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The Center for LTC Reform is a private institute dedicated to ensuring quality long-term care for all Americans by promoting public policy that targets scarce public resources to the neediest, while encouraging people who are young, healthy and affluent enough, to take responsibility for themselves. We do this through...


NEW: How Medicaid made long-term care free: The Bibliography
Read the Press release for the Center's latest report: CASSANDRA’S QUANDARY: The Future of Long-Term Care in New Hampshire
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READ STEVE'S BIO

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Updated, Friday, September 23, 2016, 10:53 AM (Pacific)

Seattle—

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LTC BULLET: GOODMAN ON BETTER RISK MANAGEMENT

LTC Comment: We invite your consideration of an exceptional paper by health policy guru John C. Goodman after the ***news.***

*** FREE TICKETS to the Insurance Agent Summit, the world’s largest online event for insurance agents. Jonas Roeser of Agent Review and 3in4 Need More recommends the program and offers free tickets. Learn more and register here: www.insuranceagentsummit.com. Feel free to pass this offer on. ***

LTC BULLET: GOODMAN ON BETTER RISK MANAGEMENT

LTC Comment: Having come to understand what’s wrong with long-term care public policy in the late 1980s, I decided I needed to have a better grasp of acute health care policy. I read John C. Goodman and Gerald L. Musgrave’s seminal Patient Power (Cato Institute, 1992) and was totally blown away. The book is clear, comprehensive, and convincing. What surprised and pleased me about its analysis was that health policy generally as explained in the book and LTC policy specifically as I’d come to understand it fit together perfectly. Government is the source of dysfunctions in both and solutions in both depend on bringing consumers back into the market while phasing government interference out.

So I’ve followed Goodman’s work at the National Center for Policy Analysis and more recently at The Goodman Institute for Public Policy Research with great interest. He’s best known as the “Father of Health Savings Accounts,” but I’m pleased to see he’s branching out into much broader public policy analysis. I want to focus your attention today on a new paper he presented recently to the Mont Pelerin Society (MPS). The MPS was founded by Milton Friedman, Friedrich Hayek and other classical liberals and counts among its members more than a half dozen Nobel Prize recipients. Goodman says

My paper . . . presents a new way of approaching public policy reform - especially reform of entitlement programs. It draws on work by Kotlikoff, Saving and other scholars we are working with. My book on this subject will be published by the Independent Institute later this year.

Find his paper, titled “Better Than Government: New Ways of Managing Life’s Risks,” here. What follows are excerpts I’ve selected to convey the gist. We’ll let you know when the book becomes available.

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Excerpts from John C. Goodman’s “Better Than Government: New Ways of Managing Life’s Risks”

This paper is based on three ideas.

The first idea is the win/win policy change.

A typical government program is funded by taxpayers and provides goods, services or money to a group of beneficiaries. Imagine that you could make a change in that program that reduces the cost to the taxpayers and enhances the value of the program for the beneficiaries – at the same time. Who could possibly object to that?

I think there are thousands of opportunities to make win/win policy changes in the US political system. Win/win policy changes ought to be irresistible to politicians – whether Republican or Democrat, conservative or progressive, independent or socialist. After all, win/win means that everyone comes out ahead. There are no losers. What could be more popular?

And yet win/win is just about the last thing our representatives seem disposed to talk about. It’s almost as if members of Congress think they were sent there to do battle. If they don’t draw blood, if someone doesn’t suffer as a result of their efforts, they apparently think they aren’t doing their job. Perhaps for that reason, Washington is dominated by a zero-sum mentality: everyone’s gain must be offset by someone else’s loss. . . .

The second idea is what I call the trial and error principle. . . . Whenever two policy extremes exist such that one kind of cost falls and another rises as we move back and forth between them, there is almost always some intermediate point where everyone gains. We can’t find that point by armchair theorizing, however. We must be willing to experiment and adapt. That is, we must be willing to do the kind of experimentation that private markets do every day.

Why do I think there are thousands of opportunities for win/win public policy changes? Because so many government programs are so visibly inefficient. They labor under archaic rules and regulations . . . -- obstacles that any private entrepreneur would jettison in a second. Further, they inevitably leave all of us with perverse incentives. When we act on those incentives we do things that make social costs higher and social benefits lower than otherwise.

Economists define inefficiency as a state of affairs in which everyone could potentially be better off by doing things differently. If government programs are inefficient, we know that in principle everyone could be better off through some sort of policy change.

Here is the third idea: win/win strategies can be used to solve our most difficult public policy problems – problems created by social insurance.

Many people incorrectly assume that the reason for the growth of government in the twentieth century, both here and abroad, was the need to take care of the poor and the unfortunate. Even the term “welfare state” suggests that way of thinking. But modern governments in developed countries are not principally focused on welfare for the poor. They are focused on benefits for the middle class.

More than one commentator has loosely characterized our federal government as an insurance

company connected to an army. That insurance is “social insurance.”

All developed countries in the world today face a common problem: they have promised more than they can deliver. People are expecting benefits for which taxpayers are unlikely to be willing or able to pay, once the needed tax increases become evident. In addition, the benefits that government provides are all too often delivered inefficiently, impersonally, inflexibly, and in a way that encourages perverse behavior on the part of the beneficiaries. . . .

There are certain risks that human beings always have faced. These include:

• The risk of growing too old and outliving one’s assets.

• The risk of dying too young and leaving dependent family members without resources.

• The risk of becoming disabled and facing financial ruin.

• The risk of facing a major health event and being unable to afford needed medical care.

• The risk of becoming unemployed and finding no market for one’s skills. . . .

In the United States, the federal government provides an income, pays medical bills, and covers a large part of the cost of long-term care for people during their retirement years. For people of working age, the federal government is subsidizing health insurance and insuring against disability and unemployment. State governments are also involved — insuring workers for injury, death, and disability on the job. Although many of these programs include the word “insurance” in their names, they are very different from traditional indemnity insurance. In many respects, they are not insurance at all, but merely thinly disguised vehicles for redistributing income.

These programs have been insulated from private-sector competition. People who find a better way of insuring on-the-job injuries or health or disability expenses or providing for retirement income are normally not able to take advantage of that knowledge. For the most part, we are all forced to participate in monopoly insurance schemes, regardless of potentially better alternatives. Even where competition is allowed (as in health insurance) it is regulated so tightly that no one ever sees a real premium for any health plan. Government insurance and government-regulated insurance are also subject to special interest political pressures that undermine its rational provision. . . .

[I]n the United States and in most other countries around the world social insurance schemes

almost always leave individuals with perverse incentives. For example:

• Social Security’s early retirement program and its survivorship benefits discourage work by imposing an implicit marginal tax rate of 50 percent — on top of all the other taxes workers face.

• Our unemployment insurance and disability insurance programs literally are paying people not to work.

• Both Social Security and Medicare have substantially altered the lifetime consumption and saving behavior of most people.

• Both Medicare and Medicaid encourage the over-use of healthcare and long-term care services.

• Obamacare’s employer regulations are encouraging part-time rather than full time work, encouraging contract labor, outsourcing jobs rather than making new hires and discouraging small firms from becoming larger. . . .

Because of the temptation to spend payroll tax revenues that are not needed to pay social insurance benefits on other politically popular programs, social insurance is almost always operated on a pay-as-you-go basis. This has resulted in huge unfunded liabilities both in this country and abroad. These unfunded promises have created enormous implicit liabilities for governments around the world. According to a Social Security trustees report, the unfunded liability in Social Security and Medicare is $107 trillion, or more than six-and-a-half times the size of the entire U.S. economy. If the implicit, unfunded promises in Medicaid, Obamacare and other programs are included, the government’s total implicit debt is almost twice that figure. . . .

Here is the principle behind social insurance, then: government intervenes in those insurance markets where people’s choices to insure or not insure impose potential costs on others. Because of basic human generosity, society is not going to allow people to starve or live in destitution. So when people don’t insure for retirement, disability, and so forth, society is going to step in and help where help is needed. Implicitly, we have a social contract that socializes the downside of certain risks. If we allow the upside to be left to individual choice, we will have privatized the gains and socialized the losses. When people don’t bear the social cost of their risk-taking, they will take more risks than they would otherwise, a behavioral response known as “moral hazard.” . . .

Here is the upshot: In fashioning better choices for people, we must at the same time prevent them from becoming free riders on the rest of society if their choices do not turn out as well as planned. . . .

If individuals can find better ways of protecting themselves against life’s risks, they should be allowed to take advantage of those discoveries. If they are willing to take responsibility for their own needs and relieve others of that burden, they should be encouraged to do so. Wherever possible, the goal should be to maximize choices and opportunities for individuals, leaving to government the minimum role of ensuring that the needs of the most vulnerable continue to be met. . . .

If we do nothing to reform our nation’s entitlement programs, we will eventually be forced to adopt harsh policies. High-income individuals will be cut off, of course. They will not receive any Social Security checks. Or if they do get them, the government will take the money back through higher taxes. Instead of getting subsidized Medicare, they will be forced to pay the full (unsubsidized) premium — and then some. Yet these changes will amount to no more than a drop in the bucket for Uncle Sam. Before it’s over, most people will find that they are getting less than what was originally promised. In fact, it’s likely that everyone will face higher taxes, smaller benefits, or both. Such a zero-sum outcome is one in which everybody loses. And because everyone will lose, these reforms will be difficult and painful to enact. They will be resisted by everyone. Is there an alternative? . . .

In what follows, I propose a simple idea. People of any age should have the opportunity to opt out of social insurance in favor of alternatives that better meet their individual and family needs. In particular, they should be able to substitute assets and arrangements they have voluntarily chosen, and that they own and control, for the government systems in which they are now forced to be participate. . . .

There is only one general condition that must govern these choices: They must not increase the expected burden for other taxpayers. This means that there must be (1) a reasonable expectation that the direct tax burden for others will not rise as a result of an individual’s opting out and (2) a reasonable expectation that the individual will not try to return to the government program (thus creating an additional burden for everyone else) if the private option turns out to be disappointing. This condition implies that opting out must be a win/win proposition. . . .

Despite this almost self-evident fact, most proposals to change our social insurance programs – proposals coming from both political parties – are zero sum. For every gain they promise, someone else must bear a loss. For example, some Democrats are proposing more generous Social Security benefits. But those benefits would be paid for by imposing new burdens on the young, either in the form of higher payroll taxes or a larger public debt. Some Republicans are proposing to solve future deficit problems by reducing future benefits – a burden for the young without any corresponding gain. . . .

There is a more general principle here: Any time anyone — rich or poor — can find a way to solve the social problems Social Security and Medicare were designed to address and leave the taxpayers with a smaller burden in the process, we should welcome the change. . . .

We don’t want the elderly to live out their remaining years of life in extreme poverty. Most of us don’t care very much, however, if seniors fail to live out their remaining years in luxury. That is important to remember because Social Security benefit payments are actually highly regressive. . . .

What about private savings? If private savings are to serve as acceptable substitutes for benefits there would probably have to be some assurance that the funds would not be squandered or gambled away. Part of the requirement might be that the funds be held by reputable financial institutions and that they be managed according to prudent investment rules. There would also have to be rules governing the rate of withdrawal during the retirement years and a general prohibition against putting the asset up as collateral for loans or other indebtedness.

Texas A&M University economists Thomas Saving, Andrew Rettenmaier and Liqun Liu have produced a first-of-its kind calculation of the value of Social Security to young people in light of the political uncertainty about its future. They conclude that a 21-year-old earning an average wage with a moderate degree of risk averseness would be better off if he could completely opt out of the system by paying a 4.5 percent payroll tax for the remainder of his work life. That means he would forgo all future Social Security benefits and avoid all future Social Security taxes, including the current 12.4 percent tax he and his employer are now paying. . . .

Think back to the mid-twentieth century when many social security systems were devised in countries around the world. What rational person would choose a system that makes promises to pay young people benefits five or six decades into the future without making any provision to save and invest the funds needed to pay those benefits? What rational person would devise a system that encourages young people to believe they will get benefits five or six decades into the future, knowing all along that the payment of benefits depends on future taxpayers -- but without knowing what the fertility rate will look like a half century later and therefore without knowing how many future taxpayers there will be? In short, what rational person would devise an entire retirement system, using the same techniques that Bernie Madoff used to scam his investors?

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LTC Comment: That’s enough to give you the flavor of this paper. I hope this inspires you to read it in full here and to await eagerly, as I will, the book-length treatment of these ideas.

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Updated, Tuesday, September 20, 2016, 8:06 AM (Pacific)

Seattle—

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LTC E-ALERT #16-036: LTC NEWS AND COMMENT

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

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

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

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

5 insider tips for finding affordable long-term care insurance
AARP Urges Candidates to Address Social Security's Financial Challenges: 67% of its Members Cite Social Security’s Future as Their #1 Concern
Donald Trump's Plan To Support Family Caregivers
Adult children dread discussing senior living with aging parents: poll
Regulators post LTCI reserve-testing draft
Study: Elderly’s Family Caregivers Need Help Too
Medicaid Is a Ticking Time Bomb
7 new peeks at how long-term care insurance is working
Failure to Improve Is Still Being Used, Wrongly, to Deny Medicare Coverage
Nearly 90% of Consumers Satisfied with Their Long-Term Care Coverage
New LTCI sales firm up
5 ways Genworth wants to reboot LTCI
Report: Demand, vacancies for SNF nursing assistants on the rise

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

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Updated, Friday, September 16, 2016, 9:46 AM (Pacific)

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LTC BULLET: MEDICAID MALFUNCTIONS MULTIPLY

LTC Comment: Medicaid ruined long-term care, but that’s not the only damage it’s done. Examples after the ***news.***

*** ILTCI CONFERENCE: The 17^th Annual Inter-Company Long-Term Care Insurance Conference will convene March 26 to 29, 2017 at the Hyatt Regency in Jacksonville, Florida. Conference organizers have issued their call for sponsors and exhibitors. “Early Bird Discounts of up to $3,495 are only available through 9/28/16!” Booth locations are first come, first pick, so best to get a move on. See you there. ***

*** DYCHTWALD AT NIC: Just received this note from Ken and watched the video. Don’t miss it. One of his best. He says: “This week I had the great honor of addressing global leaders in the senior care and housing industries in Washington DC as part of the NIC [National Investment Center] conference. I was asked to tell them how the boomers will transform aging and how aging will transform them – and do so in less than 20 minutes. As you’ll see, I threw in a few zingers….. Enjoy! https://vimeo.com/182924690 All the best, Ken ***

LTC BULLET: MEDICAID MALFUNCTIONS MULTIPLY

LTC Comment: Medicaid has had a devastating impact on long-term care services and financing. By making nursing home care virtually free for all in 1965, Medicaid (1) led to decades of institutional bias, (2) crowded out a market for private home care, (3) crippled private financing options like LTC insurance and home equity conversion, and (4) created the caregiver shortages and access, quality, reimbursement, and discrimination problems we face today. Seems like that would be enough damage for one centrally planned and managed government program to cause.

But no, there’s much more to learn about Medicaid’s multiplying misadventures. Cato’s Dan Mitchell says “Medicaid is a Ticking Time Bomb.” He delivers devastating evidence that Medicaid (1) is “the fastest-growing entitlement program,” (2) grows faster than state revenues, (3) expands “faster than the private sector,” (4) incentivizes over-spending with a perverse federal funding scheme, (5) lures states into ObamaCare with “free money” that turns out to be very expensive, (6) hurts the poor with fewer doctors available and worse medical outcomes, (7) enables “staggering amounts of fraud and theft,” (8) enriches the “poverty pimps,” i.e.the vast array of government employees, their union allies, contractors, and third parties who earn six-, seven-, eight-, or nine-figure paydays taking their cuts of money we think we’re spending on the poor,” and (9) should be block-granted like welfare was in 1996 to stem the red ink and to improve the program for the needy.

That must be all that can be said about Medicaid’s problems, right? But no, there’s more. The Mercatus Center’s Brian Blase reports today that “Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems.” In a nutshell, Blase says:

The first two years of the ACA’s [Affordable Care Act, i.e., ObamaCare’s] Medicaid expansion demonstrate that government experts failed to account for how states would respond to the incentives resulting from the elevated federal reimbursement rate. Enrollment and spending are much higher than expected, and this is especially noteworthy since states are adopting the expansion more slowly than expected. Overall, the ACA expansion significantly adds to Medicaid’s unsustainable spending trajectory, likely fails to produce outcomes worth the corresponding cost, and creates a large federal government bias toward nondisabled, working-age adults at the expense of traditional Medicaid enrollees.

He adds details on each of these problems: (1) “Enrollment has been higher than expected,” (2) “Total costs have been higher than expected,” (3) “Individual enrollees have been more expensive than projected,” and (4) “Medicaid expansion enrollees receive inadequate value from the program.” Blase also expands on Medicaid’s fundamental problems, explaining how (1) “It crowded out other priorities,” (2) “It lacked effective oversight,” (3)“It disincentivized work,” and (4) “It resulted in lack of access” to care.

Obviously it’s high time to reform Medicaid radically. Remove its perverse incentives and target its scarce resources to the truly poor. But how? We’ve tackled that question with regard to long-term care in the Center’s forthcoming report “Long-Term Care Financing: The Myth and the Reality.” Other analysts, including the two cited in today’s LTC Bullet, have complementary proposals to offer. But time is running out. A fiscal vise is closing as an unprecedented monetary bubble expands and the age wave is finally about to crest and crash. This triple threat compels change either through responsible public policy or by default.

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Updated, Friday, September 9, 2016, 9:46 AM (Pacific)

Seattle—

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LTC BULLET: CENTENNIAL CARELESS AND DIY PUBLICITY

LTC Comment: How can we get the word out more effectively about the need to plan for long-term care and avoid Medicaid dependency?

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find clients and reduce the “Ping-Pong” in the LTCi sales process. Help clients make informed final decisions about buying LTCi in 15-20 minutes! Gauge a client's true interest in a combo product immediately! Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation! Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, a past Chair of the Center for Long-Term Care Financing. Test Claude by calling 800-999-3026, x2241 or email him at claudet@targetins.com to ask questions or get references. ***

LTC BULLET: CENTENNIAL CARELESS AND DIY PUBLICITY

LTC Comment: Analysts, legislators and public officials have drifted into a dangerous frame of mind about long-term care financing. They blame Medicaid for impoverishing millions who need LTC; they’ve given up on private LTC insurance; so they assume the only hope is to give more power, control and financing of LTC to government.

But they’ve got the problem and the solution all wrong as we explain in our new report (currently in draft) and in LTC Bullet: Real vs. Mythical Medicaid. Medicaid for LTC does not require impoverishment. Rather Medicaid has operated to fund long-term care after people need expensive care while allowing them to preserve most of their wealth. The right way to think about Medicaid’s role in long-term care financing is that it substantially ameliorates the risk and cost of long-term care, not that it impoverishes people.

The result is that most people do not worry about long-term care until they need it at which point they qualify easily for Medicaid without spending down significant assets. What that means for state Medicaid programs I’ve described in the following “op-ed” which was published in slightly modified form in last Sunday’s Albuquerque Journal, New Mexico’s, the “Land of Enchantment’s,” largest-circulation newspaper. Also published yesterday on NMPolitics.net here.

I’d like you to read this op-ed in a special way. It is designed to be a template. For each of the data points underlined in the article there are easily accessible state-specific online sources. What this means is that virtually anyone in possession of those sources could fill in the blanks and create a similar op-ed for any state in the country.

As I have those sources at my fingertips, I could easily replicate this op-ed for any state or help others tap those sources to do it themselves. Your Center at work.

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“Centennial Careless”
by
Stephen A. Moses

“Centennial Care” is New Mexico’s name for Medicaid, the national means-tested public welfare program providing health benefits to the needy. Fully one-third of the state’s citizens rely on the program.

Expansion of Medicaid under ObamaCare has blown a big hole in the state’s budget. Governor Martinez recently called for a five percent across-the-board cut. An even bigger problem is the demographic time bomb facing Centennial Care: long-term care (LTC) for the aged, blind and disabled.

Three-fourths of Medicaid recipients are poor women and children in need of acute care. But they account for only one-third of Medicaid’s cost. The aged, blind and disabled are barely one-fourth of total recipients, but they consume two-thirds of program costs, mostly for their long-term care.

LTC costs skyrocket after age 85. New Mexico’s 85-plus population is only two percent now (28^th nationally), but it’ll be three percent (10^th) by 2032, about when their Trustees say Social Security and Medicare will become insolvent.

Already, Centennial Care pays too little to ensure quality care. The state reimburses nursing homes $25 per day less than the cost of providing the care (a $34 million annual shortfall). But New Mexico shuns nursing homes, relying more heavily on home and community-based care (73.6 percent of LTC expenditures, third in the nation). Home care workers are notoriously underpaid, especially by Medicaid, which is why quality caregivers are extremely difficult to hire and retain.

Given the staggering financial risks Centennial Care already faces, and the exponentially greater liabilities it will soon encounter, some of the state’s policies regarding eligibility for Medicaid long-term care boggle the mind.

For example, New Mexico exempts up to $828,000 of home equity from asset eligibility consideration, the maximum allowed by federal law. Why does a state with fiscal problems invite people with so much wealth to partake of its welfare program’s most expensive benefit?

Nor is income an obstacle to qualifying for long-term care benefits in New Mexico. Anyone with income over the monthly limit of $2,199 a month can shift the excess into a “Miller income diversion trust” and qualify quickly.

Even much wealthier people qualify without spending down their assets by consulting elder law attorneys. Try Googling “Medicaid planning in New Mexico” for advice like this: “Medicaid planning involves developing a strategy to protect your assets should you require long-term nursing home care. . . . We will help you maintain what you spent your life earning.” (http://www.pbwslaw.com/services/medicaid-planning/)

Since 1993, the federal government has required state Medicaid programs to recover care costs from the estates of deceased recipients. Otherwise, the welfare program would become free inheritance insurance for boomer heirs. But New Mexico recovers only $1.7 million from estates annually, less than half of one percent of its LTC expenditures, and only one-fourth of Idaho’s, the best state’s, recoveries percentagewise.

Medicaid was supposed to be a safety net for the poor, but it has become the dominant source of long-term care financing for nearly everyone.

Is it any wonder that only 3.8 percent of New Mexico’s age-40-plus population (33^rd nationally) have planned ahead for long-term care by purchasing private insurance? They can ignore the risk, avoid the premiums, preserve their estates and get Centennial Care to pay if they ever need expensive extended care. So why worry?

What should New Mexico Medicaid do? Governor Martinez and the Human Services Department should work with the state legislature and the federal Centers for Medicare and Medicaid Services to (1) cut the home equity exemption to the federal minimum (currently $552,000), (2) maximize estate recoveries to bring in an extra $5 million per year in non-tax revenues, (3) curtail long-term care financial eligibility loopholes wherever possible, (4) promote your LTC Partnership Program, and (5) educate the public that long-term care is a personal responsibility for which everyone one needs to plan, save, invest or insure.

It is probably too late for New Mexico to avoid a long-term care financing catastrophe, but those measures could reduce the damage and save Centennial Care $100 million per year.

Stephen Moses is president of the Center for Long-Term Care Reform in Seattle, Washington (www.centerltc.com) and a Santa Fe homeowner. Reach him at smoses@centerltc.com.

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Updated, Tuesday, September 6, 2016, 11:08 AM (Pacific)

Seattle—

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LTC E-ALERT #16-035: LTC NEWS AND COMMENT

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

Long-term care costs skyrocketing
Top markets for baby boomer moves
Will my mother have to sell her half of our house to pay for care?
The Staggering Cost Of Long-Term Care And Medical Care in Old Age
Taxpayers Foot 70 Percent Of California’s Health Care Tab, Study Finds
Sensors help predict falls up to 3 weeks in advance
8 ways long-term care insurance applicants are different: Researchers say people who seek coverage tend to be much healthier than other Americans
Small blocks of long-term care insurance may get own rules: Insurers say requiring full actuarial analysis for them would be overkill
Demand for seniors housing may be overstated, white paper says
‘America’s Other Drug Problem’: Copious Prescriptions For Hospitalized Elderly
Engineering students create app for those with dementia
Audits of Medicare Advantage plans find rampant overcharging for elderly patients
ADL needs increasing for those aged 45 to 64

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Updated, Friday, September 2, 2016, 10:11 AM (Pacific)

Seattle—

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LTC BULLET: BEHIND AHEAD

LTC Comment: The people and organizations advocating a new, compulsory, payroll-financed government program to fund catastrophic LTC expenses base their arguments on dubious sources and reasoning. Details after the ***news.***

*** LTC CLIPPING: Here’s an example of a recent LTC Clipping we sent to subscribers. To subscribe, contact Damon at 206-283-7036 or damon@centerltc.com

8/31/2016, “8 ways long-term care insurance applicants are different: Researchers say people who seek coverage tend to be much healthier than other Americans,” by Allison Bell, LifeHealthPRO

Quote: “The researchers end with a prediction that could disappoint many long-term care insurance agents and brokers: The researchers say using expansion of private long-term care insurance coverage to eliminate the need for new public long-term care programs efforts will be difficult, because about 40 percent of Americans ages 50 and older have health problems or other risk factors that would make them expensive for private long-term care insurance issuers to cover.”

LTC Comment: That “prediction” is nonsensical and, frankly, offensive. The fact that 40% of Americans over 50 years of age have health problems is no reason to shift the cost of their long-term care to healthier people by means of government compulsion. People who don’t qualify for private LTCI should begin early to save or invest individually against the LTC risk and cost. Maybe, without government to step in after they already need care (as Medicaid does now), they would take better care of themselves, avoid obesity, dodge diabetes, exercise and never become ineligible for private LTCI in the first place. If we stop covering the middle class and affluent on Medicaid, that program could survive as a decent safety net for the rest, but only after they’ve genuinely spent down their own resources, which is not required now. Will these policy wonks never grasp that it’s the nanny state that caused these problems in the first place and will only make them worse? ***

LTC BULLET: BEHIND AHEAD

LTC Comment: After decades of searching for a better way to do long-term care financing, leading policy wonks have homed in on . . . well . . . let the government do it. Not exactly radical new thinking.

Their reasoning goes something like this: Although the risk and cost of long-term care are huge, the public just won’t take the problem seriously; they don’t buy private insurance; they end up devastated by LTC costs, impoverished and dependent on welfare, i.e. Medicaid, government’s answer to LTC financing since 1965.

So, what can we do? We must redouble our efforts to employ government’s monopoly on the use of force to compel people to take long-term care seriously. Let’s have a new, mandatory, payroll-financed federal program to cover the back-end catastrophic cost of LTC.

How in the world do they end up with such a stale proposal, yet another federal entitlement program doomed to add more unfunded liabilities to a government already hopelessly submerged in debt?

They rely on survey data, simulations and modeling. And where do they find the big data to manipulate and analyze? Two sources. Today’s LTC Bullet examines those sources and concludes they are highly problematical and lead to conclusions that are misleading, mistaken and misguided. The following analysis comes from the Center’s new draft report titled “Long-Term Care Financing: The Myth and the Reality.”

First we explain how the assets analysts discover in the survey data are either entirely exempt from Medicaid resource limits under federal law (meaning they don’t need to be spent down) or they are easily converted into exempt assets. Then we show why the sources of the data themselves are unreliable. Finally, we invite analysts to “ask the people who know” instead of ignoring, as they have done for decades, the testimony of Medicaid staff, financial advisors, consumers, long-term care providers, Medicaid planners, the vast legal literature on Medicaid planning, and 143 LTC Bullets on the subject.

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HRS and AHEAD

When economists and health policy analysts claim that older people approaching the need for long-term care retain few assets and spend down rapidly, they generally . . . draw their evidence from survey data provided by the Health and Retirement Study (HRS) and its auxiliary, the Asset and Health Dynamics among the Oldest Old (AHEAD) study.

The AHEAD has information on the value of housing and real estate, autos, liquid assets (which include money market accounts, savings accounts, T-bills, etc.), IRAs, Keoghs, stocks, the value of a farm or business, mutual funds, bonds, and other’ assets.^{^[1]}

Noteworthy is the fact that every one of these financial holdings is either expressly exempt under federal law or easily converted into an exempt asset for purposes of Medicaid long-term care eligibility. Homes are exempt up to between $552,000 and $828,000 depending on the state. Additional real estate such as a vacation home or homes may easily be made exempt.

Many of our clients own a second piece of real property--a summer home, a mountain cabin, an investment. It is typically viewed as an impediment to Medi-Cal eligibility when one spouse enters a nursing home. . . . Rather than sell this property, as Medi-Cal would likely advise, protect it. . . . Assume further that the appraised value is $40,000, entirely likely in light of [California] Proposition 13. The community spouse, the spouse living at home, could take out a loan in the amount of $40,000 and, for purposes of Medi-Cal, reduce its effective value to $0. The borrowed money could then be used to add on to the residence, buy needed items, invest in other exempt resources, or be protected by an increased Community Spouse Resource Allowance (CSRA) order.^{^[2]}

If a couple has a second vacation home, consider having the couple rent that home and then claim the rental income as necessary for maintaining the community spouse's minimum monthly maintenance needs allowance. If the vacation home is considered necessary for this purpose, it is no longer a countable resource.^{^[3]}

One automobile is exempt regardless of value as long as it is used for the benefit of the Medicaid recipient. Liquid wealth such as bank accounts or securities may be converted from countable to non-countable status by purchasing exempt assets.

Another tactic is to spend the assets on property that won't count for Medicaid purposes...[such as] a home...a new car...household goods...funeral expenses...and...a burial plot...A client can also reduce his net worth by spending money on travel, which many elderly people enjoy.^{^[4]}

Farms and other businesses, including the capital and cash flow of unlimited value, are exempt.

The new amendment to the Social Security Act (Pub. L. No. 101-239, 103 Stat. 2465, amending 42 U.S.C. 1382b(a)(3)) allows for the exemption of all income-producing property used in a trade or business.... In other words, there is now an unlimited exemption for such property.... Property used in a trade or business is excluded regardless of its value or rate of return.... Critical provisions for advocates to note are that liquid resources used in the trade or business may be excluded from countable resources, and that no limit is placed on such resources (POMS SI 01130.501C.5). Thus, advocates may exclude large amounts of cash in business operating accounts, trust accounts, and the like, that are necessary for use in the business.... Ultimately, Medicaid recipients will want to transfer their property to avoid the imposition of a lien and recovery from the estate for Medicaid expenditures. Since business, farms, and ranches in current use are exempt property, they can theoretically be transferred without penalty. No restrictions are placed on the transfer of this exempt property, unlike the transfer of a home (42 U.S.C. 1396(c)).^{^[5]}

Tax-deferred retirement accounts, including IRAs, Keoghs, and 401Ks, etc. are exempt if the holder is receiving a regular payout.

At age 70 ½, individuals must begin taking required minimum distributions from their IRAs, which means the IRA is in payout status. You may also be able to choose to put your IRA in payout status as young as age 59 ½ if you elect to take regular, periodic distributions based on life expectancy tables. If an IRA is in payout status, depending on your state, it may not count as an available asset for the purposes of Medicaid eligibility, but the payments you receive will count as income.^{^[6]}

Risks of Relying on HRS/AHEAD Data

While the HRS/AHEAD surveys provide the most reliable longitudinal data ever available, they are not fool proof. Stephen F. Venti found “data quality issues” when he focused “on measurement errors in the data, particularly those arising from item nonresponse and from inaccurate respondent reports of the ownership and level of assets.”^{^[7]} He explains “The fault lies not so much in the sample design or the execution of the survey, but is instead a consequence of the extraordinary lack of knowledge displayed by respondents.”^{^[8]} He adds “‘Noise’ created by inaccurate reports and non-response is a problem common to all asset variables in the HRS.”^{^[9]} Venti concludes “It is difficult to reach consensus among research studies if each author must arbitrarily decide whether to exclude, censor, or impute particular observations.”^{^[10]} Wiener points out that HRS “information on people who are cognitively impaired and who die is derived from proxy respondents, often relatives, who may not know about specific long-term services and supports use or Medicaid eligibility.”^{^[11]} HRS and AHEAD data provide a very dubious foundation on which to generalize about long-term care financing policy.

There are many reasons why HRS/AHEAD respondents and their representatives might fail to report income and assets to surveyors or even purposefully misrepresent the facts. People who have reconfigured their wealth in order to qualify for public welfare benefits may be ashamed of having done so or simply unaware that their heirs did this on their behalf. Seniors reporting on themselves may be cognitively impaired or intimidated by their self-interested loved ones. Heirs who benefit from preserving parents’ estates may prefer to conceal the facts. Lawyers who do Medicaid planning are protected from disclosure by attorney/client privilege. Long-term care providers and Medicaid eligibility staff, who often know, especially in small rural communities, which wealthy locals are taking advantage of Medicaid, often seethe, but cannot disclose the information because of legally enforced confidentiality. Getting to the truth in such matters is extremely difficult.

Finally, the Health Retirement Study asks the wrong question regarding wealth transfer and does not address the larger issue of Medicaid planning at all. According to Lee, Kim, and Tanenbaum,

Specifically, the HRS asked the following question: ‘Did you (or your husband/wife/partner) give financial help totaling $500 or more in the last two years (since the previous interview) to any of your children (or grandchildren) not counting shared housing or shared food?’^{^[12]}

There are several problems with this question. Transfers of assets relevant to qualifying for Medicaid long-term care benefits are not necessarily done to provide “financial help” to children or grandchildren. The question is too narrow. Looking back only two years is insufficient. Medicaid’s two-year asset transfer look back period ended with the Medicare Catastrophic Coverage Act of 1988 when it became 30 months. Effective with the Deficit Reduction Act of 2005, the asset transfer look back period is five years. Finally, focusing narrowly as the question does on asset transfers ignores the much larger issue of Medicaid planning as Lee, Kim and Tanenbaum to their credit also observe,

Medicaid recipients will tend to underreport wealth transfers that occurred prior to applying for Medicaid. In addition, elder law attorneys have devised a wide variety of sophisticated asset-sheltering instruments, including irrevocable annuities, life estates, and ''spousal refusal'' testaments in the practice of Medicaid estate planning. These instruments, in fact, make up the bulk of Medicaid estate planning activity and are not captured by the AHEAD survey.^{^[13]}

Why Not Ask the People Who Know?

Besides passing over the formal legal literature on Medicaid planning, long-term care scholars have paid little attention to the voluminous testimony of Medicaid staff, financial advisors, Medicaid planners, consumers, and long-term care providers about the ease and impunity with which middle class and affluent people take advantage of Medicaid long-term care benefits. In the 1990s, The Gerontologist published several articles quoting sources like these on that topic,^{^[14]} but very little such information has found its way into the peer-reviewed literature since. Not so with the non-peer-reviewed literature and the popular media, which abounds with examples.

Since May of 1998, for example, the Center for Long-Term Care Reform has published 143 articles about Medicaid planning covering what it is, who does it, media coverage, general public opinion and what various groups of professionals think about it, as well as state and federal legislative efforts to curtail it.^{^[15]} . . . Unfortunately, most academic scholars either do not read such material or they think they can ignore anything in it, however conclusive, that contradicts the conventional scholarly wisdom about long-term care financing. Such arrogance has consequences. Had no one thought outside the peer-reviewed box about astronomy, most people would still believe the sun revolves around the earth.

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[1] Mariacristina De Nardi, Eric French, and John Bailey Jones, “Medicaid Insurance in Old Age,” National Bureau of Economic Research Working Paper 19151, May 17, 2016, p. 10; http://www.nber.org/papers/w19151. To be published in the American Economic Review.
[2] Michael Gilfix, "Practice Tip: Protect Non-Residential Real Property and Medi-Cal," Gilfix ElderLaw News Alert, Vol. VII, No. 1, February 1997, p. 3
[3] John J. Regan, Tax, Estate & Financial Planning for the Elderly, Matthew Bender, New York, 1991, 1993 update, p. 10-68
[4] Lawyers Weekly, September 27, 1993
[5] Rebecca L. Shandrick, "The Family Business: An Exempt Resource for Medicaid Eligibility," The ElderLaw Report, Vol. 4, No. 3, October 1992, pps. 1-4, emphasis in the original.
[6] ElderLawAnswers, “Can an IRA Affect Medicaid Eligibility?,” article last modified 03/17/2015, cited August 9, 2016; http://www.elderlawanswers.com/can-an-ira-affect-medicaid-eligibility-14544.
The relevant Social Security Administration, Program Operations Manual System (POMS) reference is “SI 01120.210 Retirement Funds,” https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120210.
[7] Steven F. Venti, “Economic Measurement in the Health and Retirement Study,” Dartmouth College and NBER, January 21, 2011, p. 3; http://www.dartmouth.edu/~bventi/Papers/Venti-DMC-review_final_1-22-11.pdf
[8] Ibid., p. 2.
[9] Ibid., p. 5.
[10] Ibid., p. 4.
[11] Joshua M. Wiener, et al., “Medicaid Spend Down: New Estimates and Implications for Long-Term Services and Supports Financing Reform: Final Report,” prepared for the SCAN Foundation by RTI International, Research Triangle Park, North Carolina, March 2013, p. 50; http://www.thescanfoundation.org
[12] Jinkook Lee, Hyungsoo Kim, and Sandra Tanenbaum, “Medicaid and Family Wealth Transfer,” Gerontologist, Vol. 46, No. 1, 2006, p. 9
[13] Ibid., p. 12
[14] Examples include Stephen A. Moses, “The Fallacy of Impoverishment,” Gerontologist, Vol. 30, No. 1, 1990; http://gerontologist.oxfordjournals.org/content/30/1/21.abstract.
Leslie Walker, Cynthia Gruman, and Julie Robison, “Medicaid Estate Planning: Practices and Perceptions of Medicaid Workers, Elder Law Attorneys, and Certified Financial Planners, Gerontologist, Vol. 38, No. 4, 1998, pps. 405-411,; http://gerontologist.oxfordjournals.org/content/38/4/405.full.pdf
Leslie Walker, Cynthia Gruman, and Julie Robison, “Medicaid Eligibility Workers Discuss Medicaid Estate Planning for Nursing Home Care,” Gerontologist, Vol. 39, No. 2, 1999, pps. 201-208; http://gerontologist.oxfordjournals.org/content/39/2/201.full.pdf
[15] Find 143 articles on Medicaid planning here: http://www.centerltc.com/bullets/subject.htm#medicaid_plan

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Updated, Monday, August 29, 2016, 10:53 AM (Pacific)

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LTC E-ALERT #16-034: LTC NEWS AND COMMENT

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

Social media use linked to less chronic illness, loneliness in seniors
Seniors who rarely exercise have 50% higher risk of dementia
New tax needed to fund NHS and care, says ex-minister
An Insurance Agent’s Case for Buying Long-Term Care Insurance: A rebuttal to the recent article by Next Avenue's Money Editor
Where Clinton and Trump Stand on Caregiving and Long-Term Care
Retirees, make sure medical expenses are part of your plan
CBO: Medicare, Medicaid, Social Security share blame for deficit increase
Less is more: The dilemma over long term care insurance
6 ideas for this week's big long-term care hearing
What It Means to Be a Senior in the Gig Economy
Elderly with no nearby family to help them need safety net, experts say
Are your personal finances as good as gold?

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Updated, Friday, August 26, 2016, 10:23 AM (Pacific)

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LTC BULLET: REAL VS. MYTHICAL MEDICAID

LTC Comment: What’s the difference between the Mythical Medicaid conjured by analysts and the Real Medicaid at work in the LTC financing market and why does it matter? After the ***news.***

*** GLICKMAN FOR PRESIDENT: President of the Society of Actuaries, that is. Jim asks “Although you may not be eligible to vote in the SOA election (only actuaries can vote for the President) it would be very helpful for my campaign if you can contact the actuaries at your company (as well as actuaries at other companies that you may know) and let them know about my candidacy, and how involved and dedicated I am to my volunteer activities in the LTCi industry.” We say “hear, hear” and gladly support the candidacy of this indefatigable advocate for responsible LTC planning. Here are a few links he pointed us to in support of his candidacy:

· Read about my leadership approach from this interview, published in the March 2014 issue of the SOA Reinsurance News

· View my Video Message with my goals, as SOA President: Jim Glickman Video Message

· View my Candidate Page containing my Election Message, Bio, Background Information and Photos (click on the photo to read the caption): Jim Glickman SOA Candidate Page

Go Glickman! ***

*** SAVAGE TRUTH on long-term care: Don’t miss this column by Center friend and nationally syndicated financial columnist Terry Savage that quotes Brian Gordon of Center- corporate-member MAGA, Ltd.: “Don't ignore possible long-term care needs,” by Terry Savage, Chicago Tribune. ***

*** LTC CLIPPING: Too many academics and senior advocates live in an ideological fantasy world. They think long-term care is inadequate and call for more government financing which is exactly what fouled up LTC financing in the first place. I loved this article so we sent it to LTC Clippings subscribers last week. Here’s what happens when an academic with her head in the clouds confronts the hard reality of Real Medicaid.

8/21/2016, “An academic knowledge of elder care becomes a harsh, real lesson,” by Erin E. Arvedlund, Philly.com

Quote: “‘You can only get your parent 10 hours of in-home care a week under Medicaid. Then the gap in service becomes real. I had to fill in the gap myself,’ Olson said of her visits to Florida. ‘While everyone is pushing for at-home care, there's not enough coverage under Medicaid. In order to be eligible, you have to be nursing-home eligible,’ which means your elder relative's assets have been depleted. In 2013, she moved her mother, now 93, into Gracedale, a county-run and subsidized senior facility in Nazareth, Pa. Finding a facility for her mother and ensuring that her benefits stayed consistent shattered Olson's convictions and exposed irrationalities in government systems. Despite her expertise, Olson was ill-prepared to deal with the bureaucratic barriers imposed at every turn. ‘I was surprised at how much every service is siloed,’ she said. ‘It's so burdensome as to be impossible. The VA? To deal with them [Dottie Katz's husband was a veteran] is a nightmare.’”

