 LTC Bullet: Catastrophic LTC Irony Friday, October 25, 2024 Seattle— LTC Comment: Another report insists we need a big new federal program to cover catastrophic LTC costs. Ironically, we already have one that makes a new one impossible to achieve. We explain after the ***news.*** [mostly omitted]
LTC Comment: Kudos to Eileen Tell for writing and the Jewish Federations of America for publishing “A Dynamic Campaign to Educate and Engage Constituencies for a Federal Catastrophic Long-Term Care Insurance Program.” This final report published in December 2023 and circulated last month by Leading Age's LTSS Center does a worthy job of summarizing the challenges facing America’s LTC service delivery and financing system. It seeks consensus of “stakeholders” around a proposed new LTC program based on private sector solutions for the front-end LTC risk and a new government program to cover the back-end, catastrophic risk. This approach to the LTC challenge is not new, but may finally be getting some traction. Marc Cohen and Judith Feder did early research proposing such a plan with financing to come from compulsory payroll deductions. In May 2018, we critiqued their proposal in Feder Fantasy Fatally Flawed (Cohen Contribution Notwithstanding), LTC Evasion and Feder/Cohen Proposal Ignores LTC Problems’ Cause. Nevertheless, then (and now again) New York Congressman Tom Suozzi introduced “The WISH—Well-Being Insurance for Seniors to be at Home Act,” largely embodying the Feder/Cohen catastrophic plan. That bill went nowhere but Suozzi, having returned to Congress after a failed run for NY governor, will likely reintroduce it. So it is important to remind ourselves what’s wrong with the approach. To do that, we’ll pull a few quotes from the Tell report and respond with our “LTC Comments.” Tell Report: “For the many reasons that will be discussed in this report, the current system of a separate private market for the few that can afford it and qualify for coverage and the option of spending down life savings to qualify for an already over-burdened public Medicaid program for the balance of those who cannot afford private financing fails everyone.” (p. 2) LTC Comment: This is the first hint of what’s wrong with the analysis. The report presumes and repeatedly states that people must “spend down” their life savings for LTC before becoming eligible for Medicaid benefits. If that were true, people would worry about and plan for LTC. But it isn’t true and they don’t plan. For a full explanation, see “Long-Term Care: The Problem” and “Long-Term Care: The Solution.” Bottom line: people qualify for Medicaid LTC regardless of income level if their medical and LTC expenses are high enough as they usually are for seniors in need of expensive LTC. They qualify based on assets if they hold their wealth in exempt form. Most large assets seniors own are exempt, including home equity, one business, a vehicle, prepaid burial expenses, IRAs in payout status, etc. Countable assets are easily reduced by using them to purchase exempt resources. See Medicaid's $100+ Billion Leak. Thus, the Tell report’s appeal for a new catastrophic LTC program is based on a false premise. Tell Report: “Removing the catastrophic risk component would make plans less expensive and might enable more relaxed underwriting for certain kinds of risks. … A vibrant set of private sector product options that could serve consumers well during the non-catastrophic ‘waiting period’ within the context of a Federal Catastrophic program were identified.” (p. 2) LTC Comment: This thinking is folly. Dumping the expensive catastrophic LTC risk on government, which is already hopelessly in debt (nearly $36 trillion) and beholden to huge unfunded liabilities for current entitlement programs, is fiscally suicidal. Furthermore, insurance is inherently private and individual, not social and collective. The purpose of private insurance is to inform people of the cost of the risk they are taking. So, when government eliminates catastrophic flood risk, people build irresponsibly on flood plains and in the path of hurricanes, unaware or uncaring about risk and cost. For the same reason, people ignore LTC risk and cost that government has removed. The role of insurance is to replace the small risk of catastrophic loss with the certainty of an affordable premium. That is properly a private sector role. Turning over the smaller, front-end, waiting-period LTC risk to the private sector obviates the value of private insurance. It turns LTC insurance into a clone of Medicare supplemental policies, similar to using car insurance for routine service instead of for crashes. Tell Report: “Not only is there the matter of the program cost, but how it will be paid for. The ‘pay for’ is likely of paramount importance to gaining consensus. The political challenge is best characterized as opposition among Republicans to creating a new government entitlement, and broad opposition among both parties to a tax increase, despite the large and growing costs to all sides of ‘doing nothing.’” LTC Comment: Well, yeah. That’s the history of LTC financing reform since Claude Pepper tackled the issue in 1990. Why expect anything different today when the debt and unfunded entitlement liabilities are so much higher? Looking for a new LTC funding source without asking and answering why LTC financing is so inadequate in the first place is a fool’s errand. Yet there is nothing in this report or in most of the legions of similar studies produced by interest groups, think tanks, commissions, committees and politicians to answer that question. Tell Report: “LTC costs are not covered, unless you are poor or become poor paying for care. Even though it is there as a safety net, Medicaid has strict eligibility rules, and limited or no access to some of the more desired, and in many cases the most appropriate types of care (e.g., assisted living or in-home care). … Only 25% of people ages 40-69 said they had done any kind of planning for LTC (where even just talking to your family or doing research on-line counted as ‘planning’ steps.)” (p. 3) LTC Comment: Here’s the reason this report misses the essence of both the LTC problem and its solution. Do people have to become poor by paying for care before Medicaid helps? That’s the “fallacy of impoverishment” I explained 34 years ago in The Gerontologist. Poor people qualify, but so do high-income and high-asset people. There is no systematic evidence that wide swaths of the aging public spend down their savings for LTC. The myth of Medicaid spend down relies only on anecdotes. Basing the need for a big new government LTC program on that false premise is unwise. Instead of searching for an elusive “pay for” as these analysts do, it makes much more sense to look at the potential LTC funding sources that are right in front of their eyes. There is more than enough wealth currently exempted by Medicaid in home equity ($14 trillion), retirement savings ($35.4 trillion) and life insurance ($21.2 trillion) to fund LTC for most people and relieve the fiscal strain on Medicaid. The solution is for Medicaid to stop protecting that wealth from LTC risk so that people have a stronger reason to plan, save, invest and insure for LTC while they are still young, healthy and affluent enough to prepare. For all the details on how to achieve this objective practically and flood the LTC service delivery system with desperately needed private financing read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution” and watch this “virtual LTC event” featuring age wave visionary Ken Dychtwald and leading LTC researchers. To find enormous sources of private funds for LTC, check out Medicaid's $100+ Billion Leak. WISHing for elusive/illusive “pay-fors” with no comprehension of the LTC problem’s cause leads nowhere … just as it has through decades of the same academic wild-goose chases. |