trillions into your biggest competitor, Medicaid, you responded by raising premiums to ensure adequate reserves so you could pay the future claims you contracted to pay.

Compare how government has handled its similar responsibility. Social Security and Medicare face upwards of $100 trillion of unfunded liabilities backed by nothing more than IOUs in their “trust funds” for money the federal government has already spent on other priorities.

Medicaid, the biggest obstacle to fixing long-term care and unleashing the power of private financing, doesn’t even have a phony trust fund and is doomed to continue trapping otherwise responsible people on welfare, causing excessive dependency on nursing homes, and impairing access and quality of long-term care until the program collapses entirely.

Finally, what about my claim that the best times for LTCI are ahead of you?

The problem of long-term care risk and cost hasn’t gone away.

Two in three aging Americans will need long-term care.

Alzheimer’s Disease is a huge and growing plague. Research breakthroughs are few and far between.

Most people don’t think about long-term care until they or their loved ones need it.

Then their options are few: provide care themselves, pay for professionals, or seek Medicaid’s low-cost, uncertain care.

Suddenly needing care for parents or spouse can ruin lives and tear families apart.

You’ll be in the bulls-eye if you haven’t prepared your clients for this likelihood when the government programs most have relied on in the past no longer meet their needs.

If I’ve assessed the problem, the likely eventualities, and the solution correctly, you, my friends are in the cat-bird seat going forward.

All you have to do is stay the course, persevere.

Just remember these immortal words of Calvin Coolidge, a rare, free-market capitalist in the White House:

“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan Press On! has solved and always will solve the problems of the human race.” Calvin Coolidge

If you need encouragement to stay the course, go see the movie “Darkest Hour,” in theaters right now. It’s the story of Winston Churchill’s struggle to mobilize Great Britain against a seemingly unstoppable Nazi scourge.

Compared to that our struggles to overcome the obstacles government has placed in the way of private long-term care insurance are a walk in the park.

Thanks for your dedication, hard work, collegiality and friendship in our common mission to improve long-term care for all Americans.

Before I conclude, I’d like to tell you a little bit about how we pursue that mission at the Center for Long-Term Care Reform.

We conduct state-level and national studies of long-term care financing with a focus on the problems created by government interference in that market.

You can find and read dozens of our reports at our website, www.centerltc.com, and on the handout you’ve been given for today’s presentation.

We publish a weekly essay, usually on Fridays, called the LTC Bullets. The Bullets discuss and analyze current topics related to long-term care service delivery and financing. We’ve done over 1200 of them and you can find them archived chronologically and by topic on our website.

We publish a weekly compendium of long-term care news called the LTC E-Alerts designed to keep members abreast of everything they need to know to remain on the forefront of professional knowledge and expertise.

Our daily LTC Clippings give premium members access in real time to the latest stories, articles, reports and data as these are released along with our “take” on what they mean in a sentence or two.

Our Members-Only website, AKA “The Zone,” is full of invaluable resource material including our voluminous “Almanac of Long-Term Care,” where we archive all important news about long-term care organized within 11 sub-topics.

Finally, I want to thank GoldenCare and its staff and management for this opportunity to share some ideas with you today and for their long and invaluable support for our work at the Center for Long-Term Care Reform.

I’ll be glad to take questions now.

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Updated, Wednesday, January 3, 2018, 9:18 AM (Pacific)

Seattle—

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LTC E-ALERT #18-001: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Home Equity Insurance (That Thing We Sell)
Why Tax Hospitals? It’s a Medicaid Shell Game
Rising Number Of Older Americans Carrying Debt Into Retirement
LTCI Policyholders May Get Broader Guaranty Association Protection
Trump Administration Eases Nursing Home Fines in Victory for Industry
Daily Serving of Leafy Greens May Boost Brain Health
CDC: More than 20% of 85+ adults need ADL assistance
Smaller personal care homes are a growing senior living option
Completing the Retirement Planning Puzzle: Where Long-Term Care Fits In
How Care for Elders, Not Children, Denies Women a Paycheck
CDC: More than 20% of 85+ adults need ADL assistance
Interventions Unproven for Preventing Late-Life Dementia
Physicians and Advanced Practitioners Specializing in Nursing Home Care, 2012-2015

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Updated, Monday, December 18, 2017, 10:09 AM (Pacific)

Seattle—

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LTC E-ALERT #17-043: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Why Affluent Clients Need LTC Coverage
Skilled nursing occupancy hits 5-year low
Manulife exits the Long Term Care insurance market
Don’t Count on FEHB to Cover Long-Term Care Costs
Genworth Posts LTCI Rate Hike Update
Waiting Your Turn: Wait Times for Health Care in Canada, 2017 Report
Married and protecting assets from Medicaid | Biz Brain
'Village Movement' Allows Elderly To Age In Their Homes
Americo Introduces a Single-Premium Immediate LTCI Policy
Critics say pressure to lower hospital readmissions may be backfiring
We haven’t prepared for the aging monster
Past efforts point way to future success of Medicaid LTSS reform: report

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Updated, Friday, December 15, 2017, 9:46 AM (Pacific)

Seattle—

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LTC BULLET: WHY COUPLES WORRY SO LITTLE ABOUT LONG-TERM CARE

LTC Comment: If long-term care is such a huge risk and cost, devastating families’ life’s savings across America, how come so few people, even otherwise financially responsible couples, plan, save, invest or insure for LTC? Answers after the ***news.***

*** 2018 ILTCI CONFERENCE REGISTRATION IS OPEN: The Intercompany Long-Term Care Insurance Conference will convene at the Paris Hotel & Casino in Las Vegas, March 18-21, 2018. Register here: https://www2.bravuratechnologies.com/iltcireg/register. Through January 11, take advantage of the individual Early Bird registration rate of $895. If you are attending for the first time, you can qualify for special Early Bird pricing of just $395! This is the premier industry event of the year with outstanding educational and networking opportunities. For more details and to register, visit iltciconf.org. ***

*** NOMINATIONS ARE OPEN: Something new this year. ILTCI Conference organizers are asking “Who are the stars in the long term care industry that are demonstrating out-of-the-box thinking? Who are the best and brightest? Who demonstrates passion for our industry each day? Who is embracing innovation to pursue new business strategies to advance the industry and the vision of the ILTCI?” Do you know someone who should be recognized and acknowledged at the 18th Annual Intercompany Long Term Care Insurance Conference? If so, please fill out a nomination! Here’s the form. ***

*** WHAT HAVE YOU DONE FOR ME LATELY? 2017 was a prolific year for your Center for Long-Term Care Reform. In July we co-published with the Foundation for Government Accountability a major study by Stephen Moses titled How to Fix Long-Term Care Financing. We published 43 LTC Bullets (check them out here), 43 LTC E-Alerts (check them out in The Zone here), and 552 LTC Clippings. We’ve tried hard to keep members abreast of everything that happened in the current year affecting long-term care services and financing. We’ll do the same for members in the coming year. So if you’re not a Center member yet, consider the following benefits of membership and join. ***

*** MEMBERSHIP BENEFITS. Let’s take a moment to review the benefits of individual and corporate membership in the Center. For more details, see our “Membership Levels and Benefits Schedule.”

In a nutshell, as a regular member of the Center ($150 per year or $12.50 per month), you’ll get our weekly LTC Bullets and LTC E-Alerts and a user name and password for access to our “Members-Only Zone.”

In “The Zone,” you’ll find the “Almanac of Long-Term Care,” our compendium of LTC news, reports and statistics stretching back more than a decade with links to critical research materials covering eleven topics from “Aging Demographics” to “Unfunded Liabilities.”

Other features in The Zone include key Medicaid and Medicare numbers updated yearly and archived, a transcription of our highly regarded “Long-Term Care Graduate Seminar,” links to the major current and past “Long-Term Care Cost Surveys,” a couple dozen reasons why veterans should not rely on VA benefits for long-term care and much more.

If you’re really serious about a career in long-term care financing, then join the Center as a “Premium Member” ($250 per year). At that level, you’ll have all the benefits of regular membership plus email and phone access to Steve Moses with a 24-hour turnaround and a subscription to our “Clipping Service,” placing you on the pioneering forefront of up-to-the moment news, data and analysis in your field.

Premium Elite members ($500 per year) get all of the above plus a complimentary LTC Bullet or LTC E-Alert sponsorship with a banner ad, complimentary Center membership for one assistant, and quickest-turnaround email and phone access to Steve Moses.

Regional Representative members ($500 per year) get all of the above and, after they meet all the qualifications—including five years qualified experience and completion of our LTC Graduate Seminar—the status of Regional Representative of the Center for Long-Term Care Reform.

Every member of the Center gets the “Big Benefit”: the knowledge and personal satisfaction that you're supporting the indefatigable research and public policy advocacy of the Center for Long-Term Care Reform.

Corporate membership at the Bronze, Silver, Gold and higher levels is also available. Each level includes the same benefits individual members receive for increasing numbers of employees or producers plus additional benefits exclusively for corporate members. ***

LTC BULLET: WHY COUPLES WORRY SO LITTLE ABOUT LONG-TERM CARE

LTC Comment: Conventional wisdom warns long-term care risk and costs are huge. People all across the country are supposedly spending down their life’s savings paying for caregivers, assisted living, and nursing homes. Yet most folks don’t worry enough about that ostensibly highly likely outcome to prepare in advance. Policy wonks, academics and public officials scratch their heads in wonderment at this seeming illogic, but we know what’s going on, don’t we?

Medicaid pays for most expensive long-term care. Despite the common belief that Medicaid long-term care eligibility rules require financial devastation, the truth is that income rarely stands in the way as long as it’s less than the monthly cost of a nursing home. Excluded assets, including home equity, exempt as of 1/1/18 up to $858,000 in some states and no less than $572,000 everywhere else, plus, in unlimited amounts, one car, business, IRAs, prepaid burial expenses, term life insurance, home furnishings and other personal belongings, enable affluent people to qualify easily. Anyone who still owns too much can hire a Medicaid planning attorney to slip in under the income and asset eligibility screen. Given these facts, no one should wonder why (1) the public is asleep about long-term care, (2) home equity rarely pays for LTC, and (3) too few consumers buy private insurance for this risk.

But what about the special case of couples? Medicaid planners often defend the practice of artificially impoverishing an ill spouse for the purpose of Medicaid qualification by pointing to the healthy spouse’s future financial well-being. Until the Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) was passed, that was a serious problem. Nearly all of an ill spouse’s income had to go to offset Medicaid’s cost for his care. In that generation, it was nearly always the husband who had most of the income and needed care first. The healthy wife was left in the community, often in a home owned free and clear, but with little or no income. Some survived on cat food according to media reports at the time.

All that ended with passage of MCCA ’88. Although that law was mostly about Medicare, it included some very important measures bearing on Medicaid LTC eligibility. For example, MCCA ’88 required state Medicaid programs for the first time to penalize asset transfers for less than fair market value done for the purpose of qualifying for Medicaid long-term care benefits. Previously asset transfer penalties were voluntary. But in the same legislation, Congress and President Reagan balanced that more restrictive measure with a generous provision ending spousal impoverishment. Instead of devastating healthy wives remaining in the community when their husbands entered nursing homes on Medicaid, MCCA ’88 allowed them to keep up to $1,500 per month of the institutionalized husband’s income (which would before have gone to offset Medicaid’s cost for his care) plus up to half the couple’s joint assets not to exceed $60,000. These "spousal impoverishment" protections were set to increase with inflation each year.

On January 1, 2018, the comparable figures, updated for inflation, rise to a Maximum Monthly Maintenance Needs Allowance of $3,090 per month for income and a Community Spouse Resource Allowance of up to $123,600 for assets, more than double their original levels. Medicaid's spousal impoverishment protections may be below today's middle class income and asset standards, but that's why they're called "spousal impoverishment" protections. The purpose of Medicaid was never to replace personal savings, investments or insurance for long-term care, nor has it been to protect middle-class inheritances from the risk of parents' needing long-term care. The goal of these protections was to prevent community spouses from financial devastation without featherbedding their failure to prepare for long-term care costs. Premium members of the Center for Long-Term Care Reform with access to “The Zone,” our members-only website, can review increases in the spousal impoverishment numbers for every year since 1991 here.

Here’s another major benefit married couples enjoy when they rely on Medicaid for their long-term care. Prior to the Deficit Reduction Act of 2005 (DRA’05), Medicaid imposed no limit on home equity. A Medicaid recipient could own one home and all contiguous property of any value without its affecting his or her eligibility for long-term care benefits. The DRA ’05 capped the home equity exemption at between $500,000 and $750,000 with the limit set by state legislatures. Those limits were also pegged to inflation. In 2018, they’ll increase to $572,000 and $858,000, respectively. But, not to worry. “There are some exceptions to this rule. If your spouse or your child who is under 21 or blind or lives in the home, this rule does not apply. Also, the state can choose not to apply this rule if it determines that applying the rule would be an undue hardship.” In other words, there are still no dollar limits on the home equity exemption for married couples.

Finally, married couples enjoy other special “loopholes.” Medicaid-compliant spousal annuities enable couples to shelter hundreds of thousands of dollars from Medicaid eligibility limits immediately before an ill spouse becomes eligible for care. In some states, notably New York and Florida, healthy spouses routinely refuse to share in the ill spouse’s cost of care, defying federal and state requirements, but dodging litigation because state Medicaid programs usually refuse to prosecute.

Get the picture? It’s no mystery why so many consumers fail to plan for long-term care. In most cases, most of the time, if they’re stricken by high and extended long-term care expenditures, the worst of the financial liability is picked up by tax payers. People don’t know ahead of time that they’re not at risk; they just don’t take warnings about losing their life’s savings seriously. Their denial has been enabled for 52 years by easy access to Medicaid after the insurable event occurs. There is nothing peculiar about consumers,’ especially couples’, seeming obliviousness about long-term care. They respond predictably to the perverse incentives created by government policy. We all pay the price for this poor public policy, both in taxes, and in a system that traps so many unnecessarily in welfare-under-financed long-term care.

SEASON’S GREETINGS. We wish all our friends in every aspect of the long-term care business unbounded happiness in this joyous time of year. Except for keeping up with our daily LTC Clippings, we’ll be offline now until the start of 2018. See you then!

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Updated, Monday, December 11, 2017, 9:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-042: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

5 Things an Asset-Based LTC Veteran Sees Today
Past efforts point way to future success of Medicaid LTSS reform: report
We haven’t prepared for the aging monster
National Health Expenditure Report Shows We Have Not Solved the Cost Problem
What You Could Learn About a Successful Retirement From Current Retirees
Tools added to insurance portfolio
Big 5 insurers depend on Medicare, Medicaid for growth in enrollment, profits
SUNY study: Nursing homes in minority neighborhoods provide poorer quality care
Debunking Five Common Myths About Long-Term Care Planning
Kansas Nursing Homes May Refuse Patients Waiting on Medicaid
Healthcare prices hard to find online
The cost of caregiving: ‘A sacrifice for our entire family’
What if the elderly could swap home equity for long-term care?

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Updated, Friday, December 8, 2017, 10:13 AM (Pacific)

Seattle—

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LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC?, 2016 DATA UPDATE

LTC Comment: Heads up! We're about to explain why long-term care insurance sales have disappointed, why people don't "use their homes to stay at home" and why LTC providers who depend on public financing are at risk.

LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC?, 2016 DATA UPDATE

LTC Comment: Once a year around this time the Centers for Medicare and Medicaid Services (CMS) report health care expenditure data for the latest year of record. Recently, CMS posted 2016 statistics on its website at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Tables.zip. You’ll need to choose the data tables of interest and “unzip” them.

Health Affairs has published a summary and analysis of the new data titled “National Health Care Spending In 2016: Spending And Enrollment Growth Slow After Initial Coverage Expansions." Registered subscribers to Health Affairs can access the full text of that article at www.healthaffairs.org. The “Abstract” is available free.

Following is our annual analysis of the latest nursing home and home health care data.*

Heads Up: This may be the most important LTC Bullet we publish all year. It is the fifteenth in a row we’ve done annually to analyze the federal government’s enormous, and we argue, often detrimental, impact on long-term care financing. If you'd like to see the earlier versions, go here and search for “So What if the Government Pays for Most LTC.” You’ll find our yearly analyses of the data going back to "So What If the Government Pays for Most LTC, 2002 Data Update."

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"So What If the Government Pays for Most LTC?, 2016 Data Update"
by
Stephen A. Moses

Ever wonder why LTC insurance sales and market penetration are so discouraging? Or why reverse mortgages are rarely used to pay for long-term care? Or why LTC service providers are always struggling to survive financially and still provide quality care? Read on.

Nursing Homes

America spent $162.7 billion on nursing facilities and continuing care retirement communities in 2016. The percentage of these costs paid by Medicaid and Medicare has gone up over the past 45 years (from 26.8% in 1970 to 53.7% in 2016, up 26.9 % of the total) while out-of-pocket costs have declined (from 49.2% in 1970 to 26.9% in 2016, down 22.3% of the total). Source: Table 15: Nursing Care Facilities and Continuing Care Retirement Communities Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2016.

So What? Consumers' liability for nursing home and CCRC costs has declined by nearly half, down 45.3% in the past four decades while the share paid by Medicaid and Medicare has doubled, up 100.4%.

No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care! No wonder they don't use home equity for LTC when Medicaid exempts at least $560,000 and in some states up to $840,000 of home equity (as of 1/1/17). No wonder nursing homes are struggling financially--their dependency on parsimonious government reimbursements is increasing while their more profitable private payers are disappearing.

Unfortunately, these problems are even worse than the preceding data suggest. Over half of the so-called "out-of-pocket" costs reported by CMS are really just contributions toward their cost of care by people already covered by Medicaid! These are not out-of-pocket costs in terms of ASSET spend down, but rather only INCOME, most of which comes from Social Security benefits, another financially struggling government program. Thus, although Medicaid pays less than one-third of the cost of nursing home care (30.7% of the dollars in 2016), it covers nearly two-thirds (62%) of all nursing home residents. Because people in nursing homes on Medicaid tend to be long-stayers, Medicaid pays something toward nearly 80 percent of all patient days.

So What? Medicaid pays in full or subsidizes almost four-fifths of all nursing home patient days. Even if Medicaid pays nothing with the entire amount due contributed from the recipient's income, the nursing home receives Medicaid's dismally low reimbursement rate.

No wonder the public is not as worried about nursing home costs as they would be if they were more at risk for the cost of their care. No wonder nursing homes risk insolvency when so much of their revenue comes from Medicaid, often at reimbursement rates less than the cost of providing the care. The 2015 national projected shortfall in Medicaid reimbursement was $22.46 per patient day and over $7 billion in total. Source: 2015 Report on Shortfalls in Medicaid Funding for Nursing Center Care.

Private Health Insurance

Don't be fooled by the 9.1% of nursing home costs that CMS reports as having been paid by "private health insurance" in 2016. That category does not include private long-term care insurance. (See category definitions here.) No one knows how much LTC insurance pays toward nursing home care, because many LTCI policies pay beneficiaries who then pay the nursing homes. Thus, a large proportion of insurance payments for nursing home care gets reported as if it were "out-of-pocket" payments. This fact further inflates the out-of-pocket figure artificially.

Assisted Living

How does all this affect assisted living facilities? ALFs are 85% private pay (Source: AHCA/NCAL Data) and they cost an average of $45,000 per year (Source: Genworth 2017 Annual Cost of Care Survey: Costs Continue to Rise Across All Care Settings). Many people who could afford assisted living by spending down their illiquid wealth, especially home equity, choose instead to take advantage of Medicaid nursing home benefits. Medicaid exempts one home and all contiguous property (up to $560,000 or $840,000 depending on the state), plus—in unlimited amounts—one business, one automobile, prepaid burials, term life insurance, personal belongings and Individual Retirement Accounts not to mention wealth protected by sophisticated asset sheltering and divestment techniques marketed by Medicaid planning attorneys. Income rarely interferes with Medicaid nursing home eligibility unless such income exceeds the cost of private nursing home care.

So What? For most people, Medicaid nursing home benefits are easy to obtain without spending down assets significantly and Medicaid's income contribution requirement is usually much less expensive than paying the full cost of assisted living.

No wonder ALFs are struggling to attract enough private payers to be profitable. No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care. This problem has been radically exacerbated in recent years because more and more state Medicaid programs are paying for assisted living as well as nursing home care, which makes Medicaid eligibility more desirable than ever.

Home Health Care

The situation with home health care financing is very similar to nursing home financing. According to CMS, America spent $92.4 billion on home health care in 2016. Medicare (40.5%) and Medicaid (36.8%) paid 77.3% of this total and private insurance paid 10.4%. Only 8.7% of home health care costs were paid out of pocket. The remainder came from several small public and private financing sources. Data source: Table 14: Home Health Care Services Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2016.

So What? Only one out of every eleven dollars spent on home health care comes out of the pockets of patients and a large portion of that comes from the income (not assets) of people already on Medicaid.

No wonder the public does not feel the sense of urgency about this risk that they would if they were more at risk for the cost of their care.

Bottom line, people only buy insurance against real financial risk. As long as they can ignore the risk, avoid the premiums, and get government to pay for their long-term care when and if such care is needed, they will remain in denial about the need for LTC insurance. As long as Medicaid and Medicare are paying for a huge proportion of all nursing home and home health care costs while out-of-pocket expenditures remain only nominal, nursing homes and home health agencies will remain starved for financial oxygen.

The solution is simple. Target Medicaid financing of long-term care to the needy and use the savings to fund education and tax incentives to encourage the public to plan early to be able to pay privately for long-term care. For ideas and recommendations on how to implement this solution, see www.centerltc.com.

Note especially:

“How to Fix Long-Term Care Financing” (2017), at http://www.centerltc.com/pubs/How-To-Fix-Long-Term-Care-Financing.pdf

“CASSANDRA’S QUANDARY: The Future of Long-Term Care” (2016), at http://www.centerltc.com/pubs/FIA-Cassandra-Quandry.pdf.

“How to Fix Long-Term Care,” at http://www.centerltc.com/BriefingPapers/Overview.htm;

"Medi-Cal Long-Term Care: Safety Net or Hammock?" at http://www.centerltc.com/pubs/Medi-Cal_LTC--Safety_Net_or_Hammock.pdf;

"The LTC Graduate Seminar Transcript" here (requires password, contact smoses@centerltc.com);

"Aging America's Achilles' Heel: Medicaid Long-Term Care" at http://www.centerltc.com/AgingAmericasAchillesHeel.pdf; and

"The Realist's Guide to Medicaid and Long-Term Care" at http://www.centerltc.org/realistsguide.pdf.