LTC Comment: Read this article and you’ll hate to let another LTCI prospect say “No thanks.” I’ll bet dollars to donuts this elder care “academic” spent her classroom decades teaching that private LTCI is unworkable and we need more government financing of long-term care. Karma.

To subscribe to LTC Clippings, contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: REAL VS. MYTHICAL MEDICAID

LTC Comment: Economists and health policy analysts insist that Medicaid requires impoverishment; that it drives millions of Americans into destitution paying for long-term care; and that, therefore, we need a new mandatory, payroll-financed, government program to cover the catastrophic LTC risk and cost.

Bunk!

The Center for Long-Term Care Reform’s new paper proves access to Medicaid LTC benefits does not require impoverishment (that’s Mythical Medicaid); that Medicaid has counterproductively ameliorated LTC risk and cost rather than caused widespread penury (Real Medicaid); and that a new unfunded government entitlement program is the diametrically wrong prescription for future LTC financing.

You’ll have to wait for final release of the paper currently under review by its sponsor to see all the evidence and logic backing up that conclusion, but here’s a peek at how Real Medicaid (government financed indemnification for LTC costs after care is needed) has impacted the long-term care financing market.

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Following is an excerpt from “Long-Term Care Financing: The Myth and the Reality”
by
Stephen A. Moses

Real Medicaid's Consequences

By making nursing home care virtually free in the mid-1960s, Real Medicaid locked in institutional bias, crowded out a privately financed market for home care, and trapped the World War II generation in sterile, welfare-financed nursing facilities.

By reimbursing nursing homes less than the cost of providing the care, Real Medicaid guaranteed that America's long-term care service delivery system would suffer from serious access and quality problems.

By underfunding most long-term care providers resulting in serious quality problems, Real Medicaid incentivized plaintiffs' lawyers to launch giant tort liability lawsuits, extract massive financial penalties, and further undercut providers' ability to offer quality care.

By making public financing of expensive long-term care available after the insurable event occurred, Real Medicaid discouraged early and responsible long-term care planning and crowded out the market for private long-term care insurance.

By compelling poor people to spend down what little income and savings they possessed in order to qualify for long-term care benefits, Real Medicaid discouraged accumulation and growth of savings among the poor, reducing their incentives to improve their stations in life.

By allowing affluent people to access subsidized long-term care benefits late in life, Real Medicaid encouraged accumulation and growth of savings among the rich who could pass their estates to their heirs whether or not they were stricken by high long-term care expenditures.

By enforcing spend down more aggressively on the poor than the rich, Real Medicaid aggravated ageism and racism because the rich tend to live longer than the poor and minorities.

By allowing people and families with extra "key" money to buy their way into the better nursing facilities, Real Medicaid discriminated against the poor and favored the affluent. Medicaid planners help affluent clients avoid the program's reputedly poor care.

Medicaid is the cause of most of the dysfunctions in America's long-term care service delivery and financing system. But blame should not fall on the Mythical Medicaid program imagined by advocates of a new compulsory government program. Rather blame the Real Medicaid program that has operated to fund long-term care after people need expensive care while allowing them to preserve most of their wealth.

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Updated, Monday, August 22, 2016, 10:57 AM (Pacific)

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LTC E-ALERT #16-033: LTC NEWS AND COMMENT

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

An academic knowledge of elder care becomes a harsh, real lesson
The incredible cost of higher interest rates
As the For-Profit World Moves Into an Elder Care Program, Some Worry
Computer chips to improve cognition not appealing: survey
Who Owns Long-Term Care Insurance?
1.4 Million Americans Will Go Abroad for Medical Care This Year. Should You?
Affordability, amenities top influencers of future moves for those 55+
New Study Finds Medicare Advantage Plans Pay Lower Prices Than Traditional Medicare
Health Care Costs for Couples in Retirement Rise to an Estimated $260,000
Alzheimer's Care Puts Financial Strain On Family Members
Mother is elderly; does she need long-term care insurance?
Will The Cost Of Long-Term Care Bankrupt You?
7 new, free LTC marketing graphics

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Updated, Monday, August 15, 2016, 9:43AM (Pacific)

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LTC E-ALERT #16-032: LTC NEWS AND COMMENT

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

Feds may ban agents from selling Medicare long-term care plans
Dementia care added to Medicare Advantage insurance model
Active Life Expectancy in the Older US Population, 1982–2011: Black-White Differences Persisted
Medicaid long-term care eligibility and IRA distributions
Assisted Living Residents With Dementia Prone To Abusing Others, Study Finds
Most Sick, Aging Americans Live Far From In-Home Care
Hot Franchising Trend: Services for Seniors
Don't ignore possible long-term care needs
Brain aging accelerated by 10 years with midlife overweight, obesity
Elderly Hospital Patients Arrive Sick, Often Leave Disabled
Long-term care insurance rates soaring

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Updated, Friday, August 12, 2016, 10:59 AM (Pacific)

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LTC Bullet: New CLTCR Website Feature

LTC Comment: Today we are pleased to debut an exciting new feature from our Members-Only Zone website: The Long-Term Care Clippings Archive. Think of it as a highly-curated compendium of LTC news. More on that after this week’s ***news.***

*** NEW 2016 MEDICAID SPOUSAL IMPOVERISHMENT NUMBERS. We’ve just updated MEDICAID AND MEDICARE KEY NUMBERS UPDATED ANNUALLY in The Zone, the Center’s members-only website. If you need your user name and password to access The Zone or if you’d like to join the Center to gain sustained access, contact Damon at 206-283-7036 or damon@centerltc.com. (HINT: Read on to find out how to “Zone in” for free.)

*** Ever wonder how Medicaid made long-term care free and bungled rational LTC financing and public policy in the process? Read The Bibliography and last week’s LTC Bullet “Half a Century of Bad Medicaid LTC Policy” to get enlightened. ***

LTC Bullet: New CLTCR Website Feature

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

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

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

What we introduce today is a running collection of the LTC Clippings called the Long-Term Care Clippings Archive. This archive is organized by LTC-related subject and sub-category. While CLTCR Premium members will continue to receive their LTC Clippings in real time, Individual members will now have access to the Clippings Archive (updated monthly) through our Members-Only Zone website. Furthermore, this feature is still in beta, and for a limited time (two weeks), we’re making access free to all. Keep reading to learn how you can access the Archive, but in the meantime, here’s a breakdown of the subject categories:

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

See why we’re excited about this new utility and take advantage of the free trial period by going to http://www.centerltc.com/members/LTC_Clippings_Archive/Main.htm and log in with UN: IntrotoZone / PW: FreeTrial. If you find the Clippings Archive useful, join the Center for Long-Term Care Reform here or contact Damon at 206-283-7036 or damon@centerltc.com.

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Updated, Monday, August 8, 2016, 11:18 AM (Pacific)

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LTC E-ALERT #16-031: LTC NEWS AND COMMENT

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

New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage
CMS steps up enforcement on Medicaid users getting marketplace tax credits
How to Manage Family Finances While Taking Care of an Elderly Parent
Decrease Medicaid beneficiaries in nursing homes, CMS says
Genworth stock surges on better financial report
CMS Will Begin Immediate Imposition of Penalties
Medicaid’s Role in Meeting Seniors’ Long-Term Services and Supports Need
5 reasons Medicaid kills long-term care insurance sales: Economists look at how the government program knocks out the competition
CMS extends ban on new home healthcare agencies in select markets
How a Medicare Fix Backfires: Certificate of need laws have failed to reduce health care spending, and states should work to repeal them
CMS boosts skilled nursing payments by 2.4%

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Updated, Friday, August 5, 2016, 11:35 AM (Pacific)

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LTC BULLET: HALF A CENTURY OF BAD MEDICAID LTC POLICY

LTC Comment: Medicaid long-term care policy is a classic story of good intentions leading to unfortunate consequences, after the ***news***

*** MEDICAID AND LTCI: One of this week’s LTC Clippings perfectly teed up our new report, due in draft August 15 and for publication this fall. If you don’t receive our daily LTC Clippings that highlight all the news, articles, reports and data you need to see ahead of your prospects or competition, then contact Damon to subscribe at 206-283-7036.

8/2/2016, “5 reasons Medicaid kills long-term care insurance sales: Economists look at how the government program knocks out the competition,” by Allison Bell, LifeHealthPRO

Quote: “You know that competition from the Medicaid nursing home benefit makes selling private long-term care insurance hard. So, what does that cash-strapped, bureaucracy-plagued program have that private LTCI never really had, even back when interest rates were high enough that insurers felt comfortable with writing private LTCI? Mariacristina De Nardi and two colleagues have used the tools of economics to wrestle with that question in a new paper on Medicaid insurance in old age. The paper is on track to appear in an upcoming issue of the American Economic Review, a major academic journal.”

LTC Comment: The paper described in this article is at the heart of the evidence we’ll adduce in the Center’s new report referenced in last Friday’s “LTC Bullet: New Report Preview.” ***

LTC BULLET: HALF A CENTURY OF BAD MEDICAID LTC POLICY

LTC Comment: Political satirist P. J. O’Rourke says “If you think health care is expensive now, wait until you see what it costs when it’s free.” For all intents and purposes, long-term care has been free—or more precisely, very highly subsidized—since 1965. So, by now, we have a pretty good idea of what free long-term care costs—a lot!

I spent the last couple days compiling information and quotes that explain how Medicaid made long-term care free. Some highlights follow. Find the whole sorry story here: http://centerltc.com/Bibliography.htm. In a nutshell: Medicaid made nursing home care “virtually free for life” to anyone who couldn’t afford it. From 1965 until 1980, anyone could give away everything with impunity to qualify. Starting in 1980, many Congresses and Presidents have tried repeatedly to target Medicaid’s scarce resources to people in need. But Medicaid planners have always circumvented legislative intent in order to divert critically needed funds from the poor to their affluent clients.

A fascinating historical pattern evolved over the past 50 years. The U.S. suffers a recession, tax receipts plummet, welfare rolls skyrocket, public budgets go bust, and government clamps down on Medicaid planning. Then recovery sets in, tax receipts go back up, welfare rolls recede, and the politically sensitive rules intended to protect Medicaid for the poor go by the wayside. Then another recession occurs, and so on.

What’s different this time around is that after the Great Recession of 2007 to 2009, two things have not happened that always happened before. We’ve seen no new measures to discourage Medicaid planning abuses and we’ve experienced very little economic recovery. Why? Federal debt and unfunded entitlement liabilities have increased enormously, but this time around no one seems to care. Artificially low, Fed-induced interest rates have enabled careless deficit spending and political denial of the historically inevitable consequences. Hence no new legislation like DRA ’05 to control Medicaid planning.

Will the piper have to be paid? Will the next recession, following the biggest credit bubble in history, blow up federal entitlements, including Medicaid, and lead to a whole new world of long-term care financing? Or can the government and people go on forever defying economic gravity, borrowing to fund life styles they cannot afford, and pushing the unfunded liabilities into the future? That’s the climax we’ll have to wait to see, but you can follow the history leading up to it right now.

Excerpts from a Bibliography of Books, Elder Law Treatises, and Law Journal Articles on Medicaid Planning Listed Chronologically
with Dates of
U.S. Economic Recessions
and
Passage of Major Legislation to Control Medicaid Planning

July 30, 1965: President Lyndon Johnson signed Medicaid into law providing “medical assistance on behalf of . . . aged, blind, or permanently and totally disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.”

“Because of the attention focused on Medicare, Title XIX was passed by Congress with little public notice. This relative obscurity was lost when the cost of New York State's Medicaid program (effective May 1, 1966) became known. Federal cost estimates for the entire Medicaid Program were shown to have been grossly underestimated." (p. 63)
“Under Title XIX a state may also provide medical assistance to some of the ‘medically indigent.’ This group includes all persons whose income is high enough to meet daily living expenses, but not sufficient to meet medical bills.” (p. 64)
“Several different methods of limiting the federal contributions to state Medicaid programs were considered over the objections of liberal, mostly urban, Congressmen. After long debate, the method finally selected was to place limits on the annual incomes of the medically indigent for whom federal matching funds would be available.” (p. 83)
_________, “Medicaid: The Patchwork Crazy Quilt,” Columbia Journal of Law and Social Problems, 5 Colum. J.L. & Soc. Probs. 62 1969

January to July 1980: Recession.

December 5, 1980: President Jimmy Carter signed the Omnibus Reconciliation Act of 1980, imposing the first restriction on asset transfers done in order to qualify for Medicaid.

Spring 1981: First law journal article on Medicaid planning published:

"Careful planning even under adverse state law will still be able to achieve the goal of excluding an applicant's resources for purposes of determining Medicaid eligibility."
William G. Talis, "Medicaid as an Estate Planning Tool," Massachusetts Law Review, Spring 1981, p. 94
Also: "The article also describes ways clients might reduce exposure to health costs through (1) creation of various trust devices, (2) conveyance of remainder interests in property, (3) conversion of property into assets exempted from eligibility tests for medicaid, and (4) outright transfers of property. If a client can be rendered eligible for medicaid, medical expenses will be paid in full and estate assets will be conserved. Moreover, while the Department of Public Welfare may seek recovery for payments made on behalf of elderly recipients from their estates, careful planning can lawfully defeat the Department's ability to obtain indemnification." (Ibid., p. 90)

July 1981 to November 1982: Recession

September 3, 1982: President Reagan signed the Tax Equity and Financial Responsibility Act authorizing state Medicaid programs to penalize asset transfers, place liens on real property, and recover benefits from the estates of deceased recipients.

"With long-range planning, the cooperation of relatives, some good health, and maybe a little luck, couples will be in a position to negotiate between the rock and a hard place that Congress has placed in the Medicaid path."
Gill Deford, "Medicaid Liens, Recoveries, and Transfer of Assets after TEFRA," Clearinghouse Review, June 1984, p. 139

"By helping clients plan before the occurrence of disability, by advising clients to make permissible transfers of assets, and by making them aware of relevant administrative regulations on deeming, lawyers can aid in preserving funds to the greatest extent possible."
William E. Oriol, The Complex Cube of Long-Term Care, American Health Planning Association, Washington, D.C., 1985, p. 216

April 7, 1986: President Reagan signed the Consolidated Omnibus Budget Reconciliation Act of 1985 restricting the use of Medicaid Qualifying Trusts.

"Many people assume that a family's resources must be virtually exhausted before any help will be available through the Medicaid program. In fact, people in Washington who need nursing home care can benefit from medicaid without devastating their families."
Peter Greenfield and Barbara A. Isenhour, "Medicaid for Nursing Home Care: Some Estate Planning Considerations," Washington State Bar News, Volume 40, Number 6, June 1986, p. 29

"...many individuals find it desirable to shelter their income and assets in order to remain eligible for public assistance. A trust is often recommended to achieve such a shelter.... Trust mechanisms have been and will continue to be an important aspect of planning for Medicaid eligibility."
C. Wesley Martin, "Medicaid Qualifying Trusts," Connecticut Probate Law Journal, Vol. 3, Fall 1987, pps. 185, 208

July 1, 1988: President Ronald Reagan signed the Medicare Catastrophic Coverage Act of 1988 making asset transfer penalties mandatory and expanding the look-back period to 30 months.

"So is there any practical way to juggle assets to qualify for Medicaid--before losing everything? The answer is yes! By following the tips on these pages, an older person or couple can save most or all of their savings, despite our lawmakers' best efforts...Here are the best options: Hide money in exempt assets...Transfer assets directly to children tax-free...Pay children for their help...Juggle assets between spouses...Pass assets to children through a spouse...Transfer a home while retaining a life estate...Change wills and title to property...Write a durable power of attorney...Set up a Medicaid Trust...Get a divorce...."
Armond D. Budish, Avoiding the Medicaid Trap: How to Beat the Catastrophic Costs of Nursing-Home Care, Henry Holt, New York, 1989, p. 34
Also: “By paying off a mortgage, they can magically change assets like cash, which would be lost to a nursing home, into assets that can't be touched.... Since there's no limit on the value of a house that they can buy, they may be able to hide most or all of their assets with this one simple technique. This is a giant loophole, which they should feel free to take advantage of." (Ibid., p. 38)
Also: "If the person is married, household goods, a car and personal effects are protected without regard to their value!.... For example, oriental rugs or paintings that appreciate in value may be worthwhile investments that add beauty and hide assets at the same time." (Ibid., p. 39) Also: "Here's another loophole that a nursing-home resident may want to consider. He or she could buy a brand-new--and expensive--ring right before going into a nursing home. After all, the law doesn't limit this exclusion to rings purchased at the time of a wedding or engagement." (Ibid.)

"...a common misconception among applicants is that excess resources must be spent only on doctors, hospitals, nurses, medication, and nursing homes. Nowhere in the law is this indicated. Quite literally, an applicant could spend all of his or her assets on something 'frivolous,' such as a 90th birthday celebration of Ziegfield Follies proportion and this should not be cause for denial of Medicaid, because the applicant received 'value' for his or her money."
Ira S. Schneider and Ezra Huber, Financial Planning for Long-Term Care, Human Sciences Press, Inc., New York, 1989, p. 142

July 1990 to March 1991: Recession

"It's common...for people to have undocumented and untraceable assets, such as cash and bearer bonds. If these items were to be surreptitiously transferred, their existence would probably not become known to the authorities. No doubt it is improper to tell clients to make such transfers, but the temptation to hint at them, or to scrupulously avoid finding out if the client has a safe deposit box or undocumented assets, however reprehensible, is strong."
Peter J. Strauss, Robert Wolf, and Dana Shilling, Aging and the Law, Commerce Clearing House, Inc., Chicago, 1990, p. 16

"While there are rules against giving away most assets, there are no prohibitions against simply spending money...options might include travel to visit relatives or see the world, or one last tour of Reno's finest establishments."
Michael Gilfix and Mark Woolpert, "Medi-Cal Asset Preservation and Your Clients or Estate Planning is Not Enough!: A California Elder Law Institute Continuing Legal Education Seminar," Gilfix Management Group, Palo Alto, California, 1990, p. 42

"The most common problem put to the elderlaw practitioner is how to keep an older person's assets within the family and yet allow the person to qualify for Medicaid."
John J. Regan, "Financial Planning for Health Care in Older Age: Implications for the Delivery of Health Services," Law, Medicine and Health Care, Vol. 18, No. 3, Fall 1990, pps. 275-6
Also: "It is important to emphasize to the older client, who may be reluctant to utilize Medicaid because of pride or possible stigma, that participation in Medicaid is not a gratuity but an entitlement like use of a public library or a public park."
John J. Regan, Tax, Estate & Financial Planning for the Elderly, Matthew Bender, New York, 1991, 1993 update, p. 2-44
Also: "If a couple has a second vacation home, consider having the couple rent that home and then claim the rental income as necessary for maintaining the community spouse's minimum monthly maintenance needs allowance. If the vacation home is considered necessary for this purpose, it is no longer a countable resource." (Ibid., p. 10-68)

"It is true, almost to the point of being a cliche, that benefit programs, whether public or private, are bonanzas for lawyers."
Lawrence A. Frolik and Alison P. Barnes, "An Aging Population: A Challenge to the Law," The Hastings Law Journal, Vol. 42, No. 3, March 1991, p. 715

"An alternative to resource gifting and conversion is the purchase of an annuity...the Medicaid estate can usually be reduced by the amount of countable assets used to purchase an annuity." Jonathan M. Forster, "Favorable Investment Vehicles for Public Benefits Planning (Part 1: Resource Planning and the Annuity," Elder Law Advisory, No. 7, October 1991, p. 2

"The new amendment to the Social Security Act (Pub. L. No. 101-239, 103 Stat. 2465, amending 42 U.S.C. 1382b(a)(3)) allows for the exemption of all income-producing property used in a trade or business.... In other words, there is now an unlimited exemption for such property.... Property used in a trade or business is excluded regardless of its value or rate of return.... Critical provisions for advocates to note are that liquid resources used in the trade or business may be excluded from countable resources, and that no limit is placed on such resources (POMS SI 01130.501C.5). Thus, advocates may exclude large amounts of cash in business operating accounts, trust accounts, and the like, that are necessary for use in the business.... Ultimately, Medicaid recipients will want to transfer their property to avoid the imposition of a lien and recovery from the estate for Medicaid expenditures. Since business, farms, and ranches in current use are exempt property, they can theoretically be transferred without penalty. No restrictions are placed on the transfer of this exempt property, unlike the transfer of a home (42 U.S.C. 1396(c))."
Rebecca L. Shandrick, "The Family Business: An Exempt Resource for Medicaid Eligibility," The ElderLaw Report, Vol. 4, No. 3, October 1992, pps. 1-4, emphasis in the original

"We have committed an act of piracy--we have broken into the Fort Knox of Government benefits and uncovered the best legal strategies available to you for claiming your share of the gold from the Government's treasure chest.... We'll explain how you can 'strike gold' in the Social Security [including SSI], Medicare, and Medicaid programs.... With this book we are handing you the treasure map, deciphered from a mine of unintelligible government rules and regulations."
Amy Budish and Armond D. Budish, Golden Opportunities: Hundreds of Money-Making, Money-Saving Gems for Anyone over Fifty, Henry Holt and Company, New York, 1993, p. xiii

"Another asset preservation strategy is for a community spouse to 'just say no' to paying for the other spouse's nursing home care. Say Mrs. Jones holds more money than the state allows for her husband to qualify for Medicaid coverage. If it can be shown that she simply refuses to spend her money on her husband's care, Medicaid coverage will be allowed for Mr. Jones if other easily met requirements are satisfied. This approach has been particularly successful in New York."
Michael Gilfix, "Elders and Nursing Home Expenses: Preserving Client Assets," Trial, Vol. 29, No. 6, June 1993, p.38

August 10, 1993: President Bill Clinton signed the Omnibus Budget Reconciliation Act of 1993 making estate recovery mandatory, expanding the look back period to five years, eliminating the cap of asset transfer penalties, and prohibiting “pyramid divestment.”

"Old Tactics That are Still Good: Give Assets Away. Giving assets away [three years in advance] is still the simplest and easiest way to deal with the problem, although it leaves the elderly client totally dependent upon the good faith of their children or others. Spend Assets on Exempt Items. Another tactic is to spend the assets on property that won't count for Medicaid purposes...[such as] a home...a new car...household goods...funeral expenses...and...a burial plot...A client can also reduce his net worth by spending money on travel, which many elderly people enjoy. Pay Children for Their Help. Be sure that any payments to children for their services are pursuant to a written agreement, so it's clear that they are not just gifts. Give Assets to the Other Spouse, a Minor Child, or a Child Who is Disabled. [Such gifts] will not be penalized. The Other Spouse Can Petition for an Increased Asset Allowance. The other spouse can argue that additional assets are needed to generate income...[thereby sheltering in one example an additional] $200,000. The Other Spouse Can Refuse to Support the Applicant.... In New York, this tactic can be successful even if the spouse's refusal is completely artificial; it is used in that state frequently. Divorce.... The idea is for the spouse to be given a larger portion of the couple's assets, with little or no support awarded to the applicant. Sign a Durable Power of Attorney. All clients should sign a durable power of attorney so that if they become incapacitated, someone else can shelter their assets."
Lawyers Weekly, September 27, 1993

"Medicaid is a middle-class entitlement, just like the deduction for mortgage interest and IRAs." Mark Heffner, former Rhode Island state legislator and RI Coordinator of NAELA in Providence, RI Journal, February 22, 1994

August 21, 1996: President Bill Clinton signed the Health Insurance Portability and Accountability Act (Throw Granny in Jail Law) making it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid.

"The chart at the end of these materials labeled 'The Home in Medicaid Planning'...contains a matrix with 10 rows and 8 columns. Each row contains a method of protecting the family home from Medicaid estate recovery. Each column contains a Medicaid or tax issue which must be considered when selecting a method of protecting the family home."
NAELA Conference 1996 Proceedings, Session 7, p. 1

"As a practical matter, if your wife needs nursing home care in the future you may want to privately pay the nursing home (three months up front) for purposes of expediting your wife's placement in a nursing home, unless she is eligible for Medicare benefits. Once your wife is in the nursing home and eligible for Medicaid, you should immediately proceed to file for Medicaid Nursing Home Care.... Since your assets are in excess of the CSRA [$652,550] at the time your wife files a medicaid application for nursing home care, then it is critical that you submit a 'Spousal Refusal' to contribute your assets to pay for her care, or else she will be denied Medicaid.... We are available to assist you in the preparation and filing of Medicaid applications and the coordination of Medicaid coverage, including monthly budgeting.... If you receive a denial of benefits...[o]ur firm is available to assist you with regard to any Medicare claims and appeals.... [S]hould your wife require such care, you can obtain Medicaid eligibility for her by transferring assets into your name and your utilization of spousal refusal.... Another alternative would be for you to purchase an annuity with the assets in excess of the CSRA.... This approach will allow your wife to qualify for nursing home care without a transfer penalty and without spousal refusal.... Your wife can transfer her assets into a trust for your sole benefit. This transfer would not subject her to a Medicaid period of ineligibility.... [T]he CSRA should be enhanced to $200,000 from $76,740.... If the consultation exceeds the one-half hour, then you will be charged based upon my hourly rate of $275 and my legal assistant's rate is $100." NAELA Conference 1996 Proceedings, Session 9, pps. 34-38, 46

"The PAN [private annuity] and the SCIN [Self-Canceling Installment Note] are clearly effective but highly underutilized tools in the Medicaid planning area. As practitioners become more familiar with their tax, legal, and Medicaid planning benefits, their popularity will undoubtedly increase to the point where Congress will again change the laws."
NAELA Conference 1996 Proceedings, Session 14: "Making Resources Disappear--The Magic of Private Annuities and Self-Canceling Installment Notes," p. 12

"By using a LCC [Life Care Contract], the applicant is outside the purview of the disqualifying transfer section of Title 42 because the contract anticipates a transfer for value and not a gift. Therefore, to the extent that the elder's assets are transferred pursuant to this contract, the elder will incur no period of ineligibility.... The LCC is a transfer for value and can either be structured as a lump sum transaction where the entire property is transferred at one time, or can be structured to payout on a month to month basis.... Using this one payment method, an elder can transfer a large number of assets and shortly thereafter qualify for Medicaid if the caregiver can prove that the medical condition causing the disability was totally unanticipated (massive stroke).... IT DOESN'T MATTER IF MOM HAS A MASSIVE STROKE AND IS A CANDIDATE FOR LONG TERM CARE SIX MONTHS LATER...."
NAELA Conference 1996 Proceedings, Session 6: "Uses, Terms and Provisions of Lifecare Contracts for Elders," pps. 1-2, 4, 11

"Many of our clients own a second piece of real property--a summer home, a mountain cabin, an investment. It is typically viewed as an impediment to Medi-Cal eligibility when one spouse enters a nursing home. Assume that a couple's second (non-exempt) residence is worth $225,000 and that other cash assets are relatively modest, perhaps only $80,000. Rather than sell this property, as Medi-Cal would likely advise, protect it. In tallying their assets, the appraised value, not the fair market value, determines the value of the real property asset for Medi-Cal purposes. Assume further that the appraised value is $40,000, entirely likely in light of [California] Proposition 13. The community spouse, the spouse living at home, could take out a loan in the amount of $40,000 and, for purposes of Medi-Cal, reduce its effective value to $0. The borrowed money could then be used to add on to the residence, buy needed items, invest in other exempt resources, or be protected by an increased Community Spouse Resource Allowance (CSRA) order."
Michael Gilfix, "Practice Tip: Protect Non-Residential Real Property and Medi-Cal," Gilfix ElderLaw News Alert, Vol. VII, No. 1, February 1997, p. 3
Also: "Payment for personal services can be part of a 'spend-down' when a Medi-Cal application may be submitted in one's future. Depending on the amount of services rendered, this could justify $1,000 or perhaps $2,000 per month when care and support are very substantial.... [F]unds used for the payment of services might otherwise have to be invested in payment for nursing home services at the private rate." (Ibid., p. 12)

"Cemeteries may do a good or bad job of maintaining grave sites. And they may do a good job today, but drop the ball years from now. A new service is being offered to provide assurance that sites will be maintained for the next 25 years. Depending on the plan purchased, the one-time fee ranges from $3,800 to $13,500. The company offering the plan, Westland Perpetual Trust, Inc., reports that payment of the fee has been permitted as a legitimate Medicaid spend down. The service is offered nationwide."
Elder Law Report, May 1997, p. 12

"Medicaid planning is still practiced by competent people of all socio-economic classes in all fifty states.... In this article, we argue that guardians should be permitted to perform Medicaid planning for their wards.... [T]he term 'Medicaid Planning' is used in this article to mean the process of lawfully rearranging an individual's assets so that the individual qualifies for Medicaid under the law while the assets are sheltered for use by a spouse, children or others.... These techniques...include: divesting assets generally, transferring assets between spouses, transferring assets to trusts, converting assets, and divorcing a spouse.... [T]he couple may avoid a claim by the state to recover the Medicaid payments by transferring all spousal assets to the sole ownership of the community spouse after the institutionalized spouse's application for benefits has been approved.... Another sheltering strategy is to convert available, countable assets into noncountable exempt assets. For example, money in checking or savings accounts may be used, without creating a period of ineligibility, to purchase or improve a home, pay off a mortgage, buy a cemetery lot, pre-pay funeral services, pre-pay residence-related taxes and insurance, or even pay outstanding bills, including legal fees.... Divorce is one of the more extreme Medicaid planning strategies. A successful divorce, in which both parties are represented by independent counsel, and containing an agreement in which most or all of the couple's assets are given to the community spouse, can result in almost immediate Medicaid eligibility for an institutionalized spouse.... The mere fact that Congress and the states have enacted statutes and regulations expressly permitting and endorsing Medicaid planning is clearly an expression of the public policy to allow such planning."
Hal Fliegelman and Debora C. Fliegelman, “Giving Guardians the Power to do Medicaid Planning,” Wake Forest Law Review, Vol. 32, No. 2, Summer 1997, pps. 341-2, 359, 362-4, 373

August 5, 1997: President Bill Clinton signed the Balanced Budget Act (Throw Granny’s Lawyer in Jail Law) repealing the criminalization of asset transfer to qualify for Medicaid, but making it a crime to recommend asset transfers for the purpose of qualifying for Medicaid in exchange for a fee.

"Q: Can my parents give away a part of their life savings and still qualify for Medicaid? A: Yes. The law lets people give a portion of their savings to children or others to protect those funds from being tabulated as assets. Giving away money can help your parents reduce their funds to a level that makes them eligible for Medicaid. Q: How else can my parents protect part of their life savings? A: Here are three of the most popular planning strategies. ...1. Put money into exemptions [i.e. home improvements, a new car, etc.]. ...2. Create specialized trusts. Medicaid permits the creation of a variety of specialized trusts that preserve assets. Your parents might transfer their home to an irrevocable Medicaid trust, which allows them to live at home for life, obtain Medicaid coverage if they must enter a nursing home, pass the residence to heirs at death, and avoid capital-gains taxes. ...3. Purchase an immediate Medicaid annuity or promissory note. Let's return to the example of your parents with $100,000 in assets when dad enters a nursing home. Your mom takes $50,000 of that and buys (in her name) an immediate Medicaid-qualified annuity from an insurance company. ...Dad qualifies for Medicaid immediately, and Mom remains financially secure because she keeps all the income. She may even save and accumulate the annuity payments without jeopardizing her husband's Medicaid coverage."
Armond Budish writing in Family Circle, November 1, 1997, p. 46

March 2001 to November 2001: Recession

“True, Medicaid planning remains a core element in any elder law practice and is probably the leading source of clients and revenues for almost all elder law attorneys.” (pps. 3-4)
“Of course, elder law is not a fringe practice. For thousands of attorneys, elder law represents the core of their practice.” (p. 13)
“The practice of elder law, however, is not yet fully formed, because there are many parts of it that could either expand or contract, such as nursing home and assisted-living litigation. Will elder law attorneys perceive suing nursing homes and assisted-living facilities for negligent care as part of their practice, or will it be captured by personal injury attorneys?” (p. 14)
Lawrence A. Frolik, “The Developing Field of Elder Law Redux: Ten Years After,” The Elder Law Journal, 10 Elder L.J. 1 2002

“Unfortunately, members of the Medicaid planning bar have sometimes been their own worst enemies. For example, at the May 1996 Symposium of the National Academy of Elder Law Attorneys, two prominent NAELA members (one a former President of the organization) gave a presentation on Medicaid planning. Using the format of a skit in which other NAELA members played the roles of the family, the presenters took the audience through a session in which an elderly couple, whose net worth exceeded $750,000, was counseled on how to arrange their affairs to attain Medicaid eligibility. Among the assets in the couple's portfolio was a vacation home. The skit became fodder for critics of Medicaid eligibility planning and indeed was widely criticized by other NAELA members.” (p. 135)
Timothy L. Takacs and David L. McGuffey, “Medicaid Planning: Can It Be Justified? Legal and Ethical Implications of Medicaid Planning,” William Mitchell Law Review, 29 Wm. Mitchell L. Rev. 111 2002-2003

February 8, 2006: President George W. Bush signed the Deficit Reduction Act placing the first cap ever on Medicaid’s home equity exemption, limiting the half-a-loaf loophole, amending the annuity rules, and unencumbering the Long-Term Care Partnership Program.

“Can an elderly husband really refuse to support his wife in a nursing home by shifting the financial burden to Medicaid? Yes, says the U.S. Court of Appeals for the Second Circuit, by employing a Medicaid-planning strategy called ‘spousal refusal.’
“Due to the high cost of nursing home care, elderly people and their families have increasingly turned to Medicaid-planning strategies to qualify for Medicaid benefits and ease their financial burden.' Medicaid planning involves taking measures to preserve one's assets in order to gain Medicaid eligibility by meeting the program's financial criteria. One such Medicaid-planning strategy is spousal refusal, under which a healthy spouse refuses to financially support a spouse in need of nursing home care. Spousal refusal has been in existence since 1988, following Congress' attempt to fix the Medicaid system to prevent spousal impoverishment, which is when a healthy spouse ends up poor after paying for an ailing partner's care. (p. 487)
Andrew D. Wone, “Don't Want to Pay for Your Institutionalized Spouse? The Role of Spousal Refusal and Medicaid in Funding Long-Term Care, The Elder Law Journal, Volume 14, 14 Elder L.J. 485 2006

“Now that the annuity rules have been greatly clarified, the annuity industry will likely accept this gift from Congress and develop annuity products which comply with DRA.” (p. 17)
Stan Miller and D. Scott Schrader, Guest columnist: Rebecca H. Winburn, “Advanced Planning Strategies: Medicaid Planning After the Deficit Reduction Act of 2005,” Journal of Practical Estate Planning, April - May 2006, 8 J. Pract. Est. Plan. 15 2006-2007

December 2007 to June 2009: The Great Recession

“President George W. Bush, in a statement made when he signed the DRA, explained:
The bill tightens the loopholes that allowed people to game the system by transferring assets to their children so they can qualify for Medicaid benefits. Along with Governors of both parties, we are sending a clear message: Medicaid will always provide help for those in need, but we will never tolerate waste, fraud, or abuse.
“The policy reasons set out by former President Bush for the passage of the DRA as it relates to Medicaid are clear: Medicaid's mission is to help the needy, the sickest and poorest members of society, without waste, fraud, or abuse.” (pps. 347-8)
“Before the DRA, there was a huge gap between what Medicaid law allowed and Medicaid policy, as expressed by President Bush. The DRA was passed to bring Medicaid law closer to Medicaid policy.'” (p. 350)
Catherine M. Reif, “A Penny Saved Can Be a Penalty Earned: Nursing Homes, Medicaid Planning, the Deficit Reduction Act of 2005, and the Problem of Transferring Assets,” NYU Review of Law & Social Change, 34 N.Y.U. Rev. L. & Soc. Change 339 2010

“While Medicaid was arguably created as a ‘safety net’ program with the sole purpose of providing health care for the poorest members of society, it is common for Medicaid to pay for LTC services for elderly individuals from a variety of economic backgrounds.” (p. 358)
“It is not uncommon for couples and individuals to engage in a practice often referred to as ‘Medicaid Planning,’ which one commentary defines as ‘the legal fiction of 'rearranging assets' to make someone poor on paper so that he or she may qualify for Medicaid.’ It is well established that such ‘Medicaid Planning’ is legal and that it is professionally ethical, or acceptable, for attorneys and financial planners to assist clients in such planning. Nonetheless, the Medicaid planning and spend down processes are quite complex, potentially highly financially disruptive, and may lead to inequitable results. Moreover, although legal, Medicaid planning is often perceived as ‘gaming the system.’” (p. 359)
Andrew M. Hyer, Elizabeth L. Hannah, Ross E. Burkhart, and Sarah E. Toevs, “Paying for Long-Term Care in the Gem State: A Survey of the Federal and State Laws Influencing How Long Term Care Services for Idaho's Growing Aged and Disabled Populations Are-and Will Be-Funded, Idaho Law Review, 48 Idaho L. Rev. i 2011-2012

“As discussed more fully in Section IX purchasing an annuity for the community spouse with excess resources can immediately establish eligibility of the institutional spouse irrespective of the amount of excess resources.” (p. 169)
“As discussed in Section IX, the transfer of asset rules do not foreclose all planning opportunities. It is ironic that more planning opportunities remain for persons of substantial means than for those persons of lesser means. This is an irony quite familiar to those who do tax planning.” (p. 170)
“While not required, transferring title of exempt resources solely into the name of the community spouse can avoid ineligibility for the nursing home spouse in the event the resources are sold, as well as protect the assets from Medicaid estate recovery.” (p. 183)
“Based on the foregoing analysis we can now set out various planning options to reduce excess resources in the most advantageous manner possible. We begin by looking at the options available to single persons and then consider the additional options available to married persons.” (p. 188)

“Gifting and Waiting Out the Look-Back Period or the Ineligibility Period” (p. 188)
“Purchasing Exempt Resources” (p. 190)
“Consuming Excess Resources” (p. 190)
“Transfer the Home to Certain Children or Siblings” (p. 191)
“Establish Trusts for Disabled Persons Less Than 65 or For a Disabled Child of Any Age” (p. 191)
“Disinheritance or Third Party Special Needs Trusts” (p. 192)
“Transfer Exempt Assets from the Institutional spouse to the Community Spouse” (p. 193
“Revise the Community Spouse's Estate Plan (p. 193)
“Purchase an Annuity for the Community Spouse” (p. 194)
“Requesting an Excess Resource Allowance” (p. 195)
“Divorce, Legal Separation, or Non-Binding Unions” (p. 195)
“Using Washington State as an example, this article has attempted to provide a road map for practitioners seeking to guide their clients through the long term care planning process. Most of the legal requirements and planning techniques described here have application in other states as well. There are nuances of difference and, of course, the applicable authorities differ from state to state. Still the fundamentals are reasonably universal since Medicaid's basic architecture arises under federal law.” (p. 196)
Sean R. Bleck, Barbara Isenhour, and John A. Miller, Preserving Wealth and Inheritance Through Medicaid Planning for Long-Term Care,” MSU Journal of Medicine and Law, 17 Mich. St. U. J. Med. & L. 153 2012

“This Article suggests that the United States also maintains a secret welfare state. The secret welfare state exists because of lawyers' ubiquitous use of questionable practices in representing clients before benefit-granting government agencies, which enable thousands of individuals to collect public benefits who may not qualify for them.” (p. 1847)
“The funding for SSDI and Medicaid is limited. In assisting relatively advantaged individuals to obtain SSDI, Medicaid, and other public benefits programs, lawyers may be jeopardizing these programs' sustainability and the welfare of those who depend upon them. (p. 1847)
“This Article concludes by calling for additional research on the role of lawyers in the American welfare state. In particular, it may be possible that the legal profession's central role in the distribution of public benefits is an obstacle to a fairer and more transparent social safety net.” (p. 1849)
“Studies estimate that anywhere from 5 percent to 54 percent of current Medicaid beneficiaries have engaged in Medicaid planning. Even if the lower estimates are accurate, as Medicaid planning is generally used by more affluent individuals, it predominantly benefits the nonpoor.” (p. 1855)
“Footnote 88: While fee information for Medicaid planning is not as readily available, according to the American Council on Aging, attorneys' fees can range from $2500 for individuals with relatively simple estates to $10,000 for individuals with significant assets. See Am. Council on Aging, Medicaid Planners: Pros & Cons of Public and Private Assistance, MEDICAID PLANNING ASSISTANCE, http://www.medicaidplanningassistance.org/types-of-medicaidplanners#elderlaw-attorney (last visited Mar. 27, 2016) [http://perma.cc/EJ5L-2RWR]. Nonlawyers who provide Medicaid planning services generally charge less.” (p. 1857)
“The American welfare state is sustaining relatively advantaged individuals and their lawyers as well as the truly needy. In the long-term, the United States would be well served by a more transparent public benefits regime.” (p. 1864)
Milan Markovic, “Lawyers and the Secret Welfare State, Fordham Law Review, 84 Fordham L. Rev. 1845 2015-2016

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Updated, Monday, August 1, 2016, 11:12 AM (Pacific)

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LTC E-ALERT #16-030: LTC NEWS AND COMMENT

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

Nursing Home Bills Are Swamping Medicaid
Alzheimer’s researchers seethe over years of missteps after latest drug failure
Low interest rates a growing threat to Social Security
The Mega-List of Caregiver Support Strategies and Resources
7 (relatively) easy insurer ideas for saving long-term care insurance
Trying to find adequate elder care is a bureaucratic and personal nightmare
When Aging Parents Need Help With Financial Tasks
How to solve California's housing shortage? Build 'granny flats' in homeowners' backyards
Senior surprise: Getting switched with little warning into Medicare Advantage
What you need to know about the Democratic platform
Lawmakers want answers to long-term care premium hikes
Dementia diagnosis has 'silver lining' for many
Nursing Home Residents Still Vulnerable to Abuse

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Updated, Friday, July 29, 2016, 10:13 AM (Pacific)

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LTC BULLET: NEW REPORT PREVIEW

LTC Comment: I’ve spent the past several months re-reading four decades of research on long-term care financing by economists, policy analysts, and lawyers. Our new report due out this fall will tell all, but here’s a preview after the ***news.***

*** OMINOUS PARALLELS: LTC Clippings subscribers received this item from us today. Artificially low interest rates forced on the economy by the Federal Reserve are doing to Social Security what they’ve already done to LTC insurance. To learn more about or subscribe to LTC Clippings, contact Damon at 206-283-7036 or damon@centerltc.com. ***

7/28/2016, “Low interest rates a growing threat to Social Security,” by Harvard Zhang, MarketWatch

Quote: “Record-low yields on U.S. Treasurys endanger the long-run solvency of Social Security and the future retirement benefits for younger generations of Americans, economists say. Newer Treasury bonds held by the trust fund have been earning less for years, the consequence of sluggish economic growth and persistently low interest rates. The Federal Reserve has kept its benchmark short-term rate at or near zero for more than seven years in an effort to stimulate the economy. Even with the Fed’s extended easy-money approach, the U.S. economy has not grown fast enough to generate the necessary tax income to help fund all its responsibilities, including Social Security for current and future retirees.”

