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Updated, Thursday, July 29, 2010, 10:06 AM (Pacific)

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DEAR COLLEAGUE LETTER ON CLASS

EXTRA: Howard Gleckman blogs "In defense of the CLASS Act" for The Christian Science Monitor here. He agrees with Heritage Foundation analysts Brian Riedl and James Capretta (see LTC Bullet: Heritage on CLASS and "CLASS is the next huge taxpayer bailout") that CLASS "is flawed," but believes it's easily fixed. How? Make CLASS participation mandatory so no one can escape the actuarial trap. What a great lead for today's LTC E-Alert!

LTC Comment: Yesterday we brought you the latest version of Dr. Charles Boustany's (R-LA) bill to rein in the CLASS Act. Today, read Congressman Boustany's letter to his colleagues urging them to cosponsor the bill. It follows:

July 27, 2010

Dear Colleague:

Most Americans remain unaware of the CLASS program, a new government-run long-term care insurance program that was slipped into the health-care law.

Speaker Pelosi and her allies behaved recklessly when they used the CLASS program as a $70 billion budget gimmick to fund other portions of the new health-care law. Congress has a duty to stop the implementation of this new unfunded entitlement before a single premium dollar is collected from hard-working Americans.

Instead of setting money from CLASS premiums aside solely for promised benefits, Democrats used it to pay for other parts of the new health law and merely put an IOU in a government trust fund. Americans could be required to repay these IOUs in the form of higher taxes.

Actuaries and budget experts widely agree CLASS is fatally flawed. Senate Budget Committee Chairman Kent Conrad publicly called the program "a Ponzi scheme of the first order, the kind of thing Bernie Madoff would be proud of."

The Congressional Budget Office, the American Academy of Actuaries and CMS's own actuary warn the program will disproportionately attract enrollees with the highest costs. Premiums will skyrocket and discourage young and healthy workers from enrolling. The program will enter what Medicare Chief Actuary Rick Foster called "an insurance death spiral."

The Chief Actuary predicted that CLASS will begin to run deficits in 2025 and continue to run deficits thereafter. He also estimated that an initial average premium of about $240 per month would be required to adequately fund CLASS program costs. CBO said CLASS "...would add to budget deficits in the third decade - and in succeeding decades-by amounts on the order of tens of billions of dollars for each 10-year period."

A new report from the Heritage Foundation warns that Congress will face three unpopular choices to avoid these massive deficits: benefit cuts, mandatory participation, and taxpayer bailouts. http://thf_media.s3.amazonaws.com/2010/pdf/bg2441.pdf.

This unfunded entitlement will make it harder to face Medicare's $38 trillion shortfall. Congress should repeal CLASS before it begins. I urge you to cosponsor the Fiscal Responsibility and Retirement Security Act (H.R. 5853). This bill would stop the Obama Administration from implementing a final CLASS plan without a vote of approval by two-thirds of the House and Senate.

Please contact Mike Thompson at [email address omitted by request] in my office to cosponsor the bill or for additional information.

Sincerely,

Charles W. Boustany, Jr. MD

Member of Congress

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LTC Comment: The CLASS content covered in this LTC E-Alert has been added to our Members-Only Zone website here: http://www.centerltc.com/members/ClassActUpdate-QuickReference.htm, exclusive for Center members. Not a member yet (you should be if you’re receiving this)? Need to renew? Need a refresher on your username and password? No problem. Just contact Damon at 206-283-7036 or damon@centerltc.com. Center membership is only $150 per year for individuals or $12.50 per month and gets you access to The Zone and allows you to receive our daily LTC E-Alerts and LTC Bullets by email. Corporate memberships are also available. Support the Center's research and advocacy on behalf of rational long-term care public policy and responsible LTC planning.

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Updated, Wednesday, July 28, 2010, 10:23 AM (Pacific)

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BOUSTANY BILL BUCKS CLASS

EXTRA: Read Brian Riedl's op-ed in the Washington Times titled "CLASS is the next huge taxpayer bailout" here. Excerpt: "Many of the same lawmakers who infuriated taxpayers by bailing out Wall Street, the auto companies, and Fannie Mae and Freddie Mac recently created a new program virtually guaranteed to require bailouts."

LTC Comment: Find the latest iteration of Louisiana Republican Congressman Charles Boustany's bill to rein in the CLASS Act here:  http://www.centerltc.com/CLASS_DOC_BOUSTA-REV2.pdf

Read Arthur D. Postal's article "PPACA: Boustany Fights to Kill CLASS Act" in the National Underwriter here. Excerpt:

"H.R. 5853, the Fiscal Responsibility and Retirement Security Act, would require the government to shut down the Community Living Assistance Services and Supports Act program if government actuaries said the program was unsound. . . . The program would have to refund program premiums or let enrollees use the funds in the accounts for other purposes."

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Following is a summary of Congressman Boustany's "Fiscal Responsibility and Retirement Security Act":

Sec. 1.

"Fiscal Responsibility and Retirement Security Act"

Sec. 2.

• Requires the HHS Secretary to submit a report on the CLASS plan designated by the Department.
• Requires the CMS Actuary to report to Congress on the long-term soundness of the Secretary’s final plan, including estimated average benefits and premiums.
• Prevents the implementation of a final plan before it receives approval by a two-thirds majority in the House and Senate.

Sec. 3

• Allows consumers to receive written notification of the financial risks of the CLASS program before they are auto-enrolled by employers.

Sec. 4.

• Prohibits the federal government from collecting revenues through CLASS to fund other portions of the new health-care law before designation of a final plan.

Sec. 5.

• Sunsets the CLASS program if the CLASS Independence Fund becomes actuarially unsound over a 75 year period.
• Allows enrollees to receive a refund from the CLASS Independence Fund.
• Allows enrollees to continue to use funds that remain in their Life Independence Accounts.

LTC Comment: The CLASS content covered in this LTC E-Alert has been added to our Members-Only Zone website here: http://www.centerltc.com/members/ClassActUpdate-QuickReference.htm, exclusive for Center members. Not a member yet (you should be if you’re receiving this)? Need to renew? Need a refresher on your username and password? No problem. Just contact Damon at 206-283-7036 or damon@centerltc.com. Center membership is only $150 per year for individuals or $12.50 per month and gets you access to The Zone and allows you to receive our daily LTC E-Alerts and LTC Bullets by email. Corporate memberships are also available. Support the Center's research and advocacy on behalf of rational long-term care public policy and responsible LTC planning.

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Updated, Tuesday, July 27, 2010, 9:58 AM (Pacific)

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WHAT IS A "CERTIFIED MEDICAID PLANNER?"

LTC Comment: With the federal government holding back bonus Medicaid matching funds and with states all across the country cutting LTC benefits--especially the home care services people prefer--wouldn't you think "Medicaid planning" would be dying out?

Think again. It looks like the "poverty makers" are gearing up for a bigger push than ever. Special thanks to the Center for Long-Term Care Reform's Baltimore Regional Representative Sally Leimbach for tipping us to this latest outrage.

Roccy DeFrancesco, founder of "The Wealth Institute" in St. Joseph, Michigan, has announced a new "certification course": Certified Medicaid Planner. What is a "CMP"? He offers you a "sneak peak" [sic] here: http://www.thewpi.org/?a=PG:1396. Check out the course's "Table of Contents" here: http://www.thewpi.org/pdf_files/table.of.contents.medicaid.pdf.

Here are a few clips from the training brochure:

"Medicaid Training Learn how to double your income over the next 12 months!"

"Attend this seminar and you'll walk out ready to start designing Medicaid compliant plans under the 2005 Deficit Reduction Act (DRA)

• Learn why the DRA did not "kill" Medicaid Planning

• Learn critical need planning

• Learn the proper use of life insurance and annuities in Medicaid Planning

• Learn how to significantly increase your income by becoming a Certified Medicaid Planner(tm) and working with the Medicaid Planning Network(tm)

• Be able to meet with the speakers one-on-one

• Attendees will receive a 350+ page education/training manual"

"While the two-day event is designed to educate attorneys so they can immediately start providing advice to senior clients on vital Medicaid issues, the training will also be invaluable for financial planners and insurance agents who want to give the best advice to senior clients."

Here are some of the session titles for the three-day course:

Countable Assets, Penalties, and Exempt Transfers: This session will explore what is meant by countable, unavailable, and excluded assets for purposes of Medicaid eligibility. Gifting rules: valuing the gift; penalty period vs. lookback period; exempt transfers.

Medicaid Annuities and Promissory Notes: Basic rules. How to calculate annuity amount and timing. Single and married couple planning techniques. Gift calculations. Use of promissory notes.

Gifting Strategies and "Half-a-Loaf": How to do a "half-a-loaf" calculation. Variations on the classic technique. Exceptions to the gift penalty.

Strategy Grab-Bag: Asset conversions; decreasing home equity; IRAs; Personal Services Contracts.

The Home: Planning options to protect the home, for single and married couples: gifting, joint interests, life estates, trusts. How to calculate life estate gifts and purchases.

Trusts: Design: Review of the Medicaid rules re irrevocable and revocable trusts. Pooled trusts and third-party special needs trusts. How to draft an irrevocable trust for Medicaid planning purposes. Review of various options and required provisions.

Estate Recovery: What is included in the "estate"? How to minimize exposure. Imposition of liens.

How to Implement Medicaid Planning Into Your Practice: Hourly charges vs. flat-fee "value billing" models. Ways to streamline your practice. Use of software for both planning and drafting Medicaid plans.

The Initial Consultation: How to Get Hired Without Teaching the Client Everything You Know for Free!: Ways to present the benefits of Medicaid planning to clients that don't "give away the store" in a way that will persuade clients to hire you for this type of work.

LTC Comment: Don't worry. You do not have to be a lawyer to board this gravy train. In fact, insurance agents get in for half price!

"Course Cost: Attorneys: $995; Insurance Advisors: $495 (The cost includes the optional day three marketing training & 350+ page training manual)."

Wouldn't it be interesting to attend this program and share the truth with other attendees? Medicaid is a means-tested welfare program with a dismal reputation for problems of access, quality, reimbursement, discrimination, institutional bias, loss of independence and welfare stigma? Medicaid is the truly poor's only LTC safety net. Diverting its scarce resources to clients wealthy enough to pay big lawyer's fees is despicable professional conduct and leaves clients vulnerable to deficient care.

Long-term care insurance carriers, brokers and producers have taken a lot of unfair criticism in the media. But Medicaid planning abuses seem to fly under the media's radar. Where are the investigative journalists when they're really needed?

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Updated, Monday, July 26, 2010, 10:30 AM (Pacific)

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LTC Comment: The Heritage Foundation has done the CLASS Act debate a valuable service. Details after the ***news.***

*** THE CLASS CONTENT covered in this LTC Bullet has been added to our Members-Only Zone website here: http://www.centerltc.com/members/ClassActUpdate-QuickReference.htm, exclusive for Center members. Not a member yet? Need to renew? Need a refresher on your username and password? No problem. Just contact Damon at 206-283-7036 or damon@centerltc.com. Center membership is only $150 per year for individuals or $12.50 per month and gets you access to The Zone and allows you to receive our daily LTC E-Alerts and LTC Bullets by email. Corporate memberships are also available. Support the Center's research, analysis and advocacy on behalf of rational long-term care public policy and responsible LTC planning. ***

*** ILTCI CONFERENCE. The next Intercompany Long-Term Care Insurance Conference will be held March 6 to 9, 2011 at the Atlanta Marriott Marquis hotel. Registration details to follow later. For now, potential sponsors may obtain details on sponsorship levels, exhibiting, and early bird discounts by contacting Jim Glickman (Jim.Glickman@LifeCareAssurance.com). ***

*** PHYLLIS SHELTON'S 2010 Long-Term Care Insurance Worksite & Combo Products Fall Tour begins September 15, 2010 in Seattle and heads to six more cities ending in Los Angeles on November 9, 2010. Check out all the details here. ***

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LTC BULLET: HERITAGE ON CLASS

LTC Comment: On Thursday, July 22, the Heritage Foundation (www.heritage.org) shed important light on the Community Living Assistance Services and Supports (CLASS) Act by publishing James C. Capretta and Brian M. Riedl's "Backgrounder" titled "The CLASS Act: Repeal Now, or Face Permanent Taxpayer Bailout Later." We'll share some highlights with you, but if you're concerned about long-term care services and financing, do not miss the chance to read this important article in its entirety.

While you're at it, compare "Heritage on CLASS" with "SCAN on CLASS." The SCAN Foundation says its "mission is to advance the development of a sustainable continuum of quality care for seniors." Yet, when SCAN Foundation president and CEO Bruce A. Chernof, M.D. published an op-ed lauding CLASS in the San Francisco Chronicle ("Reform eases long-term health care woes," July 23, 2010), he neglected to mention any of the program's fatal flaws so clearly delineated by Heritage.

There is an important lesson in this comparison. The CLASS Act is a fraud perpetrated on the American public. Kent Conrad (D, ND), Chairman of the Senate Budget Committee said as much when he called the program "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of." So every time you see CLASS presented positively with none of its negatives mentioned, recognize that political con artists are trying to dupe you and others.

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Excerpts from James C. Capretta and Brian M. Riedl, "The CLASS Act: Repeal Now, or Face Permanent Taxpayer Bailout Later," Backgrounder, No. 2441, July 22, 2010, Heritage Foundation, Washington, D.C.

Abstract: . . . CLASS is essentially a Ponzi scheme that will run initial surpluses followed by massive deficits—virtually guaranteeing program bankruptcy or, more likely, massive taxpayer bailouts. The surest way to avoid this fate is to repeal the program— preferably before it enrolls participants on January 1, 2011. The Heritage Foundation’s Brian Riedl and Visiting Fellow James Capretta explain why repeal is the right action for Congress to take.

Talking Points

• CLASS, a new national long-term-care insurance program, was added to Obamacare so that CLASS's total $70 billion surplus from 2011 to 2019 would cover up Obamacare's other deficits.

• CLASS is supposed to be self-financing and not cost taxpayers a dime. However, its design virtually guarantees that the program will run large deficits after 2019, and reach bankruptcy shortly thereafter.

• Senate Budget Committee Chairman Kent Conrad (D-ND) has acknowledged CLASS's unsustainability by calling it "a Ponzi scheme of the first order, the kind of thing that Bernie Madoff would have been proud of."

• The surest way to avoid a future of massive, permanent taxpayer bailouts is for Congress to repeal CLASS before it begins enrolling participants on January 1, 2011. . . .

CLASS appears to have been designed more to subsidize the first decade of Obamacare than to provide a sustainable long-term health care program. This poorly crafted program will likely have one of the four following outcomes:

• Death Spiral Followed by Bankruptcy. As stated above, the Secretary of Health and Human Services is empowered to adjust premiums as necessary to keep the program solvent for 75 years. However, for healthy individuals, CLASS will likely charge higher premiums and pay lower benefits than what is currently available on the market. As healthy individuals bypass the program, only those who expect to incur substantial long-term costs will find it profitable to participate. Maintaining solvency would then require broad-based premium increases or benefit cuts, which would subsequently drive more of the comparatively healthy participants (and potential participants) out of the program— requiring additional premium increases or benefit cuts for the dwindling number of participants. This adverse-selection death spiral would eventually bankrupt the program. . . .

• Compulsory Participation. CLASS is guaranteed-issue, meaning all workers 18 and older, regardless of health status, are eligible to enroll. Additionally, CLASS is prohibited from charging higher premiums to those with higher health risks (who will likely require more benefits), which also means that healthy individuals who require fewer benefits would not receive a discount. Lawmakers could avoid an adverse-selection death spiral by requiring that all American adults participate in the program. This would ensure that enough healthy individuals pay CLASS premiums to subsidize those who require large benefits. . . .

• Taxpayer Bailouts. With Washington unlikely to accept the two options above, the only way to shore up CLASS and pay all promised benefits would be with another taxpayer bailout. Unlike the Troubled Asset Relief Program (TARP), this would not be a one-time bailout, but would continue as long as anyone who has ever paid into the system may require benefits. Given America’s serious long-term budget challenges—trillion-dollar budget deficits and the challenge of paying Social Security and Medicare benefits to 77 million baby boomers—taxpayers cannot afford yet another expensive, permanent bailout.

• Repeal CLASS. The only way to avoid program bankruptcy or (more likely) decades of taxpayer bailouts is to repeal the program—preferably before it begins enrolling participants and collecting premiums on January 1, 2011. . . .

Congress Must Act Now Proponents of the new health law have claimed repeatedly that it will improve the nation’s long-term budget outlook. That is an illusion based on implausible assumptions, sleights of hand, and outright budget gimmicks, with CLASS topping the list. The CLASS Act is an ill-conceived concept that was included in Obamacare only because of the appearance of surplus funding. In reality, CLASS is destined to run short of funds, creating pressure for another massive taxpayer bailout. The biggest threat to the long-term prosperity of the country is the massive unfunded liabilities for the nation’s major entitlement program. The last thing Congress should be doing is adding to the burden of future taxpayers, which is why CLASS Act repeal is the most fiscally responsible—and ethical—course to follow.

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Updated, Friday, July 23, 2010, 10:15 AM (Pacific)

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CLASS DOYENNE COPS OUT, CASHES IN

*** UPDATE: The Heritage Foundation has published "The CLASS Act: Repeal Now, or Face Permanent Taxpayer Bailout Later," indicting the egregiously flawed program, warning of its disastrous long-term consequences, and calling for its immediate repeal. A quote: "Healthy individuals rationally intend to bypass CLASS because it is a bad deal for them, especially compared to insurance policies they could purchase on the open market." (p. 4) ***

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LTC Comment: Connie Garner midwived the CLASS Act from a glimmer in Ted Kennedy's eye to stealthy delivery within the new "health reform" law.

She must be an extraordinary person to have guided a proposal so bereft of merit from a political conception through a long labor of principled opposition into the law of the land.

So, big surprise, the Washington Examiner reports she's left the Senate "HELP" (Health, Education, Labor and Pensions) Committee to cash in on K Street. Here's the story:

"The great health-care cashout: Two more ‘reform’ authors go to K Street to represent Big Health Care," by Timothy P. Carney, Examiner Columnist, Washington Examiner, 07/21/10 10:30 AM EDT  LINK

"Write a bill that profits drug companies and hospitals, while making the entire health-sector more dependent on government — then go to work as a lobbyist or 'policy advisor' for those very companies.

"That’s what Democratic staffers did and are doing with regard to health-care reform. I call it 'The Great Health-Care Cashout,' and we’ve been tracking it here.

"The latest public servants to parlay 'reform' to riches are Connie Garner and Stacy Sachs, both of whom are joining Foley Hoag, a lobbying firm that represents the leading drug companies (which were the biggest winners from 'reform.') [Emphasis added.]

"Garner, a policy director at the Senate Health, Education, Labor & Pensions (HELP) Committee, was a chief of author of the portion of 'reform' known as the CLASS Act, which provides government insurance for long-term care. This measure kills the private long-term-care insurance market, but it subsidizes long-term care businesses, which, of course, supported the measure. [Emphasis added.]

"Foley Hoag says Garner will 'will focus her practice on representation of national health trade organizations, health providers, national disability, patient advocacy organizations, and educational institutions.' It sounds like she may not register as a lobbyist, but will instead by a Tom Daschle-like non-lobbyist lobbyist. . . .

"Foley Hoag’s clients include Abbott Laboratories, Amgen, Astra-Zeneca, Biotechnology Industry Organization, Bristol-Myers-Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck, Pfizer, and PhRMA.

"Imagine if Garner and Sachs had written bills reforming health-care by getting government out of the industry. You can imagine their lobbying and consulting services would not be in such demand. . . .."

LTC Comment: Ugh! What really grates about this commonplace sell out is that while Garner's raking in the dough, the real heroes of long-term care will continue to struggle. Who are they? All the people who need care, provide care and struggle to finance care responsibly. CLASS is an extraordinary detour into actuarial phantasmagoria that will end badly. The role of LTC insurers--carriers, brokers and producers--should be to counsel clients and prospects to mitigate the damage this ill begotten legislation will cause.

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*** Note: The CLASS content covered in this LTC E-Alert has been added to our Members-Only Zone website here: http://www.centerltc.com/members/ClassActUpdate-QuickReference.htm, exclusive for Center members. Not a member yet (you should be if you’re receiving this)? Need to renew? Need a refresher on your username and password? No problem. Just contact Damon at 206-283-7036 or damon@centerltc.com. Center membership is only $150 per year for individuals or $12.50 per month and gets you access to The Zone and allows you to receive our daily LTC E-Alerts and LTC Bullets by email. Corporate memberships are also available. Support the Center's research and advocacy on behalf of rational long-term care public policy and responsible LTC planning. ***

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Updated, Thursday, July 22, 2010, 11:05 AM (Pacific)

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LTC MISCELLANY

LTC Comment: Sometimes we have a grab bag of interesting items to share. This is one of those days. They follow with our comments.

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Many Americans will run short in retirement: study | Reuters: ". . . EBRI found that 47 percent of the early boomers, now 56 to 62 and nearing retirement age, are likely to exhaust their retirement savings."

LTC Comment: Seems like an annuity/LTC combo product would preserve income while protecting against a major risk to otherwise unannuitized principal.

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"Congress to hold hearing on racial disparities in nursing home reimbursements rates. A recent Avalere Health study showing that deteriorating Medicaid reimbursement rates has disproportionately affected nursing home care for black residents will be the subject of a congressional hearing Tuesday. Source: McKnight’s Daily Update, 7/19/10

LTC Comment: Playing the LTC race card? Actually, this problem is not new to the current problems financing Medicaid. As we explain here frequently, Medicaid LTC cheats the poor and underprivileged by extending benefits to the upper middle class and affluent through easy eligibility, elastic spend down rules, Medicaid planning abuse and preferential placement for the prosperous who possess "key money."

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The Washington Post: "On Monday, N2Care, a company formed by a Methodist minister in Salem, Va., showed off its first MedCottage, a 12-by-24-foot prototype filled with biometric technology that would allow a family and health-care providers to monitor the condition of an aging or disabled relative. … [T]he Virginia General Assembly this year passed legislation, HB1307, that supersedes local zoning laws and allows families to install such a dwelling on their property with a doctor's order." AARP views local zoning laws as "one of the biggest obstacles to making such dwellings a practical solution to caring for aging family members in what it calls 'accessory dwelling units.'" Detractors have said such dwellings could create neighborhood conflicts and "worry that the setup could lead to cases of neglect involving elderly or disabled occupants of the dwellings" (Kunkle, 7/20).

LTC Comment: High-tech granny flats?

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Cuts in Home Care Put Elderly and Disabled at Risk - NYTimes.com: "As states face severe budget shortfalls, many have cut home-care services for the elderly or the disabled, programs that have been shown to save states money in the long run because they keep people out of nursing homes."

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Updated, Wednesday, July 21, 10:38 AM (Pacific)

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NEW COMPILATION OF AGING STATISTICS

LTC Comment: The Federal Interagency Forum on Aging-Related Statistics has issued the latest edition (2010) of its biennial series "Older Americans: Key Indicators of Well-Being," which presents a wide range of data on the older population of the U.S.

Find the full 156-page report here. The "Highlights" section follows:

Citation: Federal Interagency Forum on Aging-Related Statistics. Older Americans 2010: Key Indicators of Well-Being. Federal Interagency Forum on Aging-Related Statistics. Washington, DC: U.S. Government Printing Office. July 2010.

Highlights [pages xiv to xv]

Older Americans 2010: Key Indicators of Well-Being is one in a series of periodic reports to the Nation on the condition of older adults in the United States. The indicators assembled in this chartbook show the results of decades of progress. Older Americans are living longer and enjoying greater prosperity than any previous generation. Despite these advances, inequalities between the sexes and among income groups and racial and ethnic groups continue to exist. As the baby boomers continue to age and America's older population grows larger and more diverse, community leaders, policymakers, and researchers will have an even greater need to monitor the health and economic well-being of older Americans. In this report, 37 indicators depict the well-being of older Americans in the areas of demographic characteristics, economic circumstances, overall health status, health risks and behaviors, and cost and use of health care services. Selected highlights from each section of the report follow.

Population

The demographics of aging continue to change dramatically. The older population is growing rapidly, and the aging of the baby boomers, born between 1946 and 1964 (and who begin turning age 65 in 2011), will accelerate this growth. This larger population of older Americans will be more racially diverse and better educated than previous generations. Another significant trend is the increase in the proportion of men age 85 and over who are veterans.