In the Deficit Reduction Act of 2005, Congress took some significant steps toward addressing these problems. A cap was placed on Medicaid's home equity exemption and several of the more egregious Medicaid planning abuses were ended. But much more remains to be done. With the Age Wave starting to crest and threatening to crash over the next two decades, we can only hope it isn't too late already.

* Note that CMS changed the definition of National Health Expenditure Accounts (NHEA) categories in 2011, adding for example Continuing Care Retirement Communities (CCRCs) to Nursing Care Facilities. This change had the effect of reducing Medicaid's reported contribution to the cost of nursing home care from over 40% in 2008 to under one-third (32.8%) in 2009. CMS also created a new category called "Other Third Party Payers" (7.1%) which includes "worksite health care, other private revenues, Indian Health Service, workers' compensation, general assistance, maternal and child health, vocational rehabilitation, other federal programs, Substance Abuse and Mental Health Services Administration, other state and local programs, and school health." For definitions of all NHEA categories, see http://www.cms.gov/NationalHealthExpendData/downloads/quickref.pdf.

Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans. Steve Moses writes, speaks and consults throughout the United States on long-term care policy. Learn more at www.centerltc.com or email smoses@centerltc.com.

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Updated, Monday, December 4, 2017, 10:03 AM (Pacific)

Seattle—

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LTC E-ALERT #17-041: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Seven tips on becoming a 'financial' caregiver
60 Percent of U.S. Kids Could Be Obese by Age 35
Skilled nursing facilities see opportunity as CMS finalizes cancellation of bundled pay models
Marriage may reduce dementia risk, researchers find
More Docs Specializing in Nursing Home Care
Retirees Still Have 80% of Savings After Nearly Two Decades
Issue Brief: Use of Paid and Unpaid Personal Help by Medicare Beneficiaries Needing Long-Term Services and Supports
Could quality measures be causing deaths?
Drugs intended to calm people with Alzheimer’s may lead to early death
When home-care costs go through the roof

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Updated, Friday, December 1, 2017, 10:44 AM (Pacific)

Seattle—

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LTC BULLET: LTC ALMANAC UPDATE

LTC Comment: We’ve updated the “Almanac of Long-Term Care” in The Zone. More on the LTC Almanac and today’s update after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find and educate clients, reducing the “Ping-Pong” in the LTCi sales process. Help clients project their exposure to LTC risk, compare Combo vs. Stand-Alone LTCi easily, and make informed final decisions about buying LTCi in 15-20 minutes! Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation! Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, & a past Chair of the Center for Long-Term Care Financing. Contact Claude at 800-999-3026, x2241 or claudet@targetins.com to ask questions or get references. ***

*** 11/28/2017, “Retirees Still Have 80% of Savings After Nearly Two Decades,” by Lee Barney, PlanAdvisor

Quote: “Research conducted by the BlackRock Retirement Institute and the Employee Benefit Research Institute (EBRI) found that after nearly two decades of being retired, the average retiree still has 80% of their nest egg intact. The researchers say this finding challenges long-held fears about retirees spending down their savings too fast. They also discovered that more than one-third of retirees continue to grow their assets late into life, ‘leaving considerable potential consumption on the table.’ And for all of the talk about long-term care insurance, the researchers found that burdensome late in life out-of-pocket medical expenses are faced by only a small portion of retirees.”

LTC Comment: These people are financial advisors? Hmmm. Don’t buy LTCI because you’ll still have most of your nest egg at 85? That’s precisely when LTC costs spike if you have them. High LTC costs only hit a small portion of retirees? That’s why insurance works. If high costs hit most people, saving would be the only way to plan. Financial journalism like this is part of the reason we’re in such a mess. ***

*** LTC CLIPPING: 11/2017, “Issue Brief: Use of Paid and Unpaid Personal Help by Medicare Beneficiaries Needing Long-Term Services and Supports,” by Amber Willink, Karen Davis, John Mulcahy, Jennifer L. Wolff, Commonwealth Fund

Quote: “This analysis shows that the amount of unpaid care provided varies little between those who receive both paid and unpaid support and those who receive unpaid support only, suggesting that paid care does not replace unpaid care, but supplements it. Addressing and supporting the need for LTSS can result in savings to individuals and the government through delayed nursing home and Medicaid entry. A public LTSS financing solution, like Medicare Help at Home, that supports individuals and family caregivers would improve the supply of long-term services and supports and allow for their quality to be monitored to ensure older adults can live safely in the community.”

LTC Comment: This report displays a lack of understanding about what causes LTC dysfunction in the USA. Funding LTC through Medicaid created nursing home bias, put the public asleep about LTC risk and cost and nearly eliminated private LTC financing. Trying to solve these problems by adding more of the same with a Medicare LTC benefit would be like trying to put out a fire by dowsing it with gasoline. The best way to prepare families to deal with LTC risk is to wean the public off dependency on unsustainable public programs like Medicaid and Medicare. ***

*** SUBSCRIBE TO LTC CLIPPINGS: We scan the news searching for data, articles and reports you need to know about. Then we send you a brief email (like the ones above) with title, author, source link, a representative quote, and our brief analysis. LTC Clippings help you stay at the forefront of professional knowledge. To subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: LTC ALMANAC UPDATE

LTC Comment: Center members know and appreciate our "Almanac of Long-Term Care" in The Zone, our password-protected website.

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free for two weeks—today through Friday, December 15, 2017. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

Aging Demographics
International
Unfunded Liabilities--Social Security, Medicare, and Budgets
Long-Term Care
Caregiving
Long-Term Care Financing
Long-Term Care Insurance
Reverse Mortgages
Long-Term Care Providers
Medicaid
Medicaid Planning

Each section is divided into sub-sections and under each sub-section we provide a list by date of the most important reports and articles published on the topic, usually with a few highlights and sometimes with analysis.

The Almanac of Long-Term Care is a great way to find statistics you need quickly or to get current on topics you need to know the latest information about.

The Zone and the LTC Almanac are for Center for Long-Term Care Reform members only, except during the current free trial offer. Join the Center here: http://www.centerltc.com/support/index.htm. Call or email Damon at 206-283-7036 or damon@centerltc.com. He can give you a user name and password to open up The Zone even before your dues payment arrives. Individual annual memberships are $150. Premium memberships with access to our “Clipping Service” start at $250. Premium Elite and “Regional Representative” membership (if you qualify professionally) are $500. Corporate memberships with many extra benefits start at $1,000. See our "Membership Levels and Benefits" schedule here.

Caveat: With time, some hyperlinks go bad. In a huge document like the "LTC Almanac," we can't keep all the links current all the time. If you find a bad link, but want to get to the material, contact us. We often have an electronic copy of the document and we can usually find a current live link. We'll also fix the link in the LTC Almanac so it will be current again for others.

Suggestion: Read through the following update to stay current on new resource materials. Then browse the full LTC Almanac at your leisure. When you need a quick fact or the latest research on a particular topic, you'll know right where to go. Enjoy.

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Chapter 1: Aging Demographics

United States

General Stats

A Profile of Older Americans 2016 0317 URL: https://aoa.acl.gov/Aging_Statistics/Profile/index.aspx

3/15/2017, “Subject: Profile of Older Americans: 2016,” Administration for Community Living

Quote: “The annual summary of the latest statistics on the older population, A Profile of Older Americans: 2016, is now available. This profile covers 15 topical areas including population, income and poverty, living arrangements, education, health, and caregiving. A description of the highlights of this document is below and the full document is attached. The profile has proven to be a very useful statistical summary in a user friendly format. It is a web based publication and is posted on the following website: http://www.aoa.acl.gov/Aging_Statistics/Profile/index.aspx”

LTC Comment: This is one of the most comprehensive compendia of data on aging Americans.

Life Expectancy

United States Life Tables, 2014 URL: http://media.thinkadvisor.com/thinkadvisor/article/2017/08/16/cdc-life-tables-nvsr6604.pdf

8/16/2017, “Life Expectancy for a 65-Year-Old Increases 1.6 years,” by Allison Bell, ThinkAdvisor

Quote: “A U.S. resident who turned 65 in 2014 could expect to live an average of 19.4 more years. The average life expectancy at age 65 was 9.2% higher than the average life expectancy of a 65-year-old around 2000. Analysts at the U.S. Centers for Disease Control and Prevention have published data on shifts in U.S. life expectancy averages since 1900 in a new U.S. life tables report.”

LTC Comment: Maybe LTCI producers should reach out to prospects and clients about extending their coverage for that extra 1.6 years.

Chapter 5: Caregiving

General

Transamerica Institute on Caregivers 0917 URL: https://www.transamericainstitute.org/docs/default-source/caregivers-research/the-many-faces-of-caregivers-research-report-2017.pdf

9/2017, “The Many Faces of Caregivers: A Close-Up Look at Caregiving and Its Impacts,” Transamerica Institute

Quote: “Key Highlights:
*Three in Four Caregivers Provide Care for One Person. . . .
*Most Caregivers Do So Out of Love. . . .
*Four Out of Five Caregivers Came to it Voluntarily. . . .
*Most Caregivers Have Provided Care for Years. . . .
*Family Members Often Work Together to Provide Care. . . .
*Caregivers Tend to Live in Close Proximity to the Care Recipient.”

LTC Comment: Click through to the report for the details behind these highlights. Thanks to Stephen D. Forman of Center-corporate-member LTCA for tipping us to this comprehensive, 300-page report from the Transamerica Institute.

Caregiver Stress, Burnout and Costs

Age Wave on Caregiving 1117 URL: https://mlaem.fs.ml.com/content/dam/ML/Registration/family-and-retirement/ML_Caregiving_WP_v02g.pdf

11/12/2017, “The Surprising Benefits and Costs of Family Caregiving,” by Maddy Dychtwald, Wall Street Journal

Quote: “Already, 40 million Americans are providing care to an adult family member or friend, most often to an aging parent or spouse. As the massive baby-boomer generation hits their 70s, the demand for family caregiving will skyrocket—and it’s poised to become America’s biggest off-the-books industry. In order to better understand the caregiving crunch, my firm, Age Wave, in partnership with Merrill Lynch, just completed a study, The Journey of Caregiving: Honor, Responsibility and Financial Complexity, that uncovers the rewards and sacrifices of this complex lifestage.”

LTC Comment: This article and the study it describes offers some interesting insights, some counterintuitive, about caregiving. It’s no surprise caregiving is complicated, challenging, multi-faceted and rewarding in surprising ways. But I don’t recall having seen percentages associated with those aspects before.

Caregiver Shortages

KFF on Medicaid Budget Survey 1017 URL: http://files.kff.org/attachment/Report-Results-from-a-50-State-Medicaid-Budget-Survey-for-State-Fiscal-Years-2017-and-2018

10/20/2017, “11 more states working on wage increases for direct care workforce,” by Emily Mongan, McKnight's LTC News

Quote: “The Kaiser Family Foundation's 50-state Medicaid budget survey for fiscal years 2017 and 2018, released Thursday, listed shortages and turnover among the long-term services and supports workforce as an issue to watch in coming years. The report cited low wages, meager benefits, limited opportunities for advancement, insufficient training and high injury rates as reasons why workers may be leaving or avoiding the sector.”

LTC Comment: This problem is endemic to a long-term care system dependent on Medicaid and worst when the economy improves and people have other employment options.

Hiding_in_Plain_Sight_FNL 1017 LINK

10/3/2017, “Caregiving for Alzheimer's patients at risk in coming years, report says,” by Karen Weintraub, USA Today

Quote: “American families are having fewer children and are more likely to be divorced or estranged and have fewer financial resources, Nick Eberstadt, an economist, wrote in a report being released Wednesday [“Hiding in Plain Sight: Social and Demographic Trends That Will Exacerbate the Impact of Alzheimer's”] by advocacy group UsAgainstAlzheimer’s. . . . These families simply won’t be able to afford to care for aging loved ones, and the burden will necessarily shift to the government — a costly trend the government hasn’t planned for, said Eberstadt, who also works for the American Enterprise Institute, a conservative leaning think-tank.”

LTC Comment: Belaboring the obvious is a public service when the powers-that-be, who should be addressing this problem, have their heads in the sand.

Chapter 6: Long-Term Care Financing

General

LTCA's summary of LTC financing proposals 1017 URL: https://ltc-associates.com/media/1323/ltc-financing_where-common-sense-finds-common-ground_ltca-100517.pdf

10/19/2017, “LTCA to Washington: Most Agree on These LTC Financing Reforms,” by Stephen D. Forman, PR/Web

Quote: “Long Term Care Associates, Inc. (‘LTCA’), accompanied by representatives from the nation's leading long-term care insurance carriers, traveled to Washington, DC this October to deliver a report addressing our country's pressing LTC financing crisis. In the report, LTCA finds common ground among competing solutions, and advocates for those which will appeal to a broad cross-section of Americans.”

LTC Comment: Congratulations to Center-corporate-member LTCA for taking a proactive stance toward the real problem facing long-term care insurance—poor public policy. Check out “LTC Financing: Where Common Sense Finds Common Ground,” their concise, highly readable report. It summarizes major recent proposals to reform LTC financing, including the Center for Long-Term Care Reform’s “How to Fix Long-Term Care Financing.” Well done!

LeadingAge on LTC Financing 0817 LINK

8/9/2017, “New report details way to finance LTSS,” by Lois A. Bowers, McKnight's Senior Living

Quote: “A universal, catastrophic insurance program sufficiently could finance the needs of those who need long-term services and supports, and a ‘managed cash’ benefit design might best pay for service delivery, LeadingAge concluded in a report issued Wednesday. The report is titled 'A New Vision for Long-Term Services and Supports.'”

LTC Comment: The key word missing in this summary and in the report itself is “compulsory.” LeadingAge (formerly the American Association of Homes and Services for the Aging) is the trade association for nonprofit nursing homes. This report updates that organization’s earlier call for a government-enforced system to compel people to fund a new entitlement for long-term care. We refuted the arguments for such an approach and offered a better solution in How to Fix Long-Term Care Financing (2017).

Bipartisan Policy Center on LTC Financing 0717 URL: https://cdn.bipartisanpolicy.org/wp-content/uploads/2017/07/BPC-Health-Financing-Long-Term-Services-and-Supports.pdf

LTC Comment: Latest in a series of BPC reports that misdiagnose and therefore misprescribe for LTC problems and solutions.

Executive Summary and Recommendations

For more than a quarter-century, policymakers have sought solutions to improve the financing and delivery of long-term services and supports (LTSS). Recent analyses suggest that roughly 52 percent of individuals turning age 65 will require LTSS at some point in their life.1 In 2016, driven by recommendations from private sector policy experts, a general consensus formed around a multi-track approach that included:
1. Private Long-Term Care Insurance Improvements

Standardize and simplify private long-term care insurance (LTCI) to achieve an appropriate balance between coverage and affordability, which we called “retirement long-term care insurance”;
Incentivize employers to offer retirement LTCI and to auto-enroll certain employees (age 45 and older with minimum retirement savings), with an opt-out like many employer-sponsored retirement savings accounts; and
Permit penalty-free withdrawal from retirement savings accounts to pay retirement LTCI insurance premiums, recognizing that LTSS is a significant drain on retirement savings.

2. Medicaid
Simplify state plan options and waivers under Medicaid to provide additional flexibility to states to offer home and community-based LTSS, as well as an “LTSS-only buy-in” as a supplement to private health insurance for working individuals with disabilities.
3. Catastrophic Coverage
Recognize that for the 15 percent of the population that will have significant LTSS expenses, the private market, and personal savings are not adequate to cover LTSS needs. Further, states will not be able to sustain spending for LTSS under Medicaid as baby boomers begin to need these services and supports. While BPC’s leaders stopped short of endorsing a public catastrophic program financed through an additional Medicare payroll tax on individuals, proposals to limit the federal share of Medicaid reimbursement could further stress state budgets, and limit the availability of Medicaid-covered LTSS.

Since the release the February 2016 report, Initial Recommendations to Improve the Financing of Long-Term Care, which outlines these recommendations in detail, BPC has also issued two reports that have implications for LTSS financing and coordination of care for high-cost, high-need Medicare beneficiaries. These two reports, Delivery System Reform: Improving Care for Individuals Dually Eligible for Medicare and Medicaid and Improving Care for High-Need, High-Cost Medicare Patients, recommend providing additional flexibility to better integrate health and social services and supports for the highest-cost Medicare beneficiaries.

Medicare LTC Financing

Commonwealth on Medicare for LTC 1117 URL: http://www.commonwealthfund.org/~/media/files/publications/issue-brief/2017/nov/willink_medicare_ltss_needs_ib_v2.pdf

11/2017, “Issue Brief: Use of Paid and Unpaid Personal Help by Medicare Beneficiaries Needing Long-Term Services and Supports,” by Amber Willink, Karen Davis, John Mulcahy, Jennifer L. Wolff, Commonwealth Fund

KFF on Income-and-Assets-of-Medicare-Beneficiaries-2016-2035 URL: http://files.kff.org/attachment/Issue-Brief-Income-and-Assets-of-Medicare-Beneficiaries-2016-2035
Update of the immediately below to April 2017. I used this data in “How to Fix Long-Term Care Financing”
Gretchen Jacobson, Shannon Griffin, Tricia Neuman, and Karen Smith

KFF on Income and Assets of Medicare Benes 091015 URL: Here

9/10/2015, “Income and Assets of Medicare Beneficiaries, 2014 – 2030,” by Gretchen Jacobson, Christina Swoope, Tricia Neuman, and Karen Smith, Kaiser Family Foundation

Quote: “While a small share of the Medicare population lives on relatively high incomes, most are of modest means, with half of people on Medicare living on less than $24,150 in 2014. The typical beneficiary has some savings and home equity, but the range of asset values among beneficiaries is wide and varies greatly across demographic characteristics. Looking to the future, the income, assets and home equity values of Medicare beneficiaries overall are projected to be somewhat greater in 2030 than in 2014 after adjusting for inflation; yet, much of the growth is projected to be realized among those with relatively high incomes and assets. As policymakers consider options for decreasing federal Medicare spending and addressing the federal debt and deficit, these findings raise questions about the extent to which the next generation of Medicare beneficiaries will be able to bear a larger share of costs.” [Emphasis added.]

LTC Comment: The correct take-away from this data showing how poor most Medicare beneficiaries are: We should stop destroying the Medicaid backstop by stretching it to cover middle and upper-middle class people.

Who Will Pay for LTC? (includes "Not the VA")

Swiss Re on Who Pays for Aging 0517 URL: http://www.swissre.com/library/expertise-publication/who_pays_for_ageing.html

5/5/2017, “Who Pays For Aging?,” by Swiss Re, Advisor Magazine

Quote: “There’s no doubt that our growing aging population could represent a major market opportunity for financial services. Of all the sources that help fund a longer life, insurance has only a single-digit share. If insurers want to increase their aging business, they will need to find new ways to provide relevant and attractive new paths to financial security for older people, rather than purely fight for market share among traditional competitors. The aging wallet analysis shows the starting point for insurers to win the hearts and minds of older consumers and their families, and become a larger part of the funding solution. . . . Read the entire report, Who Pays For Aging?, here.”

LTC Comment: Well worth a read. The thesis is that society covers most of the cost of aging now, but its share will have to decline as the age wave crests, meaning the share of private insurance, only 5% now, can, should and will grow, but only if the industry responds creatively to the opportunity.

Chapter 10: Medicaid

Medicaid Financing and Burwell Data

KFF on Strategies to Reduce Medicaid Spending 0617 URL: http://files.kff.org/attachment/Issue-Brief-Strategies-to-Reduce-Medicaid-Spending-Findings-from-a-Literature-Review

We analyzed this report in “LTC Bullet: Is it Really Hopeless to Reduce Medicaid LTC Costs?,” Friday, June 23, 2017: Control-Click to go to our analysis.

KFF on Medicaids-Role-in-Nursing-Home-Care 0617 URL: Infographic-Medicaids-Role-in-Nursing-Home-Care

June 2017, “Medicaid’s Role in Nursing Home Care,” Kaiser Family Foundation

Quote: “Nursing homes are key providers of long-term care in the US, supplying medical, skilled nursing, and rehabilitative services on an inpatient basis to individuals who need help with self-care, such as bathing and dressing. As of 2015, there were 1.4 million people, primarily seniors, served in nearly 16,000 nursing homes.
Medicaid is the primary payer for nursing home care, providing needed long-term care services not offered by Medicare that would otherwise be unaffordable for seniors with low incomes and relieving the care burden from families.
Medicaid currently provides federal matching funds with no pre-set limit that help states cover nursing home care. Medicaid restructuring and cuts in federal funds as proposed in the American Health Care Act could limit states’ ability to provide these services.”

LTC Comment: This is advocacy masquerading as scholarship. The point should not be how much the country depends on Medicaid for nursing home care, but rather how we can reduce that dependency. The key to the solution is to re-direct Medicaid to the needy and get others to plan, save, invest and insure so they have options other than nursing homes underfinanced by public welfare.

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Updated, Monday, November 27, 2017, 10:44 AM (Pacific)

Seattle—

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LTC E-ALERT #17-040: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

OneAmerica Sees LTC Solutions Knowledge Gap
Aging, the longevity economy and what it means to you
State's long-term care savings plan winding down
Q&A Column
Older Americans want to work — so why aren’t they?
Economic Freedom of the World
SNFs' neighborhoods, Medicaid reliance linked to providers' fiscal stress
Retirement planning should include long-term care costs
Confronting Retirement in a Low-Yield World
Medicaid is out of control and unsustainable. Work requirements could help
We’re so unprepared for finding an Alzheimer’s treatment
Where Is The 'Assistance' In Assisted Living?
Bill Gates makes $100 million personal investment to fight Alzheimer's
How to Reduce Dementia’s Tragic Toll on Families
The Surprising Benefits and Costs of Family Caregiving

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Updated, Friday, November 17, 2017, 10:10 AM (Pacific)

Seattle—

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LTC BULLET: ARE LTC RIDER COSTS TAX DEDUCTIBLE?

LTC Comment: Guest columnist Shawn Britt addresses the complicated subject of LTCI tax deductibility after the ***news.***

*** LTC CLIPPING: 11/15/2017, “We’re so unprepared for finding an Alzheimer’s treatment,” by Carolyn Y. Johnson, The Washington Post

Quote: “The U.S. health-care system is unprepared to cope with the Alzheimer’s crisis — even if there were a treatment in the near future, according to a new study. If there were a treatment for Alzheimer’s in 2020, the study found that people would have to wait a year and a half for access because of a shortage of specialists and equipment to diagnose and treat the disease. An estimated 2.1 million people could develop dementia while waiting for treatment over the next two decades, researchers found.”