LTC Comment: The Fed’s artificially low interest rates hurt LTCI by forcing premium increases so that reserves would suffice to pay future claims. This article offers a rare observation that the Social Security trust fund faces the same problem, inadequate reserves with too little investment return. So too Medicare and all the other many government trust funds. A reckoning looms and when it comes, we’ll all pay higher “premiums,” i.e., taxes, because of government’s reckless monetary and fiscal policy. ***

*** OTHER NEWS: LTC Clippings this week also addressed “The Mega-List of Caregiver Support Resources,” “7 (relatively) easy insurer ideas for saving long-term care insurance,” “Trying to find adequate elder care is a bureaucratic nightmare,” “When Aging Parents Need Help With Financial Tasks,” “How to solve California's housing shortage? Build 'granny flats' in homeowners' backyards,” “Senior surprise: Getting switched with little warning into Medicare Advantage,” “Lawmakers want answers to long-term care premium hikes,” “Dementia diagnosis has 'silver lining' for many,” and other important stories. Let us screen the voluminous media coverage of aging issues and send you the most important stories, reports and data with brief analysis to help it all make sense. Subscribe to LTC Clippings. ***

LTC BULLET: NEW REPORT PREVIEW

LTC Comment: I’m almost one week into writing the draft of our new report. Following are the “Abstract” and the “Introduction” as they stand right now. Although they may change, this preview should give you a pretty good idea of where the report is headed. We may offer more draft excerpts in future weeks. Your feedback, whether complimentary or critical, is always welcome.

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Abstract: The age wave and fiscal constraints challenge America’s long-term care financing system. Decades of study commissions, white papers and legislative initiatives have failed to achieve a better way. But consensus is finally forming around a public policy approach advocated by three similar papers published in February 2016. That approach is to establish a new, mandatory, publicly financed, long-term care insurance program to cover the catastrophic, back-end long-term care financing risk. The primary rationale for this new program is that the current system, based on Medicaid, forces people into impoverishment and has failed. In fact, Medicaid does not require impoverishment and the draconian program blamed for the long-term care financing system’s dysfunctions has never existed. This paper will explain how Medicaid long-term care financing actually works and why much of the contrary analysis by economists and health policy experts, based on survey data, simulations and modeling, is mistaken, misleading and misguided. The paper concludes with recommendations to improve long-term care financing for the poor, middle-class and affluent based on free-market principles and individual responsibility without adding another layer of compulsory government involvement.

Introduction

After decades of struggling unsuccessfully to find a better way to finance long-term care, researchers, industry experts and public policy makers are starting to agree on a general direction for reform. A consensus is forming around the idea of a mandatory, government-financed program to cover the back-end, catastrophic long-term care risk. Three reports published in February of this year by Leading Age, the Bipartisan Policy Center and the ad hoc LTC Collaborative offered variations of this plan.^{^[1]} All three relied on research conducted by the Urban Institute (UI) and the actuarial firm Milliman as described in a November 2015 Health Affairs article titled “Financing Long-Term Services and Supports: Options Reflect Trade- Offs for Older Americans and Federal Spending.”^{^[2]}

The Health Affairs article stated that “half of older Americans” will require “a prolonged period” of paid “long-term services and supports,” half of which assistance they will fund “out of pocket,” but because “few people purchase private long-term care insurance” or save sufficiently, “many will eventually turn to Medicaid for help.” The article concluded and the three reports agreed that among the front-end or back-end, voluntary or mandatory, capped or uncapped financing alternatives considered, “the mandatory options would be more successful than the voluntary versions” and “the comprehensive and back-end mandatory options would be most beneficial.” A payroll tax like Medicare’s, not subject to a wage cap, should fund a new mandatory public long-term care program based on these principles. This is the consensus around which a growing number of policy analysts, policy makers, and interest groups are coalescing.

It behooves everyone concerned about long-term care financing to identify and question the assumptions, data, and reasoning behind this growing programmatic consensus. When we unpack these components, we find several common propositions underpinning them that warrant critical analysis. For example, does the fact that many people eventually turn to Medicaid for help with long-term care mean they have been forced to spend down into impoverishment by the welfare program’s allegedly draconian income and asset restrictions? Is it true that half of what people spend for long-term care comes out of their own pockets? Do too few people buy private long-term care insurance because the product costs too much and delivers too little? Does it follow from rising long-term care expenditures incurred by a rapidly aging population that the best way to pay for care is through a new, compulsory government program? America already has a number of centrally planned entitlement programs with high and growing unfunded liabilities. We should not contemplate adding another without first scrutinizing these and other similar questions.

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LTC Comment: “Scrutinizing these and other similar questions” is what the remainder of our report will do in detail. Stay tuned for more.

[1] Leading Age Pathways Report: Perspectives on the Challenges of Financing Long-Term Services and Supports; Bipartisan Policy Center: Initial Recommendations to Improve the Financing of Long-Term Care; LTC Collaborative: A Consensus Framework for Long-Term Care Financing Reform.

[2] Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson , “Financing Long-Term Services and Supports: Options Reflect Trade- Offs for Older Americans and Federal Spending,” Health Affairs, November 2015.

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Updated, Monday, July 25, 2016, 10:02 AM (Pacific)

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LTC E-ALERT #16-029: LTC NEWS AND COMMENT

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

Behavior Changes May Be First Signs of Alzheimer's
Social Security, Medicare shortfalls are elephants in the room - today
Long-term care insurance market gets first new issuer in 10 years
Money, Personal Preferences Push States on Long-Term Care
5 things state lawmakers want to do about long-term care insurance
Federal long-term care premiums rising by triple digits
GOP updates medical and long-term care platform provisions
Adult children vital to senior living move-ins
Debt dims boomers' retirement prospects

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Updated, Friday, July 22, 2016, 10:14 AM (Pacific)

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LTC BULLET: THE SENIOR FINANCIAL SECURITY PROGRAM, AGAIN

LTC Comment: Fundamental things apply as time goes by, even in long-term care policy, after the ***news.***

LTC BULLET: THE SENIOR FINANCIAL SECURITY PROGRAM, AGAIN

In the spring of 1992, I sat before Wisconsin Governor Tommy Thompson. He was famous already for pioneering welfare reform and later to become Secretary of Health and Human Services. Governor Thompson wanted to do for Medicaid long-term care what he’d done already for welfare: eliminate the program’s counterproductive incentives and incentivize positive solutions. He asked me to study his state’s Medicaid long-term care program and propose changes to improve it.

On June 26, 1992, I presented this report to Governor Thompson: “The Senior Financial Security Program: A Plan for Long-Term Care Reform in Wisconsin.” Read the full report here. Its crux follows, but stay tuned for the rest of the story after this excerpt.

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Excerpt from “The Senior Financial Security Program: A Plan for Long-Term Care Reform in Wisconsin,” by Stephen A. Moses, LTC, Incorporated, June 26, 1992, Kirkland, Washington, pps. 30-31.

Who are the main parties to the long-term care financing debate and what do they want?

Seniors want access and quality in home or institutional care without impoverishment or welfare.

Taxpayers, and their stewards in government, want limits on Medicaid's explosive growth.

Nursing homes and home care providers want more private patients at full-pay, non-Medicaid rates.

Long-term care insurers want a level playing field without the competition of free public benefits for the upper middle class.

Younger and future generations want to inherit more than a huge public debt.

Today, these constituencies are pulling in opposite directions, drawing and quartering the broader public interest. What could harness their energies in a common purpose?

First, we must establish in principle a moral high ground on which everyone can stand with pride and agreement. This is the common philosophy that I found in Wisconsin:

We have very limited dollars available for public assistance; we must take care of the truly poor and disadvantaged first; the middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation; prosperous people who rely on Medicaid for long-term care should reimburse the taxpayers before giving away their wealth to heirs; seniors and their heirs who wish to avoid such recovery from the estate should plan ahead and purchase private long-term care insurance.

Next, we must imagine a program structure that achieves everyone's goals without violating these principles. Such a program would have to do six things:

(1) Maximize income and asset protections for single and married seniors who need long-term care.

(2) Eliminate divestiture and estate recovery avoidance.

(3) Secure property in a beneficiary's possession as a condition of eligibility for publicly financed care.

(4) Recover publicly financed benefits from estates when dependents no longer need the assets.

(5) Encourage the sale of long-term care insurance as an alternative to public benefits and estate recovery.

(6) Educate the public on the advantages of avoiding Medicaid dependency and paying privately for care.

Finally, we must show how this program delivers the key values that each constituency wants to achieve.

By maximizing income and asset protections, the program eliminates catastrophic spend-down for seniors. By requiring a pay-back from estates, it removes the stigma of welfare.

By making people pay their own way (pay me now or pay me later), the program creates an incentive (now nonexistent) for people to purchase private insurance.

By empowering people to pay privately for care with insurance, it diverts families from dependency on Medicaid.

By sending the home care and nursing facilities more full-pay private patients, the program enhances the providers' commercial viability and reduces their reliance on public financing. By infusing new money into long-term care, it enhances the industry's ability to provide good access to quality care for all patients, private-pay and Medicaid alike.

By making people spend their own money, i.e. their insurance benefits, on care, the program encourages a wide continuum of cost-effective home, community-based, and institutional options.

By stimulating heirs to plan ahead for their own long-term care needs and to protect their parent's estates (i.e. their own inheritances), the program ameliorates the biggest danger we face as a nation from the aging of the baby boom generation.

LTC Comment: Here’s the rest of the story. On August 10, 1993, President Clinton signed the Omnibus Budget Reconciliation Act into law. OBRA ’93 incorporated all of the key principles and policies recommended in the Senior Financial Security Program. It preserved Medicaid’s generous income and asset protections, but tightened controls on Medicaid planning (artificial self-impoverishment) and encouraged responsible LTC planning by making estate recovery mandatory. OBRA ‘93’s goal was to save Medicaid as a long-term care safety net for the poor by creating stronger incentives for the middle class and affluent to plan early, save invest or insure for LTC, and avoid dependency on public assistance.

Wait, you say, it didn’t turn out that way. True. States did not enforce the new rules aggressively. The federal government did not require their compliance. The media didn’t publicize the new program. And the public, unaware that Medicaid payments on their behalf were supposed to be deducted from their estates, did not respond by planning more responsibly for LTC.

So here we are, 24 years later, after dozens of studies, commissions and failed proposals, in the same fix we were in a quarter century ago. The difference is that we are that much closer to the demographic nightmare we’ve known all along was coming. Worse, we seem to be on the verge of doubling down on past mistakes by leaning toward a new payroll-financed government program to fund LTC’s catastrophic back-end risk.

At the Center for LTC Reform, we’re working on a new report, due out this fall, aimed at pointing out the error of pursuing such a new public LTC financing program and explaining, again, why pursuing policy based on enhancing the same principles and proposals in the Senior Financial Security Program is a much wiser and promising approach. Stay tuned.

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Updated, Monday, July 28, 2016, 9:19 AM (Pacific)

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LTC E-ALERT #16-028: LTC NEWS AND COMMENT

Care needs greatest determinant of senior living search length
'We don't know if we can pay our bills on time': For some home care workers, hardest job can be getting paid
Why 4% of Patients Consume 25% of Medicare Spending
Jumper cables and stethoscopes
LTCi Premiums Could Rise In Florida
7 ideas for improving long-term care insurance
National Health Expenditure Projections, 2015–25: Economy, Prices, And Aging Expected To Shape Spending And Enrollment
More Older Americans Cared for at Home
Can a Comic Book Change How We See Alzheimer’s?
The 2016 Medicare Trustees Report: Is Medicare Doomed?
As rates fall, scramble for riskier debt seen at pensions, insurers
5 ways retirees can control long-term health-care costs

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Updated, Friday, July 15, 2016, 11:11 AM (Pacific)

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LTC Bullet: LTC Almanac Update (2)

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

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

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

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

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

LTC BULLET: LTC ALMANAC UPDATE

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

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free another week—today through Friday, July 22, 2016. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

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

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

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

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

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

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

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Chapter 1: Aging Demographics

International

An Aging World: 2015 International Population Reports
Issued March 2016, U.S. Census Bureau [link]

3/28/2016, “Relatively low percentage of U.S. residents in long-term care: report,” by Lois A. Bowers, McKnight's Senior Living

Quote: “The percent of the over-65 population living in skilled nursing facilities or other residential care settings or receiving care at home ranges from 0.8% in Poland to 22.1% in Israel, according to a new report from the U.S. Census Bureau. Of 26 countries ranked in 2013 by the Organization for Economic Cooperation and Development in research cited in the report, the United States ranked seventh lowest, with 6.4% of the 65+ population living in SNFs or other residential care settings or receiving home healthcare. The bureau released “An Aging World: 2015” (PDF) on March 28.”

LTC Comment: If you think we have problems, explore the wide, wide world of long-term care in this report.

Boomer Generation Characteristics

IRI on boomer-expectations-for-retirement-April 2016 URL

“Boomer Expectations for Retirement 2016 Sixth Annual Update on the Retirement Preparedness of the Boomer Generation,” Insured Retirement Institute (IRI)

4/12/2016, “Trouble Ahead! Baby Boomers’ Retirement Outlook on the Decline,” Advisor Magazine

Quote: “The Insured Retirement Institute (IRI) today released a new research report that found less than a quarter of Baby Boomers, 24 percent, are confident they will have enough savings to last throughout their retirement years. This is the lowest level since IRI began this research study in 2011, when 37 percent of Boomers had this same level of confidence. … The entire report, “Boomer Expectations for Retirement 2016,” is available HERE.”

LTC Comment: We are now beginning to see the unintended consequences of Social Security, Medicare and Medicaid convincing consumers for decades that they do not need to plan privately for retirement income security, health and long-term care. Today this is just a worry; by the 2030s it will become a national catastrophe of incalculable proportions.

Chapter 3: Unfunded Liabilities--Social Security, Medicare, Pensions and Budgets

Unfunded Liability Estimates

Cato fiscal-imbalance-book 0416 URL: http://object.cato.org/sites/cato.org/files/pubs/pdf/fiscal-imbalance-book.pdf

Jeffrey Miron, “U.S. Fiscal Imbalance,” Cato Institute

See also WSJ: “Inattention-to-the-Deficit Disorder: By one estimate, the government will spend $117.9 trillion more than it takes in this century.” By George Melloan May 26, 2016 6:07 p.m. ET
http://www.wsj.com/articles/inattention-to-the-deficit-disorder-1464300465

4/6/2016, U.S. Fiscal Imbalance, by Jeffrey Miron, Cato Institute

Quote: “The U.S. fiscal imbalance—the excess of what we expect to spend, including repayment of our debt, over what government expects to receive in revenue—is large and growing. And with politicians proposing large new expenditures, little is being done to rectify the country’s fiscal health. … As of 2014, the fiscal imbalance stands at $117.9 trillion, with few signs of future improvement even if GDP growth accelerates or tax revenues increase relative to historic norms. Thus the only viable way to restore fiscal balance is to scale back mandatory spending policies, particularly on large health care programs such as Medicare, Medicaid, and the Affordable Care Act (ACA).”

LTC Comment: Our fiscal imbalance of $117.9 trillion is about 6.6 times the U.S. Gross Domestic Product and getting worse all the time. Fiscal and monetary shenanigans can delay the reckoning, but not prevent it. The economic vise is closing. I don’t think the status quo can continue until, much less beyond, the 2030s when boomers start turning 85 (2031) and Social Security (2034) and Medicare (2030) become insolvent.

Chapter 4: Long-Term Care

General

CDC on Care Incidence 0216 URL

“Early Release of Selected Estimates Based on Data From the January–September 2015 National Health Interview Survey,” Centers for Disease Control

2/28/2016, “Number of seniors who need personal care help increasing, CDC says,” by Emily Mongan, McKnight's LTC News

Quote: “The data, released last Tuesday by the CDC's National Center for Health Statistics, shows 7.2% of seniors required help with activities of daily living in 2015, compared to 6.6% in 1997. The report included eating, bathing, dressing and getting around as personal care needs. … Seniors over age 85 were twice as likely as adults between age 75 and 84 to require personal care help, and were five times as likely as adults age 65 to 74. The report also found 6.4% of white seniors required personal care help, compared to 9.6% of black and 11.3% of Hispanic seniors. Click here to read the full report, which also includes data on other health issues like diabetes, influenza vaccinations and alcohol consumption.”

LTC Comment: We not only have more seniors, especially those over the critical age of 85, but their rate of needing care is increasing as well. A dangerous combination!

Chapter 5: Caregiving

Caregiver Shortages

DOL Mandates Minimum Wage for Home Care Workers 0316 URL: http://www.dol.gov/whd/homecare/homecare_guide.pdf

“Paying Minimum Wage and Overtime to Home Care Workers: A Guide for Consumers and their Families to the Fair Labor Standards Act,” U.S. Department of Labor

3/2016, “Paying Minimum Wage and Overtime to Home Care Workers: A Guide for Consumers and their Families to the Fair Labor Standards Act,” by U.S. Department of Labor

Quote: “Most home care workers must be paid at least the federal minimum wage and overtime. The relevant question is often who is responsible for making sure these workers are paid according to these FLSA requirements. Whether you are responsible for the worker being paid federal minimum wage and overtime depends on whether you are an “employer” as defined by the FLSA.”

LTC Comment: Double whammy for LTC financing: first the Labor Department mandates home care workers receive at least the minimum wage (January 2015). Then California and New York, and probably more states, increase the minimum wage to $15 per hour. As economic gravity prevails, jobs for home care workers (and hence their availability) will decline and/or they’ll be increasingly replaced by technology such as robots and other assistive devices. This is a classic case of good intentions with unanticipated consequences, though how can intentions be good when bad consequences are inevitable and recognized by most economists?

Chapter 9: Long-Term Care Providers

General

CDC on Assisted Living Stats 0216 URL: http://www.cdc.gov/nchs/data/series/sr_03/sr03_038.pdf
“Long-Term Care Providers and Services Users in the United States: Data From the National Study of Long-Term Care Providers, 2013–2014,” Centers for Disease Control

2/24/2016, “CDC report details characteristics of assisted living residents,” by Lois A. Bowers, McKnight's Senior Living

Quote: “‘Findings on differences and similarities in supply, provision and use, and the characteristics of providers and users of long-term care services, can inform policy and planning to meet the needs of an aging population,’ according to the report, titled ‘Long-Term Care Providers and Services Users in the United States: Data From the National Study of Long-Term Care Providers, 2013–2014’ (PDF).”

LTC Comment: Valuable information well worth your time to review.

Chapter 10: Medicaid

Medicaid Financing and Burwell Data

Blase-Medicaid-Provider-Taxes-v1 URL 021716 URL: http://mercatus.org/sites/default/files/Blase-Medicaid-Provider-Taxes-v1.pdf
“Medicaid Provider Taxes: The Gimmick That Exposes Flaws with Medicaid’s Financing,” Brian Blase, Mercatus Center, February 2016

2/16/2016, “Biden Was Right: Medicaid Provider Taxes A 'Scam' That Should Be Scrapped,” by Brian Blase, Forbes

Quote: “In his book, The Price of Politics, renowned journalist Bob Woodward chronicled the 2011 negotiations between the Obama administration and Congress as the sides attempted to reach a deal to trim future budget deficits. One area of common ground between the administration and congressional Republicans centered on Medicaid provider taxes, which happens to be the subject of my most recent study, “Medicaid Provider Taxes: The Gimmick That Exposes Flaws with Medicaid’s Financing,” published today by the Mercatus Center at George Mason University.”

LTC Comment: I’ve called Medicaid provider taxes “Medicaid planning writ large.” They amount to states gaming the program in a manner similar to the way elder law attorneys artificially impoverish their affluent clients. Brian Blase’s excellent critique of the practice is right on target with this proviso. The extra federal revenue generated by provider taxes helps prevent Medicaid’s dismally low LTC provider reimbursement rates from getting even worse. In the bigger picture, however, this fact is a further indictment of Medicaid LTC financing, which crowds out responsible private planning for long-term care, and not a justification for provider taxes.

Medicaid Services

Heartland on Welfare Report Card 2015 URL: https://www.heartland.org/sites/default/files/03-18-15_welfare_report_card_final_0.pdf

3/19/2016, “2015 Welfare Reform Report Card,” by Diane Bast, Matthew Glans, Logan Pike, and Gary MacDougal, Heartland Institute

Quote: “Most state governments can improve the effectiveness of their efforts to help those in poverty. This 50-state report card offers policymakers and the public a roadmap for how it can be done.”

LTC Comment: Trillions spent on welfare have failed to improve the lot of the poor and arguably made it worse. See which states have done relatively well in fighting poverty and which have fared worse. This “report card” doesn’t address Medicaid or long-term care financing, but many of the same principles of good public policy apply.

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Updated, Monday, July 11, 2016, 10:18 AM (Pacific)

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LTC E-ALERT #16-027: LTC NEWS AND COMMENT

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

House panel votes to continue funding for Medicare assistance program
Americans underestimate senior care costs [infographic]
How a Clinton, Trump, or Johnson Win Will Impact Near and Current Retirees, Part 2
NAIC looks at ways to boost LTC policy sales
VA health care still has ‘profound deficiencies,’ report says
Meet 4 execs who are shaping the insurance industry of the future
The 2016 Trustees Report: Yet Another Warning to Congress and the President
Antipsychotic use down 27%
How Google Street View and exercise bikes are helping Alzheimer's patients to remember
MassMutual acquires MetLife’s retail advisors
U.S. Cancer Survivors Living Longer

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Updated, Friday, July 8, 2016, 10:00 AM (Pacific)

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LTC Bullet: LTC Almanac Update

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

*** Here are two news items we sent recently to our Clipping Service subscribers that deal with financing the many costs of long-term care:

1.) 07/03/2016, “How to get your kids to provide long-term care for you when you need it most,” by Sarah Anderson, Deseret News

Quote: “Are millennials as unwilling to help their parents and relatives as they age as popular conception would have you think? Not exactly. An opinion piece in Forbes discussed the recent results of the Fidelity Investments Family & Finance Study that interviewed 1,273 parents over the age of 55 and 221 of their adult children older than 25.”

LTC Comment: In many cases, it’s not about the willingness of an adult child to care for an aging parent or what generation they belong to. Ultimately, it’s about mitigating the costs associated with caregiving. Of course, those costs are many: financial, professional, physical, emotional, psychological, etc.

2.) 07/03/2016, “Warning: Healthcare Costs in Retirement May Be Higher Than We Thought,” by Maurie Backman, The Motley Fool

Quote: “Many of us by now have been exposed to the dire reality of financing healthcare in retirement. For years, Fidelity has been releasing data on estimated retiree healthcare costs, and according to the most recent assessment, a 65-year-old couple retiring today can expect to spend $245,000 over the course of a 20-year retirement, not including nursing home or long-term care expenditures.”

LTC Comment: We’ve often advised “save, invest or insure for long-term care” but with total healthcare costs in retirement on the rise, this article advocates for all of the above. In other words: save, invest and insure. On the upside, it does so in a way that eschews scare tactics and offers LTCi as a way to mitigate the risk of catastrophic healthcare costs in retirement.

Receive these LTC-relevant news items (with original analysis) in real time and stay on the forefront of professional knowledge by subscribing to our Clipping Service. Contact Damon at 206-283-7036 / damon@centerltc.com to start your subscription immediately or go directly to our secure online subscription page and sign up for $250 per year or $21 per month. Already a Center member? Contact us to add the Clipping Service to your membership for only $100 per year or $8.25 per month. ***

LTC BULLET: LTC ALMANAC UPDATE

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

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free for two weeks—today through Friday, July 22, 2016. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

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

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Chapter 1: Aging Demographics

International

Longevity+paper+-+ADA+-3-21-16 URL “A Silver Lining: The Investment Implications of an Aging World,” PGIM, Inc., March 2016

3/24/2016, “Aging population offers golden opportunities,” by Marlene Y. Satter, LifeHealthPRO

Quote: “In its report “A Silver Lining: The Investment Implications of an Aging World,” PGIM presents the case that global aging will reshape consumer spending for decades to come. According to the report, these changes will not only impact developed markets but also have a far-reaching effect on emerging markets — where two-thirds of the world’s elderly live. … Within the three sectors to be most affected, specific opportunities exist in multifamily condos, senior housing, urban life sciences clusters, pharmaceuticals and biotech and technology-enabled medical services and devices.”

LTC Comment: Not to mention to mention LTCI and other financial products to save or invest for long-term housing and care costs.

Retirement Planning

NCOA-Older-Adult-Issue-Debt-Brief 0216 URL: https://www.ncoa.org/wp-content/uploads/NCOA-Older-Adult-Issue-Debt-Brief.pdf

“Older Adults and Debt: Trends, Trade-offs, and Tools to Help,” National Council on the Aging, February 2016

2/17/2016, “Older Adults & Debt: Trends, Trade-offs, and Tools to Help,” National Council on the Aging (NCOA)

Quote: “Numerous public and private benefits programs can help low-income older adults pay for health care, housing, food, transportation, and other expenses, thereby freeing up income that can be used to pay down debt. … These programs remain undersubscribed by older adults, and yet collectively are estimated to offer savings worth more than $12,000 (in 2014), an amount that would double the income of a person living at the federal poverty level. … NCOA’s BenefitsCheckUp® is the nation’s most comprehensive free, online service to screen seniors with limited income for benefits. It includes more than 2,000 public and private benefits programs from all 50 states and the District of Columbia.” (p. 3)

LTC Comment: The epidemic of senior debt clearly described in this report is a serious problem, but government benefit programs are the problem not the solution. After 80 years of Social Security followed by 50 years of Medicare and Medicaid, aging Americans depend too much on public benefits and too little on personal responsibility and planning. When the public programs they depend on become insolvent, the current crisis will become a genuine national tragedy.

Chapter 2: International

General

LTC Financing in Europe URL: https://www.soa.org/Files/Pubs/pub-2016-05-ltc-coverage-europe.pdf

“Long-Term Care Coverage in Europe,” by Edith Bocquaire

6/15/2016, “Some European countries seek private long-term care help,” by Allison Bell, LifeHealthPRO

Quote: “Some European countries are hoping use of private annuities and insurance policies can help their residents hold down long-term care costs. Edith Bocquaire, a French insurance industry analyst, has described how some European countries build private-sector arrangements into long-term care planning efforts in a paper posted on the website of the Schaumburg, Illinois-based Society of Actuaries.”

LTC Comment: Check this paper out if you’re interested in how European countries handle long-term care financing.

Chapter 6: Long-Term Care Financing

General

Leading Age Pathways 0216 URL

“Perspectives on the Challenges of Financing Long-Term Services and Supports,” Leading Age, February 2016

2/17/2016, “Current LTSS financing methods 'irrational, unfair' LeadingAge report claims,” by Emily Mongan, McKnight's LTC News

Quote: “’Perspectives on the Challenges of Financing Long-Term Services and Supports’ builds on research from LeadingAge, AARP and the SCAN Foundation first released in late 2015. … Click here to read the full LeadingAge Pathways report.”

LTC Comment: More of the same old, same old that we’ve refuted repeatedly. Don’t bother. The last thing we need is a “mandatory, universal insurance option” which is what Leading Age advocates.

Chapter 10: Medicaid

Medicaid is the 800-pound gorilla of LTC

June-2016-Report-to-Congress-on-Medicaid-and-CHIP URL: https://www.macpac.gov/wp-content/uploads/2016/06/June-2016-Report-to-Congress-on-Medicaid-and-CHIP.pdf

“Report to Congress on Medicaid and CHIP,” Medicaid and CHIP Payment and Access Commission (MACPAC), June 2016

6/15/2016, “MACPAC: Medicaid spending for long-term care 'disproportionate',” by Emily Mongan, McKnight's LTC News

Quote: “Medicaid is the largest payer of high-cost services like long-term care, MACPAC noted in its June 2016 Report to Congress. The program finances one-third of the country's nursing facilities; and spent $169 billion on long-term supports and services in fiscal year 2012. That amount added up to roughly 43% of Medicaid's total expenditures for FY 2012, despite just 6.2% of Medicaid beneficiaries needing LTSS, the report found. … MACPAC's Report to Congress also covers financing reforms and trends in Medicaid spending. Click here to read the full report.”

LTC Comment: Critically important data: long-term care touches only 6.2% of Medicaid recipients, but accounts for 43% of costs. Yet far more political and policy attention is directed toward the other 93.8% of recipients who account for the only 57% of costs. Whatever happened to the admonition “Follow the money?”

Medicaid Eligibility

KFF on Medicaid Financial Eligibility 0316 URL: http://files.kff.org/attachment/report-medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-in-2015

“Medicaid Financial Eligibility for Seniors and People with Disabilities in 2015,” Kaiser Commission on Medicaid and the Uninsured, March 2016,

Highlights: http://kff.org/medicaid/report/medicaid-financial-eligibility-for-seniors-and-people-with-disabilities-in-2015/

Medicaid Deficiencies

NCOA on Stigma 0616 URL: https://www.ncoa.org/wp-content/uploads/An-End-to-Stigma-Issue-Brief-NCOA.pdf

“An End to Stigma: Challenging the Stigmatization of Public Assistance Among Older Adults and People with Disabilities,” National Council on the Aging, June 2016

6//2016, “Report: How to get more benefits to seniors,” by Lois A. Bowers, McKnight's Senior Living

Quote: “So what's keeping older adults from applying? Stigma, for one. Medicaid and Supplemental Nutrition Assistance Program benefits carry much more stigma that Medicare and Social Security benefits, according to the survey … ‘Concerns about estate recovery and states placing liens on homes affect applicants' willingness to apply as well,’ the report authors state, noting that such concerns can be legitimate for families applying for Medicaid coverage for long-term services and supports.”

LTC Comment: More stigma for Medicaid than Medicare? Well, yeah, Medicaid is welfare (for which others pay taxes) and Medicare is social insurance (for which everyone pays “premiums,” actually payroll taxes. The irony is that Medicaid has become a de facto entitlement for LTC because of easy and elastic eligibility rules, whereas Medicare is moving toward welfare status due to means-testing, i.e. charging higher income people more. Do some people object to paying back the cost of their care from their estates (estate recovery)? Well, yes, and other people (taxpayers) object to paying for their own care and the care of people who transfer the cost of their care to Medicaid. This new report is a good example of the moral decay we described in “Losing Principles.”

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Updated, Tuesday, July 5, 2016, 9:59 AM (Pacific)

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LTC E-ALERT #16-026: LTC NEWS AND COMMENT

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

Warning: Healthcare Costs in Retirement May Be Higher Than We Thought
How to get your kids to provide long-term care for you when you need it most
Catastrophic Insurance Could Help With Long-Term Care Expenses: Studies
Gawande: Good palliative care blocked by quality measures, lack of communication
Home healthcare industry braces for another Medicare cut
Diversity in age, ethnicity of post-acute residents increasing, research finds
The financial and emotional toll of America’s Alzheimer’s problem
How retirement planning for childless couples is different
Survey shows how much long-term care costs continue to climb
Aging parents: Your adult kids aren't total ingrates like you think they are
Michael D. Fraizer and Thomas J. McInerney

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Updated, Friday, July 1, 2016, 11:07 AM (Pacific)

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LTC Bullet: LTC Action Plan

LTC Comment: The best way to confront and change the growing LTC reform consensus into something better, after the ***news.***

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

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

LTC BULLET: LTC ACTION PLAN

LTC Comment: Center members and LTC Bullets readers know we’re working on a six-month study of Medicaid and long-term care financing whose goal is “Ensuring Scarce Resources Reach the Neediest People.” We explained in “LTC Bullet: Losing Principles” how and why this study took a change in direction. We expanded in “LTC Bullet: Long-Term Care at a Crossroads” on why that change was necessary. We describe today how we plan to proceed.

What follows is a rough, initial outline of the report we will complete in draft by August 15, 2016. Many blanks remain to be filled in and much work remains to be done, but this first cut helps us organize our thoughts. We welcome any feedback and suggestions readers may like to offer.

Draft Report Outline:

A policy consensus is forming based on reports from Leading Age, the Bipartisan Policy Center and the LTC Collaborative that America needs a compulsory back-end government long-term care financing program.

This consensus is based on the presumption that Medicaid requires impoverishment and that the welfare program’s LTC financing approach has failed. Neither of these suppositions is correct.

The truth is that Medicaid does not require impoverishment and the Medicaid LTC financing program presumed to have failed has in fact never been tried. This report will address each of those points.

I. Does Medicaid require impoverishment?

The belief that qualification for Medicaid LTC benefits requires impoverishment is based on (1) a superficial reading of seemingly draconian income and resource eligibility rules, (2) evasion of evidence from key sources, and (3) research by economists and health policy experts grounded in HRS/AHEAD data.

The first two points are easy to substantiate. Relatively high income and resources do not preclude Medicaid LTC eligibility as we’ve explained in detail often and will again in this report, with references to statutory and regulatory sources.

Advocates for an expanded government LTC financing program have ignored a vast, long-standing and current legal literature on Medicaid planning, i.e. artificial self-impoverishment to qualify for Medicaid, which we will cite and summarize.

Also ignored since the late 1980s and early 1990s are the opinions of Medicaid officials including eligibility workers, elder law attorneys, and the public regarding the ease with which people of substantial means qualify for LTC benefits.

Less easy to rebut are the findings from more than two decades of longitudinal survey research based on the Health and Retirement Study (HRS) & Asset and Health Dynamics among the Oldest Old (AHEAD). Journal articles citing these “big data” sources downplay the use of “asset transfers” to qualify for Medicaid, show that most survey respondents decumulate wealth very quickly before they become eligible for Medicaid, and document how poor most Medicaid LTC recipients actually are.

We will analyze the most influential of these articles and refute their conclusions when mistaken. For example: their focus on asset transfers ignores the larger problem of easy and elastic eligibility rules and disregards other methods of Medicaid planning that do not involve divestiture. They focus on survey respondents at the median of wealth, whereas we’ll show how people from the median to 95th percentile of wealth qualify easily for benefits. We will explain why evidence of widespread, catastrophic asset spend-down for private long-term care is lacking. Finally, we will point out deficiencies in the survey data itself based on non-reporting, mis-reporting, and misinterpretation.

II. Medicaid, as described by advocates of a big, mandatory public LTC financing program, has never been tried.

From its inception in 1965 until 1980, Title XIX of the Social Security Act (Medicaid) expressly permitted all people over age 65 with a need for long-term care to give away everything they owned in order to qualify for LTC benefits. From 1980 on, through a long series of federal statutes—including ORA ’80, TEFRA ’82, COBRA ’85, MCCA ’88, OBRA ’93, HIPPA ’96, BBA ’97, and DRA ’05—18 Congresses and five presidents struggled to prevent, or at least discourage, access to Medicaid by the middle class and affluent. Yet this problem still exists and it is getting worse as the stigma of accepting welfare recedes and the fiscal and monetary restraint of government declines.

Our report will trace these historical developments, describe the status quo, and explain the past consequences and future peril of relying excessively on public financing of long-term care.

Conclusion:

Bottom line, the severely restrictive Medicaid LTC financing program, which allegedly forces millions of Americans into impoverishment due to catastrophic long-term care expenditures, does not now and never has existed.

Historically and today, Medicaid crowds out much more than private LTC insurance. It diminishes awareness of LTC risk and cost; it degrades personal responsibility; and it discourages early LTC planning and preparation resulting in excessive and ultimately insupportable dependency on the overburdened public welfare program.

A mandatory government program as proposed in the three early-2016 papers referenced above would exacerbate, not relieve, all these problems making the moral hazard of government interference even worse.

Far better to restore the original intent of the Medicaid LTC program, which was to provide long-term care for aged individuals “whose income and resources are insufficient to meet the costs of necessary medical services.” The report will propose modifications to Medicaid LTC eligibility rules that would achieve that objective.

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Updated, Monday, June 27, 2016, 10:08 AM (Pacific)

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LTC E-ALERT #16-025: LTC NEWS AND COMMENT

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

Selling LTCi: Pricing, Perception and Persistency
Person-centered care programs projected to cut skilled nursing stays by 20%
Boomers, it’s time to spend—and pay taxes on—your 401(k)
Changes loom as most-popular Medigap plans face extinction
A tiny Alzheimer's study with huge results
'Spousal refusal' helps save on nursing home costs
Trustees: Tiny rise in Social Security benefits next year
As Suburbs Shift, Funding Fights Loom
Report: How to get more benefits to seniors
Consider Combining a CRT With Long-Term Care Insurance

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Updated, Friday, June 24, 2016, 10:02 AM (Pacific)

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LTC BULLET: THE EARLY HISTORY OF LTC FINANCING (AND WHY IT MATTERS)

LTC Comment: Did you know the original Medicaid law expressly permitted asset transfers to qualify for long-term care benefits? Learn the early history, what changed, and how it has affected LTC financing after the ***news.***

*** LTC CLIPPINGS this week included the following two, which fit right in with today’s LTC Bullet topic. The first, from a New York Medicaid planner, indicates one especially egregious artificial impoverishment technique lives on:

6/22/2016, “'Spousal refusal' helps save on nursing home costs,” by Bonnie Kraham, Times Herald-Record

Quote: “Last week's column described the ‘gift and loan’ strategy, which is crisis planning that saves about half of the assets for single persons who are applying for Medicaid for nursing home costs. This technique is used on the eve of needing a nursing home when the client has not planned ahead to protect their assets. In New York we also have a law called ‘spousal refusal,’ sometimes referred to as ‘just say no,’ to save assets from nursing home costs when one spouse needs a nursing home (the ‘institutionalized spouse’), the other spouse is at home (the ‘community spouse’), and they never planned ahead to save their assets.”

LTC Comment: For the other side of the story on “Spousal Refusal,” see our take here: They're Baaack, Part IV: "Abandon Your Spouse . . . Get Medicaid".

The other featured LTC Clipping laments America’s failure to expand “free” long-term care to even more seniors.

6/21/2016, “Report: How to get more benefits to seniors,” by Lois A. Bowers, McKnight's Senior Living

To subscribe to our daily LTC Clippings, contact Damon at 206-283-7036 or damon@centerltc.com.

LTC BULLET: THE EARLY HISTORY OF LTC FINANCING (AND WHY IT MATTERS)

LTC Comment: The federal and state governments started funding long-term care in a limited way before Medicaid came along in 1965. But the cost explosion didn’t occur until Medicaid made subsidized nursing home care easy to get.

The new Title XIX of the Social Security Act (Medicaid) provided federal funds to help states finance medical assistance, including nursing home care, for aged individuals “whose income and resources are insufficient to meet the costs of necessary medical services.”