In 2008, there were an estimated 39 million people age 65 and over in the United States, accounting for just over 13 percent of the total population. The older population in 2030 is expected to be twice as large as in 2000, growing from 35 million to 72 million and representing nearly 20 percent of the total U.S. population. (See "Indicator 1: Number of Older Americans.")

In 1965, 24 percent of the older population had graduated from high school, and only 5 percent had at least a bachelor's degree. By 2008, 77 percent were high school graduates or more, and 21 percent had a bachelor's degree or more. (See "Indicator 4: Educational Attainment.")

The number of men age 85 and over who are veterans is projected to increase from 400,000 in 2000 to almost 1.2 million by 2010. The proportion of men age 85 and over who are veterans is projected to increase from 33 percent in 2000 to 66 percent in 2010. (See "Indicator 6: Older Veterans.")

Economics

Most older people are enjoying greater prosperity than any previous generation. There has been an increase in the proportion of older people in the high-income group and a decrease in the proportion of older people living in poverty, as well as a decrease in the proportion of older people in the low-income group just above the poverty line. Among older Americans, the share of aggregate income coming from earnings has increased since the mid-1980s, partly because more older people, especially women, continue to work past age 55. Finally, on average, net worth has increased almost 80 percent for older Americans over the past 20 years. Yet major inequalities continue to exist with older blacks and people without high school diplomas reporting smaller economic gains and fewer financial resources overall.

Between 1974 and 2007, there was a decrease in the proportion of older people with income below poverty from 15 percent to 10 percent and with low income from 35 percent to 26 percent; and an increase in the proportion of people with high income from 18 percent to 31 percent. (See "Indicator 8: Income.")

In 2007, the median net worth of households headed by white people age 65 and over ($280,000) was six times that of older black households ($46,000). This difference is less than in 2003 when the median net worth of households headed by older white people was eight times higher than that of households headed by older black people. (See "Indicator 10: Net Worth.") The large increase in net worth in past years may not continue into the future due to recent declines in housing values.

Labor force participation rates have risen among all women age 55 and over during the past four decades. As new cohorts of baby boom women approach older ages they are participating in the labor force at higher rates than previous generations. Labor force participation rates among men age 55 and over have gradually begun to increase after a steady decline from the early 1960s to the mid-1990s. (See "Indicator 11: Participation in the Labor Force.")

Health Status

Americans are living longer than ever before, yet their life expectancies lag behind those of other developed nations. Older age is often accompanied by increased risk of certain diseases and disorders. Large proportions of older Americans report a variety of chronic health conditions such as hypertension and arthritis. Despite these and other conditions, the rate of functional limitations among older people has declined in recent years.

Life expectancy at age 65 in the United States is lower than that of many other industrialized nations. In 2005, women age 65 in Japan could expect to live on average 3.7 years longer than women in the United States. Among men, the difference was 1.3 years. (See "Indicator 14: Life Expectancy.")

The prevalence of certain chronic conditions differs by sex. Women report higher levels of arthritis (55 percent versus 42 percent) than men. Men report higher levels of heart disease (38 percent versus 27 percent) and cancer (24 percent versus 21 percent). (See "Indicator 16: Chronic Health Conditions.")

Between 1992 and 2007, the age-adjusted proportion of people age 65 and over with a functional limitation declined from 49 percent to 42 percent. (See "Indicator 20: Functional Limitations.")

Health Risks and Behaviors

Social and lifestyle factors can affect the health and well-being of older Americans. These factors include preventive behaviors such as cancer screenings and vaccinations along with diet, physical activity, obesity, and cigarette smoking. Health and well-being are also affected by the quality of the air where people live and by the time they spend socializing and communicating with others. Many of these health risks and behaviors have shown long-term improvements, even though recent estimates indicate no significant changes.

There was no significant change in the percentage of people age 65 and over reporting physical activity between 1997 and 2008. (See "Indicator 24: Physical Activity.")

As with other age groups, the percentage of people age 65 and over who are obese has increased since 1988-1994. In 2007-2008, 32 percent of people age 65 and over were obese, compared with 22 percent in 1988-1994. However, over the past several years, the trend has leveled off, with no statistically significant change in obesity for older men or women between 1999-2000 and 2007-2008. (See "Indicator 25: Obesity.")

The percentage of people age 65 and over living in counties that experienced poor air quality for any air pollutant decreased from 52 percent in 2000 to 36 percent in 2008. (See "Indicator 27: Air Quality.")

The proportion of leisure time that older Americans spent socializing and communicating-such as visiting friends or attending or hosting social events-declined with age. For Americans age 55-64, 13 percent of leisure time was spent socializing and communicating compared with 8 percent for those age 75 and over. (See "Indicator 28: Use of Time.")

Health Care

Overall, health care costs have risen dramatically for older Americans. In addition, between 1992 and 2006, the percentage of health care costs going to prescription drugs almost doubled from 8 percent to 16 percent, with prescription drugs accounting for a large percentage of out-of-pocket health care spending. To help ease the burden of prescription drug costs, Medicare Part D prescription drug costs, began in January 2006.

After adjustment for inflation, health care costs increased significantly among older Americans from $9,224 in 1992 to $15,081 in 2006. (See "Indicator 30: Health Care Expenditures.")

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Updated, Tuesday, July 20, 2010, 10:12 AM (Pacific)

Seattle--

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LTC BULLET: CLASS VS. LTCI--WHAT'S BEST FOR LTC PROVIDERS?

LTC Comment: LTC provider associations have been among the biggest promoters of the CLASS program, but what's best for their members? Answers after the ***news.***

*** THE ZONE: Today's LTC Bullet has been added to our comprehensive "CLASS Act Update" in the Center's password-protected, members-only website, AKA The Zone. To gain access to The Zone and receive our daily LTC E-Alerts and LTC Bullets by email, contact Damon at 206-283-7036 or damon@centerltc.com. Center membership is $150 per year for individuals or $12.50 per month. Corporate memberships are also available. Support the Center's research and advocacy on behalf of rational long-term care public policy and responsible LTC planning. ***

*** SCARY STATE OF RETIREMENT SAVINGS. By Michelle Singletary, Washington Post. Thursday, July 15, 2010; A16. The Employee Benefit Research Institute reports that about 43.7 percent of baby boomers may not have saved enough in retirement funds to cover even basic necessities 10 to 20 years into retirement. Things look slightly worse for Generation X as the EBRI calculates 44.5 percent may not have saved enough. To find an estimate of how much you need to save for your own retirement, go to http://www.choosetosave.org and click "Ballpark Estimate" retirement calculator. Source: AHCA / NCAL Gazette – Thursday, July 15, 2010. ***

*** CLASS PROPAGANDA: What would you call the burgeoning advocacy for CLASS that only mentions its alleged benefits and none of its self-evident flaws? For example, this piece from Senator Leahy (D, VT) that claims "The CLASS Act will save taxpayer dollars by reducing Medicaid costs." No chance that will happen unless CLASS is radically redesigned. Compare . . .

*** CLASS ANALYSIS: CLASS Act - Health Reform's Most Daunting Challenge:

"Projections are being figured and CLASS seems destined for adverse selection, a term where an unattainable number of participants will be needed to balance out the high risk unhealthy who will be most likely to find the plan appealing.

"Another problem that should keep Secretary Sebelius busy is the 'opt out' method of enrollment. Businesses are not required to offer CLASS to their employees, but if they do, the employees have the option of 'opting out.' Thought to be a way to encourage greater participation, especially among young workers, it has a few hurdles in the way.

"Just think. If Social Security suddenly became an 'opt out' plan, there would be an exodus of biblical proportions. The younger set might believe SS is a fabulous program, but with the new house and the baby on the way, if 'out' were an option, SS would take a back seat beside savings accounts. And SS leads one to think about retiring, having a little extra income for some fishing and travel. Signing up for CLASS is like investing in Depends futures. [Emphasis added.]

"And then there is that nasty little feature of CLASS that requires paying into the plan for five years before you can qualify for coverage. Obviously, this was a feature needed for the actuaries to figure out how to fund CLASS. Let's just say that selling that idea will be a marketing nightmare." ***

*** BAD MEDICINE: A Guide to the Real Costs and Consequences of the New Health Care Law, a special report from the Cato Institute by Michael D. Tanner. For better or worse, President Obama's health care reform bill is now law. At more than 2,500 pages and 500,000 words long, its length and complexity have led to massive confusion about its likely impact. This incisive report provides an authoritative and deeply revealing explanation of the bill's provisions. Its diagnosis is that the bill is bad medicine. It is likely to make Americans less healthy, less able to direct their own health care decisions, and places huge burdens on our economy and national debt. Buy a copy for $10 or read for free online. Author Michael Tanner is a senior fellow with the Cato Institute and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It (link). ***

LTC BULLET: CLASS VS. LTCI--WHAT'S BEST FOR LTC PROVIDERS?

LTC Comment: Long Term Living magazine is a trade journal for "continuing care professionals." Visit their website at www.ltlmagazine.com to subscribe.

LTL was a gold sponsor of our 2008 National Long-Term Care Consciousness Tour. We thank editor Maureen Hrehocik for permission to "reprint" the following article. Read it online here.

Two divergent paths to financing LTC are offered to providers, public

by Stephen A. Moses

Long-term care (LTC) providers desperately need a better source of reimbursement. Government dominates long-term care financing, but pays too little to ensure quality care and it mostly funds services consumers would rather avoid. Medicaid has an "institutional bias" that shorts assisted living and home care while paying nursing homes less than the cost of providing the care.¹

Although Medicare reimbursements are more generous, they are narrowly restricted to skilled care whether that care is provided at home or in a nursing facility. Meanwhile, Medicare is severely vulnerable to future cuts.

If LTC providers cannot rely on government to pay for their services, which option is more likely to offer a solution: the new Community Living Assistance Services and Supports Act (CLASS Act) or private long-term care insurance?

The CLASS Act is part of the health reform law signed by President Obama on March 23, 2010. CLASS is a federally mandated program in which employed people who do not opt out may prepay for cash LTC benefits without underwriting and with their "premiums," benefits, and benefit triggers determined solely by the Secretary of Health and Human Services based on the program's future actuarial solvency.

Reports by the American Academy of Actuaries; Milliman, Inc., an actuarial firm; and the chief actuary of the Centers for Medicare & Medicaid Services (CMS) have all concluded that CLASS would have to charge exorbitant premiums, offer minimal benefits, or otherwise dissolve into actuarial insolvency.

For example, CMS Chief Actuary Richard Foster warned on April 22, 2010:

In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, which may lead to further premium increases. This effect has been termed the "classic assessment spiral" or "insurance death spiral."²

Foster expects that only 2% of eligible employees will take up CLASS. On the other hand, LTC insurance has been tested in the private marketplace for more than 30 years. It pays market rates for the kinds of services consumers prefer (home care, assisted living, and the best nursing home care when needed). Private LTC insurance has no risk of insolvency because of stringent state insurance regulations and "guaranty funds."

The table on pg. 35 shows the fundamental differences between private LTC insurance and the CLASS Act.

Well then, if private LTC insurance is so great, why have less than 10% of American consumers purchased it?

Simple. Government has paid for the vast majority of all expensive long-term care since 1965. Easy access to Medicaid-financed long-term care after the insurable event occurs has anesthetized the American public to LTC risk and cost. Most people don't know who pays for it and they don't care. They've had that luxury because government has always picked up most of the cost for LTC, while protecting beneficiaries' biggest assets. Medicaid, for example, exempts up to $750,000 of home equity.

Unfortunately, the CLASS Act will only add to the public's sense of complacency and entitlement regarding long-term care. The act holds out a false hope for providers that reimbursement help is on the way. I predict CLASS will never pay a claim either because it is repealed when political sanity returns or because the federal government cannot afford to repay the Treasury bonds in the program's empty "trust fund."

What should we do instead? Give Medicaid back to the needy. Target its scarce public benefits to those who need them most. Use the savings to incentivize responsible LTC financing through private payments from asset spend-down, reverse mortgages, and private long-term care insurance.

This solution is not complicated or difficult. It will come either from political will or as a result of the collapse of the status quo. The former is unlikely. The latter is inevitable. Private insurance will outCLASS government in the end.

Stephen Moses is president of the Center for Long-Term Care Reform.

For more information, call (206) 283-7036, e-mail smoses@centerltc.com, or visit http://www.centerltc.com. To send your comments to the editor, e-mail mhrehocik@vendomegrp.com.

References

1. A Report on Shortfalls in Medicaid Funding for Nursing Home Care. American Health Care Association, cited April 23, 2010.

2. Estimated Financial Effects of the Patient Protection and Affordable Care Act. Centers for Medicare & Medicaid Services memo.

Long-Term Living 2010 July;59(7):32-35

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Updated, Monday, July 19, 2010, 11:10 AM (Pacific)

Seattle--

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WHO'S CARING?

LTC Comment: Rich Karlgaard is a thoughtful--if often self-absorbed--economic analyst and the publisher of Forbes magazine.

His blog, Digital Rules, touched on long-term care last Thursday. Read "Tammy's Economy" below or here.

It's a touching story, but here are a couple "tough love" questions that should be asked of Mr. Karlgaard, but were not in the 20 published "comments" his piece elicited.

Question #1: Who pays for Mr. Karlgaard's father's nursing home care? Out of pocket? LTC insurance? Or Medicaid?

Question #2: Does Mr. Karlgaard own private long-term care insurance for himself and his family?

The question Karlgaard asked instead is " . . . what kind of system is best at producing heroes like Steve Jobs and products like the iPad while at the same time giving different sorts of heroes, like Tammy, the dignity they deserve?"

If he'd asked and answered the right questions instead--who pays for LTC today and who will pay in the future--he'd have been on the path to find the right "kind of system."

To wit: a long-term care safety net for people truly in need and asset spend down, home equity conversion or private insurance for those who are able.

Only that kind of system will create enough private financial oxygen to allow the Tammys of the world to receive adequate, market-based compensation for the critical services they provide.

A system dominated by public financing will always shortchange LTC providers across the spectrum of care from nursing homes to informal home care providers like Tammy.

Karlgaard's blog called "Tammy's Economy" follows.

RICH KARLGAARD, Forbes.com "Digital Rules" (7/15/10): Last week my 52-year-old sister died suddenly. The cause is not known. Around dinnertime she complained of a migraine, drew the shades, took to the couch, closed her eyes and never woke up. Aneurysm has been ruled out. Her death is a mystery.

We had a memorial service for Liz on Monday in our hometown of Bismarck, N.D., which allowed my 82-year-old father to attend. He's been wheelchair bound since he fell and cracked his skull on an icy sidewalk three years ago. Dad's in a nursing home. My angelic mother visits him every day and indeed has sacrificed much of her life for him.

The "Tammy" in today's title is not a relative or anyone I knew prior to the memorial service. Tammy is a nurse temp I hired to watch over Dad at Monday's service. Getting my dad out of his wheelchair and into the front seat of the SUV rental is not difficult and is a task I've mastered. What's really hard--physically but even more, emotionally--is getting Dad to the bathroom. Should he stand or sit? Should I watch him or give him privacy? Questions of potty protocol that do not phase you as a parent of a small child can strike deep into your heart as a child of a helpless parent.

So I wussed out and hired a woman named Tammy to be with my Dad at the funeral, mainly for the inevitable bathroom call. I had booked Tammy the day before. The temp agency had almost apologized for the eight-hour minimum charge, since we'd need Tammy for only about four hours. The charge came to--hold your breath--$114.

There is no way to put this delicately. Tammy was a middle-aged woman who looked poor, sad, beaten down. She drove an old small Chevy. Her hair and teeth were not the best. She was probably in her 40s but looked a decade older. Poor people in small towns have that look.

Knowing that Tammy's share of the $114 was probably $50 and that she had to wipe an old man's bottom to earn it, I tipped her $60. This seemed generous at the time but now seems so ridiculously puny it pains me to write it.

Of all the memories I took from my sister's memorial service, the one that haunts is of a poor woman cleaning my Dad's backside in the men's room.

As I ponder the economy and its challenges, I will think about Tammy. The question worth asking is what kind of system is best at producing heroes like Steve Jobs and products like the iPad while at the same time giving different sorts of heroes, like Tammy, the dignity they deserve? The solution is not government-ordered socialism. Nor is it capitalism free of any moral foundation.

For Tammy's sake and our own, we had better figure this one out--and soon.

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Updated, Friday, July 16, 2010, 1:08 PM (Eastern)

Washington, DC--

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LTC EMBED REPORT FROM THE POLICY FRONT IN PENNSYLVANIA (#4)

LTC Comment: Yesterday's meetings and interviews for our study of long-term care financing in Pennsylvania were successful and rewarding.

We started with a briefing for approximately 20 key legislative staff in one of the Capitol Hill hearing rooms. All key legislators and committees were represented either by staff or in person. Their main interest was in the CLASS Act and they listened with rapt attention. I saw more than one look of concern and even disbelief at the details of the CLASS program, including its lack of underwriting, high premiums, low benefits and unlimited lifetime claims costs. Each attendee will receive a copy of our Pennsylvania report. Many thanks to Vince Phillips (lobbyist for the Pennsylvania Association of Health Underwriters) for planning the session and to his assistant, D.J. Craine, for his hard work mustering an outstanding attendance, both in quantity and quality.

My Commonwealth Foundation (CF) colleague, Josh Hoerner, and I ran to our next meeting back at CF headquarters to speak with a dozen or so representatives of the long-term care insurance (LTCI) and reverse mortgage (RM) businesses. I gave an overview of the project, explained why we convene LTCI and RM experts in the same session, and listened to their comments and analysis of their respective markets in Pennsylvania (PA).

Points of interest on the LTCI side: 20% of the agents in PA sell 80% of the business; between 300 and 500 agents specialize in LTCI; as of 2008, 250,028 policies were in force (source: AALTCI); the market is stagnant, down last year, picking up a little this year. Pennsylvania has zero tax incentives to encourage the purchase of LTCI. In fact, state law includes a "uniformity clause" that prohibits treating any citizen preferentially under tax law except the elderly or disabled. Asked about "Medicaid planning," agents said it is "big time" in PA. "I could take my mother out to a free dinner every night if we were willing to sit through a seminar on how to get the government to pay for her LTC." The LTC Partnership program is a great idea, they said, but PA has done a terrible job of implementing it: no advertising, no promotion.

Points of interest on the reverse mortgage side: after an overview of how reverse mortgages work and some discussion of how similar unfair publicity of the RM industry has been to the media coverage LTCI gets, the RM lenders observed that their market is in turmoil because of the recession, the decline of real estate values, and government regulation which already has reduced, and is likely soon again to reduce, amounts people are allowed to take out of their home equity using RMs. Although upfront fees for an RM can easily reach $15,000 or $20,000, more than most "forward mortgages," there are good reasons related, among other things, to the fact that RMs require no monthly payments and allow homeowners to remain in their homes permanently even if their equity goes "under water." The most common reasons people take out RMs are to pay off a "first mortgage" and get out from under monthly payments, to pay for house repairs, or to supplement living expenses. Rare is the use of an RM to fund long-term care services and using an RM to help pay LTCI premiums is almost unheard of. Only 2% of Pennsylvanians who are eligible for a RM (age 62 plus and have sufficient home equity) actually have a reverse mortgage so the market remains mostly untapped.

We were gratified to receive the following email from a reverse mortgage specialist who appreciated the opportunity to meet with his LTCI colleagues:

Steve: I just wanted to take a quick time out to thank you very much for the work that you do on behalf of the Long Term Care industry and for including the Reverse Mortgage Industry as part of your report. I found it very enlightening sitting in a room full of professionals from two separate fields dealing with the same issues of acceptance of product and the difficulty in getting the word out that our products are life changing products for the better.

I am available any time you need me to answer questions regarding the Reverse Mortgage Industry and would welcome the opportunity to get as active as you need in order to spread the word.

Thank you again for inviting me to the meeting, and I look forward to working with you in the future to help both industries.

Jeffrey H. Cooper
Jeffrey H. Cooper, Managing Partner
Great Oak Lending Partners

Our final meeting of the day was with Ted Janeczek, representing the assisted living industry. His company is the largest ALF provider in Pennsylvania with 38 facilities, 2700 residents, and 2200 employees. His operation is 100% private pay, as Medicaid does not pay for assisted living in PA. Soon, however, PA Medicaid will start covering 300 ALF slots, but Mr. Janeczek's facilities will not participate because reimbursement is expected to be inadequate. Labor issues and heavy state regulations are among the biggest challenges his industry faces in PA. ALF occupancy in PA is around 90% although his facilities are 96% full. I observed that the relevance of Medicaid LTC financing to ALFs is that it channels people who could have, would have and should have paid privately for assisted living into Medicaid financed nursing homes because of perverse incentives in Medicaid eligibility policy. After I explained how much more generous Medicaid nursing home eligibility is than is commonly understood, he became very interested in this aspect of the problem.

Because we were unable to schedule most of our critically needed meetings with the state Medicaid agency, I am on my way home to Seattle early today. I was allowed to submit written questions, however. If the state replies in time, we will at least have the benefit of that very limited information. Our goal is to have a draft of the Pennsylvania report ready by the end of July.

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Updated, Thursday, July 15, 2010, 12:23 PM (Eastern)

Harrisburg, PA--

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LTC EMBED REPORT #3 FROM HARRISBURG, PA

SPECIAL: Don't miss Phyllis Shelton's interview on "The Balancing Act" which aired yesterday on Lifetime Television here. Well done!

LTC Comment: Light schedule today. Only two meetings. An excellent one with the Pennsylvania Insurance Department and a "telling" one with Pennsylvania business lobbyists. More below on both.

Today's schedule is light and Friday's is empty due to an odd turn of events. In all my many years of doing LTC financing studies nationally for HCFA and the USDHHS Inspector General and in specific states for state legislatures (Florida and Nebraska), state provider associations (Illinois and Washington) and for State Policy Network think tanks (Kansas, Texas, North Carolina, and Rhode Island), I've never had a problem reaching the people and organizations within the state Medicaid agencies that I need to interview to get the information necessary to complete the study. Pennsylvania is the first exception. Other than one meeting with top tier staff of the Office of Long-Term Living, I'm only able to submit questions to the key operational units. Right up until last Friday, I expected to have the interviews I need and have always before completed with the state long-term care financial eligibility policy specialist, with the lien and estate recovery unit chief and with eligibility workers and supervisors in one to three local eligibility determination offices. But it did not come together in Pennsylvania. I was instructed to submit detailed questions in lieu of face to face interviews. Hopefully I'll have answers in time to use the information in our report, due the end of July. We'll see how it all plays out.

Today's meeting with the Insurance Department was dramatically different than any meeting of the kind I've had in other states. Instead of meeting, as usual, with a single low-level staffer responsible for LTC insurance, I sat before half a dozen officials, including deputy commissioners, representing all aspects of insurance regulation in Pennsylvania as they bear on long-term care coverage. It seems Pennsylvania has been a leader in the field because the state has had a disproportionate share of so-called "mono-line" companies, carriers that specialize exclusively in long-term care insurance. Mono-line companies, such as Penn Treaty, Conseco Seniors, Bankers Life, etc., according to the interviewees this morning presented early on the kinds of regulatory challenges that have engaged the Pennsylvania Insurance Department and the National Association of Insurance Commissioners over the years.

Some of what I learned, which is much more than I usually glean from these interviews in other states, follows. About 93 companies market LTCI in PA. 17 companies sell the state's long-term care partnership policy and that number is not expected to increase by much. They've seen very little activity related to the Partnership even though they originally expected to be swamped with requests for approval of Partnership policies. About 5500 producers have taken the special LTCI training in PA which is a proxy number for how many producers market LTCI in the state.

Pennsylvania has gone through several cycles of regulation. In the 1990s the focus was on stopping the practice of "churning," i.e. re-writing people who already have coverage to get a higher first-year commission. In the early 2000's the challenge was implementing a new "rating law." More recently they've focused on the requirement for more and longer agent training. As of last Saturday, a new rule requiring an internal grievance procedure was passed that comes into effect September 6 for claims after November 6. Recently the Department was in the forefront of dealing with a "groundswell" of claims payment complaints stemming from national media coverage as followed up loudly by all the 2008 presidential candidates. Dealing with closed books of business and their potential "death spirals" is one of their biggest challenges going forward. Managing rate hikes is another. But overall, they report that regulation of LTCI is leveling out at least until the next crisis comes along. The very latest challenge is handling the new hybrid or combo products linking LTCI with life insurance or annuities.

Having been very surprised by the rampant optimism about the CLASS Act evinced by Medicaid management in my interview yesterday, I decided to ask the Insurance Department people their opinion of CLASS. They were not intimately familiar with the new program, but the more we discussed its lack of underwriting, unclear premiums and benefits, unlikely "take-up" and other characteristics, the more they expressed confusion and doubts about the programs efficacy and feasibility.