LTC Comment: Five years after the baby boom began following WWII, America woke up to realize we didn’t have enough kindergartens. A mad scramble to build schools ensued. Some things never change. ***

*** LTC CLIPPING: 11/13/2017, “Bill Gates makes $100 million personal investment to fight Alzheimer's,” by Kate Kelland, Reuters

Quote: “Billionaire Microsoft co-founder Bill Gates is to invest $50 million in the Dementia Discovery Fund, a venture capital fund that brings together industry and government to seek treatments for the brain-wasting disease. The investment - a personal one and not part of Gates’ philanthropic Bill & Melinda Gates Foundation - will be followed by another $50 million in start-up ventures working in Alzheimer’s research, Gates said.”

LTC Comment: Bill Gates pursued self-interest, created thousands of jobs, made a ton of money and now he gets the personal satisfaction—self-interest again—of making a huge contribution to the well-being of everyone. I couldn’t ask for a better example of the points I made in last Friday’s “LTC Bullet: The Morality of Hazards” about the downsides of altruism. ***

LTC BULLET: ARE LTC RIDER COSTS TAX DEDUCTIBLE?

LTC Comment: Shawn Britt, Director, LTC Initiatives, Advanced Consulting with LTCI carrier
Nationwide, is the author of a white paper titled “Tax rules and opportunities for LTC products under the pension protection act of 2006.” We invited Shawn to condense the longer, more detailed piece so we could share its analysis with you in today’s LTC Bullet. The result follows, but you can read the full white paper at the link above. Please address your comments or questions to the author at britts@nationwide.com.

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“Clearing up the Myths - Are LTC Rider Costs Tax Deductible?”
By Shawn Britt, CLU, CLTC

As tax season approaches each year, the consuming question is “Are the costs of long-term care (LTC) riders on life insurance (and annuities) tax deductible? The answer is – generally no. There is material out there that states these costs can be deducted, but it is important to look where the material is coming from, which will generally be from sources that are connected to the limited products that may be able to take such a deduction.

The Old Law

Part of the confusion lies in the old law. At one time, a tax deduction was available for the cost of LTC riders on life insurance in limited circumstances. Prior to January 1, 2010, an IRC §213 tax deduction for medical expenses was allowed on a Modified Endowment Contract (MEC) after meeting the floor percentage of AGI (adjusted gross income) requirement of the time. But keep in mind, the cost of the rider was also considered a taxable distribution (and included a 10% penalty when the insured was under the age of 59½). So, at best, the tax deduction washed out the tax due. On non-MEC policies, no tax deduction was ever allowed.

New Law for LTC Riders on life insurance and annuities

The new law per the Pension Protection Act 2006, effective January 1, 2010, states that an IRC §213 tax deduction for medical expenses is not allowed for the cost of a LTC Rider - if the charge for the LTC rider is deducted from the cash surrender value of the life insurance policy. Since most life insurance policies (and annuities) take LTC Rider charges as a deduction from cash value, taxpayers owning these types of policies will generally not be eligible for an IRC §213 tax deduction. Most LTC linked benefit policies (hybrid policies) also deduct rider charges in this manner.

Are LTC Riders ever tax deductible?

Many whole life companies take the position that the cost of the LTC rider is eligible for an IRC §213 tax deduction once the 10% floor of an individual’s AGI (adjusted gross income) has been met. While not specifically stated in the Pension Protection Act 2006 as allowable, this assumption has been reached since the charges for the LTC rider in whole life policies are taken before premium dollars are placed in the cash value account. The tax code is unclear regarding this position; thus, owners of such policies should consult their tax advisor for guidance.

Are the rules different for Linked Benefit LTC polices?

No, the rules are the same. While these policies are intended to be long-term care sales, please remember that LTC Linked Benefit policies (Hybrids) are still built on a life insurance chassis with LTC riders, so the same life insurance rules apply. If the charges for the LTC riders on the policy are paid from deductions of cash value, then the cost of the riders are clearly not deductible. Life insurance premiums are never tax deductible.

Does the deductibility of LTC premium charges really matter?

Whether the cost of insurance for a LTC rider is deductible may not matter much in the end. Even when an individual owns a policy that allows for an IRC §213 tax deduction of LTC premium, the ability to realize that deduction falls on whether that individual taxpayer first meets the 10% floor of their adjusted gross income (AGI) – a mandatory requirement for individuals - before any IRC §213 tax deduction for medical expenses can be captured.

For example:

• Our hypothetical client has an adjusted gross income (AGI) of $80,000.

• To establish the 10% floor, we calculate 10% of $80,000 - which equals $8,000.

• Before any medical expense is tax deductible, this individual must first spend $8,000 in out of pocket medical expenses (not reimbursed by insurance) for which no deduction will apply.

• After spending $8,000 out of pocket for qualifying medical expenses, only non-reimbursed medical expenses in excess of $8,000 will be tax deductible.

Let’s take it a step further.

If that same client has enough in medical expenses to hit the required floor to qualify for the tax deduction, it is likely that he or she is a poor candidate in the first place for approval of LTC coverage and/or the base life insurance policy. Of course, if another family member is the recipient of expensive medical care, then a deduction for the policy might be applicable.

In the end, even if the rider expense is listed as a deduction on the tax return, no actual deduction will be realized unless the required 10% floor is met. This tax deduction may not be in play for many years (if at all) until the taxpayer is elderly and potentially has more extensive medical bills and/or a smaller income.

Ultimately, LTC coverage should be chosen based on client need, not based on a “tax deduction” that may never be realized.

Shawn Britt is a Director with the Nationwide Advanced Sales Team, specializing in long-term care. She can be reached at britts@nationwide.com

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Updated, Monday, November 13, 2017, 10:10 AM (Pacific)

Seattle—

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LTC E-ALERT #17-039: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Should you use a reverse mortgage in retirement?
LTC Product Sales Rise 12%: LIMRA
Why LTC Needs to Be Included in a Retirement Plan, Pt. 2: Five Strategies for Communicating With Prospects
2018 Social Security COLA to Be Wiped Out by Medicare Premium Hike
Racial, gender disparities among direct care workers hurting recruitment, researchers say
Predicted Retirement Wave of Baby-Boomer Nurses Has Hit, AMN Healthcare Survey Shows
Consider $2M: The Cost of Long Term Care For One Aging Parent
CMS overhaul of Medicaid may face legal challenges
Humana Finds New Home for LTCI Unit
‘Financial Caregiving’ Is Widespread and Expensive
Poll: Majority of Americans Have Astounding Knowledge Gap About Alzheimer’s and Caregiving

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Updated, Friday, November 10, 2017, 10:01 AM (Pacific)

Seattle—

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LTC BULLET: THE MORALITY OF HAZARDS

LTC Comment: If conventional morality is a trap, what would work better? Ruminations after the ***news.***

*** 1200^th LTC BULLET: As of today, we’ve published 1,200 LTC Bullets since the Center for Long-Term Care Reform’s founding on April 1, 1998. Just think of what the field of long-term care financing has been through since then. The Deficit Reduction Act of 2005 substantially curtailed Medicaid planning abuse and unleashed LTCI partnerships. The CLASS Act came and went, dashing hopes for a government solution. Several more study commissions burned up time, effort and money, but came to naught. The long-term care insurance marketplace adapted heroically to historic challenges. Through all these years, only one thing remained unchanged: long-term care is a mess, mostly welfare-financed with public denial of risk prevalent and public financing completely inadequate. Maybe last week’s and this week’s LTC Bullets shed some light on why. But one thing’s for sure, you can follow the entire 20-year history of LTC financing since the Center’s founding here. You’ll find every LTC Bullet we’ve published archived both chronologically and by these topics: The LTC Problem and Solutions; Reality Check: The Facts on LTCI; Medicaid Planning; LTC Services; Politics and Legislation; Demographics and Other Data; CLTCR News. It’s a fascinating on-going saga. Check it out. ***

*** LTC CLIPPINGS: We thank longtime Center supporter Randy Gallas, CLTC, LTCP, President of Long-Term Care Insurance Agency, LLC of Kettering, OH, for this endorsement of our LTC Clippings service: “Thanks again for all the great information. There is absolutely no way that I would have the time to do this research. Kudos to Damon and Steve for making this easy for us down here on the firing line.” As saving LTCI producers time and money while enhancing their professional expertise is a primary goal of the LTC Clippings, we especially appreciate this acknowledgement. ***

LTC BULLET: THE MORALITY OF HAZARDS

LTC Comment: Last week’s LTC Bullet: The Hazards of Morality explained how altruism, America’s dominant ethical doctrine, backfires in practice. Altruism asks us to put others’ interests ahead of our own. If we truly did that, however, we’d never accumulate anything to share with others in the first place.

So, most people most of the time do what is in their own best interest. That’s human nature. Unfortunately, practicing self-interest violates the ethical guidance of altruism, which leads to guilt feelings. To assuage their guilt while pursuing their self-interest, the public farms out altruism to the political system.

But politicians are no more altruistic than anyone else. While they claim to help the needy, they actually trade favors for votes, ego gratification and graft. The needy fare poorly at the hands of politicians. Famously, “programs for the poor are poor programs.” Here’s what really happens.

We’ve been sold a bill of goods by public officials: don’t worry about the needy, work hard, pay your taxes and we’ll take care of the poor for you and, while we’re at it, we’ll take care of you as well. So, how’s that been working out for us?

Promised Social Security, Americans don’t save as much for retirement as they otherwise would. They get a dismal return compared to what private investment of their payroll taxes could have produced.

Promised ObamaCare or Medicare, beneficiaries don’t demand private health insurance with premiums based on individual risk. They’re compelled to pay excessive premiums, deductibles and co-insurance to subsidize others.

Promised Medicaid, people don’t save, invest or insure for long-term care. They end up in welfare-under-financed nursing homes with their wealth often expropriated by heirs in order to qualify them for public assistance.

Some of the scariest words in the English language are: “I’m from the government and I’m here to help you.”

The fundamental principle underlying our Faustian bargain with government is moral hazard, the natural tendency for people to be more careless if they’re protected against the consequences of their behavior. Moral hazard is more or less manageable in a clearly articulated, carefully drafted, properly underwritten legal contract of private insurance. But it’s a disaster writ large across society with only the vague idea that government has the right and responsibility, backed by a monopoly on the use of force, to compel some of us to help others. Such socialized moral hazard becomes an ethical and financial sinkhole.

You can see the results everywhere. More people are more dependent on government all the time. Over half of all births in the USA are paid for by Medicaid. We’ve spent trillions on welfare programs, but poverty rates are flat since the “Great Society” began. Deficit spending and artificially low interest rates, alleged to create jobs and help the needy, instead line the pockets of the affluent by artificially boosting asset prices. In the meantime, the national debt exceeds $20 trillion, unfunded liabilities top $200 trillion, and the three biggies—Social Security, Medicare and Medicaid alone threaten to consume most federal spending in 30 years.

We’ve lived on borrowed time and money for decades. The hole we’re in is too deep to climb out of without a major economic reckoning, a regression to the mean for taxes, spending, borrowing, interest rates and individual responsibility. When the current credit bubble pops, we’ll be weaned abruptly off dependency on government. The 80-year invoice for socially-induced moral hazard will come due. Then we’ll have no choice but to try something different.

What would work better? Call it the “morality of hazards.” Instead of asking the government to take care of the poor and us, let each person and family take responsibility for themselves. Would that leave everyone at risk? Of course. Life is risky. But the vast majority of us, if not seduced by the soporific effect of government dependency, would worry about life’s risks, plan ahead, and save, invest or insure to meet them. That’s what private insurance is supposed to do for us and would if its design, demand and supply were not distorted by counterproductive public policies and government regulations.

But what about the poor, you ask? They’ll prosper. All they get now are the scraps remaining after politicians and bureaucrats skim wealth diverted by political compulsion away from productive people. Leave that wealth at work in the economy and everyone will prosper, except the pols and public officials who consume so much of it now. Nothing benefits the poor more than jobs and jobs come from leaving capital in private hands eager to put it to work. But that’s not the only way the poor will benefit.

It is human nature to pursue self-interest. That’s not bad; it’s good because it brings self-confidence, self-esteem, self-reliance, success and prosperity. As soon as we’ve achieved those things for ourselves, we feel pride and we want to share our success with others. That’s human nature too. When government stops co-opting our natural good will and generosity by telling us to pay up, stop worrying about the poor, and let the good times roll, we’ll take philanthropy back. Private charity will grow again as it was doing in the first half of the 20^th century before public charity thwarted it.

The hazards of relying on the morality of altruism are evident everywhere, getting rapidly worse, and pose existential risk. The “morality of hazards,” that is relying on self-interest, individual responsibility, private markets, freedom and human nature, is worth trying. In fact, when the current system finally collapses of its own weight, we’ll have nowhere else to turn. The big question remaining is whether enough of the spirit that made America great in the first place survives.

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Updated, Monday, November 6, 2017, 9:47 AM (Pacific)

Seattle—

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LTC E-ALERT #17-038: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

How Ending the Medical Tax Deduction Might Affect You
Living Well, Even With Alzheimer’s
How California skims federal Medicaid payments to fund a powerful union
Health Care Spending Could Reach 40% of Federal Total by 2047
Why LTC Needs to Be Included in a Retirement Plan: Part 1
IRS Issues Long-Term Care Premium Deductibility Limits for 2018
How to support your parents while saving for retirement
4 Signs You Need to Seek Long-Term Care for Your Aging Parent
Medicare Spends Far More On Older Adults Who Need Personal Assistance
3 New Findings About Long-Term Care Planning Prospects' Emotions
Millennials Beat Baby Boomers in Long-Term Care Planning
Trump health official Seema Verma has a plan to slash Medicaid rolls. Here’s how

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Updated, Friday, November 3, 2017, 9:32 AM (Pacific)

Seattle—

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LTC BULLET: THE HAZARDS OF MORALITY

LTC Comment: Is conventional morality a trap? Could we have it all backwards? Ruminations after the ***news.***

*** LTC CLIPPING: 11/3/2017, “Living Well, Even With Alzheimer’s,” by Gayatri Devi, Wall Street Journal

Quote: “Many people have the idea that Alzheimer’s is a one-way street to inexorable decline. They believe that treatment is ineffective, which often discourages them from seeking a diagnosis when facing memory loss. But the reality of the disease is very different. Having worked as a neurologist for over 20 years, I see Alzheimer’s not as a single disease but as a spectrum disorder—with a wide range of symptoms, responses to treatment and prognoses. Early diagnosis and treatment has kept many of my patients stable.”

LTC Comment: I bring this article in today’s WSJ to your attention because I think something different and potentially big is going on with Alzheimer’s diagnosis and treatment. I’ll have more to say in a future LTC Bullet. For now, read this article if you have access to the Journal. Then look for a new best-seller titled “The End of Alzheimer's: The First Program to Prevent and Reverse Cognitive Decline.” Jaded and dubious as I am about the constant hyperventilating reports concerning Alzheimer’s drugs and treatments, this approach may have merit and bears watching. ***

LTC BULLET: THE HAZARDS OF MORALITY

LTC Comment: Moral hazard is the “the chance that the insured will be more careless and take greater risks because he or she is protected.” Insurers understand moral hazard and guard against it with careful underwriting, copays, and deductibles.

But I’m thinking of something different, the hazards of morality. What could possibly be dangerous about being moral?

The dominant American morality is altruism, “disinterested and selfless concern for the well-being of others.” In other words, you should put others’ interests first. A corollary of altruism is collectivism. The welfare of the group trumps the rights of the individual.

Altruism is problematic. Carried to its logical extreme, putting others first leaves no one with anything to give others. If you don’t put your own selfish interest first, at least part of the time, how can you accumulate anything to share?

That logical contradiction leads to a dangerous trade-off. Human nature being what it is, most people do pursue their own interests primarily, but delegate their sense of altruistic responsibility to government.

Taxpayers salve their guilt for accumulating personal wealth by assigning its redistribution to politicians. The pols claim to have the best interests of others foremost in mind. But they use the redistributed wealth they control to buy votes from interest groups.

Altruistic intent or lip service aside, the end result redounds to no one’s best interest. Consider some examples.

In 1935, the Social Security Act passed with the altruistically noble intent that everyone would pay in during their earning years so that everyone could withdraw income in retirement. Over the years, politicians expanded Social Security to enhance its benefits, ostensibly with the goal to help people even more. But today, Social Security is on its last legs, plagued by unfunded liabilities in the many trillions of dollars, with a trust fund the federal government has already spent on other priorities, and destined to reduce benefits below current levels which are already a poor return on investment and too little to support people in retirement. This is what delegating altruism about retirement to the politicians got us.

Ditto altruism about health care. The story is the same for Medicare, Medicaid and ObamaCare. Instead of taking personal responsibility (self-interest) for their own health and long-term care, consumers transferred the responsibility to government. Now we’re all burdened by trillions in debt, perverse incentives to rely on these bankrupt government programs, and disincentives to take selfish, personal responsibility for our own well-being. This is what delegating altruism about health and long-term care to politics got us.

Do you see what happened? Altruism as a basis for morality is self-contradictory. People have to pursue their own interests before they can be altruistic. So if left voluntary, altruism does not change people’s natural self-interested behavior.

But when the responsibility to pursue altruism is entrusted to politicians and enforced by government compulsion, it is invariably perverted. The self-interest of the politicians prevails to the detriment of the public’s interests.

Here’s the dilemma: putting others’ interests ahead of one’s own sounds good as a moral guidepost, but it doesn’t work. Human nature abhors self-sacrifice. But doubling down on altruism by assigning it to government and enforcing it with coercion leads to tragic consequences.

Basing morality on altruism makes moral hazard universal. Why work hard, save, invest and insure for the future if your ethical duty is to give to others now and society’s duty is to take care of you when you confront the inevitable consequences of your irresponsibility later. You’re likely to be “more careless and take greater risks” because you think you’re protected.

Next week, we’ll explore a different moral guidepost: “The Morality of Hazards.” What if people were left to their own devices? What if we celebrated personal responsibility, entrepreneurship, and success, in a word, selfishness, first and foremost? Would the needy be worse off or would everyone prosper more? Stay tuned.

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Updated, Monday, October 30, 2017, 9:32 AM (Pacific)

Seattle—

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LTC E-ALERT #17-037: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

SNF Placement More Likely for Men Lacking Caregivers After Stroke
How to Hire In-Home Help
Preserving Our Right to Sex in Long-Term Care
Genworth Survey: Consumers' greatest fear about aging is not having enough money to pay for long term care, but few plan ahead
Why baby boomers need immigrants
Medicaid Annuities Help Protect Savings: A tactic to prevent unexpected nursing home care from evaporating the family nest egg
The Many Faces of Caregivers: A Close-Up Look at Caregiving and Its Impacts
SNFs Renew Push to Change Three-Day Stay Rule
Poverty Does No Favors for Health
Why HSAs are surging in popularity
Medicare Advantage Market Continues to Look Good
Americans Are Retiring Later, Dying Sooner and Sicker In-Between
XPRIZE Visioneers Summit Culminated in a Thrilling Closing Night Speech and Top Honors for Alzheimer's Team
Floating an alternative to assisted living

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Updated, Friday, October 27, 2017, 10:07 AM (Pacific)

Seattle—

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LTC BULLET: HAGELMAN ON “HOW TO FIX LONG-TERM CARE FINANCING”

LTC Comment: Don’t miss Ron Hagelman’s October Broker World column. A recap follows the ***news.***

*** LTC CLIPPING: 10/26/2017, “Trump health official Seema Verma has a plan to slash Medicaid rolls. Here’s how,” by Casey Ross, STAT

Quote: “With a broad overhaul of Obamacare stalled in Washington, one of President Trump’s top health care leaders is drawing the outlines of sweeping changes to Medicaid that could pare enrollments and cut costs without congressional approval. . . . ‘We want to get to the point where we are making the whole waiver process easier,’ Verma said during a discussion at the Cleveland Clinic’s annual medical innovation summit. ‘We’re not going to tell the states what their priorities are. They are going to come and tell us what their priorities are.’”

LTC Comment: Hallelujah, it’s about time. Waivers are our opening to work directly with states on LTC financing reform.

*** LTC CLIPPING: 10/26/2017, “Genworth Survey: Consumers' greatest fear about aging is not having enough money to pay for long term care, but few plan ahead,” Genworth Financial

Quote: “Not having enough money to pay for care is the greatest fear adults have about aging and their long term care needs, according to a recent consumer survey by Genworth, but only one in five have taken any action toward financing their long term care expenses. Furthermore, only half of the respondents said they plan to take personal financial responsibility for their own care as they age. The others said they would leave that worry to the government, their children or family, community or faith-based organizations, or had no idea who would provide their care.”

LTC Comment: Denial lives, but is it justified? Medicaid pays for most long-term care and it is much easier to get than ostensibly strict financial criteria suggest. The reality, that neither income nor assets obstruct Medicaid eligibility after care is needed for most Americans, is the real reason most people don’t worry about LTC until they need it. ***

LTC BULLET: HAGELMAN ON “HOW TO FIX LONG-TERM CARE FINANCING”

LTC Comment: First, who is Ron Hagelman?

In his own words, Ron is an “old soldier” and a “brother in arms” sharing the Center for Long-Term Care Reform’s mission to improve LTC services and financing.

He writes a monthly column for Broker World magazine. If you aren’t subscribed to that periodical and reading that column every month, you’re out of the loop for professional knowledge about long-term care insurance.

Ron’s October column, titled “Just Say No,” is especially dear to our heart. In it he analyzes the Center’s latest study: “How to Fix Long-Term Care Financing.” Over the years, we’ve published many studies and journalists have reviewed most of them. But no reviewer has read our work so closely and explained it so clearly as Ron Hagelman in this column. Below is enough to give you the flavor, but by all means read it in full here. If you don’t have a subscription to Broker World, we strongly advise you to get one and gain access to this excellent print and online source.

Quotes from Ronald R. Hagelman, Jr., “Just Say No,” Broker World, October 2017

“I have always been impressed by the single minded purpose and passion of our dwindling cadre of LTCI specialists. To my knowledge no one has stayed as laser focused and dedicated to basic reason, sometimes painful truths and necessary reform of the long term care financing conundrum as Stephen A. Moses, president of the Center for Long Term Care Reform. He has recently released a report for The Foundation for Government Accountability titled How to Fix Long-Term Care Financing. Stephen’s message is, as usual, well documented, and his conclusions about the cause and effect of the poorly crafted, deservedly maligned and strategically counter-productive Medicaid federal boondoggle are ‘spot on.’ This definitive analysis should be required reading for all those involved in the struggle to fix a system that is clearly broken. It has often been concluded in this column that there are no easy answers, no single strategy to turn around a system that clearly rewards bad behavior and inadvertently reduces the quality of care that should be its core mission. Stephen has convinced me that I may have been wrong. (Again.) There may be one most critical pressure point. One laser focused missile might destroy America’s most prolific ‘Death Star.’”