What’s really fascinating and little known is that the original Medicaid law expressly permitted elderly individuals in need of nursing home care to divest their assets with impunity in order to meet the new program’s relatively low resource eligibility limits. Here’s the proof:

42 U.S.C. § 1382b(b) (1983) provides: The Secretary shall prescribe the period or periods of time within which, and the manner in which, various kinds of property must be disposed of in order not to be included in determining an individual's eligibility for benefits. Any portion of the individual's benefits paid for any such period shall be conditioned upon such disposal; and any benefits so paid shall (at the time of the disposal) be considered overpayments to the extent they would not have been paid had the disposal occurred at the beginning of the period for which such benefits were paid.^{^[1]}

Does that citation not quite say to you: “Go ahead, give away everything you own, and we’ll pay for your long term care”? Right, me neither. But the same source goes on immediately to explain:

A number of [court] decisions confirmed that states were not permitted to deny Medicaid eligibility to an applicant who had divested himself of resources for less than fair market value. The conflict between the federal rule and state rules, which were promulgated to prevent applicants from divesting themselves of all resources in order to qualify for assistance, gave rise to litigation which prompted Congress to make a legislative attempt to resolve this problem.^{^[2]}

If you still have any doubt, check out some of these cases as listed in the source’s footnote 31:

See e.g., Blum v. Caldwell, 446 U.S. 1311 (1980); Fabula v. Buck, 598 F.2d 869 (2d Cir. 1979); Dokos v. Miller, 517 F. Supp. 1039 (N.D. Ill. 1981); Robinson v. Pratt, 497 F. Supp. 830 (D. Mass. 1980); Udina v. Walsh, 440 F. Supp. 1151 (D. Mo. 1977); Buckner v. Maher, 424 F. Supp. 366 (D. Conn. 1976).

I spot checked these citations and, sure enough, they involve courts striking down efforts by states to prohibit or penalize transfers of assets for less than fair market value for the purpose of qualifying for Medicaid. For example, according to the decision in Buckner v. Maher, 424 F. Supp. 366 (D. Conn. 1976):

Connecticut's "transfer-of-assets" rule violates the Supremacy Clause by presuming that assets are available to welfare recipients, which are in fact not available. The statutory rule and the information requirements relating to establishing whether or not "reasonable consideration" was received for a particular transfer of property are contrary to federal law standards and found by this court to be unlawful and unenforceable.^{^[3]}

Here’s how another source describes the situation with asset transfers between 1965 and 1980:

Shortly after the creation of Medicaid and its adoption by the states, potential Medicaid recipients started exploiting "Medicaid planning" techniques. They structured assets to preserve Medicaid eligibility while retaining personal income and property above baseline levels. Congress responded to the creative lawyering surrounding Medicaid planning by passing the Omnibus Budget [sic] Reconciliation Act of 1980 (OBRA 1980). This act made asset transfers more cumbersome and increased the use of trusts to shelter funds.^{^[4]}

So, bottom line, between the passage of Medicaid in 1965 and enactment of the Omnibus Reconciliation Act of 1980 (including the Boren-Long Amendment empowered states to constrain asset transfers), there were no enforceable federal or state laws or regulations prohibiting asset transfers to qualify for Medicaid long-term care benefits.

Of course, that was only the beginning of federal efforts to control the transfer of assets problem, later broadened to include many additional techniques of “Medicaid estate planning.” But that’s a story for another day, or if you can’t wait, read it here now, but you’ll need your user name and password to The Zone. Lacking that, contact Damon@centerltc.com or 206-283-7036.

For now . . . So what if Medicaid allowed free asset transfers for its first decade and a half? The cost of Medicaid exploded from the get-go beyond all expectations as this 1969 source explains:

The amounts expended to finance Medicaid in the first two years were surprisingly high. Estimates in 1965 of the annual federal cost of Medicaid ranged from $150 million to $238 million. Yet actual federal expenditures were $621 million in the calendar year 1966. In 1967 Congress estimated that the annual federal share would rise to $1.4 billion in fiscal 1968 and to $3.1 billion by 1972, provided no additional restrictions were placed on the 1965 program.^{^[5]}

It didn’t stop there of course and neither did the many ways people and their advisors qualify for Medicaid LTC benefits while preserving their wealth. Medicaid expenditures as of Fiscal Year 2014 were $496 billion. Of course, the program’s asset transfer and Medicaid planning giveaways only accounted for a portion of this cost explosion. But direct cost of Medicaid to taxpayers is by no means the only or necessarily even the biggest problem.

Easy access to Medicaid LTC benefits after the insurable event occurred desensitized the public to long-term care risks and costs resulting in a vast decline of private revenue to LTC providers, excessive reliance on inadequate public funding, serious access and quality problems, institutional bias that stultified the private home care market, and a crowding out of major potential new LTC revenue sources such as home equity conversion and long-term care insurance.

Consequently we find ourselves today with a public excessively dependent on a financially vulnerable and degrading welfare program for a critical human need, extended care at the end of life. Perhaps as worrisome, our policy wonks and legislators are leaning toward new programs of even greater moral hazard by expanding government financing of long-term care.

The lesson of the early history of Medicaid LTC financing is that when supply is free demand is infinite and consequences dire.

[1] Timothy N. Carlucci, “The Asset Transfer Dilemma: Disposal of Resources and Qualification for Medicaid Assistance,” 36 Drake L. Rev. 369 1986-1987, p. 372: [link].

[2] Ibid., footnotes omitted.

[3] Buckner v. Maher, 424 F. Supp. 366 (D. Conn. 1976): https://www.courtlistener.com/opinion/1444817/buckner-v-maher/. b

[4] Michael A. Bottar, “Robbing Peter to Pay Paul: Medicaid Liens, Supplemental Needs Trusts and Personal Injury Recoveries on Behalf of Infants in New York State Following The Gold Decision [link],” 53 Syracuse L. Rev. 175 2003, pps. 181-2, footnotes omitted.

[5] ________, “Medicaid: The Patchwork Crazy Quilt,” Columbia Journal of Law and Social Problems, 5 Colum. J.L. & Soc. Probs. 62 1969, p. 65, footnotes omitted: [link].

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Updated, Monday, June 20, 2016, 11:00 AM (Pacific)

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LTC E-ALERT #16-024: LTC NEWS AND COMMENT

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

Industry, policymakers await report on Medicare's solvency
Health care costs eating up Social Security benefits, early retirees say
Alzheimer's: Why actuaries shouldn't bet on a cure
The long-term care Walk of Shame
Some European countries seek private long-term care help
Father’s Day: Long Term Care Insurance
MACPAC: Medicaid spending for long-term care 'disproportionate'
How Much Will Your Health Expenses Be in Retirement?
Workers, elderly focus of Women Summit initiatives
One in five SNF residents experience abuse from other residents, study finds

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Updated, Friday, June 17, 2016, 11:05 AM (Pacific)

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LTC BULLET: CASSANDRA ON MEDICAID LTC ELIGIBILITY

LTC Comment: Exactly how do so many middle class and affluent people end up on Medicaid for LTC without becoming genuinely impoverished? And, so what if they do? Answers after the ***news.***

*** LTC LIGHT. Our LTC Clippings subscribers received only seven e-pistles from us this week, so far. As we enter the dog days of summer, LTC news is light. So this is a good week to remind subscribers and potential subscribers that one of the best benefits of receiving LTC Clippings is that we only send them when there is something worth reading to share! We spend as much time sifting through all the news, reports, and white papers washing up on the electronic shores we monitor whether there’s anything worthwhile to report or not. We do that so you don’t have to. So when your email in-box is light on LTC Clippings, relax, take a longer lunch, or start your weekend early. We have you covered. You won’t miss anything of real importance. To subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. Now for an LTC Clipping sample and a little LTC humor.

6/16/2016, “The long-term care Walk of Shame,” by Gary Tetz, McKnight's LTC News

Quote: “Having experienced the walk of shame through dozens of first-class [airplane] cabins, I can hardly bear the thought of adding that indignity to my nursing home admission. With dementia raging and fresh off my seventh hip, knee, elbow and skull replacement, I imagine hobbling through the lobby, trying to avoid eye contact with smug-looking MVP-status residents in silk bathrobes taking their meds from gold-embossed shot glasses. … As I once patiently explained to an irate commenter after he took issue with one of my flippant, unsubstantiated pronouncements, this column is called ‘Things I Think,’ not ‘Things I Research and Prove.’”

LTC Comment: Why not close this week of light LTC news with a little LTC humor, which is not an oxymoron to columnist Gary Tetz? ***

LTC BULLET: CASSANDRA ON MEDICAID LTC ELIGIBILITY

LTC Comment: For the Center’s new research project aimed at “Ensuring Scarce [Medicaid LTC] Resources Reach the Neediest People,” I’ve been reviewing a vast health policy, economics and legal literature on the topic. I’ll report soon on my findings, but for now, here’s a brief summation.

According to peer-reviewed journals in …

Health Policy: Accessing Medicaid LTC benefits requires impoverishment, so we need a compulsory new government program to pay for long-term care.
Economics: Longitudinal survey data prove asset transfers to qualify for Medicaid LTC benefits are rare and small, so we need a compulsory new government program to pay for long-term care.
Law: Medicaid LTC benefits are readily available to middle-class and affluent elder law clients and accessing them generates average per-case legal fees of $2,500 to $10,000. But the process is degrading, so we need a compulsory new government program to pay for long-term care.

With opposite premises, policy wonks and economists on one side and lawyers on the other side arrive at identical policy recommendations. Which is it? Does Medicaid LTC require impoverishment or doesn’t it? And whether it does or not, why do so many experts in such different professions agree that more government involvement in LTC is the best course forward?

The answer to the second question is ideological bias. It’s almost comical to watch these experts tie themselves in theoretical and evidentiary knots trying to force the conclusion that the only solution to the LTC market’s woes is to bring in more government funding, regulation, and control. I’ll have more to say on this topic, including examples, in future LTC Bullets.

For now, let’s stick to the first question: does Medicaid LTC eligibility require actual impoverishment or not? How can one set of professionals (health policy experts and economists) say one thing and elder law attorneys say the exact opposite? Clearly, the answer is that they don’t read each other’s academic journals. But, we are reading them and what we’re finding is fascinating. More on that in future Bullets also.

For the time being, let’s just take one more look at the underlying question: does access to Medicaid LTC benefits actually require genuine impoverishment? What follows is the section on Medicaid LTC income and resource eligibility rules from the Center’s latest report: CASSANDRA’S QUANDARY: The Future of Long-Term Care in New Hampshire (2016). While the focus is on New Hampshire, this report’s findings and recommendations apply in most respects to the whole country.

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

Medicaid LTC Financial Eligibility and Medicaid Planning

Income Eligibility

Eligibility for Medicaid long-term care benefits is not as difficult to attain in the United States as commonly reported. New Hampshire is no exception. The State Department of Health and Human Services’ (DHHS) website explains that applicants “Must have net monthly income less than the rate Medicaid pays to the facility.”^{^[1]} Net monthly income is determined by subtracting eligible health care and other expenditures paid out of pocket by the Medicaid applicant from the applicant’s total income. Such deductions can be substantial. Because the average Medicaid nursing home reimbursement rate in New Hampshire is $157 per day or $57,305 per year, any medically qualified elderly person with net income at or below that level is eligible based on income. Although media and even academic studies on Medicaid long-term care financing invariably say the program is only available to low-income people, the truth is that people with income of $57,305 per year fall in the middle income quintile for all Americans according to the U.S. Census Bureau, as of 2013.^{^[2]} Hardly low income.

Asset Eligibility

Medicaid long-term care applicants must also qualify based on their level of financial resources. The DHHS website cited earlier says the “Resource limit cannot exceed $2,500.” That’s what most articles and reports also say, but the statement is misleading because it does not take into account exempt resources.

To pinpoint those uncounted assets, it is helpful to consult the lawyers who advise clients on how to become eligible for Medicaid LTC benefits. According to the Elder Law, Estate Planning, and Probate Section of the New Hampshire Bar Association and New Hampshire Legal Assistance in their “Medicaid Income and Asset Rules for Nursing Home Residents and Guide for New Hampshire Residents Seeking Medicaid Coverage For Nursing Home Care,”^{^[3]} “A person's home as long as the equity value is less than $552,000, motor vehicle, furniture, clothing and other personal effects are not countable” which means “Since homes with less than $552,000 in equity are not countable assets, most homeowners may qualify for Medicaid.”

Other exempt assets, none of which have a dollar limit, include one business, Individual Retirement Accounts (IRAs), prepaid burial plans, and term life insurance. For a full list of exempt assets including footnoted links to the authorizing federal regulations, see the Pacific Research Institute’s “Medi-Cal Long-Term Care: Safety Net or Hammock.”^{^[4]} People can and do convert countable assets into noncountable assets by purchasing more expensive homes, new cars and other exempt resources with or without legal advice.^{^[5]}

Spousal Impoverishment Protections

Recipients with spouses encounter far more generous income and asset eligibility rules, including a maximum spousal maintenance allowance of $2,981 per month and a spousal resource allowance equal to half the couple’s joint assets up to a maximum of $119,220 with a minimum of no less than $23,844 as of 2015 [and 2016].^{^[6]} These allowances increase annually with inflation. Balances in excess of those limits are supposed to be “spent down,” but the Bar Association guide explains “It is important to note that the money which must be spent down can be used for any purpose that would benefit either spouse, such as home repairs, vehicles, life insurance, prepaid funerals, furniture, travel, etc.”^{^[7]} These “spousal impoverishment protections,” originally intended to protect only spouses of institutionalized Medicaid recipients, were recently expanded to cover husbands or wives of Home and Community-Based Services (HCBS) recipients as well.^{^[8]}

The “ElderLawAnswers website”^{^[9]} speaks to some additional nuances. For example, if applicants are not happy with their community spouse resource allowance, “a fair hearing can be obtained.” The “Average monthly cost of nursing home care according to [the] state [is]: $8,889.94 ($292.24/day).” That means Medicaid applicants are penalized only one month of eligibility for each nearly $9,000 they give away for the purpose of qualifying for Medicaid. Finally: “Actuarially sound annuities are permitted, with certain restrictions.” More follows below on the enormous costs to Medicaid such annuities can entail.

Medicaid Planning

It is clear from the foregoing, that Medicaid applicants with substantial income and wealth can qualify for Medicaid long-term care benefits with little or no asset spend down required. But the long-term care eligibility rules are complicated and elastic. Applicants, and their families, with even much greater income and assets than allowed under the basic rules summarized above often consult lawyers who specialize in the artificial impoverishment of clients to qualify them for Medicaid. Such “Medicaid Planning” specialists are easy to find. When asked, interviewees for this project spoke of how Medicaid planners advertise frequently on the radio and in newspapers throughout New Hampshire. Elder law experts are also easy to find online by means of an internet search for “Medicaid planning in New Hampshire.” For example:

We assist clients with asset preservation and asset protection for themselves and their families in anticipation of applying for long-term care through the Medicaid program. . . . Our attorneys have significant experience in asset protection strategies, such as Medicaid-Qualifying Irrevocable Trusts; Special Needs Trusts; conversion of assets into income through the use of Medicaid-Qualifying Annuities; Personal Care and Service Agreements; as well as other spend-down techniques that allow for transfers of assets to family members without violating Medicaid gifting rules. We frequently work with clients when preparing and filing New Hampshire and Massachusetts Medicaid applications, meeting with caseworkers for applicant resource assessments, as well as successfully litigating denials of Medicaid benefits.^{^[10]}

Medicaid-Compliant Annuities

One of the more egregious eligibility “loopholes” that Medicaid planning attorneys and their clients take advantage of is the “Medicaid-compliant or Medicaid-qualifying annuity.” Such annuities can be used to shelter large sums of money immediately before an individual applies for Medicaid long-term care benefits, as much as a million dollars or more in some states. We sought but were not able to arrange interviews with New Hampshire’s Medicaid long-term care eligibility policy specialist to learn specifically how such annuities are reviewed and treated by DHHS. For details on the Medicaid-compliant annuity problem nationally, see “LTC Bullet: Medicaid Annuity Abuse: A Case Study.”^{^[11]} Annuity cases involving hundreds of thousands of dollars are commonplace and well-documented. So far state Medicaid programs have been unsuccessful in several attempts to reverse the use of Medicaid-compliant annuities in state and federal courts.

209-B Status

It is true that eligibility in New Hampshire is slightly more restrictive, and could be made even more so, because it is one of ten “209-B” states. This means New Hampshire was grandfathered in with more restrictive eligibility requirements than were allowed after the Supplemental Security Income Program (SSI) replaced state welfare programs for the aged, blind and disabled in 1974. For example, 209-B states “do not automatically grant Medicaid to persons with disabilities who qualify for SSI because they use their own criteria for determining whether someone is eligible for Medicaid. These states may have income limits that are higher or lower than SSI’s, different asset limits, or different requirements for what makes someone disabled.”^{^[12]} New Hampshire’s 209-B status enables the state to require institutionalized recipients to sell their homes within six months if they have no exempt relatives occupying their home and no reasonable medical expectation that they will be able to return home.^{^[13]} Non-209-B states do not have this flexibility.

The bottom line, however, on Medicaid long-term care eligibility in New Hampshire, as elsewhere, is that people who seek state funding for long-term care and are willing to accept the conditions that apply, can, with or without the legal assistance of a Medicaid planner, qualify for assistance much more easily than is commonly understood.

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[1] “Nursing Home Care,” New Hampshire Department of Health and Human Services; http://www.dhhs.state.nh.us/dcbcs/beas/nursinghome.htm. Extracted August 10, 2015.

[2] U.S. Census Bureau; LINK. Extracted August 10, 2015.

[3] Elder Law, Estate Planning, and Probate Section of the New Hampshire Bar Association and New Hampshire Legal Assistance, “Medicaid Income and Asset Rules for Nursing Home Residents and Guide for New Hampshire Residents Seeking Medicaid Coverage For Nursing Home Care,” January 1, 2015, available here at a very long URL. Cited as of August 10, 2015.

[4] Stephen A. Moses, “Medi-Cal Long-Term Care: Safety Net or Hammock,” Pacific Research Institute, San Francisco, California, pps. 19-21; http://www.centerltc.com/pubs/Medi-Cal_LTC--Safety_Net_or_Hammock.pdf.

[5] For details and examples, see Stephen A. Moses, “Briefing Paper #2: Medicaid Long-Term Care Eligibility,” www.centerltc.com/BriefingPapers/2.htm and Briefing Paper #3: Medicaid Planning for Long-Term Care, www.centerltc.com/BriefingPapers/3.htm, which are parts of “How to Fix Long-Term Care,” Center for Long-Term Care Reform, Seattle, Washington, 2012; http://www.centerltc.com/BriefingPapers/Overview.htm.

[6] Elder Law, Estate Planning, and Probate Section of the New Hampshire Bar Association and New Hampshire Legal Assistance, “Medicaid Income and Asset Rules for Nursing Home Residents and Guide for New Hampshire Residents Seeking Medicaid Coverage For Nursing Home Care,” January 1, 2015, available here at a very long URL, pps.6-7. Cited as of August 10, 2015.

[7] Ibid., p. 7.

[8] CMS State Medicaid Director Letter, “Affordable Care Act’s Amendments to the Spousal Impoverishment Statute,” SMD# 15-001, ACA# 32, May 7, 2015; LINK.

[9] “Key Medicaid Information for New Hampshire for 2015,” ElderLawAnswers; http://www.elderlawanswers.com/key-medicaid-information-for-new-hampshire-for-2015-12209. Extracted August 10, 2015.

[10] McLane, Graf, Raulerson & Middleton Professional Association: http://www.mclane.com/services/practice-groups/trust-band-estates/medicaid-planning.aspx. “McLane services clients from its four offices, with three located in New Hampshire – Concord, Manchester and Portsmouth. Our newest office is in Woburn, MA.” Extracted August 10, 2015.

[11] Stephen A. Moses, “LTC Bullet: Medicaid Annuity Abuse: A Case Study,” Center for Long-Term Care Reform, Seattle, Washington, June 5, 2015; http://www.centerltc.com/bullets/archives2015/1088.htm.

[12] “Does Medicare or Medicaid Come With Social Security or SSI Disability Benefits?,” NOLO Law for All; http://www.nolo.com/legal-encyclopedia/does-medicare-medicaid-come-with-social-security-ssi-disability-benefits.html. Extracted August 10, 2015.

[13] Elder Law, Estate Planning, and Probate Section of the New Hampshire Bar Association and New Hampshire Legal Assistance, “Medicaid Income and Asset Rules for Nursing Home Residents and Guide for New Hampshire Residents Seeking Medicaid Coverage For Nursing Home Care,” January 1, 2015, p. 3; available here at a very long URL. Cited as of August 19, 2015.

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Updated, Monday, June 13, 2016, 9:45 AM (Pacific)

Seattle—

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LTC E-ALERT #16-023: LTC NEWS AND COMMENT

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

Can Family Caregivers Reduce Hospital Costs?
Relocating in Retirement? Don’t Forget About Long-Term Care Costs
Rowan Led Research Team Develops Highly Accurate Blood Test For Alzheimer’s Disease
1.8 Million More Seniors Housing Units Needed by 2040
Americans’ Total Wealth Hits Record, According to Federal Reserve Report
What to Consider If You May Depend on Medicaid for Nursing Care: Planning ahead could help you avoid scrambling to shed assets so you're eligible for Medicaid
Seniors most in need of affordable housing: survey
Federal regulators may try to kill critical illness insurance
Obesity rate among women reaches record high in the US
Are rate hikes for long-term care insurance a claim cost time bomb?
Traditional Medicare beneficiaries sicker at end of life than MA patients, analysis shows
How to keep your cash from leaving the nest when your kids do
15.5 Million Americans Now Surviving Cancer: Report

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Updated, Friday, June 10, 2016, 9:18 AM (Pacific)

Seattle—

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LTC BULLET: HOW THE GOVERNMENT RUINED LTC (AND WE’LL FIX IT)

LTC Comment: Government interference in the LTC marketplace since 1965 caused harmful unintended consequences that only clear analysis and bold action can fix. More after the ***news.***

*** FROM TIME TO TIME, we bring you an oldie, but goodie from the LTC Bullets archives—scan or search all 1136 of them chronologically or by topic here. Today’s Bullet was originally published August 17, 2012. Read the original below. I’ll follow it with some current comments on latest developments. ***

*** LTC CLIPPING: Wall Street Journal reports today that Americans’ Total Wealth Hits Record, According to Federal Reserve Report:

“The wealth of Americans reached a record of $88.1 trillion in the first quarter, with rising home values offsetting stock-market wobbles at the start of the year. The boost to wealth was driven by a $498 billion increase in residential real-estate values around the U.S., while the overall value of equities declined by $160 billion, according to a Federal Reserve report released on Thursday. … One key difference between the increase in asset values today versus a decade ago is that Americans aren’t taking on as much debt. Total household liabilities rose by $17 billion in the first quarter and remained lower than their level during the financial crisis.”

LTC Comment: Soaring home equity again, but this time without using it as a slush fund. Can it last? Doubtful. More likely another bubble based on the Fed’s low-interest policy. In the meantime, Medicaid’s big home equity exemption shelters seniors’ biggest asset from LTC and crowds out LTCI. ***

LTC BULLET: HOW THE GOVERNMENT RUINED LTC (AND WE’LL FIX IT)

LTC Comment: Long-term care in the United States has serious problems of access, quality, reimbursement, discrimination, institutional bias, loss of independence, and welfare stigma. How did we reach this sorry state?

A long series of well-intentioned, but perversely counterproductive government actions led directly to the dysfunctional long-term care system we have today. Here’s a list of those mistakes and their consequences in rough chronological order.

Mistake #1: Medicaid started paying for most nursing home care shortly after the program was signed into law in 1965.

Unintended Consequence: Nursing homes became the dominant venue for long-term care crowding out a home care market.

Mistake #2: Medicaid made nursing home care easy to get with no transfer of assets restrictions and no estate recovery in the beginning.

Unintended Consequence: People learned Medicaid would pay for a nursing home, but anything else was out of pocket.

Mistake #3: When unlimited access to the most expensive kind of care exploded in cost, government capped bed supply by demanding “certificates of need” (CONs) before building more nursing homes.

Unintended Consequence: This created a government-enforced monopoly. Nursing homes raised rates they charge to compensate for growth restrictions.

Mistake #4: When nursing homes raised rates, Medicaid capped reimbursement rates.

Unintended Consequence: This was the origin of the differential between low Medicaid rates and high market-based private-pay rates. [Cost shifting.]

Mistake #5: By capping supply AND price, Medicaid caused demand to skyrocket filling nursing homes with too many recipients at too low reimbursements.

Unintended Consequence: Care quality plummeted.

Mistake #6: Instead of fixing the problem (easy access to free under-financed nursing home care), the government demanded quality care without paying for it (OBRA ’87).

Unintended Consequence: Caught between the rock of inadequate reimbursement and the hard place of mandatory quality, nursing homes sued and usually won.

Mistake #7: Again, instead of fixing the problem, government repealed the 1981 Boren Amendment under which the nursing homes were suing in 1997.

Unintended Consequence: With no floor under Medicaid nursing home reimbursements, quality remained a problem and nursing homes’ reputation disintegrated.

Mistake #8: Despite some efforts, Medicaid never targeted benefits to the genuinely needy.

Unintended Consequence: Easy access to Medicaid nursing home care after care was needed discouraged responsible LTC planning, encouraged artificial self-impoverishment through “Medicaid planning,” and crowded out private LTC insurance.

Mistake #9: Trying to save money, Medicaid encouraged rebalancing from nursing home care to home care.

Unintended Consequence: LTC costs continue to explode because home care delays but does not replace nursing home care and home care is more desirable so more people apply for Medicaid.

Mistake #10: Seeing that nothing they do seems to work, the government tried to dupe the public into buying government LTC insurance with the misbegotten CLASS Act.

Unintended Consequence: Now everyone is cynical about the seeming hopelessness of the situation.

Mistake #11: Having crowded out a market for private LTC insurance by paying for most expensive LTC, the government added insult to injury by driving interest rates on carrier reserves to near zero.

Unintended Consequence: Private LTC insurance is nearly ruined as the bloat of government’s unfunded entitlement liabilities expands.

Mistake #12: The only way to save the LTC safety net is to target Medicaid’s scarce resources to the most needy, but government did the exact opposite with the “maintenance of effort” (MOE) rule in the health reform law. [Since expired.]

Unintended Consequence: States struggle to finance a hopelessly dysfunctional system with no control over hemorrhaging eligibility even as the federal government borrows 40 cents of every dollar spent on Medicaid.

OK, folks, that’s the problem and how, step by step, we got into the mess were in. So, what do we have to do to fix it?

That’s the easy part. Unwind the mistakes government made that created the problems we face. Target Medicaid LTC to the needy. Eliminate the easy income and asset rules that allow practically anyone to qualify regardless of income and assets. Most importantly, reduce Medicaid’s home equity exemption from as high as $786,000 [now $828,000] to a reasonable level closer to what socialized England allows ($36,000).

Do these simple things and the freer market will correct all the problems. Once it’s clear to all that long-term care is a personal responsibility, people will plan early and save, invest or insure for long-term care. With fewer people dependent on Medicaid, the program will be able to afford to pay for quality care across the spectrum from home care to nursing home care. Nursing homes will remain appropriate venues for short-term post-hospitalization and rehabilitation, but home and community-based care will expand radically and rapidly with an influx of private financing.

LTC isn’t so intractable a problem after all. Once you understand why things are the way they are and stop doing the things that make the situation worse, guess what? We have more than enough resources to ensure quality long-term care in the most appropriate settings for all Americans.

Just do it!

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LTC Current Update: Well, that was the lay of the LTC land four years ago, just before the last presidential election and immediately preceding yet another government fiscal crisis in 2013. What’s happened since? Nothing to improve the situation and much to make it worse.

Fiscal and Monetary Shenanigans

The biggest change is that government fiscal and monetary policy is worse than ever. Nobody worries anymore about out-of-control spending and money printing. The federal debt has grown past $19 trillion and Cato reports that the total federal fiscal imbalance (expected revenue minus promised benefits) is negative $117.9 trillion. Fed-induced artificially low interest rates continue to misdirect capital into poor investments while inflating an economic bubble of historic proportion. The only good news is that when this baby pops and the dollar-fiat-currency collapses, we’ll have nowhere else to turn but to freer-market capitalism that made America great in the first place. OK, call me Pollyanna, but that’s the last, great hope I cling to.

Medicaid Managed LTC

What about long-term care specifically? The big change there is that Medicaid, the dominant LTC payer, has shirked its responsibility for providing and paying for quality community and institutional care. How so? Instead of paying home care and nursing facility providers directly (however inadequately), state Medicaid programs all across the country are shifting to “managed long-term care.” That means they contract with private companies to (1) find and sign up providers, (2) direct Medicaid recipients to this limited range of locked in providers, and (3) pay the providers after taking a cut for themselves--all for less than it would have cost Medicaid to pay the providers itself. Traditional direct-care LTC providers wonder how adding an extra payee and a new level of bureaucracy will lower costs and improve quality. But for now, that’s the Holy Grail of managed long-term care.

LTC Policy Capitulation

From the Pepper Commission in 1990 through the Medicaid Commission of 2007 and from the CLASS Act fiasco of the early 2010s to the most recent fruitless LTC Commission, the gurus of government gimmicks have shot nothing but ideological blanks. Now they’ve given up on socializing LTC, proposing a hybrid private front-end and mandatory public back-end program, ironically, just as socialism is getting a new lease on American life thanks to the candidacy of Bernie Sanders and its influence on Hillary’s positions. Will the Medicare Part LTC idea spring back to life? I don’t think so. Its advocates are intellectually burned out. They can barely muster the energy to promote their latest compromise. Besides, the bottom’s going to fall out of the entitlement programs we already have before a new one for LTC can get traction.

Back to the Future

Here’s a novel idea. Let’s try something that’s never been tried before. Everyone says we need a new mandatory government program for long-term care because Medicaid forces people into impoverishment. But that’s not true and never has been. So, since nothing else works, why don’t we try the one approach that’s never been tried before. To wit, make Medicaid available only to the truly needy so that it can provide top-quality home and institutional care at market rates to fewer recipients. Let everyone else pay for their own top-quality, market-priced care out of savings and home equity. That huge influx of private funds will improve care quality and access for everyone. With their inheritances going to pay for their parents’ LTC, everyone else will get the idea they need to save, invest or insure for LTC. When the next generation needs LTC, they’ll pay privately for it and the free competitive market thus revitalized will generate creative new ways to provide the kind of home-based care most people prefer.

Problem Solved

LTC providers are no longer starved for adequate revenues. The poor get better access to higher quality care. So do the middle class and affluent. The reverse mortgage and LTC insurance markets boom creating jobs and throwing off big tax revenues. Tax payers breathe a sigh of relief. The new system rewards hard work, personal responsibility and early planning instead of punishing them as in today’s system where, as Jane Bryant Quinn once observed, “only the suckers pay.”

Pipe dream? Maybe. But watch what happens when the current economic bubble deflates leaving the government with staggering obligations and interest rates too high even to service the debt. Entrepreneurs and consumers will respond as they always do by making the most of a bad situation. Creative destruction and profit motive will prevail. The economy, including long-term care, will right itself in time.

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Updated, Monday, June 6, 2016, 10:25 AM (Pacific)

Seattle—

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LTC E-ALERT #16-022: LTC NEWS AND COMMENT

Expect GAO assisted living study results in early 2017
15.5 Million Americans Now Surviving Cancer: Report
More Than Two-Thirds of Americans Believe They'll Outlive Their Savings, New Study Shows
Brokers International adds OneAmerica LTC products
Naïveté solves all LTC-related problems, studies do not show
Why Encouraging Older Adults to Stay In their Homes Isn't Always Smart
How one company is studying the brain to better market to consumers
This lifesaving coincidence definitely makes you swallow deeply
President Obama Throws In The Towel On Social Security Reform
U.S. Alzheimer's death rate rises
Selling LTCi: Pricing, Perception and Persistency
Almost no one in the U.S. does everything right, healthwise
The most livable cities for seniors, according to new system

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Updated, Friday, June 3, 2016, 9:45 AM (Pacific)

Seattle—

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LTC Bullet: LTC at a Crossroads

LTC Comment: Long-term care financing policy is at a critical crossroads and may take a wrong turn. We explain after the ***news.***

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

All LTC Bullets and E-Alerts

Access to our Members-Only Zone website and Almanac of Long-Term Care
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LTC BULLET: LTC AT A CROSSROADS

When you come to a fork in the road, take it. Yogi Berra

If we could first know where we are and whither we are tending, we could better judge what to do and how to do it. Lincoln, House Divided Speech

Beware of the naked man who offers you his shirt. Navjot Singh Sidhu

LTC Comment: U.S. long-term care financing policy has come to a fork in the road. If we take the now-most-likely turn, the consequences could be disastrous. Far better if we back up, consider how we got to where we are, and reconsider alternative pathways before we choose. Otherwise, we may end up with yet another bankrupt entitlement program, with Uncle Sam nude promising raiment.

The Trending Consensus

After decades of struggling unsuccessfully to find better ways to finance long-term care, researchers, industry experts and public policy makers are starting to agree on a general direction for reform.

A consensus is forming around the idea of a mandatory, government-financed program to cover the back-end, catastrophic long-term care risk with incentives for private insurance to help pick up some of the front-end risk.

Three reports published in February of this year offered variations of this plan:

All three reports relied on research conducted by (1) the Urban Institute (UI) and Milliman as described in a November 2015 Health Affairs article titled “Financing Long-Term Services and Supports: Options Reflect Trade- Offs for Older Americans and Federal Spending,” by Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson and (2) the Urban Institute and the Department of Health and Human Services Assistant Secretary for Planning and Evaluation (ASPE) as published July 2015 and revised February 2016 in “Long-Term Services and Supports for Older Americans: Risks and Financing.”

We have already critiqued these reports, the research underlying them and the ethical principles on which they depend in:

New Data on LTC Incidence, Duration, Cost and Financing Sources, Friday, July 24, 2015
The Arrogance of LTC Analysts’ Elitism, Friday, December 4, 2015
Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations, Friday, February 5, 2016
LTCI Defeatism, Friday, April 1, 2016
Losing Principles, Friday, April 29, 2016
No Single Solution?, Wednesday, March 9, 2016

Let’s look now at what went wrong that led smart, well-intentioned people to the brink of a big mistake.

Foundational Fallacies

(1) Ignoring Lincoln. In the quote at the top of this article, our 16^th President recommended considering where we are (we might add “how we got here”) and where we’re headed, before deciding just what to do and how to do it. The organizations and authors behind the new LTC consensus have not explained why LTC has the problems it has, how the problems developed over time, or why their “solution” will help. What if excessive government interference in the long-term care market is the primary cause of its welfare-based access and quality problems, inadequate funding, caregiver shortages, institutional bias and oblivious consumers as we argue in “The History of Long-Term Care Financing or How We Got Into This Mess?” If that’s the case, how will adding more government financing and interference improve the LTC market? Why won’t it make problems worse instead of better? Yet, any reflection on the history of LTC financing and the cause of the problems they propose to resolve is missing from the research and reports underlying the new LTC consensus.

(2) Fallacy of Impoverishment and The Myth of Medicaid Spend Down. The new consensus is grounded in the assumption that vast swaths of America’s aging population are spending down their life’s savings into total impoverishment for long-term care. Its advocates do not base this assumption on evidence, but on the mistaken presumption that Medicaid, the principal payer for long-term care, requires impoverishment. Actually, people qualify for Medicaid’s expensive LTC benefit with incomes up to the total cost of their actual medical expenses including long-term care, with practically unlimited exempt assets and with much, much more if they retain the help of a Medicaid planner. For details, see “The Myth of Medicaid Spend-Down,” “The Fallacy of Impoverishment,” and the dozens of articles here.

(3) LTC Myopia. The forming LTC consensus is based predominantly on analysis of longitudinal data about the income and assets of aging Americans and their dependency on public programs such as Medicaid and Medicare. These HRS/AHEAD/Rand data bases are a wonderful source of information. They show that most people have low income and assets as they enter their declining years and that many aging people decumulate what little wealth they have fairly rapidly as they approach the need for long-term care. No surprise there. Old people in the bottom half financially are poor and do need an economic safety net. What’s missing in the research based on “big data” is an explanation of what happens to the income and assets of people between the median and the top five percent of wealth. That research has totally ignored the vast legal literature on Medicaid planning and the flood of information on how to qualify for Medicaid without spending down that is readily available on the internet and in the popular media.

(4) Equivocation on “asset transfers.” How is it possible for researchers to ignore something as big and ethically questionable as widespread artificial impoverishment to qualify for Medicaid? Several GAO reports and some scholarly studies we’ve critiqued over the years show how: Where There's Smoke, There's Fire; GAO on TOA Underwhelms; Georgetown, GAO and Kaiser: The Bermuda Triangle of Good LTC Policy; Kaiser Cover-Up Continues; GAO AWOL on LTC TOA; GAO Punts on Medicaid Planning. These studies all focus on only one of the many ways to qualify for Medicaid without spending down, specifically asset transfers. They find that asset transfers are relatively rare and occur in mostly small amounts, although one study did acknowledge that up to one percent of the cost of Medicaid long-term care spending could be recovered by aggressively pursuing transferred assets. While that is real money, the big money lost to Medicaid is not in asset transfers, but in the ease with which middle class and affluent people can qualify for Medicaid even without formal legal planning and the many forms of Medicaid planning that do not involve transferring assets, such as the purchase of exempt assets.

(4) Equivocation on “spend down” and “transitions.” A great deal of the research underlying the new LTC consensus is based on a failure to distinguish between genuine spend down of savings and simply transitioning to Medicaid without needing to spend down or after artificially self-impoverishing oneself. Because Medicaid’s income and asset rules are very generous and elastic, it is quite easy and commonplace to transition to Medicaid LTC benefits without spending down savings. But this reality is rarely recognized and acknowledged in the literature. Analysts choose instead to call everything “spend down” on the simple presumption that people are too ignorant, naïve, or stigmatized to take advantage of universally available information on how to get Medicaid, a means-tested public welfare program, to pay for their long-term care without spending down.

(5) Equivocation on “out of pocket” expenses to include residential care and to exclude Medicare post-acute care. Advocates of the new LTC consensus argue that out-of-pocket expenditures for LTC (call them “OOPs”) have skyrocketed to over 50 percent. They get to that figure by including in OOPs room and board expenses in residential care settings, costs that people would incur whether they need LTC or not, and by excluding Medicare expenditures from the LTC total, even though Medicare’s relatively generous nursing home and home care reimbursements are the only thing enabling Medicaid to pay LTC providers less than the cost of the care. Why tie themselves in argumentative knots to make OOPs look as high as possible?

If you want a big new government program to fund long-term care, it helps if you can convince policy makers and voters that the public is spending outrageous amounts of money for long-term care and so desperately needs financial assistance. But the proportion of long-term care paid by government has been going up and the proportion paid by individuals and families has been going down for half a century. When Medicaid first started paying for long-term care, out-of-pocket expenditures were very high, upwards of half of all nursing home expenditures. But then Medicaid and Medicare spending increased rapidly and dramatically. OOPs declined to around one-fourth of total expenditures. As we point out every year in our annual update on the latest LTC expenditure data titled “So What If the Government Pays for Most Long-Term Care,” even that low OOPs figure is misleadingly high because roughly half of it is not assets being spent down, but Social Security income being spent-through by people on Medicaid already as required to offset Medicaid’s cost of care. To this day, upwards of 85 to 90 percent of nursing home expenditures can be accounted for without dipping into personal savings. The same is true of home care. Only 8.9% of formal home health care costs were paid out of pocket.

Our Challenge

If the newly forming consensus on long-term care financing policy is not to become an unstoppable juggernaut like ObamaCare, we need to mobilize, analyze, criticize and refute its underpinnings. That’s how cooler heads managed to reverse the misbegotten CLASS Act even after it passed into federal law. How to proceed? Well, we’re working on that.

The Center for Long-Term Care Reform is systematically reviewing decades of published research that has culminated in the errors we’ve described in this article. We’ll show how easy access to Medicaid LTC benefits after the insurable event has occurred explains why most people do not plan for long-term care and end up dependent on Medicaid. We will explain how people over age 65 with median through 95^th percentile incomes ($24,150 to $93,000), assets ($63,350 to $1,219,250), and housing wealth ($65,500 to $418,400) routinely become eligible for Medicaid LTC benefits. We will demonstrate that tightening Medicaid financial eligibility criteria to put home equity at risk and closing the egregious Medicaid-compliant annuity loophole can remove perverse incentives that discourage responsible long-term care planning.

And from these facts and this reasoning, we will plot and recommend a better course toward improving long-term care service delivery and financing. Stay tuned.

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Updated, Tuesday, May 31, 2016, 9:18 AM (Pacific)

Seattle—

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LTC E-ALERT #16-021: LTC NEWS AND COMMENT

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

The many benefits of Health Savings Accounts
The superbug that doctors have been dreading just reached the U.S.
Could Alzheimer’s Stem From Infections? It Makes Sense, Experts Say
Report: Chronic diseases to drive growth in skilled nursing market
Fresh Approaches to Paying for Long-Term Care
The Hidden Risks of Those Popular Medicare Advantage Plans
Retirees Uncertain About Tapping Home Equity But Want To Age In Place
Brace for a catastrophic seniors housing shortage, group warns
The High Cost of Ultralow Interest Rates
Aging-in-Place Wildly Popular, Home Health Aides Less So

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Updated, Friday, May 27, 2016, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: HILLARY ON LTC: NOW AND THEN

LTC Comment: LTC policy plays in this year’s presidential election even less than in 2008. Now and then, after the ***news.***

*** Here are two ominously connected news items we sent this morning to our Clipping Service subscribers:

1.) 5/25/2016, “Could Alzheimer’s Stem From Infections? It Makes Sense, Experts Say,” by Gina Kolata, New York Times

Quote: “Could it be that Alzheimer’s disease stems from the toxic remnants of the brain’s attempt to fight off infection? Provocative new research by a team of investigators at Harvard leads to this startling hypothesis, which could explain the origins of plaque, the mysterious hard little balls that pockmark the brains of people with Alzheimer’s. … Recent data suggests that the incidence of dementia is decreasing. It could be because of better control of blood pressure and cholesterol levels, staving off ministrokes that can cause dementia. But could a decline in infections also be part of the picture?”