I also met today with lobbyists from associations, such as the National Federation of Independent Businesses and the Chamber of Commerce, that represent business interests. Since I expected to be meeting with business owners and talking about the challenges they face with elder care, related absenteeism and "presenteeism," whether they offer LTCI, how they feel about government financing of LTC, etc., I had to readjust a bit when I found myself speaking to lobbyists. They were not attuned at all to specific elder care or LTC issues, although they said their human resources divisions may know more. They'd barely heard of the CLASS Act, although they are very much focused on the other heavy responsibilities placed on businesses by the health reform legislation. Their ears perked up when I described how businesses will be asked to auto-enroll employees into the CLASS programs with monthly premiums of up to $240 and that, if they opt not to do this, then the federal government is required by the statute to find an alternative way to opt in all their employees automatically, unless the employees consciously and willfully opt out. They see this program as yet another headache for their business members among many caused by the Patient Protection and Affordable Care Act (PPACA).

Tomorrow I'll talk to a group of Pennsylvania state legislative staff (17 at latest count) about "The CLASS Act and the Future of Long-Term Care Financing." After that program, I'm with LTC insurance agents and reverse mortgage lenders to get their perspectives on those markets. And finally, I'll meet with the executive director of the Pennsylvania Assisted Living Association. And that'll be a wrap unless the state relents and I'm able after all to interview the Medicaid staff I requested. If not, I'll use published materials, document problems and ask tough questions without the benefit of getting the state's side of the story. Likely after our report, related op-eds and articles are published, some of those same tough questions may be coming from the media and state legislators.

Never a dull moment out here in the LTC policy trenches as covered by your intrepid, embedded reporter from the Center for Long-Term Care Reform. Closing report on our Pennsylvania field work tomorrow.

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Updated, Wednesday, July 14, 2010, 12:58 PM (Eastern)

Harrisburg, PA--

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LTC EMBED REPORT FROM HARRISBURG, PA

LTC Comment: Yesterday was a full day of interviews: four two-hour meetings starting with State of Pennsylvania officials in the early morning and going through late afternoon with various long-term care provider groups. Joining me was Joshua Hoerner, the research assistant assigned by the Commonwealth Foundation to work with on our study.

Pennsylvania is reorganizing its long-term care program. In 2007, the state moved all LTC operations into a new Office of Long-Term Living. Fundamental to this reorganization is a focus, backed strongly by the Governor and the state legislature, to "rebalance" Medicaid long-term care from mostly nursing home care to much more home and community-based care (HCBC). What struck me most about this session was the optimism of state officials that providing HCBC (services people want) instead of nursing home care (which people would rather avoid) will save the state money. As in other states where I've conducted this study, the expectation that rebalancing can save money is almost a matter of faith. The other impression that stood out from this interview was state officials' strong optimism and confidence that the CLASS Act would succeed and bring much-needed financial relief to the Medicaid program and to Pennsylvania's state budget.

The remainder of the day was spent with long-term care provider associations. We met first with executive director Ron Barth and his staff from the Pennsylvania Association of Non-Profit Homes for the Aging or PANPHA. Unquestionably, the biggest challenge facing long-term care providers in Pennsylvania according to PANPHA is financing. Two-thirds of the state's nursing home residents are dependent on Medicaid, roughly the national average. But Medicaid reimburses nursing homes and other providers that PANPHA represents--such as home care, adult day care, assisted living facilities, etc.--less than the cost of providing the care. To survive, LTC providers in Pennsylvania depend on relatively generous reimbursements from Medicare and a dwindling number of private payers. They worry about how long either of those sources of adequate financing will last.

Vicki Hoak, executive director of the Pennsylvania Homecare Association, had lunch ready for us and the attendees at her session. Calling in on the conference line from around the state were a number of senior advocates. I gave a brief orientation to our study and then asked a series of questions to garner opinions from the home health industry point of view and also from the advocates' perspective. My most significant impression from this meeting was the enormous success of one attendee who operates a private, for-profit service called Visiting Angels. As programs dependent on government financing struggle, her 100% private pay business is booming. She said upwards of 20% of her customers have private long-term care insurance! That is the highest estimate I've heard during all the years I have conducted this study in nearly two dozen states.

We closed the day with another long-term care provider association meeting that delivered a lot of valuable information, data and analysis. But the executive director asked not to be quoted. He indicated he didn't know who the next Governor will be, so he didn't want to be on the record. In exchange, he agreed to give totally frank answers. And he did! His and his staff's information will be reflected in our final report, although anonymously.

Today we meet with officials of the Pennsylvania Department of Insurance to learn about regulation of LTCI in the state and with business leaders to learn how long-term care affects them, their employees and the employees' family. We'll ask the business leaders if they offer LTCI and if so what their experience has been.

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Updated, Tuesday, July 13, 2010, 12:30 PM (Eastern)

Harrisburg, PA--

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LTC BULLET: LTC EMBED REPORT FROM THE POLICY FRONT IN PENNSYLVANIA

LTC Comment: We preview our week of research in Harrisburg, PA after the ***news.***

*** CLASS CONFUSION. In "LTC E-Alert: New CLASS Fix Draft" on Tuesday, July 6, 2010, we reported thus: The effective date of CLASS is January 1, 2011, but the Secretary’s final plan isn't due until October 1, 2012. Nevertheless, stakeholders worry about HHS collecting revenues through CLASS before the 2012 plan. Why? Because, the Medicare Actuary's April 22 report shows $2.8 billion and $4.5 billion in CLASS revenues for 2011 and 2012, respectively. If CLASS won't get underway earlier than late 2012, and more likely 2013, where's all that revenue coming from? We have an answer from a CMS official who will remain anonymous: "Our 4/22 estimate assumed that the program would be effective and participants would begin paying premiums on January 1, 2011.  If no participant pays any premium until January 1, 2013, then our estimates would be off by two years." You heard it here first! ***

*** AALTCI MAKES AVAILABLE LOW-COST E&O INSURANCE. A new, low-cost E&O (Errors and Omissions) protection program for insurance agents and brokers is now being offered through the American Association for Long-Term Care Insurance (www.AALTCI.org). According to Jesse Slome, executive director for the organization, the cost for $1-million per-claim is $510-per-year. Covers life and health insurance sales including long-term care insurance and is available to producers in all states. For more information visit the Association's website: http://www.aaltci.org/eo. Membership in the Association is required. If you are not a member, be sure to enter our discount code "CENTER50" to save 50% off AALTCI's membership cost. ***

*** ONCE BURNED, TWICE CAUTIOUS? The July issue of ElderLawAnswers Monthly reports: "Reverse mortgage lenders are now routinely second-guessing the legitimacy of power of attorney (POA) documents, according to industry sources. Presented with an agent seeking to take out a reverse mortgage on behalf of an incompetent principal, banks or brokers are typically asking for a letter from the principal's doctor stating that the senior was competent at the time the POA was executed, or, failing that, a letter from the doctor indicating when the principal's condition began. Based on this information, the lender or broker decides whether or not to proceed with the reverse mortgage application." ELA Monthly asks "Illegal Discrimination?" But we wonder if this caution simply reflects the reverse mortgage industry's reasonable response to financial abuse of the elderly by relatives and their Medicaid planners using powers of attorney and guardianships. ***

*** JUST IN… According to her press release: "Industry leader Phyllis Shelton, President of LTC Consultants, will appear on Lifetime Television’s The Balancing Act on July 14 at 7 AM EST to set the record straight that the issue of long-term care is not solely a financial problem." Don’t miss this! Further note: She announces that her May conference on LTCI Worksite and Combo Products was so successful that she’ll be doing a seven city Fall Tour. All info is on her website: www.ltcconsultants.com. ***

*** SUBSCRIBE TO LTC BULLETS. Please encourage your colleagues to fill out the simple online subscription form at http://www.centerltc.org/bullets/subscribe_to_bullets.htm. Subscriptions are free to everyone for the first month. After that, we'll ask you to help support the cause: rational long-term care public policy. ***

LTC BULLET: LTC EMBED REPORT FROM THE POLICY FRONT IN PENNSYLVANIA

LTC Comment: Today, I begin the field work for our long-term care financing study in the Commonwealth of Pennsylvania. For a detailed description of this project, see "LTC Bullet: Center Begins Study in Pennsylvania," Wednesday, June 16, 2010. We are conducting this research in conjunction with the Commonwealth Foundation (CF), an independent, non-profit research and educational institute dedicated to limited government, economic freedom, and personal responsibility.

Today, Joshua Hoerner of CF and I will meet with a broad range of state Medicaid officials first thing in the morning. This meeting grew in size rapidly, so I added some extra time to accommodate the group. It has been difficult to pin down all the appointments we need within Pennsylvania's complex, fragmented and reorganizing Medicaid LTC program. We're hoping this first meeting will nail down the specialized sessions we need to schedule in the areas of Medicaid LTC financial eligibility policy, eligibility rules and implementation, and Medicaid liens and estate recoveries.

Immediately following this session with state officials, we'll meet with a series of long-term care provider associations including their executive directors and some members. Among these are the Pennsylvania Association for Non-profit Senior Services, the Pennsylvania Health Care Association and Center for Assisted Living Management, and the Pennsylvania Homecare Association (PHA). Also participating in the PHA in person and by conference call will be representatives of various senior advocacy groups.

On Wednesday, July 14, we'll meet with representatives of the Pennsylvania Insurance Department including Stephen Johnson, Deputy Insurance Commissioner, Office of Corporate and Financial Regulation; Carolyn Morris, Consumer Services Bureau Director, Office of Insurance Market Regulation; Peter Camacci, Accident and Health Bureau Director, Office of Insurance Product Regulation; and Rick Stoner, Accident and Health Bureau, Office of Insurance Product Regulation. Our goal is to learn about regulation of private long-term care insurance in the state and to understand any problems or challenges the market, producers, and consumers may face.

Later on Wednesday, we will convene with a group of Harrisburg business leaders to discuss the unique challenges local companies face with regard to LTC-related absenteeism or "presenteeism." We'll also ask about the LTC insurance coverage they offer or if none, why? We'll share some thoughts about the likely future of LTC financing and how the business community may be affected. We'll request feedback from the attendees.

On Thursday, July 15, I'll start the day with a briefing for state legislative staff interested in learning more about LTC policy, Medicaid expenditures and the CLASS Act. Vince Phillips, a well-known advocate for the Pennsylvania Association of Health Underwriters organized this session. Immediately thereafter, I will meet with long-term care insurance and reverse mortgage experts at the Commonwealth Foundation's headquarters. I'll be getting their perspective on the LTCI and RM markets in Pennsylvania. Special thanks to Center supporter and LTCI producer and advocate Ross Schriftman for organizing this session.

Later in the day, we'll finish with another LTC provider meeting. This time it will be with the Pennsylvania Assisted Living Association.

We've kept time slots open on Wednesday, Thursday and Friday to accommodate supplemental meetings and interviews to be identified during the week. Our goal is to draft a final report, at least one newspaper op-ed, and an article about our findings by the end of July. Then it's on to project #2 in California.

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Updated, Monday, July 12, 2010, 11:02 AM (Pacific)

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LTC MISCELLANY

LTC Comment: I'm in Harrisburg, capital of the Commonwealth of Pennsylvania. We'll report on our LTC financing study in the "Keystone State" starting with an "LTC Embed" report tomorrow.

Today, we have a couple news items of interest and an E&O offer from the American Association for Long-Term Care Insurance (www.aaltci.org).

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THE COMING MEDICAID EXPANSION. The Washington Post reports: "Under the new healthcare law, Medicaid will expand by at least 16 million people as eligibility is raised in 2014 to a new nationwide standard of 133 percent of the poverty level. The surge in enrollment will be highest in states in the South and West, where eligibility standards have been stringent." See what the impact on your state will be in the graphic here.

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JURY NAILS SKILLED HEALTHCARE GROUP $670 MILLION. Read SeniorCare Investor editor Stephen Monroe's post titled "Skilled Healthcare and Our Absurd Judicial System" about this over-the-top judgment. Juries impose outrageously high damages against nursing homes for allegedly poor care when the real culprit is often our welfare-based, institutionally biased, government under-financed, union-driven, private-pay-starved, dysfunctional long-term care system. Find a Long Term Living e-news story on the decision here.

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AALTCI MAKES AVAILABLE LOW-COST E&O INSURANCE. A new, low-cost E&O (Errors and Omissions) protection program for insurance agents and brokers is now being offered through the American Association for Long-Term Care Insurance (www.AALTCI.org). According to Jesse Slome, executive director for the organization, the cost for $1-million per-claim is $510-per-year. Covers life and health insurance sales including long-term care insurance and is available to producers in all states. For more information visit the Association's website: http://www.aaltci.org/eo. Membership in the Association is required. If you are not a member, be sure to enter our discount code "CENTER50" to save 50% off AALTCI's membership cost.

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Updated, Friday, July 9, 2010, 10:18 AM (Pacific)

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SO MUCH FOR THE GOOD HEALTH OBJECTION

UPDATE: I'm headed to Harrisburg, PA next week to conduct the field work for our study of long-term care financing in Pennsylvania. For information about the study, see "LTC Bullet: Center Begins Study in Pennsylvania," Wednesday, June 16, 2010. Expect some "LTC Embed" reports soon from the policy front in the hot and humid Keystone State.

LTC Comment: People who sell long-term care insurance tell us this is a common objection: "I'm healthy. My family is long-lived. I don't need this insurance."

I've always thought that objection was ridiculous. It is precisely healthy, long-lived people who are most likely to live long enough to succumb to one of the chronic illnesses of old age that cause health and LTC costs to spike.

Yet, the confusion evidently persists. Following is a blurb from the July 2010 QuickFacts e-newsletter from the MetLife Mature Market Institute.

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Health, Long Life, and Health Care Costs

In a surprising, counterintuitive finding, the Center for Retirement Research finds that those who are healthy can expect to incur higher lifetime health care costs than those who are unhealthy. Using data from the University of Michigan Health and Retirement Study and simulating lifetime health care cost histories, the researchers identified three key reasons for their findings. First of all, healthy people at age 80 have a 29% longer remaining life expectancy than those who are in the unhealthy group. Secondly, healthy 80 year olds can expect to live one-third of their remaining life with a chronic condition, and lastly, they may require nursing home care at an advanced age. Planning for health care needs in retirement is crucial whether an individual is in good health or not.

Wei Sun, et al
"Does Staying Healthy Reduce Your Lifetime Health Care Costs?"
May 2010
Number 10-8
Center for Retirement Research at Boston College
Click for link to brief

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LTC Comment: Surprising, counterintuitive? Not to me. But evidently the public doesn't get the point and that's why the "I'm healthy" objection has been so problematical. Well, at least now you have more ammunition to combat it.

Check out the full "brief" here including the following "Conclusion." Note the point about CLASS that I've highlighted:

"Households planning for retirement need to decide how much to set aside for health care costs and whether to purchase Medigap and/or long-term care insurance. Those currently in good health would be unwise to infer that they will continue to enjoy lower than average health care costs. The reality is that even the currently healthy can expect to eventually suffer from one or more chronic diseases, which often results in high out-of-pocket and long-term care costs.

"Households that delay purchasing insurance until their health declines run the risk of facing higher premiums, or for long-term care insurance, being denied coverage altogether. Insurers need to charge premiums that reflect the risk of claim. [Are you listening CLASS advocates? Your guaranteed issue, low-ball premiums, and unlimited lifetime coverage guarantees insolvency.] Individuals who wait until their health declines represent a particularly bad risk because they incur higher medical costs than the healthy, at least in the short run, and also pay fewer years' premiums. Therefore, households that do not buy Medigap when they first join Medicare run the risk of facing substantially higher premiums, as do households of any age that postpone buying long-term care insurance." (Emphasis added.)

LTC Comment: This is one study LTC insurance producers and their prospects/clients can take straight to the bank. Planning responsibly for the risk and cost of long-term care is a win/win all the way around. Waiting to see what the government does with CLASS, a program intentionally designed to violate the first principle of insurance, i.e. charge premiums that reflect claims risk, is an all-around loser.

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Updated, Thursday, July 8, 2010, 10:15 AM (Pacific)

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READ ALL ABOUT LTC AT HEALTHCARE.GOV

LTC Comment: Employee Benefit News reports that "Meeting a July 1 congressional deadline [from the new health reform law], the Department of Health and Human Services has launched an initial version of HealthCare.gov, a Web site to enable consumers across the nation to compare and choose health insurance plans operating in their geographic region." Read more about the new website here.

So, we were curious to see what HealthCare.gov would have to say about long-term care and LTC financing. Here's what we found. See if you get the impression, as we did, that the new CLASS program and improvements in Medicaid overshadow responsible LTC planning through private insurance. Rejoin me below for our analysis.

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Under the headings "Seniors, improving long-term care" here:

* The Affordable Care Act creates a voluntary, enrollment-based insurance program that will be available after October 2012 called the Community Living Assistance Services and Supports (CLASS) Program that will assist people who need help with daily activities. Under this voluntary program, you'll get a cash allowance so you can get care and other supports to help you keep your independence.

* If you have a disability, regardless of your age, there will continue to be more opportunities for you to get help with daily activities while remaining in your home. The Medicaid program continues to move toward providing community-based care options as an alternative to nursing homes.

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Under the heading "Seniors, Paying for long-term care" here:

Long-term care includes supports for basic daily living for people who have a chronic illness or disability. Also called personal assistance, it may include help with everyday activities like dressing, bathing, and using the bathroom. It may also include the kind of health-related care that most people do themselves, like using eye drops.

Long-term care can be provided at home, in the community, in assisted living, or in a nursing home. It's important to start planning for long-term care now to maintain your independence and to make sure you get the care you may need in the future.

Medicare and most health insurance plans don't pay for long-term care. Medicare only pays for time-limited, medically-necessary skilled nursing facility care or home health care if you meet certain conditions. The following resources may be available to help you pay for long-term care:

The Affordable Care Act created the CLASS Program, which is a national, voluntary insurance program that will be available after October 2012 to help you pay for services and supports that help you maintain independence in your community.

* People over age 18 who are working will have the opportunity to enroll in the CLASS Program.

* Enrollees (after contributing to the program for five years) who the program determines have functional limitations expected to last 90 days or more and meet other eligibility requirements will get a cash benefit to help pay for supports to stay independent. These limitations include needing help with many basic daily living activities such as eating and getting in and out of bed. Such supports include home modifications, assistive technologies, home care aides, and personal assistance. The minimum average daily benefit will be $50 a day.

This type of private insurance policy can help pay for many types of long-term care, including both skilled and personal care. Long-term care insurance can vary widely. Some policies may cover only nursing home care. Others may include coverage for a range of services like adult day care, assisted living, medical equipment, and home care.

The amount of coverage available for different services varies by policy.

* Your current or former employer or union may offer long-term care insurance.

* Current and retired Federal employees, active and retired members of the uniformed services, and their qualified relatives can apply for coverage under the Federal Long-term Care Insurance Program.

Each state operates a Medicaid program that provides health coverage for people with low incomes including families and children, the elderly, and people with disabilities. The eligibility rules for Medicaid are different for each state.

People with Medicare with limited incomes have several opportunities for enrolling in Medicaid coverage and getting help paying Medicare costs. Medicaid also helps pay for nursing home care for a large proportion of lower-income people with Medicare.

In addition, almost all states offer community-based long-term care services and supports through Medicaid that help individuals stay in their homes for as long as possible.

To learn more about your state Medicaid program and other options available to you, use the insurance and coverage finder.

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LTC Comment: OK, let's circle back from HealthCare.gov's magical kingdom to the real world. Here's the truth. The CLASS program is a Ponzi scheme that will leave suckers who enroll in it unprotected when they need help. So-called Medicaid improvements to provide more home and community-based care are unfundable already and unachievable going forward. Medicare has an $87 trillion unfunded liability so won't be able to help "dual eligibles" indefinitely.

Suggesting to the public, as this new website does implicitly, that you can relax about long-term care risk and cost because the government will take care of you, is socially irresponsible and, in the end, politically suicidal. Such demagoguery worked when the brick wall of fiscal reality America is about to hit was decades away. But today it's just around the next bend in this long path of political chicanery.

Better advice: Secure your families' and your clients' financial seat belts. Brace for collision.

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Updated, Wednesday, July 7, 2010, 11:33 AM (Pacific)

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LTC Comment: Unlike most states, Connecticut must be rolling in taxpayers' money to be able to expand Medicaid long-term care in a manner explained after the ***news.***

*** BERWICK IN. According to the New York Times: "President Obama will bypass Congress and appoint Dr. Donald M. Berwick, a health policy expert, to run Medicare and Medicaid, the White House said Tuesday." Read what the Heritage Foundation had to say about that "recess appointment" this morning in a piece titled "The Rationer-in-Chief." ***

*** SPONSOR A BULLET? Just contact Damon for details at 206-283-7036 or damon@centerltc.com. You'll reach thousands of LTCI producers and hundreds of leading LTC media, policy makers, legislators, and other experts. Act now and get an ad on our "LTC Blog" page for no extra charge. ***

*** SUBSCRIBE TO LTC BULLETS. Please encourage your colleagues to fill out the simple online subscription form at http://www.centerltc.org/bullets/subscribe_to_bullets.htm. Subscriptions are free to everyone for the first month. After that, we'll ask you to help support the cause: rational long-term care public policy. ***

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LTC BULLET: CONNECTICUT EXPANDS MEDICAID LTC LARGESSE

LTC Comment: As most states confront serious budget shortfalls and worry that Medicaid will not extend generous "stimulus" bonuses into next year, one state seems oblivious. Connecticut has changed its "Community Spouse Resource Allowance" to permit a higher protected asset amount. The state has also circumvented rules in the Deficit Reduction Act of 2005 that placed a limit on the amount of home equity a Medicaid recipient could exempt while receiving LTC benefits.

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Here's the story as published by the Connecticut Care Planning Council and CT-NAELA, the Connecticut chapter of the National Academy of Elder Law Attorneys:

"Connecticut Care Planning Council The Connecticut chapter of the National Academy of Elder Law Attorneys ('CT NAELA') is proud to announce that Public Act 10-73, An Act Concerning Medicaid Long-Term Care Coverage For Married Couples, was signed into law by Governor Rell on May 27, 2010. CT NAELA drafted the new law and was its main proponent.

"The new law allows the well spouse of an individual needing long term care in a nursing home or at home to keep the home residence, a car and all of the couple's assets, up to $109,560.00 in 2010; the ill spouse is immediately eligible for Medicaid/Title 19. Under the old law, if one spouse was in the nursing home or needed home and community based long term care services, the well spouse still living at home could keep the home, a car, but only one-half of the couple's other assets, or $109,560.00 in 2010, whichever was less. The remaining one-half of the couple's assets had to be spent-down in order for the ill spouse to be eligible for Medicaid. For example, if a couple had $80,000.00 in assets in addition to their home and car, under the old law, the well spouse could only keep one-half of the $80,000.00, or $40,000.00, and the remaining $40,000.00 had to be spent-down before the ill spouse would be eligible for Medicaid. Under the new law, the well spouse can keep the house, car and all of the couple's assets, up to $109,560.00 in 2010, and not have to spend-down anything, and the ill spouse will be immediately eligible for Medicaid/Title 19.

"The second part of the bill allows an individual or a couple to take out a reverse mortgage loan, home equity loan or other loan financing, deposit those loan proceeds into a separate account and not have the loan proceeds counted as assets or income for an individual applying for home or community based long term care services under a Medicaid waiver. Under the old law, the proceeds of a reverse mortgage or home equity loan were counted as assets and income and made individual ineligible to receive long term home care services at home. The new law allows an individual to keep loan proceeds in a separate account and remain eligible to receive long-term home care services."

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LTC Comment: Following is our analysis:

The CSRA: Under federal law (Medicare Catastrophic Coverage Act of 1988 or MCCA '88), state Medicaid programs must allow the community spouse of an institutionalized Medicaid recipient to retain half the couple's joint assets not to exceed $109,560. (That protected amount was only $60,000 in the original MCCA '88 legislation to end "spousal impoverishment," but it increases annually with inflation.) At their option, states could instead protect the first $109,560 of a couple's assets regardless of their total wealth, thus making the federal maximum also the state's minimum Community Spouse Resource Allowance. Connecticut has recently changed from the more restrictive to the more generous rule.