“We have long suspected that the original intentions of Medicaid to help those most in need had been long subverted by a specific intent to defraud the American taxpayer. It seems there have always been those who somehow created a rationalization process that believes any and all means of exercising legal ‘loopholes’ to knowingly circumvent the intent of the program is acceptable.”

“We know there must be risk and clear consequences of not taking action to protect yourself and your family for anyone to plan ahead. We should know that far too many believe the government should pay for their care, and that if that is what they want they can have it if they are willing to pay the required minimal legal fees. Two unavoidable truths stare back at us from this concise review: Medicaid pays, and if you wish for them to pay they will!”

“Now let’s return to the reform suggestion that could do the most to bring down a system that is doomed to continue to remain its own worst enemy. All American’s have left is qualified savings and home equity. Of the two it is, I believe, the potential loss of home equity that would strike the greatest fear in the hearts of those who have so far failed to plan. Instead of constantly adjusting the limitations, perhaps the time has come to remove permanently the entire home equity exemption from the Medicaid eligibility equation. Just say no and Americans would scramble to hedge their exposure. Just say no and new monies would flow into the private care market. You would, of course, have to close the back door by extending the look back period. Potentially utilizing home equity to pay for long term care expenses would force folks to rethink their property inheritance decisions, bringing insurance back into the equation. Using their own money for care would improve services offered and could dramatically enhance the desire to remain at home for care in the first place. Honestly, I was not a fan of the original ‘Just Say No!’ campaign as I thought it was simplistic and unrealistic and overbearing. Maybe not this time!”

LTC Comment: OK, read the whole column for more. Then check out the source for the full story of what’s wrong with long-term care services and financing in the USA and what we need to do to fix it: “How to Fix Long-Term Care Financing.”

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Updated, Monday, October 23, 2017, 10:03 AM (Pacific)

Seattle—

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LTC E-ALERT #17-036: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

General Electric Has a Long-Term Care Problem. It Isn’t Alone
Alzheimer’s Team Receives Highest Honors at Annual XPRIZE Visioneers Summit: Ric and Jean Edelman Offer $25 Million in Funding
Potentially Preventable Medicare Spending High in Frail Elderly
11 more states working on wage increases for direct care workforce
LTCA to Washington: Most Agree on These LTC Financing Reforms
Why long-term care insurance is slow to catch on with Canadians
Despite GOP Efforts To Corral Medicaid Spending, States Expand Benefits
The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed
MIT: Assisted Living Innovation and Design to Flourish as U.S. Ages
Despite Obamacare Repeal Failures, SNFs Shouldn’t Think Medicaid is Safe
Elderly Americans Plagued By Fraud, Survey Finds
How Can We Keep People Out of Nursing Homes?

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Updated, Friday, October 20, 2017, 11:14 AM (Pacific)

Seattle—

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LTC BULLET: WHAT’S NEXT?

LTC Comment: What can we do to mitigate LTC Armageddon?, after the ***news.***

*** LTC CLIPPING: 10/19/2017, “LTCA to Washington: Most Agree on These LTC Financing Reforms,” by Stephen D. Forman, PR/Web

*** LTC CLIPPING: 10/18/2017, “The Nation’s Retirement System: A Comprehensive Re-evaluation Is Needed,” Government Accountability Office (GAO)

Quote: “The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. Traditional pensions have become much less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts, such as 401(k) plans. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings. In this special report, GAO examines these challenges, drawing from prior work and others’ research, as well as insights from a panel of retirement experts on how to better ensure a secure and adequate retirement, with dignity, for all. . . . Congress should consider establishing an independent commission to comprehensively examine the U.S. retirement system and make recommendations to clarify key policy goals for the system and improve how the nation promotes retirement security.”

LTC Comment: Yeah right, what this country needs is another study commission. No, what this country needs is to understand that if you’re going to make people more responsible for their own retirement and health care planning, you can’t indemnify them with unfunded Social Security, Medicare and Medicaid benefits when they fail. Otherwise, moral hazard prevails. Fewer and fewer people are responsible while more and more come to rely on social programs that are less and less able to pay benefits. It’s a vicious downward spiral which this mealy-mouthed GAO report misses entirely. ***

LTC BULLET: WHAT’S NEXT?

LTC Comment: Last week’s LTC Bullet, titled “LTC Armageddon,” described the sad state of long-term care service delivery and financing in the United States. It explained what would have to happen to avoid a more likely oncoming collapse. It opined that policy makers are unlikely to do what needs to be done and concluded our best hope is to adapt as best we can.

Consider how differently the public sector and the private sector are responding to the problems facing long-term care. The public sector digs the hole deeper and deeper, spending more and more on programs like Medicaid that trap people in low cost care of uncertain quality. The private sector instead adapts creatively by designing new products and marketing strategies.

But there is only so much long-term care insurance carriers, distributors and producers can do to combat the effect of bad public policy without confronting it head on. New products and better marketing won’t reverse the disastrous effects of Medicaid’s crowding out LTCI’s demand and the Federal Reserve’s impairing LTCI’s profitability with artificially low interest rates. What can we do to address those fundamental problems?

We answered that question in detail here: “How to Fix Long-Term Care Financing” (July 2017). Unfortunately, our recommendations to give Medicaid back to the poor and incentivize everyone else to plan, save, invest or insure for long-term care are politically unachievable for the time being. No one thinks the federal government, riven as it is by political division, will cut back Medicaid’s home equity exemption, end Medicaid planning, and experiment with new eligibility rules that encourage personal responsibility and discourage welfare dependency. Yet those measures are the ones we identified as the key to turn America from mostly public financing to mostly private financing of long-term care.

If we can’t rely on the federal government to employ these critical measures, we will have to turn to individual state Medicaid programs. For a while, it looked like efforts to repeal and replace ObamaCare might succeed and convert Medicaid into a block grant program that would provide states less federal money, but give them more flexibility and much stronger incentives to manage their Medicaid long-term care programs cost-effectively. But, at least for now, that health reform approach has failed.

We’re left with only one tack to take. We need to find one or more states willing to try out these measures on their own. But how? Generally, states must follow federal laws and regulations governing Medicaid or risk losing federal funding. Yet there is an exception. Section 1115 of the Social Security Act allows state Medicaid programs to waive otherwise mandatory federal rules in order to experiment with and demonstrate the effectiveness of different approaches. The requirements that must be met to qualify for an 1115 waiver are several and strict, but the Trump Administration has committed “to ushering in a new era . . . where states have more freedom to design programs that meet the spectrum of diverse needs of their Medicaid population.” (Governors Letter, March 2017) The Administration aims to achieve this new era by encouraging and generously approving many more and varied 1115 waiver requests.

If, as we argued in “How to Fix Long-Term Care Financing,” the main problem with long-term care is that Medicaid desensitizes the public to long-term care risk and cost, then the single most important thing we can do to fix the problem is to end that condition. The primary ways Medicaid desensitizes the public to LTC risk and cost is by (1) exempting seniors’ biggest asset, home equity and (2) allowing the many methods of Medicaid planning listed and described in our report, including especially “spousal refusal” and Medicaid-friendly annuities. What’s needed, therefore, is a state Medicaid program willing to request and obtain an 1115 waiver allowing it to stop using Medicaid as free inheritance insurance for baby-boomer heirs and return the program to its original and legitimate purpose as a long-term care safety net for the truly needy.

1115 waivers must test an hypothesis that would further the purposes of the Medicaid program. How about this for such an hypothesis? If people could not shelter hundreds of thousands of dollars in home equity or divert comparable amounts from long-term care liability using Medicaid estate planning, would Medicaid save money allowing it to provide better access and care to genuinely needy recipients while relieving tax payers? Likewise, would affluent people thus denied access to public assistance use home equity conversion and resource spend down to purchase long-term care services privately thus obtaining better care and access while avoiding or at least delaying Medicaid dependency? Would this policy incentivize people to plan earlier and prepare sooner for long-term care risks and costs? Can anyone really doubt what the results of such an experiment would show? If you eliminate perverse incentives, you end moral hazard. It’s as simple as that.

It won’t be easy to find a state Medicaid program willing to seek an 1115 waiver to answer those politically sensitive questions. Politicians and bureaucrats are great at giving benefits away, but not so good at reining in fiscally out-of-control programs. But for now, this is the only practical avenue of public policy we have available to improve long-term care services and financing in the USA.

So, what’s next for your Center for Long-Term Care Reform? We’re seeking a grant to research, design, and draft an 1115 waiver as described above and to seek and find a state Medicaid program willing to request, implement, and evaluate it. Any takers?

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Updated, Monday, October 16, 2017, 11:05 AM (Pacific)

Seattle—

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LTC E-ALERT #17-035: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Chasing millions in Medicaid dollars, hospitals buy up nursing homes
Medicare Advantage 2018 Data Spotlight: First Look
Wringing Cash From Life Insurance
Social Security Giveth, Medical Costs Taketh Away
Medicare Advantage star ratings show insurers' performance hasn't improved
Health, nursing home quality make Colorado 'Best State for Aging'
Start planning now to care for elderly parents
Eldercare litigation: The new fault line
Send Us Your Questions About Paying for Long-Term Care
Meet the New Medicare Card
Americans Face a Rising Risk of Dying Alone
Why Your 50s Are a Good Time to Begin Thinking About Long-Term Care
What if the ‘retirement crisis’ has been exaggerated?

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Updated, Friday, October 13, 2017, 10:05 AM (Pacific)

Seattle—

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LTC BULLET: LTC ARMAGEDDON

LTC Comment: Is long-term care going to hell in a handbasket or is there something we can and should do now to stem the slide?

*** WHAT ARE YOU MISSING? Visit the Center’s website at www.centerltc.com. Scroll down to “The Moses LTC Blog,” and check out our two latest “LTC E-Alert” summaries. They list the 42 critical news, data, and report items we posted in September as “LTC Clippings.” Regular Center members receive a weekly report with all those clippings included. Premium members receive all the clippings daily in real time. See what you’re missing. Then contact Damon at 206-283-7036 or damon@centerltc.com to join the Center as a regular or premium member. ***

LTC BULLET: LTC ARMAGEDDON

The litany of what’s ailing long-term care is relentless. Institutional bias prevails, though consumers prefer home care. Medicaid dominates financing, though private payers command better care access and quality. Private LTC insurance struggles, though Medicaid’s deficiencies expand and worsen. The senior living business faces lagging occupancy, though 10,000 boomers retire daily. Aging Americans aren’t saving enough for retirement, though they can’t and shouldn’t count on the social “safety net.” Government is doing nothing to prop up Social Security, Medicare, and Medicaid, though these programs are hopelessly unfunded for the long term.

Without radical change, this whole flimsy house of cards can’t withstand the LTC Armageddon approaching in 2031. What happens then? Even the youngest boomers will be 67 and drawing full social insurance benefits. Their older brothers and sisters start turning 85, succumbing to Alzheimer’s, and needing heavy care for long periods of time. Simultaneously, in the 2030s, Social Security’s and Medicare’s phony “surpluses” evaporate and payouts to beneficiaries and providers plummet. That’ll also be the last straw for Medicaid LTC which depends on recipients’ social security income and generous Medicare reimbursements to survive, despite heavy federal general-fund financial support that will likely also retrench.

It’s obvious what’s coming. So why are responsible public officials doing nothing? What’ll have to change? And what is most likely to happen? The scary answers are worthy of a Friday-the-13^th column with Halloween just around the corner.

Why no action? The Federal Reserve’s decade-long policy of near-zero interest rates, intended to supercharge a lagging economy, has lulled officials into thinking big spending and huge debt are sustainable indefinitely. Yet what that policy has actually caused is lackluster economic growth, stagflation and rapidly growing unfunded pension and social program liabilities. The malaise in long-term care services and financing is just one small aspect of this bigger problem.

What’ll have to change? Stop digging the hole deeper. Let the market set interest rates, balance government budgets, and end the moral hazard of subsidizing irresponsible personal behavior. Send a clear message that public assistance programs, including all forms of social insurance and welfare, are only for the poor. Middle-class and affluent people must fend for themselves until they genuinely qualify as needy. Do you see that happening any time soon? Of course not. So . . .

What’s likely to happen? Nations can defy economic gravity only for so long before the bottom falls out. Examples abound: Germany after WWI, Argentina repeatedly, Puerto Rico and the state of Illinois now, just to name a few. The USA is living on borrowed time and money. Sooner or later, our creditors will stop buying our bonds and expect us to begin repaying what they’ve already loaned us. We’ve managed to avoid the reckoning this long because of international confidence in the dollar as the world’s reserve currency. As Adam Smith said, “there’s a great deal of ruin in a nation.” But once it becomes obvious that America cannot pay back what it owes, ruin will come very quickly. When? Likely right around the LTC Armageddon of the 2030s, if not sooner.

If I’m right, a big test is coming for this country. When the economic reckoning occurs, we’ll find out whether the values that made America great in the first place—individualism, personal responsibility, and honest ambition pursued within freer markets—survived or whether eight decades of pushing people into government dependency wiped them out. The answer will determine whether the United States can rise from the economic ashes and become an economic powerhouse again or will evolve into a violence-prone full-fledged redistributionist welfare state.

In the meantime, what can we and should we do within our narrow sliver of the economy? It’s amazing and hopeful to watch the long-term care insurance business adapt. Unlike government, which is sitting on its hands, many LTCI producers, distributors and carriers are developing new products and strategies to confront the market challenges wrought by poor public policy. It’s a classic example of how the free market adjusts whereas public programs stagnate. My colleagues’ resilience in this field gives me hope that solid values and strong people endure and that we can re-emerge successfully after the economic bottom falls out.

At the Center, we’re planning to make the best of a bad situation too. In next week’s LTC Bullet, I’ll share what your Center for Long-Term Care Reform is planning. The health reform debacle turned our high hopes for Medicaid reform upside down. But there is a very promising direction for us to pivot. Tune in next week for “What’s Next?”

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Updated, Wednesday, October 11, 2017, 10:00 AM (Pacific)

Seattle—

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LTC E-ALERT #17-034: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Future residents may be sicker than current ones, study suggests
High Blood Pressure in Early Midlife Associated With Later Dementia Risk
Caregiving for Alzheimer's patients at risk in coming years, report says
LifeSecure Distribution Deal Includes Worksite LTCI
Genworth and China Oceanwide Hint at U.S. Panel National Security Concerns
Why Huge Quality Gaps Among Nursing Homes Are Likely To Grow If Medicaid Is Cut
15 Most Expensive States for Long-Term Care: 2017
Genworth survey: Cost of private SNF rooms jumped 5.5% in 2017
Failing Sense of Smell Tied to Dementia Risk
Majority of Americans believe health insurance or Medicare will pay for long-term care
Popularity of hybrid long-term care policies grows with longer-pay options
Can I get more affordable long-term care insurance?
Buyer Beware: Long-Term Care Costs Are Surging
Long-Term Care Insurance Depends on Genworth-Oceanwide Transaction
LTCA Announces Top Long-Term Care Producers of 2017
People with dementia fail to get specialist care despite great need
A Prime Time to Plan for Long-Term Care Is After Arranging It for Someone Else
Views How to position critical illness in the sales process
The Call-In: Elder Care
Editorial: The feds should let the Genworth deal go forward

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Updated, Monday, October 09, 2017, 1:41 PM (Pacific)

Seattle—

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LTC E-ALERT #17-033: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Meet Your Friends Who Get Medicaid
How to Get Medicaid for Nursing Home Care Without Going Broke
Census Bureau: Most seniors still own homes
Experts, lawmakers ponder impact of 8 residents' deaths on SNF sector; facility loses Medicaid funding
Pay Attention to the Small Details When Dealing with Long-Term Care Insurers
$20,000,000,000,000 in Debt and Rising
87% of Americans Favor Health Insurers Being Required to Cover Pre-Existing Conditions
SNF occupancy continues to hit new lows, NIC report shows
How to cope with health care costs in retirement
AHIP: Permanently Renew Medicare Advantage Special Needs Plans
Why Home Care Costs Too Much
James Glickman to Lead Society of Actuaries
Three Ways to Protect your Assets from Nursing Home Costs
The Traditional Long-Term Care Insurance Market Crumbles
Home Equity Conversion Mortgage Program (HECM) Fact Sheet
Ending Alzheimer's by Crowdsourcing Innovations
Report: Nearly 20% of SNF nursing assistants live below poverty line
Reverse Mortgage Pioneer Talks Past, Present, Future of Equity Conversion
Who Will Care for Us?: Long-Term Care and the Long-Term Workforce
Oregon removes nearly 55,000 people from Medicaid after they failed eligibility checks
Warning comes with sharp rise in hospitals holding ownership links to post-acute care
Long Term Care Associates Celebrates Claims Milestone

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Updated, Friday, September 8, 2017, 9:55 AM (Pacific)

Seattle—

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LTC BULLET: OF FLOODS, INSURANCE AND LONG-TERM CARE

LTC Comment: What do flood insurance and LTCI have in common? The answer after the ***news.***

*** WE’RE OUTA HERE: The Center for Long-Term Care Reform doesn’t take many breaks but we’re going to take one this month. Steve is back-packing into the Grand Canyon followed by further national park excursions in the “Silver Bullet of Long-Term Care.” We’ll be back in full force after the first week in October. Premium-member subscribers to LTC Clippings will continue to receive their e-missives, but these may arrive in clumps depending on when we can access the internet to pull down the LTC news. Thank you for supporting the Center for Long-Term Care Reform. We’ll see you again in a month. ***

LTC BULLET: OF FLOODS, INSURANCE AND LONG-TERM CARE

LTC Comment: The awful on-going natural disaster in Houston and southeast Texas is unfortunately not a one-off. The sad fact is we’ve seen this movie before and we’ll probably see it again soon, maybe as early as this weekend with Irma bearing down on Florida. It’s too late for those just devastated, but there is a lesson to be learned from these calamities about how to spread and mitigate catastrophic risk in the future.

There are two kinds of private insurance: the kind people routinely buy and the kind they usually don't. The first category includes life insurance, fire insurance and auto insurance. The latter category includes flood insurance, earthquake insurance, crop insurance and, alas, long-term care insurance. What characteristic distinguishes each of these two kinds of insurance?

If you die, or your house burns down, or you have a car wreck and you are uninsured, it is bad news. You are out of luck and out of pocket! On the other hand, if your property floods or your home quakes or your crop fails or you need long-term care, the government is there to help you with loans, subsidies, grants, and public assistance. In a nutshell, people buy insurance when they face a real financial risk; but when they don't, they don't.

After the great Mississippi River floods of 1993, Center for LTC Reform President Stephen Moses (at that time Director of Research for LTC, Inc.) published an article titled "Of Floods, Insurance and Long-Term Care" (LTC News & Comment, Volume 4, No. 1, Sept. 1993, pps. 11-12.) We repeat that article below as it elucidates the point just made about who buys insurance for what and why.

But first, it’s interesting to note a few things about the conditions it describes as of 1993, 24 years ago.

Back then we thought $20 billion was a big flood loss. Hurricane Harvey will run $190 billion.
Back then the annual cost of a nursing home was about $30,000. It’s more like $82,000 today.
Back then assisted living and home care LTC options were rare. Now they’re most of what private LTC insurance pays for and more than half of Medicaid LTC expenditures go for home and community-based services.
Nevertheless, back then the U.S. spent around $60 billion per year on nursing home care, but that figure still increased to $157 billion by 2015.
Back then OBRA ’93 had not yet passed. Medicaid estate recoveries were not mandatory and LTC eligibility loopholes were even more common and looser than today. We won that battle and another with DRA ’05 which capped the home equity exemption for the first time.
Back then we hoped closing eligibility loopholes and mandating estate recoveries would give Medicaid back to the poor and incentivize the middle class and affluent to plan ahead for long-term care. Naïve? Yes, but we have made progress, though much remains to do.
Back then, the national flood insurance program was under water financially. Today, you need a deep-submergence vehicle (DSV) to find it. For example: “Hurricane Harvey and the National Flood Insurance Fiasco” and “Flood Subsidies Helped Harvey Do More Harm.”

Now a trip down LTC memory lane:

“Of Floods, Insurance and Long-Term Care” (published September 1993)
by
Steve Moses
Director of Research, LTC, Incorporated

This year's [1993] sodden catastrophe in America's heartland is a perfect analogy for the crisis in long-term care financing. The "flood of the century" swamped thousands of homes, dislocated millions of people, and destroyed countless farms and businesses. Costs may reach $20 billion or more. State and federal governments acted immediately to provide emergency aid. Politicians inundated the media with promises that tax-financed indemnification would follow. Although most of the damaged property was located on flood plains, few property owners had private insurance to cover the risk of flooding. Why?

"My home-owners' policy will protect me," some claimed. "The water could never reach me here in a hundred years," many affirmed. "Flood insurance is too expensive," most said. Local officials and bankers frequently bent the rules to approve building permits and bank loans without the technically required flood insurance. No one said "I'm not going to buy insurance, because the government will pay if the worst happens." But, vaguely and evasively, everyone knew it was true. If the floods came, the political compassion combine would replace any natural harvest lost.

Now compare the crisis in long-term care financing. Nine percent of seniors will spend 5 years or more in a nursing home at an average cost exceeding $30,000 per year. People over 85 who are the most vulnerable to long-term institutionalization are the fastest growing population cohort in America. Nursing home costs tripled between 1980 and 1991 (from $20 to $60 billion) and they are projected nearly to triple again between 1990 and 2000 (from $53 to $147 billion). Clearly, long-term care risk dwarfs flood risk. Predictably, the government response has been commensurately large. Two-thirds of all patients in America's nursing homes receive Medicaid. Although Medicaid pays only 48% of nursing home costs directly, Social Security pays another 18% indirectly as the Medicaid patients' contribution to cost of care. Medicare and the Department of Veterans' Affairs picked up another 6% or so in 1991 bringing the government's nursing home contribution to well over 70% of total costs. Finally, Hillary's health care honchos are promising even further expansion of public benefits for long-term care. Although nursing home institutionalization is the single biggest financial risk senior Americans face, only 4% of them have private long-term care insurance and private insurance contributes less than 4% to national nursing home costs. Why?

"My Medicare supplement policy will protect me if I have to go to a nursing home," some claim. "It won't happen to me; I'm too healthy," many affirm. "Long-term care insurance costs too much," most say. Elder law attorneys and many Medicaid eligibility workers bend the rules to qualify prosperous people for the welfare program's nursing home benefit. No one says "I'm not going to buy insurance, because the government will pay if the worst happens." But, subconsciously, everybody knows this is true. The reality is that if nursing home care becomes necessary, someone else usually pays. Who knows or cares whether the payer in fact is Medicare or Medicaid, Uncle Sam or Santa Claus?