LTC Comment: Fascinating new research and speculation that seems more promising than most such reports.

2.) 5/27/2016, “The superbug that doctors have been dreading just reached the U.S.,” by Lena H. Sun and Brady Dennis, Washington Post

Quote: “For the first time, researchers have found a person in the United States carrying bacteria resistant to antibiotics of last resort, an alarming development that the top U.S. public health official says could mean ‘the end of the road’ for antibiotics.”

LTC Comment: Juxtapose this report with the clipping I just sent you tying Alzheimer’s to infection and you’ll see the combined problem is potentially much bigger than either.

Receive these LTC-relevant news items (with original analysis) in real time and stay on the forefront of professional knowledge by subscribing to our Clipping Service. Contact Damon at 206-283-7036 / damon@centerltc.com to start your subscription immediately or go directly to our secure online subscription page and sign up for $250 per year or $21 per month. Already a Center member? Contact us to add the Clipping Service to your membership for only $100 per year or $8.25 per month. ***

*** BACK THEN: When we published LTC Bullet: Hillary on LTC in February 2008, the Center’s National Long-Term Care Consciousness Tour was just getting under way. So was the “Great Recession.” There’s been a lot of water under the bridge since then. So we thought we’d take a look at how LTC policy aspirations were before and are now from the perspective of the once and current presidential candidate, Hillary Clinton. ***

LTC BULLET: HILLARY ON LTC: NOW AND THEN

LTC Comment: Most of this year’s long list of now-passed-over presidential candidates had little or nothing to say about long-term care. This January 29, 2016 piece in Forbes gave some perspective: “Why Candidates Aren't Talking About Long-Term Care.” Hillary Clinton broke from the pack, however.

Here’s her “Plan to Invest in the Caring Economy: Recognizing the Value of Family Caregivers and Home Care Workers” offered November 22, 2015.

As president:

Clinton will provide tax relief to family members who care for ailing parents and grandparents. Family caregivers spend as much as $5,000 or more in expenses related to their elders’ care, but in many cases they receive no tax deduction or credit. This shouldn’t be this way: caregiving can be a win-win for our families and our overall health system. This is why Clinton will offer a 20 percent tax credit to help family members offset up to $6,000 in caregiving costs for their elderly family members, allowing caregivers to claim up to $1,200 in tax relief each year.
Launch a Care Workers Initiative to create a coordinated, government-wide initiative to address the challenges faced by care workers—by developing strategies to improve opportunities for care workers to earn the skills they need; creating paths to professionalize the workforce through career ladders and apprenticeships; improving the rate-setting processes in the child care and health care systems to ensure fair wages; providing care workers with an opportunity to come together and make their voices heard in support of a stronger system; and by developing and enhancing matching services to connect care workers to the families who need them.
Expand Social Security by counting the hard work of caregivers and giving them the benefits they deserve. Millions of women—and men—take time out of the paid workforce to raise a child, take care of an aging parent or look after an ailing family member. Caregiving is hard work that benefits our entire economy. However, when Americans take time off to take care of a relative, they do not earn credits toward Social Security retirement benefits. This can reduce their Social Security benefits at retirement, since those benefits are calculated based on their top thirty-five years of earnings—an issue that disproportionately impacts women. For years, leaders like Congresswoman Nita Lowey have called out these disparities. No one should face meager Social Security checks because they took on the vital role of caregiver for part of their career. Hillary Clinton believes this is an idea whose time has come: Americans should receive credit toward their Social Security benefits when they are out of the paid workforce because they are acting as caregivers.
Build on the Caregiver Respite program. Caring for a sick family member day in and day out can exact a significant emotional and physical toll. Both caregiving family members, and those they care for, can benefit from occasional temporary relief. As a Senator, Clinton was the lead Senate sponsor of the Lifespan Respite Care Act, which was enacted. It authorizes grants that continue today to improve respite care access for family caregivers of children or adults of any age with support needs. As president, Clinton will go beyond President Obama’s Caregiver Respite budget request—investing $100 million in the initiative over 10 years.

That is now. This was back then as pulled from our archives: LTC Bullet: Hillary on LTC, February 7, 2008:

LTC Comment: The February 2008 issue of Health Insurance Underwriter, the monthly magazine of the National Association of Health Underwriters (www.nahu.org), contains my article "Hillary Clinton on LTC."

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Hillary Clinton on LTC
by Stephen Moses
February 2008

Presidential candidate Senator Hillary Clinton has promised a cornucopia of LTC benefits if elected. Would our service delivery and financing system be better or worse if she delivered?

Hillary Clinton announced her plans for long-term care public policy a few weeks ago. Let's give due credit: none of the other presidential candidates have committed themselves to anything like such a detailed plan. At least she's on the record, with lots of ideas, some of which are very appealing.

First a synopsis, then our comments:

Hillary Clinton's Long-Term Care Agenda

Supporting Seniors with Long-Term Care Needs, and The Invisible Army of Caregivers That Support Them:

-- Enacting a new $3,000 Caregiving Tax Credit to provide financial relief to millions of seniors, people with disabilities and their families. Clinton will also invest more than $300 million per year to support unpaid family caregivers.

-- Giving more seniors the ability to access long-term care services where and when they need them, including in their homes.

-- Doubling the elderly standard deduction to provide additional financial relief for 11 million elderly tax filers.

Helping the Elderly Prepare for Long-Term Care Needs by Making Long-Term Care Insurance More Secure and Affordable:

-- Requiring tough new consumer protections for long-term care insurance, including ending discrimination against veterans and helping states create consumer advocates for long-term care insurance.

-- Offering consumers the same secure long-term care insurance options that members of Congress enjoy.

-- Providing a new Long-Term Care Insurance Tax Credit to make secure, high-quality insurance plans affordable.

Protecting Our Seniors by Improving the Quality of Our Nursing Homes:

-- Tripling federal support for nursing home ombudsmen programs to protect consumers of long-term care.

-- Directing the Department of Justice and the Federal Trade Commission to assist state consumer advocates and prosecutors to tackle persistent abuses and new challenges in the long-term care industry.

-- Reversing the inexcusable policy of the Centers for Medicare and Medicaid Services (CMS) of withholding information on poor-performing nursing homes and giving seniors full access to usable data on nursing homes, including data on nursing home ownership structures.

-- Strengthening our nursing and direct care workforce with a national system of background checks for long-term care workers and $125 million investment in Workforce Improvement Programs.

LTC Comment: Senator Clinton's laundry list of LTC promises includes something for nearly everyone -- a tax credit for caregivers, a tax credit for LTC insurance, new LTC insurance options, tough new LTCI consumer protections, expanded home and community-based care and tougher nursing home regulation. Well, nothing in there for the much-maligned nursing homes, but they're supposed to be the problem that schemes like this are intended to fix. So, no surprise in that.

Here's the flaw in this and any similar grab bag of uncoordinated proposals: They do not derive from analysis of what caused the problems they seek to fix. Consequently, they run the risk of making the problems worse instead of better. So, to evaluate the Senator's plan, let's begin by summarizing why America has such a dysfunctional LTC system in the first place. Then we'll be able to see if her proposals are compatible and progressive or contradictory and self-defeating.

LTC is a mess in the U.S.A. because the government made nursing home care free in 1965 by paying for it through Medicaid and Medicare. That's why the public is in denial today about LTC risk and cost. That's why the system has a nursing home bias. That's why a private home and community-based services infrastructure never developed. That's why the long-term care insurance market remains stunted. It's a big reason why Medicaid and Medicare costs have exploded. And that's why state and federal budgets are too tight to fund access to quality long-term care reliably through public programs.

Now, does anything in Senator Clinton's LTC plan address this underlying dysfunction? No. If anything, her plan would exacerbate all of the underlying causes of the problems. For example:

-- Expand Medicaid-financed home and community-based care? That makes Medicaid LTC even more attractive than it already is. It would increase Medicaid estate planning and ruin the LTCI market unless combined with strict eligibility controls, which the Clinton plan lacks.

-- A $3,000 tax credit for caregivers? That also sends the wrong message: don't worry about long-term care. Not only will Medicaid pay for it, but you'll get a check from the government if you provide the care yourself. Furthermore, it's an open invitation to elder abuse. Find an elderly person to put in the basement and cut your taxes $3,000.

-- Give a tax credit for LTC insurance? Great idea, but it won't help much if combined, as it is in Senator Clinton's plan, with so many expensive new initiatives to make publicly financed LTC more attractive and responsible LTC planning less necessary than ever.

-- Improve nursing home care by adding more regulations and enforcement? Dream on. The problem with nursing home care is that it is underfunded by parsimonious public programs, not that it is under-regulated. Nursing homes are already as regulated as the nuclear industry.

It is tempting for politicians to throw a lot of money and popular proposals at problems. But too often, as in this case, their proposals treat the symptoms of social problems instead of the causes. That's why the unintended consequences of their well-intentioned ideas often make worse the very problems they are trying to solve. Then will come another set of politicians who propose more of the same. After 40 years of this we find ourselves in a quagmire of conflicting policies and funding sources so complicated it takes serious analysis to unravel and correct. But serious analysis is something no politician has the time or inclination to attempt.

And what about the cost? Five billion dollars per year! For what? To add more government interference in the LTC marketplace which is exactly what caused the problems in the first place. Just think what $5 billion could do left in the hands of consumers if they had real incentives to prepare responsibly for long-term care risk and cost.

On the other hand, there is no chance Senator Clinton's proposals will come to pass, whether she becomes president or not. Before long, the fiscal tide will turn (it may be turning already); Social Security and Medicare will shirk their unfunded liabilities by becoming means-tested welfare programs like Medicaid; Medicaid will sink further into red ink; public financing of long-term care will retrench if not disappear altogether; the burgeoning boomer generation will tap their home equity (if any remains) to pay for long-term care; their heirs will get the message and start to buy LTC insurance; and the marketplace will work things out in the long run.

What's so very sad, however, is that a lot of poor people for whom we could have preserved a social safety net will be hurt as this scenario unfolds. And here's the irony. The very politicians who claim to care most about the needy and underprivileged are the same ones who propose the policies that do the most harm. But that is no defense for the other political side, which errs by omission almost as seriously as their opposition seeks to do by commission.

The next 20 years will tell the tale.

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LTC Comment: How has Hillary on LTC changed? In 2008, she called for a $3,000 tax credit for caregivers. That proposal doubled to $6,000 for 2016’s campaign. In 2008, she proposed a “Long-Term Care Insurance Tax Credit.” No more; she’ll “expand Social Security” instead. In 2008, Hillary took aim at nursing homes, calling for more ombudsmen, litigation, background checks and information on poor performers. No longer, this year it’s all about supporting family caregivers.

Is the new Hillary on LTC any better than the old one? Hardly. I stick by my critique above. But I’ll double down in this respect. Eight years later, we find ourselves deeper than ever in the financial hole that will bring America’s LTC service delivery and financing system crashing down.

Our national debt has nearly doubled from $10.9 trillion when President Obama took office in January 2009 to $19.3 trillion now. Medicare’s and Social Security’s unfunded liabilities are staggering. Medicaid continues to crowd out responsible LTC planning. Self-indulgent fiscal and monetary policies push up spending and debt and sustain the excess with artificially low interest rates. When will this bubble burst?

I repeat: “The next 20 years will tell the tale.”

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Updated, Monday, May 23, 2016, 10:22 AM (Pacific)

Seattle—

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LTC E-ALERT #16-020: LTC NEWS AND COMMENT

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

Most hip fracture patients not told they have osteoporosis, survey suggests
More than one-third of Americans think Medicare will cover their LTC needs
Americans continue to believe government will pay for ADL assistance, long-term care
Think What You Could Do With Half a Million Dollars in Retirement
Inside the GOP’s Plans to Overhaul Medicaid
Rising Health Care Costs Shine Spotlight On Critical Illness Coverage
More Consumers Are Hanging on to their Long-term Care Insurance Policies
Poll Says Majority of Americans Prefer 'Medicare For All' Health Care
Loneliness hurts: Senior health about more than disease
The time to explore long-term elder care is before you need it, experts say
Where Drinking, Drugs and Alzheimer’s Are Disproportionately Fatal

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Updated, Friday, May 20, 2016, 11:45 AM (Pacific)

Seattle—

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LTC BULLET: LTCI OPTIMISM

LTC Comment: Pollyanna or Cassandra? Who ya gonna believe? After the ***news.***

*** LTCI STICKS: Following is one of the LTC Clippings we sent to subscribers this week.

5/18/2016, “More Consumers Are Hanging on to their Long-term Care Insurance Policies,” Advisor Magazine

Quote: “More consumers are hanging on to their long term care insurance (LTCI) policies, according to the latest persistency study of U.S. long term care insurance by LIMRA and the Society of Actuaries (SOA). The study is based on data from 20 companies with about 19 million covered lives; about 64 percent of the insureds had individual coverage and 36 percent had group coverage. The study found the percentage of policies voluntarily lapsed was 3.6 percent during the years 2008-2011. This is 30 percent lower than when the study examined experience data from 2002-2004.”

LTC Comment: For interpretation of these findings, see LTC Bullet: LTCI Lapses Reconsidered, May 6, 2016. ***

*** LTC CLIPPINGS: We scan the LTC-related news and reports constantly, select and send the most important items in order to keep our LTC Clippings subscribers on the forefront of professionalism. To inquire or subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: LTCI OPTIMISM

LTC Comment: After my downbeat assessment of a few weeks ago in “LTC Bullet: LTCI Defeatism,” we thought LTC Bullets readers might be ready for a more positive outlook on the prospects for private LTC insurance.

So today we bring you another piece by our thoughtful guest columnist Stephen D. Forman in which he makes the case that a brighter day is dawning for LTCI--so Carpe Diem.

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“Spring Comes to LTC Insurance: The Blooming of a Soft Market”
by
Stephen D. Forman, CLTC

Download the report

INTRODUCTION

Although the terms “hard market” and “soft market” are more commonly used to describe the two to ten-year cycles which recur in property and casualty insurance (P&C), they can extend to many lines, including long term care (LTC). When we pull back and examine the LTC market through a cyclical lens, not only does it improve our ability to forecast, but it sheds light on a multitude of changes which otherwise seem unrelated. Taken together, these changes signal the re-emergence of a soft market, news which the LTC community should greet like the welcome return of Spring.

Many column inches have been written about LTCI’s imminent demise, but on closer inspection what we are witnessing is “economic evolution” typical of any maturing industry. Just as water seeks its own level, the number of carriers has responded to the number of buyers, with some target markets heavily saturated. As the remaining competitors seek to broaden their reach into new markets, the seismic shift between cycles begins.

Reviewing the characteristics of each cycle, it is apparent they operate as “gas pedal” and “brake”. Do we want to slow sales or speed them up? The result is that a hard market is a seller’s market, while a soft market is for buyers. As the pool of suitable customers shrinks and LTCI sales reach historic lows, we expect a concerted reaction to reach and win new clients.

UNDERWRITING

Although conventional wisdom states that policies are tougher than ever to qualify for—that underwriting standards flow down a one-way street—we lose much through this oversimplification. At least three top-tier carriers have announced relaxed underwriting standards this year. Whether by accepting previously-uninsurable conditions (like Type-2 diabetes with insulin, or cirrhosis of the liver) or by waiving invasive requirements (like those involving bodily fluids), the pendulum is swinging back.

We are also seeing more aggressive use of “counteroffers” throughout the industry, be it through an alternative benefit, rider or product than originally applied-for. Only through the accumulation of seventy times the claims data since just 2000 are these moves possible, allowing a fair but careful balance between benefit to the policyholder and exposure to the company.

Some carriers have found another way of accepting more applicants: through the use of combination products which link life insurance with LTC. By incorporating mortality underwriting (which benefits from longer-lived policyholders) with morbidity underwriting (which benefits from shorter-lived applicants), these products boast declination rates about 1/3rd that of traditional LTC insurance. Furthermore, through the use of large single premiums, some shift an inordinate amount of risk back to the policyholder in the form of a large “deductible”, i.e. the exhaustion of one’s own money first.

SUPPLY

Although it’s a funny concept to think about, insurance companies do have a finite “supply” of insurance they can sell, similar to inventory at your local retail store. They can “sell out” of insurance if they assume more risk than they can financially support (and state regulators keep a close watch on this). In the most extreme examples, a company will suspend sales in a state entirely. But at the other extreme, an oversupplied company has a lot of capacity, and we have been told by at least two major carriers—who shall remain unnamed, of course—“We’ll take as much new business as you can send in!"

This might seem bizarre in another industry—who wouldn’t want to sell as many widgets as possible?—but LTCI puts a premium on slow, controlled growth. With its high capital requirements, growing too fast can easily strain an LTCI carrier. It’s not always the case that companies want business (especially if they are waiting for a new, more profitable product to come to market and replace the one currently for sale). So when we read that one of the market leaders is making a nationwide push to hire agents, a second is reportedly twenty percent overstaffed, and a third has lifted its unofficial cap on new business, these are all signs which point to increased capacity.

COMPETITION

While the last decade was marked by carriers exiting the long term care insurance market (from a peak of around 110 to today’s dozen or so), the transition to a soft market predicts new entrants will return. And that’s exactly what we’re seeing (aided by a new study from the Society of Actuaries which demonstrates to sideline insurers the remarkably good odds of a profitable future selling LTCI). Within the last twelve months, heavyweight endorser AARP has signaled a new partnership with the private market, a brand new carrier has announced its intention to sell traditional LTCI, and a third major brand has shed every product in its portfolio but LTCI.

Meanwhile, the number of life insurers who recognize the demographic opportunity represented by the Silver Tsunami is unprecedented: seven have entered the combo space within the past five years, while over twenty offer an accelerated benefit for chronic illness and/or critical illness. LIMRA reports that acceleration riders are now a “must have” benefit, and one carrier was quoted in confidence saying, “You will never see another life insurance product sold by us which does not include a long term care benefit.

These forays do not even consider the ancillary products which are now competing for the same dollar. Just as Netflix and Amazon now compete for the same eyeballs as cable and broadcast television, we must entertain non-LTCI competitors such as critical illness, reverse mortgage, short-term recovery, and life settlements (to name a few). Buyers are finding this softening market exceptionally dense with options.

And then there are the disruptors—those Silicon Valley-based, venture capital-backed companies who are re-writing not only how insurance is bought, but re-inventing insurance itself from a clean sheet of paper with an outsider’s perspective. One or both developments will bleed into the world of LTCI, as we are already aware of such initiatives.

RATES

While most observers would argue premiums are on an ever-upward spiral, this misses some of the nuance between the lines. In a softening market, sellers compete for buyers. We’ve seen how insurers might widen their underwriting, but they can also make their premiums more attractive or broaden their features and benefits. There are now three carriers who have agreed to share some of their profits with their policyholders (two in the form of dividends, and one in the form of policy credits). Another two carriers have explicitly re-packaged their products in order to drive the price of entry below the magic $100/month flashpoint at which buyer interest flares. A few carriers are even modifying agent compensation in an attempt to hold down prices.

And for what it’s worth, there are other entities designing products these days: think tanks like the Bipartisan Policy Center (BPC) and LTC Financing Collaborative have proposed hypothetical LTC plans. Neither is as concerned with the quality of coverage as with the quantity: they’ve concluded the best way to ensure universal participation is by making policy ownership mandatory. But rates are definitively “soft market”: premiums are kept low through taxpayer subsidy, co-insurance, long elimination period, high deductible, low-to-no agent commissions, and periodic rate recertification.

The good news is that the LTCI Pricing Study predicts the age of unstable rates is behind us. Through regulatory fiat or actuarial conservatism, premiums will toe the line.

COVERAGE

Last year’s mantra was “de-risking”: removing or tightening those policy benefits which exposed the insurers to outsize risk. Areas of concern included informal caregiving, lifetime benefit periods, and unencumbered cash, to name just a few. Are we now so optimistic that we forecast these benefits returning this soon? In fact, unlimited benefits are coming back. And at least two combination products offer cash. But not all desirable benefits must carry risk.

In the hard market of the last decade, products were unbundled to their “a la carte” pieces. In the soft market that’s coming, we can expect more and more “built-ins” to create a competitive edge. Technology will fill this gap—bridging the need for immediate benefits without costing carriers a fortune. Disruptive benefits based off of Airbnb and Uber, and robots too, are not far off. Remote sensing of seniors has been hailed a “mega-trend”. As the sharing economy extends its reach into senior services, the only thing lacking is a structural, systemic way to pay for them.

The last eighteen months have witnessed unprecedented innovation in coverage design from both inside the industry and out. From the eighty-five (85!) separate concepts brainstormed by the Long Term Care Think Tank, to the “RetirementLTC” design of the BPC, to the ongoing Home & Community Based Care pilot programs of Medicaid (competitively nicknamed “The Medicaid Insurance Company”), to the two-way mirror focus-grouping from the carriers themselves, never before has such variety been under the microscope.

Tim Urban describes it best, “When Apple decided to make a phone, they didn’t try to make a better Blackberry—they asked, ‘What should a mobile phone be?’” This attitude now permeates LTCI design, as head-scratchers wonder if the essential product which has served the last forty years may have reached the end of its lifespan. Having settled the question of whether LTC is an insurable risk once and for all, the question then becomes, “What should a long term care policy be?”

SUMMARY

The only constant in life is change—but it’s not haphazard. Those who study any profession will recognize the hidden cycles deep below which produce the visible waves on the surface. A few years ago, we claimed to have entered the “Golden Age of Long Term Care,” since there has never been a better time to buy—or sell—long term care insurance.

Today we double-down on that prediction. Unless obstructed, the private market is entering a period of softening, which portends good fortune. Viewed as a whole, LTC is becoming a “buyer’s market”, led by increased avenues through which individuals can access coverage.

This was inevitable. The market most suitable for private LTCI is the uppermost quintile in terms of income and net worth, even as LTCI ownership over age 65 is nearly twenty percent. Those who argue that the industry suffers from an incredibly low penetration rate have it exactly backward: the primary market is almost completely saturated.

The cherry picking of the first market is over, as companies move downstream and turn their attention to the broader eighty percent. Anyone looking over the horizon needs to build such products: unless the infamous retirement woes gripping the Millennials are repaired—forty-one percent of whom have less than $100 in their checking accounts—LTCI will be dead in a single generation anyway.

Motivated then as much by competition as by self-preservation, companies are breaching new LTC markets, then racing to fill them with appealing new ideas. Tens of millions of Americans will find themselves the center of this attention, wooed by an increasing number of competitors wielding a classic toolbox of underwriting, pricing and benefits to win their business.

It would be wise to take advantage of this cycle before our good fortune ebbs.

Download the report

Stephen D. Forman of Long Term Care Associates, Inc is co-author of "The Advisor's Guide to Long-Term Care" (2nd Ed.) published by National Underwriter, and a regular contributor to LifeHealthPro and ProducersWEB. Reach him at steve@ltc-associates.com

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WORKS CITED

AICPA. Press Releases: American Institute of CPA's. March 24, 2016.
http://www.aicpa.org/Press/PressReleases/2016/Pages/saving-is-a-top-priority-for-millennials.aspx (accessed April 25, 2016).

Bipartisan Policy Center. Initial Recommendations to Improve the Financing of Long-Term Care. Long-Term Care Initiative, Washington, DC: The SCAN Foundation, 2016.

Boodman, Eric. STAT. December 31, 2015. https://www.statnews.com/2015/12/31/remote-monitoring-elderly/ (accessed April 25, 2016).

English, Craig. "Hard Market vs Soft Market: The Insurance Industry's Cycle and Why We're Currently in a Hard Market." PSA Perspective Blog. January 29, 2013. http://www.psafinancial.com/2013/01/hard-market-vs- soft-market-the-insurance-industrys-cycle-and-why-were-currently-in-a-hard-market/ (accessed April 16, 2016).

Forman, Stephen D. "The Current State of the LTCI Industry: Three is the Magic Number." ProducersWEB. April 17, 2012. http://www.producersweb.com/ (accessed April 18, 2016).

Glickman, Marc, and Laury Falter. "Reflecting on Rates- Examining the Outlook of Today's LTCI Pricing."
BrokerWorld Magazine. Overland Park: Insurance Publications, March 2016. 1-4.

Hair, Lanny. What is a Hard/Soft Insurance Market? 2001. http://www.hcc.com/
(accessed April 18, 2016).

Hendricks, Arlene, Stephen Holland, and Jennifer Vey. "1+1≠2, the Challenges of Underwriting Combo Life-LTC Policies." 2016 Intercompany Long Term Care Insurance Conference. San Antonio, 2016. 34.

Ho, Catherine. "LIMRA Study Shows Life Combination Products in Double-Digit Growth Pattern." Newsletter of Insurance and Finance, August 2014: 3.

Leiber, Nick. Europe Bets on Robots to Help Care for Seniors. March 17, 2016. http://www.bloomberg.com/news/articles/2016-03-17/europe-bets-on-robots-to-help-care-for-seniors (accessed April 18, 2016).

Loomis, Roger, Jim Glickman, and Stephen Forman. "LTCI New Business Pricing: How Safe Is It?" SOA 2015 Annual Meeting and Exhibit. Austin: Society of Actuaries, 2015. 25.

Mangan, Dan. Insurance Premiums: Is $100 the Next Obamacare Hurdle? October 21, 2015. http://www.cnbc.com/2015/10/21/insurance-premiums-is-100-the-next-obamacare-hurdle.html (accessed April 18, 2016).

Urban, Tim. Wait, But Why: How Tesla Will Change the World. June 2, 2015. http://waitbutwhy.com/2015/06/how-tesla-will-change-your-life.html (accessed April 25, 2016).

MEDIA CONTACT

Stephen D. Forman, CLTC
Senior Vice President,
Long Term Care Associates, Inc.
steve@ltc-associates.com

800.742.9444 ext. 205
425.462.9500 direct
425.462.9839 fax

11900 NE 1st St., Suite 115
Bellevue, WA 98005-3030
http://www.ltc-associates.com

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Updated, Monday, May 16, 2016, 10:22 AM (Pacific)

Seattle—

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LTC E-ALERT #16-019: LTC NEWS AND COMMENT

Confined to Nursing Homes, but Longing (and Ready) for Home
Genworth Bets Heavy on LTC Brokers to Save The Day
5 insurance changes to make when you retire
Judge Sides With House Republicans Against Health Care Law
LTCI block buyer briefs analysts
Hillary Clinton Says She’s Weighing Medicare for 50-Year-Olds
What If Government Pays For All Long-Term Care?
Genworth 2016 Annual Cost of Care Study: Costs Continue to Rise, Particularly for Services in Home
The role of critical illness insurance in the new cancer economy
GAO Audit: Feds Failed To Rein In Medicare Advantage Overbilling
The Retirement Cost That 80% of Americans Aren’t Ready For
The 5 best and worst states in which to grow old
Two minutes playing this video game could help scientists fight Alzheimer’s

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Updated, Friday, May 13, 2016, 09:59 AM (Pacific)

Seattle—

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LTC BULLET: WHERE’S THE DISCONNECT?

LTC Comment: Confronting long-term chronic illness is easier with the financial help LTC insurance provides, but too few people have the coverage. Where’s the disconnect? After the ***news.***

*** TODAY IS FRIDAY, THE 13^th: Y’all be careful out there! Superstition aside, these are truly dangerous times. ***

*** LTC DÉJÀ VU: Hillary wants to add 50-year-olds to Medicare. Bernie would buy everything for everybody and charge it to Uncle’s credit card. The Donald channels Mad Mag’s Alfred E. Neuman: “What, Me Worry?” about entitlements? Janet (Yellen of the Fed) will keep their fantasies looking feasible until November 8 by means of phantasmagorical monetary policy. Welcome to election year politics. We’ve seen it all before. To stay grounded during this depressing, tumultuous time, we invite you to revisit the basics of good LTC financing policy with us. Go to http://www.centerltc.com/bullets/index.htm. Browse our 1132 LTC Bullets. Find them listed chronologically or by topic. Re-live the earth-shaking upheaval of past LTC policy battles. We predict you’ll come away with your confidence restored that basic principles apply and, however dysfunctional the current political and economic malaise, clear thinking reveals a successful pathway. ***

LTC BULLET: WHERE’S THE DISCONNECT?

LTC Comment: Honey Leveen is a long-time friend and a Premium member of the Center for Long-Term Care Reform. She contributed a chapter to a 2016 book titled “Surviving Alzheimer’s With Friends, Facebook, and a Really Big Glass of Wine,” edited by Dayna Steele with Heather Rossiello. We thank Honey for permission to reprint the piece she submitted for the book.

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“Where’s the Disconnect?”
by
Honey Leveen, The Queen, by Self-Proclamation, of Long-Term Care Insurance

Insurance disclaimer: The following is based on the author’s personal experiences and opinions.

Much of the legacy we leave may be measured by how honestly we've dealt with life's most painful truths. Often, such truths are the most obvious, yet hardest to see clearly.

I’ve specialized in long-term care insurance (LTCi) since 1990. That's a long time. I’ve seen a few hundred of my nearly 3,000 clients collect from policies I’ve sold them. This is just the tip of the iceberg, however; many more will need to collect from their LTCi as time goes on.

I see scenarios just like Dayna’s [as described in Surviving Alzheimer’s] play out again and again. For different reasons, when a parent needs LTC, family members who’ve always gotten along well may find themselves at odds with each other. It is exactly as Dayna describes. The absence of sufficient, readily available money to swiftly access long-term care (LTC) aggravates an already highly stressful situation.

People who own LTCi also commonly suffer familial dysfunction similar to Dayna’s. What makes things so different for them is that their LTCi policies pay out significant, meaningful amounts of money when LTC is needed. This is often a huge game changer. LTCi tends to subdue the emotional discord Dayna describes. Relationships don’t suffer as much, and outcomes are better. The money people collect from LTCi provides them with dignity, choices, access, and options they would not have otherwise had.

Sadly, most of us still do not own LTCi. Sadder still, it is too often well-educated people with good incomes and a whole lot to lose who choose to be unprepared for LTC.

Such people come up with what they think are fabulous excuses to avoid discussing what might happen to them at the end of their lives. There seems to be a disconnect between our intellect and our emotions when it comes to LTC planning.

According to www.longtermcare.gov and other reputable sources, at age 65, there’s a 70% chance of needing LTC. These odds go up with each year we age. Visit Genworth’s Cost of Care Calculator (find it in the Resources area of www.honeyleveen.com) to see just how expensive LTC is in your locale.

Most LTC in the US is provided on an unpaid basis, disproportionately by women, who often have to sacrifice their careers, savings, and relationships to provide care.* LTC already costs American families dearly, yet the worst of this crisis is yet to come.

As former First Lady Rosalynn Carter said, “There are only four kinds of people in this world: those who have been caregivers, those who are caregivers, those who will be caregivers, and those who will need caregivers.”

Here are some simple responses to major misconceptions about LTC and LTCi. More complex answers are found on www.honeyleveen.com or by calling me, at no obligation:

LTCi is too expensive. Not true. What may be expensive is needing LTC for anything but a short time and not owning LTCi. Policyholders usually collect back all premiums they’ve paid over the life of their policy in a few short months. Premiums are customized for each person and can be made to fit into almost anyone’s budget. *

The government pays for LTC. The type of LTC the government pays for is not what you would freely choose. *

Medicare covers LTC. No it doesn’t! Medicare covers acute medical problems and a restrictive, conditional amount of home or in-patient rehabilitative care that most people don’t qualify for.*

The LTCi industry is threatened. It’s true that the number of carriers selling LTCi has shrunk; there are valid reasons.* Policyholders are not in danger.* LTCi carriers remain staunchly committed to the market. They realize the LTC crisis and oncoming Senior Tsunami isn’t going away any time soon, and are in it for the long run.*

LTCi only pays for nursing homes. The opposite is true. The great majority of LTCi policies pay comprehensively, for care at home, in adult day care, assisted living, and nursing homes. They enable you to increase the odds you will not need LTC provided in a nursing home.*

Here are some of many silly excuses smart people give me to avoid conversing about LTCi while they’re healthy and can find reasonable premiums:

My wife will take care of me. Really? Your wife will be eager and physically capable of helping you bathe and dress, for example? You don’t mind the thought of her last memories being about the physical, emotional and financial burdens of caring for you?

That won’t happen to me. Really?

My kids will take care of me. Really?

I’ll kill myself.

I can’t afford LTCi. Many people claim LTCi is too expensive, despite the fact that we tailor LTCi premiums to fit into most people’s budgets. Situations like this one happen frequently: an acquaintance tells me she can’t afford LTCi premiums. This person’s mother needed LTC for an extended length of time, at great sacrifice to the family. A week later this person announces she is making a two week trip to Mt. Everest Base Camp/African photo safari/Tahiti or another exotic locale, or is buying a top-of-the-line car/kayak/audio equipment, etc. She has the money to do that but can’t afford LTC premiums. Where’s the disconnect?

Here’s another common scenario: I get incoming calls with Caller ID stating: “METHODIST HOSP RE-HAB”. The caller is the daughter or son of someone who’s just broken their hip or suffered a stroke. They ask me to come sell their parent LTCi. I have the unpleasant task of trying to tactfully explain that their parent is uninsurable. Sometimes the child is incensed by this news. I suggest the child is of ideal age to find reasonably priced LTCi for themselves; this might be a wise idea if they want to assure a similar scenario doesn’t play out when at the end of their lives. The child is normally not interested. The reason is that the family is in the worst kind of turmoil, duress, and dysfunction. They are scurrying around trying to cobble together LTC for their parent, and there isn’t sufficient, readily accessible money to pay for it. This is the scenario Dayna and I urge you to avoid by doing reasonable, responsible LTC planning, now.

What all of my LTCi clients have in common, regardless of their incomes, is the ability to honestly, openly discuss LTC in advance. Most of my clients have had firsthand experiences similar to Dayna’s. They’ve learned from them, and taken action to avoid the consequences of not being prepared for their own long-term care.

* For comprehensive links, videos, and documented facts supporting my statements, visit www.honeyleveen.com, or just give me a call.

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Updated, Monday, May 9, 2016, 09:59 AM (Pacific)

Seattle—

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LTC E-ALERT #16-018: LTC NEWS AND COMMENT

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

Medicaid loopholes for long-term care are wrong
Two minutes playing this video game could help scientists fight Alzheimer’s
Nursing homes turn to eviction to drop difficult patients
Low Defined Contribution Savings May Pose Challenges
Fading Fast: Fewer Seniors Have Retiree Health Insurance
LTCI Watch: Luxury Alzheimer's
LTCI earnings X-rays: CNO, Unum, CNO, Genworth
Must Suspicions About Personal Health Be Shared With an Insurer?
How does the MLTC Medicaid model impact seniors?
An Interview with Dr. Bill Thomas
Repeated nursing home sales linked to poor quality
DOJ report slams South Dakota's reliance on nursing homes to provide disability services
Aging in Place

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Updated, Friday, May 6, 2016, 10:15 AM (Pacific)

Seattle—

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LTC BULLET: LTCI LAPSES RECONSIDERED

LTC Comment: LTCI lapses are conceptually slippery. Some clarification by Claude Thau after the ***news.***

*** WE PUBLISHED the following LTC Clipping a few weeks ago. Today’s LTC Bullet conveys long-term care insurance expert Claude Thau’s thoughts on the meaning of LTCI lapses in the form of comments on the same article.

4/13/2016, “LTCI: Which insureds have the toughest grip on their policies?,” by Allison Bell, LifeHealthPRO

Quote: “The research team found that, on average, insureds with higher benefits were more likely to keep paying their premiums than insureds with lower benefits, and that insureds who went through a full medical underwriting process were more likely to keep paying. In the first three years a policy was in force, fully underwritten insureds were only about half as likely to let an LTCI policy lapse as other insureds were. But insureds who bought their LTCI policies through career agents were only about half as likely as other policyholders to let a policy lapse as other insureds.”

LTC Comment: Interesting data and insights regarding lapse rates worth considering in the context of the Boston College Center for Retirement Research claims that over a third of LTCI policies lapse. See LTC Bullet: Another LTCI Hit Job? ***

LTC BULLET: LTCI LAPSES RECONSIDERED

You may find it helpful to read the article referenced above before going on to what follows: “LTCI: Which insureds have the toughest grip on their policies?,” by Allison Bell, LifeHealthPRO, April 13, 2016.

Having seen an email with some comments by Claude Thau, we asked him if we could share some of his insights with our readers. He agreed that the following could be helpful to readers.

First of all, he wanted to note that he looks forward to each of these studies by the Society of Actuaries because they provide so much useful information and stimulate so much thought. He respects Allison greatly because she is a tireless and prolific dispenser of valuable information.

If lapse data is different between X and Y, the key question is “Why are the lapse rates different for X vs. Y?” Sometimes there are other factors involved which correlate with X and Y and skew the results. That is, it may be true that the data varied by X vs. Y, but X and Y might not be causing that impact.

For example, what if I were to tell you that heart condition victims are taller than the average person? Would that surprise you? Would you conclude that taller people are more exposed to heart conditions than shorter people? Clearly, it is true that people with heart conditions are taller because a higher percentage of such victims are adults than in the general population. Because looking at heart conditions screens out a much higher percentage of children than adults, those victims are taller than usual.

Quote from article: "On average, policyholders who went through a full medical underwriting process and those who bought their coverage from career agents seem to be more likely to keep their coverage than other policyholders."

Comment: Both of those statements are true, but perhaps not because of the medical or because of the career agent rather than broker, or at least certainly not entirely because of those. A key factor above is that group policies have higher lapses than individual policies for the following reasons:

1. When a group has core coverage paid for everyone by the employer, most employees do not buy-up. Those who don't buy-up, usually lapse when they terminate employment.

2. Voluntary work-site LTCi has a higher lapse rate, in general, because when people terminate they may forget to pay premium or may not be able to afford the premium because they are temporarily unemployed. A lag might cause them to have to pay more than one-month’s premium to continue the policy. If there was a core benefit, they have to absorb the cost of the core benefit prospectively as well.

3. Executive carve-out policies probably have a higher-than-average lapse rate upon termination of employment because some executives may not want to pay the premium that has been paid for them previously.

Individual policies dominate the full medical UW [underwriting] data and group policies dominate the simplified UW cases. The fact that the medical UW category excludes group policies is probably the primary cause for the difference in lapse rate experience.
Brokers dominate the group sales, hence have higher lapse rates. If someone were to analyze the difference between broker and agent client persistency looking only at individual policies, they might find a significantly different result.

Quote: "Actuaries classify an LTCI lapse as ‘voluntary’ if a living policyholder stops paying the premiums for some reason other than death. Actuaries contrast that kind of ‘voluntary lapsation’ with lapsation due to the policyholder's death."

Comment: That's true but a very important caveat is that lapses are overstated in the study because some deaths are coded as lapses. Another important caveat is that the SOA study addressed full lapses but did not consider partial lapses. Because of large price increases on inforce policies, there have been a lot of partial lapses, which are not reflected in this data.

Quotes: "The voluntary individual lapse rate fell to 2 percent, from 2.7 percent in 2005-2007."
"The voluntary group lapse rate fell to 4.5 percent, from 6.4 percent in 2005-2007."

Comment: Both true, but don’t forget that the percentage of first year policies dropped. As first-year policies have the highest lapse rates, the overall lapse rate would drop if the percentage of first-year policies drops, even if the lapse rate had remained unchanged for each individual policy year.

Quote: "The research team found that, on average, insureds with higher benefits were more likely to keep paying their premiums than insureds with lower benefits"

Comment: I would expect this to be true to some degree, but I suspect that the results are largely distorted because:

Group policies (which have higher lapse rates) generally provide less coverage.
The size of coverage has probably increased over time (not necessarily monotonically) causing a higher percentage of the large policies being in the first few policy years, when lapse rates are higher.

Quote: "The research team also found that two opposing forces eventually cause the lapse curves of individual LTCI insureds and group LTCI insureds to cross.....But, because the individual insureds tend to be much older than the group insureds, death becomes a major cause of individual policy terminations starting around the ninth policy year."

Comment: The first sentence is about lapse rates. The second sentence is about total termination rates. Readers might get confused. The actuaries were trying to report lapses, exclusive of mortality. But, as noted above, some mortality creeps in because of deaths miscoded as lapses.

Quote: "Meanwhile, group insureds seem to start getting serious about paying their premiums after holding their coverage for about eight or nine years."

Comment: There are a number of factors at play here. Employees have higher turn-over rates at younger ages. When you get out 8-9 years, you're looking at an older, more established employee who is less likely to terminate employment, hence less likely to lapse. Also the percentage of core coverage reduces the older the inforce block; as the people who are left are more likely to have paid some or all of the cost, they are likely to be more persistent.

Special thanks to actuary and LTCI industry icon Claude Thau (formerly Chairman of the Center for Long-Term Care Financing’s Board) for permission to publish his comments on lapses. Reach Claude at 800-999-3026, x2241 or email him at claudet@targetins.com.