Here's why that matters. When Connecticut allowed only half the joint assets to be protected up to a limit of $109,560, a couple with $120,000 could retain only $60,000 for the community spouse. The institutionalized spouse's half, or all but a few thousand dollars of it that remained exempt regardless, had to be spent down. (Of course, there are many ways to avoid that spend down requirement, but such was the theory anyway.) Now that Connecticut allows the first $109,500 to be protected, the same couple can retain all but $10,500 (i.e., $120,000 total assets minus $109,500 protected for the spouse.) Thus, the couple applying for Medicaid saves nearly $50,000. Or conversely, assuming that $50,000 would otherwise have been spent to delay Medicaid eligibility (doubtful, of course), the state is on the hook for a few extra months of Medicaid long-term care costs.

The reverse mortgage angle. Far more devastating to Connecticut taxpayers is the new provision regarding home equity. Until the DRA '05 capped Medicaid's home equity exemption at $500,000 or $750,000 (CT is one of only a few states to adopt the $750K maximum), there was no limit on how much money Medicaid recipients could shelter in a home including all contiguous property. The idea behind the DRA's cap was to encourage people with substantial home equity to fund their own long-term care instead of relying on public welfare.

To get around the DRA cap, Connecticut has evidently allowed people to take out a reverse mortgage or other home equity loan in order to reduce their home equity to below three quarters of a million dollars and to put the excess assets into a separate exempt account. Our source in Connecticut tells us that (1) Governor Rell opposed this change but did not veto it when CT-NAELA pushed it through the state legislature, (2) state Medicaid officials believe that federal CMS (Centers for Medicare and Medicaid Services) officials will allow this change (hard to believe, but who knows with the current Administration?) and (3) the sheltered assets will be recoverable from the estate. Nevertheless, this rule change could cost Connecticut and federal taxpayers millions.

Here are just a few of the problems with Connecticut's dodge of the home equity cap:

• Even wealthier people than before can qualify for Medicaid LTC in Connecticut by sheltering the wealth in a home, removing equity to reach the $750,000 limit, and hiding the rest in the newly allowed special account. (Think the affluent don't use Medicaid? Think again: Medicaid planners use "key" money to get their wealthy clients access to the best care Medicaid offers which is not readily available to the poor.)
• Connecticut taxpayers are not alone paying for this generosity because federal taxpayers supply more than half of all Medicaid funds in the "Constitution State."
• Estate recovery of assets sheltered in the new home equity protection accounts is highly unlikely. Few states recover from spouses' estates and those that do recover little as many years may transpire between the death of the Medicaid recipient and the death of the surviving spouse or other exempt, dependent relative.
• With unlimited assets protected from Medicaid spend down, the incentive has been reduced for Connecticut citizens to plan responsibly for future long-term care expenses by saving, investing or insuring so they'll be able to pay private.
• With more people dependent on Medicaid in Connecticut, long-term care providers will have an even more difficult time giving quality care at the most appropriate level because of Medicaid's notoriously low reimbursement rates ($18.23 per bed day less than the cost of providing the care in nursing homes estimated for 2009).
• The poor will have even less access to Medicaid LTC benefits as a result of scarce welfare resources being siphoned away to benefit CT-NAELA Medicaid planners and their affluent clients.

It boggles the mind how suicidally gullible and irresponsible public officials can be when responding to the self-interested pleadings of the Medicaid planning bar. Maybe Connecticut voters deserve what they get from the politicians they put into office. But surely this galls federal taxpayers, who are even more out of pocket.

(Special thanks to major-center-supporter Claude Thau for tipping us to this news and to David J. Guttchen, Project Director, Connecticut Partnership for Long-Term Care for helpful background.)

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Updated, Tuesday, July 6, 2010, 11:53 AM (Pacific)

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NEW CLASS FIX DRAFT

UPDATE: We have added to our "CLASS Act Update" in "The Zone." Center members may access this comprehensive coverage of the CLASS Act here along with many other members-only information resources. You'll need your user name and password. Contact Damon for a reminder at 206-283-7036 or damon@centerltc.com. Likewise, to join the Center and get access to The Zone and receive our daily publications, contact Damon or enroll here.

LTC Comment: In "LTC Bullet: Draft Legislation to Fix CLASS," Wednesday, June 23, 2010, we reviewed a "discussion draft" of proposed legislation under consideration by Congressman Charles Boustany (R, LA). Congressman Boustany's office requested your suggestions to improve the bill and you responded. Check out the revised draft of the proposed legislation here http://www.centerltc.com/CLASS_DOC_BOUSTA-REV.pdf. If you have further comments, please email them to mike.thompson@mail.house.gov with the subject line: "Comments on CLASS Act Draft."

In the course of reviewing the historical record on CLASS, we came across a document titled "CLASS Plan Questions & Answers," dated August 17, 2009, unattributed to a source but clearly the best shot of CLASS supporters to defend the then-proposal, now-law. Following are quotes from the document and our comments for the record:

CLASS Defenders: "The CLASS plan is a voluntary self-funded insurance plan and, according to CBO, would reduce the federal budget deficit by $57.8 billion [later $70 billion plus] over ten years including federal Medicaid savings of $2.5 billion in the first four years CLASS benefits become available."

LTC Comment: Voluntary? Hardly. You're in unless you act willfully to opt out. And how exactly does CLASS save the government money? It pretends that premiums it collects are "savings." That's only true to the extent CLASS pays no claims. It's as though a long-term care insurance company treated its reserves as profits without any thought for honoring its policies in the future. Criminal for the private sector; political bragging rights for CLASS defenders.

CLASS Defenders: "The legislation requires that the CLASS plan be implemented and maintained in a manner to be actuarially sound for the long term."

LTC Comment: Yeah, right. No underwriting, adverse selection, no limit on lifetime claims, $5/per month premiums for students and the poor: why should actuarial soundness be a problem? If CLASS defenders are so confident, they should voice no opposition to the draft legislation mentioned above that calls for repealing CLASS as soon as it proves to be unsound actuarially.

CLASS Defenders: "Although private long term care insurance can be a good choice for some people who can pass the health screen, can afford the policies, and like the benefits offered, less than 10% of seniors (and even fewer younger people) have private LTC insurance policies, even though such policies have been available for 30 years."

LTC Comment: And why do you suppose so few people buy private LTC insurance? Medicaid and Medicare have paid for most expensive LTC since 1965. So how do you figure adding another government program purporting to fund long-term care but creating massive new unfunded liabilities in yet another phony trust fund won't "discourage more consumers in the future, compared to today, from planning properly for future long-term care needs?" CLASS defenders scale heights of self-delusion.

Here's the reality about CLASS:

• Millions of workers could end up enrolled in CLASS by default unless they consciously opt out.
• They could be charged monthly premiums as high as $240 a month, with no chance of refund.
• Once enrolled, they are locked into the program until the law’s annual disenrollment period.   
• The Joint Economic Committee warns: "As currently designed, CLASS will not be able to sustain itself without subsidies from taxpayers or from all workers in the form of mandatory enrollment."
• Medicare’s own actuary warns of deficits beginning in 2025, which will likely prompt demands for another taxpayer bailout.
• The effective date of CLASS is January 1, 2011, but the Secretary’s final plan isn't due until October 1, 2012. Nevertheless, stakeholders worry about HHS collecting revenues through CLASS before the 2012 plan.
• The Medicare Actuary's April 22 report shows $2.8 billion and $4.5 billion in CLASS revenues in 2011 and 2012, respectively.

• Employer groups say the CLASS authors threaten them with mandatory employer participation if auto-enrollment is too low.

LTC Comment: Here's the saddest fact of all about the CLASS Act. It is probably unrepealable for the most criminally irresponsible reason of all. CLASS collects roughly $70 billion dollars more than it pays out in the first 10 years. Instead of preserving that money as reserves, the federal budget spends it on other things and pretends it is money saved. Thus, to repeal CLASS would "cost" $70 billion and transform the program, which Senate Budget Committee Chairman Kent Conrad has correctly termed a Ponzi scheme, into an immediate budget buster instead of only a long-term fiscal time bomb.

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Updated, Friday, July 2, 2010, 10:15 AM (Pacific)

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THOUGHTS FOR INDEPENDENCE DAY

LTC Comment: The base of the Statue of Liberty says:

"Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore. Send these, the homeless, tempest-tost to me, I lift my lamp beside the golden door." Source: WikiAnswers

Out of that "poor" raw material, America built the most prosperous society in the history of the world.

But what does "poor" mean today; what's happening to our prosperity now; and why?

Those are questions Walter Williams, the John M. Olin Distinguished Professor of Economics at George Mason University, addressed in a June 30 article for the Jewish World Review. Read it here.

First he observes that "poor" isn't what it used to be. 43% of poor U.S. households own their homes which average 3 BR, 1.5 baths, a garage and porch. 80% have A/C. 2/3 have 2 rooms per person, more space than the average individual living in Paris, London, Vienna, Athens and other cities throughout Europe. 3/4 own a car; almost 1/3 own 2 or more autos. 97% own color TVs and over half own 2 or more. And so on . . . and on.

Next Williams points out that "What's defined as poverty is misleading in another way. Official poverty measures count just family's cash income. It ignores additional sources of support such as the earned-income tax credit, which is a cash rebate to low-income workers; it ignores Medicaid, housing allowances, food stamps and other federal and local government subsidies to the poor." In fact, according to one study "reported purchases by the poorest fifth of American households were more than twice as high as reported incomes."

So what are we to make of all this? Williams concludes:

"Yesterday's material poverty is all but gone. In all too many cases, it has been replaced by a more debilitating kind of poverty — behavioral poverty or poverty of the spirit. This kind of poverty refers to conduct and values that prevent the development of healthy families, work ethic and self-sufficiency. The absence of these values virtually guarantees pathological lifestyles that include: drug and alcohol addiction, crime, violence, incarceration, illegitimacy, single-parent households, dependency and erosion of work ethic. Poverty of the spirit is a direct result of the perverse incentives created by some of our efforts to address material poverty."

One of the oldest and most fundamental laws of economics is: "You get more of what you subsidize and less of what you tax." I think Mr. Williams is warning us that we've subsidized poverty to the point of meaninglessness while taxing prosperity to the verge of eradication. That's what has the hackles up of this country's hard-working, freedom-loving, economically struggling, and gradually diminishing middle class.

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Updated, Thursday, July 1, 2010, 10:30 AM (Pacific)

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HEALTH REFORM'S IMPACT ON LOW-INCOME OLDER ADULTS

LTC Comment: Much more affects long-term care in PPACA than CLASS.

The Patient Protection and Affordable Care Act of 2010 (PPACA, '10), aka Health Reform, aka ObamaCare, roils the field of long-term care insurance because of the CLASS Act. But in truth, folks, that isn't the half of it.

PPACA '10 expands government financing and regulation of long-term care in many other ways as well. Want to know how? Got 90 minutes to find out? Watch this webinar:

"Health Care Reform & the Aging Population: How the Patient Protection & Affordable Care Act Will Impact Low-income Older Adults," by Eric Carlson, Gene Coffey, and Georgia Burke of the National Senior Citizens Law Center, presented originally June 23, 2010. Get the full, recorded webinar here. See only the PowerPoint here.

At a minimum, be sure to scan the PowerPoint presentation. You'll find a vast array of new programs and initiatives designed to make publicly financed long-term care more desirable and easier to get than ever before.

Does that mean Medicaid and Medicare will crowd out responsible long-term care planning even more than they have already? Will fewer people buy LTC insurance or use reverse mortgages to fund LTC because of these provisions? Are long-term care providers about to lose the last of their dwindling supply of market-rate private-payers?

No. The reason is that whether you like the new expansions of government LTC in PPACA or not, there is no money to implement them. State Medicaid programs are hurting financially already. It looks like bonus federal matching funds that propped up Medicaid in the past year will not be extended into 2011. Growing public discontent with unprecedented spending and debt bodes poorly for more in the future.

Bottom line, it behooves state Medicaid programs to approach program expansions cautiously, control eligibility assiduously, enforce estate recovery aggressively, and encourage private long-term care financing alternatives like LTC insurance and reverse mortgages vigorously. That's where the future lies.

To save a long-term care safety net for those in need, job one is to prevent people who are still young, healthy and affluent enough to plan responsibly for LTC from ending up dependent on Medicaid in the future. That, in a nutshell, is the primary goal of the Center for Long-Term Care Reform.

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Updated, Wednesday, June 30, 2010, 10:48 AM (Pacific)

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LTC BULLET: SUE FINANCIAL PLANNERS FOR BAD LTCI ADVICE?

LTC Comment: Sue the bum? You decide after the ***news.***
 

*** "COVERING HEALTH ISSUES," the Alliance for Health Reform's 246-page guide to 12 key health policy topics, has been completely updated to reflect the provisions of the Patient Protection and Affordable Care Act. To download, click here or go to www.allhealth.org/sourcebooktoc.asp?SBID=3 . LTC Comment: But take this source with a grain of salt as we warned in our October 7, 2009 review--titled "LTC Sourcebook and Our Caveats"--of the original version. ***

*** HEALTH ALERT from John Goodman of the National Center for Policy Analysis (www.ncpa.org): "Economists on the left and right are expressing concern -- in some cases alarm -- over the fiscal health of the U.S. government. Currently, we are running a deficit equal to about 10% of GDP; but the government is still able to borrow at 3%. No other country in the world could do that. And we may not be able to do it much longer. We may be living in the calm before the storm. As in the case of Greece -- and possibly all of southern Europe -- international investors may decide that we have neither the will nor the ability to pay back our debtors. In that case, the government's borrowing costs will soar. How bad are things? How much of the problem is health care? Can we tax our way out of it?" Continue Reading ***

*** THE RAHN CURVE. "Government spending can promote economic growth if money is used for core 'public goods' such as rule of law and property rights. But the burden of government spending in the United States and other industrialized nations is far higher than needed to finance such activities. Citing scholarly studies, this video examines the Rahn Curve, which graphically illustrates the negative impact of excessive government spending." Check it out here. Hint: to get the most out of this video, pause it when on-screen text details appear. ***

*** JUXTAPOSE this New York Times story with the desperate financial condition of Medicaid/Medicare, the biggest funders of acute and long-term care for the elderly, and it's clear private LTC insurance has a bright future. Milt Freudenheim, "Preparing More Care of Elderly," NYT, June 28, 2010: "With a nudge from the new health care law and pressure from Medicare, hospitals, doctors and nurses are struggling to prepare for explosive growth in the numbers of high-risk elderly patients. More than 40 percent of adult patients in acute care hospital beds are 65 or older. Seventy million Americans will have turned 65 by 2030. They include the 85-and-older cohort, the nation's fastest-growing age group. Elderly people often have multiple chronic illnesses, expensive to treat, and they are apt to require costly hospital readmissions, sometimes as often as 10 times in a single year. . . ." ***

LTC BULLET: SUE FINANCIAL PLANNERS FOR BAD LTCI ADVICE?

LTC Comment: Should financial advisors be held professionally and legally accountable for giving bad advice about long-term care planning? Yes!

That's the case I made in a September 2001 article titled "Long-Term Care Due Diligence for Professional Financial Advisors" in the Journal of Financial Planning.

Harley Gordon, Founder and President of the Corporation for Long-Term Care Certification, made a similar case in a 2004 article titled "The Coming Wave: Professional Liability Lawsuits for Failure to Recommend a Plan for Long-Term Care," which we republished with permission here.

Now comes the following communication addressed to me by a party I'll leave nameless. Likewise, the identities of all concerned are withheld. Let's just examine the issues and questions this message raises without getting into the personalities. Rejoin me below for our comment.

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Email received June 18, 2010

Hi Steve,

I recently ran across your article "Long Term Care Due Diligence for Professional Financial Advisors" from the Journal of Financial Planning in September 2001. I have been facing a nightmare situation caused by just the event you described in your article.

My mother, [name withheld], met with [name withheld], CFP, of [firm name withheld] in May of 2005 and he told her to "get rid of it [LTCI policy], you don't need it." His philosophy was that the government will take care of poor people that can't afford it and rich people can pay for it. At the time of this ill advice, [my mother] was 73 years old. Prior to this meeting, I had been paying on a Long Term Care Insurance policy through State Farm for my mother for several years. We had a benefit of around $250K with a 5% increasing benefit rider. We were only paying around $130 a month.

After meeting with my mother and evaluating her assets, [unnamed financial planner] determined her net worth to be $219K. Her income was around $1,900 while her expenses were just about that. [Planner] specifically told my mother that she didn't need the Long Term Care Policy and that she needed to cancel it. My mother was not even paying the premiums, I was. We came to this Financial Planner because he was highly recommended and very successful, so we thought he must know something we didn't. Following that meeting, I cancelled my bank drafts for the premiums, and my mother wrote a letter to State Farm requesting the policy be cancelled at her Financial Planner's advice.

Fast forward 5 years: Two weeks ago my mother was diagnosed with the debilitating disease Alzheimer's. The disease came on fairly suddenly leaving our whole family reeling. Suddenly, [my mother] needs constant supervision, and we've been forced to put her in an Assisted Living Facility. We lack the financial resources we will need to continue her current level of care over the years as her disease progresses.

Based on reading your article I contacted financial planner [name withheld] and asked him "why did you tell my mother to cancel her LTC policy?" His response was that he "would never recommend that my mother cancel her LTC coverage."

In addition, he said that my mother's situation showed that she could never retire and would eventually spend all of her money. However, I believed he breached his fiduciary duty to my mother three specific times:

1) Failed to review my mother's LTC coverage before recommending coverage. We had a Golden Egg on our hands. I was only spending $132/mo for LTC coverage written by State Farm. He tried to say that he has seen many good LTC companies go out of business. He doesn't have a clue that my mother's policy was with State Farm.

2) Failed to perform a cost analysis of my mother's LTC policy. Since our 2005, meeting we would have spent $8,500 and have a policy we would use now that would pay for Alzheimer benefits of $312,500. This would represent return of investment of +3740%. My mother had assets worth $220K. Based on the financial planner's projected life expectancy of 87, I estimate she would have still had $175,000. She will have $0 in the next couple of years. A Certified Financial Planner has a duty to be knowledgeable and competent. He has demonstrated a severe degree of incompetence by failing to identify that the #1 asset my mother had was our LTC policy.

3) Breached his duty as a Certified Financial Planner when he lied and said that he never recommended this to my mother. Two days ago I found a letter that my mother sent to State Farm requesting the cancellation based on the advice of her financial planner. Our meeting with him was May 5th and the letter to SF was June 22nd. Since I work as a forensic expert I had a forensic computer diagnostic company authenticate that my mother's letter was prepared on June 22nd, 2005 and was never changed. We also have verification that State Farm received the letter on June 22nd, 2005 instructing them to cancel. They have subsequently destroyed the letter.

We are currently exploring venues to seek action against [the unnamed planner] for his gross negligence in this obviously damaging recommendation. What suggestions would you have in how to handle this case? [The planner's] advice to "get rid of the policy" will result in the financial ruin of my mother. Good sound financial planning would not have resulted in the recommendation to cancel the policy.

Steve, where is the accountability? Why didn't this guy just take a baseball bat to my Mom's head? If we have to make her a ward of the State she will go into a very low care facility that will surely not provide the level of care that she would receive with her State Farm policy. . . .

In closing, he is also trying to say that anything they say is only a "suggestion" and that they can not be held financially responsible for his advice. If a surgeon cuts off the wrong leg, is he let off the hook just because he has his client sign a statement denying all liability? Steve, has the statute run on my Mom? He gave us the advice in May of 2005, but we didn't really know about her financial ruin until she was diagnosed with Alzheimer's in June of 2010. We desperately need your help and would appreciate any recommendations on a course of action to take. I've informed him that I will seek Arbitration as her investment agreement requires. If you have any recommendations on the course of action I could take, I'd really appreciate your input.

Sincerely,

[Signature]

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LTC Comment: There you have this gentleman's unvarnished plea on behalf of his mother.

I responded thus:

"Sure sounds like you and your mother got some bum advice.  Here's what I can do. With your permission, I'll remove all names and identifying information from the letter and publish it, with my commentary, as an example of what can happen.  I'll also ask my readership of several thousand, including media, state and federal legislators, financial planners, lawyers, LTCI agents, etc., if any of them know any recourse you might pursue."

He responded by asking me to proceed, which I have done.

Query: Do this man and his mother have any legal recourse? Any of you lawyers in our readership out there want to take a crack at this? If so, just reply to this LTC Bullet and we'll pass your information on to the damaged parties.

In the meantime, beware you "planners" who fail to cover the LTC risk for your clients. Many more chickens like this one will be coming home to roost.

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Updated, Tuesday, June 29, 2010, 10:01 AM (Pacific)

Seattle--

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MORE SCARED OF LIVING TOO LONG THAN DYING TOO SOON

LTC Comment: Allianz has published new survey results and they're stunning. Check out the report here. Following are excerpts. Read them, then rejoin me below for our analysis.

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Excerpts from Allianz, "White Paper: Reclaiming the Future," June 2010, ENT-991.

At 76 million strong, the "baby boom" generation represents the largest, wealthiest, and most influential segment of the U.S. population. Compared to past generations, the baby boomers have unprecedented wealth, life experiences, perspectives, and attitudes that combine to give them a unique definition of "retirement."

Yet, this "power generation" is facing one of the most pronounced retirement income challenges in history. This challenge is threefold.

First, the once-reliable sources of retirement income are either disappearing or becoming less dependable. The defined benefit plans that provided retirement income for retirees in past generation are now rare. And Social Security—which was always intended to be a small piece of the retirement-income picture—is continuing to erode.

Second, increasing life expectancies mean that the number of years spent in retirement is steadily growing, even as the average retirement age inches higher. When Social Security was established in 1935, the average life expectancy was 61.7 years, while the average retirement age was 65. By 2010, the projected average life expectancy had risen to 78.3.

Third, increased personal responsibility for retirement saving is making retirees more vulnerable to market turbulence. When the financial markets imploded in 2008 and the first quarter of 2009, many investors’ portfolios lost 30% of their value virtually overnight. Although the market is recovering, the continued volatility has stirred some deep-seated fears for many Americas.

When combined, the three factors we’ve just discussed could spell disaster for many Americans’ retirement preparedness. As a result, we’re already seeing a seismic shift in attitudes toward retirement among the baby boomers and their children.

. . .

Discovery #1: Americans believe there is a retirement crisis in this country and fear that they are unprepared.

One of the most striking findings of The Allianz Reclaiming the Future Study was the almost universal agreement that the U.S. is facing a retirement crisis.

. . .

Discovery #2: There are five distinct financial "personalities."

Overwhelmed The "overwhelmed" personality comprised the largest segment (32%) of our respondents. . . . They might say that, "Financially speaking, I am pretty much in survival mode."

Iconic The "iconic" personality encompassed 20% of our respondents. This financial personality tends to be over 60, is already retired, and is likely receiving a pension. The iconic personality is confident that their sources of income will last throughout their lifetime. This group tends to be generally optimistic. . . . Their attitude could be summarized as, "I’ve worked hard and invested wisely for my retirement security, and I’m enjoying it."

Resilient We classified 27% of our respondents as "resilient." . . . Their outlook could be quoted as, "deep down, I realize things will never be the same in terms of financial security."

Distracted The "distracted" personality describes 7% of our respondents. . . . Their attitude could be summarized as, "I am happy to live in the moment with a full house and a full life."

Savvy The "savvy" personality describes 14% of our respondents. . . . Their motto could be summed up as, "I watch the markets and manage my investments."

Discovery #3: Americans fear outliving their money more than they fear death.

A surprising 61% of the respondents said they were more scared of outliving their assets than they were of dying. Among people aged 44-49, that number climbed to 77%. And a whopping 82% of those in their late 40s who had dependents were more afraid of outliving their money than they were of death.

. . .

We asked the respondents to consider which is likelier: getting their full due from Social Security, or getting struck by lightning. More than one-third (39%) said it’s more likely to be hit by lightning. Among middle-class respondents, this number climbed to 56%.

Discovery #4: The economic downturn was a big wake-up call.

The market downturn had a measurable adverse effect on our respondents. More than half (53%) reported that their net worth dropped significantly in a very short period. About 43% saw their home’s value drop. Almost as many (41%) realized that they were not as "in control" of their financial future as they’d thought.

. . .

Across the board, a majority of the respondents agreed that, "The safety of my money matters more to me than it did a few years ago."

Discovery #5: Annuity-like solutions are gaining relevance and appeal.

Boomers are describing an annuity-like solution as what they most want, without even knowing that this is an annuity!

An unprecedented number of Americans is getting ready to retire, and they will face unprecedented challenges. Once-reliable sources of retirement income will disappear. They’ll risk outliving their savings. And they’ll be more vulnerable to market downturns.