The main purpose of private insurance is to replace a small risk of catastrophic loss with the certainty of an affordable premium. In a free market, private insurance also performs another vital function; it prices risk. Voluntary exchanges between willing sellers (insurers) and willing buyers (insureds) determine actuarially sound premium levels. Premiums tell the public as accurately as humanly possible what the precise danger is of living on a flood plain or "going bare" for long-term care. Given this information, rational people who are free to choose can make intelligent decisions in their own best interests.

Ironically, for all its good intentions and altruistic justifications, government distorts this risk calculation and dangerously misleads the public by providing tax-financed grants or subsidies to indemnify the uninsured. By reducing or disguising actual risks, the government discourages responsible people from buying private insurance and rewards the irresponsible for failing to do so. This is the real reason why so few people have flood, crop, earthquake or long-term care insurance, self-serving evasions ("it won't happen to me" or "insurance costs too much") to the contrary notwithstanding. When insurance truly costs too much, it means the risk is too great to take, by definition! If the government rebuilt every home that burned down, no one would buy fire insurance either.

If this assessment of the marketplace is correct, the solution to the long-term care financing crisis is simple: stop giving away free care to people who can afford private insurance. If we do this, everyone who can will buy long-term care insurance, stay off Medicaid, and leave the welfare program to the poor people who need it. The humane way to achieve this goal is to end Medicaid divestiture and require estate recovery of sheltered wealth. That way, we deny care to no one who needs it, but neither do we reward people who fail to insure. Miraculously, this is exactly what the government intends to do if legislation restricting Medicaid planning and mandating estate recoveries, which is now pending in Congress, passes. We are on the verge of a revolutionary breakthrough in long-term care financing!

Curiously, however, the government has not yet figured this out. President Clinton's economic plan estimates savings of $395 million over 4 years by closing Medicaid loopholes and recovering from estates. The Senate Finance Committee puts the figure at $1.1 billion over 5 years. The Congressional Budget Office bumps the estimate to $1.8 billion, increasing in the out years. All three vastly underestimate the potential savings. They take into account only the projected revenues from estate recoveries and the direct cost avoidance from closing loopholes. They completely miss the big impact of the pending legislation--the change it will engender in consumer behavior.

When Medicaid is harder to get and has to be paid back out of the estate in the long run anyway, i.e. when there is no more free ride, people will plan ahead, buy insurance and avoid Medicaid. In Wisconsin, we found that a 10% drop in the Medicaid census of the state's nursing homes (from 65% to 55%) would save $106 million or 20% of the Medicaid nursing home budget. A comparable drop in Medicaid census nationally, all other things being equal, would save $4.1 billion per year! But a 10% drop in Medicaid census is an extremely conservative goal. When the choice is "pay me now" for long-term care insurance, or "pay me later" for estate recoveries, people will search for creative ways to afford private insurance and the access to quality care that it assures.

Research shows that 57% of homeowners can afford long-term care insurance with nothing more than the proceeds of a reverse annuity mortgage, but Medicaid currently exempts the home regardless of value so there is no incentive to tap this resource. Heirs get a windfall from Medicaid now for ignoring long-term care risks, but with their inheritances at stake, they will help their parents to purchase private insurance. When unleashed by the new restrictions on Medicaid nursing home benefits, these two potential financing sources will make long-term care insurance affordable for the vast majority of seniors in America. Then, we will finally see the full impact of private insurance on the long-term care financing problem. [End]

LTC Comment: That was my view in 1993 when Congress was considering and soon passed legislation to close many Medicaid eligibility loopholes and make estate recoveries mandatory. Of course, the future did not play out exactly as I’d hoped over the next 24 years. States didn’t implement the new rules fully. The federal government didn’t enforce them aggressively. The media didn’t report the new personal liability for LTC costs. So consumer behavior changed little.

Consequently, here we are nearly two and a half decades later with Medicaid still the dominant payor for long-term care, with home equity protected from long-term care costs by a welfare program at the expense of the poor, and with the private LTC insurance market shrunken and hurt. We’re just that much closer to a rendezvous with demographic destiny that will devastate the public programs which created this moral hazard and injure especially the people dependent on them.

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Updated, Tuesday, September 5, 2017, 9:55 AM (Pacific)

Seattle—

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LTC E-ALERT #17-032: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Retiring This Year? Here’s What You’ll Pay for Health Care
Respite Care: How to Ease the Stress of Caregiving
Researchers Create ‘Alexa-Like’ Assistant to Help Alzheimer’s Patients
Long-Term-Care Insurance Gets a Makeover
Diet Study Suggests It's Carbs, Not Fats, That Are Bad for You
How Well Do We Age in the U.S.? Check Our Scores
Study: Drinking four cups of coffee daily lowers risk of death
Home Health Care: Shouldn’t It Be Work Worth Doing?
How Senior Living Costs Can Devastate Middle-Class Americans
Complete Your Pre-Retirement Checklist
Americans' likelihood of requiring SNF care 'substantially' higher than thought, study finds
Long-term care insurance becomes more expensive, even as the cost of aging skyrockets
This Is How Much Your Kids Are Worth
Is Your Retirement Plan as Well Thought Out as Your Vacation?
5 Reasons Genworth's Would-Be Buyer Could Still Close the Deal

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Updated, Friday, September 1, 2017, 11:01 AM (Pacific)

Seattle—

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LTC Bullet: Long-Term Care News and Analysis

LTC Comment: Center for Long-Term Care Reform Premium members have the option to receive our LTC Clipping Service and weekly LTC E-Alerts newsletters. Today, we’d like to share a sample of these members-only services with a wider audience. Our topic is the news this week, so we’ll skip our usual ***news*** section and dive straight in.

LTC Bullet: Long-Term Care News and Analysis

Many Center for Long-Term Care Reform Premium members are familiar with our LTC Clipping Service, and from what we hear, get great value from this benefit of Premium membership.

INSURANCE (Long-Term Care Insurance, Critical Illness Insurance, Hybrid and Miscellaneous [including alternative financing solutions])
LONG-TERM CARE (General, Cost, Assisted Living, Nursing Homes, Home Care, Caregiving, Veterans Affairs and Government Solutions)
MEDICAID (General and Medicaid Planning and Crowd-Out Effect)
MEDICARE (and Medi-Gap and Medicare Advantage)
SOCIAL SECURITY
ALZHEIMER'S DISEASE
POLITICS, LEGISLATION AND PUBLIC POLICY
ECONOMICS, DEMOGRAPHICS AND DATA
RETIREMENT PLANNING
HEALTH AND HEALTHCARE
OTHER

I find your clipping service invaluable. It helps me stay current not only with industry news (carrier’s, legislation and such) but consumer news as well. Every agent should be reading these stories daily… their clients and prospective clients are. To offer the best service one must be informed. Thank you for all your hard work in providing this service and thank you for being such a strong and dedicated advocate for our industry. -- Phillip W. Sullivan, President – SellingLTC.com

Your clipping service has saved me hundreds of hours of research each year since we started receiving your clippings. Using it makes me feel confident knowing that I’m on top of anything happening in the industry – from legislation to state movements to industry and insurer announcements. And being on top of things is critical in our industry. Any serious LTCi agent who doesn’t take advantage of this . . . doesn’t realize the value the service can bring to their production! For anyone above the level of agent, this service has to be considered a must. Thank you for your diligence in uncovering all the daily news a person in our industry needs! -- Mark Randall, LTCI Trainer

Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month.

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8/31/2017, “Long-Term-Care Insurance Gets a Makeover,” by Ellen Stark, Consumer Reports

Quote: “Once you or a family member starts having trouble with everyday activities, such as preparing meals and showering alone, you might need some assistance. It could be help from a home health aide or a move into an assisted living facility or a nursing home. Planning for this can be a fraught exercise. But there are new types of long-term-care insurance that might help.”

LTC Comment: A positive Consumer Reports article on LTCI? Check to see if the moon is blue tonight. Stephen D. Forman of Center- corporate-member Long Term Care Associates is quoted in the piece.

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8/29/2017, “Home Health Care: Shouldn’t It Be Work Worth Doing?,” by Eduardo Porter, New York Times

Quote: “How to provide long-term care for a fast-aging population poses one of the more convoluted challenges of the American labor market. Care providers — home health aides, personal care attendants and certified nursing assistants, in the government’s classification — are expected to be among the nation’s fastest-growing occupations. The Department of Labor’s economists expect about a million more will be added from 2014 to 2024. And yet despite their critical importance to the well-being of tens of millions of aging Americans, one-fourth of these aides live in poverty. The jobs are so unappealing that it is hard to keep workers in them: four in 10 leave the occupation entirely within a year. Many prefer the fast-food business.”

LTC Comment: Articles like this exasperate me. We have a problem with home health caregiving because Medicaid made nursing home care free which crowded out private markets for home health and private insurance to pay for it. So how do we fix it? Spend more Medicaid money to save more Medicare money. Yeah, that’ll happen.

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8/28/2017, “How Senior Living Costs Can Devastate Middle-Class Americans,” by Mary Kate Nelson, Senior Housing News

Quote: “Boosting affordability is top of mind for many senior housing providers, as it’s becoming increasingly obvious that many baby boomers will struggle to pay for senior living—even those who are comfortably in the middle class. That’s already the stark reality for 60-year-old Kuna, Idaho, resident Betsy Winkler, according to a report in the Miami Herald. Winkler’s husband, 69-year-old David Winkler, has Alzheimer’s disease. He lives and receives care at Ashley Manor Memory Care community in Boise, Idaho, for which the couple currently pays $48,000 per year.”

LTC Comment: The bigger story is that this is the exception, not the rule. Long-term private pay in a nursing home is almost non-existent having collapsed from 50% a few decades ago. Who pays? Medicaid. No wonder so few people worry about LTC risk and cost enough to save, invest or insure.

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08/27/2017, “Complete Your Pre-Retirement Checklist,” by Wendy Connick, The Motley Fool

Quote: “Before you finally and officially retire, it's important to make sure you're ready for such a huge shift in your lifestyle and your finances. Much like a pilot will complete the tasks on a pre-flight checklist before the plane ever leaves the ground, you should read through and complete the tasks on your retirement checklist before deciding to leave the workforce forever.

“Look into long-term care insurance (10-15 years before retirement)
If you're going to buy long-term care insurance, the best time to do so is in your 50s, not your 60s. Your premiums will be much lower if you buy the policy this early. Plus, by getting that decision out of the way so far in advance, you'll simplify the often chaotic pre-retirement years by resolving one of your critical decisions. Because the majority of retirees will need long-term care at some point, and the costs can easily run into the six-figure range, long-term care insurance is likely a good financial move. At least look at a few policies and consider how they'd fit into your retirement budget. If you decide to pass on long-term care insurance, you'll definitely need to come up with some other way to pay for long-term care.”

LTC Comment: LTCI is at the top of this pre-retirement checklist.

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08/28/2017, “Long-term care insurance becomes more expensive, even as the cost of aging skyrockets,” by Mary Katherine Wildeman, Post and Courier

Quote: “Barbara Franklin has slowly watched over the years as companies offering long-term care insurance have dropped out and premiums have become difficult to afford. As a long-term care specialist and the owner of Franklin & Associates, she said she guides her clients through the decisions they're faced with as they approach retirement. Often the choices are impossible. While long-term insurance costs rise, so, too, do the debilitating costs of long-term care. An annual cost estimate from Fidelity Investments found last week that a 65-year-old couple will need $275,000 to pay for health care during their retirement, a 6 percent increase over last year. Franklin said having her own responsibilities to care for her 92-year-old mother have reminded her to focus on the importance of making sure her clients can pay for the long-term care they will likely need one day.”

LTC Comment: This article features CLTCR friend and member, Barbara Franklin, and ultimately focuses on the value of LTCI policies in spite of rate increases.

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08/28/2017, “This Is How Much Your Kids Are Worth,” by Suzanne Woolley, Bloomberg

Quote: “Michael Hurd doesn’t have a long-term-care insurance policy, but he does have something likely to prove valuable in his old age, however—two daughters. Few Americans assign a dollar amount to the worth of their children—they are without price. But as lead author of a new study looking at nursing home cost and use, Hurd can quantify the value that daughters, and children in general, bring to parents facing one of life’s most dreaded prospects: a stay in a nursing home.”

LTC Comment: If it’s beneficial to consider how much a person’s children are worth in terms of LTC services they might provide, it should also be beneficial to consider how much it’s worth to spare those children the known health consequences of providing that care. Unfortunately, this article does not do so and undermines the importance of real long-term care planning.

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08/28/2017, “Is Your Retirement Plan as Well Thought Out as Your Vacation?,” by Mark Pruitt, Kiplinger

Quote: “After working hard all of our lives, the goal for most of us is to have the freedom to go explore and complete the ‘bucket list’ that we have always dreamed of. The problem is most people plan their vacations better than they plan their retirements.

“6. Devise a long-term care plan.

Six members of my wife’s family have had Alzheimer’s disease. My mother-in-law had it for 16 years. My sister-in-law has it currently and started her journey with Alzheimer’s at age 55. I have seen it on a very personal level. I have long-term care strategies for my wife and me in multiple forms. My parents have multiple forms of long-term care as well. Know your options. Traditional long-term care costs a premium. Can you afford it? The length of traditional long-term care policies is typically three to five years. What if you keep on living, as my mother-in-law did? The long-term care for my family started in the home and graduated to a nursing home. Layered options could include the use of non-traditional means like annuities with enhanced benefits riders that could be used for in-home, assisted living or nursing home care. Some life insurance policies have additional living benefits to help pay for care. Lack of planning for long-term care could devastate families. At the very least, explore all of your options.”

LTC Comment: A timely take on retirement planning in this vacation season.

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8/23/2017, “Opinion: Why nursing homes are suffering from old age problems,” by Betsy Rust, MarketWatch

Quote: “Remember nursing homes? Someday, perhaps as soon as the next decade, that’s how Americans may start to think about them — in the past tense, as institutional relics. The grim economic reality is that many nursing homes are facing extinction. In fact, I predict that the confluence of a number of trends — demographics, competition from nursing home alternatives, federal and state health-care policy and even technology — will mean as many as 20% of nursing home beds will be eliminated in the next five years.”

LTC Comment: So true, but why and what should be done about it? That’s why I sent this note to the author:

Dear Ms. Rust,

Based on your MarketWatch op-ed, I think you are very thoughtful and concerned regarding long-term care. I’ve spent 35 years working in and thinking about the challenge of long-term care services and financing. So I share your concern.

You’re right that nursing homes are hurting, unresponsive to the demographic onslaught, and challenged by less institutional options. But do you know how we came to have a nursing-home-based, welfare-financed long-term care system in the first place? More importantly, what has to change to improve long-term care?

I’d like to share my latest paper with you: How to Fix Long-Term Care Financing (2017). Honestly, I think it will open your eyes to some fascinating insights and even, possibly, to some business ideas.

Sincerely,

Steve Moses

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8/18/2017, “LTC deals led healthcare transactions for July,” by Emily Mongan, McKnight's LTC News

Quote: “Long-term care facilities dominated healthcare transactions compared to other sectors in terms of deal volume in July, according to a new update. . . . The trend is showing no signs of slowing down, Gary Herschman, an attorney with the firm Epstein Becker & Green, told Bloomberg. ‘As the baby boomers move into their 60s and 70s, investment continues in the long-term care sector, which expects a corresponding growth in demand for services in the near future,’ Herschman said.”

LTC Comment: Too bad ways to pay for long-term care are not expanding at a pace to keep up with places to receive care.

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4/9/2017, “Why Parents Need to Be Willing to Cut Off Adult Children Financially,” by Maddy Dychtwald, Wall Street Journal

Quote: “Among those Americans who give their adult children post-college financial support, the average amount given is $6,800 annually, according to the study, a four-year, 50,000-respondent investigation into the changing lifescape of retirement conducted by my firm, Age Wave, in partnership with Merrill Lynch. And parents are gifting that money just as they are facing their own retirement head on. . . . Supplementing our young adult children might seem like a huge help to them now. But in the long run, perhaps the greatest financial gift we can give them is to be able to afford our own retirement and the possible need for care in retirements that can last 30 years or more. The last thing many of us want is to have to turn to our children for financial help in their 40s or 50s–when they will be focused on paying mortgages, saving for their children’s college fund and funding their own retirements.”

LTC Comment: That $6,800 would buy a very good LTCI policy.

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8/21/2017, “VA seeks to funnel more nursing home money to rural areas,” by Matt Volz, Associated Press

Quote: “Veterans Affairs Secretary David Shulkin said Monday during a visit to Montana that his agency will propose changes to make it easier for rural areas to receive funding to build nursing homes for veterans. . . . The VA now sets its priority list by looking at veteran demographics and the need for beds, making it difficult for some rural areas to compete, VA officials said. The agency plans to propose regulation changes by year's end to ensure some of the money goes specifically to rural areas. Whatever proposal emerges must go through a public comment period, so it's unclear when any changes may take effect.”

LTC Comment: We’ll add this story to our members-only-website feature Reasons Why Veterans Should Not Depend on VA Benefits for Long-Term Care with the note “especially in rural America.”

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8/20/2017, “The Language of Long-Term Care: Navigating the care maze can be overwhelming; understanding the lingo can help,” by Christine Benz, Morningstar

Quote: “As I reflect on my parents' final years, a period that included multiple hospital stays, trips to rehab, and the hiring of in-home caregivers, I realize that my siblings and I were often a step behind with our responses. We initially hired in-home caregivers to help for 10 to 20 hours a week when, in hindsight, we should have had them there every day. We made the difficult decision to move my dad to a long-term care facility with memory care only after he had taken a few serious falls at home that caused him a lot of physical discomfort. And so on.”

LTC Comment: This author and her family could have had crucial care management help if they’d had LTCI. So much of what she says in the article about LTCI and Medicaid is wrong. We’ll reach out to her, explain some things and send her How to Fix Long-Term Care Financing (2017).

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8/17/2017, “The role of advisors in longevity planning,” by Kimberly Foss, Financial Planning

Quote: “Similarly, boomers don’t really want stocks, bonds, mutual funds or insurance; they want the means to live their desired lifestyle when they are no longer actively employed. They want to solve the problems that come with longevity, and those problems, more and more, go beyond simply funding their retirement accounts. . . . In order to position themselves to adequately respond to the longevity needs of an aging clientele, advisors will increasingly be called upon to provide not just transaction-based assistance, but also to serve as facilitators of the relationships required to address these and other problems. We will fall short helping our aging clients if we stay in our financial silos; instead, we will need to become conduits for leading them to the solutions they require.”

LTC Comment: Hopefully financial advisors will direct clients to LTCI producers rather than Medicaid planners when it comes to long-term care planning, but that has not always been the case.

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8/15/2017, “Could This Idea Help Fix America's Shortage Of Home Care Workers?,” by Chris Farrell, Forbes

Quote: “The demographics of a growing demand for elder care in America is raising alarms. The number of adults 65 and over requiring long-term care could rise by more than 70% over the next quarter century, estimates MIT Sloan School of Management professor Paul Osterman, author of the new book, Who Will Care for Us?: Long-Term Care and the Long-Term Workforce. But the supply of home care workers is likely to fall short of demand. Perhaps a novel program from the AARP Foundation and Capital Impact Partners, a Community Development Financial Institution based in Arlington, Va., will help solve this problem.”

LTC Comment: A far better idea than home care co-ops is to stop trapping so many people on Medicaid which pays for most home care with rates less than the cost of providing the care. With private payers paying market rates, home care jobs would pay better and attract enough qualified caregivers.

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8/15/2017, “ACA Diluted Funds for the Severely Disabled,” by Paul T. Spencer, Wall Street Journal letter to the editor

Quote: “The ACA has expanded funding for Medicaid services, but it has also to an even greater degree expanded the pool of people eligible to dip their spoon in the pot. It used to be that Medicaid did a fair job of providing for the truly disabled and needy. Now it does a lousy job of serving more people, many of whom are not truly needy and could provide care for themselves. . . . Please join me in supporting the repeal of the ACA and put Medicaid funding back in the pot for the truly needy and disabled in our society.”

LTC Comment: This letter captures the essence of what ObamaCare did to Medicaid. For the wider significance, see our new report How to Fix Long-Term Care Financing (2017). Thanks to Green Bay, Wisconsin Center Regional Rep Romeo Raabe for tipping us to this item.

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Updated, Monday, August 28, 2017, 10:53 AM (Pacific)

Seattle—

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LTC E-ALERT #17-031: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Opinion: Why nursing homes are suffering from old age problems
LTC deals led healthcare transactions for July
Why Parents Need to Be Willing to Cut Off Adult Children Financially
New York Life Promotes New Life Policy's LTC Benefits
LTCG Agrees to Acquire LifePlans
Newman Long-Term Care Buys SIA Marketing's National Sales Operations, Processes and Software
LTCG to Acquire Munich Re's Long-Term Care Insurance Arm
Caregiving Needs Double as End of Life Nears
How Long Will $1 Million Stretch In Retirement?
VA seeks to funnel more nursing home money to rural areas
The Longevity Revolution and Its Emerging Economy
‘Beyond amyloid’: A look at what’s next in Alzheimer’s research
Where prospects carry the most student loan debt

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Updated, Friday, August 25, 2017, 9:57 AM (Pacific)

Seattle—

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LTC Bullet: Government LTC Financing “Revolution” Averted

LTC Comment: Obama CMS efforts to pay for LTC value instead of volume were stopped in their tracks recently. Details after the ***news.***

*** LTCG AND LIFEPLANS REUNITED: LTCG, Inc., the leader in business processing outsourcing for long term care insurance, announced Tuesday that it is acquiring LifePlans, Inc., a national provider of innovative risk management solutions for insurers. Press release here. LTCG CEO Peter Goldstein opined that the two companies, both industry leaders and competitors, are even stronger together and showcase LTCG’s commitment to the long-term care industry. LifePlans began in the 1980s when Stan Wallach, Jay Greenberg and others left Brandeis University to form the company in those heady days for LTC insurance. Greenberg left LifePlans to form LTCG in 1990. Now, 27 years later, the two companies are one again. We wish Goldstein and his team every success in the new venture. Let’s touch base with them around the turn of the year to see how the merger is going. ***

*** MORE LTCI INDUSTRY NEWS: Gene and Pamela Schmidt, founding owners of SIA Marketing, Inc., announced the sale of their national sales operations, processes and software to Newman Long-Term care. We congratulate Pamela and Gene, long-time friends and supporters of the Center for Long-Term Care Reform, on the sale of their business and their transition to a new phase of serving the people of North Dakota. Congratulations also to Deb Newman and Thrivent who will now carry on the Schmidt’s mission to protect North Dakotans and all aging Americans from the risk and cost of long-term care. We wish all involved every success and happiness. ***

LTC BULLET: GOVERNMENT LTC FINANCING “REVOLUTION” AVERTED

LTC Comment: In LTC Bullet: A New Revolution in Long-Term Care Financing . . . by Government, published November 6, 2015, we warned that “radical, disruptive changes in how government pays for long-term care are advancing rapidly.” We explained thus:

Huge changes in how the government pays for post-acute and long-term care are under way, building steam, and about to revolutionize LTC service delivery. “Bundling” and “prospective payment” are on every health care bureaucrat’s lips. The system’s transformation to “managed care,” whereby state Medicaid programs turn over responsibility for providing and paying for LTC to the highest bidders, has long been sweeping the country. We’ve touched on that development and its likely ramifications in earlier Center publications. There will be more to come.