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Updated, Monday, May 2, 2016, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #16-017: LTC NEWS AND COMMENT

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

Fraying at the Edges
Depression in Old Age May Be Linked to Dementia, Study Finds
SNF occupancy rates and revenues fall as discharges rise, CDC says
More Customers Keeping Long-Term Care Policies
When To Move A Parent Into An Assisted Living Facility
Upscale Planning: Leveraging Social Security benefits with life insurance
LTCI Watch: $400
Dr. El tries on the Genworth aging suit
Superheroes Of Caregiving Need Better Support
It’s official: Millennials have surpassed baby boomers to become America’s largest living generation

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Updated, Friday, April 29, 2016, 11:19 AM (Pacific)

Seattle—

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LTC BULLET: LOSING PRINCIPLES

LTC Comment: What’s happening to the basic principles of personal responsibility and self-reliance that validate private insurance? We reflect after the ***news.***

*** HELPING PROVIDERS AND FUNDERS understand each other has been a major goal of the Center for Long-Term Care Reform since its inception. This week, we sent subscribers an LTC Clipping titled “Dr. El tries on the Genworth aging suit.” Here’s what Dr. Eleanor Barbera had to say in that piece: “Unless we've been residents ourselves, it's difficult for us to know exactly what they are experiencing in our facilities. Opportunities like this can bring us closer to their daily realities and help us train staff, modify approaches and improve customer service. It could mean the difference between being an OK caregiver and an outstanding one.” What’s it like wearing the Genworth aging suit and how can wearing it help caregivers do their job better? Good questions and thanks to Genworth for helping to answer them. ***

*** BOOMERS RECEDE: Did you catch the news this week that the Millennial generation (born between 1981 and 1997) has surpassed the Boomer generation (born between 1946 and 1964) in total numbers? (You did if you subscribe to LTC Clippings.) I don’t know about you, but I feel a certain sense of relief stepping out of the demographic spotlight. But don’t write off the baby-boomers yet? Another LTC Clipping this week pointed out that nearly 7,000 boomers are turning 70 every day this year with many more coming as the Age Wave continues to spike. So what? So that’s a lot of people forced to remove “Required Minimum Distributions” (RMDs) from their tax-sheltered accounts this and every year. Any ideas on how folks caught in the RMD trap might put that extra income to work? ***

*** TO SUBSCRIBE to LTC Clippings, contact Damon at 206-283-7036 or damon@centerltc.com. You’ll have access to the most important LTC news and information in real time quicker than you can cut the (little extra) check to the Center. ***

LTC BULLET: LOSING PRINCIPLES

LTC Comment: The purpose of insurance is to replace an unpredictable catastrophic risk with the certainty of an affordable premium. Private insurance depends on individuals taking responsibility for themselves by recognizing risks and taking action to mitigate their personal liability by purchasing coverage. Social insurance, such as mandatory government programs like Social Security and Medicare, also spread and mitigate risk, but they do not require personal responsibility or individual action. They’re mandatory, meaning they are imposed on consumers by government compulsion without choice or action by covered individuals. That’s a major distinction.

The other critical difference between private insurance and social insurance is that the first prices risk, but the latter does not. For example, you’ll pay more for private life insurance if you smoke, because smokers add more potential expense to the “risk pool.” Thus, private insurance nudges smokers voluntarily away from the self-destructive behavior of smoking.

Mandatory social insurance programs work differently. Everybody pays in and everybody benefits equally, at least in theory and at first. But because social insurance does not price risk, it rewards irresponsible behavior by shifting costs from independent, self-reliant people to their opposite. That’s why social insurance programs eventually become insolvent. They undercut the ethical principles of personal responsibility and self-reliance that make people, economies and societies successful over the long term. See “The Inherent Individualism of Insurance.”

From Where We Stand

The Center for Long-Term Care Reform’s latest research project is titled “Medicaid Long-Term Care: Ensuring Scarce Resources Reach the Neediest People.” We described it in this year’s first LTC Bullet “Center Kicks Off New Year With Major Study.” The study’s goal is to examine two of the most significant Medicaid LTC eligibility characteristics that allow affluent people to access the welfare program’s scarce resources. These are Medicaid’s large home equity exemption and the so-called Medicaid-compliant annuity.

Specifically, we seek to understand how often these eligibility factors occur, how much they cost Medicaid, to what extent they are recouped through mandatory estate recoveries, and whether or not their availability to preserve wealth after someone already needs long-term care crowds out other forms of LTC financing. We set out to answer those questions by inviting state Medicaid programs to participate in the study, making staff and data available for review. Unlike for dozens of similar studies we’ve conducted over the years (see their reports here), this time we’ve found surprisingly little interest and willingness to participate by state Medicaid agencies.

What’s Changed?

When I first began conducting studies of Medicaid and long-term care financing in the early 1980s, certain ethical principles were taken for granted. Among those were the belief that individuals are responsible for their own well-being, that public assistance programs should only help people who are unable to take care of themselves, and that because scarce public resources are taken from taxpayers at a substantial cost to the private economy (the only and very fragile source of public funds) those resources should go first to the people most in need. My sense is that these principles have receded in the public mind, in analysts’ perspectives, and in the outlook and perceived self-interest of politicians, policy makers and public officials.

I’ve already conducted a couple dozen interviews on our current study and that’s the sense I’m getting. A top-level expert on state Medicaid directors opined they’ve given up on fighting eligibility loopholes. Other issues consume their attention: Medicaid expansion under ObamaCare; the transfer of patient responsibility to MCOs (private managed care organizations); and massive “rebalancing” of care from nursing homes to home care. Nowadays such cost constraint as still exists is focused on risky innovations like managed long-term care and rebalancing instead of controlling eligibility and targeting benefits to the needy. Besides, why bother to control spending? Medicaid’s federal matching rate system rewards over-spending. Should Idaho cut costs when the federal government pads the state’s budget with $2.51 for every dollar the state puts up? It’s as though public officials have taken the attitude: “We’re all going to end up on Medicaid anyhow, so why fight it?”

Nor do the states get help from the federal side of Medicaid in controlling access to benefits by the non-needy. CMS (the Centers for Medicare and Medicaid Services) can’t be bothered with discouraging Medicaid planning or curtailing the use of annuities to divest unlimited assets. Making Medicaid more attractive to all users is their whole focus with none left over for targeting the program to those most in need.

In previous studies, I’ve received excellent help from State Policy Network members. These are state-level think tanks dedicated to promoting the freedom philosophy and to finding free-market solutions to social problems. In the past, SPN members often had excellent relationships with state Medicaid agencies. They’ve helped me find and interview key state agency officials and gain access to crucial data. This year most of the state think tanks I’ve contacted are in adversarial relationships with their state agencies due to the controversy surrounding Medicaid expansion under ObamaCare. The lure of “free” federal money tips the balance in favor of expanding Medicaid and against the free-market think tanks. So, as much as they believe in what we’re doing and why, the SPN members are fighting other battles these days and can’t be much help to us this time around.

Our Political Representatives

One respondent opined that he was surprised to see even conservative members of Congress defending methods of self-impoverishment to qualify for Medicaid at a recent hearing. Their reasoning? “Medicaid requires impoverishment. How can I blame my constituents for finding ways around the spend down rules? Why should hard-working, responsible people who did everything right be denied benefits that go exclusively to people who didn’t work, didn’t save and were never responsible?” I’ve heard and combatted such objections for three decades. The simple answer is that government can’t do everything for everybody and if it tries there will be nothing left for anybody. The moral hazard created by eliminating liability after an insurable event has occurred eventually destroys personal responsibility and self-reliance.

Home Equity

Home equity is the biggest asset seniors hold. In the absence of Medicaid’s home equity exemption (at least $552,000 and $828,000 in nine states, six of which have Republican Governors, go figure), people would use reverse mortgages to help fund the care they need to remain in their homes and out of a nursing home. I interviewed several experts on reverse mortgages (RMs). They tell me RMs are rarely used to fund long-term care, which is no surprise of course given the Medicaid exemption. But recent federal law and regulatory changes have made it even less likely to happen in the future. New requirements governing credit worthiness of reverse mortgage candidates make it harder than ever for lower income, lower net worth people to qualify. They’re the very people most likely to need an income supplement to fund long-term care.

Chicken is to Egg as Entitlement is to Denial

Another related principle that has gone by the wayside is the idea that people and their government should live within their means. We see statistics all the time warning that most boomers have saved little or nothing toward their retirement. Why not?

Are they unable to save because government has taken so many resources out of the private sector that companies can’t create enough jobs? Or are they unwilling to save because, why bother? “We’ll have Social Security for income, Medicare for health care, and if it comes to that, Medicaid for long-term care.” Which came first, government entitlements or the public’s denial and evasion of risk?

And what about the government itself? When was the last time anyone worried about out-of-control spending? We’re bumping up on negative $20 trillion according to the National Debt Clock. That’s more than our annual Gross Domestic Product. It doesn’t even include some $70-odd trillion in unfunded Social Security and Medicare liabilities.

Have you asked yourself why families go bankrupt when they spend beyond their means, but governments (usually) don’t? The answer is that governments push interest rates down to nothing and when they still can’t service their debts, they print money to make up the difference. If you think that sounds like a credit bubble ready to burst, you’re probably old enough to have lived through the internet and housing bubbles bursting, but too old to “feel the Bern.”

Margaret Thatcher said “The problem with socialism is that you eventually run out of other people's money.” Yet other people’s money is the input and the output of most politics. Taxes (input) come from and impair the private economy. Benefits (output) go to constituents to buy their votes. Special interests lobby to minimize their inputs and maximize their outputs. The whole system floats on a sea of increasingly unfounded faith in its continued viability. The full faith and credit of the United States means a lot until it doesn’t. A system funded by a fiat currency paying artificially low interest rates on unlimited debts and grounded on such a faulty ethical foundation could collapse at any time.

Winning Principles

We’re losing the principles that made America great and prosperous. The damage we’re experiencing is self-inflicted. If we stop doing what we’ve been doing for so long, we’ll get a different result.

But there’s the rub. How do we turn this behemoth around? I’m sorry to say I think it’s too late for better public policy, much less political leaders, to do the job. Just look at the policies advocated by most of the leading candidates for President.

Alas, we’re most likely headed for a major economic meltdown, more like the Great Depression than the latest recession, severe as it was. Sooner or later, economic reality prevails and the system of living beyond our means funded by borrowing and spending will collapse like a house of cards.

What happens then will depend entirely on how many of the winning principles that fueled our rise to super-power status have survived and how fast they can reinvigorate the nation. Ironically, the sooner we face that test, the better chance we’ll have to pass it.

But When?

So when will the financial cataclysm and the test of our underlying values happen? Sometime between now and 2031 when the boomers start turning 85 and the bottom falls out of Social Security and Medicare.

But no one knows for sure. They say a “watched pot never boils.” That’s why you read “potboilers” while you wait. Just know this: if you apply enough heat long enough the water inside a tea kettle will boil.

That’s physics. In economics, the denouement may take longer, but it’s equally inevitable.

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Updated, Monday, April 25, 2016, 11:19 AM (Pacific)

Seattle—

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LTC E-ALERT #16-016: LTC NEWS AND COMMENT

Medicaid Managed Care Rule Changes To Impact Long Term Care
Can You Be Paid to Care for Mom and Dad?
How We'll Fix Social Security By Not Fixing It
U.S. suicide rate has risen sharply in the 21st century
New Overtime Rules May Put Squeeze On Caregivers For Those With Disabilities
Study: Half of SNF residents end up in emergency room, regardless of cognitive status
Can we prevent Medicare bankruptcy?
Obama signs Older Americans Act reauthorization
Sales of Short-Term Care Insurance Policies Grow 20 Percent
Why Americans Aren't Opposed to Assisted Living Facilities
UnitedHealth to drop out of all but a few PPACA states

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Updated, Friday, April 22, 2016, 12:21 PM (Pacific)

Seattle—

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LTC Bullet: Will the Aging of America be a Triumph or a Tragedy?

LTC Comment: Many have noticed a glaring omission in the topics covered in this latest political cycle and Ken Dychtwald, Ph.D. aims to correct that. Today’s topic is the news so this week we’ll skip our regular ***news*** section and dive straight in.

LTC Bullet: Will the Aging of America be a Triumph or a Tragedy?

Today’s LTC Bullet is coverage of Thursday’s press briefing by Ken Dychtwald, Ph.D., called “Will the Aging of America be a Triumph or a Tragedy?” For those of you who don’t already know, Ken Dychtwald has been a leader in the field of gerontology and an age wave savant for four decades. He is well-known as a prolific author and effective aging activist, so when he announces a press briefing to discuss our severe demographic challenges and what our news media and presidential candidates should be doing to communicate and combat those challenges, people tune in.

The primary focus of the call was to discuss the demographic “age wave” which is leading to the United States of America becoming a “gerontocracy” and to look at the profound and myriad effects that will have on our country. This is an unprecedented challenge we face and as such Dychtwald views longevity as “humanity’s new frontier.” Is it all dire? No. There is opportunity for humanity to triumph. In order to do so, we must first talk about the issues. Unfortunately, even in this critical election cycle, our politicians give short shrift to these issues and are not prompted enough to talk about them by the news media. That’s a serious problem. What is the solution? To hold this conference call “…to raise awareness of the five aging-related transpartisan issues every presidential candidate must address” and host the audio recording and transcript online at www.agewave.com. What transpired was an engaging forty-two minutes dedicated to covering those five critical issues:

Issue # 1: What is the new age of “old?”
Issue #2: The diseases of aging could be the financial and emotional sinkhole into which the 21st century falls.
Issue # 3: Averting a new era of mass elder poverty
Issue # 4: Ending ageism
Issue # 5: The new purpose of maturity

Each issue was thoughtfully described and carefully delineated into five or six concisely presented questions for candidates to answer. The hope is that they will. But if this content does not get circulated to the people who ought to be thinking about, and can act on, these issues, they won’t. Politicians don’t always effectively answer questions they are asked; they certainly won’t answer questions they are not. Please help the aging of America be a triumph by reading the transcript or listening to the call and circulate this vital content.

What follows is the press release for the conference call. Read it, but also access the full transcript and an audio recording of the call at http://www.agewave.com/candidates/. Thank you to Ken Dychtwald and Age Wave for creating and making this content available.

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Media Contact:
Robyn Reynolds
rreynolds@agewave.com
Tel. 510-899-4004

THE COMING “AGE WAVE” THAT PRESIDENTIAL CANDIDATES
NEED TO ADDRESS…BUT AREN’T

EMERYVILLE, CA, April 21, 2016. An age wave is coming that could either make or break America. Yet the issue has received little attention in the current presidential campaign.

When our Constitution was crafted, the average life expectancy in the U.S. was barely 36 years, and the median age was a mere 16. In this regard, we are living in truly uncharted territory and longevity is humanity’s new frontier. As the baby boomers turn 70 at the rate of 10,000 a day, America is becoming a “gerontocracy.” Already, 42% of the entire federal budget is spent on Medicare and Social Security. And according to the Congressional Budget Office, this will exceed 50% by 2030. In the 2012 election, older adults out-powered all other age groups with 72% of men and women 65+ voting, while only 45% of those 18-29 did.

This demographic transformation will create new social contribution and marketplace opportunities, as well as potentially devastating medical, fiscal, and intergenerational crises. Are we prepared? No. Are the candidates addressing this age wave and offering innovative solutions? No. WHY NOT?

These are the questions being asked by Ken Dychtwald, PhD, author of 16 books on aging related issues and CEO of Age Wave. Based on his 40 years of research, dialogue, and analysis, Dr. Dychtwald believes there are five essential transpartisan issues that must be addressed if our newfound longevity is to be a triumph rather than a tragedy.

Issue #1: What is the new age of “old?”

Our economy is hinged to 19^th century notions of longevity and old age. When Otto Von Bismarck picked 65 to be the marker of old age in the 1880s, the average life expectancy in his country was only 45. Similarly, when Social Security began, the average American could expect to live only 62 years, and there were 42 workers paying for each “aged” recipient. Today life expectancy is approaching 79, and due to decades of declining fertility, there are fewer than three workers to pay for each recipient. And we have to ask, is 65—or even 67—the right marker of old age in the 21^st century? As our demography continues to tilt older, the economic impact of these numbers on working Americans will be massive. This is not a Democrat or Republican issue. This is not an issue that only impacts “seniors.” The designated age of “old” in the 21^st century is a demographic/social/economic issue that will affect us all. Left unchanged, it will have a particularly brutal impact on the millennial generation.

Issue #2: The diseases of aging could be the financial and emotional sinkhole into which the 21^st century falls.

As a result of modern medical advances and public health infrastructure, we’ve managed to prolong the lifespan, but we have done far too little to extend the healthspan—with pandemics of heart disease, cancer, stroke, Alzheimer’s, and diabetes. In addition to being quite costly, our healthcare system is incompetent at preventing and treating the complex conditions of later life. For example, Alzheimer’s (and related dementias) now afflicts one in two people over 85, and it has become the nation’s scariest disease. Unless there is a breakthrough, its sufferers are anticipated to grow from 5+ million today to 15+ million, with its cumulative costs soaring to $20 trillion by 2050. But our scientific priorities are out of synch: for every dollar currently spent on Alzheimer’s care, less than half a cent is being spent on innovative scientific research. Our doctors are also not aging-ready. We have more than 50,000 pediatricians, but fewer than 5,000 geriatricians. Only eight of the country’s 145 academic medical centers have full geriatrics departments, and 97% of U.S. medical students don’t take a single course in geriatrics.

Issue #3: Averting a new era of mass elder poverty

According to the Government Accounting Office, roughly half (52%) of all households near retirement (headed by someone age 55+) have NO retirement savings and about half (51%) of our population have no pensions beyond Social Security. We could be heading to a future in which tens of millions of impoverished aging boomers will place crushing burdens on the U.S. economy and on the generations forced to support them. On top of this, we are not fostering financial literacy or responsibility among the young. For example, 37 states require providing sex education to high school students by law, while only 17 states require financial education.

Issue #4: Ending ageism

In Colonial times, elders were respected and honored for their wisdom and experience. During the industrial era, all of that turned upside down. Now, in our youth-focused society, many people of all ages are gerontophobic—uncomfortable both with older adults and their own aging process. And many institutions—from urban planning, to technology, to employment hiring practices, to housing, to popular media (where advertisers will pay networks far more for a 30-year-old viewer than one who is 60) are both youth-centric and ageist. For example, our homes were not built for aging bodies: less than 2% of our housing stock is built to be safe and accessible for elders (and 1/3 of the elderly fall each year).

Issue #5: The new purpose of maturity

Today’s retirees feel they are in the best time in their lives to give back. And they do: contributing both more dollars and volunteer time than any other age group—doing everything from teaching schoolchildren to read, to helping their peers recover from loss, to building homes for Habitat for Humanity. Going forward, medical science will increasingly prolong life. But political, religious, and community leaders have yet to create a compelling vision for the purpose of those additional years. For example, our 68 million retirees currently spend an average of 49 hours a week watching television. Ultimately, the problem may not be our growing legions of older adults, it may be our absence of imagination, creativity, and leadership regarding what to do with all of this maturity, experience, and longevity.

A letter is being sent to each major candidate asking them to articulate their views on these five critical issues.

A written copy of Dr. Dychtwald’s views and a recording of his April 21 press briefing, including the specific questions on these issues that he believes the candidates must address – with fact sheets and related data and sources, can be accessed at www.agewave.com/candidates.

About Age Wave

Founded in 1986, Age Wave is a pioneer in the exploration of the impact of the longevity revolution. Under the leadership of Founder/CEO Ken Dychtwald, PhD, Age Wave advises businesses and non-profits worldwide on the opportunities and challenges of an aging population.

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04/21

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Updated, Monday, April 18, 2016, 10:39 AM (Pacific)

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LTC E-ALERT #16-015: LTC NEWS AND COMMENT

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

Senior Housing Occupancy Outlook Mixed Across Property Types
Rich States, Poor States, 9th Edition
Law can require children to pay support for aging parents
Disabled Medicaid beneficiaries are losing services in managed care
LTCI: Which insureds have the toughest grip on their policies?
Medicare Help At Home
Underpaid nursing home aides lead to poor care, group says
Priced out of Obamacare, some opt for short-term plans
Trouble Ahead! Baby Boomers’ Retirement Outlook on the Decline
A new divide in American death
7 Easy Ways To Get Your Financial Life in Order

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Updated, Friday, April 15, 2016, 10:21 AM (Pacific)

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LTC BULLET: USING LIFE INSURANCE DEATH BENEFITS TO FUND LTC

LTC Comment: Hybrid policies are not the only way to employ life insurance to fund long-term care according to a national expert and policy advocate after the ***news.***

*** HAPPY TAX DAY: Oops. Taxes aren’t due this year until April 18. How come? Well usually if April 15 falls on a weekend, the due date for paying the IRS becomes the following Monday. But this year April 15 falls on a Friday. So, what gives? Turns out Friday, April 15, 2016 is “Emancipation Day,” which “marks the day that the Compensated Emancipation Act was signed by President Abraham Lincoln and is observed on April 16,” a Saturday this year. It’s a legal holiday in DC so public employees get the Friday before off work. Your belated tax dollars at work. ***

*** LTC CLIPPINGS: Following is an example of an LTC Clipping we sent to our LTC Clippings subscribers this week. We try with the clippings to keep our readership abreast in real time of important news, reports and statistics that they need to know in order to stay at the forefront of professional knowledge. To join the Center or subscribe to our LTC Clippings, contact Damon at 206-283-7036 or damon@centerltc.com.

4/13/2016, “Medicare Help At Home,” by Karen Davis, Amber Willink, and Cathy Schoen, Health Affairs

Quote: “This blog presents a Medicare Help at Home policy proposal to add home and community-based services to Medicare to enhance financial protection for beneficiaries, provisions to ensure the quality and efficient use of services, and honor beneficiary preferences for independent living and care at home.”

LTC Comment: Brought to you by the same people who proposed adding deck chairs to the Titanic after the incident with the iceberg. ***

LTC BULLET: USING LIFE INSURANCE DEATH BENEFITS TO FUND LTC

LTC Comment: There is a lot of money stored up in life insurance that could go to funding long-term care according to Doug Burr, SVP of Finance, Reimbursement & Government Relations at Health Care Navigator, LLC. We asked Doug to share his ideas on this subject. He chose to put what he has to say in the context of a new “framework” for long-term care financing. His article follows explaining his new framework and how using insurance to fund LTC fits into it.

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“Using Life Insurance Death Benefits To Fund LTC”
by
Doug Burr

For decades I have been reading newspaper articles, public policy analyses and detailed academic research reports all discussing the issues related to planning for and paying for long term care (“LTC”) services. It is true that consumers generally do not want to think about potentially needing LTC services and certainly do not want to think about how much it costs to be completely dependent on other people for daily living activities. However, the reality is that the majority of us will need some LTC services at some time in our lives.

It is also true that the government - by allowing many exclusions, exemptions and special provisions in defining eligibility for the Medicaid safety net program - has both confused consumers and crowded out private market solutions and the will of individuals to take on that responsibility for themselves. It is now a widely accepted practice for consumers to structure their retirement and estate plans in order to optimize access to government benefits instead of attempting to plan for and pay for their own eventual LTC needs. And who would blame them…it’s easy to do and “free.”

We need to change the motivation for and drivers of planning for LTC needs and refocus the roles that are and should be played by individuals, families, governments and private enterprises. To do so we need to take portions of policy ideas historically proposed by competing political spectrums. Only when we have everyone disliking something will we know that we have a plan that represents a valid compromise.

There is no one size fits all right option when it comes to LTC planning. Therefore, allow me to propose a framework that has sufficient flexibility to accommodate a variety of planning options and government benefit programs.

Proposed Framework
(all dollar figures are purely arbitrary and for illustration purposes only)

The current Medicaid benefit program for the over age 65 Aged Blind and Disabled (“ABD”) populations would be replaced with a federal catastrophic safety net program that has a front end means tested LTC lifetime deductible. There would be a stringent hardship application process for the truly needy that would allow for a lower lifetime deductible. This change could be phased in over time with notices and educational materials provided to consumers as part of Social Security benefit packages mailed out on each person’s 35^th, 45^th and 55^th birthdays. These materials would educate consumers about their role in paying – on the front end - for a portion of any LTC services they may need. The lifetime deductible could be set somewhat above the current institutional LTC utilization length of stay and cost (e.g., 1 year at $225 per day = $82,125…so let’s call it $100,000). Any person who plans to and meets their lifetime LTC deductible would become eligible for the catastrophic benefit (by entering through the “front door” of the framework).

To qualify to count against the lifetime deductible any incurred LTC costs would need to be for services that are defined as covered by the new federal catastrophic LTC benefit and be incurred after the person is found to meet the institutional level of care requirement either due to physical or cognitive deficits as defined in the state in which he/she lives. The dollar amount applied against the lifetime deductible for the individual would be based upon the fee schedule payment under the catastrophic LTC benefit program for the service received that was in effect at the time the service was provided.

The lifetime deductible could be means tested by adding $10,000 to the lifetime deductible for every $1,000 of monthly retirement income in excess of a threshold – say $20,000 - AND for every $100,000 of non-family farm real estate assets in excess of a threshold – say $2,500,000 - as measured at the earlier of (i) the year in which the person first draws a social security or pension benefit or (ii) the year in which the person reaches the age of 70. Hypothetically, a person who first draws Social Security in the year they turn 67 and reports income equal to $25,000 per month and has $8,000,000 of (fair market value) real estate holdings would have a lifetime LTC deductible of $700,000 ($100,000 + {[($25,000-$20,000)/$1,000]*$10,000} + {[($8,000,000-$2,500,000)/$100,000]*$10,000}) prior to being eligible for the catastrophic benefit.

You could also adjust the LTC lifetime deductible downward on a similar basis as described above to account for low income people, but not to less than some reasonable level (e.g., 200% of FPL). The only way to get a lower lifetime deductible would be to apply through the proposed hardship process. For anyone applying through the hardship process (the “back door” of the framework) there would be no exclusions from countable income or assets.

The “premium” for the new catastrophic LTC benefit could be paid jointly by the state and federal governments. The federal government could cover the lion’s share of services it considers “mandatory”. Each state could choose from a menu of “optional” services for which it would be responsible for most or all the calculated premium. This could likely be done in a budget neutral manner over the first decade of implementation with savings occurring in future periods as larger and larger portions of LTC costs are borne by the private sector.

Using Life Insurance Death Benefits to Pay for LTC

The new framework encourages consumer friendly funding mechanisms that already have broad acceptance as means to meet the lifetime deductible amounts. I envision insurance companies offering consumers the opportunity to convert a portion of existing term life policies to some form of permanent coverage for the expressed purpose of meeting the LTC lifetime deductible and consumers using this life insurance death benefits for this purpose with the federal LTC catastrophic benefit serving as the safety net it was intended to be all along. The current practice of Medicaid paying for services and then trying in vain to recover crumbs through a tortured estate recovery process would end.

According to the ACLI 2015 Fact Book there were 142.7 million life insurance policies in force in the United States for individuals with a total death benefit of $11.8 trillion. Envision a consumer whose lifetime deductible is the hypothetical $100,000 and who owns a life insurance policy with a $150,000 death benefit when he/she first needs qualifying LTC services. The consumer could either (i) sell the policy in a viatical-like transaction that creates a tax advantaged LTC trust account that is managed by an independent fiduciary to be used only to pay health care providers for covered services or (ii) enter in to a legally binding primary collateral beneficiary agreement naming the new federal benefit program as primary beneficiary of the policy up to the amount of the LTC lifetime deductible.

To put it in perspective, a Federal Reserve report issued on June 11, 2015 indicated that home equity in the first quarter of 2015 had risen to $11.7 trillion – the highest it had been since 2007. This means that life insurance for individuals is on par with home equity as a potential funding source for LTC and it is so without possibly stripping heirs of a home.

Several states have already considered legislation that “marries together” current Medicaid eligibility provisions with life insurance death benefits. Despite this legislative activity in a few states many life insurance policies currently lapse at the point of Medicaid application due to the practice of case managers advising people to withdraw cash value from the policy resulting in these policies delivering no value to anyone.

I like to think of it this way. During and after World War II the leaders of our nation asked its citizens to pay for the war by purchasing war bonds. They did and in one generation the war was paid off. What if life insurance was thought of as the vehicle capable of paying for the Baby Boomers’ aging war? What if death benefits became the path to quality of life by providing economic security and mitigating the stress that occurs when facing need for LTC services? I think we could win this war.

Doug Burr is Senior Vice President of Finance Reimbursement & Government Relations at Health Care Navigator, LLC. Reach him at dburr@hcnavigator.net.

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Updated, Monday, April 11, 2016, 10:21 AM (Pacific)

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LTC E-ALERT #16-014: LTC NEWS AND COMMENT

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

National Poll Finds Public Not Ready For Long Term Care
U.S. Fiscal Imbalance
Long-term care premiums for federal employees set to rise
LTC regulator panel may consider viaticals, hybrids
Will obesity reverse the life-span gains made over decades of health triumphs?
CMS proposes pay raise for Medicare Advantage plan
Sicker Patients Seem at a Disadvantage With Medicare Advantage
As the poor die earlier, Social Security isn't paying off

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Updated, Friday, April 8, 2016, 10:12 AM (Pacific)

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LTC BULLET: FUEL FOR LTC CHANGE

LTC Comment: Why doesn’t somebody do something about long-term care services and financing? Well, somebody did. Details after the ***news.***

3/2016, “Paying Minimum Wage and Overtime to Home Care Workers: A Guide for Consumers and their Families to the Fair Labor Standards Act,” by U.S. Department of Labor

*** BETTER BURGERS THAN BEDPANS: Thanks to longtime Center friend and supporter Ric Schafer for tipping us to this story “Nurses Quit Texas Nursing Homes to Work at McDonald's.” The article says “Roughly 85 percent of Texans living in nursing homes depend on Medicaid or Medicare, and [Director of Government Relations for the Texas Health Care Association] Kibbe said each Medicaid patient is underfunded by 14 percent.” According to a LTC patient “You can make more money flipping hamburgers than you can helping another person,” Lopez said, and she understands why the turnover rate is so high. The pay is especially low for Certified Nurse Assistants and attendants who offer at-home care. According to Lopez, her attendant makes $8 an hour [and] she only requires one to two hours of assistance a day.” Expect more stories like this one, especially if the economy takes a turn for the worse bringing even greater pressure on state budgets and Medicaid LTC reimbursements. ***

LTC BULLET: FUEL FOR LTC CHANGE

LTC Comment: The delivery and financing of long-term care has received some much-needed attention lately. We had our say over the past few weeks regarding the recent reports and recommendations coming from a provider trade association, a policy center, and an ad hoc “collaborative”—LTC Bullet: LTCI Defeatism; LTC Bullet: No Single Solution?; LTC Bullet: Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations; and LTC Bullet: The Arrogance of LTC Analysts’ Elitism. Let’s look this week at some ideas coming from the people who see long-term care from the insurance side.

What follows are excerpts from “Long Term Care Think Tank: Exploring the Possibilities for Helping the American Public Manage the Financial Burden of Long Term Care,” a report and recommendations by Maddock Douglas, Inc. for the Society of Actuaries, February 22, 2016. Find the complete report here for free: https://www.soa.org/Files/Sections/2016-03-long-term-care-think-tank.pdf. For $149 you can buy a very good webinar titled Fuel for Change: Three Angles on LTC Innovation which describes the process that generated the report and its results.

Special thanks to Think Tank Chair Vince Bodnar of LTCG, Inc. and Maria Ferrante-Schepis of Maddock Douglas for bringing this material to our attention and for taking the time to explain and discuss the process and results with us.

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Excerpts from the Society of Actuaries’ Long-Term Care Think Tank Report

“On October 19 and 20, 2015, the [Society of Actuaries] Long Term Care Think Tank met in Rosemont, Illinois, for a collaborative workshop. During this two-day facilitated session, participants from across the LTC industry reviewed previous Think Tank work and other industry research and participated in facilitated brainstorming exercises to:

Hypothesize and describe how consumers’ needs may be changing
Brainstorm how the LTC industry could evolve their offerings to meet these need in innovative new ways

“‘Fair Game’ for the workshop included ideas that would potentially impact the following areas:

Helping people pay for their care differently
Making care more accessible to everyone
Helping reduce the costs of care
Mitigating the need for care in the first place” (p. 4)

The structured exercise, developed and led by staff of the innovation consulting firm Maddock Douglas, broke the long-term care challenge into three “Platforms of Influence” for each of which the participants generated ideas, two of which were highlighted in the report.

Read the report for its methodology and process. We’ll focus here on the end result, the two creative ideas in each of the primary areas of focus. Consult the full report for all the details.

Platform of Influence #1

“Data-Driven Decision Support: This category addresses how data is used to drive more evidence-based decision-making. Ideas in this category aim to educate caregivers and care recipients, keep them informed of best practices, guide them in making decisions, improve the coordination of care, and obtain longitudinal data required to improve pricing and recommendations.” (p. 11)

Ideas:

Healthy Longevity App: “App to encourage LTC insurance policyholders to lead healthier, more engaged and fulfilled lives. Focus on emotional, psychological and social engagement factors. App could act as coach/companion.” (p. 19)

The Care Portal: “This is a curated portal accessible via the Web that aggregates vetted products and services (such as care.com, caring.com) and points people in need of care to relevant products and services.” (p. 24)

Platform of Influence #2

“Service Evolution and Expansion: This category addresses consumer needs that relate to where, how or when claims dollars can be spent and how this impacts access to care. Ideas in this category aim to increase the number of caregivers in the system, more efficiently distribute available care to match care recipient needs, more efficiently deploy care-related resources, improve access to quality care, and delay the need for care in the first place.” (p. 12)

Ideas:

Uberfication: “Technology can lower service prices. The Think Tank will encourage and promote these trends.” (p. 30)

Health Care Look-a-Like: “Design a LTC insurance policy that ‘looks like’ a health insurance policy.” (p. 34)

Platform of Influence #3

Paying for Care (“Pay-fors”): “This category addresses how long term care costs are funded. Ideas in this category aim to help the industry and consumers to find additional ways of financing long term care, more effectively pool their resources, and make receiving financial reimbursement more familiar. Use the ideas in this category to recognize potential partnerships and/or support changes to legislation that give consumers access to new financing options and make paying for LTC easier/more affordable.” (p. 13)

Ideas:

Flex 401(k): “Individuals/families should have more options to use DC [defined contribution] plan/IRA funds to pay for LTSS (Long Term Services and Supports) directly and/or LTC insurance.” (p. 40)

The Family Long-Term Care Account: “The Family Long Term Care Account is a product designed to help an individual or a family save responsibly for long term care needs of multiple family members with a benefit that lasts beyond their savings, thanks to an insurance element added to it.” (p. 45)

Starting on page 55, the report covers “recommended next steps” for the Think Tank to pursue.

The report contains an Appendix starting on page 70 that enumerates all 85 of the ideas generated by the Think Tank.

LTC Comment: We commend the SOA LTC Think Tank for a valuable contribution to the national discussion concerning what to do about long-term care services and financing. While the report does not tackle the bigger, politically sensitive challenges which also eluded the Congressionally mandated LTC Commission, it does offer some good, systematically thought through ideas.

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Updated, Monday, April 4, 2016, 10:30 AM (Pacific)

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LTC E-ALERT #16-013: LTC NEWS AND COMMENT

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

Long-term care: at forefront of public policy, lags in personal planning
New push to keep seniors in home, community-based programs
Cognitive Decline: The Boomer Issue that Families Aren’t Discussing
At New Jersey museum, getting older is a virtual reality
As Alzheimer’s Costs Rise, Researches Double-Down on a Cure
An Overview of Medicare
Relatively low percentage of U.S. residents in long-term care: report
Hot Housing Markets Pinch Seniors
A British LTC rescue strategy: Good for you?
Medicare Advantage Makes It Easier For People To Achieve Their Best Health
Big Financial Costs Are Part Of Alzheimer's Toll On Families
Are You Your Parents' Retirement Plan?
World's Senior Population Forecast to Boom by 2050

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Updated, Friday, April 1, 2016, 10:12 AM (Pacific)

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LTC BULLET: LTCI DEFEATISM

LTC Comment: LTC insurance leaders should not surrender to government-financed long-term care based on ideologically biased policy analysis grounded in misleading data and fallacious arguments. We say “Revolt!” after the ***news.***

*** MEDICAID FOR THE RICH REVOKED: In a surprise reversal of their decades-long policy of easy access to Medicaid LTC benefits, federal authorities dropped the welfare program’s home equity exemption from over a half million dollars to under $50,000 and slammed the door shut on Medicaid-compliant annuities which enabled applicants to divest hundreds of thousands of dollars immediately before qualifying for benefits. A top-ranking official sheepishly acknowledged: “We’ve diverted desperately needed scarce public resources from the truly needy to relatively affluent people for decades. That ends today. No longer will Medicaid discourage responsible long-term care planning or crowd out better LTC financing alternatives like private insurance.” Yeah, right. Dream on. April Fools! ***

*** WHO YA GONNA CALL? What if you’re speaking with a couple about LTC insurance protection and one of them qualifies, but the other doesn’t? This week, two of the Center’s “Regional Representatives” brought to our attention alternate approaches to that problem. Barbara Franklin of Charleston, South Carolina sent a flyer from The Krause Agency that proposed: “Instead of both clients ending up with no long-term care plan, you can offer them both an option. The healthy spouse would purchase the long-term care policy they were approved for, and the ineligible spouse would plan to use Medicaid, the governmental program that pays for the majority of long-term nursing home costs in the United States.” The flyer offered a “Medicaid Compliant Annuity” as the solution. Barbara editorialized “Ugh!” and I agreed. A couple days later, I heard from Romeo Raabe of Green Bay, Wisconsin that whenever he encounters a split decision on LTCI, one spouse accepted and the other declined, he proposes an “Immediate Care” policy, an impaired risk, medically underwritten annuity that pays for quality care privately and keeps the otherwise uninsurable individual off Medicaid. I could hardly imagine a starker comparison between an improper and an appropriate use of an annuity for funding long-term care. For more, see LTC Bullet: LTC Annuities: To Get or Avoid Medicaid?, Friday, June 19, 2015 and LTC Bullet: Medically Underwritten Annuities for LTC, Friday, May 15, 2015. ***

*** HAPPY ANNIVERSARY: The Center for Long-Term Care Reform is 18 years old today. Steve Moses and attorney David Rosenfeld founded the Center with help from then-LTCI insurer General Electric on April 1, 1998. The Center’s mission “to ensure quality long-term care for all Americans” remains unchanged to this day. We thank our many providers of financial and moral support for your long and strong dedication to our common goals. Heed the message of today’s LTC Bullet and fight on! ***

LTC BULLET: LTCI DEFEATISM

LTC Comment: I came away disheartened from the recent LTC insurance conference in San Antonio. Not that it wasn’t a fine, well-conceived and flawlessly executed industry meeting. It was. See our virtual visit to it here.

What deflated my spirits was a strain of discouragement and defeatism that pervaded some of the sessions. According to Wikipedia, “Defeatism is the acceptance of defeat without struggle.” Here’s why I got that impression.

Alternative Solutions

Most of the break-out sessions I attended at the conference were in the “Alternative Solutions” track. One of those sessions focused on new research about private long-term care insurance and was excellent. But other sessions covered three recent studies that reached many wrong conclusions. Those studies were funded by the SCAN Foundation and reported by the Bipartisan Policy Center, Leading Age, and the LTC Collaborative. I call these well-financed organizations with big bull horns the “Four Horsemen of the LTCI Apocalypse” for reasons that will become obvious as you read on.

The thrust of the Alternative Solutions sessions was that although “insurance” has an important role to play in long-term care financing, the potential scope for private insurance is extremely limited by unaffordability, inadequate demand, and commercial unviability, so that social insurance in the form of mandatory, catastrophic coverage of LTC risk is unavoidable by default.

Should LTC Insurance Admit Defeat?

That’s not depressing in itself, because it is refutable as I show below. What’s bothersome is that some of the leading lights of the long-term care insurance industry seem to be buying into such a narrative.

They praise the research, reports and recommendations coming from the Four Horsemen. They acknowledge that private LTCI’s role is severely limited. They accept that the only solution may be to ally private LTC insurance on the front end with a mandatory government program on the back end. They sound whipped.

I say bunk! Don’t give in. Never give up. Think. Fight back. Here’s some ammunition.

The Best Offense is a Good Defense and Vice Versa

Ceding the moral and financial high ground to government-financed long-term care is a huge mistake. Whatever shortcomings private LTC insurance may have, they pale in comparison to the proven failures of social insurance programs as demonstrated by their trillions of dollars of unfunded liabilities and their disastrous prognosis for the future. As we explain in “Cassandra’s Quandary,” LTC expenditures will spike in 2031 as boomers start turning 85 in the same decade that Social Security and Medicare run out of IOUs in their phony “trust funds.” It would be supremely unwise to double down on government’s mistakes of the past in a futile attempt to fund LTC in the future.

Relinquishing the back end of LTC financing to the government is a fatal concession. It betrays the true principle of private insurance, which is to replace the small risk of a catastrophic loss with the certainty of an affordable premium. Taking on the front-end risk of LTC would demote private LTCI to the status of Medi-Gap, which is mostly pre-payment for care and not genuine insurance at all.

We must make the most of private LTCI and not heed the siren’s call of an easy government solution. Social insurance cannot work in the long run. While it spreads risk, it does not price risk. It forces everyone to participate and then gives each the same benefits regardless of character or conduct thus creating moral hazard, rewarding irresponsible behavior, and punishing conscientious people. “Social insurance” is an oxymoron, a contradiction in terms. See “The Inherent Individualism of Insurance.”