As the Allianz Reclaiming the Future Study has demonstrated, Americans are aware of this looming crisis—and they are scared.

Fortunately, there is hope: As the Allianz Reclaiming the Future Study has also demonstrated, Americans do have options as they face these challenges and plan for retirement. Further, the study also found that annuities may be one of the most relevant of these options: Only annuities can offer the combination of principal protection and income for life.

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LTC Comment: Sure looks to us like the public "gets it." Don't count on the social safety net. Take responsibility for yourself. Seek solutions that guarantee income for life. But be sure they're backed by real money in real reserves in real investments that you own. Don't rely on political promises backed by government IOUs. It also looks more and more like combo products linking annuities and LTC protection are a good fit for many aging Americans, especially since the Pension Protection Act.

Could it be America is finally waking up? Are we "Reclaiming the Future?" Only time will tell.

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Updated, Monday, June 28, 2010, 10:46 AM (Pacific)

Seattle--

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SO WHAT IF FEDS DON'T EXTEND MEDICAID LTC BONUS?

EXTRA: Imitation is the highest form of flattery. According to an article in today's McKnight's Daily Update: "The American Health Care Association is hitting the road on Tuesday. That's when the association is kicking off its 40-state Driving for Quality RV Tour." We wish our LTC provider friends "Bon Voyage." We hope they have as successful and enjoyable a trip as the Center for Long-Term Care Reform experienced during our 2008 National Long-Term Care Consciousness Tour!

LTC Comment: You probably saw this news somewhere in the media:

"After a bill to extend jobs and economic relief programs failed for the third time in the Senate Thursday, Majority Leader Harry Reid announced he would withdraw the bill, Politico reports. The legislation included financial relief for states, including billions to support Medicaid programs." (Kaiser Daily Health Policy Report - Friday, June 25, 2010)

Those "billions to support Medicaid programs" refer to the failed "extender bill's" provision to expand last year's federal Medicaid matching fund supplement for six months into 2011. Thirty states had already budgeted to receive that extra $24 billion. If they don't get it, their 2011 budget years, most of which begin on July 1, will start off under water.

That's devastating to already struggling state budgets, but it could be a real killer to long-term care providers who are dependent on Medicaid reimbursements. National and state nursing home trade associations lobbied heavily in favor of the FMAP bonus extension. Encountering opposition from fiscal conservatives, the Senate dropped the supplement from $24 billion to $16 billion but couldn't pass even that lower amount.

Congress may revisit the Medicaid funding supplement later, but the handwriting is on the wall. We are getting close to the end of a process that's been going on for nearly two years--priming the economic pump with all sorts of deficit spending. The message Congress sends by refusing to extend unemployment benefits beyond two years and by hanging the states, Medicaid and nursing homes out to dry, is the same message constituents, businesses and the tea party have been conveying:

ENOUGH WITH THE SPENDING, ALREADY!

We are finally about to face the rendezvous with economic destiny that has seemed so far off, beyond the horizon ever since someone first noticed there were a lot of babies born right after WWII. That's the big picture from 30,000 feet. But here's what it means from tree top level for long-term care.

State Medicaid caseloads and expenditures tend to skyrocket in recessions. More people qualify for the means-tested welfare program so costs go up just when state tax revenue goes down due to reduced economic activity. It's true for the program's acute care side and for long-term care. But care for the elderly, whether acute or long-term care, and especially care for dual eligibles (people who get Medicaid and Medicare) are the biggest cost drivers.

So during recessions, the feds tend to be more generous to state Medicaid programs. This time around, states received a huge matching fund bonus worth around $87 billion in the American Recovery and Reinvestment Act of 2009 (ARRA '09), the so-called "stimulus package." This windfall was scheduled to end on December 31, 2010, by which time everyone figured the recession would be over or ending and all would be well.

Isn't going to happen, so the states and Congress started talking about an extension of the Medicaid supplement through June 30, 2011. States figured it would be a slam/dunk. But that was before worries about hemorrhaging government expenditures and debt trumped worries about everything else. So now, if the extra money doesn't come through, states will have to bite the bullet and make even more severe cuts than they've made so far.

Adding insult to injury, here's another twist in the story. The original $87 billion bonus states received in ARRA '09 and the extra $24 billion it looks like they may not get after all were conditioned upon state Medicaid programs NOT trying to save money by making their eligibility rules stricter than they were on July 1, 2008.

In other words, the extra federal matching funds were provided in such a way as to reward state Medicaid programs for NOT taking critically needed measures to tighten their long-term care eligibility rules. Some states reversed very sensible measures they had already taken to target their scarce Medicaid resources to the most needy people. They had to reinstate the earlier, more generous rules in order to qualify for the extra federal funds.

That perverse incentive rewarding excessive spending with even more spending would have disappeared on December 31, 2010 if the federal matching fund bonus is not extended into 2011. States would no longer be incentivized by the feds to continue such expensive and counterproductive policies. They'd have had no reason not to follow our frequently repeated common sense advice:

Target Medicaid long-term care benefits to the people who need them most and use the savings to encourage early, responsible long-term care planning through savings, investments and insurance. See our "Doing LTC RIght" report for details.

Alas, here's the rest of the story: The Patient Protection and Affordable Care Act of 2010 (PPACA '10, "health reform," or "ObamaCare") continues the Medicaid "Maintenance of Effort" rules for several more years. Thus, state Medicaid programs remain hand-cuffed from implementing reforms that could reduce program expenditures and increase incentives for responsible LTC planning.

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Updated, Friday, June 25, 2010, 10:14 AM (Pacific)

Seattle--

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MORE INCOME MEANS LESS NURSING HOME, MORE HOME CARE

LTC Comment: A new study has found "a positive income shock would lead seniors to significantly increase their utilization of home care services and reduce nursing home stays."

"Income and the Utilization of Long-Term Care Services: Evidence from the Social Security Benefit Notch," by Gopi Shah Goda, Ezra Golberstein and David C. Grabowski is National Bureau of Economic Research Working Paper # 16076, June 2010. I can't point you to a free copy online but you can read the abstract gratis and buy an electronic copy of the article for $5 here.

As with any academic paper, you have to wade through a lot of "ifs, ands, and buts" to get to the essence of this one. But here's the bottom line from the abstract: "a positive permanent income shock lowers nursing home use but increases the utilization of paid home care services."

The authors speculate about reasons for this phenomenon, but they close on the most likely one: substitution of a more desirable service (home care) for a less desirable service (nursing home care) when income increases.

So what? Well, if staying out of a nursing home when you need long-term care some day is important to you (or to your clients), then it's good to know that extra income actually does, empirically, correlate with more home care and less nursing home care. So why not use insurance to leverage low premiums now into high income for LTC in the future?

Interestingly, the authors of this paper consider the possibility that Medicaid may partially explain the finding that increased income reduces nursing home utilization and increases home care. The theoretical connection is based on the conventional wisdom that higher income people are less likely to qualify for Medicaid (a means-tested welfare program) which pays mostly for nursing home. Higher income people, therefore, would be more likely to purchase home care than to end up in a nursing home on Medicaid.

The authors correctly reject this Medicaid connection. Income almost never interferes with Medicaid eligibility, because anyone with income below the cost of a nursing home (around $6,000 per month on average) qualifies based on income. This is true in "medically needy" eligibility systems (most states) but also in "income cap" states where "Miller income trusts" enable higher income people to qualify. Besides, once you're on Medicaid, most of your income has to be used to offset Medicaid's cost for your care anyway.

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Updated, Thursday, June 24, 2010, 10:15 AM (Pacific)

Seattle--

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MEDICAID PLANNING LIVES

LTC Comment: The Deficit Reduction Act of 2005 closed some of the loopholes in Medicaid eligibility policy that allow affluent people to qualify for the welfare program's long-term care benefits.

But Medicaid planning continues almost unabated everywhere in the United States and especially in New York. Following are some quotes from a June 13 article in the New York Post titled "Gilded age: How elderly New Yorkers hide their assets to qualify for Medicaid." Read it here.

We're especially interested in the practice of Medicaid planning in New York because the Center for Long-Term Care Reform will conduct a study of long-term care financing in the Empire State scheduled to begin late fall of this year. Special thanks to E.J. McMahon of the Empire Center for New York State Policy for tipping us to this article.

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Excerpts from Annie Karni, "Gilded age: How elderly New Yorkers hide their assets to qualify for Medicaid," New York Post, June 13, 2010. LINK

"Thelma, 85, has almost $1 million in assets, including the house she owns in the tony neighborhood of Roslyn Heights, and $75,000 in bonds and $50,000 in savings she hopes to leave to her two daughters. She also collects her late husband's pension and her own Social Security.

"Yet Thelma is poor enough to qualify for Medicaid.

"That's because in 2008, an estate planner advised her to go broke - at least on paper - by divesting herself of almost all of her assets. That way, if Thelma ever needs to enter a nursing home, it would be paid for by the state. . . .

"It's partly because of the tens of thousands of New Yorkers like Thelma that state taxpayers shell out $51.5 billion every year - a whopping 38% of the entire state budget - to fund the state health system. Medicaid enrollment, meanwhile, has climbed almost 13% since 2008. . . .

"'It's a relief to know I'll be covered,' said Thelma, who spoke to The Post on the condition that her last name not be used. 'I don't want my daughters to lose everything if I have to go into a nursing home. I don't want to leave them nothing.' . . .

"'Medicaid was intended for indigent people to get healthcare,' Cucinelli [of the New York Association of Homes and Services for the Aging] said. 'It was meant to serve elderly people with serious health problems, disabled people and blind people. Now you take someone with significant assets who is taking advantage of a loophole in the law. The program designed to care for indigent people is de facto long term care insurance for financially OK people. It's a serious public policy issue.' [Emphasis added] . . .

"'A nursing home can easily cost $100,000 a year,' he [a Medicaid planning attorney] said. 'A typical client of mine has a house, some IRA money and assets in bank accounts and stocks. The first thing we do is take the house and put it in an irrevocable trust. But the seniors keep the right to live there for life and the kids can't kick them out.' . . .

"For now, nobody knows how many 'fake poor people' are on Medicaid, said Cucinelli, because millionaires look exactly like paupers on paper. More than 4 million New Yorkers currently receive Medicaid-eligible services every month. . . .

"'It was a conscious decision for decades on the part of the State government to maximize Medicaid - to cover as many services as possible to draw down federal dollars,' said Courtney Burke, director of the Rockefeller Institute's New York State health policy research center. 'Lawmakers saw it as a revenue source.'"

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LTC Comment: This article focuses on only one Medicaid planning method: transferring a home into an irrevocable trust at least five years before applying for LTC assistance. There remain, however, many methods commonly used all across the country to qualify prosperous people for Medicaid without significant asset spend down.

As long as that remains true, Medicaid will strain state budgets, seniors dependent on Medicaid's low reimbursements will encounter access and quality problems, institutional bias will prevail, long-term care providers will struggle financially, home equity will not help many Americans obtain quality care, and long-term care insurance market penetration will continue low.

The sad irony is that these problems are self-inflicted by perversely counterproductive public policy that punishes responsible LTC planning and rewards gaming Medicaid after long-term care is needed. What's all about to change is that the bottom is falling out of this corrupt system that has prevailed for over four decades.

People and their advisors who wake up now and realize the risk and cost of long-term care can no longer be ignored with impunity will prosper. But affluent and middle class people who keep their heads in the sand will suffer right along with the truly poor when the Medicaid LTC safety net gives way.

When? Soon. Certainly within a decade. Likely within three to five years.

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Updated, Wednesday, June 23, 2010, 10:08 AM (Pacific)

Seattle--

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LTC Comment: Everyone knows CLASS is problematical as is and must be fixed. Check out one fixer bill under consideration after the ***news.***

*** JBQ: CLASS ONLY A "DOWN PAYMENT." Nationally syndicated financial columnist Jane Bryant Quinn advises "If you’re in your 50s or 60s and have assets to protect, don’t wait for CLASS." Read "Will You Save Money By Buying the Government’s New Long-Term Care Insurance?" here. (Thanks to the CLTC Newsletter for May 2010 for this tip.) ***

*** MORE JBQ: "To protect your finances, each of you should agree to buy long-term care insurance," she writes in a column titled "Prenups Are Hard To Write: Trust Me, I Know." Read it here. ***

*** WHY FOLLOW JBQ's ADVICE?: "Jan's Story: A Love Lost to Alzheimer's." Watch the video here. While this touching story does not mention LTC financing, rest assured Medicaid doesn't pay for the kind of assisted living facility the story's protagonist occupies and her loving husband visits. Special thanks to Center supporter Ross Perloe of Atlanta, GA for tipping us to this moving video. ***

*** NAHU CEO BLASTS CLASS in "A Ticking Debt Time Bomb" but perpetuates this myth: "Starting in 2011, workers will be automatically enrolled in this new plan if their employer decides to participate." Not so; more likely 2013, if then. Here's a better sample from Janet Trautwein's article: "The [CLASS] program is open to all Americans, so it's likely that only those who foresee needing the benefits will enroll. So, if CLASS's subscribers are largely made up of high-cost individuals, then premiums for future beneficiaries will have to be even higher to compensate. That will cause healthier enrollees to drop their coverage, driving premiums up further. This cycle will repeat until premiums are unaffordable for everyone -- or until the government opts to lose money on each beneficiary." This is a no-brainer for anyone with common sense, much less knowledge of insurance principles, but somehow it evades CLASS activists. ***

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LTC BULLET: DRAFT LEGISLATION TO FIX CLASS

LTC Comment: Sober minds assess the CLASS Act and find unrealistic its lack of underwriting; undefined premiums, benefits and triggers; and its unfulfillable promise of unlimited claims payments. The program is obviously unimplementable as signed into law March 23, 2010. So something has to be done. But what?

We've reviewed a "discussion draft" of legislation under consideration by Congressman Charles Boustany (R, LA). Read it here. Congressman Boustany's office requests your suggestions to improve the bill. If you have comments, email them to mike.thompson@mail.house.gov with the subject line: "Comments on CLASS Act Draft."

Following are some features of and quotes from the proposed bill:

Its purpose is:

"To amend title XXXII of the Public Health Service Act to require review and approval by law prior to collection of premiums or payment of benefits under the CLASS program, to replace the opt-out procedure for employer enrollment of employees with an opt-in procedure, to require termination of the program in the event of actuarial unsoundness, and for other purposes."

Requires establishment of a "CLASS Committee of Actuaries" to evaluate the program.

Allows no payroll deductions until Congress approves the CLASS Independence Benefit Plan with a Joint Resolution.

The report from the Committee of Actuaries must be received at least 60 days before a vote on such a joint resolution.

No employer can withdraw payroll deductions for CLASS nor can anyone enroll independently in CLASS until they receive these cautionary statements:

(A) The Chief Actuary of the Centers for Medicare & Medicaid Services has made the following assessment regarding the CLASS program: ‘In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better than-average health. . . . [T]here is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.’

(B) The Chief Actuary estimates that the CLASS program will likely begin to run deficits in 2025 and continue to run deficits thereafter.

(C) The Chief Actuary further estimates that ‘an initial average premium level of about $240 per month would be required to adequately fund CLASS program costs.’

(D) The Federal Government will collect more than $70 billion in CLASS program premiums during the first 10 years of the program, according to the Congressional Budget Office. Although these premiums are credited as IOUs or United States Government securities in a ‘CLASS Independence Fund,’ the money, itself, must be used to pay for other Government expenses, including other programs under the health care law enacted in March 2010 that are unrelated to the CLASS program. There is no separate pool of money set aside for CLASS program purposes, and workers and retirees could be required to repay these IOUs in the form of higher taxes.

(E) Under section 3213 of the Public Health Service Act, the CLASS program will terminate immediately if an annual report of the Board of Trustees of the Class Independence Fund indicates that the CLASS program will not be actuarially sound over the 75-year period beginning with the fiscal year in which the report is submitted.

LTC Comment: These provisions in the fixer bill under consideration in Congressman Boustany's office are intended to reduce the risk of unwitting employees being enrolled in the program without their knowledge by requiring that they consciously "opt in" and by warning them, before they enroll, of the CLASS program's serious deficiencies and risks.

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Updated, Tuesday, June 22, 2010, 10:00 AM (Pacific)

Seattle--

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RIGHT PROBLEM, WRONG SOLUTION

LTC Comment: A recent report by Deloitte titled "Medicaid Long-term Care: The ticking time bomb" gets the problem right, but the solution wrong.

(Special thanks to two strong Center supporters for tipping us to this new study: Washington State Regional Representative Steve Forman of LTC Associates (www.ltc-associates.com) and National LTC Network (www.nltcn.com) President and CEO Terry Truesdell.)

Following are some quotes from the Deloitte report. It nails the financial problem of Medicaid long-term care perfectly. But the author buys into the conventional wisdom that "rebalancing" Medicaid LTC from nursing home care to home and community-based care will save money. It won't for reasons we explained and documented thoroughly in the Center's latest study: "Doing LTC RIght."

Another flaw in "Ticking Time Bomb" is that it fails to address Medicaid's loose eligibility rules, easy Medicaid planning, and lack of estate recovery enforcement. Those are the real factors driving the program's excessive costs and crowding out other potential forms of LTC financing such as private insurance and home equity conversion.

As long as people can ignore the risk of LTC, avoid the premiums for private insurance, wait to see if they ever need expensive long-term care and, if they do, shift the costs to Medicaid and the taxpayers while diverting their estates to heirs . . . Medicaid LTC costs will continue to explode. The soft, feel-good recommendations of the Deloitte report to the contrary notwithstanding.

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Quotes from Paul H. Keckley, "Medicaid Long-term Care: The ticking time bomb," Deloitte Center for Health Solutions, Washington, DC, 2010.

"Across all scenarios, the results are the same: The portion of states' operating budget for Medicaid expenditures is increasing. In addition, the portion of the budget allocated to support LTC is increasing, and expenditures on nursing facilities are not the only driver." (p. 9)

"Research indicates that nursing facility expenditures are not driving this cost escalation, so a push to manage LTC costs by eliminating less-costly home/community care programs could boomerang, with the result that beneficiaries end up requiring more costly institutional care." (p. 2)

"Despite pressures on states to reduce HCBS, the downstream consequences of doing so could be increased costs in institutional LTC, as beneficiaries could become more costly institutional patients. Instead, states should consider implementing aggressive/transformative actions to improve Medicaid LTC programs or continue to face the prospect of budget deficiencies.

"Among actions needed to impact this escalating cost trend are enterprise cost restructuring and fundamental program redesign to improve the efficiency and effectiveness of LTC management. Important first steps are to understand the primary drivers of LTC and to analyze states' non-public data to identify what is occurring in LTC populations and to develop state-specific mitigating action plans." (p. 9)

LTC Comment: That last paragraph is pure gobbledygook. What in heaven's name does "enterprise cost restructuring and fundamental program redesign to improve the efficiency and effectiveness of LTC management" contribute to anyone's understanding of the problem or the solution?

Still, kudos to Deloitte and author Keckley for pointing out the financial inviability of Medicaid long-term care and the desperate need for analysis and corrective action. Now if we can just get them to read "Doing LTC RIght" and the other reports at www.centerltc.com, maybe we can make some progress toward actually solving the problem.

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Updated, Monday, June 21, 2010, 10:16 AM (Pacific)

Seattle--

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PERNA TO EDEN

HAPPY FIRST DAY OF SUMMER

LTC Comment: Former MedAmerica president Chris Perna joins Eden Alternative as CEO. As he moves out of the LTC-financing frying pan into the service delivery fire, we wish Chris the best.

Here's the announcement:

DENVER-The Eden Alternative, an international not-for-profit organization dedicated to long-term care culture change, has appointed Christopher D. Perna as its CEO. The CEO position was recently created by the board of directors to help the Eden Alternative organization's growth.

"Chris brings his passion for serving elders along with his outstanding leadership and business skills to this new role," said Eden Alternative founder Bill Thomas. "We are excited to have him join the Eden team as we prepare for our fifth International Conference and the launch of The Path to Mastery later this month."

"I met Bill Thomas several years ago and have watched the Eden Alternative grow as a driving force in the long-term care culture change movement," Perna added. "It is an honor to be selected to lead an organization doing such important work and touching so many lives."

Perna spent 25 years in the insurance industry, most recently in long-term care insurance as president of MedAmerica Insurance Company. His tenure at MedAmerica was marked by the introduction of a new line of long-term care insurance products.

Perna has also distinguished himself through his service to elders in the community of Rochester, New York, as a multi-year board member for Lifespan and Family Service of Rochester-two organizations serving the needs of elders. He currently serves as board chair for both organizations.

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Updated: Friday, June 18, 2010, 9:52 AM (Pacific)

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LTCI KNOW NOTHINGS

LTC Comment: Here's the title of a recent online article:

"Most people know nothing about long-term care insurance"

Sound familiar?

Now read the article and note that this is a story from the UK!

"New research from advisors partnership suggests that most people over 50 do not know that there are insurance products for funding long-term care. Half say they would sell their home to finance care for themselves.

"Two thirds believe that long-term residential care costs less than £30,000 a year, while a third believe it will cost less than £20,000 and 12% estimate £10,000 a year. Typical fees are around £50,000 [roughly $75,000] for a good quality care home. This could leave many people running out of money and needing to fall back on the state.

"Most people were accurate in their estimation of how long they are likely to live, into their 80s. Also they were about right that 40% will go into care for around five years.

"At present it is two years on average, four years for self-funders, with one in ten living for eight years in care; but in thirty years time those periods could be a lot longer."

Long term care insurance: News update: 9 June 2010

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LTC Comment: They say "Misery loves company." But it's not all that edifying to know England's socialized health care system does no better job on LTC than ours in the USA and their public is as oblivious as ours to the need for private insurance. Many Brits have a hard lesson coming in that regard.

Anesthetized to medical expenses by their publicly financed single-party health care system, few denizens of the sceptered isle realize how stingy their government LTC benefits really are. The amount of home equity protected from LTC costs there is only about $40,000 as compared to $500,000 or $750,000 under Medicaid in the States.

When boomers here and "over there" come face to face with the new reality that government financing of LTC--as bad as it's been--will soon decline radically or largely disappear, there won't be nearly so many LTCI "Know Nothings" anymore.

That day of reckoning is not so far off: "More than half the babies born since 2000 in France, Germany, Italy, Britain, Canada, Japan, and the United States will live past 100, according to a recent study in The Lancet, the British medical journal . . .." LINK

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Updated: Thursday, June 17, 2010, 10:22 AM (Pacific)

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CLASS COMMISSION

LTC Comment: In an email from the Administration on Aging, we received the following announcement yesterday.

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Today in the Federal Register, The U.S. Department of Health and Human Services announced it is establishing and seeking nominations for a new Personal Care Attendants Workforce Advisory Panel, under the Community Living Assistance Services and Support (CLASS) Act. [Emphasis added]

The Advisory Panel will be comprised of 15 members appointed by the Secretary of HHS from among members of the general public who are individuals who have distinguished themselves in the fields of long-term services and supports; aging and disability populations and services; practices that help reduce high personal care attendant workforce vacancy and turnover rates; Medicaid; Medicare, the Older Americans Act and the Workforce Investment Systems; community residential services; and policy analysis and development related to the financing, access, provision and quality of health care services.

Each member of the Advisory Panel shall be appointed for a term of 2 years.

Nominations shall be submitted by no later than June 18, 2010 to:

Margaret Reiser,
U.S. Department of Health and Human Services,
200 Independence Avenue, S.W. Room 415F,
Washington D.C., 20201,

Phone (202) 690-7858,
Fax (202) 690-7383.

For more information about the Personal Care Attendants Workforce Advisory Panel, please see the Federal Register link below:

http://edocket.access.gpo.gov/2010/pdf/2010-14447.pdf

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LTC Comment: Know anyone who fits the bill as having "distinguished themselves in the fields of long-term services and supports; aging and disability populations and services; practices that help reduce high personal care attendant workforce vacancy and turnover rates; Medicaid; Medicare, the Older Americans Act and the Workforce Investment Systems; community residential services; and policy analysis and development related to the financing, access, provision and quality of health care services." [Emphasis added]

Wouldn't it be wonderful to have someone on this new CLASS-mandated commission who understands and represents the private sector's contribution to long-term care service delivery and financing? If you can think of someone like that, by all means nominate him, her or them.

But don't waste any time! The announcement asking for nominations was published June 16, yesterday, in the Federal Register and the deadline to submit nominations is June 18, tomorrow. Hmmm. You don't suppose some friends of CLASS might have gotten an earlier heads up about this, do you? Another example, I guess, of the new focus on public notice and "transparency."

LTC Comment: Another message from the Administration on Aging apprised us a few days ago of this forthcoming webinar that may be of interest. I've registered for it and, time permitting, I'll monitor the program and report to you if it's worthwhile.

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The National Legal Resource Center presents a webinar on Health Care Reform & the Aging Population

With the enactment of the Patient Protection and Affordable Care Act (PPACA), health care reform finally became a reality. This historic legislation will impact virtually every facet of the nation's healthcare system, including the programs and services on which low-income older individuals rely.

This webinar will present an overview of how the PPACA will affect older individuals, with a focus on the Medicaid long-term services and supports provisions, the provisions relating to long-term care facilities, and the changes that will have a particular impact on dual eligibles, such as certain changes to Medicare Part D and Medicare Advantage.

The presenters will be Eric Carlson, Gene Coffey, and Georgia Burke, all of whom are attorneys with the National Senior Citizens Law Center.

Sponsorship for this Webinar is provided by the National Consumer Law Center and the National Senior Citizens Law Center. This webinar is in a series of National Elder Rights Training Project webinars for the National Legal Resource Center. The Administration on Aging supports the resource center through grant funding.

Title: Health Care Reform & the Aging Population: How the Patient Protection & Affordable Care Act will impact low-income older adults

Date: Wednesday, June 23, 2010

Time: 2:00 PM - 3:30 PM EDT

Space is limited.
Reserve your Webinar seat now at:
https://www1.gotomeeting.com/register/188759809

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Updated: Wednesday, June 16, 2010, 10:22 AM (Pacific)

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LTC BULLET: CENTER BEGINS STUDY IN PENNSYLVANIA

LTC Comment: The Center for Long-Term Care Reform and Pennsylvania's Commonwealth Foundation have begun a study of long-term care financing in the "Keystone State." Details after the ***news.***

*** STATE X thank you. Last year a group of Center supporters dug a little deeper to help us fund a project that culminated in our Rhode Island study and report titled "Doing LTC RIght." I believe the success of that project helped make our new study in Pennsylvania possible. So one more time, thank you to all members of the Center for your support but especially today, extra thanks to you "State X" donors:

Keystone ($5,000): Thomas Campbell Jackson

Foundation ($1,000 to $500): Rick Leonard and Joe Lautiero (Long Term Care Resources); Sue Howarth; Tom McAuliffe; Mark Randall (GoldenCareUSA); Phillip Sullivan; Stephen Forman (Long Term Care Associates, Inc.); Tony Stratidis

Building ($300 to $50): Bob Callanan; Claude Thau; Bill Dorfii; Eve Anderson; Alan Jonas; B.J. Randolph; Teresa Eagan; Sally Leimbach; Honey Leveen; Kyle Hitt; Annemiek Storm; Heady Nezhadpour. ***

*** AGE WAVE CRESTING. We have longevity, but lack (1) health care to sustain us, (2) finances to support us, or (3) a mission to fulfill us. Leaders in the field of aging must take on those challenges. That was the message and appeal of Age Wave prophet Ken Dychtwald's impassioned speech at the March, 2010 joint convention of the American Society on Aging and the National Council on Aging. Watch, listen and heed Dychtwald's 16-minute clarion call in two YouTube clips. (Two because YouTube has a 10-minute limit for video clips.)

Part 1: http://www.youtube.com/watch?v=oX-zU9svReI
Part 2: http://www.youtube.com/watch?v=nskLQBow7JI
Ken welcomes your thoughts and comments. He can be reached directly at kdychtwald@agewave.com. ***

*** 50 WAYS TO LEAVE YOUR . . . SENSES or 50 more reasons to own private LTC insurance.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.
#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.
#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

For the other 47: http://www.blacklistednews.com/news-9060-100-13-13--.html. ***

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LTC BULLET: CENTER BEGINS STUDY IN PENNSYLVANIA

LTC Comment: The Commonwealth Foundation (www.commonwealthfoundation.org) "is an independent, non-profit research and educational institute that develops and advances public policies based on the nation's founding principles of limited government, economic freedom, and personal responsibility."

The Harrisburg, Pennsylvania think tank has retained the Center for Long-Term Care Reform to conduct a study of long-term care financing in the state. A description of the project follows below. Preliminary research and identification of sources began last week.

I'll visit Harrisburg during the week of July 12 to 16, 2010 to conduct interviews and other field work. We have begun to schedule meetings with key interest groups and public officials. Our goal is to have a final report in draft by the end of July.

I've apprised the Center's Pennsylvania mailing list of the project. But if you know people in the state who might like to be involved as interviewees or respondents, please have them contact the Center at info@centerltc.com. We have already scheduled a briefing and interview with Pennsylvania representatives of the long-term care insurance and reverse mortgage industries for Thursday, July 15 at 10:00 am EDT.

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How to Reduce Medicaid Expenditures and Improve Long-Term Care
a proposal by the
Center for Long-Term Care Reform
submitted to the Commonwealth Foundation
on March 22, 2010

I. The National Problem

Medicaid is a means-tested public assistance program, i.e. welfare. Yet Medicaid is the principal funding source for long-term care (LTC) throughout the United States, not only for the poor, but for most Americans. Although LTC users are only seven percent of the Medicaid population, they account for more than half of the program's costs nationally. The only way Medicaid can survive as a long-term care safety net for the poor is if more prosperous people plan responsibly and pay privately for their own long-term care. But Medicaid crowds out most private LTC financing alternatives such as home equity conversion and insurance. The trend toward greater and greater dependency on welfare-financed nursing home care is reversible. It will be reversed by responsible public policy or by default as costs skyrocket and public resources dwindle with the aging of the baby boom.

II. The State Problem

Pennsylvania spent $15,856,000,000 on Medicaid in 2007 of which $4,322,000,000 or 27.3% were LTC expenditures for older people and adults with physical disabilities, an increase of only 6% since 2002. But Pennsylvania's age 85 plus population, the cohort most likely to require LTC, was 302,000 or 2.4% in 2007, and is expected to be 415,000 and 3.3% in 2030, a 37% increase. Medicaid is the primary payer for 63% of the state's nursing home residents. Another 12% rely primarily on Medicare. Medicaid and Medicare also pay for most home health care, 75% nationally. Our best estimate is that only 6% to 9% of Pennsylvania's 50+ citizens own LTC insurance. Very few use home equity to fund LTC. Thus, financing Medicaid LTC is a large and growing strain on Pennsylvania's budget. Private LTC financing is minimal and shows few signs of increasing. Demographic and fiscal pressures will exacerbate these problems. Yet federal law and regulations inhibit some effective corrective actions Pennsylvania might take--such as tightening loose eligibility rules--and encourage other initiatives--such as "rebalancing" from institutional to home care--which may increase utilization and costs.

III. Substantive Proposal

Pennsylvania can reduce its annual Medicaid budget by an amount equal to 10% of current nursing home expenditures for aged and disabled recipients or $386,800,000 per year within five years. We propose to conduct a study of LTC financing in Pennsylvania that shows why such savings are possible and how to achieve them while improving access to quality LTC for everyone in the state. Toward that end, we will . . .

• Research and document federal and state Medicaid LTC eligibility laws and regulations that encourage public assistance dependency for LTC.
• Interview state staff who make, interpret, and implement LTC eligibility policy to identify eligibility "loopholes" that circumvent spend-down rules.
• Measure the level of Medicaid estate planning, i.e. artificial impoverishment to qualify for Medicaid LTC, in Pennsylvania with a literature search and interviews.
• Analyze how much revenue Pennsylvania receives from federally mandated estate or lien recoveries and how much more could be recovered using best practices.
• Examine the reverse mortgage market and interview lenders and loan representatives to identify ways home equity could offset Medicaid LTC costs.
• Examine the LTC insurance (LTCI) market and interview carriers, brokers, agents and regulators to identify ways LTCI could offset Medicaid LTC costs.
• Meet key state legislators and executive branch officials to discuss why Medicaid LTC expenditures are so high and how they could be reduced progressively.
• Meet LTC providers (nursing home, assisted living and home health) to get their perspective and gauge their support for measures to increase private LTC revenue.
• Meet senior advocates to get their perspective and gauge their support for measures to increase overall public and private LTC resources.

We propose to work with a representative of the Commonwealth Foundation and/or the State Medicaid program to identify interviewees and schedule appointments. We will visit Pennsylvania for one week to conduct the onsite research and interviews. We will conduct other necessary research online.

IV. Business Proposal

Deliverables, within six weeks of project approval, will include (1) a comprehensive report (approx. 25 pages) that explains the problem of LTC financing and recommends solutions to achieve savings of at least 10% of Pennsylvania's Medicaid nursing home budget per annum; (2) one or more newspaper op-eds, and (3) an article suitable for publication in the Commonwealth Foundation's journal.

Stephen Moses (professional bio attached) will conduct all of the research and interviews for this project. He has conducted many similar studies over the years. Examples of his project reports are at http://www.centerltc.com/reports.htm.

Respectfully submitted March 22, 2010 by

Stephen A. Moses

President

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Updated: Tuesday, June 15, 2010, 10:27 AM (Pacific)

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LATEST CLASS ACT COVERAGE

UPDATE: Latest CLASS Act information follows.

LTC Comment: Center for Long-Term Care Reform members get the best information on the CLASS Act fastest. It's always right here in our "CLASS Act Update" in The Zone.

Need access to The Zone? Forgot your user name and password? Contact Damon at 206-283-7036 or damon@centerltc.com to join or get a reminder.

Take a virtual tour of the vast content on our public website www.centerltc.com and in The Zone here. Know people who could benefit from Center membership and Zone access? Then please forward this E-Alert to them and suggest they join.

Here's the latest content we've added to our "CLASS Act Update":

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"Health Reform's Long-Term Care Option," SmartMoney, June 11, 2010: Here's a quote from the article: "One huge advantage of the CLASS provision is that it is 'guaranteed issue' – you can enroll no matter what your pre-existing conditions are, which is not the case with all long-term-care insurance."

LTC Comment: I cringe at claims that characteristics of CLASS that guarantee its actuarial unsoundness are "advantages." Guaranteed issue, no underwriting, $5/month premiums for students and the poor, unlimited benefits. Why not chocolate bars growing on cherry trees?

Quote from the article: "With a regular, standalone policy, once the policy holder starts claiming benefits, they no longer pay a premium. But under CLASS, you continue to pay the premium as long as you’re receiving benefits – there’s no end to the payment, says Anthony Stratidis, a long-term-care insurance consultant for Marsh, an insurance broker."

LTC Comment: Special thanks to Center supporter Tony Stratidis, quoted above, for tipping us to this article and clarifying the question about waiver of premium. There is indeed nothing in the statute about premiums ending when CLASS benefits begin.

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Learn more about the CLASS Act with a new Brainshark training presentation: Click here to view a John Hancock producer training presentation that addresses questions and provides information regarding the CLASS Act and its impact on LTCI. Source: John Hancock Long-Term Care Insurance Newslink, June 4, 2010.

LTC Comment: Good, basic webinar on the CLASS Act sponsored by John Hancock.

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Biff Jones and Joe Barnett "The New Long-Term Care Entitlement," National Center for Policy Analysis, Brief Analysis No. 707, June 3, 2010, http://www.ncpa.org/pdfs/ba707.pdf.

LTC Comment: This two page report criticizes CLASS correctly. For example:

"If this were a private insurance program, the insurer would invest the premiums in stocks and bonds, and the return on those investments would pay for a substantial percentage of the eventual payouts. By contrast, the surplus CLASS funds will be spent on general government operations and replaced with IOUs from the Treasury."

But it contains some incorrect information: "The Congressional Budget Office (CBO) estimates that average monthly premiums will start at $123 in 2011." Actually, no premiums will be collected until 2012 at least, more likely 2013.

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10-minute podcast: "A close look at the CLASS Act." A leader in the LTC market, Univita Health's Peter Goldstein shares his thoughts on how the CLASS Act will impact the future of long-term care. One tip: LTC brokers, don't quit your day job.

LTC Comment: A thoughtful analysis of the likely impact of the CLASS Act on consumers, LTC providers, and LTC insurers by an important supporter of the Center for Long-Term Care Reform.

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Updated: Monday, June 14, 2010, 11:11 AM (Pacific)

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AGE WAVE WITH A PASSION

LTC Comment: We have longevity, but lack (1) health care to sustain us, (2) finances to support us, or (3) a mission to fulfill us. Leaders in the field of aging must take on those challenges.

That was the message and appeal of Age Wave prophet Ken Dychtwald's impassioned speech at the March, 2010 joint convention of the American Society on Aging and the National Council on Aging.

According to Age Wave's (www.agewave.com) press release: "Ken Dychtwald, Ph.D. (gerontologist, psychologist, documentary filmmaker and author) rages against America's unpreparedness for the aging of our society, challenges our misaligned healthcare system, sounds a wake-up call to our financially irresponsible population, questions the new purpose of aging and lambastes our leaders for their shortsightedness in public policies pertaining to the age wave."

Watch, listen and heed Dychtwald's 16-minute clarion call in two YouTube clips. (Two because YouTube has a 10-minute limit for video clips.)

Part 1: http://www.youtube.com/watch?v=oX-zU9svReI

Part 2: http://www.youtube.com/watch?v=nskLQBow7JI

Ken welcomes your thoughts and comments. He can be reached directly at kdychtwald@agewave.com.

LTC Comment: Dr. Dychtwald does not mention any specific financial products in this presentation, but one thing is very clear even if unsaid. Private long-term care insurance is a key to mitigating the challenges of longevity that he poses in this remarkable "rant." I do think it's worth your time to watch and hear.

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Updated: Friday, June 11, 2010, 10:45 AM (Pacific)

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REVERSE MORTGAGES ON THE CHOPPING BLOCK

LTC Comment: In a rational world, and in the absence of perverse government incentives to the contrary, people who need long-term care but failed to save, invest or insure to pay for it, would utilize their home equity by means of a reverse mortgage.

That's the solution to LTC financing recommended in a 2005 report authored by Dr. Barbara Stucki for the National Council on the Aging titled "Use Your Home to Stay at Home."

Instead, federal Medicaid rules exempt up to $750,000 of home equity and allow people with substantial incomes and other exempt assets to consume the welfare program's dwindling LTC resources.

Now there's a new obstacle to the use of reverse mortgages to fund long-term care. Atare Agbamu writes about recent government policy to reduce the amount of money seniors can pull from their home equity with a reverse mortgage in a blog post here.

For background, he explains:

Since 1989, the HECM [HUD's Home Equity Conversion Mortgage] program, the backbone of the nation's more than $60 billion reverse mortgage industry, has helped more than half a million older Americans maintain their financial freedom and dignity in old age. It has poured more than $60 billion of private money into our economy and saved taxpayers billions more in entitlements, rendered unnecessary because grandma could pay her own way through cash from her home.

It has allowed millions of adult children to devote their dwindling incomes to support their own families instead of squeezing their budgets to help their older parents. HECM has created a new mortgage industry and thousands of jobs and hundreds of small businesses across America. Among the world's reverse mortgage programs, it is considered the "Gold Standard."

Unfortunately, Agbamu writes, Congress refused last year to shore up the FHA reverse mortgage insurance fund resulting in a 10 percent reduction in the funds seniors can pull from their home equity through a reverse mortgage. This year, he warns: "HUD has said it may be forced to cut the cash advance again as well as raise monthly premiums by 150 percent, a move that some  analysts say could shrink the 20-year-old reverse mortgage industry by more than 40 percent."

"So what," you ask?

In proclaiming the annual Older Americans Month last month, President Obama made the following pledge:

"My Administration is committed to ensuring older Americans can age strong and live long. By strengthening Medicare and Medicaid, while protecting Social Security, we help ensure all Americans can age with dignity."

Well, Mr. President, let me share with you the warning of Stephen Moses, one of our nation's leading authorities on long-term care reform:

"...when the bottom falls out of the federal entitlement programs, people will have nowhere else to turn but to their home equity. Reverse mortgages will be the next LTC 'safety net' for middle class and affluent families when they lose their access to Medicaid ...."

My dire prediction quoted above is closer than ever to coming true. Sadly the last line of defense for families uninsured for long-term care, i.e. easy access to their home equity, is weakening too.

Take away for today? Don't count on government--Medicaid nor CLASS--nor your home equity to finance long-term care. Share the risk and cost with others through private long-term care insurance before it's too late.

[Author and columnist Atare Agbamu wrote the 2008 book Think Reverse! The Complete Guide to Marketing and Originating Reverse Mortgages for Mortgage Professionals and Financial Advisors, which we reviewed in "LTC Bullet: Think Reverse, Book Review," Wednesday, December 3, 2008.]

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Updated: Thursday, June 10, 2010, 10:10 AM (Pacific)

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DOES CLASS GIVE SENIORS A LTC SAVINGS ACCOUNT?

LTC Comment: "Obama, Sebelius tout CLASS Act for creating long-term care options at seniors summit (LINK)." That's how McKnight's Daily Update reported the answer to an elderly woman's query at a presidential town meeting Tuesday (June 8). Seems like every news outlet picked it up and repeated the story.

What really happened? Find out here. At this link to the White House blog, you can either watch and hear the town hall meeting or read the transcript. Search for "CLASS" and here's what you'll find.

An elderly participant asks: "I am concerned about how any health care changes will impact seniors and choice around alternatives to having to go live in a nursing home. My friends and I want to live independently."

After the President responds generally, he hands the question over to DHHS Secretary Sebelius who says:

"[T]here is a provision called the CLASS Act, which is going to allow workers in the current workforce to begin to voluntarily decide to have a payroll check-off and put aside some money that they can draw on later to provide the kind of residential care that I think is being talked about.  So if somebody needs to come to the house and help with lunch, or give a bath, or go to the grocery store, those kinds of features.  So you’d have your own savings account to be able to draw on that.  And that will be managed as part of the law and I think allow a lot of people to have more choices." [Emphasis added]

LTC Comment: This answer was both misleading and false. As an answer to the elderly woman who asked the question, it was misleading. CLASS requires active employment and five years of premium payments. The questioner and her friends on behalf of whom she asked will get nothing from CLASS.

The answer was false in that it stated the CLASS Act creates a "savings account" on which individuals can draw someday to pay for home and community-based services. It does not.

All premiums paid to CLASS will be immediately borrowed by the federal government, spent on other priorities, and replaced by bonds, i.e. IOUs. Who's to say the government will be able to repay those debts to CLASS when the $107 trillion of unfunded Social Security and Medicare liabilities come due around the same time?

By making baseless promises and misleading claims about the CLASS Act, top government officials are further anesthetizing the public to the real risk and cost of long-term care. Don't let them get away with it.

Know the facts, document them irrefutably, and use every opportunity you have to share them. Tell the truth about CLASS in published articles if you're a writer, in public meetings if you're a speaker, in presentations if you're an insurance producer, and in conversations with family members if you love them.

Access the most current and comprehensive information about the CLASS Act in our "CLASS Act Update" in The Zone here. You'll need your Center-member user name and password to access this resource. For a reminder or to join the Center to get access to The Zone, contact Damon at 206-283-7036 or damon@centerltc.com.

Special thanks to Center supporter and LTCI producer Bruce Landis, VP of Providence Advisors Group in Knoxville, TN for his insights on this story.

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Updated: Wednesday, June 9, 2010, 10:09 AM (Pacific)

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LTC DISCONNECTS

LTC Comment: They say "you can't have your cake and eat it too." But it sure seems like a lot of people all over the world want to retain generous government benefits without paying for them. Same thing, really. Defies economic gravity. And that usually leads to a hard fall. Coming to a federal, state, local government near you soon.

Here are a few stories that lead me to believe the public-financing Leviathan that has crowded out responsible LTC planning for decades is coming apart at the seams.

States' red ink augurs cuts, higher taxes Significant recovery unlikely until '12 or '13 (LINK), report says. By Joseph Weber, Washington Times. June 3, 2010, 7:48 PM The National Governors Association and the National Association of State Budget Officers released a 48-page report that states in part, "Although the nation's economy shows signs of improvement, state conditions continue to deteriorate. Unfortunately, states will have to make additional spending cuts or increase taxes to close their budget gaps." According to the report, states have faced a total budget gap of $296.6 billion since 2009, and face an additional $127 billion gap in the next two years. "There are budget problems in 46 states," said Scott D. Pattison, NASBO executive director. "It's across the board, unlike previous times when you could just point to the Midwest, where states rely on the auto industry." Source: AHCA/NCAL Gazette - Friday, June 4, 2010

Findings of Biannual Fiscal Survey Show States Lag Behind National Economic Recovery: NGA, NASBO Say States Face Difficult Challenges for Financial Management (LINK)

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Caregivers are bracing for Baby Boom tsunami. By Linda Valdez, Arizona Republic. June 6, 2010. The Paraprofessional Healthcare Institute (PHI) estimates that 1.1 million new direct-care workers will be needed in the U.S. in the next ten years to care for aging Baby Boomers. Unfortunately, the pool of prospective workers will be growing by only 2 percent, while the number of those requiring care services will explode by 35 percent. Steve Edelstein, national-policy director for PHI says, "Unless we pay attention to building the direct-care workforce we will need, we may well find that when the full impact of the Baby Boom hits, the pendulum may swing back toward nursing-home care." Source: AHCA / NCAL Gazette - Monday, June 7, 2010

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I WANT IT ALL, EVEN BETTER IF YOU PAY FOR IT

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More benefits with less money?:

Medicaid Long-Term Services and Supports: Key Changes in the Health Reform Law (LINK) The Foundation's Kaiser Commission on Medicaid and the Uninsured has issued a paper that examines new opportunities under the health reform law for states to balance their Medicaid long-term care delivery systems by expanding access to Medicaid home and community-based services (HCBS) programs. The brief outlines key provisions of the new law that expand HCBS benefit options, broaden financial and functional eligibility criteria, and provide additional financial incentives for states to further shift their Medicaid long-term services budgets to non-institutional settings. Source: Kaiser Weekly Update, 6/4/10

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But evidently the U.S. government has plenty of money after all:

HHS Announces Availability of $60 Million in Affordable Care Act Grants to Help People Navigate their Health and Long-term Care Options

HHS Secretary Kathleen Sebelius today announced the availability of $60 million in Affordable Care Act grants to states and communities to help individuals and their caregivers better understand and navigate their health and long-term care options. Through this opportunity made possible by the Affordable Care Act HHS' Administration on Aging (AoA) and the Centers for Medicare & Medicaid Services (CMS) will work collaboratively to award funds for an integrated approach that focuses on the unique needs of seniors, disabled Americans and their caregivers as they seek health care and long-term care.

The purpose of this new grant program authorized by the Affordable Care Act is to create streamlined, coordinated statewide systems of information, counseling, and access that will help people find consumer-friendly answers they seek to meet their health and long-term care needs. AoA and CMS will administer the funding through separate announcements, but will coordinate implementation and monitoring through a single process.

[So, will some of this money go to encouraging people to plan responsibly to pay privately for LTC some day? Nope:]

Some specific areas of focus will include assisting individuals who are under-served and hard to reach with information about their Medicare and Medicaid benefits, helping older adults and individuals with disabilities live at home or in settings of their choosing with the right supports, assisting people transition from hospital or nursing home stays back into the community, and strengthening linkages between the medical and social service systems. [Emphasis added]

Funds will be available to states, area agencies on aging (AAAs), State Health Insurance Assistance Programs (SHIPs) and Aging and Disability Resource Centers (ADRCs). The deadline for applications is: Friday, July 30, 2010. Grants will be awarded in September 2010. For more information about this grant opportunity, please visit http://www.aoa.gov/AoARoot/Grants/Funding/index.aspx or www.grants.gov

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But then, why this?: States Face Budget Scramble As Chances For Federal Medicaid Assistance Extension Get Slim (LINK). Source: Kaiser Daily Health Policy Report - Thursday, June 3, 2010

Update as of yesterday: "On Tuesday, Senate Democrats restored $24.2 billion in Medicaid funding for states, an item that was dropped at the last minute in order to get the bill through the House at the end of May (LINK)."

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Our Unsustainable Debt: America is on the verge of financial disaster (LINK)

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Government: The Next Bubble to Burst

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LTC Comment: If you can't wake people up to the importance of responsible long-term care planning with this kind of evidence, you aren't really trying. Don't use scare tactics, but remember: you owe it to clients just as I owe it to readers--the whole, unvarnished truth about the need to plan and the reasons why.

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Updated: Tuesday, June 8, 2010, 11:20 AM (Pacific)

Seattle--

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LTC Comment: Is a newly updated report on LTC insurance by the Congressional Research Service really research, or CLASS Act propaganda? You decide after the ***news.***

*** MEDICAID ABOVE THE FOLD, but under water. Read "Medicaid Cut Places States in Budget Bind" in today's New York Times here or near the top of the print edition's front page. So far Congress has balked at extending last year's "stimulus" windfall. States built their 2011 budgets counting on that extra money in boosted federal Medicaid matching funds. Highlighted in the story are three big states where the Center for Long-Term Care Reform will be doing major LTC financing studies in the coming months: Pennsylvania, California and New York. More on that soon, but rest assured the fiscal problems states are facing make our analysis of Medicaid LTC and our proposed solutions for LTC financing more appealing than ever. ***

*** WHO PAYS WHAT FOR LTCI? Over a third (35.4%) of individuals with recently-purchased long-term care insurance protection pay less than $1,499-per-year according to a new report issued by the American Association for Long-Term Care Insurance, the national trade organization. Among buyers under age 61, 43.5 percent pay less than $1,499 annually, whereas 73.6 percent of buyers between ages 61 and 75 pay $1,500 or more. Get all the details here. ***

*** KIPLINGER LTCI warns about CLASS program. "Long-Term Care That Falls Short" by Kimberly Lankford in the June 2010 issue of Kiplinger Personal Finance magazine is worth a read. For example: "[T]his CLASS Act barely gets a passing grade" and "don't give up a long-term-care policy you already own or decide not to buy one because you think you'll have enough coverage from the federal plan." But why this: "[CLASS] does cover many services that aren't eligible for benefits under most long-term-care plans, including homemaker services, home modifications and transportation." Thanks to Center supporter Alan Jonas who tipped us to this article and corrected the author saying: "On the contrary, most [LTCI] plans nowadays do cover homemaker services, home modifications and transportation plus other benefits designed to keep people in their homes." Note another flaw in the article: it says CLASS payroll deductions start next year. Wrong, more likely 2013, if CLASS survives at all. ***

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LTC BULLET: NEW LTCI REPORT: RESEARCH OR PROPAGANDA?

LTC Comment: Today, we examine a Congressional Research Service report titled "Factors Affecting the Demand for Long-Term Care Insurance: Issues for Congress," prepared by Janemarie Mulvey and dated May 14, 2010. (A copy of a report with the same title and author, but dated May 27, 2009 is available online here. We could not locate the 2010 version online.)

What intrigued me about this report is that it "throws the book" at private long-term care insurance, listing and documenting every possible flaw and criticism, but offers the CLASS Act as a solution almost uncritically.

For example, consider this excerpt from the report's "Summary":

"A number of factors have adversely affected the demand for LTCI. The cost and complexity of LTCI policies have been cited as major deterrents to purchasing LTCI. In addition, increased concerns have arisen about the adequacy of consumer protections for LTCI as a result of inconsistencies in LTCI laws and regulations across the states. More recently, adverse publicity about potential problems with claims denials and heightened concerns about the future solvency of LTCI insurers in the current economic environment have further dampened demand." (p. i)

The body of the report elaborates in excruciating detail on all of these factors adversely affecting demand for LTCI. But it totally ignores the single biggest reason constricting demand for private long-term care insurance: the easy availability of Medicaid-financed long-term care after the insurable event has occurred. Brown and Finkelstein (www.nber.org) irrefutably documented that Medicaid alone--never mind all the other ways government pays for long-term care--crowds out 2/3 to 90 percent of the potential market for private LTCI. Ignoring Medicaid in this context is like overlooking a rhinoceros in your rumpus room.

So what does the report have to say about the CLASS Act?

Report: "The publicly administered LTCI program is intended to address many of the concerns in the private LTCI market." (p. 20)

LTC Comment: Oh, yeah? How? Following are excerpts from page 20 of the report followed by our comments.

Report: "Once established around 2013, employed individuals aged 18 and older could voluntarily enroll in the program."

LTC Comment: Why would people voluntarily enroll in CLASS but not voluntarily purchase LTCI?

Report: "CLASS enrollment would not be subject to underwriting, except for age, so coverage would be available to all persons who enroll, regardless of preexisting conditions."

LTC Comment: OK, I understand, CLASS won't price risk like private insurance. So sick people will join for sure. But why would healthy people participate?"

Report: "Premiums for the CLASS program are to be determined by the Secretary based on 75-year actuarial estimates of expected future use and expenditures."

LTC Comment: Wait a minute! You mean the Secretary decides premiums based on what the insurer, i.e. government, can afford? Where's the consumer protection in that, if, as is likely: CLASS uptake is inadequate; reserves are used for other government spending; and claims experience overwhelms?

Report: "After a five-year vesting period, eligibility for benefits from the CLASS program is based on the existence of a functional or cognitive impairment that lasts for at least 90 days and that is certified by a licensed health care practitioner."

LTC Comment: I have to pay indeterminate premiums for five years before I'm eligible for indeterminate benefits, but at least all I have to do is find some doc willing to certify my need. What about moral hazard?

Report: "Benefits to eligible recipients include a cash benefit of at least $50 a day, which varies based on the degree of the beneficiary's functional or cognitive impairment."

LTC Comment: At least $50? Can't you even tell me what the benefits will be before I sign up to pay premiums?

Report: "Other benefits include advocacy services, and advice and assistance counseling on accessing and coordinating LTC services."

LTC Comment: What assurance do I have that these services will actually be available when the time comes?

Report: "PPACA [Patient Protection and Affordable Care Act, aka "health reform"] also includes premium subsidies for workers with incomes below the federal poverty level and full-time students aged 18 to 21 who currently are working."

LTC Comment: So, as a healthy, privately insurable person, you want me to pay extra premiums so poor people and students can pay lower premiums? Sounds more like wealth redistribution or welfare than insurance to me."

This report reminds of the biblical query: "And why beholdest thou the mote that is in thy brother's eye, but considerest not the beam that is in thine own eye?" (Matthew 7:3)

Or more prosaically: It's the pot calling the kettle black.

How in the world can CLASS improve on private LTC insurance by charging higher premiums for lower benefits without protecting insureds by pricing risk and without protecting the insurer by limiting liability?

Answer: it can't and won't, but in the meantime unrealistic expectations for CLASS risk further anesthetizing the public to LTC risk and cost at the very time that the traditional social safety net for long-term care is most vulnerable.

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Updated: Monday, June 7, 2010, 10:15 AM (Pacific)

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REVERSE HALF-A-LOAF REVERSED

LTC Comment: If you care about quality LTC services and financing, you need to read today's LTC E-Alert. Whether you sell LTC insurance, promote government financing of LTC, or deliver LTC services, you need this information.

Medicaid crowds out 2/3 to 90% of the market for LTC insurance (Brown and Finkelstein, www.nber.org). Therefore, most of the financing burden for LTC falls on Medicaid, a virtually bankrupt welfare program. Medicaid LTC eligibility rules are so generous that most people still qualify without significant asset spend down. Wealthier people have always qualified relatively easily with the help of "Medicaid planners."

The single most common Medicaid planning technique prior to the Deficit Reduction Act of 2005 (DRA '05) was the "half a loaf" strategy. Because Medicaid's "transfer of assets" penalty used to begin at the date of the transfer, Medicaid planners routinely advised their clients to give away half their assets and either hide or spend down their remaining resources during the ensuing eligibility penalty period. That was the simplest way to unload wealth without using it to pay privately for long-term care.

To put an end to the half-a-loaf strategy, Congress changed the rules in DRA '05 so that the eligibility penalty for asset transfers would begin not at the date of the transfer but at the date that the person would have otherwise become eligible for Medicaid. Thus, under the new rule, if you give away half your assets, thus creating an eligibility penalty, the penalty does not begin until you spend down the remaining assets that you did not give away. The original intent of Congress, i.e. that people actually spend down any assets they have before becoming dependent on Medicaid, was finally realized.

But Medicaid planners are clever. They came up with a "work around." To circumvent Congressional intent, they began advising clients to use a "reverse half a loaf." Here's an example of how it can work:

The way to accomplish this same goal [half-a-loaf] under the "new" rules is a technique called "reverse half-a-loaf" planning. In this case, a potential Medicaid applicant would give away all of his or her assets to a loved one, retaining only what is needed for living expenses for the next five years. If the person remains healthy and does not require nursing home care for five years, the gift will be protected because it will be beyond the 60-month lookback period at the time of application. If the person does require nursing home care within those five years after making the gift, the recipients of the gift simply give back half. By giving back half of the gift, the penalty period is reduced and the applicant has sufficient funds to pay for the cost of care until he/she is eligible to apply for Medicaid. (Article)

Leaving aside the risk that relatives may not be responsible guardians of one's gift and may not give back half if and when it's needed, this technique of course results in someone receiving Medicaid benefits who could have paid privately for care. Conversely, it means a person who could have paid for quality care in the private marketplace at the most appropriate level, ends up in a welfare nursing home receiving whatever access and quality Medicaid can afford and siphoning scarce resources away from genuinely needy people.

So, do state Medicaid programs and the courts have to allow these half-a-loaf legal shenanigans? They've done so up to now. But a District Court in New Jersey balked recently. You can read the details here. In a nutshell: "A U.S. district court finds that the penalty period for a New Jersey Medicaid applicant who transferred assets and then had some of the transfers returned does not start running until the applicant has spent down the funds from the returned transfers to below the resource limit. Marino v. Velez (U.S. Dist. Ct., Dist. N.J., No. 10-911 (JAP), May 4, 2010)." (ElderLaw Answers Monthly, 6/1/10) It remains to be seen whether other states and courts will follow this precedent.

Historically, courts have usually held against Medicaid and in favor of Medicaid planning clients in cases involving eligibility gaming techniques. It seemed for decades that judges simply figured: Hey, people need help, and it's only government money after all so why not give them what they need?

Of course, we have the answer to that question now. Medicaid can't afford to provide quality care in nursing homes, much less home care; taxpayers are tapped out; and the insurance to pay for and the infrastructure to provide quality LTC have been choked nearly to death by excessive reliance on Medicaid.

The only good news is also the bad news. This whole house of cards is falling down. When it collapses, private LTC financing through real asset spend-down, home equity conversion, and private LTC will supplant Medicaid as the dominant payment source for long-term care. That will mean better access to higher quality care across a wider spectrum of services for everyone: rich, poor and in between.

But getting to that outcome will be turbulent and torturous. That's why good advice from knowledgeable advisors is so critical right now. And that's why you can do well doing good by helping people prepare for the risk and cost of long-term care.

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Updated: Thursday, May 27, 2010, 10:21 AM (Pacific)

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CENTER'S MIAMI REGIONAL REP DEFENDS LTCI IN HERALD

UPDATE: Your Center for Long-Term Care Reform is shutting down for one week: May 28 (tomorrow) to Friday, June 4. Usually we take "working vacations" and respond to calls and email at a minimum. This time we'll be pretty much out of touch. Thanks for your patience and support. We do expect to have occasional email (smoses@centerltc.com) and cell (425-891-3640) coverage: just in case a big story breaks or a major problem erupts. Let us know.

LTC Comment: Remember that cheap shot the LA Times took at long-term care insurance last April? Read "Long-term-care policies: Pouring money down a hole?" by Michael Hiltzik in the Los Angeles Times here. We covered that misguided attack in: "LTC E-Alert #10-039: LA-LA Times Shoots at LTCI, but Hits Government," Friday, April 9, 2010.

As so often happens, a regional paper uncritically picked up the LA Times story a month later to fill some white space. The Miami Herald re-ran the poorly researched piece. It caught the eye of George Holmes Braddock, II, CLTC, the Center for Long-Term Care Reform's Regional Representative in the area. Braddock filed the following rebuttal, which the Herald, to its credit, published with a very positive title.

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"Long-term-care insurance can be a good investment"

Your paper did a grave disservice to its readers in the May 9 Money section when you ran a month-old article from The Los Angeles Times. Good policies gone bad started out as a report on the problems a government-created long-term care insurance plan is facing in California and wound up as a broad-brushed indictment of private long-term care insurance sold nationwide.

While the private insurance market is not problem-free, the typical carrier has not experienced anywhere near the extreme price instability plaguing the government plan offered by the California Public Employees Retirement System. And especially not since most states, including Florida, adopted the Rate Stabilization Act many years ago. The California plan, what with its ridiculously low initial premiums, touted itself as a cheap alternative to private long-term care insurance. Now its customers are paying a heavy price for its miscalculations.

Reporter Michael Hiltzik should have distinguished between public and private plans in his criticisms. Because he did not, the article lacked perspective and was a gross distortion of the reality facing today's consumers who are considering the purchase of private long-term care insurance.

Because it now pays out more than $6 billion in annual claims, the private insurance industry has an abundance of claims experience from which to draw in pricing products for the long haul. The biggest risk of all is not having insurance protection from the greatest threat to one's retirement savings: the likelihood of one day having to pay for long-term care services. A need that may go on for years.

Readers should not allow themselves to become paralyzed from protecting themselves from the longevity risk due to inaccurate reporting.

GEORGE BRADDOCK II, certified long-term care planner, Miami

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LTC Comment: Kudos to LTCI producer Braddock for his proactive efforts to hold the media to a higher standard of accuracy and honesty.

George Braddock is a long-time member and supporter of the Center for Long-Term Care Reform. He is responsible for bringing me in to the Miami area twice to address important industry meetings. Braddock is also a Partner with "Long-Term Care Financial Partners" of Kirkland, WA (www.ltcfp.com). LTCFP is a "Silver" corporate member of the Center for LTC Reform.

As a Regional Representative of the Center, Mr. Braddock seeks opportunities to advance the Center's mission in the Miami area. The Center's mission is to "ensure quality long-term care for all Americans."

If you would like to work more closely with the Center in your area, check out the qualifications to become a "premium member" of the Center and/or a Regional Representative of the Center for Long-Term Care Reform here.

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Updated: Wednesday, May 26, 2010, 11:00 AM (Pacific)

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LTCI INDUSTRY CONFERENCE SCHEDULED . . . AND MORE

LTC Comment: Here's news from Jesse Slome and the American Association for Long-Term Care Insurance (www.aaltci.org) . . .

"The 9th National Long-Term Care Insurance Producers SUMMIT will take place April 3-5, 2011. It will be held in Las Vegas (the first time we have held the Summit in Vegas).

"We'll have an all-new program ... focused on selling and marketing. Only Association members can attend the Summit. Great sessions ... and a whole lot of networking with other agents, insurers and more.

"The Early Registration rate will provide a significant savings. We'll start to provide info starting this Fall ... so watch for it.

"And, if you have suggestions for sessions or want to part of the Summit program send an E-mail to Jesse Slome: mailto:jslome@aaltci.org."

What's more, Slome reports that AALTCI members have access to a new resource . . .

"A new category [MultiLife LTCi: Sales Success From 3 to 300,000 Lives] has been added to the Association's online audio library.

"Clearly, there has been enormous interest in multilife sales and this is one of the growing opportunities for long-term care insurance sales.

"Five audios have been added to the new section. You can listen to them online or download for listening in your car or on your iPod.

"AALTCI offers 70 audios online. If you are a new member - or have not checked out this enormously valuable resource - take a moment to access the audio library. Click on this link and sign-in using your E-mail address. http://www.aaltci.org/ltc-marketing/"

LTC Comment: Steve Moses says "I've been to all the previous 'LTCI Producers Summits' and I'll be at the one in Las Vegas next April. It's on my calendar as of today. I've also audited many of the educational audio programs in AALTCI's extensive library. I even recorded one of them. They're excellent. If you're not a member of AALTCI, the industry trade organization, join today and make the most of these valuable resources."

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Updated: Tuesday, May 25, 2010, 10:07 AM (Pacific)

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LTC BULLET: MORE CLASS

LTC Comment: We've posted new material to our comprehensive "CLASS Act Update" in The Zone. A summary follows after the ***news.***

*** STATE HEALTH FACTS on the go: Statehealthfacts.org has been optimized for use on mobile devices - when you are on the road or in a meeting and need to know how many California residents are uninsured or how many children in Florida are covered through Medicaid, just go to www.statehealthfacts.org on your mobile device and easily find the answer. On the main website, enhancements include updated state and category main pages featuring an interactive "Facts At-A-Glance" section displaying key indicators which can be printed and shared. To help you stay informed of the latest data on StateHealthFacts, the site now offers RSS feeds of all updates or those specific to a category. Look for the RSS link at the top right corner of all "Recent Updates" boxes on the home page and all category pages available online at http://www.statehealthfacts.org/. ***

*** MRS. AGE WAVE. Maddy Dychtwald's (Age Wave sage Ken's wife's) third book, Influence: How Women's Soaring Economic Power will Transform Our World for the Better, was released on May 4th. If you'd like more information, visit her website (www.maddydychtwald.com), her blog (http://influencebook.wordpress.com) or follow her on Twitter (@GoInfluence). Long-term care is definitely a "women's issue," so I expect Maddy Dychtwald's book will be packed with ideas and statistics that can help you reach women about the critical issue of long-term care planning. ***

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LTC BULLET: MORE CLASS

LTC Comment: Individual and corporate members of the Center for Long-Term Care Reform have access to our "Members Only" website, aka "The Zone."

In The Zone, they find a wealth of useful information including "The Almanac of Long-Term Care;" a one-hour webinar on the CLASS Act sponsored by the Corporation for LTC Certification; a transcription of our two-hour LTC Graduate Seminar; archives of all LTC E-Alerts and LTC Bullets; as well as many other features to keep you in the know with knowledge at your fingertips.

Our latest addition to The Zone is a comprehensive list of information and documents about the CLASS Act with live hyperlinks to vital source documents. Today, we've added the following new items to our "CLASS Act Update." Check them out in context with dozens of other related materials here.

[If you do not belong to the Center yet or lack a user name and password to gain access to The Zone, contact Damon at 206-283-7036 or damon@centerltc.com. He'll have you "Zoned In" momentarily. Annual individual memberships are $150 or $12.50 per month. Corporate memberships start at $1,000 per year. Check out all the Center's membership levels and benefits, each of which includes access to The Zone, here.]

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CLASS Act: Madoff Would Be Proud, May 18, 2010, report of the Senate Joint Economic Committee Republicans.
Quote: "Obamacare includes a new long-term care entitlement called CLASS that masks health care reform's full costs. CLASS will add to federal deficits within 15-20 years. It is financially unsustainable due to poor design. Fixing it will require premium hikes, benefit cuts, and/or mandatory participation."

Larry Rubin, Jinn-Feng Lin , Victor Shi, and Alison Yao, "The CLASS Act: Are you prepared?," PriceWaterhouseCoopers, 2010 - LINK
Quote: "This article attempts to compare the CLASS program with private sector coverage based on information available at the time of writing."
Categories of comparison: Enrollment process; Participation rate; Underwriting and vesting period; Premium; Benefits amounts; Non-forfeiture benefit; Benefit payout; Administrative expense; Tax treatment; Dependent coverage; and Fund management.

CLASS Act could spur LTC reckoning, May 3, 2010
Quote: "Organizations that decide to offer the CLASS Act option through payroll deduction as a stand-alone benefit or alongside a voluntary plan will need to explain not only how the government-run program works, but also how it differs from group LTC insurance so that there's no confusion."

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LTC Comment: It's obvious from any serious reading of the literature on CLASS that expert opinion on the program is extremely negative. In fact, I think it is fair to say that no one, including the Act's advocates and sponsors, believes the program is operationalizeable as passed. So, what lessons should we take?

First, there is a very real possibility that CLASS, as it currently exists, will disappear. In fact, opposition to the entire health reform plan is so great and growing, that it may itself be repealed taking CLASS with it. See the latest Rasmussen poll for example: "Health Care Law: 63% Favor Repeal of National Health Care Plan." Quote: "Support for repeal of the new national health care plan has jumped to its highest level ever."

Second, whether the CLASS Act survives in some modified and rationalized form or not, advisors should be fully aware of its deficiencies now. Be prepared to warn businesses and individuals of the risks associated with government "insurance" that lacks (1) underwriting, (2) privately invested reserves, (3) definite premiums, (4) defined benefits, (5) contractual protections, or (6) any realistic prospect of actuarial solvency.

If they fix CLASS somehow, there will be plenty of time to re-evaluate.

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Updated: Monday, May 24, 2010, 10:11 AM (Pacific)

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"AS GOES EUROPE" OR "IF YOU THINK WE'VE GOT PROBLEMS!"

LTC Comment: When a story appears above the fold on the front page of the hard-copy Sunday New York Times, you can bet some very important people who favor big government are very happy or very scared.

Score this story from yesterday in the scared column: Steven Erlanger, "Payback Time: Europeans Fear Crisis Threatens Liberal Benefits," New York Times, May 23, 2010, p. 1.

If you haven't been following the sovereign debt crisis in the PIGS (Portugal, Italy, Greece and Spain), this would be a very good time to start. The action may be "over there," but the ramifications and teachable moments are highly relevant here.

I'll pull a few quotes below to give you the flavor, but definitely read the whole piece and ask yourself: "Could it happen in the good old USA?" And while you're at it, here's more food for thought:

• U.S. MUST CHANGE COURSE ON NATIONAL DEBT TO AVOID GREECE'S FATE, May 19, 2010 - LINK
• Medicare, Social Security Projected to Become Insolvent Sooner, May 18, 2010 - LINK
• More than 10% of GDP will be spent on Medicare by 2083, new analysis finds, May 20, 2010 - LINK
• STATE PENSIONS BECOMING FEDERAL ISSUE, May 21, 2010 - LINK

When Will America Face Its Fiscal Crisis?, May 21, 2010 - LINK

Clearly, Europe is backing away from welfare statism almost as fast as America is embracing it.

This story has me wondering just what the "generational warfare" we've been anticipating will look like. Maybe it won't be the young (who pay the taxes) against the old (who get most of the benefits).

Maybe it will be more like all of us, whether young or old (who build businesses, create jobs, and do the work) against the politicians, bureaucrats, public-sector unions, and pensioners (who appropriate and consume the wealth producers create.)

That sure seems to be how it is sorting out "across the pond."

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"Across Western Europe, the 'lifestyle superpower,' the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.

"Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism."

"But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.

"With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions."

"The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.

"In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece's bloated state sector and its employees. 'They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,' he said. 'As for us, the way things are going we'll have to work until we're 70.'"

"Changes have now become urgent. Europe's population is aging quickly as birthrates decline. Unemployment has risen as traditional industries have shifted to Asia. And the region lacks competitiveness in world markets.

"According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1."

"Figures show the severity of the problem. Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.

"The challenge is particularly daunting in France, which has done less to reduce the state's obligations than some of its neighbors. In Sweden and Switzerland, 7 of 10 people work past 50. In France, only half do. The legal retirement age in France is 60, while Germany recently raised it to 67 for those born after 1963.

"With the retirement of the baby boomers, the number of pensioners will rise 47 percent in France between now and 2050, while the number under 60 will remain stagnant."

"The problems are even more acute in the 'new democracies' of the euro zone - Greece, Portugal and Spain - that embraced European democratic ideals and that Europe embraced for political reasons in the postwar era, perhaps before their economies were ready. They have built lavish state systems on the back of the euro, but now must change."

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Updated: Friday, May 21, 2010 10:53 AM (Pacific)

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THE PERFECT LTC STORM

UPDATE: I'm back home after a whirlwind, overnight trip to Baltimore. I spoke yesterday about the CLASS Act at the "Seventh Annual Maryland Expo," a gathering of top-notch brokers and producers associated with the state NAIFA-NAHU affiliates. Special thanks to Sally Leimbach, the Center for Long-Term Care Reform's Regional Representative in Maryland, for the invitation and coordination.

LTC Comment: Every so often we offer a compilation of news items that seem to support one conclusion or another. Today, we invite you to browse the following links with this question in mind: Is there a perfect long-term care storm brewing?

With financial markets ailing, aging Americans are more worried than ever about retirement planning, and our country's social safety net is nearly threadbare. Like the Chinese symbol for crisis, which includes "danger" and "opportunity," it behooves advisors to turn worries into solutions for clients.

Here are some of the worries. Use them to draw attention and open minds to solutions.

Four in Five Americans Will Fall Short of Retirement Income Needs - LINK

MetLife Retirement Readiness Index: Are Americans Prepared for the Transition? and the accompanying Retirement Readiness Workbook - LINK

Retirement and Medical Bills Top Financial Worries

Alzheimer's costs to soar without effective drugs

What about Those Deficits?

Medicare, Social Security Projected to Become Insolvent Sooner - LINK

More than 10% of GDP will be spent on Medicare by 2083, new analysis finds - LINK

Nursing home advocates join call for extended Medicaid funding for states - LINK

U.S. must change course on national debt to avoid Greece’s fate - LINK

Weiss Ratings Challenges S&P, Moody's and Fitch to Downgrade Long-Term U.S. Debt: Downgrade Would Help Protect Investors and Prod Washington to Fix Its Finances - LINK

LTC Comment: That's enough bad news for one sitting. Have a restful weekend and come back to these challenges next week restored and ready. Be your clients' and prospects' "port in the storm" that is coming.

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Updated: Wednesday, May 19, 2010 9:52 AM (Pacific)

Seattle--

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LTC E-Alert #10-055: CLASS Source Document Added to The Zone

Wednesday, May 19, 2010

Up in the Air--

LTC Comment: As today's LTC E-Alert sends, I'm somewhere in the air between Seattle and Baltimore preparing for a presentation tomorrow on the CLASS Act, health reform and the future of LTC financing.

Today, we want to tip you to a new resource in the Center's Members-Only website, aka "The Zone."

For several months, I've compiled the best information I can find on the CLASS Act. I add to the list as new materials become available. What we have so far follows. In the future, you can find this material here including all updates as they're added.

To access this resource in The Zone you'll need your user name and password. If you need a reminder or want to join the Center to get access to this and all the other resources in The Zone, just contact Damon at 206-283-7036 or damon@centerltc.com. He'll get you whatever you need quickly and easily.

Thanks for supporting your Center for Long-Term Care Reform.

------------------

Quick reference to Steve Moses's publications on CLASS:

LTC Bullets on CLASS:

LTC Bullet: The CLASS Act: Implementation and Impact on Consumers, Thursday, April 29, 2010 - LINK

LTC Bullet: CLASS and the Senior Care Investor, Wednesday, April 21, 2010 - LINK

LTC Bullet: CLASS Caveats, Wednesday, April 7, 2010 - LINK

LTC Bullet: "CLASS Dismissed" for Broker World, Thursday, February 11, 2010 - LINK

LTC Bullet: DéCLASSé, Wednesday, December 9, 2009 - LINK

LTC Bullet: CLASS Consciousness, Wednesday, October 21, 2009 - LINK

LTC Bullet: CLASSified, Monday, October 19, 2009 - LINK

LTC E-Alerts on CLASS: (You'll need your Center for Long-Term Care Reform user name and password to access these publications in The Zone. If you have any trouble getting into The Zone, just call [206-283-7036] or email Steve [(smoses@centerltc.com] or Damon [damon@centerltc.com].)

LTC E-Alert #10-053: CLASS Angst

LTC E-Alert #10-052: CLASS Confusion

LTC E-Alert #10-048: SOA/AAA CLASS Webinar 4/27

LTC E-Alert #10-047: LTC Insurance vs. the CLASS Act

LTC E-Alert #10-040: The Bernie Madoff Side-by-Side

LTC E-Alert #10-038--CLASS Act May Be Hazardous to Your (Financial) Health

LTC E-Alert #10-037--CLASS Q&A from AALTCI

LTC E-Alert #10-036--New CLASS Act Webinar--Immediate Access

LTC E-Alert #10-035--Inside Dope on CLASS

LTC E-Alert #10-033: CLASS Begins

LTC E-Alert #10-032: SSA and LTC in NYT, OMG! (Translation Follows)

LTC E-Alert #9-123--CLASS Dismissed

LTC E-Alert #9-104--Will CLASS Pass?

LTC E-Alert #9-076--A CLASS Half Full

Other sources about CLASS we'd recommend:

CLASS Act advances LTC awareness, April 26, 2010

I love it, however, when somebody else does the heavy analytical lifting for me, so here's how three experts dissected the LA Times article:

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Claude Thau, the former head of a California-based insurer’s LTCi division, former actuary, former educator and current role model for responsible marketing writes in this pull quote:

"Despite LTCi losses, the insurance industry has performed better than other financial industries during the current financial crisis because of the quality of state insurance department oversight and the conservatism of the insurers’ investments and accounting. Mr. Hiltzik uses CalPERS as an example of an "insurance company chang[ing] the rules". However, CalPERS is NOT an insurance company! It is a state pension fund and because it is specifically exempted from requirements imposed on insurance companies, it has a financial competitive advantage. Although many people trust government organizations and non-profits more than for-profit entities, Mr. Hiltzik’s article demonstrates that government and non-profit entities do not necessarily produce better results."

Read Claude Thau's full analysis of the LA Times article after the following two comments.

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Jesse Slome, president of AALTCI (www.aaltci.org) wrote:

"This is really irresponsible and one-sided reporting. The primary reason that policies purchased in the 1990s are experiencing rate increases is the significant drop in interest rates. Insurers project that between 40 and 60 percent of claims will ultimately be paid NOT by premiums but by investment returns. For every 1% drop in interest rates, a 10-to-15% increase in premiums is needed to ultimately have the needed funds to pay claims. The greatest need is for those who have lifetime policies with inflation growth options. Their claims can amount to millions of dollars (the largest open claim currently has exceeded $1.4 million). No one complains when interest rates drop and they get to refinance a 7% mortgage at 5%. That's understandable. A good article would cover the ramifications of lower rates have on sound insurance coverage. No one likes to pay more. But even with a rate increase the individuals profiled are paying less than a comparable new policy (assuming they could still health qualify)."

Jesse Slome

American Association for Long-Term Care Insurance

Los Angeles, CA

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Stephen D. Forman, long-time Center supporter and well-regarded LTCI marketer said:

"If readers were to heed [this article's] fear-mongering, they might well end up relying on public programs which are currently saddled by a $100 trillion unfunded liability, consisting of Medicare, Medicaid, Social Security (whose payments help to subsidize the former), and now a 4th entitlement, CLASS. While private policyowners hold legally-enforceable contracts, backed by actuarially priced and untouchable reserves, with rates regulated by state Insurance Commissioners, where do public policyholders (i.e., Medicaid, the nation's de facto LTC insurance company) turn when they face a rate increase [i.e., tougher eligibility rules] or a change in benefits, e.g., one state just changed its triggers to 4 of 6 ADL's [Minnesota Medicaid just changed from 2 of 6 ADLs]?

"In the case of the Klotz's profiled in [the] article, while no one likes to see rates increased, please remember that inflation protection was offered not as a 'come on,' but as required by law, and thank goodness! It may now allow either to recoup their entire premiums paid in 4 months should one go on claim."

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Claude Thau's full critique of the LA Times article:

Response to "Long-term-care policies: Pouring money down a hole?"

Michael Hiltzik’s April 7, 2010 article entitled "Long-term-care policies: Pouring money down a hole?" creates misleading impressions about the long-term care insurance (LTCi) industry. As a former head of a California-based insurer’s LTCi division, a former actuary and a former educator, I can clarify the situation as follows:

1. I share Mr. Hiltzik’s concern for Mr. and Mrs. Klotz and others who have faced large price increases and feel a burden from my personal involvement in what, in some cases, constitute tragic increases.
2. The situation of people who have bought low-priced LTCi in the past must be differentiated from the situation of people who bought recently or who buy in the future. Thanks to efforts by the industry and regulators, LTCi prices in all jurisdictions are much higher now and are based on much more conservative assumptions. Therefore people who buy today have much less risk of a price increase. If price increases occur, they should be much lower than in the past.
3. While extremely sad, the price increases experienced by early purchasers are, as I will explain, justifiable and the California Insurance Department has acted properly in approving increases, often negotiating with insurers to ease the burden on California citizens.
4. The fact that large increases are justifiable under the law does not mean it is appropriate (for moral or business reasons) for an insurance company to seek full increases.
5. We should applaud those insurers which have exercised significant restraint in increasing prices for existing customers, however that restraint is not obvious to the public. Mr. Hiltzik may not have contacted sources who could explain this point and #3 to him.
6. The insurance industry has lost tons of money on LTCi, as reported in financial analyses of the industry. Insurers which entered the industry early took great risk as regards profitability and reputation in order to provide a valuable service (and hopefully make a profit). We should be thankful for pioneers; even if they fail, they pave the road for future success.
7. Because of the problems in the industry, many insurers and people have dropped out of the LTCi industry. The stalwarts who continue to provide service deserve respect.

Mr. Hiltzik correctly writes:

The actuarial complexities of long-term-care insurance don't yield to such an easy solution. For one thing, long-term care is a moving target. Methods, techniques and standards are evolving; today they encompass services such as in-home care that weren't widely accepted years ago. One relatively new wrinkle is the rise of assisted-living facilities, which were uncommon in the 1980s. Actuaries don't have much experience at figuring out patterns of use of those facilities, including the state of impairment at which people will typically enter them and how long they'll remain before moving on to a nursing home, so figuring how much assisted living will cost insurers is a work in progress.

However, despite identifying that claim payments are much higher than expected, Mr. Hiltzik refers to "pouring money down a hole". How many holes pay claims?

He also wants to keep "millions of Americans from getting scammed". Scammers intentionally fleece victims to enrich themselves. As Mr. Hiltzik’s above paragraph suggests, the insurers did not intend for the policies to be under-priced and have not profited from the under-pricing.

Mr. Hiltzik writes "Through the 1990s, insurers set rates low to drum up business". He also writes "The insurers assumed, correctly, that regulators would wave rate increases through". I know of no evidence to support those statements. (However, I’ve heard evidence that a speculator from outside the insurance industry bought several companies’ LTCi lines of business after the problems became apparent, thinking that he could profit by consolidating expenses and securing large price increases. Insurance professionals did NOT agree with his strategy and he failed.)

Insurance actuaries and executives thought the original prices were appropriate. Ironically, a law intended to protect consumers worked against them and has since been changed. I pushed my actuary (I was no longer working in an actuarial role) to be more conservative in our pricing. He responded that if he used more conservative assumptions, our premiums would be higher and he would not be able to, in good conscience, sign the required certification that he expected the product to meet state loss ratio requirements. (For several years now, instead of having to attest to such loss ratios, actuaries must certify that they expect the insurance company to be able to maintain the proposed pricing even if moderately adverse experience develops.) Note: although I wanted to be more cautious, I did not anticipate anything close to what happened.

In the above-quoted paragraph, Mr. Hiltzik identifies one cause of price increases -- the advent of assisted living facilities (ALFs). Ironically, the day his article was published, I was analyzing data that indicated that claims of people in ALFs (a type of facility that did not exist when some of the policies were priced) added 32% to the amount of LTCi claims paid in 2009 (not all the data is in yet, so the statistic might change).

The inaccuracy of Mr. Hiltzik’s statement that "[t]he insurers assumed, correctly, that regulators [might] allow for reductions in benefits" is exposed by his own explanation that insurers expanded coverage to include ALFs. ALF coverage is good for consumers, even if it contributes to a price increase. LTCi benefits continue to be guaranteed.

Nonetheless, while significant, ALFs are not a major cause of price increases. Some ALF claimants would have used other providers if ALFs weren’t covered. The two primary causes of insurance company LTCi losses are low interest rates for an incredibly long period of time and people "lapsing" (terminating) their policies less than expected.

• Interest rates: Any insurance premium that is intended to stay level is much greater than the cost of claims in the first year, but insufficient to pay the cost as policyholders age. Therefore insurers [are required to] set aside reserves that are intended to be sufficient, in combination with future premiums, to pay future claims. These reserve levels are established and reviewed by state insurance departments.

Any person who needs LTC will start needing such care before he/she dies. But the average age when a roomful of people start needing LTC may be older than their average age of death! This back-ended nature of LTCi claims causes LTCi reserves to be HUGE. In addition, insurers are required to set aside capital (surplus). There is a trade-off here for regulators and consumers as well as insurers --- requiring more reserves protects the solvency of the insurance company, thereby providing security to consumers. However, the cost of setting aside the money makes premiums higher.

Insurers recognize that earning interest on these reserves allows them to charge lower premiums. They expect to get much more revenue from investment income than from premiums. An on-going 7.5% net investment yield assumption was common in the mid-1990s. If someone pays a LTCi premium into a fund every year for 25 years and earns 7.5% interest, 75% of the money in the fund at the end of the period would have resulted from interest and the premiums would be only 25%. If the fund earns only 5.5% interest, its value at the end of 25 years will be lower by an amount equal to 76% of the premiums! Because interest income dwarfs premium income, a loss of investment income requires a disproportionately large premium increase to restore the intended funding. Our low interest rate environment is unprecedented and was not foreseeable.

b) Lapse rates: When people drop LTCi policies, fewer claims ultimately occur and their large reserves can be used to pay claims for other policyholders. Anticipating that such released reserves would help them pay claims, insurers reduced their prices. However, insurers did not know that so many people would still have their policies at the high ages when claims become common. It turns out that people cherish LTCi policies. The lapse rates have been unimaginably low, resulting in more claims and fewer reserves released to help cover those claims. Fifteen years ago, a lapse rate of 5% per year would have been considered conservative by most actuaries. Although 5% seemed too high to me, I never dreamed that lapse rates would be as low as 1% per year. A 4% difference in lapse rates (5% vs. 1%) is roughly twice as significant as the huge investment loss explained above.

Despite LTCi losses, the insurance industry has performed better than other financial industries during the current financial crisis because of the quality of state insurance department oversight and the conservatism of the insurers’ investments and accounting. Mr. Hiltzik uses CalPERS as an example of an "insurance company chang[ing] the rules". However, CalPERS is NOT an insurance company! It is a state pension fund and because it is specifically exempted from requirements imposed on insurance companies, it has a financial competitive advantage. Although many people trust government organizations and non-profits more than for-profit entities, Mr. Hiltzik’s article demonstrates that government and non-profit entities do not necessarily produce better results.

I hope my comments help readers to understand the situation better.

Claude Thau

April 8, 2010

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Updated: Thursday, April 8, 2010, 11:05 AM (Pacific)

Seattle--

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CLASS ACT MAY BE HAZARDOUS TO YOUR (FINANCIAL) HEALTH

LTC Comment: The CLASS Act's proposed LTC financing scheme is full of actuarial, coverage and logical holes. People who fail to opt out of its automatic enrollment will pay a big price. We've outlined the problems with CLASS in several LTC Bullets, most notably:

CLASS Caveats, April 7, 2010

"CLASS Dismissed" for Broker World, February 11, 2010

DéCLASSé, December 9, 2009

CLASS Consciousness, October 21, 2009

But the Community Living Assistance Services and Supports Act is now the law of the land. So it's time to shift from warning politicians about the dangers of passing it to warning consumers about the dangers of participating in it.

Following is a proposed amendment to the CLASS Act as recommended by a long-time supporter of the Center for LTC Reform who is a well-regarded expert on LTC financing and insurance.

Think of it this way: if you followed those warning labels on cigarette packs, didn't smoke, and now you're likely to live long enough to need long-term care someday, then here's the new warning label you should heed.

(Evidently, an amendment to CLASS along similar lines was actually offered, but not adopted.)

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"CLASS Act Participant Disclosure Requirement Amendment"

Prepared by Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Purpose: American workers and their families and other individuals will be enrolled in the Class Act unless they opt out. It is essential that participants understand their rights and benefits prior to enrollment so that they can make an informed decision.

Each potential enrollee shall be given a disclosure form by their employer or, in the case of a self employed or unemployed individual, by the Department of Health and Human Services. Along with the disclosure form will be an acknowledgement form that the potential enrollee will sign, date and return either to their employer or to the Department of Health and Humana services.

The disclosure form shall contain the following in clear language and reasonably large font:

• That participants are not entitled to any benefits until they have contributed to the program for five years and the current estimated amount of premiums paid monthly and over the five years shall be listed for each participant.

• That the Secretary of Health and Human Services will be responsible for determining future premiums and benefits. That, at the time services are needed, a determination of benefits will be made.

• That participants do not receive an insurance policy or certificate, but instead receive a notational account in their name held and invested by the Department of the Treasury similar to Social Security. (Note: The language in the legislation doesn’t address this specifically.)

• A listing of the average current cost of home care, adult day care, assisted living and semi-private nursing home rates in the potential participant’s region.

• A listing of the average regional cost for these services 10 years prior to enrollment.

• A statement that benefits paid when services are needed can be as little as $50 plus inflation that is tied to the Consumer Price Index. That the Consumer Price Index is not an indication of future costs for long term care services. That $50 per day is not enough currently to cover more than a limited amount of services.

• That the Congressional Budget Office report has stated that premiums will have to be raised significantly or benefits reduced after 10 years to prevent insolvency of the program.

• A statement that the Independence Fund can be used for other purposes if approved by a 3/5 vote of the majority of the members of the United States Senate (Note: This was in the original bill. Not sure if it is in now)

• The Government Accountability Office will conduct annual audits to confirm that the Department of Health and Human Services has complied with these requirements and that all Americans who have an opportunity to participate in the Class Act have been provided with the disclosure and that its language is understandable enough for an average person to make an informed decision about whether or not to participate.

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Updated: Wednesday, April 7, 2010, 10:30 AM (Pacific)

Seattle--

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LTC BULLET: CLASS CAVEATS

LTC Comment: Steve Moses says caveat emptor on the CLASS Act in a column for McKnight's Long-Term Care News & Assisted Living, after the ***news.***

*** EXPO-NENTIAL OPPORTUNITY. May 19 & 20, 2010 mark the dates for The Seventh Annual Maryland State Expo at the Turf Valley Hotel & Conference Center in Ellicott City, Maryland. The Maryland NAIFA /NAHU event still has sponsorship opportunities available. Steve Moses says "I'll be there speaking about the likely future of CLASS, Medicaid and LTC insurance." Contact Center for Long-Term Care Reform Regional Representative Sally Leimbach (sally.leimbach@franklinmorris.com) about event and speaker sponsorships and for registration information. ***

*** EXTRA $100 OFF: American Independent Marketing (www.AIMforLTC.com) has announced a special discount for LTCI producers to attend the industry's first LTCI Worksite and Combo Products Conference. (AIM asked us to pass the word on to you. We're always happy to make such announcements when asked.) We've tipped you before to Phyllis Shelton's "Worksite and Combo Products Conference" convening in Nashville, Tennessee on May 24-26, 2010. Register by May 1 and save $200! But enter "AIM" as your "discount code" when registering and you'll get a full $300 off. Enjoy a registration reception with entertainment and a fun-filled barbecue dinner at the world famous Wildhorse Saloon in downtown Nashville. Limited to 200 attendees. Details here. ***

*** DELUGED, we've been, with requests for access to the webinar I did on the CLASS Act for 600 CLTCs last week. Thanks to the generosity of the Corporation for Long-Term Care Certification, we've been able to make that program available immediately to all Center members. It's here waiting for you now. You'll need your Center for Long-Term Care Reform user name and password for The Zone to get to the webinar. Need a reminder? Or need to join the Center to get a user name and password? Then contact Damon at 206-283-7036 or damon@centerltc.com. He'll have you "zoned" into the webinar within the hour. (Individual memberships are $150 per year or $12.50 per month.) Once you belong to the Center, you'll have access to an almost bottomless repository of valuable professional information AND you'll receive our daily e-publications. Then cap your expertise by taking the CLTC course and earning that well-regarded certification (www.ltc-cltc.com). ***

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LTC BULLET: CLASS CAVEATS

LTC Comment: When McKnight's editor Jim Berklan asked me last Friday afternoon for a column on CLASS, I demurred. "Too busy," I said, "too tired." He would have none of it, so thanks to Jim we have the following article to share with you today.

McKnight's website--www.mcknights.com--is the award-winning online home of the McKnight's Long-Term Care News family of publications. Check it out. You'll find a wealth of information about the provider side of the LTC business and you can subscribe to their monthly magazines and Daily Update newsletter.

We thank McKnight's for publishing this piece and for permission to "reprint" it here for our readers. Check it out online at McKnight's site here (with picture) and do forward the link to many others.

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Guest Column:

"CLASS caveats"

by

Stephen A. Moses

With enactment of the ''Community Living Assistance Services and Supports" or CLASS Act, America is about to experience the biggest advertising promotion since visionaries set out to save humanity with a soft drink in the '70s. Remember "I'd like to buy the world a Coke"?

The campaign for CLASS will be just as sugary sweet, sincere and heartrending. Every progressive foundation with money to burn will push this new public product. "Take up" of the "voluntary" government-run long-term care prepayment system (it's definitely not insurance) may far exceed the meager estimates (as low as 2%) of professional actuaries.

I fear the CLASS Act could be a disaster for the people and businesses that need it most. They are:

1. the low income disabled or chronically ill who would otherwise be medically uninsurable, and

2. long-term care providers, including nursing homes, assisted living facilities and home caregivers, who are desperate for a source of revenue other than Medicaid, which pays them less than the cost of providing the care.

What if group No. 1 buys in, perhaps with generous, self-sacrificing financial assistance from parents and friends, but the CLASS "Independence Fund" never gets beyond inhaling premiums to the point of exhaling benefits? Somebody must be smoking something to think CLASS adds up actuarially.

What if group No. 2 puts all its hopes on CLASS and ends up a decade from now with little or no revenue from it, even more dependent on a weaker-than-ever Medicaid program, and with real private LTC insurance still struggling to get a foothold in a yet-government-dominated market?

So before the publicity juggernaut for CLASS gets fully up to speed, let me raise some red flags that I hope will persuade everyone to slow down and take a careful look before they leap. You need search no further than the statute itself to find the glaring pitfalls.

But let's start with a definition of CLASS promulgated by one of its biggest promoters, the American Association of Homes and Services for the Aging: CLASS is a "new voluntary nationwide long term services and supports insurance program for persons with disabilities and seniors with chronic illness."

Wrong on three counts.

— CLASS is not "voluntary." Every worker is involuntarily and automatically opted into the program. Each employee or self-employed person must willfully opt out to avoid the program's large "premiums" that will otherwise accrue by default.

— Second, CLASS is not "insurance" by any stretch of the imagination. Insurance is for healthy people who want to prepare responsibly for the relatively small possibility they may become disabled or chronically ill. CLASS is more accurately described as pre-payment of care subsidized by the insurable for the benefit of the uninsurable. Charity in other words.

— Finally, CLASS will be promoted as a program for chronically ill seniors as well as for the disabled, but it is predominantly a program to benefit the working disabled. CLASS benefits, even if they are paid at something approaching the most optimistically anticipated rates, hardly will make a dent in the cost of long-term care for the elderly.

Let's just tick off a few of the fundamental problems that stick out like sore thumbs in the CLASS Act:

– CLASS has no underwriting, which means there is no price put on the level of risk each participant brings into the program. Some will pay more than their level of risk would otherwise require so others can pay less and take out more than their level of risk objectively justifies.

— CLASS has subsidized premiums, as little as $5 per month for the poor. The non-poor will pay higher premiums to make up the difference. Again, charity, not insurance.

— CLASS will suffer adverse selection. People most likely to use the benefits will be far more likely to participate than people who are privately insurable otherwise.

— CLASS will experience moral hazard. Once covered and eligible for benefits, there is no reason not to file claims because lifetime benefits are unlimited and eligibility criteria are loose . . . just find an agreeable physician to certify need.

— CLASS will have nothing of real value in its "Independence Fund" from the outset. Every nickel the government collects goes to fund current operations, with IOU's (Treasury bonds) replacing the real money and generating only negligible returns even if the government makes good on them in the future at all.

— CLASS joins a long chain of unfunded entitlement programs as its weakest link. Medicare is under water $89 trillion and Social Security $17 trillion, not to mention the unfunded liabilities of federal, state, local and private-companies' pension systems.

— CLASS says you'll qualify if you need help with two or three ADLs (activities of daily living), but what if CLASS can't afford that "generous" a "trigger" when the time finally comes many years from now to pay claims? Minnesota just went to a four-ADL trigger for its Medicaid program.

Everything in CLASS depends on a final decision by whoever is secretary of the Department of Health and Human Services someday when CLASS claims come due. If CLASS is broke, the secretary can change virtually anything and everything to fit the funds available. That means future premiums, eligibility rules, benefit triggers and the benefits themselves are big unknowns … or a "crapshoot" as someone from CBO was quoted as saying.

So before you take the CLASS leap, consider this. You'll have no contract enforceable in a court of law. You'll be jumping into a risk pool with a lot of people paying in less than you are and guaranteed to take out a lot more than you do. Your premiums do not go into responsibly and privately invested reserves. No state insurance commission will hold the federal CLASS program's feet to the fire. You'll have zero recourse if this insurer-of-last-resort fails.

What if you want to get all of those protections and benefits? Then consider private long-term care insurance instead. You'll not only be better protected yourself, but you'll be doing a much better deed for the poor who truly are dependent on government programs like Medicaid or CLASS.

There's an old saying: "The best way to help the poor is not to become one of them." The best way to do that is to insure yourself and your family p