The government’s latest move toward centralized control of the LTC market is even more significant. The Centers for Medicare and Medicaid Services (CMS) is changing the focus of long-term care financing in both of the programs for which it is responsible from paying for services (volume) to paying for value (as measured by new, vague and complicated “quality” metrics). The new system will put care managers and providers at far greater financial risk. Only time will tell if this shake-up improves or damages the care patients actually receive.

Time has told.

According to Healthcare Finance: “The Centers for Medicare and Medicaid Services on Tuesday officially announced it is pulling back from mandatory bundled payment models set up under the Obama administration.”

Why is this development so important? For the answer to that question, we refer you to the following speech Steve Moses delivered at an Omega Healthcare Investors, Inc. conference on November 10, 2015.

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“The Future of Long-Term Care Seen Through the Prism of History”
by
Stephen A. Moses

If value-based payment is good enough for Medicare, it should be good enough for McDonald’s too.

A monopsonistic, government-based nutrient payer could ensure quality food distribution by paying for value instead of quantity.

We could reimburse prospectively for dietary-related groups of alimentary consumption episodes rewarding lower food poisoning levels with five-star ratings.

“What if I want a Big Mac,” you ask? Tough luck. Too many calories for too little nutrition. The re-hospitalization risk is off the chart.

Why do we have prospective payment systems, bundling, managed care, and value-based payment in health care but not in food distribution?

Why is government micro-management of long-term care service delivery and financing the wave of the future?

Well, it’s been a slippery slope for 50 years. Santayana said: Remember history or you’ll repeat it. We’re not just repeating the mistakes of the past, we’re doubling down.

So, how did we get into this mess?

Once upon a time, long-term care was a Mom and Pop arrangement. Mom and Pop took care of Grandpa and Grandma, usually as a family, sometimes as a business.

Then, in 1965, government stepped in to help. At first, Medicare and Medicaid paid generously on a fee-for-service basis--initially to win passage of those programs and later to sustain support for them from business and political interests.

Medicare was to be “social insurance” for acute health care with premiums paid and benefits received by all.

Medicaid was to be a safety-net for long-term care, a means-tested public welfare program.

Remember that distinction between social insurance and welfare. We’ll return to it.

In the beginning, Medicaid offered only nursing home care. This was the origin of the welfare-program’s infamous “institutional bias.”

And in the beginning, Medicaid had no asset transfer restrictions nor any estate recovery requirement. Access to publicly funded nursing home care was easy and practically universal.

Now, people aren’t stupid. They saw that Medicaid would pay for Grandma in a nursing home, but they’d be burdened by personal caregiving or face cash out of pocket for any other kind of care.

Why pay for home care, adult day care, respite care or assisted living, when the government provides nursing home care?

Unsurprisingly, a private market for home and community-based services did not develop in those early years. There was no financial incentive for entrepreneurs to build a better long-term care mouse trap.

The same generous nursing home policies also stunted a budding private long-term care insurance market in the mid-1970s. Why insure privately for a risk and cost the government already pays for?

The nursing home profession was pretty savvy also. They saw a huge new funding source in Medicaid and Medicare. Naturally, nursing homes adapted to take full advantage of the opportunity. They formed powerful interest groups to influence public LTC policy.

So what do you think happened by the early 1970s? P.J. O'Rourke, the political satirist, likes to say "If you think health care is expensive now, just wait until it's free." Of course, the cost of Medicaid financed long-term care exploded.

Did the government respond by addressing the cause of this cost inflation—easily available free long-term care paid for by Medicaid?

No. Government attacked the symptom of bulging budgets instead.

Figuring nursing homes couldn’t charge for beds that don’t exist, the public pontiffs of health policy imposed “certificate of need” requirements severely limiting new construction.

But you don’t need a Ph.D. in economics to understand what happens in any market when you artificially cap supply. Prices tend to increase and that’s exactly what happened.

Nursing homes said: “We can’t build more beds? Fine, we’ll charge you more for the ones we already have. Thanks, by the way, for protecting us from new entrants into our business.”

So, government finally got the message and curtailed the cause of the problem, free Medicaid-financed nursing home care, right? Wrong. The Medicaid monarchs capped nursing home reimbursement instead.

This was the origin of the differential between low Medicaid reimbursements (often less than the cost of providing the care) and market-based rates half again higher but dwindling in total as private-payers followed public policy incentives and migrated to Medicaid.

Now, put your economists’ hats back on. With supply and price capped, what do you think happened to demand? Correct, it went through the roof! Nursing home occupancy in the mid-1980s jumped to 95 percent at a time when hospitals were little more than half full.

If a nursing home was willing to accept Medicaid's low reimbursement rates, it could fill all of its beds . . . no matter what kind of care it provided. Consequently, quality of care collapsed in principally Medicaid-financed nursing homes. Or so the public powers-that-be concluded.

True to form, government attacked the symptom (poor quality) instead of the cause (public financing). As if wishing could make it so, Congress simply mandated higher quality, more nurses’ aides, better training and so on in the Omnibus Budget Reconciliation Act of 1987.

Thankfully, this time federal command and control worked. Expenditure growth abated and quality improved—NOT.

Now caught between the rock of inadequate reimbursement and the hard place of mandatory quality, the nursing home profession had no place to turn but to the courts.

Suing under the 1981 “Boren Amendment” which required state Medicaid programs to reimburse nursing homes adequately so they could provide good care--lo and behold--state nursing home associations won most of those lawsuits.

Who says you can’t fight city hall?

But then, what do you think the government did next? You guessed it. Congress repealed the Boren Amendment in the Balanced Budget Act of 1997. Since then, there has been no legal floor under Medicaid reimbursement for nursing home care, yet costs continued to grow insupportably.

Now, while all this was going on another situation developed. Private payers in nursing homes, paying half again as much as Medicaid for the same semi-private room, began to wise up.

They rebelled against this “cost shifting” toward them by seeking ways to qualify for Medicaid themselves. After all, state and federal laws require the same quality of care regardless of payment source. So why not?

Some Medicaid eligibility workers were only too eager to help families who faced a long-term care crisis by stretching Medicaid’s already elastic financial eligibility rules in their favor.

Other workers tried to solve the national debt by strictly enforcing the most draconian rules keeping even the poorest families off Medicaid.

A special practice of elder law evolved to impoverish wealthier clients artificially in order to qualify them for LTC benefits.

In other words, Medicaid long-term care eligibility became a crap shoot with the lucrative benefit passing to people lucky enough to get a lenient eligibility worker or wealthy enough to consult a Medicaid planning attorney.

Not that it was ever very hard to qualify for Medicaid long-term care benefits. Despite the common misconception that you must be “low income” to get Medicaid, the fact is that anyone with income below the cost of a nursing home, upwards of $80,000 per year on average, is eligible based on income.

Consequently, two out of five people receiving Medicaid LTC benefits have incomes between $51,000 and $217,000 per year or more. More than two-thirds getting Medicaid LTC have incomes between $30,000 and infinity. Only for the low income? Hardly.

What about assets? The usual limit of $2,000 in cash or equivalents is unquestionably poor. But to get to that level, you can spend down on anything, not just care. Lawyers advise world cruises, big parties, better cars and larger houses to dispose or shelter excess assets.

Furthermore, virtually unlimited exempt resources don’t even count toward the asset limit. These include . . .

At least $552,000 in home equity and--with no dollar limit at all--one business including the capital and cash flow, Individual Retirement Accounts, one automobile, term life insurance, prepaid burial plans, home furnishings, and personal belongings.

If you still have too much money, your friendly local Medicaid planner will wave a magic legal wand and reduce the surplus to a level below the welfare program’s income and asset limits.

Cost in attorneys’ fees to become eligible for Medicaid after you already need care? About the same as one month in a nursing home private pay, maybe $6,000 or $7,000.

In the early ‘80s, Congress began to attack the problem of Medicaid eligibility abuse with a long series of statutes:

TEFRA (the Tax Equity and Fiscal Responsibility Act of 1982) for the first time authorized state Medicaid programs to impose asset transfer penalties, liens on real property and estate recoveries. But these measures were only voluntary.

MeCCA (the Medicare Catastrophic Coverage Act of 1988) required state Medicaid programs to penalize asset transfers made for the purpose of qualifying for public benefits within 30 months of application.

OBRA ’93 (the Omnibus Budget Reconciliation Act of that year) made estate recoveries mandatory, expanded the asset transfer look-back period to 36 months, and eliminated the previous 30-month cap on the asset transfer penalty.

When none of these measures worked as hoped, Congress and President Clinton stepped in with HIPAA (the Health Insurance Portability and Accountability Act of 1996) which made it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid.

Senior advocates and the elder law bar called this the “Throw Granny in Jail Law,” so Congress repealed that provision in the Balanced Budget Act of 1997 and replaced it with the “Throw Granny’s Lawyer in Jail Law” making it a crime to advise a client in exchange for a fee to transfer assets to get Medicaid.

When that law was deemed unconstitutional because it held lawyers culpable for recommending a practice made legal again when Congress repealed “Throw Granny in Jail,” public policy intended to save Medicaid for the needy was dead in the water again.

Nothing more happened until the Deficit Reduction Act of 2005 put the first cap ever on Medicaid’s home equity exemption. It started at $500,000 or $750,000 at state legislatures’ discretion and has increased with inflation to range today from $552,000 to $828,000, from four to seven times the average senior’s home equity.

The DRA ’05 also extended the transfer of assets look-back to five years and closed several loopholes such as the “half-a-loaf” strategy, but it left other gimmicks used to qualify millionaires for Medicaid in effect such as the “Medicaid-compliant annuity.”

Now, let’s pause for a moment and review. Government intervened in the long-term care marketplace 50 years ago by providing nursing home care to infirm seniors with most of their assets exempt from spend down and most of their income (largely Social Security benefits) as co-insurance.

This caused Medicaid LTC expenditures to skyrocket leading to federal and state initiatives to control costs by capping supply and price which drove up demand, undercut quality, reduced private-pay census, and crowded out private markets for long-term care insurance or home equity conversion (to fund LTC) and for home and community-based services (to provide care).

Meanwhile, from the early 1980s forward, another theme developed which was aimed at addressing the problem of escalating Medicaid LTC costs without confronting their real cause.

Academics and government officials became enamored of the idea that Medicaid's long-term care financing crisis could be relieved by paying less for expensive nursing home care and more for lower-priced home and community-based services.

The idea is that taking care of people in their own homes or in the community must be cheaper than maintaining them in a nursing home. Data often cited at the individual level seem to show that home care is less expensive than nursing home care.

But this reasoning commits the fallacy of composition, inferring that potential savings for specific individuals are additive to the society as a whole.

In fact, available research does not show that home and community-based services save money compared to nursing home care overall.

Community-based care usually only delays institutional services. Between them, expanded home care plus eventual nursing home care end up costing more in the long run than nursing home care alone.

That fact is borne out by historical data showing continued growth in total Medicaid long-term care expenditures. While nursing home costs have leveled out considerably, the home care side of Medicaid continues to grow rapidly.

Here’s the point: providing long-term care in the most appropriate and desirable setting is a worthy goal to pursue. But it does not save money.

For every person in a nursing home or assisted living facility in America, there are two or three of equal or greater disability, half of whom are bedbound, incontinent or both, who remain at home. They are able to stay home because their families, mostly daughters and daughters-in-law, struggle heroically to keep them out of an institution.

When government starts providing long-term care that they want (home care) instead of long-term care that they’d prefer to avoid (nursing home care), people come out of the woodwork to take advantage of it. That too drives up overall Medicaid LTC expenditures.

Finally, Medicaid financed home and community-based care is deadly to the marketability of private long-term care financing alternatives, such as reverse mortgages or long-term care insurance.

The big benefit of being able to pay privately for long-term care is the ability to command red-carpet access to top-quality long-term care at the most appropriate level and in the private marketplace.

To the extent the government conveys to the American public that consumers can obtain the same benefits financed by Medicaid, Medicaid will continue to explode in costs and reverse mortgages to fund long-term care in the short-term and LTC insurance to fund it in the long run will remain stunted.

What a mess! Here it is in a nutshell.

Easy access to Medicaid-financed nursing home care prevented the development of a private market for home and community-based services.

Explosive cost growth led to ultimately unsuccessful government efforts to control the supply, price, quality, type and access to Medicaid funded care.

Notoriously low Medicaid reimbursement rates for two-thirds of nursing home residents were partially counterbalanced by relatively generous Medicare reimbursement levels for post-acute and home health care.

As good business people, the nursing home profession pursued the incentives in public policy by reaching out for higher paying Medicare post-acute patients and by seeking fewer lower-paying long-term Medicaid custodial care residents.

That caused the balance of Medicare financing to shift significantly from nearly all acute care toward much more post-acute and long-term care.

Between 1990 and 2013, long-term care—defined as nursing home and home health care—remained roughly eight percent of total National Health Expenditures.

During the same period, however, the proportion of long-term care expenditures funded by Medicare more than tripled from 9 percent in 1990 to 29 percent in 2013. Long-term care increased from 4.5 percent of total Medicare expenditures to 11.7 percent in those 23 years. (CMS-NHE Data)

Consider what this means. Our current long-term care financing system depends, and has depended for decades, on generous and growing Medicare reimbursements for home care and nursing home care balancing meager Medicaid reimbursements for the majority of people dependent on either or both programs.

As worries about Medicare’s solvency grew throughout the 2000s, federal policy makers looked for new ways to control public LTC expenditures. CMS hit upon the idea of driving reimbursement toward “quality” instead of “quantity” as a way to reduce long-term care cost growth in Medicare and Medicaid.

In other words, this latest push by government to manage the LTC service delivery and financing system is designed to fix or at least mitigate problems that were actually caused by earlier government market interventions.

As always before, these new interventions address symptoms—high costs, low quality and public-policy-induced market dysfunction—instead of the real causes, perverse incentives created by earlier government intercessions.

The risk is that further interference in an already fragile LTC market will turn everything topsy-turvy just as the age wave begins to crest and the entitlement programs’ unfunded liabilities begin to come due.

Remember what I said at the beginning of this talk about how Medicare began as “social insurance” and Medicaid as welfare?

Ironically, political pressure is building now to means-test, that is to say welfarize, Medicare. I’ve already shown how Medicaid has become a de facto entitlement, the dominant LTC funding source for all economic levels of Americans.

The net effect of this long historical process is that public financing of long-term care has expanded beyond government’s ability to pay while private LTC financing has dwindled almost to disappearance.

The public does not know who pays for long-term care, but they know someone must pay. You don’t see Alzheimer’s patients dying in the gutter.

The result is a public asleep about the risk and cost of long-term care and dependent by default on a mostly publicly financed LTC service delivery system that may be on its last legs, unable to squeeze more and better care out of more and more intrusive regulations and mandates.

In a free market consumers rule. They demand quality and volume. If they don’t like what they get, they vote with their pocket books and move on to products and providers they prefer.

Competition to provide the best care at the lowest price in the most appropriate settings could and would solve the LTC service delivery and financing problems that have been created by government’s interventions, however well-intentioned those interventions may have been.

Do you have any doubt that long-term care services and financing in the United States would be better if government had left the market alone and allowed competition and the profit motive to make the best possible care available at affordable levels?

Would the poor suffer? More than they do now? Hardly. There would be room for a real safety net paying market rates for the full continuum of care. Such a safety net might even be possible without public funds, relying entirely on charity and philanthropy.

But, that is not the course we’re on. Let’s get back to reality. I fear we’re headed toward a perfect economic storm when interest rates finally increase making service of our massive public debt unsustainable and leading to a severe retrenchment in Medicaid and Medicare long-term care financing.

Such an outcome is very nearly inevitable. The Federal Reserve and the U.S. Government cannot ignore economic gravity forever. Sooner or later debt and unfunded promises come due.

But to end on a more positive note, if the worst does happen, we’ll be forced to get back to methods and strategies that are more in keeping with the traditional American values of independence, personal responsibility, self-sufficiency and hard work.

I predict that as government is compelled to withdraw from LTC financing dominance:

Medicaid will have to become a real welfare program. Its home equity exemption will disappear or be radically reduced. Consumers will use their home equity to pay privately for long-term care. They’ll employ reverse mortgages for that purpose.

That new source of private financial oxygen will reinvigorate all providers across the whole continuum of long-term care.

Over time, after watching their own inheritances consumed by their parents’ long-term care costs, the next generation will finally see the merit of private LTC insurance and begin to buy it.

Medicare will stop being “social insurance” paid for by and available to all. It will be means-tested and become a program for the poor, and hence, as the saying goes, “a poor program,” like Medicaid.

Acute health care will drift away from mostly public funding toward mostly private financing through health savings accounts and high-deductible insurance.

After 50 years of consuming our economic seed corn by moving ever more fully away from private and toward public financing of long-term care, demographic and economic reality will force us back to the kind of freer market that made the country great in the first place.

Now, before I conclude and turn to your questions, let me anticipate your first query. You might ask:

“Well Steve, you’ve painted a pretty dismal picture. Why are you so worried that this whole publicly financed long-term care house of cards may soon come crashing down?”

I’m glad you asked.

My organization, the Center for Long-Term Care Reform, has developed a tool to measure and analyze that risk.

We call it the “Index of Long-Term Care Vulnerability.” We’ve applied the Index to the LTC service delivery and financing systems in four states so far: Virginia, New Jersey, Georgia, and most recently, New Hampshire.

You can find our reports on each of those projects by opening the link on my handout which will take you to an online version of the handout where all the links in it are live.

Our Index of LTC Vulnerability analyzes the sustainability of current long-term care systems by examining published data in each of seven key issue areas. These are:

Aging demographics: how many 85 year olds are in the pipeline? Answer: Too many; more than triple what we’re dealing with now by 2050.
Morbidity: how sick will they be? Answer: Too sick. Recent optimistic compression of morbidity predictions are not bearing out due to the obesity epidemic.
Medicaid: how viable is the welfare program as a source of future LTC financing? Answer: Not very based on expenditure trends, ObamaCare expansion, easy income and asset eligibility, inadequate reimbursement and cost shifting, dual eligibles, rebalancing and managed care challenges.
Federal revenue: can revenue from taxation and borrowing sustain the federal share of Medicaid? Answer: Almost impossible when interest rates increase because of elevated debt and entitlement liabilities and high state matching rates exacerbated by provider taxes and recessions.
State revenue: can state economies generate enough revenue to fund their share of Medicaid? Answer: Very doubtful based on rankings of states’ fiscal policies by Cato, Forbes, Mercatus, the Pew Charitable Trust, and the Urban Institute.
Private financing alternatives: could genuine asset spend down, higher estate recoveries, reverse mortgages and private LTC insurance relieve the financial pressure on Medicaid and, if so, how much? Answer: Plenty if Medicaid financial eligibility rules were tightened and enforced.

Finally,

Entitlement mentality: to what extent has easy access to all forms of public assistance undercut the willingness and ability of the American people to fend for themselves? Answer: A lot based on metrics like dependency on Medicaid, food stamps, welfare, and disability, but we won’t know how much until we see what happens when people do have to fend for themselves.

The Index of Long-Term Care Vulnerability comes with an interactive score sheet which allows the user to apply weights and scores for each factor of analysis in order to estimate, albeit subjectively, the potential vulnerability of the national and each state’s long-term care service delivery and financing system.

Check it out and let me know what you think.

Well, that’s my take on where we are, how we got here, and what’s likely to happen next. Thanks for your attention. I’ll be glad to answer questions.

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Updated, Tuesday, August 22, 2017, 10:30 AM (Pacific)

Seattle—

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LTC E-ALERT #17-030: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

“‘Granny pods’ become a solution for retirees with limited budgets
The Language of Long-Term Care: Navigating the care maze can be overwhelming; understanding the lingo can help
The role of advisors in longevity planning
7 Peeks Into Long-Term Care Insurance Issuers' Thinking
You can get quality elder care but be prepared to pay for it
Life Expectancy for a 65-Year-Old Increases 1.6 years
A centered approach to research on aging
Could This Idea Help Fix America's Shortage Of Home Care Workers?
ACA Diluted Funds for the Severely Disabled
Brain scan study adds to evidence that lower brain serotonin levels are linked to dementia
3 Insurance-Based Medicaid Planning Strategies
Nearly 1 In 5 Hospice Patients Discharged While Still Alive
Hospital patients don’t get good data on nursing homes

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Updated, Friday, August 18, 2017, 9:48 AM (Pacific)

Seattle—

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LTC BULLET: ON THE ETHICS OF MEDICAID PLANNING

LTC Comment: Is Medicaid planning ethical? Reasonable people can disagree. But is that the right question to ask? If not, we need to dig deeper.

LTC BULLET: ON THE ETHICS OF MEDICAID PLANNING

LTC Comment: As I perused the New York Times yesterday morning, I noticed an article titled “The Ethics of Adjusting Your Assets to Qualify for Medicaid.” Thinking it might be a follow up to Ron Lieber’s thoughtful column on the subject from last month, I clicked through. But no, it was the same column he published on July 21, which garnered a swarm of replies, thoughtful and otherwise. I passed over the piece originally with nothing more than an LTC Clipping. But re-reading it now, I think it deserves a fuller reply. What follows are quotes from Mr. Lieber’s NYT column followed by our comments.

Lieber/NYT: “At any given moment, there is a large group of citizens who want nothing more than to make absolutely certain that they are impoverished enough to qualify for Medicaid sooner rather than later. Someday, you might be one of them.”

LTC Comment: Sad, but true.