Besides, the Four Horsemen’s arguments about long-term care are fallacious.

The Fallacy of Impoverishment

They say Medicaid requires impoverishment, but that’s untrue. Anyone with income below the cost of a nursing home can qualify for Medicaid LTC based on income. Countable assets retained must be minimal, but exempt assets are virtually unlimited, including at least $552,000 of home equity and, with no limit at all, one business including the capital and cash flow, term life insurance, prepaid burial expenses, Individual Retirement Accounts, one auto, and personal belongings. Add hundreds of thousands of dollars more in sheltered or divested assets with the help of a Medicaid planner using special trusts, transfers or annuities. Don’t believe “The Fallacy of Impoverishment,” which I refuted in this Gerontologist article 26 years ago.

The 53 Percent Hoax

The Four Horsemen say that 53 percent of all long-term care costs are paid for out of pocket, implying people all across America are spending down their life’s savings for long-term care before turning to Medicaid. Where do they get such a number? It’s double the true figure of out-of-pocket spending (OOPS)? They get it by including assisted living which is nearly all private-pay (81 percent) and by excluding Medicare as though it does not pay for long-term care. Why is including assisted living and excluding Medicare deceptive?

Including payments for assisted living facilities (ALFs) in long-term care expenditures is misleading, because ALFs provide room and board primarily and care secondarily. As one tax expert explains: “Nursing homes are primarily used for medical care, and medical care is always deductible. Assisted living is not necessarily there for medical reasons. It’s often a safety or companionship issue, so an assisted living facility is not usually deductible.” Money spent for assisted living is largely money that would have been spent for food and lodging anyway in the absence of a care component. That may be why assisted living costs $120 per day on average whereas nursing homes cost $220 per day (for a semi-private room.)

Excluding Medicare from long-term care expenditures seriously distorts LTC financing. It is true Medicare pays mostly for short-term post-acute and rehabilitative care provided in nursing homes and by home health agencies. But it pays generously compared to Medicaid. Without Medicare, most long-term care providers could not survive on the revenue they receive from Medicaid, at less than the cost of the care, or from a dwindling supply of private payers. Take generous Medicare reimbursements out of the long-term care financing equation, as the Medicare Payment Advisory Commission often recommends to Congress, and the whole government-financed house of cards collapses.

Out-of-pocket spending for long-term care is much lower than the Four Horsemen acknowledge. CMS reports OOPS for 2014 as 26.5 for nursing homes and only 8.9 percent for home health care costs. See “LTC Bullet: So What If the Government Pays for Most LTC?, 2014 Data Update,” Friday, December 11, 2015. What’s more, half of what CMS reports as OOPS is actually spend-through of income, mostly from Social Security, by people already on Medicaid. So what? It’s still people spending their own money for their care, isn’t it? Yes, but two critical points apply. First, Social Security may have to cut back substantially on benefit payments someday, which would throw Medicaid programs and LTC providers that depend on Medicaid into financial chaos. Second, heirs don’t count on getting their parents’ income, which ends when they die. So expenditure of income for long-term care does not disincentivize taking advantage of Medicaid. But Medicaid does provide free inheritance insurance for heirs by protecting substantial assets, making qualification for Medicaid very desirable. That’s why Medicaid crowds out all forms of private LTC financing.

The Red Herring of Affordability

Its critics say LTC insurance is unaffordable. But affordability is relative. Early policies were underpriced and their purchasers got a great deal. LTCI is still a good deal--even after premium increases forced on the industry by irresponsible government monetary policy made interest rates too artificially low to grow reserves adequately. So, blame the culprit (government) and not the victim (LTCI).

Furthermore, LTCI affordability should be measured against the real risk of catastrophic LTC expenditures. But government also took real LTC risk off the table by making Medicaid the de facto catastrophic coverage plan for most Americans, including the rich according to analysts at the Chicago Fed. It’s no wonder people remain in denial about LTC and think long-term care insurance is unaffordable. Since 1965, most have successfully ignored the risk, waited to see if they ever need expensive extended care and, if and when they do, transfer most of the cost to the government thus indemnifying and desensitizing the next generation to LTC risk.

We Already Have a Back End Government Program for Long-Term Care So Give It a Chance to Work

It’s called Medicaid. It was conceived as a safety net to care for people who were unable to care for themselves: the truly needy. It was supposed to protect only those with too little income and assets to manage on their own. But Medicaid transformed in time into the dominant payer for most Americans in need of expensive long-term care. We need to give Medicaid back to the poor, eliminate the eligibility loopholes abused by the affluent, tighten eligibility in general, enforce estate recoveries, educate the public about Medicaid’s deficiencies and the benefits of private financing, support the LTC Partnership program, end the crowd-out of private financing alternatives, and unleash the power of free-market forces to save Medicaid and private long-term care insurance.

March On

So, buck up, LTCI team. You not only have more to offer toward the solution of LTC financing than government; you’ll be the primary LTC financing source one day, when the bottom finally falls out of those doomed unfunded entitlement programs. Shake off your doldrums. Take your critics on, boldly. When the Four Horsemen point to the mote in LTCI's eye; hit them with the log in their own.

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Updated, Monday, March 28, 2016, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #16-012: LTC NEWS AND COMMENT

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

How You Can Have More Time, Money, And Freedom This Year As 60+ Of The Industries Best Agents And Thought Leaders Show You Their Secrets For Success
Investing for Your Future Health Care
2015 Welfare Reform Report Card
Aging population offers golden opportunities
Survey reveals senior living's current, potential appeal
Watch Out, Boomers, Here Comes 70
New York Life Introduces NYL Secure Care, a New Long-Term Care Insurance Product with Industry Leading Dividend Opportunity: Reimbursement Now Available to Family Members Who Live with the Client
AirLTC: Can you play that game?
Most U.S. adults lead unhealthy lifestyle, study says
Navigating Medicaid for elder care can be as painful as the ailments
New Math on Reverse Mortgages
Europe Bets on Robots to Help Care for Seniors
The high cost of seniors' soaring Rx drug use
Where Is The Long-Term Care Insurance Industry Headed?
The annual Medicare Advantage dance avoids the bigger issues of entitlements
Women outlive men but suffer long years of disability

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Updated, Friday, March 25, 2016, 10:15 AM (Pacific)

Seattle—

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LTC BULLET: HOW MUCH DOES LONG-TERM CARE COST?

LTC Comment: How do we know how much people pay for home care, assisted living and nursing home care? Where do those dollar figures come from? Background on a key source follows, after the ***news.***

*** MEMBERSHIP BENEFITS: Are you or your company a dues-paying member of the Center for LTC Reform? Or do you only receive our weekly LTC Bullets or LTC E-Alerts when a member forwards them to you or we send to our widest distribution? Basic members ($150 per year or $12.50 per month) receive the Bullets, the E-Alerts, access to Damon and Steve for answers to queries, and the satisfaction of knowing they’re at the forefront of LTC knowledge and advocacy. Premium members ($250 per year or $21 per month) also receive our LTC Clippings service, daily real-time notices of key articles and reports you need to know first before your competition and clients act on them. Ask about our Premium Elite memberships and Regional Representative status. Read all about our “Membership Levels and Benefits” here. Corporate members make the benefits of membership available to staff or agents at no extra cost, a genuine perk for them and the company. Join us and help promote our mission: “Universal access to top-quality long-term care for all Americans.” Contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: HOW MUCH DOES LONG-TERM CARE COST?

LTC Comment: LTCG, formerly the Long-Term Care Group, Inc., has a mission “to provide industry leading long term care services and solutions while helping people through some of the most challenging times of their lives.”

When we saw a press release announcing availability of LTCG’s latest annual cost of care survey, we asked for a copy. Wouldn’t it be great to preview the results for you, our readers? Not surprisingly, however, this is highly valuable proprietary information that requires enormous effort to compile and analyze. In other words, it’s for sale.

So, instead, we asked for a brief summary of how the data is collected and some highlights about this year’s findings. We reckon you’ll see these numbers and much more from the study reported in many places over the coming year. But remember, you saw it here first.

Bottom line, long-term care is expensive and getting more so all the time. The figures you’ll find below are considerably higher than we’ve seen before.

“LTCG’s Cost of Care Study”

by Adam Hoffman, Vice President Business Development for LTCG

Using actionable data about LTC costs helps insurers, consumers and advisors navigate the complexity of the marketplace

LTCG’s newest Cost of Care Study showcases the variation in LTC pricing across a wide array of services and geographies

The long term care (LTC) industry environment continues to rapidly change. The demographics of today’s applicants are shifting—as are their demands—and new products are coming into the marketplace to address these issues. In these evolving times, it’s critical that insurance companies, agents and policyholders make coverage-related decisions based on real, actionable data and not assumptions. One of the biggest factors that can influence the amount of coverage a consumer needs—whether they are looking at purchasing a new LTC policy or considering adapting their traditional LTC coverage to address rate changes—is the wide variation in long term care costs.

To meet these demands, LTCG recently released its 11^th annual Cost of Care Study, which provides a thorough, retrospective compilation of the cost of care for LTC services and facilities nationwide. The study examines the range and average costs of receiving care in an assisted living facility, in a nursing home, at home or at adult day cares.

As a leader in business process outsourcing for LTC insurance, LTCG surveys its extensive nationwide network of 47,000+ providers covering 190 Metropolitan Service Areas to distill detailed and valuable cost of care insights into a centralized, comprehensive report. LTCG surveys the same providers year over year to capture true longitudinal trends in cost of care pricing. However, new providers are also added each year, leading to larger and more reliable datasets.

The Cost of Care Study can be used to support agents and applicants in determining the appropriate amount of coverage, to educate existing policyholders about coverage changes and as a tool for home office new business, claims and customer support teams to better inform the individuals they serve.

Examples of high-level key findings include:

For care in a nursing home, the nationwide average was $273/day. At $460/day, Connecticut was the most expensive state while Missouri was least expensive at $186/day.
For care in assisted living facilities, the average annual rates ranged from $46,500 for a studio to $56,000 for a 2-bedroom unit. Washington, D.C. was most expensive at $100,680/year and North Dakota was least expensive at $37,908/year.
For care in the home, the average hourly rate ranged based on different provider skill levels from $25.75/hour for health aides to $65.74/hour for licensed practical nurses to $83.40/hour for registered nurses.

Simply put, there are a lot of factors to evaluate in comparing and contrasting LTC costs, which are not always easy to understand. LTCG’s process is supported by a comprehensive provider database where full-time staff working year-round collect and analyze this information in this annual study, so you can use it to empower your agents, policyholders and home office staff with actionable data based on actual industry costs.

Purchased versions of the Cost of Care Study can be private labeled or co-branded, and each report comes with the data tables so you can leverage the data for your business needs. Also available is an optional interactive online map for easy at-a-glance comparisons.

To learn more or to purchase the report, please email adam.hoffman@LTCG.com. Or for a web-based demonstration, visit http://www.ltcg.com/our-services/cost-of-care/.

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Updated, Monday, March 21, 2016, 10:53 AM (Pacific)

Seattle—

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LTC E-ALERT #16-011: LTC NEWS AND COMMENT

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

Seniors Rush To Medicare's Star-Rated Plans Under ACA
Life Insurers Pass Pain of Low Rates on to Consumers: Long-term-care policies are among hardest hit
Women outlive men but suffer long years of disability
Insurance for Critical Illness Adds Security, but at a Cost
NAHU To Propose National LTCi Program
Long-Term Care Insurance: Less Bang, More Buck
The red-hot debate about transmissible Alzheimer's
Long Term Care Insurance Tax Benefits 2016
Long Term Care Insurance Industry Payout Potential Equals $800 Billion Reports AALTCI
How to Fix the Scandal of Medicaid and the Poor
NIC report: Occupancy down, managed Medicare use up in skilled nursing facilities
LTCi and D-I-V-O-R-C-E: A Conversation Worth Having
Genworth Agrees to Pay $219 Million to Settle Securities Suit
3 Ways To Mitigate The Cost Of Long Term Care
Ontario's long-term care problem: Seniors staying at home longer isn't a cure for waiting lists
Share Of Medicare, Managed Care Plans In SNF Revenue Falls, Report Finds
An LTC planner's guide to the presidential candidates
John Hancock Hires Long-Term Care Industry Veteran Scott Williams As Vice President, LTC Insurance Sales and Distribution
Medicaid and senior living: A troubled marriage
Living With the Parents I’m Losing to Alzheimer’s
Why Long-term Care Insurance Is Becoming a Tougher Call
Screening for Alzheimer’s Gene Tests the Desire to Know

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Updated, Friday, March 18, 2016, 9:30 AM (Pacific)

Seattle—

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LTC BULLET: THE 16^TH ANNUAL INTER-COMPANY LONG-TERM CARE INSURANCE CONFERENCE: A VIRTUAL VISIT

LTC Comment: In case you couldn’t be there, today’s LTC Bullet provides a little glimpse and some of the flavor of an exceptional industry meeting convened earlier this week, after the ***news.***

*** WE NEED YOU. Every time I attend a major industry conference like the one described in today’s LTC Bullet, I’m gratified by the many expressions of appreciation I receive for our work at the Center for Long-Term Care Reform. Thank you! But let me make this appeal, if you are receiving our content forwarded by others, please consider joining the Center on your own. The only thing that makes our contribution to improving long-term care financing policy possible, is the support we receive from our very special individual and corporate members. So, please, if you get value from our publications and you appreciate our advocacy on behalf of responsible LTC public policy, lend us your support by joining and contributing to the Center and our common mission. Contact Damon at 206-283-7036 or damon@centerltc.com. ***

LTC BULLET: THE 16^TH ANNUAL INTER-COMPANY LONG-TERM CARE INSURANCE CONFERENCE: A VIRTUAL VISIT

LTC Comment: The biggest and best LTC insurance industry conference wrapped up at the Hyatt Riverwalk in San Antonio, Texas on Wednesday. Attendance approached 1000, slightly down from last year, but the quantity and quality of sessions as well as the opportunities for networking were as plentiful and rewarding as ever.

It would have been virtually impossible to top last year’s event at The Broadmoor in Colorado Springs, and there were a few overcrowded sessions this year, but conference founder Jim Glickman told me that’s because a larger proportion of attendees actually went to the educational session than last year. He also opined that this year’s meeting was more upbeat, thanks to a new entrant to the business (National Guardian), optimism about combo products, and a general sense that LTCI has passed its nadir and is on the way back up.

LifeHealthPRO reporter Alison Bell took away a less sanguine impression of the meeting’s mood as she reported from the conference on March 15 in “ILTCI attendees hope traditional LTCI gets better soon”: “[T]he conversation is more somber than it was a year ago … with news of MedAmerica's departure from the long-term care insurance (LTCI) market still fresh.” My impression: It’s a “glass half full or half empty” quandary which pretty well describes the LTCI industry’s current condition.

What follows are some quick impressions of the sessions I attended. They are not a representative sample as I visited almost exclusively the program’s “Alternative Solutions” track. (Special thanks to Eileen Tell, John O’Leary, Brian Vestergaard, and Don Redfoot for the hard work they expended to put together the seven sessions comprising the Alternative Solutions Track.) The other tracks were Actuarial; Claims & Underwriting; Combination Products; Finance, Management & Operations; Legal, Compliance & Regulatory; Marketing, Sales & Distribution; and Technology.

To find a list and description of all the sessions in all the tracks including links to the slide decks for many of the presentations, click here https://event.crowdcompass.com/iltci2016 and check out the conference’s web-based version of the smartphone app that guided participants to all the sessions. You’ll be quickly impressed by the range and richness of the content.

Texas Insurance Commissioner David Mattax offered a welcome to San Antonio and delivered some remarks about regulation of the LTCI product in Texas.

This year’s keynote speaker, sponsored by Agent Review, was Ken Schmidt, brand visionary and former communications strategist for the Harley-Davidson Motor Company. The eponymous motorcycle company famously reinvented itself, rising from sinking failure to market ascendancy under Schmidt’s guidance. He urged the audience to ask and answer three questions: What are people saying about you? What do you want them to say? And how do you get them to say it? Drawing parallels between the motorcycle industry and long-term care insurance, spiced with humorous anecdotes, the speaker pointed to ways a company in the latter business might achieve extraordinary results like those he and Harley Davidson achieved. I don’t think anyone who heard the talk will be able to see and hear a HOG (Harley Owners Group) member revving his bike’s engine at an intersection without laughing and contemplating “How can we get people to brag about owning a long-term care insurance policy the way Harley owners take pride and satisfaction in their purchase?”

The first break-out session I attended was What's on the Minds of Combo Product Thought Leaders? Producer Linda Chow of Ernst & Young brought together panelists Barry Fisher – Broadtower; Dennis Martin – OneAmerica; Parag Shah - Pacific Life Insurance Company; Steve Schoonveld - Lincoln Financial Group and Anthony Vossenberg – Genworth. Consensus quickly emerged that the combo market remains largely untapped, that many more players are needed and wanted in the market, and that while combo products do not replace traditional LTC insurance, they do fill a critical space that fulfills and expands the mission of LTC insurance protection. All in all, a very positive panel enthusiastic about the future prospects for their niche of the market. Refreshing.

Next came the two-part “Alternative Finance Proposals” sessions. Together the two sessions provided a review and summary of work recently reported by the SCAN Foundation, Leading Age, the LTC Collaborative, and the Bipartisan Policy Center. Click here for details on Part 1. Part 1 focused on the “Economic and Actuarial Modeling Results” that formed the basis for analysis and recommendations reported by these groups and the policy implications explained in Part 2 of the program. Independent consultant Anne Tumlinson described the “Top Ten Lessons from LTC Financing Research.” Milliman actuary and mathematician Al Schmitz greeted the audience with “Happy Pi-Day” (3.14.16) and proceeded to explain how Milliman brought actual industry data to bear in the review and analysis of policy options and proposals.

Part 2 covered “the policy implications of the results and potential next steps from the study funders and from the perspectives of other interested parties.” The presenters said, in a nutshell, that private long-term care insurance on its own is too expensive to make much of a difference so it should be targeted toward a two-year front end role while a mandatory, government program paid for by an extra payroll tax should pick up the back-end, catastrophic risk. I wanted to ask this question, but could not get recognized: “You’ve put a lot of effort into showing why private, voluntary LTCI won’t work, which leaves you with a mandatory public program by default. What effort have you put into considering that the mandatory public programs we already have--Social Security, Medicare and Medicaid--face trillions in unfunded liabilities and become insolvent in the 2030s just as the first baby boomers turn 85 and start needing LTC in skyrocketing numbers?” I always wonder why private market options are scrutinized thoroughly but public funding alternatives get a casual pass—at least until they become law like CLASS and then blow up in the face of hard reality.

The next session I attended was New Research on LTCI. Susan Coronel and Marc Cohen shared insights coming out of two important new studies, one of which looked at 25 years of buyer and nonbuyer research and general population surveys on LTCI. The other updated critical work on claimant satisfaction, needs, experiences and the role of insurance. Here are a few highlights, but watch for the full results in forthcoming reports. Average age of LTCI purchase is down from 68 in 1995 to 64 in 2015 but up from 63 in 2010. Only 26% think it’s the federal government’s responsibility to finance LTC for everyone. Nursing-home-only policies have disappeared, but they were 60% of all LTCI policies in 1990. Consumers who bought early underpriced polices were getting a very good deal. LTCI claims are predominantly for home care (36%) and assisted living (30%). Claims paid to date are a little less than $100,000 on average, a fairly high level of benefit with the vast majority of benefits way above premiums paid. Very high, 96%, satisfaction with LTCI policies reported. Summary: Insurers are performing well for claimants regarding the claim filing process. Insurance is achieving multiple goals : affordability of services, ability to access high quality care, reducing burden on families, receiving care timely and not delaying, supporting choice regarding services.

What Role Should Informal Caregivers Play in Alternative Solutions
Click here for details and access to presentation slides. Unpaid (don’t call them “informal”) caregivers are the unsung heroes of long-term care. The statistics are alarming: 60% of caregivers are women averaging 49 years old (1 in ten is 75 years plus). They provide 24.4 hours per week of care; a quarter give 41 or more hours of care. Duration averages 4 years, but a quarter provide care for more than 5 years. Worst of all, we’re living in the halcyon days now because typical caregivers are boomers. The supply of caregivers will decline radically just as the number of people needing care explodes in the 2030s. The value of unpaid care is $470 billion, which exceeds the entire cost of the Medicaid program.

Thought Leaders Forum (Details) LTCI industry veterans (Jodi Anatole - Independent Consultant; Malcolm Cheung - Cheung Consulting, LLC; Laura Moore - TriPlus Services, Inc.; and Karen Smyth – Prudential) opined about “the successes, failures, hits and misses of our industry. If we knew then what we know now, what would they have done differently? What are the key lessons of the past and how do they or should they inform the future?” The reflections of these experts were too many and varied to summarize, but I’ll share one that especially struck me. When asked “what role should the public sector play?,” Laura Moore said we’re no closer to “cracking the nut of LTC risk;” there won’t be enough caregivers; there is no way Medicaid can cover the LTC need; and we’re going to see a “financial tsunami to make the current challenges we face look like a mere blip.” So there has to be a public/private solution, but her biggest fear is that we’ll wait until the crisis happens to deal with it. Hear, hear!

The conference’s closing general session was It's Not Me, It's You; A Consumer View on LTCI (Details). Behavioral economist Jeremy Pincus and consumer insight expert Luisa Uriarte delivered new information about how our current approach and sales and marketing techniques are actually standing in the way a broader appeal for long-term care insurance. These fascinating presentations challenged everything we thought we knew about LTCI marketing, such as--explain the problem, price the risk, scare the pants off ‘em and they’ll buy. Well, no, turns out that just drives people away. What’s needed is an approach that generates good feelings and makes people positive about preparing for what’s coming. Interestingly, this session was a perfect bookend for the conference, by providing evidence from behavioral research for some of the same insights about human behavior shared by the opening general session speaker about the turnaround he led at Harley Davidson.

The last full day of the conference ended with a closing exhibit hall session capped by a prize drawing and leading into a “casino night” featuring Texas hold ‘em and Blackjack tables.

That was not the end, however. Wednesday morning’s offering was Alzheimer’s Association Session: Advancements in Research, Current Breakthroughs and a Personal Story. Details. James A. Hendrix, Ph.D., Director, Global Science Initiatives, at the Alzheimer’s Association, opened the program by acknowledging that, yes, he is Jimmy Hendrix, followed by delivering a summary of the current status and recent findings of Alzheimer’s research. The numbers are staggering: Alzheimer’s cost is $226 billion growing to $1.1 trillion by 2050; 50.1% of boomers will have the disease by 2050; it will consume a quarter of Medicare funding by then. In the meantime, NIH spends $586 million on research, less than for other major illnesses. Research has made progress against other diseases and other diseases are declining as causes of death, but Alzheimer’s continues to increase.

Numbers are scary, but nothing moves an audience like a personal story. Barb Cole shared the saga of early onset Alzheimer’s Disease experienced by “someone she knows very well.” She talked about the confusion, the exclusion, the frustration, the expense, on and on as you can imagine from hearing so many similar stories. What brought the audience to its feet in a standing ovation was when Ms. Cole acknowledged that the “Annie” of her story was actually she, herself. Barb Cole reinvented herself after her devastating diagnosis by telling her story, opening others’ eyes, and advocating on behalf of the Alzheimer’s Association for the past six years.

See what you missed this year? Mark your calendars now: The 17th Annual ILTCI Conference will be held March 26-29, 2017 at the Hyatt Regency Jacksonville Riverfront in Jacksonville, FL.

P.S. The last time the ILTCI conference convened in Jacksonville, Florida was 2008 during the Center for Long-Term Care Reform’s “National LTC Consciousness Tour.” We parked the “Silver Bullet of Long-Term Care” right in front of the Hyatt Regency venue, stocked the fridge with refreshments, and opened the little Airstream trailer as a “hospitality suite” for all visitors. Check out our review of that year’s conference: “LTC Bullet: The Jacksonville LTCI Conference,” Thursday, March 20, 2008.

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Updated, Wednesday, March 9, 2016, 10:50 AM (Pacific)

Seattle—

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LTC BULLET: NO SINGLE SOLUTION?

LTC Comment: Three groups with new LTC policy proposals “share many of the same members, cite many of the same sources, and rely on the same modeling,” but can’t find a single solution after the ***news.***

*** THIS WEEK’S LTC BULLET comes to you earlier than usual because we are headed to San Antonio, Texas for the 16^th Annual Inter-Company Long-Term Care Insurance Conference. We’ll bring you a full report on that major LTCI industry meeting next week. For now, check out the agenda, the keynote speaker, and each of the sessions with their presenters. ***

LTC BULLET: NO SINGLE SOLUTION?

LTC Comment: As one who has since 1985 proposed a consistent, thoroughly documented single solution to the long-term care financing problem (see the reports linked here), and who has watched several of my recommendations moving us toward that solution pass into federal law (in 1988, 1993, and 2005), I’m not surprised to see three more study groups come up empty handed yet again by ignoring basic facts about Medicaid and addressing the challenge from a mistaken ideological perspective.

Today, we bring you the reflections of a thoughtful LTC insurance producer and author regarding the latest spate of LTC policy proposals.

But first, if you want to see just how aimless and confused the analysts, policy makers and legislators struggling with this critical topic are, then check out the March 1, 2016 hearing of the House Energy and Commerce Health Sub-Committee titled “Examining the Financing and Delivery of Long-Term Care in the U.S.” Find the details, witnesses, documents, etc., here. Watch and listen to the proceedings here: https://www.youtube.com/watch?v=lGy905yCQkU.

I sat through most of the live hearing video suppressing a scream of frustration at the witnesses’ and their interrogators’ failure to understand, articulate and deal with the role of Medicaid in long-term care. As the dominant, last-resort, and easily accessed payer for LTC, Medicaid has discouraged responsible LTC planning, crowded out private financing alternatives, created institutional bias, and trapped generations of aging Americans in welfare-financed care of often dubious quality. Unless and until we understand and confront the real cause of our country’s LTC woes (excessive government interference in the market) we’ll be doomed to repeat the many fruitless efforts (including these most recent three) to address them.

But for now, check out what guest columnist Stephen D. Forman, CLTC has to say about the three newest proposals from long-term care experts:

“The Voice of Long Term Care: No Single Solution”

Stephen D. Forman, CLTC

As if the name itself weren't a giveaway, take a look at the logo for the Bipartisan Policy Center: red and blue arching toward one another. And so it is that we half-expect the conclusions of its LTC Initiative (begun December, 2013) to appeal to everyone and please no one at the same time.

When we first previewed their work, we gave the BPC promising marks for their desire to build consensus at a time of political discord and fiscal constraints. Better still was their stretch-goal of producing actionable legislation. And in their initial paper, the BPC headily rejected a "true social insurance option financed through a broad-based tax."

But during the intervening years, we have grown cynical. The BPC has come to the sobering conclusion that there simply is no "single, comprehensive solution" to our nation's LTC funding crisis (that is financially or politically viable anyway). There is no magic bullet.

After two years of work, the Bipartisan Policy Center has released its “Initial Recommendations to Improve the Financing of Long-Term Care.” Building on the lessons of CLASS—that unique populations require unique solutions—the working group has pitched several planks, each with a different target:[1]

Placing a “heightened focus on the role of the private market”[2]
Improving Medicaid
Constructing a catastrophic, backstop plan

Speaking as a producer, I should feel heartened by the BPC’s belief that “middle-income Americans should have a functional, sustainable private LTCI marketplace to help them pay for LTSS should they need it.” Unfortunately, I may never play a role in it.

Wait, what? Why not?

Because they’ve concluded one of the reasons premiums are unaffordable is due to our agent commissions.[3] So they aim to reduce the price of insurance by removing us. Consumers of the future will apply for LTCI by one of two means: via automatic enrollment at work (on an opt-out basis), or on the state and federal exchanges. (Ironically, the Bipartisan Policy Center devalued agents during the same month Google Compare announced its withdrawal from agent-less sales of auto insurance—a mandatory commodity and failed precedent rolled into one.)

Part of the BPC’s enormous bet on worksite LTC stems from their belief in the existence of a thriving true group market of eight carriers (even though the actual number is closer to one). But to their credit, they also propose eliminating the early withdrawal penalty imposed on qualified retirement savings tapped to pay LTCI premiums. This is such an agreeable notion that the 100,000-member National Association of Health Underwriters (NAHU) has advocated for it in its own LTC position paper.[4]

The linchpin of the BPC’s proposal is a new class of LTC product coined “Retirement LTC.” Although described as lower-cost and limited-benefit[5], it should not be mistaken for Short-Term Care (STC), because its benefit periods range between 2-, 3- and 4-years. Instead, keeping the price low are its high deductible (ranging from $10,000 to $50,000, indexed for inflation), its elimination period (ranging from 180 to 365-days)[6], and built-in 20% coinsurance.

Premiums would be step-rated through age 75 (in other words, policyholders would pay more each year, based on the CPI-U). On top of this, every three years everyone’s rates would be re-priced based on current assumptions. A nonforfeiture benefit would be built-in, as would inflation protection based on the employment cost index (never before used in LTC). Since an annual open enrollment implies some version of guaranteed issue, the BPC assumes Retirement LTC plans might incorporate a vesting period during which no claims would be payable—for example the first 10 years.[7]

If you recognize some of this product’s features as among the industry’s least popular, you are not alone. The only difference is, the BPC is proposing that every working American buy it.

In future work, the BPC will be exploring:

a limited LTC benefit for MedSup and MedAdvantage plans,
a federal caregiving tax credit,
a respite-care benefit for Medicare, and
a right to “buy-in” to Medicaid LTC by the working disabled

Finally, they recommend a fully-financed (budget-neutral) catastrophic risk pool for the nationally uninsurable and largest claims (the 15% of Americans 65+ whose care will cost more than $250,000). The BPC does not believe the private market wants to insure claims this large—an arguable point, to say the least. To cover as many of us as possible (estimated to reach 90%), this would be a mandatory, public insurance program, potentially funded via payroll tax.

Deliberately, the BPC did not spend a great deal of energy building out the concept of universal catastrophic LTC since they acknowledged it would be dead-on-arrival in today’s political climate. Rather, they float the trial balloon and leave it to fall some indefinite day in the future.

This is in stark contrast to the LTC Financing Collaborative (LTCFC), whose final report came out within days of the BPC’s and gained national headlines by advocating for their own version of universal catastrophic LTC, calling it not only “most likely to meet the test of fiscal sustainability,” but ominously—since voluntary insurance hasn’t worked—“the only thing that’s left.”

In a recent article promoting its plan, the LTCFC described a possible catastrophic benefit of $100/day for life which would kick in after a 2- or 3-year elimination period, and cost about $300/year in taxes. But the article gently skirted the elephant in the room: such coverage has been marketed before. I still have the rate books, and can produce a similar benefit for a similar price. But they've always proven deathly unpopular. Why can't anyone be convinced to spend even a pittance on such a plan?

The answer to this question is the heart of our entire LTC financing debacle[8], but we can put a pin here for now: the Collaborative's imaginative understanding of Medicaid is holding them back from making real progress.

In almost conspiratorial fashion, LeadingAge also chose February to release their “Pathways Report: Perspectives on the Challenges of Financing LTSS.” And while they see “an urgent need for an LTSS financing system that is insurance-based and guided by principles of rationality, equity and affordability,” they ultimately couldn’t help themselves, and called for “a mandatory, universal insurance option [as] the best choice to minimize costs and optimize coverage.”

If readers are by now curious why three major reports have all called for universal, mandatory LTC, it is no coincidence. The Bipartisan Policy Center, LeadingAge and the LTC Financing Collaborative share many of the same members, cite many of the same sources, and rely on the same modeling (the Dynasim Model co-produced by Milliman and the Urban Institute). Practically all that’s left is for each to sign the other’s yearbook.

The opportunity to catch-up with old friends came on March 1st when the House Energy & Commerce Committee held a hearing which featured these three reports. Although reviews of the testimony were tepid, at least one Congressman present that day (Frank Pallone, D-NJ) was moved to "act with a sense of urgency," and plans to introduce legislation that would finance LTC through Medicare Part E.

Whether any of this will come to pass takes a crystal ball none of us has. Some proposals call to mind the half-baked naiveté of the CLASS Act, while some common-sense ideas are long overdue and will surely be greeted with enthusiasm. It is disappointing that the valuable field experience of agents was not sought, nor were carriers themselves given a seat at the table during these grand deliberations. Nevertheless, we shall remain vigilant to ensure our clients above all are protected, and our livelihoods as well.

_________________________________________________

[1] The BPC recognizes that financing is the first element which must be addressed nationally. Without adequate payment reforms, the US won’t attract good caregivers and will continue to face a worker shortage.

[2] Of the private market, the BPC says categorically, “LTSS is an insurable risk.” The significance of this declaration should not be discounted.

[3] Never mind that, on average, administrative expense (~16%) contributes more to policy pricing than commission expense (~12%), which adds not much more than the 10-15% cushion added explicitly for safety. Everyone wants to pay "factory-direct" wholesale prices ... what the heck do distributors even do? The Affordable Care Act's Medical Loss Ratio (MLR) debate accelerated this assault on the role of distribution (which began with Amazon and eBay), and which we will explore in a future column.

[4] They would allow access at age 45, and are also investigating the possibility of allowing LTCI as an investment option in workplace retirement plans.

[5] And so simple that ordinary folks can buy it without agent guidance.

[6] Policyholders would qualify for benefits after satisfying the deductible OR elimination period, whichever comes first.

[7] They would also seek legal exemptions to ensure Retirement LTC is both tax-qualified and partnership-qualified, and rules changed to protect plan sponsors from fiduciary liability.

[8] Because nothing is at risk, and someone else always pays.

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Updated, Monday, March 7, 2016, 11:00 AM (Pacific)

Seattle—

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LTC E-ALERT #16-010: LTC NEWS AND COMMENT

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

Hybrid Long-Term Care Policies Provide Cash and Leave Some Behind
GAO Report Sheds Light on Retirement Debate
The Voice of Long-Term Care: No Single Solution
The Internet Of Caring Things
Medicare Advantage ratings proving to be boon to insurers, patients
Women 80% More Likely Than Men to be Impoverished in Retirement
Experts talk trade-offs in House hearing on LTC financing
House To Take Up Long Term Care Financing
How to Prioritize Spending in Retirement

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Updated, Friday, March 4, 2016, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: READ CASSANDRA’S QUANDARY

LTC Comment: After the recent spate of misguided LTC financing proposals recently, read our analysis for recommendations that will truly fix the problem, after the ***news.***

LTC BULLET: READ CASSANDRA’S QUANDARY

LTC Comment: We’ve teased you mercilessly about our new report starting with “LTC Bullet: Cassandra’s Quandary,” Friday, July 17, 2015, which previewed the project as we began its research phase. “LTC Bullet: Heed Cassandra on LTC,” Friday, January 22, 2016 offered the report’s brief summary and conclusions. “LTC Bullet: Cassandra’s LTC Recommendations,” Friday, January 29, 2016 followed with its specific proposals.

But now, finally, you can read the full report and see how we reached its conclusions and recommendations. Find “Cassandra’s Quandary: The Future of Long-Term Care in New Hampshire” here on Federalism in Action’s website or here on the Center for Long-Term Care Reform’s website.

Don’t be fooled by the title’s reference to New Hampshire. This report is about America’s long-term care financing crisis. The Granite State is our “canary in the mineshaft” to show why the crisis is so great, why it hasn’t fully materialized yet, and why 2031 through 2050 are the years when tremendous damage will occur unless the corrective actions we propose are implemented.

By all means, read the whole report, but to whet your appetite, here’s the press release that announced its publication. We welcome comments and questions.

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FOR IMMEDIATE RELEASE: March 2, 2016
CONTACT: media@federalisminaction.org

New Hampshire’s Financial Time Bomb: The Looming Impact of Long-Term Care on Medicaid

WOODSVILLE, NH – A new study, published by Federalism In Action, finds that America’s and New Hampshire’s long-term care service delivery and financing systems - as currently operating and likely to evolve - will not survive the coming demographic age wave.

According to the study, CASSANDRA’S QUANDARY: The Future of Long-Term Care in New Hampshire, radical changes in federal and state laws and regulations are needed to align consumer incentives with the need to finance future long-term care (LTC) adequately. To begin the public conversation and highlight this financial time bomb, Federalism In Action (FIA) partnered with the Center for Long-Term Care Reform and the New Hampshire Center for Economic Policy to perform a 30-year cost projection of NH’s Medicaid system.

“Long-term care financing is a time bomb about which experts and policy makers are too complacent,” said Stephen Moses, author of the study. “The soporific effect of moderate health and LTC cost inflation will end soon causing disastrous financial and care quality problems. Cassandra’s Quandary explains how and why this will happen in New Hampshire and the USA if nothing is done.”

Two federal programs—Social Security and Medicare—are notorious for their unfunded liabilities: $25 trillion and $43 trillion, respectively. However, another federal program—Medicaid—consumes a growing proportion of state and federal budgets but attracts less scrutiny of its long-term fiscal viability.

“While Obamacare is dominating the Medicaid discussion at the state level, it is long-term care for the aging that will dramatically increase Medicaid spending over the next several decades,” said J. Scott Moody, Federalism In Action CEO. “Yet, there is not a single state that is estimating these future costs, let alone preparing for them. New Hampshire, and New England in general, will be the first place where the fiscal pressure of the retirement of the baby-boomer generation will be felt.”

According to Moses, “the risk and cost of long-term care explodes at age 85. The first baby-boomers turn 85 in 2031. By then, it will be too late to avoid the collapse of America’s long-term care service delivery and financing system that will occur by 2050. The report explains why we’re in this mess and what to do about it—now!”

While common perceptions are that America’s aging population will strain Medicare resources, it will also adversely impact Medicaid and its long-term care coverage. Already a problem, three-fourths of Medicaid recipients are impoverished adults or children, but account for only one-third of the program’s expenditures, whereas only one-fourth of Medicaid recipients are aged or disabled, but consume two-thirds of the program’s costs. Just as alarming, Medicaid’s most expensive “dual eligible” recipients—those also receiving Medicare—comprise only 15% of total recipients but account for 39% of Medicaid spending, of which 70% is for their long-term care.

“Poor federal Medicaid policy caused America’s and New Hampshire’s LTC problems of impaired access, doubtful quality, inadequate reimbursement, and institutional bias,” explains Moses. “Our study explains what’s wrong with long-term care public policy and how shifting responsibility from the federal government to the states and the people can fix it.”

Stephen Moses is a senior policy fellow with Federalism In Action and the president of the Center for Long-Term Care Reform. He may be reached by email at smoses@centerltc.com or by phone at 432-364-2254. (To read his bio, click here.)

Federalism In Action, a 501c(3), is an energetic, results-oriented public policy organization – promoting American federalism, liberty, and fresh ideas aimed at limiting government. We seek to restore the proper balance between the federal government and the states – focusing on ways states can truly act as independent sovereigns and come up with local solutions. To learn more, visit FederalismInAction.org.

The Center for Long-Term Care Reform, located in Seattle, Washington, promotes universal access to top-quality long-term care by encouraging private financing as an alternative to Medicaid dependency for most Americans. To learn more, visit CenterLTC.com.

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Updated, Monday, February 29, 2016, 11:00 AM (Pacific)

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LTC E-ALERT #16-009: LTC NEWS AND COMMENT

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

Number of seniors who need personal care help increasing, CDC says
HEARING NOTICE
Nursing Home Evictions Strand The Disabled In Costly Hospitals
SNF bed prices increased 12% last year, hitting all-time high
MetLife in Talks to Sell U.S. Advisor Network to MassMutual
CDC report details characteristics of assisted living residents
Genworth's announcement a potential game changer
Mental Stimulation May Delay Alzheimer's Symptoms, But Not Pathology
ACSIA Partners Alerts Americans to Plan for Alzheimer's Long-Term Care Before It's Needed
Nursing home capacity down across country, CDC report finds
Yes, We Can Create A Universal Long-Term Care Insurance Program
Genworth debuts new annuity for long-term-care coverage
U.S. proposes hike in Medicare Advantage payments; insurer shares rise

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Updated, Friday, February 26, 2016, 10:17 AM (Pacific)

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LTC BULLET: REAL ID VS. ESTATE RECOVERIES: A DECADE OF DIVERGENCE

LTC Comment: Why do the Feds force states to comply with one law that costs money (Real ID), but fail to enforce another law that saves money (Medicaid estate recoveries)? Stephen D. Forman poses the question in today’s guest LTC Bullet after the ***news.***

*** THIS WEEK’S LTC CLIPPINGS: Did a prospect or client hit you with a surprise question or comment this week? Were you up to speed on everything you needed to know each day? Ever get flat-footed by a fact or stat you wish you’d known but didn’t? Those are problems our LTC Clippings subscribers avoid. Here are this week’s LTC Clippings titles through this morning.

Nursing Home Evictions Strand The Disabled In Costly Hospitals : Shots - Health News : NPR
SNF bed prices increased 12% last year, hitting all-time high - McKnight's Long Term Care News
MetLife in Talks to Sell U.S. Advisor Network to MassMutual | IAG Breaking News
CDC report details characteristics of assisted living residents
Genworth's announcement a potential game changer
Mental Stimulation May Delay Alzheimer's Symptoms, But Not Pathology - Neurology Advisor
ACSIA Partners Alerts Americans to Plan for Alzheimer's Long-Term Care Before It's Needed - ACSIA Partners
Nursing home capacity down across country, CDC report finds - McKnight's Long-Term Care News
Yes, We Can Create A Universal Long-Term Care Insurance Program – Forbes
Genworth debuts new annuity for long-term-care coverage – InvestmentNews
U.S. proposes hike in Medicare Advantage payments; insurer shares rise | Reuters

Our LTC Clippings alert you in real time to news or reports you need to know and understand. We give you a quote from the source, a web link to the full item, and a one- or two-sentence analysis of what it means. All for 27 cents per day if you’re already a member of the Center or 68 cents per day with a new Center for Long-Term Care Reform membership. Contact Damon at 206-283-7036 or damon@centerltc.com for details. ***

LTC BULLET: REAL ID VS. ESTATE RECOVERY: A DECADE OF DIVERGENCE

“Real ID vs. Estate Recovery: A Decade of Divergence”

Stephen D. Forman, CLTC

An article ran in the December 28, 2015 edition of the New York Times detailing a fight between the federal government’s Department of Homeland Security and the states over a 2005 law that would bar some residents from commercial air travel due to their non-compliant state driver’s licenses.[1]

It’s an interesting story, and one that impacts nearly all of us, but what does it have to do with long-term care? Read on.

The 2005 Real ID Act was enacted by Congress on the recommendation of the 9/11 Commission, and it requires states to comply with minimum federal standards when issuing driver’s licenses. These include new burdens on drivers (e.g., proof of immigration status and Social Security number), the cards themselves (e.g., use of new machine-readable chips to store information and deter counterfeiting), and the agencies issuing them (e.g., conducting background checks on employees issuing driver’s licenses). The cost alone—perhaps as high as $11 billion—was just one reason states objected. Several state legislatures took the extreme countermeasure of passing their own laws literally banning compliance with the Act.[2]

So, if you’re the federal government, how do you compel the states to adopt your law? First, you apply pressure by barring visitors to military bases and nuclear sites unless they can show proof of ID from a compliant state. Then, when that doesn’t work, you exert your leverage over air travel via the TSA, preventing travelers without compliant ID’s from passing security checkpoints to board their flights. As one commenter notes, “This is a game of intimidation being played out between ... the federal government and state governments, with ordinary citizens being squeezed in the middle.”[3]

And this is where we get to long-term care.

2005 was a productive year for Congress, the same in which they passed the Deficit Reduction Act (“DRA ‘05”), which contained some of the widest-reaching Medicaid reforms since 1993.[4] Besides widening the Partnership Program nationwide, you’ll remember these:

Imposing the first-ever home-equity limit of $500,000 (or $750,000 at the state legislature’s discretion)[5]
Extending the look-back period on all transfers to 5 years (not just trusts)
Forwarding the penalty-period start date to the date of Medicaid application (versus the date of transfer)
Adding more restrictions to so-called “Medicaid-friendly” annuities

Eleven years later, there are still 23 jurisdictions which have yet to fully comply with the DRA[6] and/or OBRA ’93—the law which made estate recovery mandatory. We know this because Congressman Fred Upton (R-MI) and Senator Orrin Hatch (R-UT) wrote to then-CMS Administrator Marilyn Tavenner^{^[7]} last January to raise this very issue. In their letter they pointed out how federal Medicaid dollars may be paying for individuals who are not eligible for coverage, thus straining the program’s ability to pay for rightful recipients.

Here’s the irony: whereas Real ID costs states money, implementing these Medicaid reforms would actually save states money, as much as $2.5 billion. Very few non-tax sources of revenue can do better. More than that, they’d spur interest in private long-term care insurance. And we know that LTCI is a net-positive for states: each new policy saves Medicaid approximately $8,000 over its lifetime (at a minimum).

As we begin 2016, there is no shortage of trial balloons being floated by various advocacy groups who envision new ways of financing America’s system of long-term care. Included among these are dozens of Medicaid reforms, but it is hard to justify a menu of new reforms when we have yet to implement those enacted over 20 years ago.

In November, 2014 the Inspector General released a report three years in the making, to determine whether states were implementing federal law designed to restrict high-net worth individuals from accessing Medicaid, and to quantify states’ estate recovery efforts. Here is what the IG found:

51 states now report they are recovering assets from the probated estates of deceased Medicaid recipients (when not survived by a spouse)
42 states report implementing the option to recover all Medicaid costs paid to beneficiaries aged 55 and over—not just LTC—from an individual’s estate
26 states report adopting a voluntary expanded definition of “estate” which allows the recovery of Medicaid costs from assets outside state probate law (e.g., through joint tenancy with right of survivorship)

On average, estate recoveries are a good investment. In 2011 the states spent a combined $34 million (M) to recover $498M (or $14.60 for each dollar invested). More could be recouped if obstacles to spousal recoveries were lifted. In those 51 states identified above, about 1/3^rd of Medicaid nursing home (NH) residents who own a home have a spouse still living there. If the Medicaid-recipient outlives the community spouse, the state will make the recovery; but if the community spouse outlives the Medicaid NH recipient, those assets are protected by law in many states (even after she or he dies).

As a percent of total Medicaid expenditures, some states recover a higher share than others. At the top of the list is Idaho (recovering 5.4 percent of what it spends on nursing facility costs, or 2.2 percent of total LTC costs when home and community-based services [HCBS] are included). Extrapolating from these numbers, Steve Moses of the Center for Long-Term Care Reform calculated the combined recoveries from all states if they did as thorough a job as the Gem State. Instead of the $497M actually recovered (according to the Inspector General’s report), total recoveries could have been as great as $2.9 billion (B). In other words, there’s an additional $2.5B currently being forfeited by the states through no fault but a failure to enforce existing law.

The results are well-documented:

A Medicaid program which is chronically over-extended and under-funded[8]
Whose underpayments lead to systemically low quality, high staff turnover, lack of institutional investment, and cost-shifting to private LTC insurance
Which teeters between institutional bias on the one hand and lack of access to overcrowded HCBS programs
Which crowds out responsible early planning, including saving, investing, long-term care insurance and the use of reverse mortgages and home equity options to age-in-place

The federal government has the ability to swing a big stick or wave a big carrot. The way it’s exerting its muscle with the Real ID program is an example of the former. An example of the latter is the way the White House has sold the Affordable Care Act’s (ACA’s) Medicaid expansion. To convince states to enroll an additional 10M Medicaid beneficiaries, states were promised a higher federal “matching rate”—a full 100% reimbursement through 2020, dropping to 90% thereafter. Even so, 20 states remain un-sold on this deal.[9]

We live in strange times. States fail to enact their own laws. The federal government gives them a free pass even though it has multiple means at its disposal to effect compliance. Medicaid programs are gobbling up budgets, yet no one likes being the candidate who voted in favor of the last tax hike. A proven solution exists in plain sight, but in 2016 if something’s not “The Uber of…” anything, it’s hard to generate attention anymore. All we can hope is that by repeatedly calling attention to the issue, the conclusions will finally be inescapable—it makes no sense to embark on grandiose new visions until we’ve taken steps to maximize existing Medicaid estate recovery law.

Stephen D. Forman of Long Term Care Associates, Inc is co-author of "The Advisor's Guide to Long-Term Care" (2nd Ed.) published by National Underwriter, and a regular contributor to LifeHealthPro and ProducersWEB. Reach him at steve@ltc-associates.com.

[1] On January 9^th, 2016 the Seattle Times ran an updated story “TSA gives reprieve on state driver’s licenses” in which they advise that Homeland Security now says passengers could continue using current ID’s through 1/22/18. Some will have until 10/01/20. Currently 23 states and territories have complied with the Act and 27 states and territories have been granted an extension. Five states—IL, MN, NM, MO and WA (and American Samoa) have not complied and have not been granted an extension.

[2] The other reason states oppose the Act is requiring the storage of “proof of identity” images which they say could be breached and be used to track law-abiding US citizens. They also oppose the US government unilaterally setting standards which have traditionally fallen under the purview of the states.

[3] It’s a lot like the government telling states, “We can’t force you to adopt a 55-mph speed limit, but we don’t have to share these highway construction funds with you, either.”

[4] Omnibus Budget Reconciliation Act of 1993 (“OBRA ‘93”).

[5] These amounts have now increased with inflation to $552,000 and $828,000 respectively for 2016.

[6] Twenty-two states and the District of Columbia.

[7] Now President and CEO of the industry trade group, America’s Health Insurance Plans (“AHIP”).

[8] Although LTC users are only 7 percent of the Medicaid population, they account for more than 50 percent of its costs ($106B spent in 2014 on NH and HCBS).

[9] As we approach 2020, those states who failed to expand Medicaid when first given the opportunity were recently offered an extended deadline for the higher matching rate in an attempt to re-sell the deal.

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Updated, Monday, February 22, 2016, 9:50 AM (Pacific)

Seattle—

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LTC E-ALERT #16-008: LTC NEWS AND COMMENT

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

Medicare reform a back-burner issue for most 2016 presidential candidates
Baby Boomers Set Another Trend: More Golden Years In Poorer Health
Current LTSS financing methods 'irrational, unfair' LeadingAge report claims
New Study Links Widening Income Gap With Life Expectancy
Biden Was Right: Medicaid Provider Taxes A 'Scam' That Should Be Scrapped
Long-term care insurance could help defuse the looming baby boom retirement ‘disaster’
What Older Voters Care About Now
How retirement has changed in the last 30 years
Family caregivers may be sacrificing their own health to help loved ones
Heartburn medications associated with higher dementia risk
Long Term Care Insurance Is Second Leading Source Paying For Private Home Care
A promise sometimes impossible to keep

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Updated, Friday, February 19, 2016, 10:08 AM (Pacific)

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LTC Bullet: LTC Almanac Update (2)

LTC Comment: We’ve updated the “Almanac of Long-Term Care” in The Zone. The Almanac is not up to date. More on the LTC Almanac and today’s update after the ***news.***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including: our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries. Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources. Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments. Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***

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LTC BULLET: LTC ALMANAC UPDATE

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

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free for one week—today through Friday, February 26, 2016. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

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

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Chapter 3: Unfunded Liabilities--Social Security, Medicare, Pensions and Budgets

Unfunded Liability Estimates

TIA on State Finances 0915 URL: http://www.truthinaccounting.org/library/doclib/FSOS-Overview.pdf

9/2015, “Financial State of the States,” by Robert Rector, Truth in Accounting

Quote: “For the sixth consecutive year, Truth in Accounting (TIA) has completed a comprehensive review of the financial reports of all 50 states to provide citizens with a clear picture of their governments’ financial conditions. Despite an improvement in the economy and financial markets, the amount of bills accumulated by the states has not significantly decreased. States still have almost $1.3 trillion of unfunded debt, accumulated despite balanced budget requirements in 49 of the 50 states. 39 states have dug financial holes, thus creating a “Taxpayer Burden,” which is the amount each taxpayer would have to send to their state’s treasury in order for the state to be debt-free. If state budgets had been truly balanced, no Taxpayer Burden would exist.”

LTC Comment: Check out your personal debt or credit as a taxpayer in your state.

Chapter 5: Caregiving

Caregiver Stress, Burnout and Costs

Genworth on Caregiving 1015 URL: https://pro.genworth.com/riiproweb/productinfo/pdf/157453C.pdf

10/1/2015, “Beyond Dollars: Caregivers Face Career Crisis Resulting from Lack of Long Term Care Planning, According to Genworth Study,” Genworth press release, Market Watch

Quote: “Providing care for loved ones has taken a toll on the careers of half of caregivers surveyed in Genworth's latest Beyond Dollars study, with 11 percent actually losing their jobs and another 10 percent having to change careers. That's in addition to the other financial, physical and emotional impacts of caregiving examined in the study. ”

LTC Comment: It’s not just the money—a powerful message for prospects in denial.

Caregiver Shortages

NBER on LTCI 0815 URL: http://www.nber.org/papers/w21483

8/2015, “Family Spillovers of Long-Term Care Insurance,” by Norma B. Coe, Gopi Shah Goda and Courtney Harold Van Houtven, National Bureau of Economic Research

Quote: “LTCI coverage induces less informal caregiving, suggesting the presence of intra-family moral hazard. We also find that children are less likely to co-reside or live nearby parents with LTCI and more likely to work full-time, suggesting that significant economic gains from private LTCI could accrue to the younger generation.”

LTC Comment: How much more would this finding apply to free Medicaid-financed HCBS than for expensive private long-term care insurance? Easy access to Medicaid LTC crowds out free family care whereas private LTCI enables family members to keep their jobs and spend quality, less stressful time with chronically ill elders.

Value of Free Care

BLS on Free Caregiving 0915 URL: http://www.bls.gov/news.release/archives/elcare_09232015.pdf

9/23/2015, “Unpaid Eldercare in the United States —2013-14: Data from the American Time Use Survey,” Bureau of Labor Statistics

Quote: “Sixteen percent (40.4 million) of the civilian noninstitutional population age 15 and over provide unpaid eldercare, the U.S. Bureau of Labor Statistics reported today. Of the 40.4 million eldercare providers, a majority are employed (61 percent) and nearly one-half are employed full time (47 percent). These estimates are averages for the 2-year period of 2013-14; combining the 2 years of data facilitates a more in depth analysis of eldercare. ”

LTC Comment: This BLS report contains extensive data on unpaid caregiving in the USA, but no estimate of its dollar value. For that ($470 billion per year) see: Susan C. Reinhard, et al., “Valuing the Invaluable: 2015 Update, Undeniable Progress, but Big Gaps Remain,” AARP Public Policy Institute, July 2015, p. 1; http://www.aarp.org/content/dam/aarp/ppi/2015/valuing-the-invaluable-2015-update-undeniable-progress.pdf.

Chapter 6: Long-Term Care Financing

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

Bipartisan Policy Center’s “Initial Recommendations to Improve the Financing of Long-Term Care”

2/2/2016, “Private Long Term Care Insurance Market Must Be Shored Up, Policy Center Argues,” by Bill Myers, Provider

Quote: “Policymakers should act ‘to stabilize’ the long term care insurance market ‘and make it accessible to more Americans,’ a new report argues. ... The report also urges state policymakers to consider expanding Medicaid-even if only as part of a one-off ‘buy-in’ to help pay for long term care services and supports. Finally, the report urges lawmakers and policymakers to pursue concepts and elements for a public insurance program to: 1.) address uninsurable long term care costs; 2.) protect Americans from the catastrophic costs of long term care supports and services; and 3.) provide relief to states, which along with the federal government face significant Medicaid costs in the coming years as baby boomers begin to need their own long term care, the report says.”

LTC Comment: This Friday’s LTC Bullet will summarize and analyze the new report. Check it out here in the meantime.

Find our critique of the BPC proposals at LTC Bullet: Three Cheers (But Two From the Bronx) for New BPC-LTC Recommendations, Friday, February 5, 2016
Health Affairs on LTC Article 1115 LINK

“Financing Long-Term Services And Supports: Options Reflect Trade- Offs For Older Americans And Federal Spending,” by Melissa M. Favreault, Howard Gleckman, and Richard W. Johnson

ABSTRACT About half of older Americans will need a high level of assistance with routine activities for a prolonged period of time. This help is commonly referred to as long-term services and supports (LTSS). Under current policies, these individuals will fund roughly half of their paid care out of pocket. Partly as a result of high costs and uncertainty, relatively few people purchase private long-term care insurance or save sufficiently to fully finance LTSS; many will eventually turn to Medicaid for help. To show how policy changes could expand insurance’s role in financing these needs, we modeled several new insurance options. Specifically, we looked at a front-end-only benefit that provides coverage relatively early in the period of disability but caps benefits, a back-end benefit with no lifetime limit, and a combined comprehensive benefit. We modeled mandatory and voluntary versions of each option, and subsidized and unsubsidized versions of each voluntary option. We identified important differences among the alternatives, highlighting relevant trade-offs that policy makers can consider in evaluating proposals. If the primary goal is to significantly increase insurance coverage, the mandatory options would be more successful than the voluntary versions. If the major aim is to reduce Medicaid costs, the comprehensive and back-end mandatory options would be most beneficial.

Find our critique of this important article in “LTC Bullet: The Arrogance of LTC Analysts’ Elitism,” Friday, December 4, 2015

Nursing Home and Home Care Expenditure Data from CMS and Health Affairs

Health Affairs on 2014 National Health Expenditures URL: http://content.healthaffairs.org/lookup/doi/10.1377/hlthaff.2015.1194

“National Health Spending In 2014: Faster Growth Driven By Coverage Expansion And Prescription Drug Spending,” by Anne B. Martin, Micah Hartman, Joseph Benson, Aaron Catlin, and the National Health Expenditure Accounts Team

ABSTRACT US health care spending increased 5.3 percent to $3.0 trillion in 2014. On a per capita basis, health spending was $9,523 in 2014, an increase of 4.5 percent from 2013. The share of gross domestic product devoted to health care spending was 17.5 percent, up from 17.3 percent in 2013. The faster growth in 2014 that followed five consecutive years of historically low growth was primarily due to the major coverage expansions under the Affordable Care Act, particularly for Medicaid and private health insurance, which contributed to an increase in the insured share of the population. Additionally, the introduction of new hepatitis C drugs contributed to rapid growth in retail prescription drug expenditures, which increased by 12.2 percent in 2014. Spending by the federal government grew at a faster rate in 2014 than spending by other sponsors of health care, leading to a 2-percentage-point increase in its share of total health care spending between 2013 and 2014.

Chapter 7: Long-Term Care Insurance

Criticism

CRR on Lapse Rates 1015 LINK

Pdf: http://crr.bc.edu/wp-content/uploads/2015/09/IB_15-17.pdf

“Why Do People Lapse Their Long-Term Care Insurance?,” by Wenliang Hou,Wei Sunand, Anthony Webb
IB#15-17

The brief’s key findings are:

More than a third of those with long-term care insurance at age 65 will let their policies lapse at some point, forfeiting all benefits.

Lapses could be due to the burden of insurance premiums, a strategic calculation that care use is less likely, or poor decisions due to declining cognitive ability.

The analysis finds support for both the “financial burden” and “cognitive decline” explanations.

The consequences of lapsing are significant, as lapsers are actually more likely than non-lapsers to use care in the future, partly due to cognitive decline.

Thus, for some lapsers, having insurance could be counterproductive as they buy it to protect against risk but drop it just when the risk becomes more likely.

For our critique of this report, see LTC Bullet: Another LTCI Hit Job?, Friday, October 9, 2015

Chapter 10: Medicaid

Medicaid Spousal Impoverishment Tables

2016 SSI and Spousal Impoverishment Standards
2016-ssi-and-spousal-impoverishment-standards URL: http://medicaid.gov/medicaid-chip-program-information/by-topics/eligibility/downloads/2016-ssi-and-spousal-impoverishment-standards.pdf

https://attorney.elderlawanswers.com/cms-confirms-that-spousal-impoverishment-figures-will-remain-the-same-for-2016-15398

12/2/2015, “CMS Confirms That Spousal Impoverishment Figures Will Remain the Same for 2016,” by, ElderLawAnswers

Quote: “The Centers for Medicare and Medicaid Services (CMS) has announced that the spousal impoverishment and home equity limit figures will not change from 2015 levels next year. This is because there was no increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). . . . For CMS’s page on all the SSI and spousal impoverishment standards for 2016, click here. For an informational bulletin that was attached to the figures, click here.”

LTC Comment: We’ll also update these numbers in The Zone where you can find the comparable annual amounts all the way back to 1991 for comparison.

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Updated, Monday, February 15, 2016, 11:00 AM (Pacific)

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LTC E-ALERT #16-007: LTC NEWS AND COMMENT

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

Surge in Medicare Advantage Sign-Ups Confounds Expectations
Many Americans Are Rising Out of the 'Middle Class' — But Are They Better Off?
[Seniors Housing] Troubles Everywhere
Hedge fund manager: Genworth had a good fourth quarter
Long Term Care Insurance Industry Paid $8.15 Billion in Claim Benefits
Study finds dementia rates falling steadily
Millionaires Are Qualifying for Medicaid Under Obamacare
LTC planning in world history: You are here...
Report: Alzheimer’s market to double by 2021 to $10.4B
Deal on New Managed Care Tax Imminent
White House budget includes $4 billion pilot to 'streamline' LTC
‘Promise you’ll never put me in a nursing home’
Who’ll Pay for Americans to Live to 100?
Premiums for New Long-Term Care Insurance Policies Actually Decline in Some Cases

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Updated, Friday, February 12, 2016, 9:38 AM (Pacific)

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LTC Bullet: LTC Almanac Update

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

*** 2016 ILTCI CONFERENCE: The 16th Annual Intercompany LTCI Conference will convene at The Grand Hyatt in San Antonio, Texas March 13th to 16^th, 2016. Get the mobile app and be there if you can. Professional meetings don’t get any better than this one. Your Center for Long-Term Care Reform will be on hand and we hope to see you there. By the way, we hear that nearly all exhibit booth spots are taken, but there are some left. Click here for further information and reserve your spot while you can. ***

* CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including: our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries. Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources. Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments. Contact Damon at 206-283-7036 / damon@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. *

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LTC BULLET: LTC ALMANAC UPDATE

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

*** SPECIAL: We are making access to The Zone, including the "Almanac of Long-Term Care," free for one week—today through Friday, February 19, 2016. To access this introductory peek into The Zone, go to http://www.centerltc.com/members/index.htm and use the following case-sensitive user name and password: UN: IntrotoZone / PW: FreeTrial. Like what you see? Then join the Center for Long-Term Care Reform here. Or contact Damon at 206-283-7036 or damon@centerltc.com. ***

The LTC Almanac is divided into 11 sections:

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

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Chapter 1: Aging Demographics

United States

General Stats

Heritage on Poverty 0915 LINK

9/16/2015, “Poverty and the Social Welfare State in the United States and Other Nations,” by Robert Rector, Heritage Foundation

Quote: “When private-sector contributions to retirement, health care, and education are added to the count, social welfare spending in the U.S. dwarfs that of other nations. In fact, social welfare spending per capita in the U.S. rises to nearly twice the European average.[4] As Garfinkel, Rainwater, and Smeeding conclude, ‘For those who believe the absolute size of the US welfare state is small, the data presented...[in the book] are shocking and constitute a wake up call. Once health and education benefits are counted, real per capita social welfare in the United States is larger than in almost all other countries!’[5] Only one nation (Norway) spends more per person than the U.S. spends.[6] . . . Compared against a uniform standard, the U.S. has a poverty rate that is similar to poverty rates in most other advanced nations. However, the U.S. should not seek to outspend other nations in its anti-poverty programs. Instead, the U.S. should seek to reduce poverty by promoting self-sufficiency: the ability to support one’s self and family above the poverty level without reliance on welfare aid.”

LTC Comment: This is a fascinating article that blows up the stereotype of poverty in America. The poverty rate is lower and the poor’s standard of living is higher that commonly understood.

Chapter 5: Caregiving

Caregiver Stress, Burnout and Costs

Health Affairs on Caregiving 1015 URL: http://content.healthaffairs.org/content/34/10/1642.full.pdf

10/9/2015, “The Disproportionate Impact Of Dementia On Family And Unpaid Caregiving To Older Adults,” by Judith D. Kasper, Vicki Freedman, Brenda C. Spillman, and Jennifer L. Wolff, Health Affairs

Quote: “Although 10 percent of older adults have dementia, their caregivers account for one third of all family and unpaid caregivers and for 41 percent of all hours these caregivers provide to older adults.”

LTC Comment: You can read the Abstract of this article for free here. You can subscribe to Health Affairs or buy only this article here.
Northwestern Mutual 2015 Long Term Caregiving Study 1015 LINK

11/09/2015, “New C.A.R.E. Study from Northwestern Mutual Reveals the Caregiving Conundrum,” by Northwestern Mutual

Quote: “New research from Northwestern Mutual released today uncovers a number of surprising insights into the emotional and financial implications of delivering care to an elderly relative or friend. Drawn from the perspectives of both current and future caregivers, the C.A.R.E (Costs, Accountabilities, Realities, Expectations) Study finds that Americans are often unprepared for the complex and unpredictable realities of longevity and caregiving. According to the C.A.R.E. Study, the cycle of care and dependency is a constant that extends beyond child rearing. Nearly 4 in 10 Americans (36%) either currently consider themselves a caregiver to someone aging, ill or with special needs (other than a child) or say they have performed this role in the past. Notably, the majority (59%) of Americans feel that taking care of two adults between the ages of 85 and 90 would be more difficult than managing two children, ages 3 and 5.

“The 35% of experienced caregivers who have incurred financial costs suggest there can be significant financial pressure. They estimate that on average more than a quarter (26%) of their monthly budget goes towards caring for an aging family member or friend. However, even though financial demands are a concern, people are not necessarily taking action. According to the research, among experienced caregivers who listed financial costs as their top concern about caregiving, more than a quarter (27%) say they know they need to do something but have not taken any steps while 22% have just completely avoided the issue.”

LTC Comment: This is a good reminder, especially during LTC Awareness Month, that while some people might be able to rely on family for caregiving, it’s not without cost. Of course, those costs are vast: emotional, physical, psychological, professional, financial and so on.

Chapter 6: Long-Term Care Financing

General

NAHUWhitePaperLTC 0615 LINK

LTC Bullet: NAHU on LTC Financing, Friday, September 18, 2015:

LTC Comment: The National Association of Health Underwriters (NAHU) has published its analysis and recommendations regarding long-term care financing. Some background, the executive summary and a link to the full report follow the ***news.***

Medicare LTC Financing

Institute on Medicare Age Increase Impact 0915 URL: Here

9/17/2015, “The Effect on States of Increasing the Medicare Eligibility Age,” by Timothy A. Waidmann and Emily Lawton, Urban Institute

Quote: “Proposals to raise the eligibility age for Medicare may have unintended consequences for state government finances. The medical care of persons who currently receive both Medicaid and Medicare benefits, also known as ‘dual eligibles,’ could become the sole responsibility of Medicaid. In this brief we estimate the number of such individuals in each state and the amount of current Medicare spending that could be shifted to state Medicaid programs. The actual cost impact of such a policy change for an individual state depends on both the demographic makeup of its population and its decision about Medicaid expansion under the ACA.”

LTC Comment: Something has to be done about Medicare’s huge unfunded liabilities. One of the commonest proposals is to raise Medicare’s age of eligibility. But doing that could devastate Medicaid by shifting huge costs to the welfare program.

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

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

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

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

HCBS: Cost-Effective or Not? (See also similar section under LTC Financing)

Chapter 9: Long-Term Care Providers

HCBS: Cost-Effective or Not?

KFF on Medicaid HCBS 0915 LINK

9/18/2015, “Serving Low-Income Seniors Where They Live: Medicaid's Role in Providing Community-Based Long-Term Services and Supports,” by Rachel Garfield, Katherine Young, MaryBeth Musumeci, Erica L. Reaves, and Judy Kasper, Kaiser Family Foundation

Quote: “Looking ahead, state and federal policymakers and other stakeholders will be challenged to meet the growing need for LTSS to support seniors living in the community in a way that accommodates diverse needs, ensures care quality, and manages costs. Insight into the socio-demographic and health status characteristics of these seniors, especially dual eligible beneficiaries who rely on Medicaid for their LTSS needs and how they may be similar to or different from other seniors with LTSS needs, can lead to increased understanding about how to optimize policies to support these populations.”

LTC Comment: Like the Health Affairs issue brief on “rebalancing” we sent your way yesterday, this disquisition on the long-term services and supports (LTSS, aka LTC) needs of seniors in the community is worth reading. But keep in mind that the high need and poor care management it documents was caused by excessive dependency on public financing for long-term care. In a free market, people would pay privately for care they prefer instead of relying on Medicaid with its institutional bias. They would buy private insurance to avoid late-life catastrophic LTC costs. If they did not buy insurance, they would use their home equity to pay for care. With those incentives to plan responsibly in place, few would end up dependent on welfare which would be better able to serve fewer people in the most appropriate care setting.

Health Affairs on Rebalancing Medicaid LTC 0915 LINK

9/17/2015, “Health Policy Brief: Rebalancing Medicaid Long-Term Services And Supports," Health Affairs, September 17, 2015.

Quote: “Twenty-five years after the passage of the Americans with Disabilities Act (ADA), the Medicaid program is also marking an important milestone in system transformation in 2015. The national profile of Medicaid long-term services and supports (LTSS) expenditures has shifted away from primary dependence on institutional care. In 2013 the majority of Medicaid LTSS spending was for the first time focused on home and community-based settings instead of institutional care, and the Centers for Medicare and Medicaid Services (CMS) projects that community-based spending will reach 63 percent of all Medicaid LTSS spending by 2020. However, the fundamental structure of the Medicaid statute continues to promote an ‘institutional bias’ that strongly limits the potential for true balance for beneficiaries.”

LTC Comment: This history of Medicaid’s rebalancing from principally institutional to mostly home and community-based care is worth reading, but take it with a grain of salt. There is no reliable evidence that rebalancing saves Medicaid money and one thing is for sure, the more Medicaid pays for home care that people want instead of nursing home care they’d rather avoid, the more people will seek Medicaid and the more its cost for LTC will increase. Be sure to note that while HCBS now consumes over half of Medicaid LTC expenditures overall, that’s not the case for elderly recipients for whom 71 percent of LTC expenditures still pay for institutional services.

Chapter 10: Medicaid

Medicaid is the 800-pound gorilla of LTC

KFF on LTC and Medicaid 1215 link to PDF of report

Report online: Here

12/15/2015, “Medicaid and Long-Term Services and Supports: A Primer,” by Erica L. Reaves and MaryBeth Musumeci, Kaiser Family Foundation

Quote: “Private long-term care insurance is typically inaccessible to all with current or future care needs often due to high premium prices. . . . Few individuals can afford to pay out-of-pocket for needed long-term services and supports, especially those living on fixed incomes with limited personal savings and assets. . . . People with long-term services and supports needs may qualify for Medicaid based solely on their low incomes or they may qualify at slightly higher incomes if they also meet disability-related functional criteria.” (Emphasis in the original.)

LTC Comment: This overview of Medicaid and long-term care is mostly accurate factually. The problem is interpretation of the facts based on ideological bias. That bias is revealed in the quotes above. In a nutshell: LTC is expensive so people can’t afford insurance for it and, therefore, government has to pay even for people with higher incomes. Try this instead: LTC is expensive so people would insure against its potentially catastrophic costs if it were not for government having co-opted the private insurance market by paying for most LTC for most people regardless of their financial wherewithal. See how the otherwise puzzling pieces fit together if you just look at the facts objectively?

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Updated, Monday, February 8, 2016, 11:00 AM (Pacific)

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LTC E-ALERT #16-006: LTC NEWS AND COMMENT

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

Genworth: 3 things for agents to know
Radio Interview with Former U.S. Comptroller General David Walker
Where dementia is most prevalent
Genworth suspends life insurance sales, plans restructuring
The 2 Big Misconceptions About Long-Term Care
Where You Live Matters
Analysis: Affordable senior housing becoming harder to find
Why Critical Illness Insurance Is Gaining Popularity
Aetna Overcomes Obamacare Losses As Medicaid, Medicare Lines Grow
Private Long Term Care Insurance Market Must Be Shored Up, Policy Center Argues
Why the Conventional Wisdom About Retirement Spending Is Wrong
Wealth-Protection Insurance People Neglect
Millionaires Get Obamacare Tax Credits. And It’s Completely Legal

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Updated, Friday, February 5, 2016, 10:16 AM (Pacific)

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LTC BULLET: THREE CHEERS (BUT TWO FROM THE BRONX) FOR NEW BPC-LTC RECOMMENDATIONS

LTC Comment: The Bipartisan Policy Center’s new report on long-term care leads with LTCI (hear, hear!), but makes Medicaid even more tempting (boo!) and adds a new, expensive, mandatory government program (boo!) based on faulty premises. Our analysis and critique follow.

LTC BULLET: THREE CHEERS (BUT TWO FROM THE BRONX) FOR NEW BPC-LTC RECOMMENDATIONS

LTC Comment: The Bipartisan Policy Center released “Initial Recommendations to Improve the Financing of Long-Term Care” this week to considerable live, web-based fanfare. The new report is the second deliverable in fulfillment of the BPC’s “Long-Term Care Initiative” launched in April 2014 with the publication of “America's Long-Term Care Crisis: Challenges in Financing and Delivery.” We summarized and criticized the BPC’s ambitious long-term care plans in “LTC Bullet: Will Bipartisan LTC Policy Be Better?,” Friday, April 11, 2014. Let’s apply a critical eye now to what they’ve come up with 22 months later.

What follows are quotes from and our comments on the BPC’s “Initial Recommendations to Improve the Financing of Long-Term Care.”

BPC Quote: “BPC’s Long-Term Care Initiative plans to produce a set of recommendations that weave together the approaches of publicly funded programs, such as Medicaid, with private insurance products, while also improving the efficiency and quality of LTSS.” (p. 4)

LTC Comment: A worthy goal, but the devil is in the details.

BPC Quote: “[S]ales of private LTCI continue to fall, largely because premiums are unaffordable and the traditional product design has proved to be unsustainable for carriers.” (p. 5)

LTC Comment: Wrong! Devilish detail #1: The real cause of falling LTCI sales is government fiscal and monetary interference in the market. Easy access to Medicaid after the insurable event occurs crowded out demand for private LTC insurance and the Federal Reserve’s zero-interest-rate policy (ZRP) made the product unprofitable, thus necessitating premium rate increases. Artificially low interest rates also reduced seniors’ incomes making it harder for them to afford LTCI premiums, a double whammy. Blaming the victim (LTCI carriers) instead of the culprit (bad government fiscal and monetary policy) for poor LTCI sales is incorrect and irresponsible.

BPC Quote: “BPC’s work over the last two years led us to conclude that the challenges to achieving consensus on long-term care financing are numerous. Among them: … Lack of awareness about the costs and risks of needing LTSS and the incorrect belief that Medicare or Medicaid will cover LTSS needs … Significant variation in the need for LTSS. For example, while more than half of Americans age 65 and over will need LTSS during their lifetimes, only 15 percent will have LTSS expenses exceeding $250,000 during their lifetimes.” (p. 5)

LTC Comment: False assumptions! Devilish detail #2: Erroneous foundational premises bode poorly for BPC’s conclusions. The “belief that Medicare or Medicaid will cover LTSS needs” is hardly incorrect. Those two public programs pay for most high LTC costs, whether the public realizes the fact or not. Variations in the need for LTC are hardly a “challenge”; they are precisely what makes private insurance a viable solution.

BPC Quote: “The Long-Term Care Initiative recommendations place a heightened focus on the role of the private market, outline improvements to public programs such as Medicaid, and consider the potential for catastrophic coverage.” (p. 5)

LTC Comment: OK, sounds reasonable, what exactly does BPC recommend?

BPC Quote: Recommendation: “Increasing the Availability and Affordability of Private Long-Term Care Insurance to Extend Existing Resources” including “establish a lower-cost, limited-benefit private LTCI product, called ‘retirement LTCI,’” for which “employees may use funds in retirement accounts to pay retirement LTCI premiums (early withdrawals would be penalty-free),” and “providing incentives for employers to offer retirement LTCI on an opt-out basis through workplace retirement plans and permitting the sale of retirement LTCI through state and federal insurance marketplaces.” (pps. 5-6)

LTC Comment: Well, hallelujah, now you’re talking! I think we have LTCI analyst/advocate Marc Cohen’s participation in the BPC project to thank for the ascendancy of private long-term care insurance in the report’s hierarchy of priorities. These are proposals LTCI carriers’ government affairs specialists have been advocating for decades. Unfortunately, designing a lower-cost LTCI product and getting expensive LTCI incentives passed will be very difficult, more likely impossible, unless and until the Devilish Details identified above are recognized and corrected. Affordable LTCI won’t happen as long as Medicaid LTC is easy to get, artificially low interest rates prevent profitability, and so-called experts believe Medicaid and Medicare do not pay for LTC.

BPC Quote: Recommendation: “Expanding Options at Home and in the Community for Older Americans and Individuals with Disabilities under Medicaid Under Medicaid” including “Create incentives for states to expand the availability of HCBS by: (1) combining existing Medicaid waiver and state plan amendments (SPAs) authorities into a single streamlined SPA; and (2) extending existing enhanced federal matching to encourage states to take advantage of the new streamlined authority.” (p. 6)

LTC Comment: Sounds great. Most seniors prefer home and community-based services (HCBS) to living in a nursing home and shouldn’t Medicaid give its “customers” what they want? Sure, but the presumed financial viability of expanding Medicaid HCBS depends on another erroneous assumption—Devilish Detail #3—that home care saves money. It does not. Home care delays but too often does not replace institutional care. Everywhere and everywhen Medicaid LTC expenditures for nursing home care and HCBS combined have increased rather than decreased year after year. That’s why Congress only dipped its toe into providing non-institutional Medicaid LTC services originally. It required formal waivers approved by the federal government which, ironically, limited HCBS to people who already need nursing home care and, as a cost-effectiveness guarantee, mandated that total costs could not exceed what expenditures would have been for purely institutional care. BPC’s belief that Medicaid can throw the doors wide open to HCBS without breaking the bank is as dangerous as it is naïve. The truth is that making Medicaid even more attractive and tempting will drive up costs and further crowd out private LTC financing alternatives.

BPC Quote: Recommendation: “Addressing the Needs of Americans with Significant LTSS Needs” including “For individuals with significant LTSS needs, pursue concepts and elements for a public insurance program to: (1) address uninsurable long-term care costs; (2) protect Americans from the catastrophic costs of LTSS; and (3) provide relief to states, which along with the federal government face significant Medicaid costs in the coming years as baby boomers begin to need LTSS.” (p. 6)

LTC Comment: Did you wonder why people with such an obvious bias for a government-program solution led with a nod to private LTC insurance? Now you have the answer. They think we really need a public LTC financing program to “address uninsurable long-term care costs.” But what LTC costs are uninsurable? Well most of them supposedly because BPC assumes private LTC insurance is severely limited by challenges they delineate, but which wouldn’t exist in the absence of government interference in the fiscal and monetary markets, as I explained above. (See Devilish Details 1, 2 and 3.) BPC wants to relegate LTC insurance to covering relatively small front-end LTC expenditures which would turn this genuine insurance product into a pseudo-insurance, pre-payment mechanism like Medigap. The true purpose of insurance is to replace the small risk of a catastrophic loss with the certainly of an affordable premium. By claiming the back-end, catastrophic costs of LTC for a new government program, these analysts relegate private LTC insurance to a permanent third class position and elevate the public program to a precarious fiscal pedestal from which, like its predecessors Social Security and Medicare, it will inevitably fall.

BPC Quote: Recommendation: “Program costs should be fully financed so as not to add to the federal deficit over the long-term.”

LTC Comment: This is the “have our cake and eat it too” portion of the BPC proposals. How exactly shall we pay for this big new back-end catastrophic LTC government program? For that you have to leave the “Executive Summary” and dig through the weeds of the report. Here’s what you’ll find:

BPC Quote: “A variety of financing approaches could be considered, including: A dedicated payroll-tax financing approach, similar to Social Security or Medicare Part A” or “A general-funding approach, which could be offset through changes to the tax system, such as broadening income or consumption-tax bases or increasing tax rates, changes to spending programs, such as adjustments to Medicare and Social Security, or a combination of both.” (pps. 22-23)

LTC Comment: Bottom line, if you start with the false premises (1) that people are spending down to impoverishment for long-term care because Medicaid and Medicare don’t pay for it, (2) that variations in LTC risk are a detriment to LTCI instead of its basis, and (3) that home and community-based services save Medicaid money, you’ll end up concluding that the only solution to the LTC financing crisis is to increase payroll taxes, income taxes, sales taxes, or most likely, all of the above.

Closing LTC Comment: We saw this upshot coming. Here’s how we closed our analysis and critique of the Bipartisan Policy Center’s original “Long-Term Care Initiative” mission statement (America's Long-Term Care Crisis: Challenges in Financing and Delivery) in LTC Bullet: Will Bipartisan LTC Policy Be Better?, Friday, April 11, 2014:

“The consensus coalescing around a long-term care financing solution is that some form of mandatory social insurance should supplement private LTC insurance. The dangers in that remedy are myriad. Do we really need another expensive entitlement program? What happens when Social Security cuts back so that people have less income to spend on LTC? What happens when Medicare reduces its generous provider reimbursements that currently enable LTC providers to survive despite Medicaid’s low payments? Wouldn’t more public financing of LTC only increase the public’s growing entitlement mentality? Don’t we need to start weaning people off dependency on government largesse? How long will it be before economic gravity takes hold again and government has to pay normal interest rates on its trillions of debt? What happens when the unfunded entitlement liabilities come due? It is nothing short of bizarre that serious people claim to study, diagnose, and prescribe about long-term care without taking these factors into account. It goes to show we’re not much closer to a real solution and that the new consensus coalescing is as much a danger as an opportunity.”

We see no reason to amend this judgment based on the Bipartisan Policy Center’s latest report. If anything, we’re more concerned than ever. We document our concerns in much greater detail in a new report soon to be published by Federalism in Action and the Center for Long-Term Care Reform titled “Cassandra’s Quandary: The Future of Long-Term Care in New Hampshire.” This report will show why the current long-term care service delivery and financing system in the USA in general and New Hampshire specifically is highly unlikely to survive the age wave. It will recommend viable solutions. Stay tuned.

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Updated, Monday, February 1, 2016, 10:16 AM (Pacific)

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LTC E-ALERT #16-005: LTC NEWS AND COMMENT