Lieber/NYT: “Welcome to the (perfectly legal) world of Medicaid planning, the plain-vanilla term for the mini-industry of lawyers and others who help people arrange their financial lives so they don’t spend every last dime on a nursing home. Once properly impoverished under the law, then Medicaid, which gets funding both from your state and the federal government, picks up the tab.”

LTC Comment: Right, but there is an important nuance. Most people qualify quite easily for Medicaid long-term care benefits without spending down assets for care and without any special, lawyer-assisted planning. Only fairly prosperous people need to resort to Medicaid planning. That’s why Medicaid ends up paying for all or part of 80 percent of nursing home bills even though it pays for only a little more than 60 percent of nursing home costs. The key point here is that if an affluent person qualifies for Medicaid, his or her private income will pay most or sometimes all of the bill, but the nursing home receives only the Medicaid rate of reimbursement, on average less than the cost of providing the care. That reality drags down care quality for all, the genuinely needy and the artificially self-impoverished alike.

Lieber/NYT: “In my first Medicaid column on June 30, I asked for your questions about the program, aging and long-term care, and you sent me more notes about the ethics of Medicaid planning than on nearly any other topic. About half of you were outraged by the ethical implications, and the rest wanted to know where you could sign up for it.”

LTC Comment: Nationally syndicated financial columnist Jane Bryant Quinn wrote many columns excoriating Medicaid planners for artificially impoverishing their clients. She told me once that she hesitated to write any more such columns, because no matter how strongly she criticized the practice “my phone would ring off the hook with people wanting to find a Medicaid planner.”

Lieber/NYT: “The debate is not new, though it happens to be the rare topic on which the editorial boards of The New York Times (“Pretending to Be Poor”) [1996] and The Wall Street Journal (“Medicaid for Millionaires”) [2005, quoting Steve Moses] have agreed over the decades.”

LTC Comment: Noteworthy is the timing of both those editorials. The New York Times editorialized against Medicaid planning in 1996, the year Congress passed and President Clinton signed the Health Insurance Portability and Accountability Act (HIPAA ’96) which criminalized Medicaid planning, but became known as the “Throw Granny in Jail Law,” and was quickly repealed and replaced by the “Throw Granny’s Lawyer in Jail Law” (Balanced Budget Act, BBA ‘97), which targeted Medicaid planners, but was later deemed unenforceable.

The Wall Street Journal column was published in 2005 as I was spending half time in Washington, DC educating anyone who would listen about the need to curtail Medicaid planning and give the welfare program back to the poor. We won that fight when the Deficit Reduction Act (DRA ’05) was signed into law capping Medicaid’s home equity exemption for the first time and making the transfer of assets rules longer and stronger.

Lieber/NYT: “Did I mention the need for a qualified lawyer? If you want to do some homework first, the book “How to Protect Your Family’s Assets From Devastating Nursing Home Costs” will give you a sense of what questions you need to ask. However, you may want nothing to do with this. It would not surprise K. Gabriel Heiser, the lawyer who wrote the book. He’s heard from colleagues over the years who wanted no part of this work. This confused him, he said in an interview this week, given that many of them handled estate planning for wealthier clients. There, they helped people avoid paying millions to the government, whereas Mr. Heiser’s work merely helps clients get the government to pay a few hundred thousand for care on their behalf.”

LTC Comment: Comparing tax planning with Medicaid planning is commonplace and wrong. There is no moral equivalency. Legitimate tax planning results in full payment of all taxes legally due, but no more. Medicaid planning results in someone who could have paid privately for top quality long-term care in the most appropriate venue ending up in a nursing home dependent upon a welfare program notorious for paying providers too little to ensure quality care.

Lieber/NYT: “The retorts are numerous. I heard several versions of the following in recent weeks: I’m a taxpayer and paid into this system. I was thrifty, and my neighbors were not. They went on vacation. In fact, I watched them go when I was home at Christmas, and they came back with suntans. And now my heirs should get nothing? To accuse me of gaming the system is absurd; I just don’t want to be taken by it.”

LTC Comment: I’ve heard that argument many times over the years, as often as not from hypocritical fiscal conservatives who want to have their ideological cake and eat it too. Their reasoning is specious and no justification for Medicaid planning. Think of it instead as an indictment of public policy that rewards failure to save, invest or insure for long-term care and punishes responsible planning.

Lieber/NYT: “Here, Medicare pays the surgery and drug bills for people with heart disease and cancer. But dementia patients . . . need expensive supervision, which Medicare generally doesn’t pay for. That’s not fair, one might argue, so doing everything legally possible to get a dementia patient eligible for Medicaid is like a form of political protest that corrects an inequity.”

LTC Comment: The problem with this argument is that Medicare is fraught with trillions of dollars in unfunded liabilities. We’ll likely lose Medicare for acute care before we gain more government funding for long-term care. Undermining Medicaid by overloading it with people who could have, would have and should have paid their own way helps no one, least of all the truly needy who genuinely need Medicaid.

Lieber/NYT: “Then there are the parents who take the estate they bestow on their children as a point of pride. One adult child, who did not want to be named because her father is so emotional on the topic, said that he insisted on a [Medicaid planning] trust even though she and her sibling did not ask for any money. . . . All he has done is sweat and scrimp and save so he could leave something behind. Any discussion about not doing so causes him to cry and have panic attacks. So should his daughter really have tried harder to talk him out of a trust?”

LTC Comment: Well, on the other hand, I personally struggled to afford the premiums for private long-term care insurance on both of my parents, myself and my late wife. Should I have to pay for this man also so his children can get an inheritance they evidently neither need nor want? Medicaid is supposed to be a safety net for people in need, not a guarantor of uninsured legacies.

Lieber/NYT: “Jennifer L. VanderVeen, a lawyer in South Bend, Ind., who delivered a presentation at a 2009 legal conference on the ethics of gifts as part of Medicaid planning, said that many of her clients come in with more practical concerns. For instance, they would prefer not to have to sell a small business or a farm that employs other family members in order to pay for long-term care.”

LTC Comment: Medicaid exempts one business or farm including its capital and cash flow with no dollar limit, so that argument is erroneous. But why should Medicaid, a means-tested public assistance program intended as a long-term care safety net for the poor, be used as free inheritance insurance for heirs of a business owner? Turn the argument around. If people really risked losing a business or farm to the cost of long-term care, maybe they would plan earlier and more responsibly to prepare for that risk and cost privately.

Lieber/NYT: “If you’re looking for another way to frame these issues, consider one other thing: . . . Would the care be worse if you or your relatives were on Medicaid, and because of that, limited to whatever nursing home or home-care agency was available? If so, is the most ethical choice to urge aging parents or relatives to keep as much money as possible to pay out of pocket for the care of their choice?”

LTC Comment: Medicaid pays long-term care providers on average less than the cost of providing the care. So obviously, access to and quality of care are lower for people dependent on Medicaid than for people who have prepared to pay their own way. The one exception to this rule applies to affluent people who qualify for Medicaid after paying privately for a while to secure their place in one of the nicer nursing facilities that take only a small number of Medicaid residents. (Nursing homes roll out the red carpet for private patients who pay half again as much as Medicaid.) After a few months, their Medicaid planners flip the switch and convert them to public assistance. Thereafter state and federal laws prevent their being removed simply because their source of payment changed. Poor people do not have “key money” to buy their way into the best nursing homes, so they’re stuck with the mostly-Medicaid facilities that have such a poor reputation for quality. If you really care about the ethics of Medicaid planning, this situation which benefits the affluent at the expense of the poor, should figure prominently.

Lieber/NYT: “I’ve been struggling to answer this question for weeks now, and if you have any experience with it yourself, I’d like to hear from you. Watch this space in the coming weeks and months for more on how money and Medicaid are so often a part of the mix when we shop for care for ourselves or our older loved ones.”

LTC Comment: OK, you’ve heard from us and we’ll be watching for your next column on the subject. In the meantime, thanks for taking a serious, thoughtful look at this critical, but controversial topic.

Closing LTC Comment: Do you see a common thread in the excuses people use to justify Medicaid planning morally? What were they?

Medicaid planning is no different than tax planning.
I worked hard and saved. Why should lazy bums get all the government gravy?
Lucky heart attack victims have Medicare, so dementia patients should have the same.
It’s not fair my kids won’t get my business or estate.

It’s human nature to want something for nothing. America’s founders understood that changing human nature with moral suasion is fruitless. So they employed checks and balances to prevent one branch of government from dominating the others.

Whether Medicaid planning is ethical or not is the wrong question to ask. Medicaid has lost its original checks and balances that prevented privileged rent seekers from taking advantage of the welfare program. In other words, the problem is poor public policy not human nature or immorality.

The good news in this conclusion is that the problem is easily fixable. Remove the perverse incentives in Medicaid that discourage responsible long-term care planning. In their absence, human nature, i.e. self-interest, will prevail for the good, incentivizing all to save, invest or insure against the risk and cost of long-term care.

How? Well, that’s why we published How to Fix Long-Term Care Financing (2017). Read it for a full analysis of the problem and the solutions.

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Updated, Monday, August 14, 2017, 9:48 AM (Pacific)

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LTC E-ALERT #17-029: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Vince Bodnar, Larry Nisenson to Join Genworth’s U.S. Life Insurance Division
Long-Term Care Insurer Pain May Hit More Companies
New report details way to finance LTSS
Firm Proposes Long-Term Care Insurance Run-Off Program
Study Links Moderate Drinking to Reduced Risk of Dementia
LTCG awarded five-year contract from the California Public Employees’ Retirement System (CalPERS)
Study suggests higher Medicaid payments for assisted living operators
Middle-Income Boomers Face ‘New Retirement’
Why a Pennsylvania insurer's collapse could whack Californians in the wallet
Medicare Advantage Spends Less on Care, So Why Is It Costing So Much?

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Updated, Friday, August 11, 2017, 10:57 AM (Pacific)

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LTC BULLET: 2017 LTC INSURANCE SURVEYS PUBLISHED

LTC Comment: Broker World magazine has published its annual long-term care insurance surveys for 2015. Highlights after the ***news.***

*** WHY SUBSCRIBE TO LTC CLIPPINGS: To counsel prospects and clients responsibly, financial advisors--including insurance agents--need to know more than basic demographic facts and product knowledge. Good LTC planning requires understanding the six “blind men” of long-term care and how they interact: government, consumers, senior advocates, providers, insurers and financiers. For the story behind that observation, read “The Elephant, The Blind Men and LTC” here.

How can you keep abreast of those complicated topics and their interactions? You can spend dozens of hours every week canvassing the internet for potentially relevant articles, speeches and reports. Then scan volumes of useless information to find and absorb the few valuable gems of knowledge they contain. Or you can subscribe to LTC Clippings and let us do that part of the job for you.

If you subscribe to LTC Clippings and invest a few minutes of your time each week to read and consider them, we promise you a plentiful and profitable source of actionable information and insights. Contact Damon at 206-283-7036 or damon@centerltc.com for details and to subscribe. ***

LTC BULLET: 2017 LTC INSURANCE SURVEYS PUBLISHED

LTC Comment: Every year Broker World magazine publishes surveys of traditional and worksite long-term care insurance. The surveys’ authors are well known LTCI experts, Claude Thau, Allen Schmitz, and Chris Giese. We’ve culled a few highlights from this year’s surveys below. Check out all the details in the July and August issues of the magazine. Be sure to subscribe to Broker World if you haven’t already.

It’s clear from the following data that the private long-term care insurance industry continues to face daunting challenges. On the other hand, it is equally true that private LTCI is playing a bigger role in financing extended care as its policies mature and claims increase. What the future holds is anyone’s guess, but a likely scenario is that publicly financed long-term care will face harder times, and the obstacles holding back LTCI will retrench over time.

Excerpts from “2017 Milliman LTCI Survey,” Broker World, July, 2017

“The 17 carriers reported sales of 88,922 policies ($220,501,539 of new annualized premium) in 2016, which we believe represents 100 percent of the stand-alone LTCI industry’s 2016 individual and multi-life sales.”
“Overall, the number of policies sold was 13.6 percent less than in 2015 and the annualized premium was 14.2 percent less than in 2015.”
“‘Combo’ policies (i.e., LTCI combined with life insurance or annuity coverage) and policies that offer LTC-related accelerated death benefits more than made up for the sales reductions.”
“Six insurers increased sales compared to 2015.”
“The average issue age dipped from 55.9 to 55.8, the lowest ever reported in this survey. Fewer insurers offer coverage to people under issue age 40 or above issue age 75.”
“The average premium per new insured dropped slightly from $2,497 to $2,480 (reflecting 17 insurers), and the average premium per new buying unit (recognizing couples as one buying unit) dropped slightly from $3,526 to $3,496.”
“Reported affinity business amounted to 6.1 percent of the 2016 new insureds (down from 6.8 percent in 2015 and 7.8 percent in 2013 and 2014) but only 5.1 percent of the premium (consistently a lower percentage of premium than policy count).”
“Northwestern and Mutual of Omaha continued as the number one and number two carriers, combining for 45 percent of the new sales in terms of premium.”
“In 2015, the number of in-force policies for our participants dropped for the first time (0.2 percent). In 2016, the number of in-force policies dropped again, by 0.3 percent.”
“Nonetheless, year-end in-force premium increased 2.9 percent in 2016 (2.4 percent in 2015). In-force premium is increased by sales, price increases, and benefit increases, and is reduced by lapses, reductions in coverage, deaths, and shifts to paid-up status for various reasons.”
“Participants’ individual claims rose 6.9 percent and group claims rose 4.7 percent. Overall, the stand-alone LTCI industry incurred $9.7 billion in claims in 2015 based on companies’ statutory annual filings, raising total incurred claims from 1991 through 2015 to $107.8 billion.”
“The average time from receipt of the application until a policy is issued dropped from 44 days to 38 days, the fastest time since 2012.”
“Insurers continue to deal with disheartening price increases on existing policies and unsatisfactory results for those older blocks. Recently priced policies are based on assumptions that rely on far more credible data, hence premiums should generally be more stable, but many financial advisors presume that currently issued policies will face steep increases.”
“We are aware of only 37 times claimants have resorted to independent third-party review (IR), and the insurers’ denials were upheld 89 percent of the time. . . . The existence and voluntary expansion of IR and the insurer success rate when appeals occur all work to justify confidence in the industry’s claim decisions. Such confidence may be reflected in the media, as the industry has received little criticism regarding claims adjudication in the past few years.”
“The annual number of life insurance policies sold with long term care benefits is now more than twice the number of stand-alone policies sold.”
“Only one participant believes there will eventually be a government LTCI program and expects that program to provide limited benefits. Seven insurers responded that they do not expect such a program, and the other participants chose not to answer this question.”
“The shift to gender-distinct pricing is nearly complete, but the impact continues to evolve. At the beginning of 2013, all products used unisex pricing. Now only one insurer uses unisex pricing outside the worksite. (Note: two carriers use unisex pricing for couples.)”

Excerpts from “2017 Analysis of Worksite LTC Insurance,” Broker World, August, 2017

“In 2016, participants reported sales of 14,929 worksite [WS] policies for $23.7 million of new annualized premium, increases of 22.1 percent in the number of WS policies and 12.4 percent in new annualized WS premium.”
“These increases contrast with the declines in total 2016 LTCI sales compared with 2015 (13.6 percent fewer policies and 14.2 percent less new annualized premium).”
“Worksite LTCI sales accounted for 18.5 percent of the policies sold in the industry (up from 12.5 percent in 2015) and 11.9 percent of the annualized premium (up from 8.7 percent).”
“For one carrier, 64 percent of its new premium came from WS sales. Another carrier had 37 percent of its sales from WS. The other three carriers sold seven percent to 11 percent of their new premium in WS.”
“The average worksite premium dropped from $1,740 in 2015 to $1,590 in 2016. Among participants, the average varied from $1,344 to $3,453, so a change in distribution by carrier can significantly affect the overall average premium. Core business drags the average worksite premium down a lot and carve-out business pulls it up, so a change in distribution by core versus carve-out can also have a big impact on average premium.”
“The WS share of the total market has been increasing for the past three years despite pressures affecting the worksite market. Most of the increase in WS market share reflects the decline in NWS stand-alone LTCI. The popularity of combo products has eaten into the NWS stand-alone LTCI market much more so than in the worksite market.”
“Our data indicates that the WS market has become increasingly dominated by female sales, perhaps because females are becoming informed about the attractiveness of unisex premiums and because the WS market charges males a lot more than males are charged in the NWS market.”
“Insurers have also raised their minimum ages to avoid anti-selection (few people buy below age 40) and, to reduce exposure to very long claims, stopped insuring people who don’t go to the doctor regularly.”
“Uncertainty related to the Patient Protection and Affordable Care Act (ACA) continues. The waves of confusion and work for employee benefit brokers and employee benefit managers continue to make it hard for brokers and clients to consider WS LTCI.”
“Voluntary worksite LTCI sales may gravitate toward combo products, which have the added advantage of providing valuable life insurance coverage that is viewed as a more immediate potential need.”

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Updated, Monday, August 7, 2017, 10:15 AM (Pacific)

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LTC E-ALERT #17-028: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

LTC worker shortage a 'train wreck waiting to happen,' expert says
Insurers Think They’ve Found the Perfect Patients for Profits
Reverse Mortgage: Yes or No?
10 Tips for Children of Aging Parents
Post Crisis: Rebounding But Not Recovered
Struggling Americans Once Sought Greener Pastures—Now They’re Stuck
Older Americans Aren’t as Poor as We Thought
Medicaid Managed Care Comes to Assisted Living: Challenges abound as providers adapt to growth of health plans in the Medicaid program
Even Without Congress, Trump Can Still Cut Medicaid Enrollment
Getting Less Than 7 Hours Of Sleep May Lead To Obesity, Study Finds
Is Long-Term Care Insurance Still Viable? Key Considerations for Retirees and Advisors

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Updated, Friday, August 4, 2017, 9:33 AM (Pacific)

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LTC BULLET: MOVE THE MEDIA

LTC Comment: Let’s talk about getting “How to Fix Long-Term Care Financing” in front of the media and thought leaders, after the ***news.***

*** LTC CLIPPINGS. The following story caught our eye last week, so we forwarded it to LTC Clippings subscribers. Medicaid managed care is moving into assisted living and raising the same problems it caused for nursing homes. I warned about the slippery slope for assisted living facilities as they take on more Medicaid residents in a 2004 article titled "The Sirens' Call, The Primrose Path, and Assisted Living." Let us search for and send you the articles, reports and data you need to see. Subscribe to LTC Clippings. Contact Damon at 206-283-7036 or damon@centerltc.com

8/2017, “Medicaid Managed Care Comes to Assisted Living: Challenges abound as providers adapt to growth of health plans in the Medicaid program,” by Patrick Connole, Provider

Quote: “States contracting with health plans to operate as Medicaid managed care organizations (MCOs) is a growing phenomenon. So is the correspondingly sharp rise in MCOs administering services for elders and people with disabilities, under the formal name of managed long-term services and supports (MLTSS). As a result, populations in skilled nursing care centers, and increasingly Medicaid beneficiaries in assisted living communities, are coming under the umbrella of a new world order for reimbursement, where health plans are the payer and the state acts as overseer. It is in the assisted living space that this article will examine how managed care is having an impact on provider contracting, reimbursement, and care coordination.”

LTC Comment: It’s hard to see how putting another government-induced layer between patient and provider will improve long-term care, much less reduce costs. ***

LTC BULLET: MOVE THE MEDIA

LTC Comment: “How to Fix Long-Term Care Financing” is our new flagship, leading the advance for long-term care financing reform.

If you haven’t read the Center for Long-Term Care Reform’s new report, published last week jointly with the Foundation for Government Accountability, please do so now.

The health reform fiasco playing out in Washington, DC has left policy analysts and free market advocates depressed and demoralized. While the health policy forces regroup, LTC policy should advance.

Toward that end, your Center for Long-Term Care Reform hereby deputizes all members and friends in the cause. Help us get “How to Fix Long-Term Care Financing” into the hands (and minds) of people who can (1) spread the word (reporters and policy analysts), (2) implement better policies (government officials and trade association representatives), and (3) change the laws (state and federal legislators and their staffs.)

How do you do that? Well, it’s mainly about taking opportunities as they arise. For example, if you read an article with which you either agree or disagree (nearly everything you read, right?), reply to the author. Find something nice to say about his or her writing, take courteous issue with anything on which you differ, and send along “How to Fix Long-Term Care Financing” as another way of looking at the subject.

That’s exactly what Lori Fjelstad of Center-corporate-member GoldenCare USA did to get the favorable attention of an influential reporter. Lori wrote:

Your article was well written and informative, but I had to cringe at the last recommendation that said before you buy LTC insurance you should consult with an eldercare attorney, which may lead to Medicaid planning which is neither good for the client nor taxpayers. I encourage you to read a recent report written by Steve Moses “How to Fix Long-Term Care Financing.

Judith Graham of Kaiser Health News, whose piece was published in the New York Times, replied “I'll read it with great interest, Lori, and get back to you. Judy.” That’s how to get the word out and forge good media relationships.

But don’t expect every outreach attempt to be successful. As in sales, it’s not how many times you fail that counts, but how many times you succeed and how many times you succeed is directly proportional to how many times you try and fail. Throw enough spaghetti at the wall and some of it is going to stick.

If you attend a professional conference, or serve on a trade association committee, or meet with a political representative, mention the report, get a business card, and send a link to the report when you get back to the office.

At the Center, we’re systematically sending the report to everyone we think should read and heed it. With your help, we’ll reach a much wider audience. Thanks as always for your support and proactivity.

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Updated, Monday, July 31, 2017, 9:14 AM (Pacific)

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LTC E-ALERT #17-031: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Older Americans Buck Trend of Decreased Homeownership
Alzheimer’s Stats Look Alarming, But No Need to Panic
High-Cost Dual Eligibles’ Service Use Demonstrates The Need For Supportive And Palliative Models Of Care
How To Get Long-Term Care At Home Without Busting The Bank
The Hidden Costs In Medicare Advantage Plans
Disabled Medicare enrollees are not getting the same care as able-bodied ones
New Study Identifies Major Gaps in Medicaid Structure
Over 80 Percent of Women Fail Retirement Income Literacy Quiz
40% underestimate assisted living costs
Kitces: When and how to deduct long-term care insurance
Wisconsin faces critical shortage of care workers for disabled and elderly
The Ethics of Adjusting Your Assets to Qualify for Medicaid
My uncle with dementia needs long-term care — should I refinance his house?

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Updated, Wednesday, July 26, 2017, 9:54 AM (Pacific)

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LTC BULLET: “HOW TO FIX LTC FINANCING” REPORT RELEASED

LTC Comment: FGA and CLTCR released Steve Moses’s study “How to Fix Long-Term Care Financing” today. The press release, a link to the report, and how you can help make its recommendations a reality follow.

LTC BULLET: “HOW TO FIX LTC FINANCING” REPORT RELEASED

LTC Comment: The purpose of today’s LTC Bullet is to get our new report, released today, into your hands. Please download “How to Fix Long-Term Care Financing,” save it as a .pdf, and send it to everyone you can think of who could benefit from its analysis and recommendations.

Like whom? Well, local and national reporters who cover health and long-term care issues; your local, state and federal political representatives; colleagues in whatever aspect of the business you pursue such as LTCI producers, LTC providers, Medicaid administrators, etc. If you have a personal relationship with anyone in a policy making capacity, please send him or her our report with your recommendation to review it.

Feel free to refer anyone to whom you send the report to the author, Stephen Moses, at 425-891-3640 or smoses@centerltc.com.

Now here’s the press release sent to the media by the Foundation for Government Accountability this morning.

New Study Identifies Major Gaps in Medicaid Structure, Whitney Munro, July 26th, 2017

Naples, FL – A new study has identified a major loophole in the structure of Medicaid that has led to massive cost overruns and a shortage in available funds for truly needy individuals. According to the study, eligibility expansions and loopholes have led to a perversion of Medicaid, creating an entitlement program for the middle-class.

The report, How to Fix Long-Term Care Financing, co-published by the Foundation for Government Accountability (FGA) and the Center for Long-Term Care Reform, found that the current structure of Medicaid has created a perverse incentive for middle-class and affluent seniors to plan their estates in order to qualify for the long-term care program.

“Federal law restricts long-term care eligibility to individuals with limited countable assets, but eligibility loopholes and home-equity exemptions provide a way for middle-class and affluent seniors to take advantage of the benefits program. These loopholes allow those with the means to plan for retirement and potential health-needs to take valuable funds away from needy individuals,” said Stephen Moses, Center for Long-Term Care Reform President.

“The current structure of Medicaid for long-term care is a blatant misuse of the public’s tax-dollars, and it’s ultimately hurting those it was designed to protect.”

According to the study, under current law, up to $560,000 in home equity is exempt from Medicaid’s asset limit on those applying for long-term care; in some states, the exemption is as high as $840,000. This exemption, which can be combined with other loopholes such as the rearranging of estates to hide funds, has led to the overuse and abuse of Medicaid, often at the expense of those who truly need the aid.

FGA President Tarren Bragdon noted that the study revealed just how damaging government benefits programs can be when misused and incorrectly structured.

“By creating an incentive to use Medicaid as a long-term care strategy for the middle class and allowing loopholes to be abused, the government is hurting entire populations in each state. Rather than allowing people to take advantage of the system, our elected-officials should promote work as a means to prosperity and promote personal responsibility. We must protect limited taxpayer resources for the truly needy,” said Bragdon.

The full text of How to Fix Long-Term Care Financing can be viewed here. For more information, please contact Stephen Moses at 425.891.3640.

The Foundation for Government Accountability is a non–profit, multi–state think tank that specializes in health care, welfare, and regulatory reform. To learn more, visit TheFGA.org.

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Updated, Monday, July 24, 2017, 9:39 AM (Pacific)

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LTC E-ALERT #17-024: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Mississippi not talking about the wealthy people on Medicaid
UnitedHealth Group Predicts 50% Of Seniors Will Choose Medicare Advantage
Nine lifestyle changes can reduce dementia risk, study says
Ranking the States by Fiscal Condition 2017 Edition
Medicaid reductions off the table, as GOP turns to plan D: Let Obamacare 'fail' on its own
The US is losing ground when it comes to retirement security
Social Security trust fund will be depleted in 17 years, according to trustees report
Long-Term Care Insurance Association Reports 39 Percent Increase In Consumer Inquiries
What You Need to Know about the Social Security and Medicare Trustees Reports
How Much Should the Average American Save for Retirement?
Stressful experiences can age brain 'by years', Alzheimer's experts hear
Don't ignore this serious retirement threat

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Updated, Friday, July 21, 2017, 10:29 AM (Pacific)

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LTC BULLET: MY HISTORY OF LONG-TERM CARE FINANCING

LTC Comment: When economists and policy wonks get long-term care analysis wrong, we correct the record. Twenty-eight examples follow.

LTC BULLET: MY HISTORY OF LONG-TERM CARE FINANCING

LTC Comment: Next week we’ll announce publication of “How to Fix Long-Term Care Financing.” This new paper by Stephen Moses, published jointly with the Foundation for Government Accountability, lays to rest once and for all the myth that Medicaid requires impoverishment. More importantly, it explains why economists and policy analysts continue, despite overwhelming evidence, to purvey that fallacy and base poor policy proposals on it. Finally our new report explains how to fix long-term care in ways that will improve access and quality while reducing Medicaid costs substantially.

But first, this week, we give you the back story of the decade of analysis that led up to the new report. In 2005, Congress was considering legislation to prevent abuse of Medicaid long-term care benefits by middle class and affluent people. That year, I spent half time in Washington, DC talking to any interest groups, legislators and policy makers who would listen about how to improve Medicaid for the needy by diverting prosperous people into responsible LTC planning. At the same time, my co-founder of the Center for Long-Term Care Reform, Attorney David Rosenfeld, was staffing a key committee of Congress considering what to do about the Medicaid estate planning problem.

We were having an impact. The issue was in the news. Opposition grew vehement, but in the end we won a big victory. You’ll recall the Deficit Reduction Act of 2005 became law early in 2006. It put the first cap ever on Medicaid’s home equity exemption, lengthened and strengthened asset transfer look-back rules, eliminated the half-a-loaf loophole, reinstated LTCI partnerships, and did a dozen more valuable things to correct Medicaid eligibility problems. But it wasn’t a slam-dunk. The Vice President had to fly home from overseas to cast a tie-breaking vote in the Senate to pass DRA ’05.

Who opposed such good and needed legislation? Well, read on and you’ll find out. From early 2005 on, studies, articles and white papers poured out attacking the mounting evidence and arguments in support of controlling Medicaid LTC eligibility. As each one appeared, we addressed it, answered it and corrected it in a series of LTC Bullets that has continued to the present. These LTC Bullets are listed below. Read them and we believe you’ll receive a pretty good history of long-term care financing over the past twelve years. In any case, you will be fully primed to read and understand our new report when it’s released next week. You’ll see the battle is not yet won, but our goal—to give Medicaid long-term care back to the needy and help everyone else prepare to pay privately—is finally within reach.

LTC Bullet: Why Does Georgetown Dodge RAMs?, April 12, 2005
LTC Comment: A new report on home equity conversion from the Georgetown LTC Financing Project downplays the importance of reverse annuity mortgages (RAMs) for financing long-term care. We present an opposing view from the National Council on the Aging in this LTC Bullet.

LTC Bullet: Where There's Smoke, There's Fire, May 18, 2005
LTC Comment: A new report on Medicaid planning by the Georgetown LTC Project tells us more about that organization's research bias than about the critical topic of artificial impoverishment to qualify for publicly financed long-term care. More in this LTC Bullet.

LTC Bullet: LTC Bombshell, June 29, 2005
LTC Comment: Results from a poll of state Medicaid programs by a Congressional office with subpoena power may blow the lid off a carefully orchestrated cover-up of Medicaid planning abuses.

LTC Bullet: LTC Doubletalk, January 24, 2006
LTC Comment: Medicaid planners and their academic and media enablers are talking out of both sides of their mouths: asset transfers are rare but preventing them will devastate seniors. Say, what?

LTC Bullet: Georgetown, GAO and Kaiser: The Bermuda Triangle of Good LTC Policy, January 25, 2006
LTC Comment: LTC doubletalk is not the exclusive province of Medicaid planners and AARP lobbyists. Otherwise often reliable analysts get long-term care policy wrong too. More in this LTC Bullet.

LTC Bullet: Kaiser Cover-Up Continues, April 27, 2006
LTC Comment: Urban Institute "scholars," aided and abetted by the Kaiser Family Foundation, employed an underhanded straw man argument in the foundation's latest unsuccessful attempt to debunk the impact of Medicaid planning abuse.

LTC Bullet: Take Georgetown's Facts With a Big Grain of Salt, February 15, 2007
LTC Comment: Three new "fact sheets" from the Georgetown LTC Financing Project are spoiled by ideological bias. Click the link above to read our analysis.

LTC Bullet: GAO on LTCI Partnerships, June 20, 2007
LTC Comment: GAO drops the ball again on the issues of Medicaid, long-term care financing and private insurance.

LTC Bullet: KFF Misfires on LTCI, June 9, 2009
LTC Comment: A new study of private long-term care insurance published by the Kaiser Family Foundation fails in the usual, predictable ways.

LTC Bullet: The Enemy of LTC Truth, February 8, 2010
LTC Comment: Albert Einstein said "Unthinking respect for authority is the greatest enemy of truth." See how this principle applies to long-term care.

LTC Bullet: New LTCI Report: Research or Propaganda?, Tuesday, June 8, 2010
LTC Comment: Is a newly updated report on LTC insurance by the Congressional Research Service really research, or CLASS Act propaganda? You decide.

LTC Bullet: Nursing Home Spend Down Misunderstood and Late-Breaking LTCI Industry News, July 20, 2012
LTC Comment: A recent EBRI study that claims nursing home stays are wiping out Americans’ savings is based on a fallacy and mistaken. What’s really happening?

LTC Bullet: Medicaid Spend Down that Isn’t and Why it Matters, July 19, 2013
LTC Comment: Claiming “transitions” to Medicaid are evidence of catastrophic LTC asset “spend down” misrepresents the truth and should be publicly recanted. Click the link above to find out who, what, when, where and why.

LTC Bullet: Do the Rich Benefit from Medicaid?, August 23, 2013
LTC Comment: Biased reporting by AARP suggests the answer to the title question is “no,” but solider peer-reviewed scholarship says “yes.” Who’s right?

LTC Bullet: Who Gets Medicaid LTC?, March 28, 2014
LTC Comment: Is Medicaid a long-term care safety net for the poor, the middle class, even the affluent, all of the above? Questions remain, but answers abound.

Will Bipartisan LTC Policy Be Better?, April 11, 2014
LTC Comment: Heads up! Consensus is coalescing around a bipartisan long-term care financing solution. Let’s be hopeful, but wary in this LTC Bullet.

LTC Bullet: GAO Punts on Medicaid Planning, July 3, 2014
LTC Comment: Another GAO report underplays dramatic findings about the role, methods and extent of Medicaid planning and loose LTC eligibility rules.

LTC Bullet: IG Report Reveals Costly Medicaid Enforcement Failures, November 21, 2014
LTC Comment--The USDHHS Inspector General reports that many states failed to implement mandatory provisions in OBRA ’93 and/or DRA ’05 designed to discourage abuse of Medicaid LTC benefits.

LTC Bullet: IG Report Reveals Medicaid Estate Recovery Weakness, December 5, 2014

LTC Comment—A newly released USDHHS Inspector General report shows few states do Medicaid estate recoveries well resulting in a potential annual loss, we infer, of $2.5 billion. Details, numbers, and why it matters.

LTC Bullet: How Careless Economists Boosted LTC Risk, December 12, 2014
LTC Comment: We explain how Boston College economists generated poor long-term care planning advice that national media unfortunately amplified in this LTC Bullet.

LTC Bullet: Another LTCI Hit Job?, October 9, 2015
LTC Comment: What shall we make of this new attack on private long-term care insurance?

LTC Bullet: The Arrogance of LTC Analysts’ Elitism, December 4, 2015
LTC Comment: Arrogance, ideological bias and elitism spoil the recent research of abundantly endowed LTC analysts. We explain.

Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations, February 5, 2016
LTC Comment: The Bipartisan Policy Center’s new report on long-term care leads with LTCI (hear, hear!), but makes Medicaid even more tempting (boo!) and adds a new, expensive, mandatory government program (boo!) based on faulty premises. Our analysis and critique follow in this LTC Bullet.

LTC Bullet: LTC at a Crossroads, June 3, 2016
LTC Comment: Long-term care financing policy is at a critical crossroads and may take a wrong turn. We explain in this LTC Bullet.

LTC Bullet: Behind AHEAD, September 2, 2016
LTC Comment: The people and organizations advocating a new, compulsory, payroll-financed government program to fund catastrophic LTC expenses base their arguments on dubious sources and reasoning.

LTC Bullet: Who Isn’t Covered by Private Long-Term Care Insurance?, October 21, 2016
LTC Comment: Who is not covered by private LTCI is a much more interesting question, and harder to answer, than who is covered as we’ll explain in this LTC Bullet.

LTC Bullet: The LTC Wars (shawsky), February 24, 2017
LTC Comment: The self-styled conservative LTC Commission co-chair has declared war on government-financed long-term care proposing private sector solutions that mirror our own.

LTC Bullet: Home Equity and LTCI Demand, June 30, 2017
LTC Comment: We affirm and confirm Professor Thomas Davidoff’s observations on the connection between home equity and LTC insurance demand in this LTC Bullet.

LTC Bullet: Medicaid, Home Ownership and Long-Term Care Financing, July 7, 2017
LTC Comment: Medicaid’s estate recovery requirement induces aging Americans to reduce home ownership and decrease home equity in order to qualify for Medicaid long-term care benefits: we explore how this occurs and to what extent in this LTC Bullet.

LTC Bullet: Is it Spend Down or Medicaid Planning?, July 14, 2017
LTC Comment: A lot of what passes for Medicaid “spend down” in the scholarly literature is really Medicaid planning. We explain and give examples in this LTC Bullet.

LTC Comment: That’s it for now, folks. See how we put it all together in our new report next week.

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Updated, Monday, July 17, 2017, 10:11 AM (Pacific)

Seattle—

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LTC E-ALERT #17-017: LTC NEWS AND COMMENT

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

How the Medicaid Debate Affects Long-Term Care Insurance Decisions
Medicare’s hospital trust fund will run out of money in 2029
NIC: Assisted Living Occupancy Plummets to Record Low
California government retirement plans are more than 50% underfunded
Chocolate consumption could improve cognitive function
New BPC Report Suggests Fixes to LTC Financing Challenge
Medicare, Medicare Advantage physician rates nearly equal
Aging in America: Crisis in long-term care
Thinking Boomer: Understanding This Generation and What They Need From You
Insurance pays little for caregiving of elderly at end of life
2 of 3 Americans Don't Have 'Advance Directive' for End of Life
One Woman’s Slide From Middle Class to Medicaid

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Updated, Friday, July 14, 2017, 9:59 AM (Pacific)

Seattle—

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LTC BULLET: IS IT SPEND DOWN OR MEDICAID PLANNING?

LTC Comment: A lot of what passes for Medicaid “spend down” in the scholarly literature is really Medicaid planning. We explain and give examples after the ***news.***

*** AEI PANEL ON 2017 MEDICARE TRUSTEES REPORT: If you’re ready to wrap your brain around Medicare’s fiscal problems and their impact on America’s financial crisis, you could not do better than to spend an hour and a half watching the American Enterprise Institute’s Joe Antos and a panel of experts discussing the latest Trustee’s report just released. The video will be available here within 24 hours from the live presentation this morning.

In the meantime, in case you don’t think what happens to Medicare matters much for long-term care, then consider the following LTC Clipping we sent this morning to subscribers. By the way, if you’re not tuned into the LTC Clippings yet, be sure to contact Damon at 206-283-7036 or damon@centerltc.com about subscribing.

7/13/2017, “Medicare’s hospital trust fund will run out of money in 2029,” by Carolyn Y. Johnson, Washington Post

Quote: “The trust fund that pays Medicare's hospital expenses will run out of money in 2029, a year later than the most recent projection, according to a federal report. The Social Security program will remain solvent until 2034, a projection unchanged from last year. The annual report from the Social Security and Medicare board of trustees provides a snapshot of the long-term solvency of the federal government's two biggest entitlement programs.”

LTC Comment: Oh, so no problem, right? We have a decade or two to deal with these problems. Hmmm, well, no. Both Social Security and Medicare are already consuming their “trust funds” which contain nothing but IOUs from the general fund, meaning the federal government has to borrow to pay back what it has already spent. As well, it’s not like the problems that created this premature insolvency are getting better. It all hits the fan in the 2030s when boomers start turning 85 and needing LTC in huge numbers. That brings Medicaid into the mix and Medicaid is a hopeless case if Medicare stops propping it up with generous provider reimbursements and Social Security cuts payments by 25% to recipients who must turn over their income to cover Medicaid costs. Oh man, don’t get me started! ***

LTC BULLET: IS IT SPEND DOWN OR MEDICAID PLANNING?

LTC Comment: Several economists have published excellent research showing how the availability of Medicaid affects consumers’ financial behavior and demand for long-term care insurance. We explored examples of this work in each of the past two weeks:

LTC Bullet: Medicaid, Home Ownership and Long-Term Care Financing (7/7/17) discussed dramatic evidence that Medicaid’s estate recovery requirement induces aging Americans to reduce home ownership, decrease home equity, and set up trusts in order to qualify for Medicaid long-term care benefits.

LTC Bullet: Home Equity and LTCI Demand (6/30/17) explored the thesis that home equity “substitutes” for long-term care insurance demand and suggested instead that Medicaid’s large home equity exemption obviates LTCI demand by eliminating home equity’s liability for long-term care costs.

The economists who wrote both of the articles reviewed in those Bullets got key aspects of Medicaid asset spend down wrong. The first assumed that Medicaid requires assets to be spent for care, but that is not the case as any amount of countable resources can easily be converted to exempt resources. The second assumed that Medicaid spend down is an onerous process and leads to deficient care, neither of which outcomes necessarily occurs if the spend down is managed by a Medicaid planner.

So what? I think that in both of these cases, the economists’ findings about the impact of Medicaid on financial planning behavior would have been much stronger if they had taken into account the ease with which even affluent people structure their income and assets before and after care is needed.

Today and in future weeks, we will review the work of other economists regarding Medicaid and long-term care to see how they treat the spend down issue. We’ll keep this question always in mind: “Is it spend down or Medicaid planning?” We seek an explanation of why economists and health policy analysts tend to equivocate on the meaning of Medicaid spend down. Why do they ignore the evidence of widespread Medicaid planning and therefore underestimate the impact of Medicaid on asset accumulation or decumulation and long-term care insurance demand?

Today, we consider an often-cited article by economist Norma B. Coe titled “Financing Nursing Home Care: New Evidence from Spend Down Behavior,” Tilburg University, 2007. What follows are quotes from the article followed by our comments.

Coe: “I find that the elderly shift their consumption and savings decisions in response to Medicaid. Single households have lower net worth through the median of the distribution due to Medicaid policy. On the other hand, I find that married households do not lower their total net worth, but they change their relative holdings of protected and non-protected assets.” (Abstract, p. 1)

LTC Comment: That sure sounds like Medicaid planning at work, doesn’t it? Singles jettison wealth whereas couples, over whom Medicaid financial limits are less stringent, convert countable assets into exempt resources. Surely the body of the article will explore this process. But, no.

Coe: “Medicaid covers long-term care, but only after most private savings have been exhausted.” (p. 2)

LTC Comment: Exhausted? How? The presumption is that savings are spent down for care. But Medicaid does not require that. A vast peer-reviewed legal literature explains how to “exhaust” savings to qualify for Medicaid without spending on care. Surely the article will review and explore the ramifications of that literature and those techniques. But, no.

Coe: “I explore two major avenues available to households to shift more of the cost of a nursing home stay to the government. The first is available to all households, and it is to simply lower your net worth. The second is available to single households in select states and all married couples, and that is to put more money in housing assets, which are protected from the Medicaid program.” (pps. 2-3)

LTC Comment: Now that’s a promising start. Unfortunately, we learn nothing more about how single people and married couples lower their net worth and put money into exempt housing assets. Is it spend down or Medicaid planning? For example:

Coe: “Medicaid . . . will pay for an unlimited amount of nursing home care, regardless of the underlying cause or the ability to recuperate. This insurance is not free: Medicaid is means-tested, and generally speaking, the eligibility rules require spending most of a household’s accumulated assets before coverage can start.” (p. 4)

LTC Comment: That is simply not true. Medicaid eligibility rules do not require spending most accumulated assets before coverage can start. Besides the fact that one can convert countable to non-countable assets without spending down anything, the vast majority of Medicaid applicant/recipients’ wealth is already held in exempt resources like the home and auto. On top of that, recipients can retain without any dollar limit a business including the capital and cash flow, IRAs in payout status, term life insurance, prepaid burial plans, home furnishings and personal belongings. Finally, for people who still own too much countable wealth to qualify, there are sophisticated legal methods to shift wealth away from spend down liability. If Medicaid induces reductions in net worth or conversion of wealth to exempt status, how much more so does it do that if you take these Medicaid planning techniques into consideration.

Coe: “A QIT [qualified income trust] is a ‘sheltering’ device, but it only shelters income to meet the eligibility criteria.” (p. 7)

LTC Comment: Here Dr. Coe veers into discussing one actual Medicaid planning technique. QIT’s, AKA Miller income diversion trusts, allow people in income cap states to divert excess income temporarily so they can become eligible for Medicaid LTC benefits despite having incomes above, often far above, the state’s limit. Thanks to QITs, the rule of thumb throughout the USA, whether in medically needy or income cap states, is that anyone with income below the cost of a nursing home, at least several thousands of dollars per month, can qualify for Medicaid long-term care benefits based on income.

Coe: “Any assets not allocated to the community spouse are allocated to the institutionalized spouse, who must spend them down to the state resource limit for a single individual before becoming eligible for Medicaid.” (p. 9)

LTC Comment: Here again, this time discussing the special rules to protect spouses from impoverishment, the reference is to the institutionalized spouse’s need to spend down excess resources. The unspoken presumption is that such resources must be spent for care. There is no acknowledgement of other options to reach the eligibility limits, such as the many methods of Medicaid planning.

Coe: “There are limits to how one may eliminate assets to qualify for Medicaid.” (p. 10)

LTC Comment: That sounds promising, but the following section discusses only Medicaid’s largely ineffective asset transfer rules without addressing the many highly effective ways people actually use to shelter or divert assets in order to qualify for Medicaid.

Coe: “While this set-up is done to minimize the government’s burden for nursing home care, it does set up an interesting incentive scheme. If one enters a nursing home and cannot self-fund the entire cost and therefore needs to go on Medicaid, there is an implicit 100% tax on all income and assets over the protected limit. If there is no difference, psychological or in actual care between having public funds or private funds pay for a nursing home, the optimal decision is to consume all wealth over the protected amount in the previous period and then let Medicaid pay for all nursing home costs.” (p. 11)

LTC Comment: