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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...

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Updated, Friday, April 18, 2014, 10:53 AM (Pacific)

Seattle—

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LTC BULLET:  INSPECT THIS PLANE

LTC Comment:  There are good and bad ideas in the LTC Think Tank’s remarkable “Land This Plane” report.  Which are which?  We’ll opine after the ***news.***

*** GOOD LTCI NEWS.  Center for LTC Reform Premium Member and clipping service subscriber Melissa “Missy” Vanderwaal of LTC Benefits in Indianapolis shared the following client letter that she received April 15 (slightly edited and names replaced with initials). 

Dear Missy,

In the Fall of 1999 you wrote a LTC policy for a 77 year old woman, my mother.  My sister and I decided to pay the premium for her by splitting the premium and each paying half.  Mother could not afford the premium but we looked into the future and decided LTC insurance was the best option for her and us.  In the Spring of 2011 mom was diagnosed with dementia (which she denies to this day) and she was placed in Assisted Living.  She remains in Assisted Living but we are beginning to consider the next step, Memory Care. 

But my point is this:  the LTC insurance you helped us choose has been a blessing.  We did not have to sell her home to afford her care.  The independence and stimulation she receives in Assisted Living is better than the fewer choices she would have had without LTC insurance.  Even though she has been using her benefits for 3 years, she still has a large amount of value left in her policy which eases our concern for her future care. (You helped us choose an Indiana Partnership plan).

So, I'm sure you get the gripes when things go wrong, but I wanted to remind you of the times when things go, oh, so right.  Don't know what we would have done without you and LTC insurance. 

P.S.  My sister and I are both retired now and our mother is 92.  Sis and I were both able to go to Florida for a few months this Winter.  How in the world would we have been able to go if we did not have confidence that our mother would be well taken care of while we were gone?

Thanks for helping us chose the right policy for mom,

Sincerely,

T. W. ***

LTC BULLET:  INSPECT THIS PLANE

LTC Comment:  Sponsored by the Society of Actuaries and prepared by John O’Leary, the LTC Think Tank recently published a report titled “Land This Plane:  A Delphi Research Study of Long-Term Care Financing Solutions.”  Read it here. 

Sticking with the aeronautical metaphor, every aircraft requires periodic inspection and maintenance.  We’ll have a look at this plane in today’s LTC Bullet.  Will it fly or should it be grounded?  Your feedback is welcome.

Let’s start with some background about the study from the report’s Executive Summary:

In January 2013, the Long-Term Care Think Tank launched a comprehensive study with the goal of articulating solutions to the nation’s long-term care (LTC) financing challenges. The project, called “Land This Plane,” was conducted by the Long-Term Care Think Tank, and sponsored and supported by two of the Society of Actuaries’ professional interest sections: the Long-Term Care Insurance (LTCI) Section and the Forecasting and Futurism Section. The Long-Term Care Think Tank was established in 2005. Its broad purpose was to provide a forum for a broad coalition of LTC experts from inside and outside the insurance industry to discuss the looming LTC financing crisis. The hope was that the group would research and discuss needed changes, and would publish solutions with broad public and private support.

I participated in the first phase of this project, but dropped out when it became too time consuming and seemed to be drifting toward some recommendations with which I preferred not to be associated.  Nevertheless, I think this was an exceptional effort and that all those associated with it should be congratulated and thanked for the professional time and effort they invested in it.  Kudos especially to Roger Loomis and Ron Hagelman.

What follows are brief excerpts from the “Land This Plane” report’s “Executive Summary” with our “LTC Comments” on each.

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Quote:  “A systemic overhaul of the LTC financing system is needed.  . . .  The overhaul needs to clarify, define, and structure today’s somewhat disjointed system of private and public funding options for the American consumer.”

LTC Comment:  LTC financing in the USA is a mess.  That’s for sure.  But we don’t need anyone or anything to “overhaul” it.  The very idea evokes what?  A deus ex machina, a Long-Term Care Czar, a five-year plan?  Rather we need to reduce government interference that has steered LTC financing off course.  Get Medicaid out of the business of funding LTC for the middle class and affluent.  Put home equity at risk for funding long-term care.  Stop crowding out private funding sources like reverse mortgages and private LTC insurance.  Return to sane fiscal policy (balanced budgets) and honest monetary policy (no Fed gaming interest rates).  Let the market work and it will solve most of the problems with LTC services and financing.  Stop doing what you’ve always done and you will get a different result.

Quote:  “Private insurance needs to be part of the financing solution.  . . .  Private insurance could provide a much-needed additional funding source for many people, but both the supply of and demand for private insurance need to increase. There was less consensus on exactly how to do this, but several ideas received positive consideration, including changes to regulations, new product designs, government incentives, public awareness campaigns, and changes to professional standards.”

LTC Comment: All are fine ideas but none will have much effect unless and until the government stops giving away what the LTCI industry is trying to sell to the very same middle class and affluent people to whom they’re trying to sell it.  Fix that and most of the rest of what’s needed will fall into place.

Quote:  “Social insurance is needed as part of the solution. The most surprising finding of the survey is the overwhelming degree to which the panelists agreed on the need for a social insurance component as part of the ultimate LTC financing solution.  . . .  Among the range of social product concepts evaluated by panelists and that emerged with strong support were a high-deductible, long-term care insurance concept to cover catastrophic situations, and a health savings account (HSA)-like LTC savings fund.”

LTC Comment:  Here we part company.  With Medicare and Social Security facing $66 trillion dollars of unfunded liabilities, the last thing we need is another social insurance entitlement.  That’s not to say there’s no role for public financing.  Medicaid could provide a very good LTC safety net for the truly needy if it stopped being the primary LTC funder for everyone.  By giving Medicaid back to the poor, enough money could be saved to pay market rates for quality care across the whole continuum of “long-term services and supports,” home care, assisted living and nursing homes. 

An HSA for LTC is a great idea.  So also is high-deductible LTC insurance, although not through a government program which would leave private insurance with only Medi-Gap-style products for the front end.  The purpose of insurance is to replace the small risk of a catastrophic loss with the certainty of an affordable premium.  Regulatory change should permit and encourage such products.

Quote:  “The government needs to take an active role in the LTC financial solution. Over 90 percent of panelists agreed on the need for the government to take an active role developing and implementing LTC financing solutions. Panelists consistently discussed the need for a logical, consistent, defined LTC system.”

LTC Comment:  Again with the central planning focus!  How’d that work out for the Soviet Union?  Has our government done such a fine job of managing the long-term care marketplace up to now that we should turn over more control to it?

Quote:  “Consumer education and tax incentives are critical to the solution. The study suggests that government’s active role should extend beyond designing the overall system to providing education, incentives and leading regulatory change that encourage planning-oriented behaviors.”

LTC Comment:  This constant plea for the past decade or more from the LTCI industry to the appropriators of government money has always fallen on deaf ears.  Hello!  No one’s listening.  Tax incentives and education programs are within reach, but only if you show legislators where to save the money to pay for them.  You can get the funds for positive incentives for responsible planning by increasing the disincentives against failing to plan.  In other words, give Medicaid back to the poor and use some of the savings to incentivize and educate consumers about private LTC financing alternatives.

Quote:  “The Medicaid program is overdue for a major reform. Panelists consistently and emphatically agreed that major changes are required to the Medicaid program as related to LTC. Those changes consisted of tightening eligibility for Medicaid so the program doesn’t allow people with significant assets to divest them to the benefit of heirs and still qualify for LTC reimbursement. Also, panelists felt that benefit restrictions need to be changed across all states/jurisdictions to enable Medicaid to pay for services in a full range of settings, including home and community care, if appropriate and cost-effective. . . .  Many panelists suggested that reforming Medicaid is the essential first step in the overall LTC system overhaul.”

LTC Comment:  OK, good, but it could be better.  First, divesting assets isn’t the big problem.  The big problem is that basic Medicaid LTC eligibility rules allow people with very high income and assets to qualify.  Start there, then eliminate the Medicaid annuity loophole, and finally tackle asset transfers.  Regarding the rebalancing from nursing home care to home and community-based care, states can do that now and many have, but it doesn’t save money.  The only way to enable Medicaid to pay for quality care in the most appropriate and most desired venues, including the home, is to have fewer people dependent on the program.

Quote:  “LTC regulations and legislation need substantial revision. Panelists were in strong agreement that regulations and legislation governing LTCI should be revisited and revised to consider consumer realities and needs. . . .  Panelists indicated a need for regulatory change that encourages simpler policies that are affordable and accessible to a broader population.”

LTC Comment:  I agree completely except that “simpler policies” should not limit consumers’ choices.  They should be able to buy whatever a carrier wants to offer, including high-deductible, catastrophic policies as well as more complicated policies that cover much more.

Quote:  “Incenting personal and family responsibility should be part of the solution. Panelists overwhelmingly indicated that a reformed LTC system should incent household and family participation in long-term caregiving situations. Comments from panelists suggested the use of innovative tax credits to encourage family- and community-based caregiving as a way to minimize formal services and keep costs under control.”

LTC Comment:  Again, who’s going to pony up for those costly tax credits?  What if paying caregivers reduces the free care on which the current Rube-Goldberg public financing system depends?  Has anyone considered the unintended consequences that current public policy causes and these new ideas may exacerbate?

Quote:  “Use of retirement savings accounts to fund LTC protection should be incentivized. Panelists overwhelmingly favored the idea of modifying federal tax rules to enable funds in tax-deferred savings accounts (401(k), 403(b) and IRA accounts) to be used on a tax-free and penalty-free basis to fund LTC protection products, including LTCI. Panelists agreed that tax incentives are an attractive way to encourage consumers to leverage existing savings mechanisms to protect against the costs of LTC.”

LTC Comment:  Great idea although unlikely because it would cost the government money that it doesn’t have and legislators would rather spend money they must borrow on things that bring more direct benefits, i.e. campaign contributions.  The first thing to do about tax-deferred savings accounts is to stop exempting them from Medicaid asset spend down limits.  That would save the government money, pump more private funding into the desperately under-financed service delivery system, and radically increase the public’s incentive to plan ahead for long-term care . . . in order to avoid having to spend their IRAs for care.

Quote:  “Improvements in LTCI products, marketing and sales are needed. Panelists agreed that the risks of needing LTC, the potential costs of LTC services, and the available LTC financing solutions need to be better communicated both overall and at the point of agent interaction with consumers. Life and health insurance agents and brokers as well as financial advisors need to include the risks, costs and LTC funding options in their consumer presentations.”

LTC Comment:  Agreed.  People who fully understand the downsides of “going bare” will buy LTC insurance if they can afford it.  The problem is that easy access to publicly financed care after the insurable event occurs has desensitized consumers and most of their financial advisors to the real risk and cost.  Hence most people don’t even talk to someone who can fully advise them.  That won’t change until the alleged catastrophic financial consequences of going bare become real. 

Closing LTC Comment:  I conclude this plane needs to go into the hanger for further inspection, but it is repairable.  Two suggestions. 

Number one:  Ask and answer the key question no one ever seems to pose.  That is, how did long-term care in the USA get so fouled up in the first place?  Answer:  Medicaid made nursing home care free, which created the institutional bias problem, crowded out a private home care market, and stifled the private insurance market leaving families unprotected financially and with a huge burden of “free care.”  There in a nutshell is the problem and a pointer to the solution.

Number two:  Don’t ask the government to “overhaul” the same dysfunctional “system” it created.  No mysterious third party is going to fix this mess either.  Central planning does not work.  Just get out of the way. 

Bottom line:  We don’t need an airliner with Uncle Sam at the controls.  We need a glider, unmanned and guided only by the invisible hand of market forces, consumers’ self-interests and free competitive enterprise.  That’ll fly.  And it’ll take us where we need to go.

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Updated, Monday, April 14, 2014, 11:10 AM (Pacific)

Seattle—

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SECOND WIND AND LTC NEWS AND COMMENT

LTC Comment:  Dr. Bill Thomas, the indomitable force behind the Eden Alternative and The Green House Project, has a new book out called Second Wind.  In it, according to a blurb by Jane Pauley, "Bill Thomas goes deep inside our culture. Like the best kind of doctor, he evaluates the toll our hurried, quantified, and driven lives have taken on us before he suggests a new way forward. He'll challenge the way you think about your future. And you'll want to make the journey with him." 

Speaking of journey’s, Dr. Thomas has taken his book and mission on the road in a “Second Wind Tour.”  He says:  “The Second Wind Tour will visit 25 cities in spring of 2014 and offer audiences powerful insights into slower, deeper, more connected ways of living and working.”  To find out when the tour will be in your city, get tickets, or become a sponsor, click here.  It’s a new age vision of aging from a long-term care revolutionary.

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4/13/2014, “Mistakes to Avoid When Shopping for Long-Term-Care Insurance: How to Pick the Best the Policy for Your Needs and What to Avoid [link],” by Anne Tergesen,” Wall Street Journal

Quote:  “Here are six mistakes consumers commonly make when purchasing long-term-care insurance, and advice on how to avoid these pitfalls.”

LTC Comment:  This is a relatively long and fairly good article.  As it’s in the Wall Street Journal, many across the country will see it.  Consider picking up a hard copy of the WSJ.

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4/11/2014, “Burwell has insurance ties: HHS nominee was a MetLife director,” by Allison Bell, BenefitsPRO

Quote:  "But Burwell, who has been director of the Office of Management and Budget since April 2013, also has ties to the insurance community: She was a director both of MetLife Inc. and of Metropolitan Life Insurance Company from early 2004 through early 2013." 

LTC Comment:  It’ll be interesting to see if Ms. Burwell’s background in private insurance affects her policy making at HHS if she’s confirmed.

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4/9/2014, “Finally, Modest Progress Toward Long-Term Care Financing Reform [link],” by Howard Gleckman, Forbes

Quote:  “For the first time in years, there is hope that the U.S. can create a new model to help families finance long-term supports and services.  The solution isn’t yet visible, and lawmakers won’t address the issue any time soon. But a wide range of private interests including long-term care providers, consumer groups, the insurance industry, and policy analysts seems to be moving toward a broad consensus on how to address this important and difficult issue.  And that solution is likely to include some mix of private insurance and a public safety net beyond Medicaid—the current government program that is the single biggest payer of long-term services and supports.”

LTC Comment:  It is true that long-term care policy is getting more attention all of a sudden.  Let’s hope policy makers abide by the medical rule:  “first do no harm.”  Of the three initiatives mentioned in this article, we’re covering two in LTC Bullets this Friday and next:  the Bipartisan Policy Center’s report and initiative tomorrow and the Society of Actuaries’ “Land This Plane” report the following week.  We promise you an objective, well-documented and enlightening perspective you won’t get elsewhere.

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4/9/2014, “Advising The Worry Generation:  Millennials, younger Americans continue to show more anxiety about common financial issues than older generations [link],” Life & Health Advisor

Quote:  "Younger Americans, including 'millennials' age 25-34, show the highest level of concern across all generations for common financial planning issues, including saving for retirement, paying for a child's education, and burdening others with final expenses." 

LTC Comment:  Maybe there's hope for the younger generation after all. 

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4/9/2014, “Caregivers need greater support, Harvard study says,” by Kathryn Roethel, SFGate

Quote:  “A Harvard report released last month provides statistics to back up what millions of Baby Boomers supporting aging parents already suspected. The vast majority of long-term care in the United States takes place at home, and 43.5 million friends and family members are the unpaid caregivers.  The report, published in the Journal of the American Medical Association, reveals that most caregivers are women and that the hours they spend assisting their loved one usually equates to a part-time job. As the U.S. population ages, the problem is likely to worsen because there will be fewer caregivers to go around.”

LTC Comment:  Evidence mounts of growing age wave impact on caregiving.

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4/8/2014, “Avoiding the Nursing Home Ups The Risk of Unwanted Medical Care [link],” by Linda Poon, National Public Radio  

Quote:  "Most older people suffer from cognitive impairment or dementia in the year before death, making it more likely that they will get aggressive medical treatments that they don't want.  And people with dementia who are cared for at home are more likely to get unwanted treatment than if they are in a nursing home, a study finds." 

LTC Comment:  Unintended consequences of a generous and inadequately monitored Medicare home health system.

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4/8/2014, “Think Tank to Recommend Long-Term Care Solutions,” by Steve Teske, Bloomberg BNA

Quote:  “The Bipartisan Policy Center April 7 said it will publish recommendations by the end of the year for transforming the way long-term care is delivered and financed. The think tank released a white paper that said the number of Americans estimated to need long-term care services is expected to more than double, from 12 million in 2010 to 27 million in 2050.”

LTC Comment:  I wrote about this initiative and critiqued its white paper in Friday’s “LTC Bullet:  Will Bipartisan LTC Policy Be Better?”

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4/8/2014, “ It takes villages: Boomers' new retirement communities,”  by Mark Miller, Reuters

Quote:  "Villages and house sharing are growing the most rapidly. The village movement started in 2001, and 125 have opened around the country, with another 100 more in the planning stage. It's a 'neighbors helping neighbors' approach, with the aim of providing support and friendship to people who want to age in their homes. They rely on a mix of paid staff and volunteers who help members with everything from transportation to computer know-how and grocery shopping. They're really great - they provide support and friendship to people who want to age in their homes, although most have been started in upper-income or upper-middle income neighborhoods." 

LTC Comment:  The LTC service delivery system continues to evolve.  Will LTCI cover “villages” as it came to cover assisted living over time?

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4/8/2014, “Skilled nursing facilities could lose big money if they don't hire a managed care coordinator, expert says [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "Skilled nursing facilities stand to lose substantial sums of money as they increasingly do business with managed care plans, unless a coordinator is on top of exclusions and other contract elements, a prominent healthcare consultant told an audience Monday at the American College of Health Care Administrators annual meeting."  

LTC Comment:  Medicaid's move to managed care for frail and infirm elderly recipients--even the extremely vulnerable dual eligibles in some states--will further exacerbate challenges skilled nursing facilities face as they try to provide quality care despite low, and getting lower, Medicaid reimbursement rates. 

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4/7/2014, “U.S. government rolls back proposed Medicare Advantage cut,” by Caroline Humer and David Morgan, Reuters

Quote:  "The Obama administration on Monday rolled back some of the more controversial cuts proposed for privately managed Medicare health plans used by the elderly following pressure from insurance companies and lawmakers.  The Centers for Medicare and Medicaid Services (CMS) said that on average, reimbursement for such Medicare Advantage plans in 2015 would rise 0.4 percent, reversing what is said was a 1.9 percent average reduction proposed in February."

LTC Comment:  Go figure!  These cuts were hanging over the head of the Medicare Advantage industry for months, and then "poof," gone.  A good thing, but it looks like health policy is being decided with a public-opinion wind sock. 

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4/7/2014, “America's Ponzi scheme: Why Social Security needs to retire,” by Laurence Kotlikoff,  PBS News Hour

Quote:  "Resolving Social Security's insolvency requires either an immediate and permanent 32 percent increase in payroll taxes or an immediate and permanent 22 percent cut in all Social Security benefits. Detroit, in contrast, needs to cut pension benefits by roughly 16 percent on a system-wide basis." 

LTC Comment:  At the risk of belaboring this subject, this is one of the best articles I've read about it.

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4/7/2014, “Expensive Markets for Long-Term Care Coverage,” Fort Mill Times

Quote:  "Statistics show that the need for and cost of long-term care are both increasing. In fact, according to the results of an independent study commissioned by New York Life's Long-Term Care Operations, the average cost for nursing home care in the U.S. has climbed significantly in the past five years, up 20% to $95,706 per year from $79,935 in 2009." 

LTC Comment:  Genworth's annual cost of care survey recently estimated the cost of a private nursing home room as $240 per day which aggregates to $87,600 per year.  Now New York Life reports $95,706 or $262 per day.  Who's right?  We’ve asked folks at Univita who did the study for New York Life for an answer.

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4/7/2014, “Do preventive home visits work? The largest and most comprehensive review of trials on home visits is inconclusive on their benefits [link],” by Evan Mayo-Wilson, Sean Grant and Paul Montgomery, The Guardian   

Quote:  "On average, these programmes did not reduce hospitalisation, long-term care or mortality. That is, there were no consistent differences between older adults receiving home visits and those who did not."

LTC Comment:  More evidence (from the UK) that home and community-based services will not be the end all and be all for long-term care savings. 

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4/7/2014, “The Government Debt Iceberg,” by Jagadeesh Gokhale, Cato Institute

Quote:  “In The Government Debt Iceberg, Jagadeesh Gokhale reveals the extent to which western governments are keeping taxpayers in the dark about true levels of debt by hiding the magnitude of future spending commitments that cannot be met by future tax receipts.”

LTC Comment:  A good read by an excellent scholar.

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4/4/2014, “Medicaid, CHIP enrollment soars in February,” by Jayne O'Donnell, USA Today

Quote:  “Nearly 3 million people enrolled in Medicaid or the Children's Health Insurance Program in February, an increase probably spurred by the Affordable Care Act deadline of March 31 and improvements in state and federal insurance exchanges. . . .  Opponents of Medicaid expansion say states won't be able to afford it once the federal government isn't paying the whole bill and that expanding a program that even President Obama has called ‘a broken system’ is not the best approach. Many doctors refuse to treat Medicaid patients because they receive very low reimbursement for their services.”

LTC Comment:  Watch for much more reporting like this in the national media.

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Updated, Friday, April 11, 2014, 1:17 PM (Pacific)

Seattle—

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LTC BULLET:  WILL BIPARTISAN LTC POLICY BE BETTER?

LTC Comment:  Heads up!  Consensus is coalescing around a bipartisan long-term care financing solution.  Let’s be hopeful, but wary after the ***news.***

*** LAND THIS PLANE, the LTC research project undertaken by the Society of Actuaries, has issued its final report titled “Land this Plane: A Delphi Research Study of Long-Term Care Financing Solutions.”  Read it here.  We’ll take a closer look and provide our analysis and comments in next week’s LTC Bullet, or soon.  Congratulations to Roger Loomis and Ron Hagelman, the out-going co-chairs of the Long-Term Care Think Tank who brought this study to fruition, and good luck to Vince Bodnar and John O’Leary, the incoming Think Tank co-chairs. ***

*** 2014 LTC SALES SUMMIT - FREE LIVE STREAMING VIDEO.  Jesse Slome of the American Long-Term Care Insurance Association reports that “the deadline to sign up approaches!  For the first time, you can watch sessions streamed live from the 2014 National Long Term Care Solutions Sales Summit.  It's all completely free. No special equipment required. You can watch on your computer or tablet.  Pre-register to receive the secure website access.  Click here.  The conference will feature top industry producers and experts, including the CEOs of five leading insurers.  You can watch as little or as much of the conference as you like. Sessions will be broadcast live on Sunday, May 18, Monday May 19 and Tuesday, May 20. (This is not a webinar. It's a live broadcast from a national sales conference.)”

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LTC BULLET:  WILL BIPARTISAN LTC POLICY BE BETTER?

LTC Comment:  Long-term care is back on the public policy radar screen.  The CLASS Act fiasco got people thinking.  Last year’s LTC Commission crystalized the issues.  Think tanks are doing programs with panels of long-term care experts.  Studies, reports and scholarly monographs emerge in greater numbers.  Articles in the popular media abound warning of catastrophic long-term care risk.  Now, here’s the very latest:

The Bipartisan Policy Center (BPC) has taken on the challenge of fixing long-term care services and financing.  The BPC launched its “long-term care initiative” last Monday with an event in Washington, DC and a white paper titled “America's Long-Term Care Crisis: Challenges in Financing and Delivery.”  Watch the event here and read the white paper here.  But I’ve already done both so let me save you some time and effort. 

Skip all the introductory remarks by the program’s sponsors, two former Senators, a former CBO director and a former Governor and HHS Secretary.  You’ve heard it all before and these folks bring little to the conversation beyond their prestige.  Go directly to the panel of experts.  That’s worth watching.  Note especially these presentations:

Anne Tumlinson, founder and director of Avalere, is one of the more thoughtful long-term care analysts.  She observes that 1/3 of all payments for assisted living in this country are actually made by adult children who are also buying geriatric case management services, private duty nursing, and home care aides to help their ailing parents.  But none of this spending shows up in the national health expenditure accounts that most analysts use to estimate the cost of long-term care.  Tumlinson also observes that Medicaid is actually spending less on LTC as a percent of total expenditures today than in the past 20 years.  Hence, relative to the exploding number of people who will need long-term care, there will be fewer public dollars to go around.  She concludes that voluntary insurance will not work and that some form of mandatory social insurance is unavoidable.  Her observation that “the people who would be helped by private LTC insurance are not the people who spend down to Medicaid” is wrong as we’ll explain.

Marc Cohen of LifePlans always does a fine job of laying out the statistical parameters of the long-term care financing issue.  He says, for example, that the expected cost of long-term care would account for about 31% of the net worth of households aged 65 to 74.  Yet most people don’t worry or plan for long-term care:  “If you don’t perceive there is a problem, why would you do anything about solving it?,” he asks.  “What would it take to move the needle of public awareness and planning?  My own sense,” Cohen says, “is that we can’t fund care for middle class Americans without expanded public sector support to spur demand and supply.  We need to think through new models that go beyond current Partnerships to combine public and private funding.”  In other words, he agrees with Tumlinson that it will take more than Medicaid and private insurance to solve the problem. 

Tom McInerney of Genworth and Diane Rowland of the Kaiser Family Foundation also presented on this panel.  McInerney’s main points were that the government is broke, can’t fund what’s needed and private insurance could do much more with a better regulatory environment.  Dr. Rowland made her usual appeal for a bigger government role in long-term care financing.  As always she pooh-poohed the impact of Medicaid asset transfers but failed to acknowledge the far greater impact of easy Medicaid eligibility and other forms of Medicaid planning.

Let’s turn now to the Bipartisan Policy Center’s white paper:  “America's Long-Term Care Crisis: Challenges in Financing and Delivery.”  It does a good job of laying out the issues and data, but not without some errors, omissions and misunderstandings.

First a pet peeve.  Throughout, this paper refers to “long-term services and supports” or LTSS instead of “long-term care.”  That awkward locution is the current politically correct term of art.  It evolved to emphasize the need for home and community-based care to replace nursing homes, the venue which had become synonymous with long-term care.  The irony is that Medicaid, i.e. public LTC financing, is responsible for the long-term care system’s nursing home bias.  If Medicaid hadn’t paid for nursing home care after the insurable event occurs for most Americans, including the middle class, since 1965, we would have had a healthy private home-care-based service delivery system funded largely by personal savings, home equity conversion and private long-term care insurance.  So the very people who caused the problem of institutional bias by demanding more and more government interference in the long-term care market are the same people corrupting the language with “LTSS” and denigrating the honorable appellation “LTC.”

Some quotes from the BPC report follow with our “LTC Comments.”  We’ve omitted footnotes in the quotes below, but you can find them in the published report here.

Quote:  “In this paper, BPC seeks to: (1) identify the most pressing problems associated with the current system of providing LTSS in the United States; (2) identify the barriers to finding a sustainable means of financing and delivering LTSS; and (3) outline some of the more critical policy questions that will guide BPC's work in the coming months.” (p. 6)

LTC Comment:  Note that the Bipartisan Policy Center’s approach does not include an attempt to analyze, understand, or explain what caused long-term care’s problems.  That is a fatal omission.  If you don’t know why you have a problem, you run the risk of making it worse by applying the same remedy that caused the problem in the first place.  For example, if government financing of long-term care through Medicaid caused institutional bias, crowded out private financing alternatives, and contributed to poor care by providing inadequate funding, then it is folly to expect more government financing to fix those problems.

Quote:  “While some may believe that a true social insurance option financed through a broad-based tax, similar to the Medicare program, may be the most efficient and equitable means of financing LTSS, the current political and fiscal environment make that solution infeasible for the foreseeable future.”  (p. 9)

LTC Comment:  It is easy to discern the ideological bias in this “bipartisan” report.  But it is encouraging to see that even die-hard advocates of socialized long-term care are finally acknowledging economic and political reality.

Quote:  “No one would argue that the private long-term care insurance (LTCI) market, as currently structured, is a viable solution to address the needs of the diverse population in need of LTSS.”  (p. 11)

LTC Comment:  Whose fault is that?  Medicaid crowds out most of the market for private LTC insurance and the Federal Reserve ruined the product’s financial viability by artificially forcing interest rates to nothing.  The miracle is that private insurance does as good a job as it does do protecting consumers and developing new products in spite of the daunting obstacles imposed by counterproductive public policy.

Quote:  “Medicare does not cover long-term services and supports. Benefits are limited to acute care health services-including, among other acute services, hospital stays, post-acute care, and physician visits-and prescription drugs for the elderly and certain individuals with disabilities.”  (p. 18)

LTC Comment:  Leaving Medicare out of the computation of long-term care expenditures is bad reasoning and naïve.  Duration of care is not the key factor.  Medicare has a huge impact on long-term care because its generous reimbursements to nursing homes and home health agencies help to counterbalance Medicaid’s paying less than the cost of care for the vast majority of their residents and patients.  If and when Medicare cuts back on its reimbursement to long-term care providers, as the program’s desperate financial condition suggests it will have to do, the financial bottom will fall out of the main source of long-term care spending, i.e., Medicaid.  That will devastate state budgets, the nursing home business, and home care providers who rely on Medicaid.

Quote:  “Medicaid is the primary LTSS payer, generating two-thirds or more of the total payments for LTSS. In 2011, the CMS Office of the Actuary estimated Medicaid LTSS spending at $114 billion, while an analysis by Mathematica Policy Research arrived at an estimate of $136 billion. LTSS accounts for at least one-quarter, and possibly almost a third, of total Medicaid spending ($432 billion in 2011); however, only a small fraction (6.7 percent or 4.2 million in 2009) of Medicaid beneficiaries received LTSS and/or post-acute care.” (p. 19)

LTC Comment:  Yes, Medicaid is the 800 pound gorilla of long-term care and, to stick with the animal metaphor, LTC is the elephant in the room when it comes to Medicaid expenditures.  So job number one should be to understand why Medicaid dominates LTC financing, why the public ignores LTC risk and cost despite being educated that it will devastate them financially, and why private LTC financing is so limited and focused on desirable services that government does not provide, such as most assisted living.  Again, if you don’t know why you have these problems, you run the risk of applying more of the “remedy” that caused them in the first place.

Quote:  “When an individual has too much income to qualify for Medicaid under the SSI pathway, but faces catastrophic LTSS and health care costs that he or she cannot meet, it is possible to qualify for Medicaid through a ‘spend down’ process. Most individuals over the age of 65 who qualify for Medicaid do so by spending down.  The details of this process vary by state, but individuals typically must exhaust almost all of their savings (an exception allows Medicaid beneficiaries to keep a home, within certain limits) and spend a substantial portion of their income on health care and LTSS expenses before they can qualify.” (p. 19)  

LTC Comment:  The ignorance of most “experts” about Medicaid financial eligibility rules and policy simply astounds.  People do not have to “exhaust almost all of their savings” to get Medicaid LTC.  They can hide them in exempt assets, including a home, business or car.  They can buy unlimited term life insurance.  They can use Medicaid friendly annuities.  Their individual retirement accounts are exempt as long as they’re generating a regular distribution as is required by tax law after age 70 and a half.  “Mandatory” estate recovery is easy to dodge.

Nor do people have to “spend a substantial portion of their income on health care and LTSS expenses before they can qualify.”  There is no such requirement.  People can spend their income and assets on anything they want in order to “spend down” to Medicaid eligibility.  Elder law journals have recommended taking a world cruise, throwing a party of “Ziegfield Follies” proportion or simply purchasing assets that Medicaid does not count.  The only requirement is that you get value for what you spend, not that you spend on health or long-term care. 

Income rarely obstructs Medicaid LTC eligibility because private health and LTC expenses are deducted before income eligibility is computed in most states.  In the other “income cap” states, Miller income diversion trusts enable higher income people to qualify.  It is true that once someone is on Medicaid, he or she must contribute most of their income to offset Medicaid’s cost for their care.  But at that point, the damage has been done.  The person is on public assistance, probably in an underfinanced  nursing home, and Medicaid is paying for someone who could, should and would have paid their own way, at least for a time, if it were not for the perverse incentives in Medicaid eligibility rules that discourage responsible LTC planning.

Quote:  “Because a small number of people will have substantial needs that are unlikely to be met solely through personal savings, insurance would seem to be an ideal mechanism to finance these needs. Yet, the private LTCI market has struggled in recent years and currently plays a minor role in the financing of LTSS. After several years of strong growth in private LTCI coverage in the late 1990s and early 2000s, the number of insured lives has been virtually unchanged since 2005, and sales of individual-market policies have dropped by two-thirds from their peak in 2002. Growth has focused on the group market, while the individual market (two-thirds of the total) has declined. About 8.2 million lives are covered by private LTCI, representing fewer than 6 percent of Americans over the age of 40. Of those over 65 with annual incomes above $20,000, only 16 percent carry private LTCI. In 2012, LTCI policyholders paid more than $11 billion in premiums. Cash payments to policyholders (or LTSS providers) from private LTCI claims totaled about $7 billion in 2012,73 funding less than 5 percent of total spending on LTSS.” (p. 20-21)

LTC Comment:  I draw the exact opposite conclusion from these statistics.  It is amazing, approaching miraculous, that private long-term care insurance has done so much for so many in spite of the terrible obstacles put in its way by public policy.  Try this thought experiment:  if government did not pay for most expensive LTC after care is needed unless and until people became truly impoverished, having consumed all their savings, property and home equity, do you really think long-term care insurance would still play “a minor role in the financing of LTSS?”  And if you dream up yet another government funding source for long-term care, do you really think consumers will become more responsible about saving, investing and insuring for long-term care?  Think about it and you will understand why proposals to increase government financing of LTC may, and likely will, exacerbate rather than ameliorate these problems.

Quote:  “Even without adverse selection, it is not clear that consumer demand for private LTCI would be strong. Most Americans are not especially interested in or motivated to purchase private LTCI. Many do not plan for LTSS costs, and, as noted above, 65 percent of Americans over 40 have done little to no planning for any sort of living expenses for when they are older. Many think that they won't need LTSS (70 percent of those over 65 will need some LTSS, whether paid or unpaid, but just over half say that they are at risk of needing LTSS), and most of those who do realize they are at risk of needing LTSS think that someone else will bear the cost.”  (p. 23)

LTC Comment:  Consumers’ denial of LTC risk is rational and excusable, because most expensive LTC gets paid for by the government in the end.  People don’t know who pays, but they know someone must.  You don’t see Alzheimer’s patients dying in the gutters.  On the other hand, LTC analysts’ evasion of the facts about public financing of long-term care is neither rational nor excusable.  It is grounded in ideological bias and fact avoidance.  “None so blind as those who will not see.”

Quote:  “The National Retirement Risk Index, which incorporates factors other than retirement accounts (such as home equity and Social Security) into an assessment of national retirement preparedness, estimates that 53 percent of households are at risk of not being able to maintain their standard of living when they are no longer working.”  (p. 24)

LTC Comment:  That means 47 percent of households may be all right financially if you count home equity.  Yet the BPC report barely mentions home equity as a source of LTC financing.  Eliminate or severely reduce Medicaid’s home equity exemption and a flood of private dollars from reverse mortgages would revive the home and community based care, assisted living and nursing home markets making more choices and better care available to everyone, including those who remain dependent on Medicaid.

Quote:  “Private spending on LTSS is even more difficult to estimate than public spending. The NHPF [National Health Policy Forum] analysis of NHEA [National Health Expenditure Accounts] data shows a total of almost $70 billion out-of-pocket and other private (including insurance) spending on LTSS in 2011 (not including assisted living), but this figure includes a substantial amount of PAC [post-acute care] spending. Additionally, some spending that originated from private LTCI is reported as out-of-pocket because it is common for LTCI to pay policyholders directly, who then in turn pay LTSS providers. This figure also leaves out spending on assisted living, and probably does not include a substantial amount of graymarket home care, but it likely includes all nursing-home out-of-pocket spending, which is the most expensive form of LTSS. Because we have no sense of how much of the $70 billion figure is for out-of-pocket and health insurance payments for PAC, the true out-of-pocket LTSS spending figure (not including assisted living) is likely somewhere well above zero and well below $70 billion. Hence, a precise estimate is not possible; the best we can say is that tens of billions are likely spent out-of-pocket on LTSS annually, excluding assisted living.

“The situation is different for private LTCI. While LTCI issuers do not report the exact amount of cash paid to policyholders and LTSS providers each year based on claims, the data available can be used to estimate annual cash payments from claims. At the request of BPC, LifePlans reviewed data collected by the National Association of Insurance Commissioners and estimated that private LTCI paid out about $7 billion on claims in 2012.” (p. 27)

LTC Comment:  Two points about these tightly packed paragraphs.  The observation that “some spending that originated from private LTCI is reported as out-of-pocket because it is common for LTCI to pay policyholders directly, who then in turn pay LTSS providers” is one we often make, but I have not seen it in other published work before.  It is critical.  Out-of-pocket LTC spending, we call it “oops,” is much lower than is usually reported.  That’s why consumers ignore the “catastrophic spend down” warnings that permeate media coverage and ostensibly scholarly publications.

Secondly, a very substantial part of out-of-pocket spending for long-term care is really the contribution from income to their cost of care that Medicaid recipients are required to make.  That out-of-pocket expenditure does not come from assets, but rather from income and mostly from Social Security income.  As much as half of all out-of-pocket LTC spending comes from Social Security income of people already on Medicaid which income is diverted to reduce Medicaid LTC expenditures.  Why does this matter?  Social Security is financially unstable, already collects less in payroll deductions than it spends, relies on a phony trust fund that the rest of government has already spent, and will pay 24% less in the future than it has promised unless fixed, which is unlikely.  If and when Social Security cuts back, Medicaid nursing home recipients won’t care because they have to contribute nearly all their benefits to offset Medicaid expenses anyway.  But state Medicaid programs, nursing homes and home health agencies will have to make up the difference and that will devastate them financially.

Closing LTC Comment:  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.

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Updated, Monday, April 7, 2014, 10:25 AM (Pacific)

Seattle—

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BIPARTISAN POLICY CENTER EVENT AND LTC NEWS AND COMMENT

LTC Comment:  The Bipartisan Policy Center (BPC) Health Project's Long-Term Care Initiative (LTCI) will release a white paper today at 1:00PM EDT identifying the major challenges to the financing and delivery of long-term care for seniors and individuals with disabilities under 65.  A final report of LTC policy recommendations will be released in late 2014.  The initiative is co-chaired by former Senate Majority Leaders Tom Daschle and Bill Frist, former Wisconsin Governor and HHS Secretary Tommy Thompson and former White House and Congressional Budget Office Director Dr. Alice Rivlin. Co-chairs will make introductory remarks and a panel discussion on the topic will follow with national experts in the field.  You can watch the live webcast of the event starting at 1:00PM ET here.

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4/5/2014, “Long-term care insurance is a difficult decision,” by Chris Farrell, Star Tribune

Quote:  "Without insurance you and your family are largely on your own meeting these costs. Medicare doesn't pay the tab for most long-term care charges. Medicaid, the joint federal/state safety net, is the main public program for long-term care. However, Medicaid is a 'means-tested' program geared toward low-income households. The greater your financial resources, the more purchasing long-term care insurance is a sensible precaution. Put it this way: If you can easily afford the premium payments then go ahead and get it and hope you never have to tap the policy." 

LTC Comment:  Good advice although the presumption that Medicaid is only for “low-income” households is untrue.  Income rarely excludes people from Medicaid LTC eligibility.

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4/3/2014, “LTCI is worth it: Opinion,” by Louis H. Brownstone, LifeHealthPRO

Quote:  "Getting LTCI coverage for half of what, from an actuarial perspective, the coverage ought to cost is like buying a $30,000 car and paying on a $16,000 loan for half of the loan period. What a deal!"

LTC Comment:  Center corporate member Louis Brownstone opines in this article on how to respond to clients' complaints about premium increases. 

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4/3/2014, “Guide to Funding Long-term Care,” by FTAdviser

Quote:  "Most shocking for many is to realise for the first time that they are expected to pick up the bill for their own care where the state deems they can afford to do so and the costs can run into many tens of thousands of pounds each year. . . .  This guide explores self-funding requirements for long-term care, the different products that offer to pay for that support in 2014 and regulatory requirements for these deals." 

LTC Comment:  Ever wonder how the Brits do it?  This "guide" includes several articles on long-term care financing in the UK. 

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4/3/2014, “How to win the long-term-care insurance game,” by Elizabeth O'Brien's, WSJ MarketWatch

Quote:  "The long-term care insurance industry has seen its share of challenges in recent years, generating no shortage of negative headlines. But while such coverage isn't for everybody, almost anyone planning for retirement ought to carefully consider whether they might need it-after all, burying our heads in the sand about our future care needs is hardly a good alternative." 

LTC Comment:  Hackneyed but true, “denial is not a river in Egypt.”

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4/3/2014, “The RAND Military Caregivers Study,” by Rajeev Ramchand and Terri Tanielian, Rand Corporation

Quote:  “The RAND Military Caregivers Study focuses on the caregivers of wounded, ill, and injured military service members and veterans. Funded by the Elizabeth Dole Foundation, the study aims to quantify military caregivers' needs and examine existing policies and programs for meeting them. . . .

“There are 5.5 million military caregivers across the United States, with nearly 20 percent caring for someone who served since the terrorist attacks of Sept. 11, 2001. Military caregivers experience more health problems, face greater strains in family relationships, and have more workplace issues than noncaregivers. Changes are needed to both provide assistance to caregivers and to help them make plans for the future.”

LTC Comment:  Tragic long-term (care) consequences of war.

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4/3/2014, “Today's Estate Planning Strategies: How to use ILIT-owned UL with an indemnity LTCi rider [link],” by Russell E. Towers, Life & Health Advisor

Quote:  "A popular new product that has aroused the interest of many estate planners is a Guaranteed No-Lapse UL Policy with an ‘Indemnity’ Type of Long Term Care (LTC) Rider. This type of policy would typically be owned by an Irrevocable Life Insurance Trust (ILIT) to provide an income and estate-tax-free death benefit. And the ‘indemnity’ LTC rider would be available to provide potential LTC benefit payments to the ILIT to offset extended care medical costs of the insured estate owner." 

LTC Comment:  All these acronyms and complexity make a layman almost feel ILITerate.

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4/3/2014, “Median cost of a private nursing home room now exceeds $87,000 a year, Genworth survey finds [link],” by Tim Mullaney, McKnight's LTC News

Quote:  “The median annual cost of a private nursing home room in the United States has increased to $87,600, according to the latest annual survey from insurance company Genworth. This represents a 4.4% increase from a year ago.  The median price for a semi-private nursing home room increased by 2.62%, reaching $77,380 a year, according to the report.  The cost of nursing care surged more dramatically than the cost of assisted living, which ticked up 1.45% since Genworth's last report. The monthly median rate for assisted living now is at $3,500, according to the latest figures. . . .  Click here to access the 2014 report.”

LTC Comment:  Homemaker services surged 4.11% to $19 per hour, a 1.20% five year growth rate.  Home health aide services were up 1.59% and 1.32% per year for the past five years.  As always, we’ve posted the Genworth report in The Zone, the Center’s special compendium of key data and information for members.

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4/1/2014, “Connecticut blocks MetLife LTCI rate hikes,” by Allison Bell, LifeHealthPRO

Quote:  "The Connecticut Department of Insurance has rejected 13 individual long-term care insurance (LTCI) rate increase applications filed by MetLife Insurance Company of Connecticut."

LTC Comment:  Penny wise, pound foolish. 

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4/2/2014, “Assembly Hearing Examines Latinos' Unpreparedness for Long-Term Care [link],” by David Gorn, California Healthline

Quote:  "An Assembly [lower house of California state legislature] committee hearing yesterday highlighted the lack of preparedness in the Latino community for long-term care of family members  and the large number of families who likely will need help paying for it.  . . .  According to a 2012 poll by the SCAN Foundation, 60% of all Latino families in California will need long-term care for a family member in the next five years. Among Latino respondents, 91% said they could not afford three months of nursing home care." 

LTC Comment:  In the meantime, California’s Latino population continues to grow as the state’s ability to generate revenue to fund its main LTC payer—Medicaid—constricts.

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4/1/2014, “Huge Opportunity for Assisted Living to Retool for Short-Term Patients [link],” by Alyssa Gerace, Senior Housing News  

Quote:  “Assisted living providers looking for ways to grab a piece of the post-acute care pie and simultaneously improve occupancy are exploring short-term care models that function as a private-pay bridge from hospital to home.  In the skilled nursing industry, the split between the short-term, Medicare-reimbursed and long-term, Medicaid-reimbursed models is growing. As healthcare reform puts greater emphasis on the healthcare continuum and post-acute care, a similar split may start to occur in assisted living as well.”

LTC Comment:  As Medicare and Medicaid dodge responsibility to cut costs by pushing people into private-pay assisted living, LTC insurance will be more valuable to consumers than ever.

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3/31/2014, “Government-Sponsored Healthcare Shifts To ‘Survival Of The Fittest [link],’" by Sundar Subramanian and Joyjit Saha Choudhury, Forbes 

Quote:  "As baby boomers retire, the number of people eligible for Medicare is expected to grow by some 3 percent a year, and we think growth will slightly exceed that rate. That's only half the story though. Given current constraints in the market, we expect that many unfocused and low-quality plans will either be acquired or exit the MA business, particularly small and mid-size payors. The emerging winners-those that gobble up the membership of the exiting plans-will fall into two categories: (1) larger players that can leverage their scale as an antidote to smaller margins, and (2) regional plans that have deep local provider relationships, which can give them a significant cost advantage in both medical care and administration." 

LTC Comment:  Maybe, but if true to past form, government will continue to clamp down on reimbursements and increase regulation until even the fittest will be challenged to survive.

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3/31/2014, “Leadership and execution: Keys to culture change,” by Chris Perna,  McKnight's LTC News 

Quote:  “The transformation of an organization's culture to person-directed care is really hard work. Culture change may sound like a simple concept, but it isn't necessarily easy to do. It takes strong leadership to guide an organization through the transformation process. It takes time, energy, resources, and requires a strong focus on follow-through. Leaders need a combination of patience and tenacity to pull it off.  If these realities are underestimated, the journey will likely lead to failure.” 

LTC Comment:  Remember Chris Perna who used to run MedAmerica?  He left a few years ago to direct the Eden Alternative, Dr. Bill Thomas's movement to bring person-centered care to long-term care facilities.  Chris writes about that challenge in this “guest column” for McKnight's. 

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3/31/2014, “States may tighten ancillary product rules,” by Allison Bell, BenefitsPRO

Quote:  "Some insurance regulators want to tighten the state laws and regulations that apply to health insurance products other than major medical products.  The regulators hope to update the standards that apply to critical illness insurance, hospital indemnity insurance, short-term medical insurance, dental insurance, vision plans and other products that fall outside the scope of most or all of the Patient Protection and Affordable Care Act major medical coverage rules." 

LTC Comment:  Heads up!  Here come the regulators.

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3/31/2014, “How 'eBaby Boomers' are finding extra cash in their closets,” by Michael De Groote, Deseret News

Quote:    "A growing number of baby boomers are making money by taking a lifetime of possessions and selling them online."  

LTC Comment:  This story reminded me of the old TV ad with seniors shaking the couch cushions in search for change to pay for long-term care.  What company ran that ad? 

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3/31/2014, “LifeSecure Insurance Company Names New President and CEO [link],” press release, PR Newswire

Quote:  “LifeSecure Insurance Company, today announced the appointment of Tiffany Albert as president and CEO. The move follows the retirement of Lisa Wendt, who previously held the same position.”

LTC Comment:  Our best wishes to Ms. Wendt in her future pursuits.

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3/24/2014, “The Private Cost of Public Queues for Medically Necessary Care: 2014 Edition [link],” by Nadeem Esmail, Fraser Institute   

Quote:  "The estimated cost of waiting for care in Canada for patients who were in the queue in 2013 was $1.1 billion-an average of about $1,202 for each of the estimated 928,120 Canadians waiting for treatment in 2013."

LTC Comment:  Publicly financed health and long-term care definitely has "ancillary" costs.  

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1/22/2014, “How Are Seniors Spending Their Money?,” by Pamela Villarreal, National Center for Policy Analysis Issue Brief No. 135 

Quote:  "Today's seniors have a mixed bag of spending habits. Although discretionary and recreational purchases have increased, today's seniors are taking on debt in the form of mortgages and credit cards. Moreover, with abysmally low interest rates on savings and a tax policy that subsidizes consumption over saving, seniors do not have much incentive to save. Those who are early into retirement should rethink conventional wisdom about saving by considering a variety of investments besides just bonds. Also, they should avoid incurring debt through a home equity loan or any type or mortgage." 

LTC Comment:  As today’s boomers become tomorrow’s seniors, they’ll pay a steep price for our country’s misguided fiscal and monetary policy.

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Updated, Friday, April 04, 2014, 11:17 AM (Pacific)

Seattle—

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LTC BULLET:  HOW TO FIX LTCI IN CALIFORNIA

LTC Comment:  Private long-term care insurance in California is hurting.  Center corporate member Louis Brownstone provides a diagnosis and prescription after the ***news.***

*** GENWORTH published its widely cited “Cost of Care Survey” for 2014 this week.  The median annual cost of a private nursing home room in the United States increased 4.4% since last year to $87,600.  Cost of a semi-private nursing home room went up 2.6% to $77,380 per year.  Assisted living monthly costs increased somewhat less, up 1.45% to $3,500.  Homemaker services surged 4.11% to $19 per hour, up substantially from an average 1.20% five-year growth rate.  Home health aide services increased 1.59%; 1.32% per year over the past five years.  Click here for the full 2014 report; here for the “cost of care map”; and here for “key findings.”  As always, we’ve posted the Genworth report here in “The Zone,” the Center's special compendium of key data and information for members. ***

*** THE AMERICAN ENTERPRISE INSTITUTE hosted another forum on long-term care services and financing this week.  Watch the full proceedings here.  This video is well worth a two-hour investment of your time.  Six of the most thoughtful analysts in the field comprise the panel including the chairman, vice-chairman and one member of last year’s Long-Term Care Commission.  Besides summarizing the Commission’s work and report, the panelists cited much of the most important recent research on LTC financing.  A couple thoughts to keep in mind as you watch this program, however.  First, not one of the presenters addressed the question of how long-term care came to be so dysfunctional.  (Nor did the LTC Commission address that question.)  It’s very dangerous to propose solutions to a problem when you don’t know what caused the problem in the first place.  You run the risk of exacerbating the problem by administering more of what caused the problem in the first place.  Second, note that the panel recognizes that Medicaid is important but can’t quite pin down why and how.  For example, even though it’s well substantiated that the program helps middle class and affluent people as well as the poor, how can Medicaid crowd out private LTC insurance if most people don’t know who pays for long-term care?  Simple:  Medicaid has paid for most expensive LTC since 1965, so the public doesn’t know who pays, but Medicaid does pay, and that fact has anesthetized the public to LTC risk and cost.  Little progress in solving the LTC financing problem will be made until experts like these diagnose the real cause (government interference in the LTC market) and propose solutions that address that problem (targeting Medicaid to the poor and using some of the savings to incentivize responsible private LTC planning.) ***

*** READ OUR REPORT on long-term care financing in California--Medi-Cal LTC: Safety Net or Hammock? here [???Damon add URL???] or on the Pacific Research Institute’s website here [???Damon add URL???]--together with today’s LTC Bullet for a fuller understanding of the big picture in “The Golden State.” ***

LTC BULLET:  HOW TO FIX LTCI IN CALIFORNIA

LTC Comment:  From time to time we turn over the Center’s weekly LTC Bullet op-ed to an expert in a field of interest to our readers.  Today, we invited Louis Brownstone to share his analysis of the long-term care insurance market in California. 

Mr. Brownstone is Chairman of California Long-Term Care Services, NorthStar Network, Inc. and past chairman of the National LTC Network (also a longtime corporate member of the Center for Long-Term Care Reform).  Get to know Louis here.

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The following is Louis Brownstone’s “A Proposal for Long Term Care for California,” as edited and condensed by LTC Bullets.

From what I can see, and from what others tell me, the long term care insurance industry in the State of California is in gridlock.  The stakeholders are not speaking constructively to each other.  The industry is in danger of losing its viability.  I want to stimulate a conversation that can fix this mess.
 
What's at stake?  Absent a solution, long term care services needs will grow in the next twenty years to consume more than one half of all Medi-Cal expenditures, costing hundreds of millions of dollars, that will drain funds from a myriad of other public needs.  Thousands of citizens will be unable to afford or receive long term care services, will not be able to care for themselves and will age poorly in place.  Alternatively, we can all come together and resume leadership in long term care planning.

Here are the problems as I see them with proposed solutions. 

Problem #1:  The Department of Insurance (DOI) fails to protect the interests of the insurance carriers.  It distrusts insurance carriers and is either unwilling or unable to approve new policy filings.  Maybe the DOI has become ossified and the carriers are correct in saying that the people in the DOI don't care.  I suspect that's not true.  Maybe it's a question of an inadequate budget.  Whatever the cause, I hear of many instances where the DOI’s responses to carrier's requests are sympathetic to their needs . . . and then nothing happens.  That has to change. 

It takes three to five months for carriers to get new policy filings approved in other states, but two to three years in California.  Many carriers have adjusted their pricing in their filings to reflect this time delay.  The result is that citizens in California pay more than citizens in other states for the same or lesser benefits.  Timely approvals will help everyone.

Long term care insurance policies sold in the 1990's gave policyholders terrific value and cost about a third of what policies cost today.  The insurance carriers priced the policies incorrectly, and need price relief so that they can come close to a breakeven on these older policies.  They're asking for huge rate increases.

They need some help . . . maybe not all that they are asking for, but some help.  It's not well known, but it also takes two to three years in California for the DOI to approve a rate increase.  This only creates further delay and larger rate increase requests later on.  Timely approvals will help everyone in the end.

California has a history of top insurance carriers either suspending sales or ceasing sales altogether.  Allianz, Transamerica, Prudential, MetLife, John Hancock, Mutual of Omaha, Genworth Financial . . . all large and well-funded carriers.  We need them.  My greatest concern is that Genworth will once again suspend or cease sales in California.  Genworth represents roughly half of all long term care insurance policies sold in California in the last six months.  It would be catastrophic if Genworth left.  Everyone would lose.  Six months ago, Tom McInerney, Genworth's Chairman, met with DOI Commissioner Jones.  They had a meeting of minds.  To my knowledge, nothing has happened since.

Problem #2:  The Department of Insurance is failing to protect the interests of California citizens.  The DOI has evolved from being a strong protector of the interests of consumers to watching other states provide better long term care solutions to their citizens.  The main problem here is failure to adjust to a change in the philosophy of long term care planning and to accept the structure of new policies.

People are living longer, and when they get old, they get sick.  Adverse morbidity trends and other factors have made long term care insurance policies far more expensive than before.  Compromises have to be made to make policies affordable to more than the very rich. The DOI has resisted many of these compromises.  The result is that people in other states are utilizing novel inflation riders and are often paying far less in premium than Californians.  We allow our citizens to buy $25,000 life insurance death benefits, which afford little family protection, because that's better than nothing.  Why not the same rationale for long term care insurance?  Bad regulations are hindering needed change.

An important price factor has been inflation riders.  The old standard of 5% compound inflation is often unaffordable.  But is it necessary?  Most folks are going to be cared for either at home or in a residential care facility.  Nursing facilities are becoming a last stop, and average time spent in them is shrinking.  If home health care inflation has been 1% to 2% and residential care facility inflation has been 3%, why should a person need 5% compound inflation, as required by California Partnership plans? 

The industry standard for inflation riders has become 3% compound . . . or less.  We sell life insurance with small death benefits and even term insurance which produces very few claims.  Short and fat long term care benefits can be a great help in many situations.  Allow the consumer to decide what he or she can afford.

Problem #3:  Long term care insurance in California is badly in need of new enabling legislation.  The laws of the 1990's are outdated and are not appropriate for the 21st century.  They were in many ways visionary when they were enacted, especially in consumer protections.  But they now inhibit change and prevent Californians from having choice in long term care planning.

The theory has been that California should not adopt laws prevalent elsewhere because California is different from any other state.  California is different, but if you look at California's six major regions, each region has strong similarities with other regions of the United States.  We are Americans, and can learn from other Americans and even embrace some of their laws.  Our citizens are similar, and our long term care problems are similar.

Many of the consumer protections in our laws have been adopted by other states.  They have not caught up to us, but they're close.  Some thirty-seven states have banded together to create an “interstate compact.”  Is it time to change our laws sufficiently to enable us to join them?  This would be a far simpler solution than beginning from a zero base, and should be considered.

The National Association of Insurance Commissioners has adopted long term care insurance standards and is presently working on a set of even newer standards.  We are engaged with this process.  Again, the reasons for us to be different have decreased.  The Legislature needs to immediately review and possibly adopt these new standards when they have been completed.

The Legislature should enact new legislation which will change the laws to give insurance carriers the product flexibility they enjoy elsewhere.  This will give consumers more choice and, importantly, more affordable long term care insurance options.  Policies in California are now primarily being sold to the wealthy.  Future Medi-Cal costs are going to go through the roof if policies are not sold to the middle class.
 
Rich Californians now utilize elder law attorneys to shield their assets in order to qualify for long term care services and supports through Medi-Cal.  The list of exempt assets is far too generous and the look-back period needs to be extended.  Medi-Cal should be for the needy, not the rich.  These lax standards need to change.

There is a new Assembly bill (AB 1553) which would prohibit gender-based pricing for long term care insurance.  Women pay lower rates than men for life insurance and this is as it should be.  Women live longer than men and the insurance carriers price life insurance policies appropriate to the risk.  It should be the same with long term care insurance.  This bill is unwise and should be defeated. 

I hope that the Insurance Committees of the Assembly and Senate will consider these thoughts and will engage in meaningful discussions with all stakeholders.  It's their responsibility to do so, and much needs attention.

Problem #4:  The California Partnership for Long Term Care needs a total overhaul.
California was one of the original four Partnership states in 1994.  Its purpose was to provide long term care protection for Californians with moderate income and assets.  This concept has now been adopted by most other states and Partnership policies are being sold in quantity almost everywhere.  But the California Partnership is now in such bad shape that it is really on life support.

This product is no longer saleable to its intended buyers . . . people with moderate income and assets.  Partnership policies used to constitute about 75% of all my brokerage's sales, but I doubt if we sell 20% Partnership policies today.  Long term care insurance rates are triple what they were in 1994.  The 5% compound inflation requirements are too stringent.  Federal legislation accepts almost any kind of inflation rider as a part of a Partnership policy.  We need new Partnership legislation so that the Partnership can be sold to a far greater audience.  Otherwise, it's of little value, and may even be a negative factor on future Medi-Cal expense.

The Partnership program is currently a part of the Department of Health Services.  It is severely underfunded and understaffed.  It seems almost as if DHS doesn't recognize its existence.  The Partnership has the potential to save the state hundreds of millions of dollars.  It needs to be recognized as a future producer of revenue for the state, not as an expense.  It needs to be given the tools to do its job.

The Partnership was originally put under DHS because the program needs to be coordinated with Medi-Cal.  In fact, Medi-Cal has inhibited change by insisting on the robust inflation riders discussed above.  Maybe the Partnership is in the wrong department and should be moved over to the Department of Insurance.  I would be in favor of this because it would create fresh thinking.

The Interstate Compact could be a starting point for new legislation. A simple approach, accepting the Compact, could get a major change done quickly.  If its regulations were unacceptable, it could at least be built upon to conform with some of the unique California standards.
 
The Partnership needs additional funding in order to educate Californians and disseminate its message.  It needs to ally with other outreach programs, such as the 3in4 Need More campaign, and increase its public relations efforts.  These PR efforts are currently restricted by budgetary considerations.  Again, the proper promotion of long term care insurance will save the state of California hundreds of millions of dollars. 

As I said at the top, I want to stimulate a conversation that can fix this mess.  I am available to assist in any way that I can.

Sincerely,

Louis H. Brownstone
Louis@cltcinsurance.com

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Updated, Monday, March 31, 2014, ???? AM (Pacific)

Seattle—

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NEW SOURCEBOOK EDITION AND LTC NEWS AND COMMENT

LTC Comment:  Our lead story today highlights the publication of the latest version of the Alliance for Health Reform’s “Sourcebook for Journalists.”

*** HAPPY 16^TH BIRTHDAY (TOMORROW) TO THE CENTER FOR LONG-TERM CARE REFORM ***

3/25/2014, “Covering Health Issues: A Sourcebook for Journalists, Fall 2013,” Alliance for Health Reform

Quote:  "The Sourcebook, produced with the support of the Robert Wood Johnson Foundation, has the latest information and data on pressing health care topics. It also includes the names and contact details for top experts in each subject area, along with a comprehensive glossary of health care policy terms." 

LTC Comment:  This recently updated "Sourcebook" slants toward public financing and away from market-based solutions but it is a useful data resource. 

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2/28/2014, “MasterCare, a National LTC Network Member Firm, Recommends Consumers Work with Long Term Care Insurance Specialists [link],” press release edited by Jennifer Hedly, Florida NewsWire   

Quote:  "The National LTC Network announces its immediate past Chairman, Mike Skiens, is featured in an article on long term care planning in Kiplinger's Retirement Report (March 2014)."

LTC Comment:  Congratulations to Mike Skiens and Center-corporate-member MasterCare.

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3/27/2014, “Insurers tire of 'frenemy' White House,” by Elise Viebeck, The Hill

Quote:  "Insurers feel that the administration has taken advantage of them by making repeated delays and changes to the law, even as they have gone above and beyond the call of duty to fix problems with the rollout."

LTC Comment:  That’s what insurers get for trusting a government that repeatedly draws the private sector in with promises of rich rewards and then reneges. 

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3/28/2014, “CMS is failing to ensure that terminated skilled nursing facilities and other providers are not billing Medicaid, watchdog agency says [link],” by Tim Mullaney, McKnight's LTC News

Quote:  “The report does not include any numbers as to how many terminated providers still might be receiving Medicaid payments, but the implication is that many could be. Without reliable interstate data, a provider conceivably could be terminated in one state but continue to bill Medicaid in another.”

LTC Comment:  Lack of profit motive and competition accounts for such oversights, or lack of oversight.

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3/26/2014, “Overwhelming Majority of Seniors Satisfied with their Medigap Coverage [link],” AHIP Press Release, InsuranceNewsNet.com

Quote:  “Ninety-four percent of seniors enrolled in Medigap are satisfied with their coverage, according to a new Purple Insights survey released by America's Health Insurance Plans (AHIP). According to the survey, 80 percent of beneficiaries say their policy provides excellent or good value for the money, and the vast majority (91 percent) would recommend Medigap to a friend or relative.”

LTC Comment:  Pretty good batting average.

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3/26/2014, “How A New Alzheimer's Test Could Kill Long-Term Care Insurance -- Or Make It Cheaper [link],” by Howard Gleckman, Forbes

Quote:  "A widely available test to predict Alzheimer's would make any form of voluntary long-term care insurance impossible. 'It would be a huge game changer,' one insurance actuary told me."

LTC Comment:  Nonsense.  As long as the law is changed to allow--better yet, require--insurance carriers to have access to the same test results, a reliable test to predict Alzheimer's would increase the market for private LTC insurance and lower the premiums.  Such a test would impel financially responsible people to purchase insurance before they take the test.  Otherwise they would lose some or all insurability if test results showed a proclivity toward the disease.  If people therefore purchased LTC insurance earlier in life and if the test excluded more bad risks (anti-selection), the coverage itself could cost less.  On the other hand, a test for Alzheimer's could devastate publicly financed LTC programs by preventing people who could have and should have insured privately from obtaining coverage in the market. 

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3/26/2014,  “Social Security Deficit:  Fact or Fiction?,” by Paul Nor, Financial Planning  

Quote:  "The Social Security OASI Trust Fund, now valued at roughly $2.7 trillion, is fully invested in US Treasury securities. The projected 2013 interest payments on this investment are approximately $98 billion. Add this into the tax receipts and the program remains snugly in the black." 

LTC Comment:  This article is worth reading for its clarification of the annual Social Security deficit.  It misleads, however, by suggesting Social Security is "in the black" by virtue of its "trust fund," which holds nothing but IOUs for money the rest of government has already spent.  How solvent would you feel if your entire net worth amounted to promissory notes from a bankrupt relative? 

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3/26/2014, “CNA Announces the Appointment of Al Miralles as President of Long-Term Care [link],” Press Release, Wall Street Journal

Quote:  "Al joined CNA in 2011 as Senior Vice President, Investments and Treasury. He has more than two decades of insurance and financial services experience and a proven track record of developing strategy, building high performance organizations, and executing on sustainable operational improvements.  'This new position brings a renewed focus to strategic and operational management of Long-Term Care,' said Craig Mense. 'I am confident Al's leadership will help us advance our objective in this line of business." 

LTC Comment:  CNA:  Gone but not forgotten.

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3/25/2014, “Long-Term-Care Coverage With an Asset-Protection Twist:  A ‘partnership-eligible’ policy may allow you to keep more of your assets if you eventually need to rely on Medicaid [link],” by Kimberly Lankford, Kiplinger

Quote:  “If a policy doesn’t qualify for the partnership program because it has a smaller inflation protection, but it meets your needs and costs a lot less than a partnership-eligible policy that, say, provides 5% compound inflation, don’t automatically reject the lower-cost policy. If you never need Medicaid, you’ll never benefit from the partnership policy anyway. There are generally two criteria to qualify for Medicaid: the asset test and the income test, says Steve Sperka, vice-president of long-term care for Northwestern Mutual. 'If people have some source of retirement income, say, from a pension, they may run out of assets but may never qualify for Medicaid based on income.' You can find out more about your state’s Medicaid eligibility requirements at www.medicaid.gov."

LTC Comment:  The possibility Steve Sperka mentions—that people might deplete their assets but still not qualify for Medicaid LTC benefits because of excess income—is theoretically possible but highly unlikely.  Income almost never disqualifies anyone for Medicaid LTC because most states subtract private LTC expenditures and medical expenditures not covered by Medicare from income before deciding eligibility.  You don’t need low income, but rather only insufficient cash flow.  Other states (13) apply income caps but those are easily circumvented by means of Miller income-diversion trusts.  A good rule of thumb is that anyone with income below the cost of a private nursing home, roughly $6,000 per month, qualifies for Medicaid LTC based on income.  Of course, most of that income has to be used to offset Medicaid’s cost of care, but the eligible person gets Medicaid’s lower reimbursement rate (for purposes of later estate recovery) along with Medicaid’s substantial acute care benefits that go beyond what Medicare covers.

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3/25/2014, “Two New Ways to Buy Long Term Care,” by Terry Savage, Huff Post

Quote:  “Getting older is far better than the alternative. But taking care of our parents - or having children take care of us - in our old age is an expensive burden to place on each generation. That's something to think about as Mother's Day and Father's Day approach. Long term care insurance - either a traditional policy or one of these asset-based policies - can make a huge difference in a family's finances. And that's The Savage Truth.”

LTC Comment:  Sound advice from long-time nationally-syndicated financial columnist Terry Savage.  The article recognizes Center corporate members One-America as a major carrier offering equity-based LTC combo products and MAGA as a key distributor.

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3/25/2014, “A Quiet 'Sea Change' in Medicare,” by Susan Jaffe, New York Times

Quote:  “In January, Medicare officials updated the agency’s policy manual — the rule book for everything Medicare does — to erase any notion that improvement is necessary to receive coverage for skilled care. That means Medicare now will pay for physical therapy, nursing care and other services for beneficiaries with chronic diseases like multiple sclerosis, Parkinson’s or Alzheimer’s disease in order to maintain their condition and prevent deterioration.”

LTC Comment:  More Medicare coverage of home care will help a lot of people, but it will also contribute to the crowd out of private financing alternatives like LTCI, thus doing long-term damage to LTC financing overall.

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3/25/2014, “Univita's Long Term Care Expertise Highlighted in LIMRA's MarketFacts Publication [link],” Press Release, HeraldOnline.com

Quote:  “Univita Health, the largest long term care insurance administrator in the United States, as well as an innovator in providing home-based care management, announced today important findings in key claim practices for successfully managing closed blocks of long term care insurance. Their findings are published in the recent issue of LIMRA’s MarketFacts Quarterly. In addition to converting more long term care (LTC) insurance closed blocks than any other company in the industry, Univita’s LTC division has over 1.4 million LTC policies under management, handling over 1 million claim transactions that pay over $1.4 billion in claims annually. The findings in this study are based on Univita’s more than 20 years of research, analysis, and practice in claims and care management, including claims audits of many of the leading insurance companies in the industry.”

LTC Comment:  Congratulations to Univita, an industry leader and bellwether.

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3/24/2014, “Feeling ill-effects of private long-term care insurance,” by David Lazarus, Los Angeles Times  

Quote:  "Critics of safety-net programs such as Social Security and Medicare are fond of saying that the private sector would do a much better job of protecting people thanks to the magic of the marketplace. Mike and Judy Holtzman of Laguna Woods are now experiencing the magic of the marketplace for long-term care insurance. And it stings. They were recently informed by their insurer, John Hancock Life & Health Insurance Co., that their annual premiums will almost double." 

LTC Comment:  The premise of this article--that public programs have done fine while private LTC insurance has failed--is false.  The truth is that the public entitlement programs are vastly underfunded.  Yes, so are private books of old LTC insurance.  The difference is that the private sector is doing the responsible thing, raising premiums to be able to pay claims, whereas the public programs are sinking deeper and deeper into economy-sapping debt and deficit spending. 

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3/24/2014, “Medicaid now attractive to millionaires,” by Jackson Adams, The Daily Journal

Quote:  "Millionaires now can safely enroll in Medicaid, thanks to an interpretation of the Affordable Care Act recently confirmed by the U.S. Department of Health and Human Services." 

LTC Comment:  It's not quite that simple, but still a concern, and worth understanding. 

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3/24/2014, “Unless You Have Cash, You Don't Have Long Term Care Insurance [link],” Press Release, PRNewswire

Quote:  "Why have sales started to increase with plans that offer a cash benefit?  Many feel agents are showcasing the cash benefit in response to prospects' objections that LTCI policies are too complicated and that the consumer is reacting to the simplicity that cash offers at claims time." 

LTC Comment:  Cash IS king.

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3/21/2014, “How the Fed is hurting seniors, Opinion: The low-interest-rate policy does more harm than good [link],” by Diana Furchtgott-Roth, WSJ MarketWatch

Quote:  "The big winners of the Fed's policies were the U.S. government, which gained about $900 billion, and non-financial corporations, which gained $310 billion. 

"McKinsey calculated that households headed by people under the age of 45 are net debtors and so have benefitted from lower rates. In particular, those households with heads ages 35 to 44 have gained $1,700 more in spending each year because of lower rates. Those under 35 gained $1,500 a year. 

"The losers are the seniors, especially household heads aged 75 and over, who lost $2,700 a year in income. Those aged between 65 and 74 lost $1,900." 

LTC Comment:  Turnabout from the usual government policy favoring seniors at the expense of the young, but still a pernicious policy in many ways.

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3/21/2014, “Flu Vaccines Spare Even the Frailest Elderly, Study Finds,” by Bill Myers, Provider Magazine

Quote:  "Some health experts have worried that flu vaccines may do more harm than good for those elderly in hospitals, homes or other 'institutions.' But researchers at the Fung Yiu King and Queen Mary hospitals in Hong Kong pored over thousands of worldwide studies-some dating as far back as 1946-and re-examined the data for outcomes. They found that vaccinations correspondent [sic] to a 37 percent reduction of pneumonia (especially when the year's vaccine matched the strain of that year's virus-42 percent), and a 34 percent reduction in deaths from pneumonia or flu." 

LTC Comment:  I’ve wondered myself about the efficacy of flu vaccines.

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Updated, Friday, March 28, 2014, 11:46 AM (Pacific)

Seattle—

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LTC BULLET:  WHO GETS MEDICAID LTC?

LTC Comment:  Is Medicaid a long-term care safety net for the poor, the middle class, even the affluent, all of the above?  Questions remain, but answers abound.

LTC BULLET:  WHO GETS MEDICAID LTC?

LTC Comment:  Last week’s “LTC Bullet:  LTC Embed Report from the Policy Front at ILTCI ’14 Orlando [link]” highlighted a presentation at the recent 14^th Annual Intercompany Long-Term Care Insurance conference titled “Feder and Warshawsky:  Long-Term Care Financing Perspectives and Solutions:  An in-depth conversation with two of the nation's most knowledgeable long-term care experts, Mark Warshawsky and Judith Feder.”

During that presentation, Dr. Feder of Georgetown University's McCourt School of Public Policy—who has had a long and distinguished academic career focused on long-term care financing issues—stated that most people who receive Medicaid nursing home benefits did not possess much wealth 10 or 15 years before qualifying for public assistance.  That statement didn’t surprise me.  Too few Americans have accumulated sufficient retirement savings so naturally “most” of them who end up in Medicaid nursing homes will have had small estates a decade or more earlier.  What gave me pause, rather, was her implication that this fact meant problems raised in a recent Wall Street Journal op-ed titled Millionaires on Medicaid by her interlocutor, Mark Warshawsky of the American Enterprise Institute , himself an accomplished and well-regarded scholar in the field, somehow didn’t matter. 

So I asked Dr. Feder what her source was for that conclusion.  She responded by referring me to Rich Johnson’s testimony before the LTC Commission.  Check it out:  “Income and Wealth of Older Adults  Needing Long-Term Services and Supports,” Statement of  Richard W. Johnson,  Senior Fellow, The Urban Institute, before the Commission on Long-Term Care, August 1, 2013.  I encourage everyone to read his full testimony.  What follows are selected quotes and my comments.  My closing comment addresses the more general question of why so many academics choose to conduct only research that supports a public financing bias and avoid addressing facts that challenge that bias.

Quote: "As the focus on Medicaid intensifies, questions grow about exactly who receives help from the program in later life. Has the program morphed into a middle-class entitlement for nursing home care? I have been examining the income and wealth trajectories of older adults who end up in nursing homes. My principal conclusion is that most older people who receive Medicaid-financed nursing home care have low incomes and very little wealth, not only while they are in the program but also for at least a decade before they enter a nursing home.” (p. 1)

LTC Comment:  OK, as I acknowledged above, that’s obvious given Americans’ well-documented failure to save adequately for retirement.

Quote:  "These results suggest that efforts to promote individual saving for long-term care, while laudable, may not move many people off Medicaid or save the program much money, because most Medicaid nursing home residents never had the means to save much in the first place. These findings thus underscore the importance of Medicaid for some of the nation's most vulnerable citizens."  (pps. 1-2)

LTC Comment:  Whoa!  Wait a minute.  First, no one has challenged “the importance of Medicaid for some of the nation's most vulnerable citizens.”  What’s at issue is whether Medicaid should provide long-term care to people who could have, would have and should have planned responsibly to pay for their own care if it were not for perverse public policy incentives that discourage responsible LTC planning.  Let’s first see if Johnson’s data and analysis support his conclusion that more responsible LTC planning wouldn’t save Medicaid much money. 

Quote:  “It can be difficult to tap into home equity to cover the cost of long-term services and supports and other living expenses, and states do not always pursue beneficiaries' housing wealth when trying to recoup some of the cost of Medicaid-financed nursing homes. Consequently, nonhousing wealth-defined as total household wealth excluding the value of home equity-is another useful metric of financial well-being.”  (p. 4)

LTC Comment:  Hard to tap home equity?  No it’s not.  That’s what reverse mortgages do.  The National Council on the Aging (NCOA) encourages their use as a funding source for long-term care.  Home equity, the biggest asset aging Americans possess, goes largely unused to fund long-term care because Medicaid exempts the home and all contiguous property up to a minimum of $543,000 in most states and a maximum of $814,000 in the rest.  People face a strong disincentive to tap the equity in their homes to fund home care or to supplement their income so they can afford private LTC insurance.  Furthermore, the fact that state Medicaid programs fail to pursue estate recovery of housing wealth means that home equity is not only exempt for recipients going onto assistance, it is protected as a “windfall of Medicaid subsidies” for their heirs as the HHS Inspector General explained in a 1988 report (pps. 47-48).  Johnson’s conclusion that “nonhousing wealth” bears considering as a measure of financial well-being is therefore unfounded.  Nonhousing wealth doesn’t amount to much in the first place and, in the second place, it is very easy to eliminate from Medicaid spend down liability by purchasing exempt assets including home equity but also an automobile, an income-producing business, term life insurance, an IRA, and prepaid burial insurance.

The first section of the testimony titled "Current Financial Status of Older Americans with Disabilities" (pps. 2-5) is not relevant as the disabled could not have insured and likely would not have been able to save for long-term care.  The second section, titled "Midlife Financial Status among Those Who Develop Disabilities in Later Life" is more relevant (pps. 5-7) 

Quote:  “The limited income and wealth of older adults with disabilities suggests that few can afford to spend much out of pocket on long-term services and supports. However, financial shortfalls in later life may reflect long-term care expenses and are not necessarily reliable indicators of lifetime economic status or the ability to have saved earlier in life for future care needs. Moreover, some older adults with disabilities might have recently transferred assets to family members to qualify for Medicaid. To improve our understanding of the potential capacity of adults to save for future spending on long-term services and supports, the analyses described in this section examine income and wealth for people in their fifties in the early 1990s, and compares financial well-being for those who develop disabilities by their seventies and those who do not. Estimates are restricted to those who reported no ADL limitations in their fifties and were not yet retired at that time, so that the analyses do not confound the financial effects of retirement with the effects of future disabilities.  (p. 5)

LTC Comment:  This is too short a span of years to permit valid conclusions.  People in their 50s who develop disabilities only 20 years later by their 70s were likely poorer and more prone to health problems than people who did not develop disabilities in that short time span.  We would need to compare the financial condition of people in their 50s with their financial and health conditions at age 85 or older, which is when the need for long-term care spikes upward.  Unfortunately the data source used for this analysis does not cover such a long span of time.  It would be very interesting to have an insurance actuary analyze this data.

Quote:  “Disability-related disparities in household wealth are even more stark than disparities in household income. Median household wealth in 1992 for adults ages 52 to 60 was nearly twice as high for those who did not develop any disabilities by ages 70 to 78 than those who developed two or more ADL limitations (figure 2). Total household wealth did not exceed $13,300 for one in four of those who became disabled. Half of those who became disabled held less than $111,300, and three-quarters held less than $238,900. Household wealth approached $700,000 or more for only 1 in 10 adults in their fifties who became disabled by their seventies.  (p. 6)

LTC Comment:  Ditto my previous comment.  But really, half of those who became disabled had $111,300 or more in household wealth and one quarter had $238,900 or more in their 50s when they were still working and accumulating more wealth?  They sound like candidates for savings or insurance who could have prepared better for their future disabilities (and possibly delayed or avoided welfare dependency) had they had stronger incentives (and fewer disincentives) to do so.

The key section in Dr. Johnson’s testimony is the next one, titled “Financial Status of Older Americans Receiving Nursing Home Care” (p. 7).

Quote:  "The analysis in this section follows a sample of HRS respondents for up to 17 years, from 1993 until 2010. The respondents were ages 70 to 75 in 1993, when all were living in the community, and survivors were ages 87 to 92 in 2010. The analysis compares 1992 income and 1993 wealth for those who received some Medicaid-financed nursing home care over the period, those who received some nursing home care but were never covered by Medicaid, and those who never received nursing home care.

"Adults who eventually obtained nursing home care paid at least in part by Medicaid received substantially less income before they entered a nursing home than those who never entered a nursing home and those who obtained nursing home care that was never paid by Medicaid. Median annual per capita household income in 1992 was about $14,200 (in 2012 constant dollars) for those who eventually received Medicaid-financed nursing home care, compared with $21,500 for those who never received nursing home care and $25,500 for those who received nursing home care but were never covered by Medicaid (figure 4). Only a quarter of those who eventually obtained Medicaid-financed nursing home care received annual per capita income in excess of $20,000, and only a tenth received income in excess of $31,800." (p. 7)

LTC Comment:  How is this relevant?  By the time they're in their 70s their incomes have already declined because they are no longer employed.  We need to know their incomes and wealth in their 50s when they could have saved or insured.  But again, as above, the data source used for this analysis does not have the longitudinal reach it would need to have to span people’s financial and health conditions from their 50s, when their income and wealth are higher and still growing, through their 90s when they’re most likely to need expensive long-term care. 

Quote:  “Household wealth varies sharply by future nursing home care. Among community-dwelling adults ages 70 to 75 who eventually entered nursing homes, the median household wealth for those who never received Medicaid was more than five times as high as for those whose nursing home care was at least partly paid by Medicaid ($255,000 versus $49,600, figure 5). Median wealth for those who never entered nursing homes was more than three times as high as for those who received Medicaid-financed care. A quarter of those who later received Medicaid-financed nursing home care held less than $2,700 in total household wealth at ages 70 to 75, while only a quarter held more than $151,700 in total household wealth and 1 in 10 held more than $260,600.”  (p. 9)

LTC Comment:  Ditto my comment above about the inadequate chronological span of this data.  Furthermore, that quarter of folks with more than $151,700 and the one in 10 with over $260,000 sure sound more like candidates for private-pay LTC instead of Medicaid, yet that’s where they ended up.  The more important question is how much of their wealth was actually used to fund long-term care?  How much was lost to asset exemptions, Medicaid planning, and estate recovery evasion?

Quote:  "About half of our 1993 sample of adults ages 70 to 75 who eventually received Medicaid-financed nursing home care entered a nursing home within 10 years. Some of these people may have spent much of their wealth on paid home care, and some may have transferred some of their assets out of their own name to qualify for Medicaid because they expected to need nursing home care soon.

"To account for these possibilities, figure 7 examines household wealth in 1993 for community-dwelling adults ages 70 to 75 who did not enter nursing homes until 2003 or later (at least 10 years in the future). Even among members of this group, who seem less likely to have been able to anticipate their future nursing home admissions and may have spent less on other care and medical expenses than those who entered nursing homes sooner, very few of those whose eventual nursing home stays were at least partly paid by Medicaid had accumulated much wealth. Half had less than $59,600 in total household wealth in 1993, and a quarter had less than $9,900. Only 10 percent had more than $286,800." (p. 10)

LTC Comment:  Ditto my comment above about the inadequate chronological span of this data.  Furthermore, it is naïve to think people are unaware of Medicaid planning opportunities to shelter or divest assets.  Do an internet search for “Medicaid planning in Your State” and see what you get.  Word gets out fast among the aging on the “wheel chair telegraph.” Potential heirs have their ears to the ground as well.  Still, half had more than $59,600 and one in 10 had over $286,800?  Isn’t there something these folks and their families might have done to avoid welfare dependency if public policy had encouraged them to do so instead of providing a slippery slope into public assistance?  Before Medicaid intervened half of nursing home residents were private pay; now 63% reply on Medicaid; 14%, on Medicare; and only 22% depend on “other” sources.  Those other sources include private long-term care insurance, other medical insurance, other public coverage and, finally, last and likely least, the old-fashioned, write-the-check every month kind of private-pay which is rapidly disappearing.

Quote:  “It is worth noting some of the limitations of this research. For example, income, wealth, and Medicaid coverage are all reported by older respondents themselves or their proxies (usually their spouses or adult children), and the information they provide is not always accurate. The sample of older adults with disabilities on which the analyses are based is relatively small, which limits confidence in the estimates. Additionally, we observe Medicaid coverage only through ages 87 to 92, and some people do not receive Medicaid-financed nursing home care until even older ages. Those who do not obtain Medicaid coverage until they reach their nineties may have had more wealth when younger than those who obtain coverage sooner.” (pps. 11-12)

LTC Comment:  “Worth noting some of the limitations”?  I should say so.  Data provided by elderly respondents, and by their heirs with a stake in potential inheritances protected by Medicaid, is dubious.  Missing ages over 92 years drops the most costly long-term nursing home expenditures from the analysis as Mark Warshawsky points out and DeNardi, et al. observed in their seminal paper for the Chicago Federal Reserve Bank.  Finally “big data” is notorious for misinterpretation, intentional or otherwise.

Quote:  “Despite these caveats, it is clear that Medicaid provides a vital safety net for older adults with disabilities. Most older adults who end up on the program would never have been able to earn enough income or accumulate enough wealth to cover their nursing home costs. It seems likely that Medicaid will continue to play an important role in long-term care financing as long as those with long-term care needs are disproportionately those with limited financial resources.”

Closing LTC Comment:  Most is not all.  The fact that “most older adults who end up on the program” would not have been able to save, invest or insure sufficiently to avoid Medicaid is not at issue.  Nor is Medicaid’s future role in providing long-term care to the indigent.  What is at issue is whether Medicaid should be readily available for middle class and affluent people without significant spend down and whether or not the fact that it is so available results in fewer people saving, investing or insuring for long-term care and more people unnecessarily dependent on the program.

That is the issue so many academics evade.  They continue to write that “Medicaid requires impoverishment” and only “low income” people qualify for the program’s long-term care benefits.  Such statements are demonstrably false.  Income level rarely interferes with eligibility.  Assets are virtually unlimited because of Medicaid’s many exemptions.  Actual unlimited wealth can be divested five years ahead of applying without penalty.  Numerous other means of sheltering assets are available from elder law advisers without planning half a decade ahead.  Estate recovery is weak in most states, easily avoided in the rest, and of course cannot recapture wealth that was jettisoned in the first place.

All these facts are well documented here.  They explain why a few brave academics have been able to discover and publish results that contradict the conventional academic wisdom that Medicaid LTC requires impoverishment.  They explain why the Chicago Fed found “that even higher-income retirees benefit from Medicaid.”  They explain why Brown and Finkelstein discovered that Medicaid crowds out 65% to 90% of the potential market for private long-term care insurance.

What remains unexplained is why most academics and the reporters they supply with expert advice still ignore the facts of Medicaid eligibility.  They continue to seek answers in giant data bases and tiny samples, but almost never ask Medicaid eligibility workers how the program really works or consult actual Medicaid case files for answers.  I’ve done both for 30 years and I’ve reported the surprising results in publications for the Health Care Financing Administration (1985), the HHS Inspector General (1988), the Gerontologist (1990),  the Journal of Accountancy (1993), the Journal of Financial Planning (2001), the Cato Institute (2005) and in dozens of trade journal articles and think-tank sponsored reports available here.  So, you can’t say we didn’t warn you. 

The Center for Long-Term Care Reform’s latest research goes beyond documenting the easy access to Medicaid LTC benefits and its crowd out effect on responsible planning.  We’ve begun to explore the likely consequences of a wider range of factors dragging down the prospects for future long-term care financing.  Our “Index of Long-Term Care Vulnerability” gauges the likelihood that long-term care service delivery and financing as it exists in the United States today can survive the ravages of aging demographics, morbidity, economic and fiscal challenges, inadequate private financing alternatives, and the “entitlement mentality.”  Our three latest reports apply this “Index” to Virginia, New Jersey, Georgia and the USA.  Read them here at the section titled “The Center’s latest state reports.” 

It may be already too late to save America’s dysfunctional long-term care system, but it’s never too early to wake up, smell the coffee, debunk the myths, and confront the reality.

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Updated, Monday, March 24, 2014, 11:20 AM (Pacific)

Seattle—

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PREMIUM INCREASES AND LTC NEWS AND COMMENT

LTC Comment:  During his “Future of the Industry” remarks last week, Genworth CEO Tom McInerney emphasized the importance of convincing LTC insurance regulators to allow reasonable premium increases.  We highlighted this event and his speech in Friday’s LTC Bullet:  “LTC Embed Report from the Policy Front at ILTCI ’14 Orlando.”  Read it here.  In our first article today, the New York Times addresses the issue of LTCI premiums.

3/21/2014, “Premiums Rise for Long-Term Care Insurance. Keep It or Drop It? [link],” by Ann Carrns, New York Times

Quote:  "[M]ajor insurers have been successfully seeking state approval to raise premiums on existing policies, and the increases are typically phased in over several years."

LTC Comment:  Music to Tom McInerney's ears as he identified--at the ILTCI conference last week--cooperation of regulators in raising premium rates as key to the LTCI industry's survival and growth.   

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3/21/2014, “The 'wealthy poor' replace the middle class,” by Rick Newman, Yahoo! Finance

Quote:  “A new paper by economists Greg Kaplan and Justin Weidner of Princeton University, and Giovanni Violante of New York University, finds that about 70 million Americans may live in families they describe as “wealthy hand-to-mouth” households. These are families that own assets such as homes, cars, retirement plans and even boats, yet still spend virtually every dollar of their regular income because it’s necessary to pay all the bills they’ve racked up.”

LTC Comment:  Two points:  (1) this research shows why Medicaid’s home equity exemption of up to $814, 000 is crazy and (2) imagine the potential for funding long-term care insurance through a carve out of home equity which would protect the entire estate including the residual home equity.

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3/21/2014, “How Long-Term Care Insurers Deny Benefits,” by Richard Eisenberg, Forbes 

Quote:  “Here’s a heartbreaking scenario: Your parents or another loved one bought a long-term care insurance policy years ago and have paid its steep premiums ever since, but now that they need the benefits, the insurer refuses to pay them.  Sadly, this happens all too often, as I learned last week at the Aging in America 2014 conference of the American Society on Aging in San Diego.”

LTC Comment:  This slanted article is full of specious arguments even implying that LTC insurers should pay for facilities that are unqualified to provide the insured services!

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3/21/2014, “Public reporting of physical restraint use led to 36% increase in antipsychotic prescribing for dementia, researchers find [link],” by Tim Mullaney, McKnight's LTC News      

Quote:  "Public reporting of physical restraint use in nursing homes caused a spike in the use of antipsychotic medications to control residents' dementia symptoms, according to a recently published analysis. These results suggest that policymakers should consider unintended negative consequences of publicly reporting quality measures, the researchers emphasized."

LTC Comment:  You couldn't ask for a better example of how bureaucrats' good intentions can go terribly awry.

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3/20/2014, “Trade groups oppose LTCI proposal,” by Allison Bell, LifeHealthPRO

Quote:  "Some regulators want insurers to have a long-term care insurance (LTCI) loss ratio of 100 percent before they raise LTCI rates.  The American Council of Life Insurers (ACLI) and America's Health Insurance Plans (AHIP) have teamed up to fight the proposal."

LTC Comment:  Only government can operate at a 100 percent (or greater) loss ratio and look what that's brought us!

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3/19/2014, “Observation stay bills in focus for LTC providers,” by Elizabeth Leis Newman, McKnight's LTC News

Quote:  “While some have argued that CMS's recently enacted two-midnight rule should fix much of the problem for seniors, providers counter that it doesn't help those who are in the hospital for fewer than two midnights and may face huge costs when they discover they are ineligible for skilled nursing care.”

LTC Comment:  Medicare dropped the 3-day hospitalization rule after MCCA ’88 but reinstated it a year later.  Private LTCI dropped it and it stayed dropped.

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3/19/2014, “HBO documentary reveals a certified nursing assistant's struggle [link],” by Tim Mullaney, McKnight's LTC News

Quote:  “President Lyndon Johnson highlighted impoverished families in Appalachia when he declared a ‘war on poverty.’ Fifty years later, as the nation takes stock of how successfully we've waged this war, the media is spotlighting certified nursing assistants in long-term care facilities as examples of the working poor.”

LTC Comment:  A good example of poor public LTC policy that left too many people dependent on inadequate Medicaid reimbursement rates.

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3/18/2014, “Robots to Aid Walking Offer New Tool to Aging, Disabled [link],” by Kanoko Matsuyama, Bloomberg

Quote:  “Eyeing a new market of aging populations and concern over rising health costs, companies in U.S., Europe and Japan are developing bionic suits that may someday save labor and help the elderly care for themselves.”

LTC Comment:  A new version of “the six million dollar man.”

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3/19/2014, “Alzheimer's takes heavy toll on women,” by Karen Weintraub, USA Today

Quote:  "Women are far more likely to develop the fatal disease than men: one in six women over 65 will get it during their lifetime, compared with one in 11 men."

LTC Comment:  Nevertheless, some say charging women more for LTC insurance is "discrimination."  The same folks are silent about the appropriateness of charging men more for life insurance.  Just goes to show that politics is the wrong realm for discussing such issues.  Logic, evidence, markets and economic principles should prevail. 

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3/19/2014, “Dual eligibles in nursing homes have fewer hospitalizations than those in home- and community-based care, researchers find [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "Recent Medicaid reforms have aimed to increase use of HCBS because it is believed to be less costly than institutional long-term care, investigators noted. They said their findings suggest that more frequent hospitalizations are a 'hidden cost' of home- and community-based care."

LTC Comment:  More evidence HCBC is a double-edged sword.

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3/17/2014, “HHS may kill stand-alone indemnity,” by Allison Bell, LifeHealthPRO

Quote:  "The U.S. Department of Health and Human Services is trying to eliminate any possibility that consumers will use limited-benefit health insurance as a substitute for traditional coverage. . . .  HHS proposed the rule on page 44 of a draft regulation that could apply to individual hospital indemnity insurance, individual critical illness insurance and other individual supplemental health insurance products."

LTC Comment:  We'll follow this issue and report further developments.  Thanks to AIM's John Hennessey for tipping us to this article.

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3/17/2014, “U.S. retirees return to reverse mortgages, big banks stay away [link],” by Peter Rudegeair and Michelle Conlin, Reuters 

Quote:  "U.S. baby boomers desperate for retirement income are increasingly turning back to a financial product that, after the housing bust, had been left for dead: the reverse mortgage."

LTC Comment:  Home equity could boost private LTC financing when the bottom falls out of Medicaid, but not if it’s used up supplementing seniors’ retirement income in the meantime.

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3/10/2014, “America Needs to Rethink 'Retirement':  Unleashing the economic power of older workers is essential for U.S. prosperity [link],” by Nicholas Eberstadt And Michael W. Hodin, Wall Street Journal 

Quote:  "Research suggests that keeping older workers engaged in the economy will directly boost gross domestic product. In Japan, a 2005 study by the Nihon University Population Research Institute concluded that increasing the retirement age to 65 from 60 could raise per capita GDP 10% by 2025." 

LTC Comment:  A “silver” lining.

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3/16/2014, “How to handle long-term care premium hikes,” by Robert Powell, USA Today    LTC Comment:     

Quote:  "Three things are certain in life if you're among the 8 million Americans who own a long-term-care insurance policy.  Besides death and taxes, you'll face an extraordinary increase in your premium at some point."

LTC Comment:  Death and taxes will continue but exceptionally high LTCI premium increases may not.  What if interest rates return to normal and public programs stop paying for LTC?  With profits and demand up, LTCI premium might decrease in the future.

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3/16/2014, “Alzheimer's and Its Uncounted Victims Deaths from the disease may be six times higher than reported. This is a cancer-size illness [link],” by George Vradenburg and Stanley Prusiner, Wall Street Journal

Quote:  "It's well known that President Ronald Reagan died in 2004 after a long battle with Alzheimer's disease. Yet his death certificate listed pneumonia as the official cause of death. Attributing Alzheimer deaths to other diseases is all too common-and highlights the complicated nature of Alzheimer's contribution to deaths in the U.S. each year. It also suggests that Alzheimer's might be a bigger problem than previously thought."  

LTC Comment:  One more way in which this disease is pernicious.

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3/15/2014, “As Living Standards Fall for Seniors, Some See Signs of 'Silver Revolution' [link],” by David Wallismarch, New York Times       

Quote:  "Whatever the reasons, several social scientists say deteriorating conditions for retirees and older Americans in general - intensifying fear about retirement security, age discrimination, increasing poverty among the elderly and new threats to cut programs for seniors - could be the impetus for what some are calling a 'silver revolution.'"

LTC Comment:  Others have called this “generational warfare.”

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3/13/2014, “Life care lawyers can help navigate veterans' benefits,” by Rachel Kabb-Effron, Cleveland Jewish News

Quote:  "With the cost of long-term care rising every day, seniors want to know how to pay for care without breaking the bank. Many know about Medicaid benefits and planning, but few realize there is a benefit available to veterans and their widows called the VA Pension, commonly known as Aid and Attendance. Under this program, the VA can contribute up to $2,094 per month for a married veteran and $1,130 per month for a veteran's widow." 

LTC Comment:  Gaming VA benefits is as common as, and easier than, gaming Medicaid LTC benefits.

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3/13/2014, “Emergency Rooms Are No Place for the Elderly,” by Pauline W. Chen, M.D., New York Times

Quote:  “The number of older people seeking health care is expected to increase significantly over the next 40 years, doubling in the case of those older than 65, potentially tripling among those over 85. In a health care system already critically short of primary care providers and geriatrics specialists, many of these older patients will likely end up in emergency rooms.”

LTC Comment:  Just as we didn’t have enough elementary schools for the baby-boomers in the early 1950s despite several years to plan, we won’t have enough caregivers for them in the 2030s despite decades to plan.

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3/12/2014, “Medicare Changes Prompt Enrollees to Reconsider Plans [link],” by Walecia Konrad, New York Times 

Quote:  "One reason Medicare Advantage plans have attracted a growing number of Americans - 29 percent of the 52 million Medicare recipients have chosen them, according to Avalere Health, a research firm - is that they have been, in effect, subsidized by the federal government.  Now the government is reducing, over time, what it pays the private plans, bringing payments in line with those for traditional Medicare." 

LTC Comment:  Another bait and switch by the government?

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3/12/2014, “Insurers wary of Obamacare unknowns as they plan for 2015,” by Caroline Humer, Reuters

Quote:  "For 2015, insurers must describe their health plans and proposed rates to state and federal regulators starting in April and May. But before they do, some of the most important factors that go into those decisions may not be known, from the size of the doctor and hospital networks that the federal government will approve to final 2014 enrollment figures and the relative health of their new plan holders."

LTC Comment:  It looks like the health insurance industry will pay dearly for following government down the primrose path of ObamaCare.

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3/12/2014, “CalPERS long-term care policyholders downgrade coverage, avoid rate hike [link],” by Jon Ortiz, The State Worker

Quote:  “About 16,000 people shifted from programs that guaranteed life-time benefits with inflation-adjusted payouts to policies that cap payments for convalescent care, in-home assistance and similar services, CalPERS executive Ann Boynton told reporters during a Tuesday conference call.”

LTC Comment:  But they kept their coverage and that’s the bigger story.

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3/12/2014, “Long Term Care Insurance Association Launches Drive To Double Sales [link],” Press Release, ExpertClick

Quote:  “A drive to bring back insurance agents who once sold long term care insurance and recruit new producers interested in hybrid solutions is being undertaken by the American Association for Long Term Care Insurance, a national trade group." 

LTC Comment:  You can’t win the war without soldiers.

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3/11//2014, “Lincoln Financial Group Introduces Next Generation of Long Term Care Funding Solution [link],” Press Release, Wall Street Journal

Quote:  "MoneyGuard(R) II offers clients the option to spread premiums over multiple years. Clients can select a variety of payment patterns, from single pay to over 10 years, providing cash flow flexibility for various financial portfolios. MoneyGuard(R) II offers clients the option to spread premiums over multiple years. Clients can select a variety of payment patterns, from single pay to over 10 years, providing cash flow flexibility for various financial portfolios." 

LTC Comment:  Another “combined product” to help meet the industry challenges of these times. 

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3/10/2014, “What Paul Ryan Got Right: Medicaid's Effect on Long-Term Care Insurance [link],” by Jeffrey Brown, Forbes 

Quote:  “The study in question – the one that Congressman Ryan got right despite the Fiscal Times claim to the contrary – was a paper I co-authored with Amy Finkelstein of MIT.  This paper, published in the 2008 American Economic Review, estimated that Medicaid could explain the lack of private insurance for about two-thirds to ninety percent of individuals, even if no other factors limited the market for insurance.  This despite the fact that long-term care expenditures constitute one of the largest financial risks facing the elderly in the United States and play a central role in determining the retirement security of elderly Americans.”

LTC Comment:  Good to know that Paul Ryan understands how Medicaid crowds out private LTC insurance.

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3/9/2014, “Researchers find way to predict Alzheimer's disease: report [link],” by Joel Landau, New York Daily News

Quote:  “A group of scientists claims it has developed a revolutionary test that can predict if someone will develop Alzheimer's disease.  The researchers told CNN they were able to find the connection through testing lipids levels in the blood. The testing found the blood test predicted who would get the degenerative brain disease that kills about half a million people a year with more than 90% accuracy — even if the patient has not exhibited any symptoms, the doctors said.”

LTC Comment:  Underwriting breakthrough?

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Updated, Friday, March 21, 2014, 11:11 AM (Pacific)

Seattle—

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LTC BULLET:  LTC EMBED REPORT FROM THE POLICY FRONT AT ILTCI ’14 ORLANDO

LTC Comment:  ILTCI ’14 in Orlando was another fine conference with record attendance despite downbeat LTCI industry results.  Details after the ***news.***

*** SPRING SPRANG YESTERDAY!  ENJOY.  Now, let’s go directly to today’s report.  ***

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LTC BULLET:  LTC EMBED REPORT FROM THE POLICY FRONT AT ILTCI ’14 ORLANDO

LTC Comment:  Damon and I are just back from the 14^th Annual Intercompany Long-Term Care Insurance Conference in Orlando, Florida.  Like its predecessors, this year’s meeting, with over 900 attendees including 100 presenters, was another big success.  Incomparable networking opportunities, a large exhibit hall and excellent food and drink (open bars) are typical of this industry meeting.  None of that would be possible without the generous support of many major supporters.  Check out the Diamond, Platinum, Gold and Silver sponsors here.

We asked conference founder Jim Glickman for his highlights of the meeting.  He responded: 

1.      The 14th Annual Intercompany LTCi Conference in Orlando, FL (co-sponsored by the LTC Section of the Society of Actuaries) had over 900 attendees, an all-time record surpassing the 855 attendees in Jacksonville, FL in 2008.  [NB:  the Silver Bullet of Long-Term Care was parked outside the conference venue in Jacksonville as we were well underway with the Center’s 2008 “National Long-Term Care Consciousness Tour.”]

2.      As usual, the largest representation from the 10 tracks (Actuarial, Claims, Compliance, Field Marketing, Group, Home Office Marketing, Management, Operations, Policy and Providers, and Underwriting) was from Field Marketing, followed closely by Actuarial and then Management).

3.      For the first time in several years, there were attendees from multiple insurance companies not currently participating in the LTCi marketplace, together with most of the larger companies, who have at least temporarily, stepped away from issuing new business.

4.      Also in attendance were several reinsurers not currently in the LTCi marketplace together with several representatives of the private equity world, apparently looking for new opportunities to consider.

5.      The two full days and two half days featured over 45 educational sessions, together with more than 20 hours of organized networking.

6.      The Exhibit Hall featured 54 Exhibitors, displaying all the latest innovations for insurance company home offices and their agents.

Next year’s 15^th Annual ILTCI Conference will take place March 22-25, 2015 at the beautiful Broadmoor in Colorado Springs, CO.  Conference organizers negotiated a $128 daily room rate!

Saturday, March 15, 2014

Pre-conference activities included Harley Gordon’s CLTC Master Class, always an important contribution to LTCI marketing and professionalism.

Following is a sampling of the conference sessions I attended.

Sunday, March 16, 2014

“Land This Plane” Report:  Ron Hagelman, Roger Loomis and John O’Leary reported on the findings of a “Delphi Study” conducted by the Society of Actuaries’ Long-Term Care Think Tank.  Dubbed the “Land This Plane” project, the research has been underway since January 2013.  A panel of 45 experts answered and defended their responses to numerous questions about how to solve America’s long-term care financing problems.  An executive summary of the project’s final support was distributed in hard copy, but you can read it now here.  The final report should be out within the next couple weeks.  We’ll watch for it and pass on the key findings.  Here are the highlights as reported in Orlando:

*  An overhaul of the LTC system is needed with private insurance involved
*  Government should have a role, but without “filial responsibility” required
*  Social insurance needs to be part of the solution (84% agreed)
        *  Catastrophic  (81%)
        *  Mandatory (78%)
*  Medicaid needs major reform
        *  Tightening eligibility, closing loopholes (81%)
        *  Modernization (86%)
                *  Remove institutional bias
*  NAIC regulations need revision (79%)
*  Marketing and sales improvement (67%)

Monday, March 17, 2014:  St. Patrick’s Day

Opening General Session:  The conference’s opening session featured motivational speaker Chris Gardner whose life story was portrayed in the book and movie “Pursuit of Happyness.”  Gardner’s message was that people always have a choice to make of themselves what they will.  “Spiritual genetics” are more important than biological genetics.  “Never let anyone tell you what you can’t do.”  Just do it.  His humorous, inspirational presentation was a good start for a convocation of shell-shocked, but persevering, LTC insurance experts dedicated to overcoming difficult industry challenges.  More on Chris Gardner and his story here.

Feder and Warshawsky on LTC Financing Policy:  Billed as “an in-depth conversation with two of the nation's most knowledgeable and thoughtful long-term care experts,” this session paired two Harvard PhDs with opposing views both of whom served on last year’s Long-Term Care Commission.  (Read the LTC Commission’s final report to Congress here.)  After John O’Leary’s introduction, the two policy wonks outlined very different perspectives and solutions.  Mark Warshawsky, who co-chaired the LTC Commission, offered a market-based analysis emphasizing the risk that government LTC financing would crowd out family care and private insurance.  Judith Feder took the position that government needs to take an even larger role in financing LTC than it does now.  She proposed a sliding-scale financing approach whereby people with higher lifetime Social Security incomes would have to wait longer than people with lower earnings for government financing of their catastrophic LTC costs to begin.  Presumably, private insurance might be available to cover the front-end cost, sort of like Medicare supplemental coverage.  While the LTC Commission on which both served failed to reach a consensus on the key issue of LTC financing, Warshawsky’s views prevailed in the majority report.  To wit, we should tighten Medicaid LTC eligibility rules, reduce the home equity exemption, and incentivize early and responsible private LTC planning.  (Those ideas should sound familiar to Center members and LTC Bullets readers.)

Short-Term Planning for Long-Term Care:  This session addressed the question “What can you do if you didn’t plan?”  Only 14 people attended, but that was due to a mis-print in the mini-schedule used by most of the conferees which showed the program would be presented a day after it actually look place.  Romeo Raabe, “The Long-Term Care Guy” from Green Bay, Wisconsin, and a Regional Representative of the Center for Long-Term Care Reform, opened the session.  He observed that most agents have gotten this breathless phone call:  “Remember that long-term care insurance you tried to sell me three years ago?  I’m ready.  How fast can you write me?  What?  Oh yeah.  Well it was only a little stroke.”  Romeo described how VA Aid and Attendance benefits can help when private LTC insurance is no longer an option.  He explained and gave examples of how he uses and combines medically underwritten annuities and reverse mortgages to help people generate the extra income they need to purchase LTC services and remain in their homes.  John Zwolanek, an elder law lawyer, discussed how he helps clients without using egregious Medicaid planning gimmicks.  He pooh-poohed the $300-per-hour Medicaid planners who push complex gimmicks like the “reverse half a loaf.”  Finally Bridgett Duber, of Elderlife Financial Services, explained her company’s bridge loan designed to help families span the financial gap between a long-term care crisis and the time when permanent financing can be secured from a reverse mortgage or other source.  Elderlife Financial Services, formally known as “Granny Mae,” was founded and guided for over a decade by Elias Papasavvas, a good friend and long-time supporter of the Center for Long-Term Care.  Slides for this program including Romeo’s case studies and details on Elderlife’s “financial concierge” service are here.

Tuesday, March 18, 2014

Aging and Community Redefined with an Eye Toward the Future:  Beth Ludden of Genworth introduced Dr. Gretchen Alkema, Vice President for Policy and Communications at the SCAN Foundation.  SCAN is 6 years old and addresses the needs of vulnerable older adults.  The foundation focuses on the “macro population level, service delivery and financing,” distributing $6 million per year in grants.  Dr. Alkema offered three take-home messages:  the LTC financing and delivery challenges are not intractable; they involve “people not patients,” and require a strategic framework for a path forward.  LTC financing boils down to “four big buckets”:  (1) front end or (2) back end funding which is public (3) or private (4).  My own take away from this presentation is that SCAN focuses on making LTC service delivery and financing more efficient without first understanding and fixing why long-term care became such a convoluted, dysfunctional mess.  They run the risk of fine tuning a Rube Goldberg machine that may run better but still poorly.  Better to get to the root of the problem first and then address causes, not only symptoms.  Slides for the program are here.

Squaring the Circle: The American LTCI Program: Paul Forte, CEO of the Federal Long-Term Care Insurance Program, presented his recently published version of the proposed “American Long-Term Care Insurance Program.” Forte calls the ALTCIP “A New Public-Private Model for Financing and Delivering Long Term Services and Supports.” Check out his detailed description of the program here and his slides for the conference program here. Like the LTCI program for federal employees and qualified relatives that he runs, the ALTCIP would market directly to consumers but without sales being limited to government workers. Critiquing the Forte proposal were G. Lawrence “Larry” Atkins, Ph.D., Executive Director, Long-Term Quality Alliance and staff director of the Long-Term Care Commission and Stuart Butler, Ph.D., Distinguished Fellow and Director, Center for Policy Innovation, The Heritage Foundation. Both discussants agreed Paul’s proposal is a valuable contribution to the search for a better way to market LTC insurance, although each had his own reservations and recommendations.

Managed Medicaid:  Understanding the Basics from an Industry Leader:  Paula J. Tietjen, Executive Director of Long-Term Care for the United Healthcare Community Plan of Florida, described that state’s ambitious effort to implement a Medicaid managed care program for the frail and infirm elderly.  See details in her slides here.  Combining personal care, case management, participant direction, and rebalancing toward home care, this approach sounds comprehensive and appealing.  But senior advocates worry the end result may be narrow provider networks, quality sacrifices due to cost cutting, and ultimately provider failures.  Still the basic approach is sweeping the country so it bears watching closely.

The Future of the Industry:  This general session, delivered to a packed auditorium, closed the conference.  Its goal was to address the “elephant in the room,” the industry’s challenges, missed assumptions, dismal recent results and uncertain future. 

Marc Cohen of LifePlans painted a picture of the LTCI industry’s current state.  See his slides here.  LIMRA’s recent  review showed LTCI sales down 30% last year and minus 8% compounded for the past  five years.  Most industry metrics are negative but there are some bright spots, such as “combination products.”  Marc opined that “we need to rethink the structure and distribution of the product, think beyond current LTC Partnership product, and do some unorthodox thinking.” 

Maria Ferrante-Schepis of Maddock Douglas said LTCI may face a “Napster moment,” as when someone who doesn’t belong in your business comes in and reinvents your business.  Citing Apple and Amazon as companies that Napstered several industries, she observed that some companies, such as American Airlines/Travelocity and Disney, have successfully Napstered themselves.  She recommends the latter course for LTCI.  “What if Mark Zuckerberg were to reinvent the insurance industry?,” she mused.  Exciting queries, but no answers except to suggest we all “lean into” the “sharing economy.”  See her slides here. 

Tom McInerney, CEO of Genworth, observed that “we can’t continue to do what we’re doing.  It doesn’t work.”  He came into the LTCI business with an insurance background and a bias toward following other big carriers out of the market.  But after close review he concluded LTC insurance is viable.  The key is to persuade regulators to allow periodic small premium increases as occur in other lines of insurance.  Everyone needs to recognize that morbidity and service delivery preferences are unpredictable decades in advance.  Aging demographics, the national debt, and huge unfunded entitlement liabilities mean a government takeover of LTC financing is impossible and private insurance is necessary.  See his slides here.

Wednesday, March 19, 2014

Two post-conference programs occurred this day:

Harley Gordon’s Advanced Sales & Marketing Program for CLTC Designated Professionals

“Alzheimer's Disease:  the What, the How and the Hope.”  This two part session included: 

Understanding the Latest In Alzheimer’s Research: Every week there is something in the news about Alzheimer’s research, treatments or prevention. Join Heather Snyder, PhD, Director of Medical and Scientific Relations at the Alzheimer's Association to hear the latest in what is real and promising in the fight against Alzheimer’s. (75 minute session)

Resources and Support for All Stages of the Disease: This session explores the benefits of early detection, how to address a diagnosis of Alzheimer’s disease, stages of the disease and most importantly the various programs and services of the Alzheimer’s Association available to help individuals. Presented by Ruth Drew, Director of Family and Information Services at the Alzheimer's Association. (75 minute session)

I didn’t stay for this program but Center for Long-Term Care Reform Regional Representative Sally Leimbach reports that it was excellent.

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Updated, Monday, March 10, 2014, 12:01 PM (Central)

Midland, Texas—

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LTC E-ALERT #14-008:  MANAGED LTC AND LTC NEWS AND COMMENT

LTC Comment:  Keep an eye on “managed long-term care.”  It’s coming on big, throwing the service delivery system into confusion, and changing LTC financing in radical ways.  Today’s first article gives some perspective on how long-term care providers see managed LTC.  The March 6 New York Times article which it discusses is highlighted and linked below.  Check it out too.  Managed LTC is a major trend comparable to the impact of HMOs on acute health care delivery a couple decades ago.

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3/10/2014, “Privately managed Medicaid threatens long-term care quality and options, New York Times article states [link],” by Tim Mullaney, McKnight's LTC News

Quote:  “People with complex needs could find themselves squeezed out of the most appropriate long-term care settings as Medicaid beneficiaries become enrolled in programs from private sector companies, The New York Times reported in a lengthy Page 1 examination of the subject Friday.”

LTC Comment:  This article gives a long-term care provider perspective on the New York Times report about managed LTC that we highlighted in Friday’s LTC Bullet and in today’s LTC E-Alert.

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3/7/2014, “LIMRA: LTCI-covered life count holds steady,” by Allison Bell, LifeHealthPRO

Quote:  "The number of people covered by new LTCI policies fell 26 percent between 2012 and 2013, to 172,178, according to the LIMRA data.  Premium revenue from new sales fell 30 percent, to $406 million.  The average level of premiums generated by each of the new covered LTCI lives fell 5.4 percent, to about $2,360.  But, in spite of all of the news reports about massive increases in LTCI premiums, the number of people with LTCI coverage held steady at about 4.8 million." 

LTC Comment:  Amazing persistency.

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3/7/2014, “Should Middle-Class Seniors and People with Disabilities be Paying More for Medicare? [link],” Medicare Rights Center 

Quote:  "If the President's plan were implemented today, people with incomes as low as $46,500 would be forced to pay higher premiums. Middle class seniors and people with disabilities are in no position to pay more for Medicare." 

LTC Comment:  Proponents claimed for decades that Social Security and Medicare were better than private insurance.  They were "social insurance" for which everyone paid the same premiums (payroll taxes) and everyone received the same benefits, whether rich or poor.  Critics claimed from the beginning that these programs failed to price risk and so rewarded irresponsibility.  They were Ponzi schemes and economic reality would catch up with them sooner or later.  Well, sooner has arrived and later looks worse than ever.  We predicted long ago that government would deal with burgeoning social insurance costs by means-testing the programs; in other words, by welfarizing Social Security and Medicare.  That process began years ago when Social Security benefits were taxed and Medicare Part B and Part D premiums were raised for higher income beneficiaries.  Means testing is accelerating now as this message from the Medicare Rights Center complains.  It just goes to show, you can evade economic reality for a long while, but not indefinitely.

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3/6/2014, “'Aging-in-place' features for the home gain higher profile as baby boomers get older [link],” by Wendy A. Jordan, Washington Post

Quote:  "Aging-in-place design choices are gaining a higher profile as baby boomers become a larger and larger segment of the population. . . .  This demographic change translates into demand for residential designs that anticipate changes in health, vision or mobility, and ensures that homes stay safe, comfortable and aesthetically pleasing." 

LTC Comment:  Boomers are waking up to aging-in-place design choices.  Now, how do we wake them up to planning for how to pay for aging in place?

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3/6/2014, “Financial 'vicious cycle' traps poor women caregivers,” by Shereen Jegtvig, Reuters 

Quote:  "Caring for aging parents can be a burden for anyone, but poor women are more likely to need to take it on and to enter a financial downward spiral as a result, a recent study suggests.  . . .  Overall, the researchers found, women who cared for their parents in 2006 and 2008 had lower incomes in 2008 and 2010. As household income increased, women were 23 percent less likely to care for parents in 2008 and 12 percent less likely to care for parents in 2010." 

LTC Comment:  Elder care is expensive in lost income and other ways.  More evidence supporting the value of LTCI.

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3/6/2014, “Pitfalls Seen in a Turn to Privately Run Long-Term Care,” by Nina Bernstein, New York Times

Quote:  “Even as public attention is focused on the Affordable Care Act, another health care overhaul is underway in many states: an ambitious effort to restrain the ballooning Medicaid cost of long-term care as people live longer and survive more disabling conditions.”

LTC Comment:  This is a long article, but I strongly recommend that you take the time to read it.  Managed long-term care, even for the most severely disabled Medicaid recipients, is sweeping the country.  State Medicaid programs are trying to save money by turning over their most severely impaired LTC recipients to giant managed care companies whose job it is to move them from mostly nursing home to mostly home care.  This article explains why the strategy is not working as well as hoped.  Savings from managed deinstitutionalization are not materializing and care quality is suffering.  The underlying problem, however, with which this article does not deal and which most analysts evade, is that Medicaid covers the long-term care for too many people who should, could and would have paid for their own care.  Managed home care for severely disabled patients won’t solve the problem of too many people dependent on welfare-financed long-term care.  That problem will only be solved by (1) returning Medicaid to its original purpose of being a long-term care safety net for the neediest and by (2) incentivizing all who are financially able to plan, save, invest and insure to pay privately for their own long-term care.

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3/6/2014, “2013 a record-setting year for Mutual of Omaha,” by Steve Jordon, Omaha.com

Quote:  "Mutual of Omaha reported Wednesday a record $359.2 million in net income in 2013, up 26.6 percent from 2012, crediting increases especially in individual Medicare supplement, employee benefit and mortgage loan products." 

LTC Comment:  Good for MoO.

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3/5/2014, “Senior Services Take a Hit in Obama Budget,” by Howard Gleckman 

Quote:  "Until Congress and the president break their impasse over raising taxes and fundamentally restructuring costly entitlement programs such as Medicare and Social Security, there is no chance that spending for federal senior services will increase. The money just won't be there." 

LTC Comment:  The money isn't there and hasn't been there for a long time, but that hasn't stopped Congress and the President from borrowing to spend more and more.  A little less of that is a good thing.  A lot less would be a better thing. 

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3/5/2014, “New study ranks Alzheimer's as third-leading cause of death, after heart disease and cancer [link],” by Tara Bahrampour, Washington Post 

Quote:  “The Centers for Disease Control and Prevention lists Alzheimer’s as the sixth-leading cause of death, far below heart disease and cancer. But the new report, published Wednesday in the medical journal of the American Academy of Neurology, suggests that the current system of relying on death certificates for causes misses the complexity of dying for many older people and underestimates the impact of Alzheimer’s.”

LTC Comment:  Families often object to having “Alzheimer’s” listed as the cause of death.

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3/5/2014, “A Third Of Nursing Home Patients Harmed By Their Treatment,” by Ina Jaffe, National Public Radio

Quote:  "In a large sampling of Medicare patients discharged from hospitals to skilled nursing facilities in one year, roughly a third of the patients were harmed by their treatment in the nursing homes, the study found. And most of that harm could have been prevented." 

LTC Comment:  We reported this study earlier, but the fact that NPR publicized it is news in itself.  Two-thirds of nursing home residents are funded by Medicaid at less than the cost of care.  You get what you pay for . . . or what you don't pay for.  Jawboning quality without adequate reimbursement won't work now any more than it did when Congress tried to demand quality in OBRA '87. 

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3/5/2014, “Required Minimum Distributions for Roth IRAs?,”  by Jeffrey Levine, Financial Planning

Quote:  "In other words, you would have to begin taking RMDs from your Roth IRA when you turn 70 1/2, the same way you do with your traditional IRA and other retirement accounts. If this were to come to pass, it would be a major game-changer when it comes to retirement planning.  The fact that Roth IRAs have no RMDs is one of the key reasons many people decide to contribute or convert to Roth IRAs in the first place.  If this proposal were to become law, conversions would make sense for far fewer people. Not only that, this proposal gives all those who haven't made Roth conversions over the years because they 'don't trust the government to keep their word" more ammunition.'"

LTC Comment:  Heads up! 

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3/5/2014, “White House proposes 'accelerated' skilled nursing facility payment cuts [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "The White House's proposed 2015 budget includes sharp cuts to skilled nursing facility reimbursements, which has drawn strong criticism from the nation's largest long-term care provider group." 

LTC Comment:  The more government reduces already inadequate Medicaid nursing home reimbursements, the more important it becomes for people to be able to pay privately for their own care-both to avoid nursing homes if possible and to ensure quality care if necessary. 

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3/4/2014, “GAO: 'Traditional Medicare' is private, too,” by Allison Bell, LifeHealthPRO

Quote:  "The traditional Medicare program affects the commercial health insurance and employee benefits markets by shaping provider pay rates; changing reimbursement rates for its enrollees in ways that change costs for enrollees in commercial insurance programs; and affecting private insurers' appetite for commercial business, by causing big, sudden shifts in profitability at some private carriers' Medicare administration units." 

LTC Comment:  What an interesting admission from GAO! 

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3/4/2014, “Don't Get Conned on Long-Term Care,” by Carole Moore, The Fiscal Times

Quote:  "Brian Gordon, president of MAGA, a long-term care planning and insurance company, says consumers should exercise extreme care when purchasing policies from telemarketers or agents who claim to be 'jacks of all trades.' Like Teicher, Gordon cautions consumers to ascertain that the agent knows his or her way around the industry, has a good track record and is knowledgeable on the art of filing a claim. He also advises choosing an insurance company that's not new to the game." 

LTC Comment:  Good advice from Center-supporter Brian Gordon of Center-corporate member MAGA.

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3/4/2014, “Government report: 1 in 5 Medicare patients suffers an adverse event while receiving post-acute SNF care [link],” by Tim Mullaney, McKnight's LTC News 

Quote:  “About 22% of Medicare beneficiaries experienced an adverse event during a post-hospitalization skilled nursing facility stay in fiscal year 2011, and the majority of these events were preventable, according to a newly released government report. Post-acute provider groups said many initiatives to lower this percentage already are underway.”

LTC Comment:  Medicare pays adequately for SNF care but Medicaid doesn’t.  Because most nursing home residents are on Medicaid and most SNF revenue comes from Medicaid, the bar of quality is lowered for everyone, including private payers, who also have to overpay because of low Medicaid reimbursements.

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3/3/2014, “Long-term care insurance costs go up, benefits go down; Experts say it's best to buy policy while still in good health [link],” by Tom Wilemon, The Tennessean

Quote:  “People on the wrong side of the baby boomer population curve are getting doubly squeezed. As costs for private long-term care insurance skyrocket, state Medicaid programs are imposing greater hurdles to qualify for nursing home coverage.”

LTC Comment:  When a reporter needs an “expert” to tell him people should buy insurance before the insurable event occurs, you know you have a problem.  People and reporters have been brainwashed by social insurance and ObamaCare which purport to be available whenever you need them, but never quite live up to the billing.

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3/3/2014, “Strict blood pressure control won't stem mental decline, study says [link],” by Melissa Healy, Los Angeles Times  

Quote:  "New research has found that using medication to aggressively drive down blood pressure or improve lipid levels does not do more than standard therapy to stem the decline in cognition that's common among such patients. In fact, aggressively lowering systolic blood pressure may accelerate brain shrinkage, which is a hallmark of dementia, the new study found." 

LTC Comment:  Can’t win for losing.

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3/3/2014, “Warning over 'risky' schemes to cut care bills,” by Nicole Blackmore, The Telegraph

Quote:  "Experts have warned local authorities are increasingly challenging cases of what they call 'deliberate deprivation of assets' - where people give away their wealth to avoid paying for care. Local authorities have the power to challenge such transfers and seize the assets." 

LTC Comment:  This article is about the UK but it goes to show we're not alone in this problem of "Medicaid planning" abuse. 

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3/3/2014, “Buyers beware of long-term care insurance,” by Cynthia Flash, The Spokesman-Review

Quote:  "The [1994 Bankers United] policy the couple bought covers skilled nursing-home care. But Dan's physician wrote to the insurance company stating his ailments are best served at a special dementia-care facility like the one where he is, rather than a more expensive skilled nursing home. Gunnarson called the insurance company and later had the director of the facility work on her behalf, but failed to get anywhere." 

LTC Comment:  Faced with a similar situation Genworth paid for my mother's assisted living although she had a nursing-home-only plan originally purchased in 1987. 

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Updated, Friday, March 7, 2014, 11:40 AM (Central)

Alpine, Texas—

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LTC BULLET:  ILTCI CONFERENCE PREVIEW

LTC Comment:  Whether you can attend or not, you should know what’s being discussed at this important LTC insurance industry conference.  We offer a preview after the ***news.***

*** NEW YORK TIMES reports today:  “Pitfalls Seen in a Turn to Privately Run Long-Term Care.”  We alerted the Center’s “Clippings Service” subscribers first thing this morning to this important article.

Quote:  “Even as public attention is focused on the Affordable Care Act, another health care overhaul is underway in many states: an ambitious effort to restrain the ballooning Medicaid cost of long-term care as people live longer and survive more disabling conditions.”

LTC Comment:  This is a long article, but I strongly recommend that you take the time to read it.  Managed long-term care, even for the most severely disabled Medicaid recipients, is sweeping the country.  State Medicaid programs are trying to save money by turning over their most severely impaired LTC recipients to giant managed care companies whose job it is to move them from mostly nursing home to mostly home care.  This article explains why the strategy is not working as well as hoped.  It claims that savings from managed deinstitutionalization are not materializing and care quality is suffering. ***

*** CLIPPING SERVICE.  Would you like to receive three emails a day alerting you to the most important new articles, reports, and data sources related to long-term care services and financing?  The Center for LTC Reform’s clipping service is available at no extra cost to Premier Members ($250), Premier Elite Members ($500), and Corporate Members ($1,000+).  Even non-members of the Center can receive our clippings for only $120 per year.  Steve Moses (and Damon if Steve’s away) scans the LTC literature, culls the most important items, and sends them to you every day with a representative quote, a link to the source, and often a brief comment or analysis.  It’s like getting your weekly LTC E-Alert in smaller doses and in real time.  Don’t be left wondering what your prospect is talking about when he or she has read something important that you haven’t seen yet.  To subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

*** SPEAKING OF LTCI CONFERENCES, don’t forget AALTCI’s 2014 LTC Sales Solutions Summit at the Westin Kansas City at Crown Center May 18-20, 2014.  For the agenda:  http://www.aaltci.org/i/2014summit.pdf.  For all the details:  http://www.aaltci.org/2014summit/index.html.  To register (only $99!):  http://www.aaltci.org/2014summit/register.html.  And if you can’t attend, you can even view some of the conference programs online for free:  http://www.insuranceexpos.com/. Watch a short video about the free online access:  http://www.insuranceexpos.com/ ***


LTC BULLET:  ILTCI CONFERENCE PREVIEW

LTC Comment:  The 14^th Annual Inter-Company Long-Term Care Insurance Conference convenes in Orlando, Florida at the Rosen Centre Hotel from March 16-19, 2014.

This is a premier industry meeting for a business facing many challenges and changes. Its theme this year is “Sharing News, Exchanging Views, and Forging Solutions,”

Most of the following “preview” comes from the conference’s website here:  http://www.iltciconf.org/.  We’ll only hit a few of the highlights. So take the opportunity to dig deeper there.

Damon and I will be onsite, so if you can attend, be sure to say hello.  We’ll report from the conference.  If you aren’t able to be there, we will try to give you a virtual visit with our “LTC Embed” dispatches.

Hopefully this preview will inspire some of you to join us at the conference after all or to send a representative from your company or organization.

Find a full conference brochure with brief descriptions of each session and information on all the conference sponsors here.

For a top line version of the agenda, go to:  http://www.iltciconf.org/agenda.htm

Harley Gordon will offer his CLTC Master Class on Saturday (3/15) and Sunday (3/16):  http://www.iltciconf.org/cltc%20master%20class.htm plus a special program, Advanced Sales & Marketing Program for CLTC Designated Professionals on Wednesday, March 19:  http://www.iltciconf.org/cltc%20master%20class.htm.

Keynote speaker will be Chris Gardner, well known for The Pursuit of Happyness:  http://www.iltciconf.org/keynotespeaker.htm

A Future of the Industry - General Session on Tuesday, March 18 will feature Marc Cohen (LifePlans), Maria Ferrante-Schepis (Maddock Douglas), and Thomas McInerney (Genworth) discussing:  “Carrier exits, in-force premium increases, missed assumptions, the persistent low  interest rate environment, few new carriers, shrinking distribution” and what to do about all the industry’s problems.

You can view the “PowerPoint” presentations for many of the breakout sessions here:  http://www.iltciconf.org/presentations.htm. 

Following are descriptions of several sessions that caught my eye.  All the sessions are described here.

1. Current Alternatives – Short Term Care/Combination Products
The major alternative products that exist in the market today include Short Term Care and combination products. Both products have their own niche markets. The speakers will give a brief introduction about each product, pros and cons from a consumer and insurance company's perspective, discuss the regulatory requirement, the existing market, the opportunity and obstacles in the future.

Alternative Products – Panel Discussion
Session Producer: Linda Chow, Milliman, Inc.
Panel: Dawn Helwig, Milliman, Inc.
Anthony Laudato, Hannover Re

5. Litipedia: How Recent Trends in LTC Litigation are Changing the Face of Risk
Show me an insurer and I’ll show you a litigant. Sooner or later, we all get sued. And litigation is on the rise. Not just the simple one-off claim disputes, mind you, but the larger and more sophisticated brand of actions that resonate across our industry. This interactive session gives a primer on key current legal actions and the take-aways that will help you reduce risk to the company.

Legal, Compliance, & Regulatory – Case Studies
Session Producer: Mike Rafalko, Drinker, Biddle & Reath LLP
Panel: Mike Rafalko, Drinker, Biddle & Reath LLP
Lisa Simmons, Edwards Wildman Palmer LLP

6. Feder and Warshawsky: Long-Term Care Financing Perspectives and Solutions
An in-depth conversation with two of the nation's most knowledgeable and thoughtful long-term care experts. Judy Feder and Mark Warshawsky come at the long-term care problem with years of experience and two different points of view. In this session, the panelists will discuss their different perspectives on private and social insurance, but importantly, the session will also explore where there are areas with the potential for agreement.

Marketing – Panel Discussion
Session Producer: John O’Leary, O'Leary Marketing Associates
Panel: Judy Feder, Georgetown University Public Policy Institute
John O’Leary, O'Leary Marketing Associates
Mark Warshawsky, American Enterprise Institute

13. There’s Room in the Tent: Clarifying Traditional LTCi/Hybrid Product Roles
According to LIMRA, individual LTC sales declined 27% through 3Q13. Fewer people are buying and they’re spending less when they do. But it’s not all bad news. Buyers continue to get younger –57 is the current average age – and in 2012, 57% were Boomers between 55 and 64 years old. This session will look at today’s buyer in the context of shifting priorities and changing market conditions. The session is designed to help carriers rethink your product choice, position for maximum effect, and find the best fit for your consumers.

Marketing – Panel Discussion
Session Producer: Suzanne Schmidt, Lincoln Financial Group
Panel: Suzanne Schmidt, Lincoln Financial Group
Steve Schoonveld, Lincoln Financial Group

15. Middle Market Success Stories
To the extent that people don’t buy LTCI, how are they solving this problem when they need assistance? This session will examine the concerns and motivations of middle-income families, and potential solutions for this market.

Alternative Products – Panel Discussion
Session Producer: Dr. Barbara Stucki, NestCare FPC
Panel: Rona Bartelstone, Our Aging
Linda Chow, Milliman, Inc.
Dr. John Migliaccio, Strategy and Research Consulting

20. Incremental Visualization - LTC Product Innovation in Minnesota
How is the State of Minnesota approaching the Long-term care dilemma facing its citizens? Minnesota has long been a leader in healthcare and aging innovation. They have identified the future impact long-term care will have on their state and they are doing something about it. Hear Minnesota Lt. Governor Yvonne Prettner Salon, Loren Colman, Assistant Commissioner of Continuing Care and LaRahe Knatterud, Director of Aging Transformation, discuss Minnesota's approach to LTC.

Marketing – Panel Discussion
Session Producer: John O’Leary, O'Leary Marketing Associates
Panel: Loren Coleman, State of Minnesota
LaRhae Knatterud, Minnesota Department of Human Services (DHS)
John O’Leary, O'Leary Marketing Associates
Yvonne Prettner Solon, Lt. Governor State of Minnesota

21. The Growing LTC Spectrum
This session will cover the LTC Product Spectrum. The speakers will discuss the scope of products, the future role of traditional products, new product definitions, costs, and benefits, training agents on how to make appropriate recommendations, and how new product designs can re-ignite worksite LTC sales.

Sales – Panel Discussion
Session Producer: Carroll Golden, Transamerica Long Term Care
Panel: Doug Burkle, Genworth Financial
William Comfort, Comfort Assurance Group, LLC
Bradley Ridnour, Transamerica Long Term Care
Session Survey

22. Short-term Planning for LTC
If you did not plan ahead, what are the options? Who is innovative? Who is providing advice? Creative ways to make the money last, America’s best kept funding secret, and protecting assets for self and family.

Alternative Products – Panel Discussion
Session Producer: Romeo Raabe, Consultant
Panel: Bridgette Duber, Elderlife Financial Services, LLC
Romeo Raabe, Consultant
John Zwolanek, Main Street Law Office

26. Watch Out! Protect Your Company from LTC Insurance Fraud
LTC Insurance remains a prime target for insurance fraud, especially with the shift to home-based and new care delivery models. Come hear from the experts about what your company needs to be doing today to avoid being a victim of fraud. This session will include: • Insights from the Claims Bureau USA with firsthand accounts of current fraud techniques • Legal experts will offer the latest information on fraud litigation • Company Special Investigations Unit (SIU) leaders share their advice and answer your questions.

Legal, Compliance, & Regulatory – Panel Discussion
Session Producer: Rod Perkins, Genworth Financial
Panel: Chuck Angiollio, Claims Bureau USA
Mike Gugig, Saul Ewing LLP
Harry Markland, Genworth Financial

28. Aging and Community Redefined with an Eye Toward the Future
The SCAN Foundation will present their new strategic framework that includes viable options for long-term care needs in 2014 and beyond. Hear about family, vulnerable adults, support models, decision making and various options to help families finance LTC expenses.

Policy & Providers – Teaching Session
Session Producer: Beth Ludden, Genworth Financial
Panel: Dr. Gretchen Alkema, The SCAN Foundation
Beth Ludden, Genworth Financial

29. International Market
What is working in other places? Demographics, care delivery system, family and consumer attitudes in 3 countries. Government programs used to fund LTC. Market for private LTC insurance and products provided.

Alternative Products – Panel Discussion
Session Producer: Vince Bodnar, Towers Watson
Panel: Dr. Yair Babad, University of Illinois at Chicago
Etienne Dupourqué, Consultant
Mark Dearsley, Partnership

34. Home Equity Release Products
With only a few years of coverage, policyholders may need to use other resources, particularly home equity, to serve as a wrap-around to comprehensive LTCI. This session will examine new ways of funding this gap for aging in place.

Alternative Products – Panel Discussion
Session Producer: Dr. Barbara Stucki, NestCare FPC
Panel: Steve Cinelli, PRIMARQ
John Nelson, Wall Street Without Walls

36. Squaring the Circle: The American Long Term Care Insurance Program
Paul Forte will present an overview of his proposal for a national public-private partnership to finance LTSS. His new framework would facilitate mass enrollment, create administrative efficiencies, and offer greater accountability and stability to consumers. In this session his proposal will be reviewed and discussed by nationally recognized policy experts Stuart Butler and Larry Atkins in light of the key policy issues facing LTSS financing today. The session will be moderated by Gretchen Alkema.

Marketing – Panel Discussion
Session Producer: Joan Melanson, Long Term Care Partners, LLC
Panel: Dr. Gretchen Alkema, The SCAN Foundation
Larry Atkins, Long-Term Quality Alliance
Dr. Stuart Butler, The Heritage Foundation
Paul Forte, Long Term Care Partners, LLC

37. Managed Medicaid - Understanding the Basics from an Industry Leader
Florida Managed Care programs have been leading the country in innovation and cost-effective solutions. This session will provide training in the basics of Managed Medicaid programs that focus on the chronically ill in both home and facility based settings. Learn the terminology that is buzzing around in this space, the priority of case management metrics and the role of state/federal government.

Policy & Providers – Teaching Session
Session Producer: Sharon Reed, Penn Treaty Network America
Panel: Sharon Reed, Penn Treaty Network America
Paula Tietjen, UnitedHealthcare Community Plan of Florida

41. Price Sensitivity in LTC Insurance
Consumers typically cite "it costs too much" as a primary reason for not buying LTCI. But if the premium were reduced, would they really buy? Or would the trade-off in coverage required to satisfy a lower premium turn off interest? At what premium price point does product interest increase? This session explores consumer price sensitivity in LTCI based on a recent study across age segments and at varying price points. Coverage trade-offs with enhanced "middle market" appeal are explored.

Marketing –Panel Discussion
Session Producer: Eileen Tell, Univita Health
Panel: Clark Heitkamp, United Health Actuarial Services, Inc.
Dr. Jeremy Pincus, Forbes Consulting Group
Eileen Tell, Univita Health

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Updated, Monday, March 3, 2014, 11:33 AM (Central)

Alpine, Texas—

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ILTCI ROOMS AND LTC NEWS AND COMMENT

LTC Comment:  Are you headed to the 14^th Annual Inter-Company Long-Term Care Insurance Conference in Orlando March 16-19?  Great, see you there.

But if you’ve had a change of plans and need to cancel your Rosen Centre hotel reservation, Jim Glickman asks you to contact him rather than the hotel.  Here’s Jim’s message:

To all:   The Rosen Centre is sold out for the nights of Monday March 17th, Tuesday March 18th, and Wednesday March 19th.   We have a waiting list for rooms (which is growing as more people register), but can only help those people if those of you who need to cancel part (such as Wednesday night only) or all of your reservation choose to contact me first to reassign your reservation.   If you cancel directly with the hotel, your cancelled reservation will unfortunately not be available to anyone on our waiting list.   Also, there are still rooms available at the $125 Conference rate for the Friday, Saturday, and Sunday nights before the conference.   Please let me know if you have any questions.   Thank you.   Jim Glickman 818-867-2223 

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3/1/2014, “State rules for nursing care aid are strict,” by Katie Evans Moss, The Tennessean

Quote:  “Choices, a part of TennCare Medicaid, is the major payer for nursing home care in Tennessee, but changes in nursing home admission requirements are affecting many patients. Navigating eligibility requirements for Choices can be difficult. An acuity scale determines if you meet the at-risk level of care based on how serious your medical problems are and how much help you need with daily activities. Take, for example, a person who must be physically helped to get from a bed to a chair. That person gets a maximum of four points if he can never do this on his own. If the same person is incontinent and can never use a toilet on his own, he gets three more points. That is still not enough to get the nine points required to qualify for Choices Groups 1 or 2.”

LTC Comment:  The good news is you’re eligible for Medicaid.  The bad news is that you don’t qualify medically for services.

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2/28/2014, “6 Ways Federal Reserve Policy Hurts Retirees,” by Chris Kissell, Fox Business

Quote:  "Fed policy effect No. 4: Costly long-term care premiums.  Long-term care insurance covers the cost of a wide range of expensive services you may need in your final years, including nursing home care, assisted living facilities and adult day care. This insurance potentially can save you and your family hundreds of thousands of dollars.  But thanks to falling interest rates, long-term care insurance premiums have skyrocketed, says Jesse Slome, executive director of the American Association for Long-Term Care Insurance." 

LTC Comment:  Double whammy.  Low interest rates mean seniors have less cash flow for LTCI premiums which low interest rates have forced to be increased.

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2/27/2014, “New Report: Seniors to Lose Benefits and Choices as a Result of CMS' Proposed Cuts to Medicare Advantage [link],” by Robert Zirkelbach, AHIP 

Quote:  "Seniors and people with disabilities enrolled in Medicare Advantage plans would face premium increases and benefit reductions of $35-$75 per month, or $420-$900 next year, if new Medicare Advantage payment cuts recently proposed by the Centers for Medicare and Medicaid Services (CMS) take effect next year, according to a new analysis by Oliver Wyman prepared for America's Health Insurance Plans." 

LTC Comment:  Cut what works and subsidize what doesn’t.

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2/27/2014,  “Better Coordinating Long-Term Care and Medical Treatment,” by Howard Gleckman, Forbes

Quote:  “The most important trend in care for the frail elderly and younger people with disabilities may be what’s called managed long-term supports and services, or MLTSS. This effort to combine medical care with long-term care would replace today’s disorganized, ineffective, and even dangerous system with one that can bring together complex care that’s being delivered by many different providers.

“Done well, this model has the potential to improve the quality of life for those receiving care and save money. Done poorly, it puts an extremely vulnerable population at even greater risk than it is today–and may not save money.”

LTC Comment:  Funding most long-term care through dysfunctional public programs that have mutually contradictory perverse incentives is what caused this problem.  Turning it over to giant private sector managed care organizations (MCOs) financed inadequately by those same public programs may mitigate the problem if “done well.”  But that is a very big “if.”  Far better would be to introduce more private financing and competition into the LTC marketplace by implementing recommendations of the Center for LTC Reform in many reports including this one:  Briefing Paper #5:  Dual Eligibles and Long-Term Care:  How to Save Medicaid LTC $30 Billion Per Year and Pay for the "Doc Fix" www.centerltc.com/BriefingPapers/5.htm -- (PDF for print)

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2/27/2014, “5 Financial Risks to Consider in Retirement,” Life & Health Advisor

Quote:  "Health/long-term care: Sadly, the escalating costs associated with long-term care during retirement can make the possibility of outliving one's retirement income a reality for many. Statistics reveal that as we age, there's an increased probability of our eventually needing assistance with basic daily activities. The truth is that most of us will need long-term care in our later years." 

LTC Comment:  It is encouraging to see this basic truth sinking in and articulated more often in the media.

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2/27/2014, “Many families will spend modestly for dementia care, a minority face financial ruin, expert tells senators [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "Low uptake of current long-term care insurance policies shows that these products are not working, Hurd told the senators. RAND is preparing a report on long-term care costs for dementia to help guide policymakers as they work to improve the status quo, Hurd noted."

LTC Comment:  Yet another study by "experts" will conclude LTC protection has to be nationalized because private insurance is "not working."  Nonsense.  Stop paying through Medicaid for most expensive LTC after the insurable event occurs and private insurance will grow.  Medicaid's "spend down" and "estate recovery" mandates are too weak and easy to avoid.  Consequently, the public has no sense of urgency about LTC until they need it.

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2/26/2014, “A Shortage of Caregivers,” by Judith Graham, New York Times

Quote:  “If you want fresh evidence of the caregiving crisis that lies in the not-too-distant future, look no further than the employment projections released by the Bureau of Labor Statistics late last year.  Topping the list of occupations expected to grow between 2012 and 2022 are personal care aides, in the No. 1 slot (580,800 new positions); home health aides, No. 4 (424,200 jobs); and nursing assistants, No. 6 (312,200 jobs).  . . .  About 75 percent of services provided by home care agencies are paid by Medicaid and Medicare. Financial pressures on both programs are enormous, making it unlikely that significant wage increases are in store. . . .  ‘The direction of Medicaid policy is to provide more services to frail seniors in the home and fewer in institutions,’ he said. Yet this won’t be possible unless steps are taken to create a more stable, better trained work force.’”

LTC Comment:  All the more evidence we desperately need more private LTC financing sources including genuine Medicaid spend down requirements, stronger estate recoveries, home equity conversion and long-term care insurance.

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2/26/2014, “LTC Global Marketing Names Diana Hayn Director of Talent Acquisitions [link],” Press Release

Quote:  "In this new position, Diana Hayn will be responsible for handling the extra flow of candidates from the more efficient recruiting drive LTCGM has been using in its efforts to bring agents in to selling Long Term Care insurance. LTCGM has developed new techniques to recruit potential candidates at a much higher efficiency." 

LTC Comment:  Congratulations.

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2/25/2014, “Study Questions Benefits of 'Medical Home' Programs for Chronically Ill [link],” by Melinda Beck, Wall Street Journal

Quote:  "Health-policy experts often talk up the notion of a 'patient-center medical home'-in which a medical practice actively manages patients' chronic conditions to improve their health and avoid hospitalizations-as the ideal model for transforming the U.S. health-care system. But a study of one of the earliest and largest medical-home pilots found that after three years, patients' health improved in only 1 of 11 measures. There was no change in hospital or emergency-room use, and no significant cost savings."

LTC Comment:  The best-laid plans of mice and academics go awry unless and until they are tested in a market.      

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2/24/2014, “Obama Administration Proposes 1.9% Cut In Medicare Advantage Payments [link],” by Mary Agnes Carey, Kaiser Health News

Quote:  “Late Friday, the Centers for Medicare & Medicaid Services announced proposed rates that officials said could mean payment reductions of 1.9 percent for the private plans in the program. But insurers, who have led a fierce lobbying campaign against payment reductions, say the Medicare Advantage plans would sustain a far deeper cut.”

LTC Comment:  The squeeze is on . . . already!

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2/24/2014, “Link Between BP Meds and Falls Affirmed for Some,” by Todd Neale, MedPageToday

Quote:  “Older adults with multiple chronic health conditions -- including hypertension -- appear to be at greater risk for sustaining serious fall injuries when treated for high blood pressure, an observational study showed.”

LTC Comment:  Damned if you do and damned if you don’t.

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2/24/2014, “Implementing Health Reform: Medicaid Asset Rules and the Affordable Care Act [link],” by Timothy Jost, Health Affairs

Quote:  "In sum, most of the rules that apply to traditional Medicaid recipients with respect to LTSS (except for lien requirements) are likely to apply to MAGI-eligible individuals who receive LTSS.  CMS intends, however, to take steps to avoid applying estate-recovery rules to MAGI-eligible individuals who do not receive LTSS to keep this from becoming a barrier to Medicaid expansion eligibility." 

LTC Comment:  There has been much ado in the media lately about the possibility that Medicaid estate recovery will impact new enrollees who end up on Medicaid due to ObamaCare.  This commentary is more "inside baseball" than most of you are likely to want, but it does do a good job of explaining the situation and allaying those concerns. 

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2/24/2014, “NYL Launches Next Generation Asset Preserver,” Press Release

Quote:  "This product is designed to help individuals guard against today's surging costs of long-term care, including nursing home care, assisted living and extended at-home care, while enjoying the traditional benefits of permanent life insurance."

LTC Comment:  Another hybrid.

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2/24/2014, “Incorporating the LTCi Solution: The once stand-alone product has become integral to retirement income strategy [link],” by Maria Sarci, Life & Health Advisor

Quote:  "Today the LTC planning market is vastly different and in a good way. There are more solutions available to agents and consumers than ever before. Linked-benefit solutions continue to enjoy double-digit growth each year, and insurance companies continue to innovate their standalone long-term care solutions."

LTC Comment:  Silver lining on a difficult market created by bad public policy.

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2/23/2014, “Options for Covering Long-Term-Care Costs; Facing scaled-back benefits and premium hikes, baby boomers can use several strategies to help cover future costs [link],” by Kimberly Lankford, Kiplinger's Retirement Report

Quote:  "As boomers help their aging parents, many are experiencing firsthand the overwhelming costs of long-term care. And they want to protect their own children from these crushing responsibilities if they end up needing care themselves."

LTC Comment:  And just imagine how much more daunting it will be when boomers are the care receivers instead of the care givers. 

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2/21/2014, “The Baby Boomer Housing Bust,” by Mary Meehan, Forbes

Quote:  "Boomers had an unreal real estate run for decades. But it's about to come to a hard stop. Social shifts and demographic forces (more than the ups or downs of any local housing markets) are poised to change Baby Boomers' futures."

LTC Comment:  With the baby-boomers downsizing, who will buy all those McMansions?

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2/21/2014, “Blockbuster merger will bring Brookdale, Emeritus together, create largest senior living company [link],” by Tim Mullaney, McKnight's LTC News 

Quote:  "Brookdale Senior Living and Emeritus Senior Living will merge through a $2.8 billion deal, in a move that Brookdale CEO T. Andrew Smith said will be 'transformative for the industry.'  . . .  'In an industry with very attractive long-term growth dynamics, this strategic merger creates the first national, predominantly private-pay based, senior living solutions company,' said Smith." 

LTC Comment:  Bigger isn’t always better, but economic activity in a dominantly private-pay sector of long-term care is promising.

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2/20/2014, “Many on Medicare get painkillers from multiple doctors,” by Deborah Kotz, The Boston Globe

Quote:  "In the study published Wednesday in the British Medical Journal, researchers reviewed more than 1.2 million medical records of Medicare patients who received a prescription for an opioid— such as hydrocodone, fentanyl, morphine, and oxycodone—and found that nearly 35 percent had received a prescription from more than one doctor. One-third of this group got their prescriptions from four or more doctors.”

LTC Comment:  With no profit motive or competition, Medicare lacks a financial incentive to avoid such disastrous mis-handling of dangerous drugs.

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2/20/2014, “Medicaid-only long-term care residents driving up state expenditures, report finds [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "The high-expenditure group represented 4.3% of total Medicaid beneficiaries nationally, but accounted for 31.6% of state Medicaid spending in 2009, according to the report. Dual eligibles were a costlier group, accounting for 35.2% of spending.  The remaining third of Medicaid dollars went toward the beneficiaries who were not in the high-expenditure or dual-eligible groups - and this cohort accounts for the majority (81%) of those enrolled in Medicaid, the report notes."

LTC Comment:  Because a disproportionate share of Medicaid expenditures go to a small percentage of recipients who need long-term care, public policy to discourage Medicaid dependency by encouraging early LTC planning and private LTC financing alternatives would result in disproportionately high savings to the program and tax payers.

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2/19/2014, “California bill would ban gender-based LTCI pricing,” by Allison Bell, LifeHealthPRO 

Quote:  “Assembly Member Mariko Yamada, D-Davis, Calif., has introduced Assembly Bill 1553, a bill that would prohibit gender-based LTCI pricing.”

LTC Comment:  Unlikely to pass but worth knowing about.

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2/18/2014, “Unique Retirement Planning Challenges Facing Hispanic Americans,” by Jamie Hopkins, Forbes

Quote:  "The bright side for both financial planners and for the Hispanic American community is that the study found that they are 'equally likely to work with a financial advisor, if contacted.' This provides an amazing opportunity for financial advisors and retirement planning specialists to reach out and assist Hispanic Americans in planning for the unique retirement challenges they face."

LTC Comment:  Another rapidly growing demographic to target . . .  and help.

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2/17/2014, “Should You Self Insure Against Long-Term Care Risk Or Buy Insurance? [link],” by Howard Gleckman, Forbes

Quote:  “So what most people face is an impossible choice. Realistically, most won’t save for their long-term care needs despite Ms. Thakor’s advice (many won’t even save enough for healthy retirement). Yet, they won’t buy LTC insurance either, and for the most part can’t buy catastrophic coverage even if they want to. That means yet another generation unprepared and likely with nowhere to turn but Medicaid.”

LTC Comment:  At long last, an article by this writer with which I can largely agree, although we strongly disagree on the cause of the problem and the solution.  People will buy LTC insurance, even at newly increased premiums, when Medicaid stops mitigating the consequences for the middle class and affluent of failing to insure.  Likewise, even more consumers would buy LTCI if the government got smart and gave large, above-the-line tax deductions for catastrophic policies that would save Medicaid billions and make critical back-end coverage more affordable.  Alas, don’t hold your breath.

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2/17/2014, “Long-term care insurance rising,” by John Reid Blackwell, Richmond Times-Dispatch 

Quote:  "While long-term care insurance has been on the market for about four decades, it is still a relatively new type of insurance compared with others such as homeowner and health insurance.  McInerney said insurers approached the pricing of long-term care insurance the wrong way from the start. It should have been structured less like life insurance and more like health insurance."

LTC Comment:  Article has long section on Genworth's McInerney's views on LTCI.

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Updated, Friday, February 28, 2014, 11:47 AM (Pacific)

Alpine, Texas—

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LTC BULLET:  HOW TO END MEDICAID ANNUITY ABUSE

LTC Comment:  Medicaid-compliant annuities enable wealthy people to divest unlimited assets making them immediately eligible for Medicaid LTC benefits.  What should be done?

LTC BULLET:  HOW TO END MEDICAID ANNUITY ABUSE

LTC Comment:  The problem of waste, fraud and abuse of scarce Medicaid resources is long-standing, wide-spread, and repugnant.  No worse misuse of the welfare program exists than so-called Medicaid-friendly or Medicaid-compliant annuities.  These special annuities enable the affluent to qualify easily for Medicaid’s expensive long-term care benefits without spending down their own resources as Congress intended.  They reduce public awareness of and demand for private LTC planning and financing alternatives, thus resulting in more people unprepared to pay for their own long-term care and dependent on public assistance. 

State Medicaid programs have litigated against the use of Medicaid annuities to dodge the program’s spend down rules.  But those lawsuits failed.  Courts have held that federal law precludes preventing the use of annuities in this way so long as the annuities comply with all other laws and regulations.  Appeals by some states to the Centers for Medicare and Medicaid Services (CMS) have not resulted in corrective action by administrative means.  It seems evident now that resolution will have to come in the form of an Act of Congress.  But, without strong public support, Congress is unlikely to tackle this politically sensitive issue.  Such action would eliminate a lucrative loophole used mainly by the same affluent constituents most likely to finance congressional campaigns.

Persuading Congress to act will require a systematic effort to identify, document and publicize the frequency and cost of Medicaid annuities.  The Center for Long-Term Care Reform has prepared the following proposal for a project to achieve those objectives. We invite our readers to forward this proposal to any company, organization, or foundation that might consider supporting this work.

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

How to Eliminate Fraud, Waste and Abuse
Caused by Medicaid-Compliant Annuities
a proposal by the
Center for Long-Term Care Reform
submitted to the [sponsor to be decided]

I.  The Problem

            Medicaid is a means-tested public assistance program, i.e., welfare.  Yet Medicaid is the principal funding source for long-term care (LTC) throughout the United States, not only for the poor, but for most Americans.  Medicaid’s basic LTC eligibility rules allow people with income below the cost of a nursing home—$82,855 on average as of 2013—to qualify.  Many large assets are exempt, such as the equity in a home and contiguous property up to as much as $814,000 and, without a dollar limit--one business including the capital and cash flow, one automobile, prepaid burial expenses, term life insurance, and IRAs.  Research shows that easy access to Medicaid’s LTC benefits by people with substantial assets after they already need care discourages early and responsible LTC planning and crowds out private LTC financing alternatives.

Further exacerbating this basic problem are Medicaid-compliant annuities which allow wealthy individuals to (1) shelter and divest virtually unlimited assets, (2) avoid Medicaid spend down requirements entirely, and (3) qualify for LTC benefits immediately.  Three recent U.S. Court of Appeals cases bearing on Medicaid-compliant annuities—Geston v. Anderson in North Dakota ($400,000 annuity), Hughes v. McCarthy in Ohio ($175,000), and Lopes v. Department of Social Services in Connecticut ($167,000)—have dramatically complicated this issue by reversing state Medicaid programs’ efforts to prohibit the abuse of Medicaid annuities.  Two national studies have estimated the cost of Medicaid-compliant annuities to the program at $1 billion (2003) and $200 million (2005) per year.  Whatever their actual cost, the use of Medicaid annuities to artificially impoverish affluent people in order to qualify them for public assistance violates the congressionally intended purpose of Medicaid which is to be a long-term care safety net for people in need.

II.  Substantive Proposal

            Closing the Medicaid-compliant annuity loophole would save the state and federal governments substantial amounts of money.  It would end a practice that discourages private long-term care planning and causes unnecessary Medicaid dependency.  Entreaties to the Centers for Medicare and Medicaid Services (CMS), which oversees Medicaid at the federal level, and court challenges at the federal district and appeals court levels have not curtailed the use of Medicaid annuities.  To resolve the problem will likely require action by the Congress of the United States.  The best way to encourage Congress to act is to make the public aware of the widespread abuse of Medicaid-compliant annuities and to encourage citizens and the media to call for statutory corrective action.  Toward that end, we propose to . . .

·        Research and document federal and state Medicaid LTC eligibility laws and regulations that encourage public assistance dependency for LTC.

·        Review the issue of Medicaid-compliant annuities and compile examples of annuities having been used in North Dakota, Ohio, Connecticut and other states to shelter or divest large amounts of assets.

·        Study all relevant court cases, including appeals, and identify necessary legislative changes to prevent the abuse of Medicaid annuities.

·        Interview attorneys who represented the state Medicaid programs in cases challenging Medicaid-compliant annuities and seek their advice regarding needed changes in the law.

·        Interview state staff who make, interpret, and implement LTC eligibility policy to determine and document the frequency of Medicaid annuity use and the amounts involved.

·        Seek advice from Medicaid directors and eligibility policy specialists, supervisors and workers with experience handling annuity cases regarding needed changes.

·        Interview Medicaid estate recovery staff on methods used in various states to discourage the use of annuities:  what has worked where?

·        Travel to five or more key states to accomplish these reviews and interviews.

·        Review published research conducted by the American Public Health Services Association in 2003 that resulted in a potential savings estimate of $1 billion per year from closing the Medicaid-compliant annuity “loophole.”

·        Summarize, analyze and critique findings by Robert A. Levy, et al., for CMS in 2005 that estimated potential savings at only $200 million per year.

o       This research arguably underestimated potential savings by inadequate sampling, failing to consider moral hazard or the crowd out effect on private LTC financing and because the Deficit Reduction Act of 2005 (DRA ’05) later closed other Medicaid planning loopholes making annuities more attractive, frequent and larger.

o       This research appears to have a pro-annuity bias as the reviewers did not interview long-term care providers or insurers who are most impacted negatively by Medicaid annuities, but rather only consulted one annuity marketer and an elder law attorney representing the “industry” that benefits from Medicaid annuities.

o       This research did not review or cite sources in the voluminous Medicaid estate planning literature which widely advocates the use of Medicaid annuities to circumvent Medicaid spend down rules.

·        Document and publicize egregious examples of Medicaid-compliant annuities

·        Interview key state legislators and/or their staff to gauge their interest and willingness to fix the problem and seek advice on best strategy to do so.

·        Interview members of Congress and/or their staff to gauge interest in fixing the problem and to get advice on the best strategy.

·        Work with staff in Congress to develop proposed legislation to close the Medicaid annuity loophole.

·        Estimate the cost of Medicaid annuities to the Medicaid program.

·        Propose specific changes to federal and state law to fix the Medicaid annuity problem.

·        Publish articles through national and state think tanks identifying abuse of Medicaid-compliant annuities and advocating legislative action at the state and federal levels to close the loophole.

·        Publish op-eds in national and state-level media identifying abuse of Medicaid-compliant annuities and advocating legislative action at the state and federal levels to close the loophole.

To accomplish these objectives, we will contact Medicaid officials in the states most seriously affected by the Medicaid annuity problem.  Through them we will reach and interview the key front line staff who know the most about the issue.  We will also seek their advice and assistance in identifying and contacting their peers in additional states until we have reached and interviewed all state and federal officials with knowledge of and a concern for the impact of Medicaid annuities.  We will also contact and work cooperatively with staff of the State Policy Network affiliates in each state.  We anticipate that the research, report writing, and article and op-ed preparation and publication will consume approximately six months full time effort.

III.  Business proposal

Deliverables, within 26 weeks of the project start date, will include (1) a comprehensive report (at least 35 pages) that explains the problem of Medicaid annuities, documents the degree of the problem, and recommends solutions to achieve savings per annum of at least 1,000 times the cost of the contract; (2) distribution of electronic reports to all interviewees and respondents, (3) several newspaper op-eds in affected states, and (4) an article suitable for publication in a relevant professional journal.

Stephen Moses (professional bio attached or viewable here:  http://www.centerltc.com/steves_bio.pdf) will conduct all of the research and interviews for this project.  He has conducted many similar studies over the years.  Examples of his published articles and project reports are at http://www.centerltc.com/reports.htm and on the websites of many state and national think tanks, including the Cato Institute, the Pacific Research Institute in California, and the Manhattan Institute’s Empire Center for New York State Policy.

Total cost:  $75,000 plus reasonable travel expenses not to exceed $10,000.  Payable:  $10,000 upon signing; $10,000 upon submission of five monthly progress reports; and $15,000 upon submission of acceptable deliverables.

Respectfully submitted February 28, 2014

Stephen A. Moses

President

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Updated, Friday, February 21, 2014, 7:00 AM (Pacific)

Alpine, Texas—

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LTC BULLET:  CAN LONG-TERM CARE SURVIVE?

LTC Comment:  How vulnerable is our current and likely future long-term care system to the ravages of aging demographics, unfunded entitlement liabilities, bad economic policies, and a growing entitlement mentality? 


LTC BULLET:  CAN LONG-TERM CARE SURVIVE?

LTC Comment:  We welcome your comments on the following draft article, on the findings it summarizes, and on the reports it references.  My thanks to Bob Helms of the American Enterprise Institute for his helpful suggestions.

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“Can Long-Term Care Survive?”
by
Stephen A. Moses

The question policy makers and analysts usually ask is “How shall we pay for long-term care?”  It stumps them every time.  Last year’s Long-Term Commission punted on the question.  The only hint of consensus is that public and private funding must combine somehow.  But how? 

Maybe it’s time we ask a more basic question:  Can Long-Term Care Survive?  If we don’t find a way to pay for it, what is the likelihood our current non-system of service delivery and financing can endure the coming age wave?  If we can muddle through, all right.  But what if prospects are dim?  Then how to finance LTC takes on far greater urgency.

America’s dominantly Medicaid-financed, nursing-home-based long-term care system is in turmoil.  State Medicaid programs struggle to constrain LTC expenditures by expanding managed care and rebalancing from institutional to home care.  But total Medicaid LTC costs continue to rise and private LTC financing continues to decline.  Few people save, invest or insure to pay for their own long-term care.

What if those trends persist?  Can long-term care survive in its current or likely future form?  The answer depends on how the USA and each state copes with the daunting problems of aging demographics, Medicaid funding, economic growth and social policy.  It bodes poorly that we already have too many sick elderly people dependent on inadequately funded public programs without the means to pay for their own care. 

The Index of Long-Term Care Vulnerability

How can we measure the prospects for future success or failure?  The Center for Long-Term Care Reform developed an “Index of Long-Term Care Vulnerability” as a tool to help answer that question.  The Index incorporates seven key metrics to which the analyst ascribes weights.  The Index, an Excel worksheet, automatically calculates maximum points for each metric out of a total possible of 1000.  The analyst then scores each sub-factor under the metrics using links to data sources provided in the Index instructions.

Here’s how we ranked the key metrics followed by the results we obtained for the United States and three states.

1. How many older people are coming in the next few decades?  (5%, 50 points)
2. How sick will they be?  (5%, 50 points)
3. How viable is Medicaid as a long-term care payer?  (15%, 150 points)
4. How reliable is federal revenue on which Medicaid mostly depends?  (20%, 200 points)
5. How reliable is state revenue on which Medicaid secondarily depends?  (20%, 200 points)
6. How much private-pay revenue is available to relieve LTC financing pressure on
Medicaid?  (15%, 150 points)
7. How strong is dependency on public programs (i.e., the entitlement mentality)?  (20%, 200 points)

You may assign different weights for each metric and different scores for each sub-factor.  Our objective with the Index was not to provide an indisputable conclusion but rather to ask “Can LTC Survive?,” to lay out some key issues that go into answering that question, and to provide links to sources of data that shed light on the crucial factors and sub-factors . 

Results

So far, we have applied the Index of Long-Term Care Vulnerability to the United States and to the states of Virginia, Georgia and New Jersey.  In the following reports, you can find our analysis, a completed Index for each of those states with footnotes to the data sources used, and a blank Index that you can experiment with by filling it out yourself.

“The Index of Long-Term Care Vulnerability:  A Case Study in Virginia” was published in November 2013 by the Thomas Jefferson Institute for Public Policy and the Center for Long-Term Care Reform.  It is posted on their websites here and here, respectively.

“The Index of Long-Term Care Vulnerability:  A Case Study in Georgia” was published in December 2013 by the Georgia Public Policy Foundation and the Center for Long-Term Care Reform.  It is posted on their websites here and here, respectively.

“The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey” was published in January 2014 by the Common Sense Institute of New Jersey and the Center for Long-Term Care Reform.  It is posted on their websites here and here, respectively.

The results are not encouraging.  We concluded that the United States—scoring only 529 out of a possible 1000 points—has little more than a 50/50 chance to sustain its long-term care system through the aging of the baby boom generation.  Virginia’s prospects (501 points) and Georgia’s (455 points) are only slightly worse, but New Jersey’s situation (338 points) is nearly hopeless with a two-thirds probability the state’s LTC system will fail.

How did we reach these conclusions?  You will need to consult the individual state reports and their vulnerability indices for a full explanation.  But in a nutshell, here’s how we scored each of the key metrics:

Factor #1—How many older people are coming in the next few decades?

The key metric for aging demographics is how many people over age 85—the population cohort most likely to need long-term care—there will be in the future.  We applied a weight of 5% for a possible 50 points out of 1000 total.  For the USA, 2% of the population was over 85 in 2012 with an increase of 69% expected by 2032 and 224% by 2050.   Providing long-term care to this rapidly increasing group is a formidable challenge so we assigned only one-third of the possible points, 17 to the USA.  Virginia begins with a smaller proportion over 85 (1.7%) but its old-old (85 plus) cohort grows even faster through 2032 (101%) and 2050 (307%).  We gave Virginia 14 points.  Georgia is comparable to Virginia.  It starts at only 1.4% in 2012, but increases 121% and 375% through 2032 and 2050, respectively.  Georgia got 14 points also.  New Jersey begins with a higher percentage of old-old than the USA (2.2%), but its expected increase is somewhat less, 58% through 2032 and 206% through 2050.  So 14 points for New Jersey too.  All three states face similar vulnerability for aging demographics, just slightly more vulnerable than the USA as a whole.  Hence slightly fewer points.

Factor #2—How sick will they be? 

We applied a weight of 5% (50 points) and ranked the USA and all three states based on their percentage of people age 65-plus with disabilities including self-care difficulty, cognitive difficulty, any disability, and nursing facility residents with dementia.  Consult the state reports for scoring details.  The totals were USA, 22; VA, 27; GA, 14; and NJ, 26.  In other words, Virginia and New Jersey’s aged populations are somewhat healthier than the USA average, but Georgia’s elderly are markedly sicker. 

Factor #3:  How viable is Medicaid as a long-term care payer? 

Medicaid is now and will remain for the foreseeable future the principal payer for long-term care throughout the United States.  The program’s sustainability is critical to long-term care financing.  We applied a weight of 15% to this factor with 150 potential points.  To measure Medicaid’s sustainability in future decades, we considered (1) the percent of budget devoted to Medicaid, (2) the percent of LTC spending for aged and disabled recipients, (3) the increase in nursing home spending over time, (4) the increase in Home and Community-Based Services (HCBS) spending over time, (5) HCBS spending as a percentage of LTC spending, (6) Federal Medical Assistance Percentage (FMAP), (7) Affordable Care Act (ACA) Medicaid expansion or not, (8) LTC eligibility strictness, (9) Skilled Nursing Facility (SNF) reimbursement shortfall, (10) Medicaid SNF reimbursement rate compared to private-pay rate, (11) dual eligibles vulnerability, (12) rebalancing vulnerability, and (13) managed care vulnerability.  Refer to the respective worksheets for detailed scoring.  Totals are USA, 97; VA, 81; GA, 114; NJ, 68. 

Factor #4:  How reliable is federal revenue on which Medicaid mostly depends? 

Without federal matching funds averaging 57% of their total Medicaid expenditures, state Medicaid programs would collapse.  We assigned a weight of 20% to this factor, 200 possible points.  Sub-factors considered were (1) total Medicaid spending, (2) five year increase in spending, (3) federal and state shares of Medicaid costs, (4) dependency on “provider taxes,” (5) Social Security unfunded liability, (6) Medicare unfunded liability, and (7) federal debt.  Refer to the respective worksheets for detailed scoring.  Totals are USA, 89; VA, 70; GA, 71; NJ, 64.

Factor #5:  How reliable is state revenue on which Medicaid secondarily depends? 

States can only draw down federal Medicaid matching funds by putting up revenue of their own.  Therefore a healthy economy is critical to the sustainability of long-term care programs.  We assigned a weight of 20% to this factor, 200 total possible points.  Sub-factors considered were (1) ALEC-Laffer State Economic Competitive Index, (2) Forbes Best States for Business and Careers, (3) Cato’s “Fiscal Policy Report Card,” (4) Mercatus Center’s “Freedom in the 50 States,” (5) Tax Foundation’s “State and Local Tax Burdens,” and (6) State Health Facts State Budget Shortfalls.  Refer to the respective worksheets for detailed scoring.  Totals are USA, 160; VA, 156; GA, 139; NJ, 55.

Factor #6:  How much private-pay revenue is available to relieve LTC financing pressure on Medicaid? 

If public financing falters, long-term care viability will depend on private resources such as savings and home equity.  We assigned a weight of 15 to this factor, 150 possible points.  Sub-factors are (1) asset spend down potential, (2) Medicaid estate recoveries, (3) home equity conversion potential, and (4) private long-term care insurance.  Refer to the respective worksheets for detailed scoring.  Totals are USA, 77; VA, 69; GA, 47; NJ, 49.

Factor #7:  How strong is dependency on public programs (i.e., the entitlement mentality)? 

To the extent citizens have come to expect government to provide their long-term care, service delivery and financing are more vulnerable than when people expect to take personal responsibility for funding their own care.  We assigned a weight of 20% or 200 points to this factor.  Sub-factors include (1) percentage of births financed by Medicaid, (2) Food Stamp participation rate, (3) the degree by which welfare proceeds exceed the minimum wage, (4) the degree to which Social Security Disability Insurance replaces work, (5) unfunded pension liabilities, (6) nursing facility residents dependent on Medicaid, and (7) Medicaid recipients with prepaid burial plans that avoid spend down requirements.  Refer to the respective worksheets for detailed scoring.  Totals are USA, 67; VA, 84; GA, 56; NJ, 62.

What is the bottom line? 

Be scared.  Be very scared about the future of long-term care financing and services wherever you live in the USA.  By our reckoning, the USA and two of the states we reviewed in detail (Virginia and Georgia) have only one chance in two of surviving the age wave with their LTC programs intact.  New Jersey’s prospects are even worse, about one in three.

What might a long-term care system failure look like?  Exploding public expenditures for long-term services and supports.  Long-term care expenses crowding out other critical government priorities such as education, highways, and law enforcement.  More municipalities and then states declaring bankruptcy.  Nursing homes and home health agencies closing due to cuts in federal and state funding.  Caregiver shortages caused by inadequate wages.  Plummeting quality of paid care.  Excessive strain on family and friends forced to provide even more free care than they do now.  Loss of personal savings and home equity as Medicaid and Medicare spend less on home care and skilled nursing home care.  Concomitant reduction in retirement income and acute health care security as more personal wealth goes into funding long-term care.  Development of a two-tier long-term care system; best for the affluent and worst for the poor.

If you see many of these outcomes starting to happen already, you might want to ask this next question and see if the Index of Long-Term Care Vulnerability can help you answer it.

Can long-term care survive in my state?

How would your state score on the Index of Long-Term Care Vulnerability?  The Center for Long-Term Care Reform can review the key factors, calculate the metrics, and give you an answer.  To discuss that possibility contact Center president Stephen Moses at 425-891-3640 or smoses@centerltc.com.

But feel free to use the Index of Long-Term Care Vulnerability to compute your own estimate of your state’s LTC prospects.  A lot depends of course on how you analyze the current condition of long-term care in your state, what weights you place on each of the major metrics in the Index, and how you score each of the sub-factors.  Those choices will determine the result and your conclusion may be very different from the one we would reach.

So try the Index of Long-Term Care Vulnerability yourself.  See what you conclude.  And please let us know your results.  We’ll use your findings to improve the current beta version of the Index.

Steve Moses is president of the Center for Long-Term Care Reform (www.centerltc.com). Reach him at smoses@centerltc.com or 425-891-3640.
 

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Updated, Tuesday, February 18, 2014, ???? AM (Pacific)

Alpine, Texas—

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WSJ ON LTCI AND LTC NEWS AND COMMENT

LTC Comment:  The Wall Street Journal has been running a series of articles about long-term care insurance by “The Experts,” a collection of writers the newspaper convened and calls “An exclusive group of industry and thought leaders . . . who engage in in-depth online discussions of important topics.”  Well, take that with a grain of salt.  We critiqued one egregiously wrong and misleading example in last Friday’s LTC Bullet and below.  Some of the other articles in this series weren’t so bad and we highlight a couple of those below.  But the basic problem with the series is that it gives voice to financial planners who, as a group, understand little about long-term care financing and insurance.  So too often they end up criticizing LTCI unfairly and endorsing Medicaid planning irresponsibly.

Heads up!  The last three exhibit booths (10x10, $3,250) for the 14^th Annual Inter-Company Long-Term Care Insurance Conference (Orlando, March 16-19) are available with a special enticement.  According to Jim Glickman:  “In order to finish selling the rest of the Exhibit Hall slots quickly, the Executive Committee has approved allowing your attendees to register for the conference for only $100 each (instead of the regular discounted price of $295) as long as they are registered by February 21^st.  In addition, any new Exhibitor (who has never exhibited at our conference before) is eligible for an additional $250 discount.”  If you have questions,  please contact Jim Glickman or go to www.ILTCIconf.org for additional information.

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2/18/2014, “Response to ‘Surprise! Your Long-Term Care Insurance Won't Cover It’,” [link] by Phyllis Shelton, LTC Consultants

Quote:  “This very unfair and uneducated article was written by a financial planner. My take on it is his agenda is to sell individual long-term care insurance by bashing group LTCi plans. You can read it and see what you think. Here is my response. Just as in any other response I write, please feel free to use any part of it in any response of your own with your clients and prospects.”

LTC Comment:  Phyllis Shelton takes issue with an article published in the Wall Street Journal’s “MarketWatch.”

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2/16/2014, “Medicaid's death bill leaves homes, assets at risk,” by Shannon Mullen, USA Today

Quote:  “After their 92-year-old mother died, Richard Pfieffer and his siblings were set to sell her New Jersey home when a bill for $25,347 brought them up short. The amount was the total cost of the home-based medical care their mother received through Medicaid in the last years of her life. If the bill wasn't paid in full, the family was informed, the state would place a lien on the property.”

LTC Comment:  We fought hard to make estate recovery mandatory in 1993 on the grounds that people who get free long-term care from Medicaid should pay it back from their estates.  We argued successfully that without estate recovery baby-boomer heirs would reap a windfall from the welfare program and be less likely themselves to insure for long-term care.  Now, estate recovery is under attack and this article in a national newspaper openly proposes Medicaid planning as a means to evade estate recovery.  The Center for Long-Term Care reform remains one of the few voices defending estate recovery and Medicaid as a safety net.  Matt Salo, executive director of the National Association of Medicaid Directors Association, is another such voice.  Bottom line:  the tide is turning against responsible long-term care public policy and your support for our work is needed more than ever now.

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2/15/2014, “Custodial care fraud against Medicare persists as funds to fight it ebb,” [link] by Jim Landers, Dallas Morning News                 

Quote:  "Medicare has struggled with home health care fraud for decades, because the industry has kept trying to use the federal insurance program to get paid for long-term custodial care." 

LTC Comment:  The common caveat that "Medicare does not pay for long-term care" is untrue.  Just as Medicaid funds LTC for the middle class and affluent despite rules that seem to prohibit the practice, Medicare pays for a great deal of LTC at home and in nursing facilities despite rules to the contrary.  

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2/13/2014, “Retiring on the House:  Reverse Mortgages for Baby Boomers,” by Lisa Prevost, The New York Times

Quote:  "As baby boomers age, reverse mortgages are expected to gain popularity as a means of covering living expenses. Hence, in the future, more homes passed on to children will come with a bill attached - the balance due on these equity loans." 

LTC Comment:  Medicaid's mandatory estate recovery is a form of government-provided reverse mortgage which protects Medicaid from affluent abusers and encourages heirs to protect their inheritances by insuring their parents and themselves against LTC risk. 

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2/13/2014, “Why Long-Term-Care Coverage Is Right for Me,” by Olivia Mitchell, Wall Street Journal

Quote:  "We became empty nesters! Our children finished school, moved out, and (even more awesome), got jobs. To celebrate, I canceled my term life and bought long-term care insurance (LTCI) instead."

LTC Comment:  Better advice from WSJ.

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2/13/2014,  “LTCI sales rise at John Hancock,” by Allison Bell, LifeHealthPRO 

Quote:  "John Hancock Long-Term Care operations did well in the fourth quarter, despite the effects of a paper investment loss that reduced revenue."

LTC Comment:  Better news.

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2/13/2014, “Start Shopping for Long-Term-Care Insurance at 45,” Michelle Perry Higgins, Wall Street Journal

Quote:  "If you're around 45 years of age, start doing your homework on the different plans available (including through your employer) and costs you may be looking at for a long-term health-care policy.  By 50 years of age, you may want to consider purchasing a policy that would complement your financial plan." 

LTC Comment:  Better advice from WSJ than what we cite below.

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2/13/2014, “CO man gets decade-long prison sentence for human trafficking of nursing home workers,” [link] by Tim Mullaney, McKnight's LTC News

Quote:  “Kizzy Kalu, 49, was convicted on dozens of criminal counts in July. He and a co-conspirator, 78-year-old Philip Langerman, were found guilty of promising nonexistent jobs to foreign nurses, then forcing them to take jobs in nursing homes once they were in the United States. The nurses paid Kalu about 40% of their earnings, and he threatened to have them deported if they did not comply.”

LTC Comment:  Low Medicaid reimbursement rates have many bad side-effects.

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2/12/2014, “CNO Rallies After Deal to Cut Long-Term Care Risk,” by Alexandria Baca, Bloomberg

Quote:  “Beechwood Re Ltd. agreed to take on obligations tied to the policies with CNO ceding $590 million, mostly in reserves, the reinsurer said in a statement today. CNO is among insurers burned by higher-than-expected costs on the coverage, which helps pay for home-health aides or residence in nursing homes. Low interest rates also pressured returns.”

LTC Comment:  Who “reinsures” Social Security and Medicare?  We do.

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2/12/2014, “States Meld Medicare and Medicaid,” by Christine Vestal, Stateline

Quote:  "In the nearly 50 years since Medicaid and Medicare were enacted, the two health care programs - one for the poor and the other for the elderly and disabled - have remained separate, with different rules, duplicative benefits and conflicting financial incentives. The result has been wasted money and disjointed care for more than 10 million 'dual eligibles,' the Americans who qualify for both programs."

LTC Comment:  The best solution for the “dual eligibles” problem is to have fewer of them.  Our white paper explains how:  “Briefing Paper #5:  Dual Eligibles and Long-Term Care:  How to Save Medicaid LTC $30 Billion Per Year and Pay for the ‘Doc Fix’” www.centerltc.com/BriefingPapers/5.htm -- (PDF for print)

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2/12/2014, “The Real Reason Health Spending Has Slowed,” by John C. Goodman and Peter Ferrara, National Center for Policy Analysis   

Quote:  "Three developments track the slowdown in health care spending very closely: the growth of Health Savings Accounts (HSAs), the growth of Health Reimbursement Arrangements (HRAs) and the general trend toward higher deductibles. All three changes mean that patients are paying more medical bills out of their own pockets. And that has produced profound changes - on both the demand and supply sides of the market." 

LTC Comment:  And if HSAs and HRAs had been the norm in acute health care insurance for the past three decades, enough money would repose in them now to pay LTCI premiums for aging boomers.

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2/11/2014, “Carrier applies for LTCI rate hikes,” by Allison Bell, LifeHealthPRO

Quote:  "For that block, incidence is just 58 percent of what the company had expected, but, because the claim termination rate is just 89 percent of the expected rate, and mortality is just 34 percent of the affected rate, the company expects the lifetime loss ratio to be 93 percent even if it gets the full rate increase requested, the company said." 

LTC Comment:  Hard to make such numbers work.

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2/11/2014, “Medicaid and Your Parents: The Basics,” by Virginia Morris, Forbes

Quote:  “Some health care providers and nursing homes won’t take patients on Medicaid or will accept only a limited number because the reimbursement rates are low. In some areas, it may be difficult (or impossible) to find aides or other home care workers who will take Medicaid. As a result, Medicaid patients may have to settle for fewer choices and lower quality care.  Furthermore, Medicaid has largely switched over to managed-care plans, which means that your parent has to receive care from a particular list of pro­viders. Her doctor and many specialists might not be in that group.”

LTC Comment:  This article advocates Medicaid planning and incorrectly states that the home exemption disappears when a recipient is permanently institutionalized, but at least the author mentions some of the downsides of ending up on Medicaid.

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2/11/2014, “When Boomers Inherit, Complications May Follow,” by Fran Hawthorne, New York Times 

Quote:  "[T]here have never been as many heirs with as much money as now, thanks to the intersection of two demographics: the 79 million baby boomers and the general thriftiness of their Depression-raised parents. The Center for Retirement Research at Boston College estimates that boomers will ultimately receive a total of $8.4 trillion, most of it by 2030."

LTC Comment:  That’s a lot of money that needs protection from LTC risk.

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2/11/2014, “States Accelerate Shift Of Nursing Home Residents Into Medicaid Managed Care,” [link] by Phil Galewitz, Kaiser Health News 

Quote:  “States had traditionally been reluctant to place frail and elderly people into managed care. But that caution is fading as officials become comfortable with managed care and more anxious to curb Medicaid spending.  The elderly and disabled account for about 6 percent of Medicaid enrollees, but nearly half of the program’s spending.”

LTC Comment:  Can giant managed care companies learn to care adequately for Medicaid’s frailest, most infirm recipients?  Does home and community-based care so managed really save money without sacrificing quality?  Time will tell as managed LTC is a trend sweeping through Medicaid programs across the country.

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2/11/2014, “Remembering Philip Seymour Hoffman, long-term care firebrand,” [link] by Tim Mullaney, McKnight's LTC News

Quote:  "Hoffman himself wasn't a critic of the nation's long-term care system, but in the role of Jon Savage, he delivered a blistering and relevant diatribe against a certain type of provider."

LTC Comment:  This is an interesting column dealing with the tension between assisted living and nursing homes with a relevant movie review included.

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2/10/2014, “Reasons to be Wary of State-Run Retirement Plans,” by Jeffrey Brown, Forbes

Quote:  “Lawmakers in states from Connecticut to Washington are considering letting the state manage the retirement funds of private sector workers.  Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too.  The spate of recent activity, however, suggests otherwise.”

LTC Comment:  There’s no substitute for personal responsibility when it comes to retirement savings.  Some private company pension programs and most run by governments at any level are unsound financially.

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2/10/2014, “The Case for Skipping Long-Term-Care Insurance; Adviser Says the Coverage Is Too Expensive and Often Doesn't Get Used,” [link] by Susan Kaplan, Wall Street Journal

Quote:  “Those who are wealthy enough or can save enough should just pay for long-term care out of pocket. For those who can't, one solution is to put clients' assets into an annuity, which will provide them with an income stream of X amount for the rest of their lives. Because they are no longer holding the majority of their assets, clients can qualify for Medicaid before entering a nursing home.”

LTC Comment:  This patently irresponsible article had no business appearing in the Wall Street Journal.  Nevertheless, the annuity gambit it recommends works . . . for now.  The Center is going after that gaping loophole with a vengeance this year.  We devoted last Friday’s LTC Bullet:  WSJ Misfires on LTC Insurance to refuting claims in this article.

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2/8/2014, “Seniors overspend on mortgage, credit cards,” by Robert Powell, USA Today

Quote:  “The percentage of 65- to 74-year-olds who report having a mortgage or home equity loan payment increased from 21% in 1989 to nearly 37% in 2010, according to Pamela Villarreal, author of How Are Seniors Spending Their Money. And for those age 75 and older, the percentage of mortgage or home equity loan holders increased from just 6% to 21% during the same time.”

LTC Comment:  An ominous development if the Center’s prediction proves true that aging Boomers will need their home equity to fund long-term care when Medicaid cuts its home equity exemption.

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2/7/2014, “'Aid in Dying' Movement Takes Hold in Some States,” by Erik Eckholm, New York Times

Quote:  "Helping the terminally ill end their lives, condemned for decades as immoral, is gaining traction. Banned everywhere but Oregon until 2008, it is now legal in five states. Its advocates, who have learned to shun the term 'assisted suicide,' believe that as baby boomers watch frail parents suffer, support for what they call the 'aid in dying' movement will grow further." 

LTC Comment:  Worthy perhaps in its own right as a voluntary choice, let's hope "aid in dying" doesn't become a mandatory solution to the long-term care financing crisis. 
 

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Updated, Friday, February 14, 2014, 9:26 AM (Pacific)

Terlingua, Texas—

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LTC BULLET:  WSJ MISFIRES ON LTC INSURANCE

LTC Comment:  We dissect and correct a misbegotten column in the Wall Street Journal after the ***news.***

*** HAPPY VALENTINE’S DAY ***

*** CENTER “CLIPPINGS” SUBSCRIBERS knew about this WSJ article the day it was published and fired off rebuttals.  Others learned of the piece when their prospects cited it as a reason not to buy LTCI.  Knowledge is power and information is key.  If you belong to the Center for Long-Term Care Reform, you already receive a weekly digest of the most important LTC articles and reports, our Monday LTC E-Alerts.  But reading material that is critical to your profession a week later is like waiting for the gun to go off before you duck.  Clippings subscribers receive the information and data they need by email daily in real time.  Join the Center as a “premium member” or upgrade to that status and you’ll begin immediately to receive our clippings service.  Contact Damon at 206-283-7036 or damon@centerltc.com for details. ***

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LTC BULLET:  WSJ MISFIRES ON LTC INSURANCE

LTC Comment:  Over the years, private long-term care insurance has been the target of many unfounded attacks.  But this latest one is especially galling as it comes from someone pushing a truly irresponsible alternative:  Medicaid planning.  Here’s the reply we emailed to the offending author and posted on the Wall Street Journal’s website.

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Susan Kaplan’s “The Case for Skipping Long-Term-Care Insurance” (Wall Street Journal, 2/10/14) is full of inaccurate statements and bad advice. 

For example:

Quote:  “[T]he odds that clients will continue paying for coverage until they actually need it are slim.”

LTC Comment:  Not true.  Most LTC insurance policy holders retain their coverage.  In fact, lapsed policies are only a small fraction of what actuaries originally expected.  Besides, consumers who worry about making future premiums for traditional coverage can purchase LTC protection linked with single-premium life insurance or an annuity.

Quote:  “Premiums are going up 10% to 45% a year.”

LTC Comment:  Premiums on in-place business remained flat for the first three decades of the LTC insurance product’s existence.  Recent premium increases have largely achieved their purpose so future increases should be moderate.  If the Federal Reserve stops forcing interest rates to zero so insurance carriers can receive better returns on their reserves it is possible competition could actually push LTC insurance premiums down in the future.  Besides, consumers who still worry about premium increases have guaranteed premium options through linked products.

Quote:  “The average premium these days can cost anywhere from $4,000 to $6,000 annually per person, a lot even for high net-worth clients.”

LTC Comment:  Actually, a couple can buy “best” coverage for less than that.  According to the American Association for Long-Term Care Insurance:  “Today’s average cost for ‘Best’ coverage for a 60-year-old couple each purchasing $164,000 of immediate coverage that grows to a combined benefit pool of $730,000 ($365,000 each) at age 85, is $3,840-per-year. ‘That’s a three percent increase from the 2013 average ($3,725) and 4.8 percent higher than 2012 ($3,663),’ [AALTCI executive director] Slome shares.”  Furthermore:  “A 55-year-old single male purchasing new long-term care insurance protection can expect to pay $925-per-year for $164,000 of benefits according to an industry report.  He’ll pay $1,765 for coverage that increases the benefit pool to $365,000 at age 85, a 14.5 percent decline from last year’s average.”

(Emphasis added.  Source:  “2014 Long Term Care Insurance Price Index Published,” http://www.aaltci.org/news/long-term-care-insurance-association-news/2014-long-term-care-insurance-price-index-published)

Quote:  “After paying the premium, clients may not have money left over to do things like take a vacation.”

LTC Comment:  What’s more important?  Preparing for a secure future or immediate gratification?

Quote:  “Those who are wealthy enough or can save enough should just pay for long-term care out of pocket.”

LTC Comment:  So, it’s better to spend dollar-dollars later than nickel-dollars today?  Most people with significant assets to protect didn’t accumulate their wealth by ignoring the power of private health, life and auto insurance to protect it.  Why should they ignore the leverage from private long-term care insurance?

Quote:  “For those who can't [save enough to pay for their own long-term care], one solution is to put clients' assets into an annuity, which will provide them with an income stream of X amount for the rest of their lives. Because they are no longer holding the majority of their assets, clients can qualify for Medicaid before entering a nursing home. This doesn't have to be done in advance of needing long-term care and is perfectly acceptable to the nursing home.”

LTC Comment:  Here’s what this article is really about, i.e., selling “Medicaid-friendly annuities.”  But, Medicaid is a means-tested public assistance program.  In a word, welfare.  The program has a dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias.  It is not true that Medicaid is “perfectly acceptable to the nursing home.”  Medicaid pays nursing homes only 2/3 of the private pay rate so the nicest facilities roll out the red carpet for private payers.  It is true now and will be more true in the future that to obtain the highest quality long-term care at the most appropriate level people need to be able to pay privately.

Quote:  “The reality is that when a client gets sick, many don't even make it to the nursing home, and once there, most people die within 18 months. This paints a bleak picture of the future, but ultimately can save a client thousands of dollars over the years, especially as long-term-care policies get less and less appealing.”

LTC Comment:  Long-term care insurance is “stay out of a nursing home insurance” because it ensures that policy holders can stay at home or in a comfortable assisted living facility as long as possible and that they can access the very finest skilled nursing facilities if necessary.

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Updated, Friday, February 10, 2014, 10:55 AM (Pacific)

Seattle—

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3 IN 4 NEED MORE, AN INSPIRING STORY AND LTC NEWS AND COMMENT

LTC Comment:  The 3in4 Association has announced its new lead generation marketing fulfillment licensee -  TargetLeads.  Says 3 in 4:  “This new partnership means more efficiency, more variety, more effectiveness and more success in sharing the 3in4 message with Americans.”  Check out the details here.

Center Regional Representative Romeo Raabe of Green Bay, Wisconsin reports:

“I had quite an emotional end to a meeting this morning.  I was in a client’s office, delivering his wife’s LTCi policy and going over options for him who was declined.  We settled on an annuity/LTC product that should accept him although costing much more and providing less coverage.  After filling out all the paperwork and him signing it, he got up and paced a bit in his office as I packed up. 

“He had tears in his eyes as he looked at me and said ‘You don’t know this, but I’ll bet you have saved 20-30 lives over your career.  People who did not know what to do, people who might have considered suicide if you had not come along with some solutions to at least help them somewhat.’
 
“I did not know what to say, except that it is so satisfying to be able to help people with what would otherwise be overwhelming financial distress.  I had tears in my eyes as we shook hands and I left.

“Just thought you might be heartened by this story, I sure as heck am!”

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2/9/2014, “LTCi & Gender-Distinct Pricing As products mature, so do opportunities [link],” by Henrik Larsen, Life & Health Advisor

Quote:  "In conclusion, I strongly believe that the move to gender-distinct pricing is an overall benefit to not only the carriers from a risk spreading perspective, but also to distribution from the marketing perspective. Results from our early initiatives support this opinion. The change in pricing philosophy has not disrupted demand; it has created opportunities. The fact that women are the ones planning for long-term care as they face the largest risk has been validated. We will capture more sales to men. And lastly, women in the workplace will be even greater allies than before." 

LTC Comment:  Congratulations to author Henrik Larsen of Center Bronze corporate member Advanced Resources Marketing for this thoughtful article.

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2/6/2014, “Unum says LTCI reserve release possible,” by Allison Bell, LifeHealthPRO

Quote:  "Someday, the closed block of long-term care insurance (LTCI) at Unum Group Corp. could free up a lot of cash for general corporate purposes.  . . .  John McGarry, the head of individual disability and LTCI closed-block operations, said the company would be cautious about releasing reserves but might be in a position to do so in three to five years.  McGarry said one challenge is that the average age of the insureds in Unum's large block of group LTCI business is still under 50.  'This is going to be around for a long time,' McGarry said."

LTC Comment:  That’s a good example of a difference between government and private insurance.  Medicare and Social Security didn’t wait to release their reserves.  Everything in their “trust funds” has been spent and replaced with IOUs.

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2/6/2014, “CalPERS reopens long-term care insurance to new applicants,” by Dale Kasler, Sacramento Bee  

Quote:  "CalPERS' troubled long-term care insurance program has reopened to new applicants, ending a five-year hiatus marked by heavy financial losses and the announcement of a significant rate increase.  . . .   Following years of hefty losses, the California Public Employees' Retirement System closed the program to new applicants in 2008. In 2012, the fund imposed an 85 percent rate increase for most of its existing policyholders, taking effect in 2015."

LTC Comment:  More proof that putting government in charge of insurance is a very bad idea.

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2/6/2014, “Study: Small biz health costs have doubled under Obama,” by Tim Devaney, The Hill

Quote:  "Healthcare costs for small businesses have doubled under President Obama, according to a new study.  The report from the National Small Business Association (NSBA) surveyed 780 small business owners and found that healthcare cost increases are preventing many companies from growing."

LTC Comment:  No wonder we’re experiencing a jobless non-recovery.

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2/6/2014, “MetLife Study Finds Lost Income from Major Accidents and Critical Illness Averaged $26,900 and $50,600 Respectively [link],” press release, Wall Street Journal

Quote:  "MetLife, a leading provider of employee benefits, today announced the release of new research exploring the growing need and popularity of supplemental health solutions. Findings are highlighted in MetLife's white paper, Accident and Critical Illness Insurance Are Surprisingly Good for Business!, which examines the financial risks associated with accidents and critical illnesses and how employers can effectively leverage voluntary insurance solutions to not only provide added financial protection to employees, but to address their own business challenges. The paper can be downloaded at metlife.com/cwb."

LTC Comment:  Good news for CI.

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2/5/2014, “Subsidy Eligibility, Demographics Fuel Hot Debates,” by Bruce Shutan, Health Insurance Exchange  

Quote:  "HHS noted that nearly 80% of the roughly 2.2 million Americans who signed up for a public exchange plan by the end of 2013 were eligible for federal subsidies. However, reports published in December by The Atlantic Monthly and Kaiser Health News projected that just 40% of people were thought to be eligible for HIX subsidies, which the former publication later revised upward to 60% in an article postscript. The HHS report was more in keeping with Congressional Budget Office projections of around 90%." 

LTC Comment:  Just what we need—more people dependent on government subsidies.

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2/5/2014, “Emerging Trends: A Working Retirement,” Life & Health Advisor

Quote:  "Working beyond the traditional retirement age is having a positive effect in the British workplace as older people stay on in work because of high living costs and uncertainty about the future, a survey commissioned by Nationwide Building Society shows."

LTC Comment:  The same trends are present in the USA and bode well for private financial planning and insurance products.  Working longer in retirement is a sign of greater personal responsibility and lesser confidence in financially vulnerable public programs.

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2/5/2014, “Some Illinois Medicaid patients' assets at risk,” Chicago Tribune

Quote:  "More than 200,000 low-income Illinoisans have applied for new coverage under Medicaid, the state-federal health insurance that was expanded in Illinois and several other states as part of the Affordable Care Act. But for certain members of that group, the new coverage could come with strings attached. A little-known wrinkle in the federal health insurance expansion could put at risk the house and other assets of those ages 55 to 64 should they require substantial and expensive health care treatments. The issue arises because of a provision in the long-standing laws governing Medicaid that compel states to recoup certain medical costs after a person dies, either via liens placed on an individual's home or claims on their assets." 

LTC Comment:  Medicaid estate recovery is a mandatory and critical feature of the LTC safety net ensuring (when enforced) that affluent people pay back the welfare program for the cost of their care.

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2/5/2014, “The true state of the elderly,” by Robert J. Samuelson, Washington Post

Quote:  "How well-off are the elderly? The answer is crucial to public debate about Social Security, Medicare and other programs to help older Americans. If most live on the edge, then cuts are hard to justify. On the other hand, if many elderly are financially comfortable, then their government benefits and taxes should be open to change - just like other Americans'.

"It's routinely said that the elderly's median household income - the income of the household exactly in the middle - is lower than that of the non-elderly population. That's true. In 2012, it was $33,848 compared with $57,353 for the under-65 population. We're then supposed to imagine that the median income accurately reflects the lot of most elderly. That's not true."

LTC Comment:  You’re well-advised to click through to this article and find out why and how the elderly are better off than commonly reported.

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2/5/2014, “CBO: Affordable Care Act will reduce full-time workforce by more than 2 million in the next decade [link],” by Tim Mullaney, McKnight's LTC News

Quote:  “More than 7.5% of the nursing home workforce is vulnerable to having hours reduced as a result of the health law's ‘employer mandate,’ Stanford University's Lanhee J. Chen, Ph.D., told the House Ways & Means Committee on Jan 28. The mandate calls for employers with at least 50 full-time workers to provide health insurance that meets certain requirements, or face a penalty. The ACA defines full-time work as 30 hours or more a week, and some employers threatened to cut workers' hours below that threshold to avoid the mandate."

LTC Comment:  Nursing home care deficiencies are directly related to inadequate staffing and the ACA will make the problem even worse.

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2/4/2014, “Less than half of doctors in nation's largest cities are accepting Medicaid now: study [link],” by Sarah Hurtubise, The Daily Caller

Quote:  “Health-care consulting firm Merritt Hawkins conducted a survey of Medicaid acceptance rates which found that just 45.7 percent of physicians are now accepting Medicaid patients in the U.S.’s largest 15 cities. The federal welfare program cuts costs by reimbursing physicians at extremely low rates, preventing many doctors from seeing patients with Medicaid coverage.”

LTC Comment:  Will Medicaid LTC facilities be next?

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2/4/2014, “Genworth's Profit Rises 24%, Insurer Cuts Expenses, Posts Higher Net Investment Gains [link],” by John Kell, Wall Street Journal

Quote:  "Genworth Financial Inc.'s fourth-quarter profit rose 24% as the life and mortgage insurer cut expenses and reported higher net investment gains.

"Genworth's long-term-care insurance's operating profit grew to $42 million from $7 million last year. Long-term-care insurers rely heavily on investment income to help pay claims decades into the future."

LTC Comment:  With premiums up and able to go higher, imagine how profitable LTCI can be once interest rates rise.

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2/4/2014, “Tips on caring for your aging parents,” by Julie Landry Laviolette, Miami Herald

Quote:  "Financial advisors say the best way to manage a potential blow to your budget if you take on the financial care of a parent is to anticipate and plan for it. A little preparation can go a long way, said Frank Armstrong, a certified financial planner and founder of Investor Solutions in Coconut Grove. 'There are all kinds of resources available, but they come at a cost, and if your parents didn't save enough, it's going to come out of your pocket,’ he said. ‘The average family has only 'x' number of dollars, and if you don't plan in advance, it may mean your kid can't go to the college you want them to or you may impact your own ability to retire.'"

"You may be dealing with your own retirement, kids who want to go to college and your parents' problems, and there are only so many dollars to go around. It's a crap shoot, Armstrong said. 'Some of these things can be insured against - like long-term care - it's expensive, but the odds that one of your parents is going to need long-term care are quite high,' Armstrong said. 'So you can share the risk through insurance policies or you can bear the risk, and take the chance that you're going to get wiped out.'"

LTC Comment:  Unfortunately, there’s another option that is available even after the LTC crisis occurs.  Medicaid planners offer protection of the inheritance and free care (such as it is) for the parents.  All it costs in attorney’s fees is the equivalent of one month in a nursing home at the private-pay rate.

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2/4/2014, “Long Term Care Insurance Industry Paid $7.5 Billion in Claim Benefits [link],” by Jesse Slome, AALTCI

Quote:  "Long term care insurance companies paid nearly $7.5 billion in claim benefits to 273,000 individuals in 2013 according to a just-released report.

"'Total benefit payments increased by 13 percent and the number of long term care insurance policyholders on claim grew 3.4 percent,' explains Jesse Slome, director of the American Association for Long Term Care Insurance (AALTCI), the national trade group.  Insurers paid $6.6 billion to some 264,000 policyholders in 2012."

LTC Comment:  Progress but, alas, still a drop in the bucket of total LTC expenditures of $229 billion.

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2/3/2014, “Nation's nursing homes undergoing culture change,” by Stacey Burling, Philadelphia Inquirer 

Quote:  "Long places where many older people dreaded to go, nursing homes originally followed a medical model. They resembled hospital units with long, sterile-looking corridors. Regimented schedules were designed more for staff efficiency than patient happiness. A newer approach emphasizes that skilled nursing centers are often a last home before death. They should feel more like homes. That means more choices for residents, better food, individualized care, smaller units called neighborhoods or households, stronger relationships with staff, flexible schedules, even pets. WillowBrooke now lets residents help choose new staff and pick paint colors. This model of reform, known broadly as 'culture change,' has been building for more than 25 years. It remains rare, in part because of tight funding, old buildings, a lack of incentives, and resistant staff, but it is gaining."

LTC Comment:  You can thank nursing home reform pioneer Dr. Bill Thomas for these promising changes.

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2/3/2014, “Who Will Pay For Mom's Or Dad's Nursing Home Bill?  Filial Support Laws and Long-Term Care [link],” Northwestern Mutual

Quote:  "If your parents live in one of 29 states or Puerto Rico that has filial responsibility laws on the books, you could potentially be held legally responsible for their care under certain circumstances, such as when your parents are ailing and without sufficient financial resources to take care of themselves. Until recently, these statutes have been largely ignored. However, several recent court decisions indicate that there might be renewed interest in enforcing them.

"Now, with long-term care costs on the rise and funding sources under pressure, nursing homes and other health care providers may have increasing incentive to seek to use the courts to compel children to either help a parent financially or be at risk for covering the cost of his or her care.

"No one knows whether these recent court cases will encourage other states to enforce their filial support laws with greater vigor, but this is a development worth watching. However, as more of the Baby Boomer generation reaches their golden years, and as many nursing homes and local governments are faced with providing care to a growing number of indigent elderly patients, there's a possibility that other states will look more closely at their filial support statutes in an attempt to find another way to fund mom's or dad's nursing home bill." 

LTC Comment:  Idaho tried in 1984 (and I helped as their HCFA Medicaid state rep) to enforce relative responsibility but the effort succumbed to political opposition.  It’s more likely states will strengthen estate recovery than they will enforce filial support laws.

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2/3/2014, “Pew report: US expectations for elder care are at odds with those in similar nations [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "People in the United States are much more likely to say that seniors should be responsible for their own care, compared with people living in similar economies around the world, according to a recently released study from the Pew Research Center.

"Only 24% of Americans said the government should bear primary responsibility for the elderly, which tied Indonesia as the second-lowest percentage. Pakistan ranked lowest, with 16% saying the government should bear primary responsibility, and 77% saying families should do so."

LTC Comment:  Maybe there’s still hope.

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1/31/2014, “Retiring on Your Own Terms,” by Jason Zweig, Wall Street Journal

Quote:  "To be assured of having enough money to fund a comfortable retirement, you should save a total of 22 times the annual income you want to earn when you retire. That is higher than many previous estimates, but it offers near-certainty of hitting your target."

LTC Comment:  Best to include in that savings goal enough income to cover your LTCI premiums so the total principal is protected.

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1/31/2014, “The Policy Lapsed, but No One Knew,” by Paula Span, New York Times

Quote:  "In the meantime, cases like this demonstrate anew how vigilant families need to be. If your older relative has a long-term care policy, photocopy the page listing the company, policy number and claims contact information. Keep the insurance company updated on new addresses, yours (if you are the third-party designee) and your relative's. It wouldn't hurt, if the policyholder is becoming forgetful, to check bank statements or call the company to be sure premiums are paid."

LTC Comment:  Reasonable precautions.

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1/31/2014, “More elderly get care from families than paid workers,” by Sharon Jayson, USA Today

Quote:  "More than 8 million people (mostly women over 65) used services of a long-term care provider in 2012, according to the first-ever compilation of federal data on the subject, by the National Center for Health Statistics.
"Services include adult day centers, home health agencies, hospices, nursing homes and assisted-living-type residential care communities.
"But 'by far, the lion's share of people getting care are getting it from family caregivers rather than from paid care workers,' says John Schall, CEO of the Caregiver Action Network in Washington, D.C. 'There's no question that family caregiving is really the backbone of the long-term care support services in this country.'"

LTC Comment:  Publicly financed LTC would crowd out more family caregiving than it does already if it weren’t for its serious problems of access, quality, low reimbursement, discrimination and institutional bias.

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1/30/2014, “Maryland considers LTCI tax credit bill,” by Allison Bell, LifeHealthPRO

Quote:  "Today, Maryland lets a taxpayer have a credit for up $500 in LTCI premiums for the first year the coverage is in effect.  If S.B. 478 takes effect as written, it will cut the value of the state's LTCI tax credit to $250 in the first year, then increase the value to $500 in later years."

LTC Comment:  Penny wise, pound foolish.

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1/30/2014, “Americans shrug off worries over aging population,” by Mary Bowerman, USA Today

Quote:  "Concern was highest in regions such as East Asia and parts of Europe, where the percentage of older people will be greater than other countries by 2050. Almost 90% of Japanese surveyed worried about the aging population, and half of those in Germany and Spain are worried, the survey found. On the opposite end, only 26% think the aging population is a major problem for the USA."

LTC Comment:  What, me worry?  Dangerous complacency about aging demographics.

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1/8/2014,” State Budget Solutions' Fourth Annual State Debt Report,” by Cory Eucalitto, State Budget Solutions

Quote:  "State Budget Solutions' (SBS) fourth annual State Debt Study reveals that state governments face a combined $5.1 trillion in debt. This total equals roughly $16,178 per capita, or 33 percent of annual gross state product. Another telling way to view the problem - state debt is equal to 469% of all fiscal year state general and other fund expenditures."

LTC Comment:  What happened to the idea that states can't run deficits because their constitutions don't allow it?  How do you accumulate huge debt without running deficits?
 

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Updated, Friday, February 7, 2014, 11:11 AM (Pacific)

Alpine, Texas—

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LTC BULLET:  MEDICAID PLANNING—THE REST OF THE STORY

LTC Comment:  We made progress combatting Medicaid estate planning over the years, but artificial self-impoverishment to obtain free long-term care is back with a vengeance.  Details follow.

LTC BULLET:  MEDICAID PLANNING—THE REST OF THE STORY

LTC Comment:  You may recall those catchy radio commentaries by the late Paul Harvey in which he told an anecdote, paused for a commercial, and then returned with the “rest of the story,” a surprising, amusing or tragic twist on the lead.  Here’s the rest of the story about Medicaid planning.

Medicaid planning is the practice of divesting or sheltering assets to create a condition of supposed poverty sufficient to fall within the welfare program’s ostensibly stringent income and asset eligibility limits.

Medicaid estate planning includes many techniques to achieve that goal.  One can give away any amount of assets, or transfer them to an irrevocable trust, five years before applying for Medicaid.  Or use countable assets to buy exempt things such as an expensive house, business or car.  Or claim compensation for providing care to a parent, care that most people give for free out of love and personal responsibility.  Or convert wealth Congress meant to be spent down privately for care into uncountable income by means of an annuity.

Over the years, we’ve tried to discourage this abuse of the welfare safety net by affluent shirkers.  I wrote about the problem in a 1988 report for the DHHS Inspector General you can still read on the IG’s website here.  I proposed a simple solution:  let people keep most of their wealth and receive LTC from Medicaid if they want it, but make certain they pay it back out of their estates so their heirs do not “reap the windfall of Medicaid subsidies.”  (pps. 47-48)

Most of my recommendations in that long-ago report became law in the Omnibus Budget Reconciliation Act of 1993.  OBRA ’93 made Medicaid’s asset transfer restrictions longer and stronger and required states to recover from recipients’ estates.  The idea was to send good news and bad news to people with wealth who wanted to reply on public assistance.  They could access the safety net, but they’d have to pay it back.

Congressional intent in OBRA ’93 was to encourage people to plan responsibly for long-term care so they would not end up dependent on Medicaid with their legacies encumbered to reimburse the government.  It didn’t turn out that way.  Most states did not implement the new rules aggressively; the federal government did not enforce the stronger eligibility standards and mandatory estate recovery strongly; the media didn’t report the new liability consumers were supposed to face; and so the public went on ignoring LTC risk until they needed care leaving them dependent on Medicaid and with easy access to it.

Later attempts to discourage Medicaid planning also failed.  HIPAA ’96 made transferring assets to qualify for LTC assistance illegal.  But the “throw Granny in jail law” was repealed a year later by the BBA ’97 “throw Granny’s lawyer in jail” which proved unenforceable.  Finally the Deficit Reduction Act of 2005 (DRA ‘05) made some more progress by extending the asset transfer look-back period to five years, capping the home equity exemption for the first time, and attempting to discourage the use of Medicaid friendly annuities.

Have the decades-long efforts by Congress to preserve Medicaid as a safety net for the poor finally worked?  Read the following and judge for yourselves.

In “LTC Bullet:  States Decry Medicaid LTC Loopholes,” we highlighted responses from states’ replies to a Congressional inquiry about the problem of Medicaid planning.  One state’s reply was especially informative and we provide it here in full along with the question to which it responded.

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4.   Do you consider Medicaid estate planning to be a significant problem that takes resources from the truly needy in your state?  Please explain and provide examples.

ND: Assuming that by "Medicaid estate planning" you mean the sheltering of assets to allow people with greater resources to become eligible to receive Medicaid, then yes. We have seen some extreme examples in North Dakota.

The Medicaid Act is very difficult to understand, making it easy to misconstrue its intent. The courts have recognized that the Act's "Byzantine construction makes it almost unintelligible to the uninitiated," "an aggravated assault on the English language," and "resistant to attempts to understand it." This has led to courts approving techniques employed to circumvent the intent of the Medicaid Act and expand eligibility far beyond those it was intended to serve.

Under current statutes and case law, married people are able to shelter nearly unlimited wealth. Recent court decisions are allowing for a more widespread use of asset sheltering strategies within the Medicaid system, with agents marketing products like annuities on the internet and attorneys advising clients on how to circumvent Medicaid rules and exploit them to their benefit. (Interestingly, single people are not able to shelter their assets in the same way.)

A striking example of aggressive asset sheltering strategies is seen in Geston v. Olson No. 1:11-cv-044,2012 WL 1409344 (D.N.D.2012) where one spouse had dementia and, it was apparent, would eventually need nursing home care. Shortly before going into the nursing home, the couple had liquid assets worth about $700,000, not including the home or car. They were over the Medicaid limit by more than half a million dollars. The community spouse, on advice of an attorney, sold the home the couple had lived in for years and bought one worth twice as much and sold the car they had and bought a brand new one worth three times as much. The car is completely exempt under Medicaid rules. The house also is completely exempt under Medicaid rules, as long as the community spouse lives in the house.

After successfully sheltering those assets, the community spouse took $400,000 cash, money that was available to be spent on the institutionalized spouse's care and instead, bought an annuity from their attorney, (an "investment" which essentially returns the premium with a very small return) in an effort to tie up the money to make the couple appear to have fewer resources. The annuity is irrevocable, non-assignable, and non-transferable.

Under a very well-crafted state statute that places limits on the amounts that can be put into these types of annuities, and a long line of state case decisions that allows the Department to count the annuity as an asset, eligibility was denied. The North Dakota Department of Human Services was sued in federal court under a civil rights action for denying Medicaid to this wealthy institutionalized spouse. Based on its interpretation of federal law and following existing federal case law, the Court ruled the annuity could not be counted as an asset. Thus, none of the actions could be considered a disqualifying transfer, none of the 'new' resources could be considered available, and none of the annuity income could be considered available to meet the long-term care needs.

The community spouse has successfully retained nearly all of the wealth the couple had before the institutionalized spouse went into the nursing home and the nursing home has not received one penny. The bill is nearly $100,000 and the couple wants Medicaid to cover it. The couple receives nearly $8,000 a month from pensions, social security, the annuity payments, and oil lease money. This couple is not needy and they are simply not who the Medicaid program was or is intended to cover. While North Dakota believes that reading the statutes as a whole and applying generally accepted rules of statutory construction would not allow these provisions to be used to shelter assets, courts are consistently reading certain sections of the Act to the exclusion of relevant others to allow applicants with extensive assets to become eligible for Medicaid by transferring assets from the institutionalized spouse to the community spouse.

In another case, a couple had nearly $600,000 available that could have been used for nursing home costs.  The 83-year old community spouse had beginning signs of dementia, and "invested" $340,000 (over 64 percent of the couple's net worth) into an irrevocable, nontransferable, non-assignable annuity on the advice of his attorney in an attempt to qualify the institutionalized spouse for Medicaid.

In another case, the day the institutionalized spouse entered the nursing home, the couple had more than $528,000. At that time, the couple represented to the nursing home that they intended to be "self-paying," and in fact, paid for two months of care. After learning of ways to exploit Medicaid laws, the community spouse purchased not one, but two annuities from their attorney after realizing the first one did not maximize the assets that could be sheltered. The community spouse bought a new home, a new car, an annuity for $220,000 and the next day, a subsequent one for $20,000, and then applied for Medicaid to pay the institutionalized spouse's nursing home costs.

In yet another case, a couple had nearly $400,000 the day one spouse entered the nursing home. An annuity for $125,000 was purchased to try to become eligible for Medicaid.

These scenarios are being duplicated around the state, with an increase in the sales of these types of annuities, and around the country in other states. Medicaid is not intended for people who artificially impoverish themselves by sheltering their wealth instead of using it to pay for nursing home care, but these are the people who are fighting for it and winning - at the expense of the taxpayers and those who legitimately need the assistance of the Medicaid program.

The North Dakota Department of Human Services argues that annuities like these should be treated as an asset available to pay the long-term care costs incurred by either spouse. It is simply a contractual right to receive income, an asset under state law. The annuity is not income, but a different form of asset; the cash is converted to another asset, the contractual right to receive income. The annuity pays the annuitants' own money back to them over time, similar to a certificate of deposit. Further, under state law, the contractual rights to receive money payments are presumed saleable. Despite the "irrevocable, non-transferable, non­ assignable" language of the annuity contract, a factors market exists where these annuities can be sold. If the annuitant makes a good faith effort to sell and finds no buyer willing to pay at least 75 percent of the fair market value of the payment stream of the annuity, an annuitant is able to defeat the presumption that the annuity is saleable. In that case, the annuity is not saleable and is not counted as an asset. This is how annuities were treated under North Dakota state law, until the Geston decision.

As the law currently stands, federal courts have misinterpreted federal law as prohibiting states from counting annuities as assets.  The problem is the courts are treating the annuity as community spouse income (which cannot be deemed available under Medicaid law) instead of treating the annuities as assets-which are available and countable under Medicaid law.

Something should be done quickly before these practices become commonplace. Changing the federal law to clarify that these annuities are assets or to allow states to determine how to treat these annuities as assets would be a significant first step in helping states determine the appropriate limits of eligibility for the Medicaid program. This would help ensure that Medicaid funds would be used by states for those who are the intended recipients rather than being diverted to subsidize those who can and should pay for their own care.

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LTC Comment:  North Dakota appealed the court decision that allowed the use of annuities to shelter hundreds of thousands of dollars immediately before accessing Medicaid LTC benefits.  Eight more states supported North Dakota’s appeal with amicus briefs.  But the Eighth Circuit Court of Appeals rejected the eloquently argued and documented appeal on September 10, 2013.  Its decision leaves North Dakota and other states helpless to prevent such egregious abuses of the Medicaid safety net.

That’s the rest of the story . . . but not the end of the story.

It’s clear the Centers for Medicare and Medicaid Services (CMS) will not act to close the annuity loophole.  The problem has been brought to CMS’s attention many times.  Nor will the courts act, believing they are constrained by the impermeable federal Medicaid statute.  The solution will have to come from Congress, but despite efforts in the House of Representatives, the problem remains and grows as more and more states report the abuse of Medicaid annuities.

What’s needed is to make the public aware of this profligate misuse of their hard-earned tax dollars.  We propose to (1) gather examples of egregious Medicaid annuities from state Medicaid programs around the country, (2) write articles and op-eds exposing these abuses, and (3) engage the support of interest groups representing the needy and others who would benefit from discouraging the abuse of Medicaid.  By shining the light of public scrutiny on this problem, Congress can be persuaded to fix it.  That’s what happened with OBRA ’93 and DRA ’05.  It can happen again.

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Updated, Friday, January 31, 2014, 11:23 AM (Pacific)

On Amtrak near Los Angeles—

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CONFERENCE NEWS AND LTC NEWS AND COMMENT

LTC Comment:  ‘Tis the season for conferences.  I just returned from presenting at the AICPA Personal Financial Planning Conference in Las Vegas.  CPAs are a rich potential source of leads.  Center Regional Representative Romeo Raabe informs us he’s been a guest speaker for an investment company helping their financial advisors fulfill continuing education requirements.  The Wisconsin CPA Association has asked him to present a three hour class on LTC financing.  You go, Romeo!

The Intercompany Long-Term Care Insurance Conference coming up soon (March 16-19) in Orlando, Florida reports that all but ten booth locations in their exhibit hall are sold out.  “The cost for a 10x10 Exhibit Booth is only $1,250 for Non-Profit Associations and allows you to send up to four attendees at a discounted price of only $295 each ($700 off of the individual registration price of $995).”  If you have questions, contact Jim Glickman at 818-867-2223 or go to www.ILTCIconf.org.

Last but not least, Jesse Slome urges everyone to spread the word about the AALTCI’s forthcoming “Summit” and the fact that portions of it will be streamed for free.  To be held May 18 to 20, 2014 in Kansas City, this premier event for LTCI producers is a “must see” especially now that you can watch it online from the comfort of your office or home.  Check out all the details here:  2014 National Long-Term Care Solutions SALES SUMMIT.

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1/29/2014, “Health Care and Retirement:  Embracing the new essentials of retirement planning [link],” by Beth Allan and Chris Leone, Life & Health Advisor

Quote:  "While planning for the final two years of life may seem excessive to some, there is growing concern that a lifetime of saving and hard work may go to LTC facilities, rather than children or other family members. For many, this will result in the liquidation of assets to pay for a decent facility, a minimal inheritance for surviving family members, and living with the very real possibility that earnings garnered over a lifetime of labor might be pillaged in the final two years of life."

LTC Comment:  Access to Medicaid-financed LTC without significant loss of assets has been the rule since 1965, but that reality is likely to change.  A fiscal vise is closing on Medicaid and Medicare making the conclusion above truer now and in the future than it has ever been.

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1/28/2014, “Falls Top Car Crashes as Leading Cause of U.S. Spinal Injuries
Rates rising fastest among seniors, study finds [link],” HealthDay

Quote:  "Spinal cord injury rates in the United States are rising, and the leading cause now appears to be falls suffered by seniors rather than traffic crashes, according to a new study.  The findings suggest that programs to prevent falls in elderly people could significantly reduce the number of spinal injuries in the nation, the researchers said."

LTC Comment:  Get used to more news like this as age-related injuries and illness spike with the aging of the baby boomers.

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1/28/2014, “New Website for LTC Agents Launched - LTCUnderwriter.COM; Recently launched website LTCUnderwriter.com offers free underwriting tools and features to assist LTC insurance professionals in various underwriting processes [link],” Debra Tancredi, LTC Global

Quote:  "By combining multiple functionalities that reflect common, yet tedious, tasks associated with underwriting, LTCUnderwriter can help agents become more efficient in manual checks, and allow them to focus better on giving top quality service to their clients."

LTC Comment:  Simplifying tedious tasks sounds like a good thing.

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1/28/2014, “2014 Long Term Care Insurance Price Index Published,” AALTCI

Quote:  "Long term care insurance prices drop 14 percent for single men, rise three percent for couples reports the American Association for Long Term Care Insurance."

LTC Comment:  A different spin on the usual reports that LTCI premiums have skyrocketed.

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1/28/2014, “Political Cartoon: 'Think Or Swim?,” by Lisa Benson, Kaiser Health News

Quote:  Click through to see the cartoon:  http://www.kaiserhealthnews.org/Cartoons/2014/January/Think-Or-Swim.aspx.

LTC Comment:  Community rating always means low risk people subsidize high risk people whether the low risk people want to or not and whether the high risk people are deserving of special treatment or not.

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1/28/2014, “Surprise: Millennials as Financially Conservative as Grandma & Grandpa [link],” Life & Health Advisor

Quote:  "The majority of Millennials said saving was the best financial advice they had received, while other generations said investing was the best. This Depression Era mentality combined with advice they get from family is turning Millennials into a generation of savers who are skeptical about long-term investing and market chasing. Only 12% of Millennials said they would invest found money in the market, and only 28% see long-term investing as a pathway to success and are focused on meeting their goals instead of a specific market return."

LTC Comment:  Conservative savers are likely to protect their principal with insurance.

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1/27/2014, “Part-time work is the fastest-growing source of retirement income [link],” by Emily Brandon, US News and World Report

Quote:  "While 47 percent of retirees receive interest generated by their personal savings, half reported $255 or less in annual interest payments."

LTC Comment:  You can thank the Federal Reserve’s having pushed interest rates to near zero for that meager return on savings.

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1/27/2014, “The Older Mind May Just Be a Fuller Mind,” by Benedict Carey, New York Times

Quote:  "It goes without saying that many people remain disarmingly razor-witted well into their 90s; yet doubts about the average extent of the decline are rooted not in individual differences but in study methodology. Many studies comparing older and younger people, for instance, did not take into account the effects of pre-symptomatic Alzheimer's disease, said Laura Carstensen, a psychologist at Stanford University."

LTC Comment:  Hopeful findings for the aging brain.

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1/27/2014, “As America ages, senior care options flourish,” by Matthew Perrone, FiftyPlusAdvocate

Quote:  "'The people who can really afford long-term care insurance often have enough fixed income that they don't really need it,' said Bradley Frigon, vice president of the National Academy of Elder Law Attorneys."

LTC Comment:  Unsound advice from the people who bring you artificial impoverishment via Medicaid planning.
 
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1/25/2014, “Sixteen States Still Offer Unisex Long Term Care Insurance Rates [link],” by Jesse Slome, Kansas City Infozine

Quote:  "California, New York and Florida are three of the nation's larger states where men and women still can pay equal amounts for long term care insurance according to an analysis by the American Association for Long Term Care Insurance."

LTC Comment:  Isn’t failure to price risk a form of sex discrimination?

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1/23/2014, “Baby Boomers to Push U.S. Politics in the Years Ahead; Baby boomers' politics vary significantly by age [link],” by Frank Newport, Jeffrey M. Jones, and Lydia Saad, Gallup Politics

Quote:  "Predicting the politics of the highly important baby boom generation over the next decade as the group moves into its senior years is highly speculative. But one thing is certain. Baby boomers, holding the distinction of the largest generation in the U.S. population, will continue to exert disproportionate influence over the U.S. political process for at least the next 25 years."

LTC Comment:  It’s not so difficult to predict that boomers will become more conservative as they grow older just as previous age cohorts have done.

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1/23/2014, “For Seniors With Dementia, the Choice to Live Alone Can Be a Risky One; Study identifies safety issues, lack of social activities and health care [link],” by Lisa Esposito, HealthDay

Quote:  "For the millions of Americans with dementia, staying at home for as long as possible is a common goal. But independent living can pose certain risks for these adults -- and prove challenging for family caregivers.  A new study of more than 250 Baltimore residents with dementia found unmet needs, especially concerning safety, health and meaningful activities, in almost all cases."

LTC Comment:  We're seeing more and more reports like this one suggesting that home care is not the panacea often suggested.  Institutional care of various kinds may rebound especially for the most frail and infirm seniors.  Such a trend runs directly contrary, however, to broad national Medicaid policy pushing high-risk "dual eligibles" into home care managed by giant MCOs (managed care organizations).

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1/23/2014, “5,000 Expected For Long Term Care Insurance Virtual Conference [link],” American Association for Long-Term Care Insurance

Quote:  "Some 5,000 insurance agents and financial advisors who market traditional long term care insurance as well as hybrid long term care products are expected to participate in the national conference organized by the American Association for Long Term Care Insurance."

LTC Comment:  Congratulations to AALTCI for convening a virtual crowd.

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1/22/2014, “Intercompany Long Term Care Insurance Conference Welcomes 800+ LTCI Professionals to Orlando for 14th Annual Conference, March 16-19; Chris Gardner, Portrayed by Will Smith in the movie ‘The Pursuit of Happyness,’ To Provide Keynote Address [link],” by The Intercompany Long Term Care Insurance Conference Association, Inc., PR Newswire

Quote: “The Intercompany Long Term Care Insurance Conference Association, Inc. (ILTCI) today announced its 14th annual conference (http://www.iltciconf.org), March 16-19 at the Rosen Centre in Orlando. 800+ long-term care insurance (LTCi) specialists are expected to attend, to learn more about how to better support retirement planning for baby boomers and seniors. Co-sponsored by the LTCi Section of the Society of Actuaries, the conference will include a keynote by Chris Gardner, whose amazing life story was published as the #1 bestselling autobiography, The Pursuit of Happyness. Will Smith starred in the movie version, earning Academy Award, Golden Globe, and Screen Actors Guild nominations for his performance.”

LTC Comment:  Be there if you can and do say hello to Damon and Steve.

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1/22/2014, “Managing long-term care insurance for a parent? Try these tips to make sure claims are covered [link],” by Kimberly Lankford, Kiplinger Personal Finance

Quote:  “A long-term-care insurance policy can help cover the costs of care in a nursing home, an assisted-living facility, or at home. If you're helping out a parent, follow these steps, and you're more likely to get through the claims process smoothly . . ..”

LTC Comment:  Helping a parent through the LTC or LTCI process is often the first encounter of the younger generation with the challenges of long-term care.

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1/22/2014, “Most Boomers Mistakenly Think Affordable Care Act Covers Long-Term Care Costs [link],” Life & Health Advisor

Quote:  “According to the poll conducted by Harris Interactive of 801 Americans over 50 with at least $150,000 in household income, only 28 percent know that the Affordable Care Act does not cover LTC costs. Nearly half say they are worried about becoming a burden to their families, but 54 percent say they would rather die than live in a nursing home.”

LTC Comment:  What you don’t know can  hurt you.

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1/22/2014, “Issue Brief:  How Are Seniors Spending Their Money?,” by Pamela Villarreal, National Center for Policy Analysis

Quote:  “Today's seniors have a mixed bag of spending habits. Although discretionary and recreational purchases have increased, today's seniors are taking on debt in the form of mortgages and credit cards. Moreover, with abysmally low interest rates on savings and a tax policy that subsidizes consumption over saving, seniors do not have much incentive to save. Those who are early into retirement should rethink conventional wisdom about saving by considering a variety of investments besides just bonds. Also, they should avoid incurring debt through a home equity loan or any type or mortgage.”

LTC Comment:  LTC insurance is a great option to preserve capital in such an environment.

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1/21/2014, “New York Life Introduces a New Way to Address the Financial Demands of Chronic Illness [link],” Business Wire

Quote:  “The Chronic Care Rider is a flexible, low-cost addition to a whole life insurance policy with a premium that is guaranteed to stay level. If a policyholder does not need to use their benefits for chronic care, those funds remain intact as life insurance benefits for heirs or as cash value that can help supplement retirement income as their life insurance needs decrease. The Chronic Care Rider is also very easy to use once the insured is certified as permanently chronically ill. Policyholders are not required to submit receipts or a care plan for claim reimbursement, and policyholders can decide how their monthly claim payments are spent. The benefits may be used - for at-home care, a nursing home stay, or even to help supplement the needs of family members who are spending time providing care - no receipts or plan of care needed.”

LTC Comment:  Options for LTC protection proliferate.

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1/20/2014, “High-tech upgrades may let aging boomers live independently in their own homes longer [link],” by Hayley Tsukayama, Washington Post

Quote:  “Their medicine bottles will alert their doctor when they miss a dose. Pressure-sensing floor mats can sense when they have fallen or let caregivers know when a patient hasn't showered for a while. Honeywell is developing a sensor that customers can wear on their body that would detect whether they are moving in a manner that would indicate they have fallen. The aim of these upgrades is to allow an aging population to stay in their homes - and independent - longer.”

LTC Comment:  Ain’t technology great . . . when it works?

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1/18/2014, “The Register's Editorial: Court delivers a lesson on Medicaid,” DesMoines Register

Quote:  “Most Iowans are likely comfortable paying taxes used to provide health care to poor people - as long as we know they are actually poor.

“So there is something wrong when Medicaid pays hundreds of thousands of dollars for an Iowa couple's care and then after they die, the children sell the couple's assets and collect more than $900,000. But that is what happened with Arnold and Vesta Melby. . . .

“'The decision of the Iowa Supreme Court was unanimous supporting the state's position that these funds should be repaid to the taxpayers of Iowa,' said DHS spokeswoman Amy Lorentzen McCoy. . . .

“A strong estate recovery program is essential as more Iowans will be eligible for Medicaid under the health reform law. These government health care dollars should not be used to pay for the care of those who can afford to pay it themselves. And when that does happen, taxpayers should get their money back, even if the state has to fight the case all the way to the Iowa Supreme Court.”

LTC Comment:  Once in a while, a court and a newspaper get it right.

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1/13/2014, “Iowa Supreme Court Reaffirms Extensive Reach of Medicaid Recovery in Granting Department's Claim against Irrevocable Trusts [link],” by Kristine A. Tidgren, Iowa State University Center for Agricultural Law and Taxation

Quote:  "The Iowa Supreme Court has reaffirmed the extensive reach of the Iowa Medicaid recovery program, stressing the Medicaid program's 'broad purpose' of 'providing for care for those in need' and 'allowing for recovery by the state' to free 'more funds for the provision of future services.'  The Court again noted that the Iowa legislature has intentionally defined 'estate' for purposes of the Medicaid recovery statute more broadly than required by federal law. . . .  Clients should be counseled that a long-term care insurance policy, purchased during middle age from a reputable insurer, is usually going to be the best Medicaid planning tool available."

LTC Comment:  Finally a state supreme court sends the message we've been sending for decades now.

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Updated, Monday, January 27, 2014, 1:30 PM (Pacific)

Seattle—

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LTC BULLET:  A BRIEF HISTORY OF LONG-TERM CARE FINANCING

LTC Comment:  How did America’s LTC service delivery and financing system become so dysfunctional?  A brief history follows the ***news.***

*** CENTER PREZ Steve Moses is back from the AICPA (American Institute of Certified Public Accountants) Advanced Personal Financial Planning Conference at the Aria Resort and Casino in Las Vegas.  There he presented a “Long-Term Care Intensive” which included two key sections of our “Long-Term Care Graduate Seminar”:  “The Elephant, the Blind Men and Long-Term Care” and “The History of Long-Term Care” to a highly attentive and appreciative audience. ***

*** BULK MAIL MISHAP.  Our bulk mail sending program was down for a few days.  Hence we’re sending this Bullet today instead of last Friday.  Your next LTC E-Alert  will arrive on schedule next Monday.  Thanks for your patience. ***

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LTC BULLET:  A BRIEF HISTORY OF LONG-TERM CARE FINANCING

LTC Comment:  Once a year we update the Center for Long-Term Care Reform’s “LTC Graduate Seminar.”  Center members have access to this 44-page transcription in The Zone here.  Reading it is a great way to review the big picture about long-term care financing.  For access, you’ll need your user name and password.  For a reminder or to join the Center and get access to everything we do including The Zone, contact Damon at 206-283-7036 or damon@centerltc.com.

Today for everyone, including non-members, we offer a special peek at one section of the LTC Graduate Seminar.  What follows is a 15 page history of long-term care services and financing in the United States since the establishment of Medicaid and Medicare in 1965.  We hope you find it interesting and helpful in understanding this complicated topic.  There is much more in the LTC Graduate Seminar than this, however.  If we pique your interest with the history section below, check out the rest of the document including these informative sections:

The Elephant, the Blind Men, and Long-Term Care
The Welfare Paradigm
The Entitlement Paradigm
Medicaid Eligibility for Long-Term Care
Medicaid Estate Planning
Key Money
What's Going to Happen Next?
How Social Security Props Up Medicaid LTC
How Medicare Props Up Medicaid LTC
The Welfarization of Medicaid, Medicare and Social Security
The Bottom Line

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History of LTC and Why it Matters for Financial Advisors and LTCI Producers

I want to change gears now and take another approach to the LTC issue.  We have established so far that the elephant of long-term care is a very complicated animal.  It's comprised of many competing interest groups, each and all of which have something to gain from continuation of the status quo.

We've established that the United States has a welfare-financed, nursing home based long-term care system in the wealthiest country in the world where nobody wants to go to a nursing home.  And yet most people are asleep about the risk and cost of long-term care.  Until we understand how this status quo came to be and why, we can hardly expect to identify the right corrective actions.

So I want to turn now to the history of long-term care service delivery and financing.  How did we get into the mess we're in?

Something really important happened in 1965.  Two new government programs were established.  Do you know what they were?

Right, Medicare and Medicaid. 

Medicare, of course, was designed to provide acute health care to the elderly.  But Congress decided that something really needed to be done for low income people as well.  So they added Medicaid as kind of an afterthought to Medicare.  Then, as an afterthought to that afterthought, Congress decided that something should also be done for aging Americans who need long-term care.  So they added nursing home care to Medicaid for people over the age of 65.

In the beginning, there were no transfer of assets restrictions interfering with eligibility for Medicaid long-term care.  There was no estate recovery mandate requiring people with sheltered wealth to pay back the cost of their care.  If you were over the age of 65, it was easy to get the government to pay for nursing home care.

The public isn't stupid.  They figured:  "You mean, if we want to take care of Grandma at home, we'll have to pay for it 100 percent out of our own pockets?  But if we put her in a nursing home, the government will not only pay for her care but send in surveyors to make sure she receives quality care?  That's a no-brainer."

The nursing home industry isn't stupid, either.  They said.  "You mean the government is going to put a giant pot of money out in the middle of the country, somewhere around Kansas or Nebraska, and all we have to do is build nursing homes, offer the beds to people who want long-term care, and the government will pay?  Terrific.  Bring it on."

Medicaid Nursing Home Costs Explode

P.J. O'Rourke, the political satirist, likes to say "If you think health care is expensive now, just wait until it's free."

For all intents and purposes, the government made nursing home care free in 1965. 

That had the effect of crowding out a market for privately financed home and community-based care.  Why pay out of pocket for home care services, adult day care, respite care or assisted living, when the government provides nursing home care? 

For the same reason, a market for long-term care insurance to pay for home care and nursing home care was slow to develop and remains stunted to this day.

By the mid-1970s, I was working for the Health Resources Administration in Rockville, Maryland.  That's part of the U.S. Public Health Service.  I saw what happened next, up close and personal.

Predictably, the cost of Medicaid financed nursing home care exploded.  The public filled new nursing home beds as fast as the nursing home industry could build them.  "Roemer's Law" said:  "A built bed is a filled bed." 

[See http://en.wikipedia.org/wiki/Roemer's_law]

The government looked at the exploding cost of nursing home care and concluded that something had to be done.  But instead of addressing the cause--that is, the fact that government had made nursing home care free or radically subsidized resulting in higher construction, utilization and expenditures--they attacked the symptom, the increasing costs.

The government figured "they can't charge us for a bed that doesn't exist."  So, state  governments began to require nursing homes to get permission before they build new facilities.  Nursing home companies had to obtain a "certificate of need" or CON before building new skilled nursing facilities.

Now, this arrangement was fine with the nursing home industry.  For anyone already in that business, the Certificate of Need only meant that they now had a government-enforced monopoly.  They might not be able to build more nursing homes, but neither could their potential competition.  Since the nursing homes' growth was restricted by this limit on supply, however, the industry simply started charging more for the beds they already had.

That was predictable.  In any economic system, when supply goes down or is artificially restrained from going up, price tends to increase.  You don't need a PhD in economics to figure that out, but the government didn't see the consequences coming.

The cost of Medicaid financed nursing home care continued to explode.  Once again, the government knew it had to take action.  And once again, it failed to address the cause--i.e., free government financed nursing home care--and went instead after the symptom--skyrocketing costs caused by increasing charges to Medicaid by the nursing home industry. 

So the government told the nursing home industry they could no longer charge whatever they wanted to charge for nursing home care.  Medicaid capped its reimbursement rates.  This was the origin of the differential between the very low Medicaid reimbursement rates for long-term care and the relatively high private pay rates.  Today, Medicaid pays only about two-thirds of the private-pay rate for nursing home care.  Private payers have to pay half again as much as Medicaid reimburses for people in the same nursing home, sometimes in the same room as the private payers.

Quality Collapses

With supply AND price capped, what do you think happened to demand?  Of course, demand went through the roof.  In the mid-1980s, nursing homes were 95 percent occupied.  At the same time, hospitals were only 55 percent to 60 percent full.  If a nursing home was willing to accept Medicaid's low reimbursement rates, it could fill all of its beds . . . no matter what kind of care it offered.  Consequently, quality of care collapsed in principally Medicaid-financed nursing homes.

Once again, Congress took note.  Even though quality plummeted, costs continued to explode.  True to form, however, government attacked the symptom (poor quality) instead of the cause (public financing).  So Congress went to the nursing home industry and said, in paraphrase:

"This is America.  We cannot tolerate poor quality of care in our nursing homes.  You must improve the care.  You must hire more nurse's aides; you must train them better; you must pay them more.  Make sure you dot every I and cross every T according to stricter regulations.  And if you don't, we will hit you with fines and other penalties." 

That was OBRA '87, the Omnibus Budget Reconciliation Act of 1987.  Thankfully, it worked, and quality of care in America's nursing homes is top notch today.  [Audience snickers.]  Well, not exactly.  If anything, the problems are worse than ever now, 27 years later.

But when OBRA '87 passed, the nursing home industry wasn't displeased.  They said, in essence, "We're not in this business just to make a lot of money.  We want to provide loving and compassionate care.  We love the idea that you want us to hire more people, train them better and provide higher-quality care.  Only one question though, how much more are you going to reimburse us under Medicaid to make this possible?"

And the government responded "Money?  We don't have any of that.  We just demand that you do all these new things."

Nursing Homes Sue Medicaid

Well, now the nursing home industry was caught between the rock of inadequate reimbursement and the hard place of mandatory quality.  If they tried to attract more private payers at the higher private-pay rate, they were accused of discriminating against Medicaid recipients.  If they tried to cut costs, they were accused of providing poor care.  It was a hopeless situation.  So the nursing home industry turned to the courts.

Under the "Boren amendment," which was part of OBRA '81, the nursing home trade associations in many states began suing their state Medicaid programs for higher reimbursement under Medicaid.  The Boren amendment said in essence:  "State Medicaid nursing home programs must provide sufficient reimbursement for an effective facility to provide decent care."  That's a paraphrase, but pretty close. 

[For the precise language, see Joshua M. Wiener and David G. Stevenson, "Repeal of the 'Boren Amendment': Implications for Quality of Care in Nursing Homes," at http://www.urban.org/publications/308020.html.]

Who do you think won most of those lawsuits?  There's an old saying that "you can't fight City Hall," so you might think the State Medicaid programs prevailed.  But the truth is, the state nursing home associations won most of those Boren suits.  They forced Medicaid to increase reimbursements for nursing home care. 

So, what do you think the government did next?  You guessed it.  Congress repealed the Boren Amendment in the Balanced Budget Act of 1997.  Since then, there has been no floor under Medicaid reimbursement for nursing home care.  Nevertheless, long-term care costs continue to increase and quality remains questionable.

Medicaid LTC Eligibility Bracket Creep

While all this was going on, another situation developed.  Most people who needed long-term care were receiving it in nursing homes because an alternative market for home and community-based care had been crowded out by free nursing home care.  So people were finding themselves in nursing homes, often in semiprivate rooms, paying privately, but sharing a room with a person on Medicaid. 

The people paying privately, or their representatives, noticed that the person on Medicaid may have had more money throughout most of their lives than the person paying privately.  Because of Medicaid's reduction in the reimbursement rate it was willing to pay nursing homes, private payers came to be paying half again as much on average as Medicaid was paying for Medicaid recipients.  That's called "cost shifting."  Naturally, this created a temptation on the part of the private payers to find a way to qualify for Medicaid.  If they could get onto the program, it would pay not only for their nursing home care, but for other, ancillary services that Medicaid often pays for but Medicare doesn't, such as foot care, eye care, dental care and residual pharmaceuticals after Part D.

By the early 1980s, there developed a sub-practice of law, called "Medicaid estate planning" designed to help middle-class and affluent people self-impoverish in order to become eligible for Medicaid.  I call this process of extending Medicaid eligibility to more and more prosperous people "eligibility bracket creep."  As Medicaid LTC eligibility expanded, it created even more financial pressure on Medicaid and reduced the number and percentage of people in nursing homes who were paying at the higher private pay rate.  Thus, eligibility bracket creep exacerbated all the problems we've discussed so far regarding access to and quality of care.

Congress Acts to Discourage Medicaid Abuse

Beginning in 1982, Congress tried to get control of Medicaid LTC eligibility.  The first major measure in this direction was the Tax Equity and Fiscal Responsibility Act of 1982, or TEFRA '82.  TEFRA authorized state Medicaid programs for the first time to (1) penalize asset transfers done for the purpose of qualifying for Medicaid, (2) place liens on real property in order to hold that property in a recipient's possession during their period of Medicaid eligibility, and (3) to recover the cost of their care from the estates of deceased recipients.

The critical thing to understand about TEFRA '82 is that it was entirely voluntary.  States could implement these new programs or not at their own discretion.  In 1983, I was the Medicaid State Representative for the state of Oregon in the Seattle Regional Office of the Health Care Financing Administration (the predecessor organization of the current Centers for Medicare and Medicaid Services or CMS).  It was my job to make sure that the federal laws and regulations governing Medicaid long-term care were properly implemented by the state government.  The federal government partially funds and oversees Medicaid.  State governments partially fund and administer the program.  So the Medicaid State Rep's job was to be the linchpin between the federal and state Medicaid programs.

In Oregon, I came across this interesting program called "Medicaid estate recoveries."  It purported to recover five percent of the cost of Oregon's nursing home program, or about $5 million a year.  That was back then.  It's more like $20 million a year now. 

Imagine my confusion when I discovered this program.  By that time I had already worked a total of ten years in federal welfare programs.  I thought I knew how they worked.  When you're poor . . . when you're destitute . . . when you have nothing left . . . you can apply for public assistance, and the government helps you with cash or, in Medicaid's case, with medical or long-term care services.  That's how it was with the old Aid to Families with Dependent Children Program.  I thought it was the same with Medicaid. 

So how could it be that people who are poor and destitute enough to qualify for Medicaid would spend years in a nursing home at enormous expense to the state and federal governments, and then, after they die, a little state like Oregon recovers nowadays $20 million out of their estates?  Where did all that money come from?

That question really fascinated me.  So, in 1983 I conducted a study, the objective of which was to ask and answer the question "What if every state in the country recovered from estates at the same rate as Oregon?" 

I quickly realized that to do this study, I would have to understand how Medicaid eligibility works.  In other words, how could people with substantial income and assets qualify for Medicaid in the first place?  

What I learned is that income is rarely an obstacle to qualifying for Medicaid.  I also found that assets, ostensibly limited to only $2000, were rarely an obstacle to qualifying for Medicaid.  That's because unlimited assets could be held in exempt form.  We'll discuss Medicaid income and asset eligibility in detail later in this program. 

Until 2006, for example, there was no limit on the amount of home equity that could be exempted.  One home and all contiguous property, regardless of value, was disregarded.  It was no wonder, therefore, that people could qualify for Medicaid, receive free or subsidized nursing home care and other medical services indefinitely, and still have substantial assets in their estates. 

The report I prepared for the Health Care Financing Administration in 1985, titled "The Medicaid Estate Recoveries Study," is available at http://www.centerltc.com/mer_study.pdf.  What I found was that most states had not aggressively implemented TEFRA '82.  Most states had put in place some form of the transfer-of-assets restriction, but back then it was limited to a two-year look-back and no more than a two-year penalty.  Only two states had implemented TEFRA liens.  And while 15 or 16 states had implemented estate recoveries, most had not done so in such a way as to maximize estate recoveries.  My state of Oregon was an exception in that regard.

After I drafted this report, I forwarded it to a number of people interested in long-term care financing, including several scholars and federal agencies like the General Accounting Office (GAO is now known as the Government Accountability Office) and the Office of Inspector General (OIG) of the Department of Health and Human Services (DHHS).  Although HCFA discouraged my work and refused to publish it, the DHHS Inspector General loved it and hired me out of the Health Care Financing Administration to conduct a more comprehensive national study and write a report titled "Medicaid Estate Recoveries." That report is still available to read on the OIG's website at http://oig.hhs.gov/oei/reports/oai-09-86-00078.pdf. (Cut and paste this link into your browser if it does not come up otherwise.)  GAO also followed up with a national study on which I consulted.  Read that report at http://archive.gao.gov/d15t6/138099.pdf.

My report for the OIG explained how people with substantial income and assets could qualify routinely for Medicaid.  It estimated that nearly $600 million could be recovered from estates, if every state in the country performed at the same level as Oregon.  The report warned that as long as people with substantial income and assets could qualify easily for Medicaid, there would be very little market for private LTC financing alternatives; Medicaid long-term care expenditures would continue to explode; little privately financed home and community-based services infrastructure would develop; quality of care would continue to decline due to Medicaid's notoriously low reimbursement rates; and, if something weren't done about these problems, within 30 years the cresting of the Age Wave would crush the existing long-term care financing system.

Here we are 26 years later and everything I predicted in that early OIG study has come true or is about to!

COBRA '85, MCCA '88, OBRA '93, HIPAA '96, BBA '97 and DRA '05

In 1985, in the Consolidated Omnibus Budget Reconciliation Act of that year, Congress took the next step to rein in abuse of Medicaid LTC.  COBRA '85 put a stop to "Medicaid qualifying trusts."  MQTs had become the technique of choice for elderlaw attorneys to impoverish their affluent senior clients and qualify them for Medicaid nursing home care.  COBRA '85 changed the rules, but did not grandfather in people who already had Medicaid qualifying trusts.  Many individuals and families were hurt.  A lot of elderlaw attorneys were embarrassed professionally.  But that didn't stop them from finding new ways to focus on qualifying affluent clients for Medicaid financed long-term care.

The Medicare Catastrophic Coverage Act of 1988 (MCCA '88) was the next step in this process.  MCCA '88 was mostly about Medicare, but it did have some provisions that affected Medicaid long-term care eligibility.  The most important change was, for the first time, to require state Medicaid programs to penalize asset transfers for less than fair market value done for the purpose of qualifying for Medicaid long-term care benefits.  MCCA '88 required state Medicaid programs to look back 30 months for inappropriate asset transfers.  It established an ineligibility penalty equal to the amount of assets transferred for less than fair market value for the purpose of qualifying for Medicaid divided by the average cost of a nursing home in the state.  For example, give away $80,000 to qualify for Medicaid in a state where nursing home care averaged $8,000 per month and you'd be ineligible for 10 months from the date of the transfer.  The italicized point will be very important later.  MCCA '88 also established a limit of 30 months as the maximum penalty for asset transfers.  In other words, if you gave away $1 million within 30 months of applying for Medicaid, your transfer of assets penalty would still be only 30 months.

In 1993, the Omnibus Budget Reconciliation Act of that year implemented most of the recommendations from my 1988 "Medicaid Estate Recovery" report for the Office of Inspector General [http://oig.hhs.gov/oei/reports/oai-09-86-00078.pdf, you may have to cut and paste this link into your browser].  OBRA '93 extended the look-back period for asset transfers to a full three years (36 months) for most improper transfers and to five years for transfers into or out of a trust.  The law also eliminated the limit on the eligibility penalty.  Now, if you gave away $1 million within three years of applying for Medicaid, you would be permanently ineligible for all intents and purposes.  OBRA ’93 made estate recoveries mandatory for the first time.

OBRA '93 also eliminated the Medicaid planning gimmick of "pyramid divestment."  Before OBRA '93, the elderlaw bar had figured out that because transfer of assets eligibility penalties were allowed to run concurrently, they could jettison lots of money very quickly for their affluent clients while minimizing any transfer of assets penalty.  On their websites, they published schedules that showed exactly how much to give away each month to take full advantage of this loophole.  They could actually spend you down from $1 million to nothing in a period of about a year.  This was possible because, for example, instead of giving away all the money in one month and incurring the maximum penalty, you could give away smaller amounts each month and, because the penalties ran concurrently from the date of the first transfer, you'd be out of money and eligible for Medicaid in only a fraction of the time originally intended by Congress.  This so-called pyramid divestment was no longer allowed after 1993.  But the elderlaw bar was very creative and opened many new "loopholes" to replace this one.

A Political Earthquake

Something big happened in American politics in 1994.  Anybody recall what it was?  Remember the "Contract with America," Newt Gingrich?  The Republicans took over both houses of Congress. 

Who was president at the time?  Right, Bill Clinton. 

Clinton was well known for something in particular.  [Audience snickers.] 

"Not that!" 

I'm referring to President Clinton's frequent statement that he would "change welfare as we know it."  And he did.  He added a work requirement to the welfare (Aid to Families with Dependent Children or AFDC) rules and reduced the welfare rolls by two-thirds, a tremendous success.

The new Republican Congress and President Clinton were alarmed by the exploding Medicaid long-term care costs.  They were frustrated that none of the government's efforts since 1982, which were intended to control the abuse of Medicaid long-term care resources, had worked.  So they decided to stop the overuse of Medicaid once and for all.  In 1996, in the Health Insurance Portability and Accountability Act (HIPAA '96 or the Kennedy/Kassebaum Act), they made it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid.  To do so, according to HIPAA '96 would be punishable by a fine of up to $10,000 and a jail term of as much as a year.

Now, remember the senior advocates?  They were one of the blind men of long-term care we talked about.  The senior advocates and their organizations looked at this new rule with alarm and decided to fight it.  They called HIPAA '96 the "throw granny in jail law."  Okay, this was one measure to control Medicaid abuse that even I didn't favor.  It seemed to me like a stupid, ham-handed way to deal with the problem, which is actually fairly simple to fix.

But when Congress repealed the throw granny in jail law in the Balanced Budget Act of 1997 (BBA '97) and replaced it with the "throw granny's lawyer in jail law," that made a lot more sense to me.  Why penalize the victim, when you should be going after the culprit?  For a while, the Medicaid planners' big conventions, held at luxury resorts twice a year, were more like funeral dirges than professional meetings.  (I used to attend those sessions to keep an eye on the Medicaid planners and report their egregious methods to the media until they blackballed me by closing their conventions to non-attorneys.)

Unfortunately, the "throw-granny's-lawyer-in-jail law," which threatened a year in jail and/or a $10,000 fine for recommending (in exchange for a fee) that a client transfer assets to qualify for Medicaid, was unconstitutional.  Janet Reno, who was Bill Clinton's Attorney General at the time, looked at the law and concluded it would be unenforceable.  How could you hold an attorney legally culpable for recommending a practice that was legal again after the "throw-granny-in-jail law" was repealed?

So, there we were in the late 1990s, 15 years after Congress had taken the first steps in TEFRA '82 to control the abuse of Medicaid, right back where we'd started.  Costs continued to explode.  More and more people were qualifying for Medicaid-financed long-term care.  Private payers were disappearing.  Quality of care continued to decline.  The public remained asleep about long-term care risk and cost.  Neither private insurance nor home equity conversion contributed significantly to LTC costs.  And the Age Wave was a decade and a half closer to wiping out the LTC safety net.

From Boom to Bust

Now, what was the economy like in the late 1990s?  Good or bad?

Right, those were boom years.  The Internet bubble.  The new economy.  Everyone's 401(k) was on its way to becoming an 802(k).  In my experience, when the economy is good, when tax receipts are up, and when welfare rolls are down, it is extremely hard to get the attention of politicians and public officials to the issues of controlling Medicaid costs and encouraging personal responsibility and long-term care planning.

But, exactly the opposite is true when the economy goes into the tank.  When welfare rolls are up and tax receipts are down, state legislatures, governors and other public officials become much more amenable to reason and evidence about the need to control Medicaid long-term care expenditures.  After September 11, 2001, as the economy went rapidly into recession, state officials became far more sensitive to the need to spend Medicaid's scarce resources effectively and efficiently. 

When governors could not make their budget ends meet and because, unlike the federal government, they are constitutionally required to work within their budgets, we were able to get their attention.  In 2005, I was funded by the American Health Care Association, the big proprietary nursing home and assisted living trade association, to spend half time for six months in Washington, DC.  My objective was to explain to all of the "blind men of long-term care," the key stakeholders in the LTC issue, the need to control Medicaid long-term care expenses and encourage private financing alternatives for long-term care.

I testified before Congress on April 27, 2005; I gave briefings on Capitol Hill; I met with all the key interest groups, including long-term care providers, LTC insurers, the National Governors Association, the National Reverse Mortgage Lenders Association and dozens of others.  In fact, I sought out and met with anyone and everyone who had any role in or concern about long-term care financing . . . and would listen.

My co-founder of the Center for Long-Term Care Reform, an attorney by the name of David Rosenfeld, after leaving the Center in 2001, ultimately became the Chief Health Counsel to the House Energy and Commerce Committee, the germane committee for Medicaid in the United States House of Representatives.  David wrote much of the Deficit Reduction Act of 2005 and guided it through the shoals of political opposition. 

On February 8, 2006, President Bush signed the DRA '05.  It had passed by a single vote.  Vice president Cheney had to be transported back from the Middle East to cast the deciding vote in the Senate.  As soon as the law was signed, senior advocacy organizations and Medicaid planning attorneys filed lawsuits against it.  All of this litigation was thrown out of court.

The DRA '05 took some giant steps in the direction of controlling Medicaid eligibility.  For the first time ever, it put a limit on the amount of assets that could be exempted in a home and contiguous property.  The limit was placed at $500,000 ($543,000 as of 2014 in 37 states) or up to $750,000 ($814,000 as of 2014 in 13 states and DC) at the option of a state legislature.  That is a step in the right direction.  By the time the Deficit Reduction Act passed, however, the recession that made it possible had ended.  When state governments were under severe budgetary constraint, the National Governors Association had actually advocated in writing for a limit on the Medicaid home equity exemption of $50,000.  We got half a million and that's significant, but it isn't enough to solve the problem.

An LTC Tour Anecdote

Let me tell you an anecdote from our 2008 National Long-Term Care Consciousness Tour that helps make the point about Medicaid's home equity exemption.

When I was in Washington, DC with the Silver Bullet of Long-Term Care, I received an e-mail from the Prime Minister's office of the United Kingdom.  They wanted to know if it would be all right to send over a delegation to speak with me, and others, about long-term care financing.  It seems Great Britain is unable to pay for its socialized acute care health system, much less for long-term care.  They would love to have a private long-term care insurance market to help defray the public cost of funding long-term care. 

But when they looked at the United States, where it is commonly understood that no one qualifies for help with their long-term care costs until they have spent down into total impoverishment, they wondered:  "If Americans can't sell long-term care insurance in their dog-eat-dog, capitalist system, how could we ever hope to develop a long-term care insurance market in a socialized health care system like England's?"  (My paraphrase.)

I invited the U.K. delegation of two experts on aging to join me in the Silver Bullet at a very nice RV park on the outskirts of DC.  I picked them up in the truck at the end of the D.C. Metro Green line, and drove them to the Airstream trailer.  It was a hot and humid day, so we had the air conditioning on.  The three of us sat in that little 16-foot trailer for three hours talking about long-term care financing. 

I learned something very interesting.  In the United Kingdom, all you can shelter in home equity while getting the government to help with your long-term care costs is $40,000.  We are 10 to 20 times more generous with our scarce public resources for long-term care in the United States as they are in their socialized health care system.

More on the DRA

The Deficit Reduction Act of 2005 also extended the look-back period for asset transfers from three years to five years for all transfers.  That sounds impressive until you realize that the look-back period on asset transfers in Germany, another European socialized health care system, is ten years!  Transfer assets for less than fair market value within ten years of applying for public assistance to help with your long-term care costs in Germany, and you run the risk of their pursuing recovery from the people, probably your relatives, to whom you gave the money.

One of the most important changes the DRA '05 made was to eliminate the single most prevalent Medicaid estate planning gimmick at the time.  That was the so-called "half-a-loaf" strategy.  Instead of giving away $100,000 and incurring a 20 month transfer of assets penalty, people would give away $50,000, incur half the penalty, i.e., 10 months, hide the rest of the money and become eligible after the penalty ran its course, without ever spending any of their own money for long-term care.  The Deficit Reduction Act ended this practice by starting the eligibility penalty at the date someone would have otherwise become eligible for Medicaid if the rule hadn't changed.  Previously, the penalty began at the date of the transfer, a practice which enabled the half-a-loaf strategy.  Now, the penalty begins (usually) at the date of Medicaid application. 

Ironically, this was a DRA provision the nursing home lobby opposed.  They worried that people who had transferred assets would end up on their doorstep destitute, unable to pay their own way for long-term care, but also ineligible for Medicaid.  In other words, nursing homes figured they'd end up with a lot more "charity" cases.  I explained to them at the time that this would not happen, at least not in significant numbers, because the new rule eliminated the practicality of giving away half of one's assets to become eligible for Medicaid more quickly.  In the future, no attorney in his or her right mind would recommend that people transfer assets in the same old way to qualify for Medicaid, because that strategy would no longer work and would leave the lawyers vulnerable to malpractice suits.  To date, I have heard no evidence that the worry of the nursing home industry has materialized.  By eliminating the half-a-loaf strategy, people who would have used that trick are now having to spend their money for long-term care or they divest or shelter it in some other way.

Long-Term Care Partnership Program

Finally, the DRA ’05 reinvigorated the LTC Partnership Program.  LTC Partnerships had been around since 1992.  The idea behind them was to incentivize people to purchase LTC insurance by forgiving some of the prospects’ Medicaid spend down liabilities.  The offer:  buy LTCI, use it, and the Partnership policy holder could go onto Medicaid while retaining assets up to the amount of insurance purchased and used instead of having to spend down to $2,000.  Under a Robert Wood Johnson Foundation grant, four states—California, New York, Connecticut and Indiana—piloted the program.  A variation, in New York alone, allowed holders of special Partnership policies to retain all their assets and still receive lifetime Medicaid LTC benefits.

As these pilot projects were gearing up in the early 1990s, they were derailed by Henry Waxman, a liberal Congressman from California.  Waxman considered Medicaid to be welfare and inappropriate for people with substantial resources to receive.  So, when the Omnibus Budget Reconciliation Act of 1993 made recovery from the estates of deceased Medicaid recipients mandatory, Congressman Waxman insisted that assets sheltered by Partnership policies for purposes of initial Medicaid eligibility, should nevertheless, not be exempted from estate recovery.  That rule took the steam out of the Partnership movement.  A Partnership policy holder could preserve substantial wealth and qualify for Medicaid, but at death that wealth became recoverable by the state to recoup Medicaid funds expended on the policyholder’s behalf. 

For over a decade, the Partnership program languished.  Then, in the DRA ’05, the OBRA ’93 estate recovery mandate was eliminated as against Partnership policies.  They resurged and became available in half or more of the states.  LTC insurance sales in the original four pilot states increased on the margin.  Similar results are expected in the new Partnership states, especially in those that endorse and promote the policies officially.  Nevertheless, two factors impede Partnership sales.  First, Medicaid LTC eligibility remains easily available to middle-class and affluent people without significant spend down so that the Partnerships’ spend down forgiveness is less of an incentive than it would otherwise be.  Second, Medicaid LTC has such a dismal reputation for problems of access, quality and impending insolvency that consumers who know the program are not likely to want to rely on it.  Certainly, Medicaid is unlikely ever to pay for the kind and quality of home care and assisted living that are routinely available through private LTC insurance policies.

[See Stephen A. Moses, "The Long-Term Care Partnership Program:  Why It Failed and How to Fix It," in Nelda McCall, editor, Who Will Pay for Long Term Care?: Insights from the Partnership Programs, Health Administration Press, Chicago, Illinois, 2001, pps. 207-222; http://www.centerltc.com/pubs/LTCPartnership.pdf.]

Recent LTC History

America’s post-Internet-boom, early-2000s recession led to passage of the DRA ’05 with its new constraints on Medicaid LTC financial eligibility.  As so often happened in the past, however, soon after the new legislation passed, the economy improved, welfare rolls went down, tax receipts improved and public officials at the state and federal levels lost their enthusiasm for enforcing the new restrictions.  In California, for example, Medi-Cal (California’s name for Medicaid) didn’t implement mandatory changes required by the DRA ’05 such as the longer lookback period for asset transfers and the cap on home equity.  Nor did the federal government enforce the law, allowing California to flout it with impunity and other states to get by with only half-hearted enforcement. 

[Source:  Stephen A. Moses, Medi-Cal Long-Term Care:  Safety Net or Hammock?, Center for Long-Term Care Reform and Pacific Research Institute, January 2011]

Medicaid planners found new ways to circumvent the DRA’s stronger spend-down rules, replacing for example the newly proscribed “half-a-loaf” strategy with a clever “reverse half-a-loaf” gimmick whereby their affluent clients could use promissory notes or annuities to “cure” an asset transfer penalty and achieve the same objective to preserve half the assets.  Medicaid-compliant annuities re-emerged in popularity allowing “millionaires” to qualify easily for LTC benefits according to MaineCare (Maine’s name for Medicaid) eligibility workers.

[Source Stephen A. Moses, “The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net [link],” Center for Long-Term Care Reform and the Maine Health Care Association, November 2012]

Thus, by 2007, easy access to Medicaid LTC benefits was returning to its historical norm.  Then the economic cycle clobbered America again.  In 2008, the “Great Recession” began.  Once more, state and federal tax revenues plummeted, welfare rolls skyrocketed, and huge state and federal budget shortfalls developed.  In other words, the stage was set for another round of legislative and administrative initiatives to reduce Medicaid expenditures, tighten eligibility rules, curb Medicaid planning abuses, and protect the LTC safety net for people most in need.  But this time, it didn’t happen.  Why?

Maintenance of Effort

The American Recovery and Reinvestment Act of 2009 (ARRA ’09) was signed into law by President Obama on February 17, 2009.  This “stimulus” law ultimately pumped $831 billion into the economy according to the Congressional Budget Office.  State Medicaid programs were among the biggest beneficiaries of the ARRA ‘09’s largesse receiving approximately $100 billion in extra funds from an increase in federal Medicaid matching funds.  But this windfall had a string attached.  To qualify for the additional revenue, states had to agree not to tighten their Medicaid eligibility rules.  This “maintenance of effort” (MOE) requirement prevented states from reducing Medicaid expenditures during the economic downturn by means of targeting scarce resources to the neediest applicants. 

The ARRA ‘09’s MOE restriction expired at the end of June 2011, at which time state revenues plunged as federal matching fund rates reverted to pre-stimulus levels.  A state that had been getting three dollars in federal matching funds for every dollar it put up now was getting only two federal dollars for every state dollar.  Simultaneously, due to the reduced economic activity incidental to the ongoing economic downturn, other state revenues from sales and income taxes declined as well.  But Medicaid costs continued to increase rapidly as they always do when the economy falters.  This would have been the perfect time to control the Medicaid eligibility hemorrhage by targeting the program’s scarce benefits to citizens who needed them most.

By this time, however, a new MOE rule applied which prohibited any reduction in Medicaid financial eligibility.  The Patient Protection and Affordable Care Act of 2010 (PPACA ‘10, AKA health reform or “ObamaCare”) required maintenance of effort upon penalty of the loss of all federal Medicaid funds.  Under PPACA ‘10, however, the states received no bonus in federal matching funds for complying with MOE.  Thus, with flat or falling state government revenues, state Medicaid programs all across the country were locked into retaining the generous Medicaid LTC financial eligibility they had implemented during better economic times.  If they acted to reduce Medicaid LTC eligibility even within limits allowed by federal law before imposition of the MOE requirement, they could lose all federal Medicaid funds.

Then in June 2012 the United States Supreme Court ruled that, although ObamaCare is constitutional, states can nevertheless opt out of its Medicaid expansion provision without losing federal matching funds for the rest of their Medicaid programs.  Arguably, states that choose not to expand Medicaid under PPACA should therefore not be constrained by the law’s MOE provision for the same reason.  Some legal and policy experts, as well as the state of Maine, have made that case, but so far unsuccessfully based on interpretations from the Centers for Medicare and Medicaid Services (CMS, the federal agency that oversees Medicaid) and the Congressional Research Service. 

Thus, faced with widespread budget shortfalls and doubtful new revenues sufficient to close the gaps, states have only two ways to constrain costs:  cut benefits or cut providers.  With eligibility cuts out of bounds due to MOE, the states’ only options, besides shifting funds from education or some other budget category, are to eliminate desperately needed services or to reduce provider reimbursements.  Cutting services hurts the most needy.  Provider reimbursements are already minimal and further cuts could lead to facility closures and other LTC provider shortages.  At present, the maintenance of effort requirement is the biggest obstacle to Medicaid LTC reform, which is stymied so long as MOE remains in effect.

ObamaCare

The Patient Protection and Affordable Care Act of 2010 (PPACA ’10) or “health reform” was signed into law by President Obama on March 23, 2010.  By far its most important impact on long-term care financing was its provision regarding maintenance of effort as already explained.  But ObamaCare attempted to address LTC financing in two other potentially important ways.  One was the “CLASS Act,” an acronym standing for Community Living Assistance Services and Supports.  While not formally repealed, CLASS died for all practical purposes when it became clear the pseudo-LTC-insurance program was financially infeasible to implement.  I explained the problems and deficiencies of CLASS in a 2011 speech to the Society of Actuaries "Living to 100" Symposium.  The aborted program does not warrant further consideration.

The other way ObamaCare addressed long-term care was with several special programs and pilots designed to encourage more public financing of home and community-based services (HCBS).  These are described in an October 2011 report by the Kaiser Family Foundation titled “State Options That Expand Access to Medicaid Home and Community-Based Services [link].”  They need not concern us here, because, as the following section explains, publicly financed HCBS on a wide scale are not financially sustainable, impede a private market for home-based care, and discourage responsible long-term care planning.

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Updated, Tuesday, January 21, 2014, 1:01 PM (Pacific)

Seattle—

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LTC NEWS AND COMMENT

1/18/2014, “The Key Health Risk Obamacare Doesn't Cover,” by Dan Caplinger, Motley Fool

Quote:  "But Obamacare doesn't address one key health risk that everyone faces, forcing you to make alternative arrangements to protect yourself from potentially catastrophic expenses.  In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about how Obamacare doesn't cover long-term care expenses." 

LTC Comment:  Important advice from a widely read national column.

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1/17/2014, “Advisors Put To Test by LTC Insurance Market Upheaval,” by Karen Demasters, Financial Advisor

Quote:  "'Financial advisors need to start the conversation about long-term care with their clients and then go to experts for the details,' says Deb Newman, founder of Newman Long Term Care and former chair of the board of directors of the LIFE Foundation. . . .  'One of the challenges is to get advisors to discuss the subject. Their clients do not want to talk about dying, becoming disabled or living too long. But long-term care coverage is not just a financial issue,' Newman says. 'Having coverage provides peace of mind.'”

LTC Comment:  Excellent quotes from long-time friend, Center supporter and corporate member Deb Newman of Newman Long Term Care.

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1/17/2014, “Medicare appeals at the administrative law judge level will be suspended for two years due to backlog, agency announces [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "A tremendous increase in appeals has swamped the 65 ALJs who hear disputes over Medicare claim determinations, OMHA Chief Administrative Law Judge Nancy J. Griswold wrote in a memorandum obtained recently by the Bureau of National Affairs. To give the judges time to work through this backlog, OMHA stopped assigning new hearing requests from providers as of July 15, 2013, Griswold disclosed. Beneficiaries' appeals will continue to be processed, to safeguard patients, she wrote." (Emphasis added.)

LTC Comment:  Interesting policy.  Pay nursing homes less than cost for most of their residents who depend on Medicaid.  Threaten often to cut Medicare reimbursements which currently help to make up for the revenue shortfall from Medicaid.  Then process Medicare beneficiaries' appeals but gag providers.  Observed over time it is easy to see why publicly financed long-term care is deteriorating.

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1/16/2014, “Medicare cuts weigh on UnitedHealth,” by Alex Nussbaum, LifeHealthPRO 

Quote:  "Medicare Advantage, insurers' private version of the U.S. government program for the elderly, has been a key source of growth for the industry and provided about a fifth of UnitedHealth's profit last year. The companies' reimbursements are being scaled back to help pay for the insurance expansion under the Patient Protection and Affordable Care Act (PPACA)."

LTC Comment:  Another version is playing out of the common government "bait and switch" gimmick.  Offer lucrative incentives to private industry.  Get them committed to some new publicly financed program.  Then, when costs explode as they always do, stop the party by pulling away the financial punch bowl.  It's happened over and over again, but the private sector never seems to learn.

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1/16/2014, “Study: Rehospitalizations Nearly Twice As High When Elders Are Transferred To HCBS From Skilled Nursing [link],” by Bill Myers, Provider

Quote:  "Those seniors who went into HCBS from nursing homes were nearly 40 percent more likely to be sent back into the hospital with preventable conditions, the Brown University report says in this month’s edition of the Journal of the American Geriatrics Society.  Indeed, moving to HCBS increased the overall risk of hospitalization by 58 percent compared with those who stayed behind, lead researcher Andrea Wysocki writes for her colleagues."

LTC Comment:  More evidence that, desirable as home care may be, it does not save Medicaid money overall.

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1/16/2014, “Insured for Old Age? An Economist Explains the Dangers of Long-Term Care Insurance [link],” by Lew Mandell, PBS NewsHour

Quote:  "If neither community spouse nor another dependent lives in the house, homes with equity values from $536,000 to $802,000 (depending on the state) may be retained when the owner accepts Medicaid for long-term care, provided that the owner signs a form stating his or her intent to return to the house. Medicaid is then entitled to be reimbursed from the equity of the home when it is sold, generally after the recipient's death, so it is seldom worthwhile to pay real estate taxes, insurance, utilities and maintenance for a home owned by a long-term care Medicaid recipient."

LTC Comment:  This article is a mixed bag of good and bad, accurate and inaccurate information and advice about LTC insurance and Medicaid LTC eligibility.

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1/16/2014, “Managed care plans will account for 75% of Medicaid beneficiaries by 2015, analysts estimate [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "By providing capitated payments to these plans, states can have more budget certainty than if they were paying out Medicaid claims on a fee-for-service basis. The MCOs themselves can coordinate care and sometimes offer services that would not be available through a program administered by the state."

LTC Comment:  Managed care saves Medicaid money by transferring management responsibility and cost control to giant private companies (Managed Care Organizations or MCOs).  The worry is that Medicaid will clamp down on payments forcing the MCOs to reduce provider reimbursements and minimize the number of providers resulting in care and access even more deficient than now.  A special worry is how this new system will impact the most frail and vulnerable Medicaid population, the "dual eligibles."

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1/15/2014, “Long-term care insurers' 'gender rating' practices challenged,” Business Record

Quote:  "The complaints were filed today by the National Women's Law Center with the U.S. Department of Health and Human Services' Office for Civil Rights. The organization asserts that recently adopted gender rating practices by Genworth Financial Inc., John Hancock Financial, Transamerica Life Insurance Co. and Mutual of Omaha violate an anti-discrimination rule enacted as part of the federal health care overhaul."

LTC Comment:  What about the discrimination against men when they have to pay premiums in excess of the level of risk they bring into the risk pool?

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1/15/2014, “Only one-third of employees consider retirement savings a priority,” by Amanda McGrory-Dixon, Employee Benefit Adviser 

Quote:  "Regionally, North America and Asia-Pacific respondents report being the most involved in saving for retirement, with interest at 39%. However, only 32% of respondents in Latin America, 30% of respondents in the Middle East and Africa, and 26% of respondents in Europe say they are actively saving for retirement. In fact, 40% of respondents in Europe say they have no expectations for saving for retirement at all, above the global average of 22%."

LTC Comment:  That statistic for Europe is alarming and clearly a result of the continent's decades-long growth of entitlements and public dependency.  When Europe's social insurance programs finally hit the fiscal wall, it will be devastating for citizens who lack private resources.  As Europe is further along in this decay than the USA, perhaps we can learn the lesson before it's too late.

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1/15/2014, “Gap between long-term care costs and Medicaid payments was widest ever last year, report finds [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "LTC providers incurred more than $7.7 billion in allowable costs that were not reimbursed by the Medicaid program in 2013, the investigators estimated. Analysts from Eljay LLC compiled the report by looking at data such as Medicaid cost reports and the long-term care inflation index known as the market basket. This 'historic' shortfall translates to an estimated average Medicaid shortfall of $24.26 per Medicaid patient day. This exceeds last year's projected shortfall by 8.6%, the report notes."

LTC Comment:  Access and quality problems in Medicaid-financed LTC?  Why expect otherwise when the program pays less than cost for a majority of long-term care patients?  

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1/14/2014, “Virginia considers LTCI premium options,” by Allison Bell, LifeHealthPRO

Quote:  "Virginia has not let insurers use the drop in interest rates as a reason to increase rates. But, if rates turn out to be 4 percent, and the company assumed it could earn 6 percent on its investments, it would have had to charge 45-year-old purchasers about 33 percent more at the time of purchase to make up for the difference, and it would have had to charge 55-year-old purchasers about 24 percent more, the actuaries say."

LTC Comment:  Too many regulators try to defy economic gravity.

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1/14/2014, “Fresh Thinking on Long-Term Care Financing:  The American Long-Term Care Insurance Program [link],” by Paul Forte, Contingencies

Quote:  "Many U.S. policymakers believe that there's no way a voluntary long-term care (LTC) insurance program can attract a critical mass of enrollees. Given the 2011 severing of the optional federal Community Living Assistance Services and Supports Act from the Affordable Care Act (ACA) and a continuing exodus of private insurers from the LTC market, this isn't surprising. But arguing that any LTC program must be mandatory ignores both the federal budget deficit and ongoing political resistance to mandatory provisions in the ACA."

LTC Comment:  This thoughtful, well-documented article by Federal Long-Term Care Insurance Program CEO Paul Forte is well worth a careful reading.  His proposal seems to leave little room for LTCI producers and it does not solve the problem of easy Medicaid LTC access after the insurable event occurs, but it is nonetheless a notable contribution to the literature on this difficult topic.

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1/13/2014, “America's Dwindling Economic Freedom,” by Terry Miller, Wall Street Journal

Quote:  "World economic freedom has reached record levels, according to the 2014 Index of Economic Freedom, released Tuesday by the Heritage Foundation and The Wall Street Journal. But after seven straight years of decline, the U.S. has dropped out of the top 10 most economically free countries."

LTC Comment:  If you would like to read this article but do not have easy access to the Wall Street Journal, let me know.  I'll forward a copy to you under the Center's online subscription.

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1/13/2014, “Government Programs Have Become One Big Scammer Fraud Fest,” by Merrill Matthews, Forbes

Quote:  "We are being inundated by news stories of fraud perpetrated against numerous government programs.  The feds themselves put Medicare and Medicaid fraud at approaching 10 percent of the programs’ budgets, or about $100 billion a year for the two programs."

LTC Comment:  This article highlights the problem of Medicaid planning abuse of LTC benefits.

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1/13/2014, “New Medicaid rule requires patient-centered care for home- and community-based services, defines HCBS settings [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "A person receiving HCBS should be able to direct the care planning process, including defining goals and preferences for how to achieve them, the rule states. The planning process also may involve a representative chosen by the beneficiary, and other people who the beneficiary wishes to contribute. . . .  The final version of the rule revised problematic language in the proposed version, which threatened to uproot residents of assisted living and residential care communities, according to the American Health Care Association/National Center for Assisted Living."

LTC Comment:  Providing patient-centered home care is a nice goal for Medicaid-financed LTC, but demanding it without accounting for cost--as when OBRA '97 demanded higher nursing home quality without supplying new revenue--will have no more effect than to hamper state Medicaid programs' ability to manage their financially challenged systems cost-effectively.

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1/12/2014, “The High Cost of Health Care in Retirement,” Wall Street Journal

Quote:  "A couple retiring in 2013 with median drug expenses would need $151,000 for a 50% chance of having enough money to cover health costs in later life (assuming they have Medicare Part B and Part D coverage as well as Medigap insurance). But the same couple at the 90th percentile of drug spending would need $220,000-an additional $69,000. (Some good news: Those figures are down from 2012, given that projections of spending growth for Medicare beneficiaries are slowing.)"

LTC Comment:  Don’t forget long-term care on top of that.

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1/9/2014, “Why boomers get more from Social Security than anyone,” by Jeffrey Miller, WSJ MarketWatch

Quote:  "The age at which workers born between 1943 and 1954 can receive full Social Security retirement benefits is 66. If workers delay claiming benefits until age 70, they are rewarded with a whopping 8% increase in benefits for each year delayed. Workers who are retiring now can get the 8% increase each year for four years. In an environment where interest rates are historically low, the 8% Delayed Retirement Benefit bonus is one of the very best bargains around."

LTC Comment:  For younger generations, who must wait until age 67 to receive full Social Security benefits, the 8% yearly increase for delaying benefits will only be available for three years.

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Updated, Friday, January 17, 2014, 11:33 AM (Pacific)

Seattle—

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LTC BULLET:  THE INDEX OF LONG-TERM CARE VULNERABILITY:  A CASE STUDY IN NEW JERSEY

LTC Comment:  The Center for Long-Term Care Reform and the Common Sense Institute of New Jersey have published “The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey [link].”  Details after the ***news.***

***  "FRESH THINKING ON LONG-TERM CARE FINANCING:  THE AMERICAN LONG-TERM CARE INSURANCE PROGRAM [link]" by Federal Long-Term Care Insurance Program CEO Paul Forte is a thoughtful, well-documented Contingencies article well worth a careful reading.  Unfortunately, his proposal leaves little room for LTCI producers and it does not solve the problem of easy Medicaid LTC access after the insurable event occurs.  Quote:  "Many U.S. policymakers believe that there's no way a voluntary long-term care (LTC) insurance program can attract a critical mass of enrollees. Given the 2011 severing of the optional federal Community Living Assistance Services and Supports Act from the Affordable Care Act (ACA) and a continuing exodus of private insurers from the LTC market, this isn't surprising. But arguing that any LTC program must be mandatory ignores both the federal budget deficit and ongoing political resistance to mandatory provisions in the ACA." ***

*** THE FOURTEENTH ANNUAL INTERCOMPANY LONG TERM CARE INSURANCE CONFERENCE [link] will be held March 16-19, 2013 at the Rosen Centre, in Orlando, FL.  Find details and registration at the conference website here:  http://www.iltciconf.org/.  If you have questions, please contact Jim Glickman at 818-867-2223.  Check out the closing conference session on “The Future of the Industry Session” here.  Genworth's CEO Thomas J. McInerney will complete the panel previously announced.  Conference highlights also include keynoter Chris Gardner, whose life story The Pursuit of Happyness became a best-selling book and movie. ***

***  THE INSTITUTE FOR THE AGES has announced that National Public Radio (NPR) correspondent Ina Jaffe will headline the dinner keynote presentation at the Seventh Annual International Conference on Positive Aging on February 11, 2014 at the Hyatt Regency in Sarasota, Florida.  For more information about the Conference program, travel and hotel arrangements, and other details, visit www.positiveagingconference.org.  Tickets may be purchased online at www.positiveagingconference7.eventbrite.com.  Sponsorship opportunities are still available.  Please email inquiries to info@institutefortheages.org or contact Michelle Bauer at 727-510-2524. ***

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LTC BULLET:  THE INDEX OF LONG-TERM CARE VULNERABILITY:  A CASE STUDY IN NEW JERSEY

LTC Comment:  Last summer, the Center for Long-Term Care Reform conducted research on Medicaid and long-term care financing in three states:  Virginia, Georgia and New Jersey.  Last month, we published our reports on the first two states in “The Index of Long-Term Care Vulnerability:  A Case Study in Virginia” and “The Index of Long-Term Care Vulnerability:  A Case Study in Georgia.”  On Wednesday, January 15, 2014, we released the third and last report in the current series titled “The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey.” 

Today we bring you the Executive Summary of the New Jersey report and encourage you to read any or all of the three studies.  Each report features a new tool, called the “Index of Long-Term Care Vulnerability.”  The purpose of the Index is to help legislators, policy makers and analysts assess the future sustainability of their states’ long-term care financing systems. 

Try your hand at filling out the “Index” for your state.  You’ll find two links to the Index tool at the end of each report.  One link goes to a sample version I filled out as an example.  The other link goes to a blank version you can use to evaluate the state of your choice.  See the body of each report for links to the sources you’ll need to find the data for your state.

Soon, we will publish a comparative analysis of Medicaid and long-term care financing in the three states comparing them to each other and to the USA as a whole.  This year, we plan to apply The Index of Long-Term Care Vulnerability to more states and to bring the findings to the attention of key state and federal decision makers.

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Executive Summary from “The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey,” by Stephen A. Moses, published simultaneously by the Common Sense Institute of New Jersey here and by the Center for Long-Term Care Reform here, on January 15, 2014.

Long-term care (LTC) for the elderly is already a large risk and expense for private citizens and public programs.  The need for and cost of LTC will increase radically with the aging of the baby-boom generation.  Most expensive long-term care, including care provided in nursing homes or by professional aides in family homes for more than nominal durations, is paid for by Medicaid, a means-tested public assistance program. 

Medicaid already strains federal and state budgets, including New Jersey’s.  Yet major initiatives at the federal level and in New Jersey are underway to expand Medicaid coverage in general and to make the program’s LTC benefits more attractive, accessible and efficient.  New Jersey’s “Comprehensive Medicaid Waiver” aspires to achieve those goals by rebalancing care from mostly institutional services to mostly home and community-based services and by turning over management of long-term care for more recipients with higher acuity care needs to managed care organizations.

New Jersey faces multi-faceted long-term care problems including (1) a rapidly increasing elderly population with (2) much higher numbers of disabled or demented people coming soon and (3) Medicaid already strained as the principal LTC payer dependent on (4) funding from the heavily indebted federal government as supplemented by (5) state revenues constrained by recessionary pressures and poor future economic prospects with (6) very little private financing of LTC to relieve the budgetary pressure on public programs in the context of (7) heavy public dependency on social programs already and a growing “entitlement mentality” among the citizenry.

By focusing on improving the state’s current long-term care service delivery and financing program instead of taking into account this full range of problems and addressing it, New Jersey runs the risk of modifying a broken LTC system that cannot survive the larger on-coming demographic, economic and social challenges.  This report offers a way to take account of these broader challenges by applying an Index of Long-Term Care Vulnerability.  It recommends that New Jersey reassess its current LTC initiatives and move in the direction of reducing dependency on public programs while attracting much more private revenue into the LTC financing mix.

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Updated, Monday, January 13, 2014, 11:23 AM (Pacific)

Seattle—

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2014 ILTCI CONFERENCE AND LTC NEWS AND COMMENT

LTC Comment:  Early-bird registration ends this Thursday, January 16th, for the Fourteenth Annual Intercompany Long Term Care Insurance Conference, to be held from March 16-19, 2013 at the Rosen Centre, in Orlando, FL.  On that date the $895 and all early bird registration prices go up $100.  Agents selling long term care (or other insurance) directly to consumers may apply for a scholarship here.  Government employees may register at a special $95 rate here.  New attendees may apply by January 10th (tomorrow) for a special $395 rate here.  If you have any questions, please contact Jim Glickman at 818-867-2223.
Conference highlights include keynoter Chris Gardner, whose life story The Pursuit of Happyness became a best-selling book and movie.  A closing session on “The Future of the Industry,” featuring Marc Cohen, Maria Ferrante-Schepis and another panelist to be named, will focus on the present state of the LTCI industry, provide parallels to other industries that have weathered turbulent times and offer opinions and perspectives about what all can do to re-invigorate this industry.  Here’s an outline of the closing general session:
TITLE:  The Future of the Industry

1. Current vs. Future State: Can our industry bounce back?
2. What can we learn from other industries?
3. Hear from experts why they are bullish on our future

DESCRIPTION:  The long term care insurance industry is in a state of flux.  Numerous companies have exited the market.  Sales of long-term care insurance are on a downward trend.  Distribution is shrinking.  In-force premium increases dominate the headlines.  This general session will focus on the present state of the industry, offer parallels to other industries that have weathered turbulent times and offer opinions and perspectives about what we all can do to reinvigorate this industry.

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1/11/2014, “What happens when your spouse's care drains your savings?,” by Garry Marr, Financial Post 

Quote:  "It's the end of the line for you, so who cares if there's nothing left and you actually owe money? How about the lifelong partner funding the expensive care you require in your last days - their own retirement plans now in jeopardy? . . .  While it depends on the province, the government will provide you with long-term care in your old age, but the type of place you'll end up living in could be limited and part of your income is likely to be clawed back."

LTC Comment:  Note the ominous parallels between Canadian and U.S. long-term care policy.

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1/11/2014, “Top 5 reasons why long-term care insurance hasn't taken off,” by Mark Halpern, Financial Post

Quote:  "LTC insurance coverage has a number of benefits, and you have to weigh the possibility of requiring long-term care in the future as part of your comprehensive estate planning or explore other ways to self-fund the care, perhaps with less expensive joint last-to-die insurance or an annuity down the road."

LTC Comment:  This is an interesting article about LTCI in Canada.

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1/10/2014, “Long Term Care Insurance Prices Drop for Men, Rise Slightly for Couples [link],” by Jesse Slome, Market-Wired

Quote:  "The typical healthy 55-year-old male can expect to pay almost 15 percent less for long term care insurance coverage purchased in 2014 compared to last January. A 60-year-old married couple faces a seven percent increase according to a new analysis of prices.

"‘Compared to last year, costs for long term care insurance have risen slightly for couples, increased more significantly for single women but they have decreased for single men,’ reports Jesse Slome, director of the American Association for Long-Term Care Insurance (AALTCI). The national trade group released the findings of their 2014 Long-Term Care Insurance Price Index."

LTC Comment:  How long until the government forbids pricing insurance based on risk and requires “gender equality” for LTCI?

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1/9/2014, “Study: Supplemental Plans Raise Medicare Costs 22 Percent,” by Jay Hancock, Kaiser Health News

Quote:  "Supplemental "Medigap" plans shield millions from Medicare's deductibles and other out-of-pocket costs.  Pay a flat Medigap premium to a private insurer such as UnitedHealthcare or Humana and you might have little or no out-of-pocket expense for doctor visits, hospitalization or other Medicare services.

"Naturally many worry that the all-you-can-eat model inflates Medicare's costs by encouraging consumers to seek -- or doctors to order -- potentially unnecessary procedures.  Now economists at the University of Texas and the University of Chicago have taken what some call the closest look yet at the relationship between Medigap coverage and Medicare spending.  Their conclusion, that Medigap substantially increases what Medicare spends on treatment and tests, gives new ammunition to those who want to restrict these plans."

LTC Comment:  This is only one of many perverse economic incentives in government health financing programs that have unintended, but entirely predictable, negative consequences.

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1/9/2014, “Transition from facility to home- and community-based care greatly increases dual eligibles' risk of hospitalization, study shows [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "Controlling for demographic and medical factors, the researchers determined that people who transitioned had an elevated risk of being hospitalized and also had their first hospitalization sooner than those living in nursing homes. Including both preventable and non-preventable hospitalizations, 419 people in the transition group were admitted while 297 of the nursing home residents were admitted."

LTC Comment:  Nevertheless, rebalancing from nursing home to home care and switching dual eligibles into giant managed care organizations with little experience caring for the most frail and vulnerable are two trends sweeping through Medicaid programs nationwide.  Our new “Index of Long-Term Car Vulnerability” exposes the risk of these cost-cutting policies.

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1/8/2014, “Why has LTD done better than LTCI?,” by Allison Bell, LifeHealthPRO

Quote:  "Premium flexibility has helped the U.S. long-term disability (LTD) insurance market weather low interest rates better than the private long-term care insurance (LTCI) market."  

LTC Comment:  Ultimately, the only solution is to let markets set interest rates and get the Federal Reserve out of the business of manipulating them to crony capitalists’ benefit and everyone else’s detriment.

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1/8/2014, “Long-Term Care Platform Eyes CU Market,” by Michelle A. Samaad, Credit Union Times

Quote:  "Advanced Resources Marketing, a distributor of long-term care insurance, announced the creation a new sales and marketing platform for credit unions.  The Health Care Solutions Distribution platform will consist of agents working closely with ARM nationwide, delivering long-term care insurance and related product solutions to credit unions, according to the Boston-based ARM."

LTC Comment:  Congratulations to Center Bronze corporate member ARM president Joe Pulitano, CEO Henrik Larson and Brent Stubbe who will head up the new distribution channel.

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1/7/2014, “U.S. Cancer Deaths Decline Again: Report  Better prevention, screening and treatment are keys to continued progress, experts say [link],” by Steven Reinberg, HealthDay
 
Quote:  "The rate of cancer deaths among Americans continues to decline, according to a new report. Over the last 20 years, the overall risk of dying from cancer has dropped 20 percent, researchers found."

LTC Comment:  A bit of good empirical news in a torrent of poor public policy.

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1/7/2014, “Illegals still get Medicare benefits, but feds vow crackdown, $70M savings,” by Tom Howell Jr., The Washington Times

Quote:  "Federal health officials vowed this week to crack down on illegal immigrants who get Medicare — signaling that one part of the Obama administration believes it has authority to deny taxpayer-funded benefits going to those in the country without authorization.  The Centers for Medicare and Medicaid Services said it could save nearly $70 million from 2015 to 2019 by preventing illegal immigrants from taking advantage of Medicare’s prescription drug program or enrolling in Medicare Advantage plans."

LTC Comment:  Yeah, that’s about as likely to happen as government stopping Medicare fraud and Medicaid eligibility abuse. 

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1/7/2014, “CMS: Nursing home Medicare cuts helped keep healthcare spending at historic low levels [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "While hospital, physician and clinical services spending increased in 2012, health spending as a share of gross domestic decreased slightly, from 17.3% in 2011 to 17.2%. This was due to slow growth in nursing home, prescription drug, private health insurance and Medicare expenditures, according to the annual report from the CMS Office of the Actuary." (Emphasis added.)

LTC Comment:  We've predicted major cuts to Medicare nursing homes.  They've arrived.  This is a very significant development because high Medicare reimbursements for a small minority of nursing home residents have historically made up for extremely low Medicaid reimbursements for the majority of nursing home residents.  Further strains on nursing home access and quality are inevitable.

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1/6/2014, “More Cuts In Store For Medicare Plans -- Here Are The Options That Will Shrink Most For Seniors [link],” by Scott Gottlieb, Forbes

Quote:  "The privately run Medicare plans known as 'Medicare Advantage' have been in the political crosshairs of the Obama White House. Even after facing steep cuts under Obamacare, the Advantage plans are now slated to take a brand new round of reductions in 2015.  . . .  This means that in 2015, the rates that the feds pay these plans is slated to go from an earlier 1.7 percent increase to a new, -2.0 percent decrease. This is on top of other cuts that have already been announced or implemented. Combined with these other cuts mandated by Obamacare, the Medicare Advantage plans are looking at significant reductions when they had been expecting small increases."

LTC Comment:  Current health policy:  first, find the best Medicare program and cut it.  Then, find the worst health care program, Medicaid, and expand it.  What are they thinking?

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1/6/2014, “Millionaires on Medicaid,” by Mark Warshawsky, Wall Street Journal

Quote:  "Expanding Medicaid coverage to an estimated nine million more Americans-as mandated by the Affordable Care Act-reinforces the idea that Medicaid only serves the poor. That perception is not accurate. And it distracts from a looming budgetary threat to the program: long-term care. . . .

"We might accept these rising costs if benefits flowed only to the elderly poor, as originally intended. But that is not the case. Significant long-term care benefits flow to individuals in the top 20% of retirement earnings, enabled by Medicaid's generous asset-exclusion limits. . . .

"The rules wouldn't matter if wealthy individuals shunned Medicaid long-term care benefits. But with Medicaid crowding out private alternatives, many don't. In fact, 15% of elderly individuals in the middle-income quintile, 8% in the upper-middle quintile, and 5% in the top quintile receive Medicaid benefits.

"Even these numbers don't capture the burden wealthy individuals place on Medicaid because they live much longer than the poor. Beneficiaries in the top income quintile receive, on average, double the lifetime payouts of those that are less well-off. And because Medicaid lowers reimbursement rates to providers and restricts benefits to contain costs, the poor are tied to lower-quality care and enjoy far less provider flexibility. . . .

"Tightening eligibility rules is the first step toward a solution. Before receiving Medicaid payouts, for example, wealthier households should first be asked to draw down the value of their home through a reverse mortgage to help pay for long-term care. Wealthier households could also be asked to meet long-term care expenses through life annuity payouts from their retirement accounts. Such changes would help ensure that Medicaid benefits flow to the financially needy."

LTC Comment:  The author of this Wall Street Journal op-ed co-chaired last year's LTC Commission.  I spent several hours answering his questions about the problem of easy Medicaid LTC eligibility for the middle class and affluent and its effect of crowding out home equity conversion and long-term care insurance as private financing alternatives.  I'm very glad to have Mark Warshawsky as an ally in the Center for LTC Reform's mission to ensure access to quality long-term care for all Americans.

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1/6/2014, “Genworth shows $8.3 billion in captive reserves,” by Zachary Tracer, LifeHealthPRO

Quote:  "The Richmond, Va.-based company said it would probably face increased costs and the need to curb sales of some products if it were required to stop using reinsurance subsidiaries, known as captives, to build reserves. . . .  Genworth said most of the $7.3 billion in reserves at its Bermuda-based units stem from the LTCI business. Today's filings include queries from the SEC about the reserves and Genworth's responses."

LTC Comment:  Reinsurance is as important to insurers as insurance is to consumers.

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1/6/2014, “New Medicare Data Show Hospitals With High Rates Of Readmissions,” by Jordan Rau, Washington Post

Quote:  "Medicare’s new comprehensive measure of hospital readmissions shows that at least 20 percent of the hospitals in Illinois, Maryland, Massachusetts, New Jersey, New York and Rhode Island have higher rates of patients returning than the national average.  Colorado, Hawaii, Idaho, North Carolina, Oregon, South Carolina, Utah and Washington led the states with the highest proportion of hospitals with low readmission rates. In those states, between 13 and 16 percent of hospitals came in below the national average, the data show."

LTC Comment:  Are states with higher readmission rates simply providing more aggressive, better care?  Or are they wasting money?  Who decides?  Medicare regulators decide in the absence of real market data based on consumers selecting hospitals based on price, reputation, and other objective metrics.

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1/4/2014, “Readers weigh in about their long-term care insurance,” by Scott Burns, Dallas Morning News  

Quote:  "Some people swear by their long-term care insurance policies. Others swear at them. There is no middle ground.  . . .  I think it is fair to say that while long-term care insurance is a wonderful idea, the actual product has been oversold and underserviced."

LTC Comment:  An unfortunate conclusion reached by a reporter who has covered LTC for a long time.

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Updated, Friday, January 10, 2014, 11:15 AM (Pacific)

Seattle—

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LTC BULLET:  SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC?, 2012 DATA UPDATE

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

*** “MILLIONAIRES ON MEDICAID” by Mark Warshawsky, Wall Street Journal, 1/6/14:  We forwarded this article to Center “clippings service” subscribers on the day of its publication.  We’ll feature it in Monday’s LTC E-Alert.  The author, Mark Warshawsky co-chaired last year’s LTC Commission and queried Center president Steve Moses often about why and how the affluent qualify for Medicaid LTC benefits. ***

*** INSTITUTE FOR THE AGES’ Seventh Annual International Conference on Positive Aging (February 9-12, 2014 at Sarasota, Florida's Hyatt Regency) will feature a keynote address by Marc Freedman, founder and CEO of Encore.org, a non-profit supporting "encore" careers for older Americans.  Susan Stamberg, special correspondent for National Public Radio and former co-host of NPR's award-winning news magazine, All Things Considered, will deliver the closing keynote. The 2014 conference theme is "Positive Aging Transcends:  The Voices of Innovation and Community."  Registration for the conference is open.  Find tickets here.  More information here.  For sponsorship opportunities, email inquiries to sponsor@institutefortheages.org, or call Michelle Bauer at 727-510-2524. ***

*** KEN DYCHTWALD, Ph.D., one of the world's foremost visionaries and original thinkers in the field of aging has been nominated Chair-Elect of the American Society on Aging (ASA), www.asaging.org.  The association's 5,000+ members range from practitioners, educators, administrators, policymakers, business leaders, entrepreneurs, investors, researchers, media and students all working towards improving the lives of older adults. In this important and significant role, Ken will contribute the leadership skills he has honed for nearly 40 years, as well as innovative ideas, with an eye towards further building the largest association of professionals in the field of aging/gerontology.  More here. ***

*** ATTEND AALTCI’s 2014 LTC Solutions Sales Summit for $99 or watch its top sessions online FOR FREE.  Get all the conference details here and register for the online access here.  Jesse Slome expects 5,000 people will watch the live sessions, with special interest in the LTC CEO panel featuring the chiefs of five insurers.  He notes that two insurers, Transamerica and Mutual of Omaha have signed up to be Platinum Sponsors in support of the virtual event.  Kudos to Slome, AALTCI, and the meeting sponsors for this creative, cost-sensitive effort to encourage LTC insurance success during a challenging time for the profession. ***

*** EARLY BIRD REGISTRATION ends next Thursday, January 16th, for the Fourteenth Annual Intercompany Long Term Care Insurance Conference, to be held from March 16-19, 2013 at the Rosen Centre, in Orlando, FL.  On that date the $895 and all early bird registration prices go up $100.  Agents selling long term care (or other insurance) directly to consumers may apply for a scholarship here.  Government employees may register at a special $95 rate here.  New attendees may apply by January 10th (tomorrow) for a special $395 rate here.  If you have any questions, please contact Jim Glickman at 818-867-2223.

Conference highlights include keynoter Chris Gardner, whose life story The Pursuit of Happyness became a best-selling book and movie.  A closing session on “The Future of the Industry,” featuring Marc Cohen, Maria Ferrante-Schepis and other panelists to be named, will focus on the present state of the LTCI industry, provide parallels to other industries that have weathered turbulent times and offer opinions and perspectives about what all can do to re-invigorate this industry. ***


LTC BULLET:  SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC?, 2012 DATA UPDATE

LTC Comment:  Once a year around this time the Centers for Medicare and Medicaid Services (CMS) report health care expenditure data for the latest year of record.  Recently, CMS posted 2012 statistics on its website at http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf. 

The current issue of Health Affairs (Vol. 33, No. 1, pps. 67-77) contains a summary and analysis of the new data titled “National Health Spending in 2012: Rate of Health Spending Growth Remained Low For The Fourth Consecutive Year."  Registered subscribers to Health Affairs can access the full text of that article online at http://content.healthaffairs.org/content/33/1/67.full.pdf.

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

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"So What If the Government Pays for Most LTC?, 2012 Data Update"
by
Stephen A. Moses

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

America spent $151.5 billion on nursing facilities and Continuing Care Retirement Communities in 2012.  The percentage of these costs paid by Medicaid and Medicare has gone up over the past 42 years (from 26.8% in 1970 to 53.3% in 2012, up 26.5 % of the total) while out-of-pocket costs have declined (from 49.5% in 1970 to 28.6% in 2012, down 20.9% of the total).  Source:  http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf, Table 15.

SO WHAT?  Consumers' liability for nursing home and CCRC costs has declined by 42.3% in the past four decades, while the share paid by Medicaid and Medicare has nearly doubled, up 98.9%.

No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care!  No wonder they don't use home equity for LTC when Medicaid exempts at least $543,000 and in some states up to $814,000 of home equity (as of 1/1/14).  No wonder nursing homes are struggling financially--their dependency on parsimonious government reimbursements is increasing while their more profitable private payers are disappearing. 

Unfortunately, these problems are even worse than the preceding data suggest.  Over half of the so-called "out-of-pocket" costs reported by CMS are really just contributions toward their cost of care by people already covered by Medicaid!  These are not out-of-pocket costs in terms of ASSET spend down, but rather only INCOME, most of which comes from Social Security benefits, another financially struggling government program.  Thus, although Medicaid pays less than one-third of the cost of nursing home care (30.6% of the dollars in 2012), it covers two-thirds of all nursing home residents.  Because people in nursing homes on Medicaid tend to be long-stayers, Medicaid pays something toward nearly 80 percent of all patient days. 

SO WHAT?  Medicaid pays in full or subsidizes almost four-fifths of all nursing home patient days.  If it pays even one dollar per month (with the rest contributed from the recipient's income), the nursing home receives Medicaid's dismally low reimbursement rate. 

No wonder the public is not as worried about nursing home costs as they would be if they were more at risk for the cost of their care.  No wonder nursing homes risk insolvency when so much of their revenue comes from Medicaid, often at reimbursement rates less than the cost of providing the care.

Don't be fooled by the 7.9% of nursing home costs that CMS reports as having been paid by "private health insurance" in 2012.  That category does not include private long-term care insurance.  (See category definitions here.)  No one knows how much LTC insurance pays toward nursing home care, because most LTCI policies pay beneficiaries who then pay the nursing homes.  Thus, a large proportion of insurance payments for nursing home care gets reported as if it were "out-of-pocket" payments.  This fact further inflates the out-of-pocket figure artificially.

How does all this affect assisted living facilities?  ALFs are 87% private pay (Source:  AHCA/NCAL Issue Brief) and they cost an average of $42,600 per year (Source:  2012 MetLife survey).  Many people who could afford assisted living by spending down their illiquid wealth, especially home equity, choose instead to take advantage of Medicaid nursing home benefits.  Medicaid exempts one home and all contiguous property (up to $543,000 or $814,000 depending on the state), plus—in unlimited amounts—one business, one automobile, prepaid burials, term life insurance, personal belongings and Individual Retirement Accounts not to mention wealth protected by sophisticated asset sheltering and divestment techniques marketed by Medicaid planning attorneys.  Income rarely interferes with Medicaid nursing home eligibility unless such income exceeds the cost of private nursing home care. 

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

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

The situation with home health care financing is very similar to nursing home financing.  According to CMS, America spent $77.8 billion on home health care in 2012.  Medicare (43.4%) and Medicaid (37.2%) paid 80.6% of this total and private insurance paid 7.2%.  Only 7.8% of home health care costs were paid out of pocket.  The remainder came from several small public and private financing sources.  Data source:  http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf, Table 14.

SO WHAT?  Only one out of every 13 dollars spent on home health care comes out of the pockets of patients and a large portion of that comes from the income (not assets) of people already on Medicaid.

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

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

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

Note especially:

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

"Medi-Cal Long-Term Care:  Safety Net or Hammock?" here; 

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

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

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

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

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

Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington.  The Center's mission is to ensure quality long-term care for all Americans.  Steve Moses writes, speaks and consults throughout the United States on long-term care policy.  He is the author of the study "Aging America's Achilles' Heel: Medicaid Long-Term Care," published by the Cato Institute (www.cato.org).  Learn more at www.centerltc.com or email smoses@centerltc.com.

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Updated, Monday, January 6, 2014, 11:46 AM (Pacific)

Seattle—

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HAPPY NEW YEAR AND LTC NEWS AND COMMENT

LTC Comment:  Failure of the Affordable Care Act brings danger and opportunity.  Danger because demands for a government-controlled single-payer system will increase.  Opportunity because true insurance against catastrophic risk, with vouchers as a safety net, is a better direction to take.  Whether the danger or the opportunity prevails will depend on whether or not the pendulum of government dependency swings back toward freedom, independence, and market-based solutions.  2014 could be the year.

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1/3/2013, “Analysts expect slower Medicare Advantage growth,” by The Associated Press, Business Week  

Quote:  "Enrollment in Medicare Advantage plans will grow more slowly in 2014 than it did the past couple years, predicted a Citi analyst who follows health insurers. . . .   The government has been cutting funding in part to help pay for the health care overhaul, the federal law that aims to cover millions of uninsured people. Insurers have responded by trimming the benefits their Medicare Advantage plans offer, dropping doctors from their coverage networks or, in some cases, pulling out of markets where they feel they can no longer make a profit."

LTC Comment:  ObamaCare siphons funds from a relatively good program to support a relatively bad program.

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1/3/2013, “Medicaid Expansion Drives Up Visits to ER; Study Finding Increased Use Contradicts View of Health-Overhaul Backers [link],” by Melinda Beck, Wall Street Journal  

Quote:  "Some supporters of President Barack Obama's health-care overhaul say that putting uninsured Americans on Medicaid will reduce costly emergency-room visits by giving them more access to care in other settings. But a new study found the reverse: A group of 10,000 low-income Oregon residents who recently obtained Medicaid coverage visited ERs 40% more often than those without insurance."

LTC Comment:  One possible explanation for this phenomenon is that people on Medicaid have difficulty finding primary care physicians and specialists to treat them because of Medicaid's low reimbursements.

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1/2/2013, “State finds Medicaid expansion surprise,” by Allison Bell, BenefitsPRO

Quote:  "To reduce the risk that families with assets will think of Medicaid as a free long-term care insurance plan, federal regulations require states to put liens on the homes, cars and other assets of Medicaid users ages 55 and older, to help state [sic] recover any money spent on long-term care from the Medicaid users' estates."

LTC Comment:  Unfortunately, this statement is incorrect.  Medicaid law and regulations do not require liens.  Liens are optional and can only be applied to homes, not cars or other assets, and only under very strictly limited circumstances, i.e., when it can be shown that a Medicaid recipient will be unable to return to the home within six months.  The author confuses liens with estate recoveries, which are mandatory for the recovery of costs for long-term care services, though optional for recovery of costs for non-LTC services provided after age 55.  See the CMS guidelines here.

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1/2/2014, “Long-Term Care Insurer Gets Sued for Excluding Assisted Living Claims [link],” by Alyssa Gerace, Senior Housing News

Quote:  "'Defendants have engaged in an illegal course of conduct designed to reduce its exposure to costly long-term care claims by denying claims of elderly insureds through a scheme of fraud, deception, and manipulation of policy terms, while seeking massive premium increases at the expense of these same insureds,' Gardner says in a federal class action suit she's bringing against CNA, Courthouse News reports."

LTC Comment:  The principle of “innocent until proven guilty” should apply as accusations of failure to pay claims in the past have often proved specious.

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1/1/2014, “Why the rise in fatal falls?,” by Barbara Peters Smith, Herald-Tribune

Quote:  "Especially when it comes on top of other chronic health problems, a hard fall often signals the beginning of the end for an elder - causing broken bones or injuries that can immobilize the body, depress the spirit and force overall well-being to plummet."

LTC Comment:  More people living longer means more falls and more need for education and preventive measures to prevent them.

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12/31/2013, “High Vitamin-E Dose Slows Decline in Alzheimer's Patients, Study Finds,” by Jennifer Corbett Dooren, Wall Street Journal

Quote:  "However, the research to be published in this week's Journal of the American Medical Association, found no impact on memory and doctors said there was no evidence that vitamin E prevents the debilitating disease." 

LTC Comment:  If it doesn’t help memory this news is less than epochal.

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12/31/2013, “With new year, Medicaid takes on a broader health-care role,” by Sandhya Somashekhar and Karen Tumulty, Washington Post

Quote:  "'I think it is very bad social welfare policy,' said Edmund F. Haislmaier, a senior research fellow at the Heritage Foundation. 'You are taking people who are by and large young, healthy and perfectly capable productive members of society and encouraging them to become dependent on public assistance. This is the very last population you want to do that for.'"

LTC Comment:  The ACA should be renamed the “Entitlement Expansion Act.”

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12/31/2013, “Liability claims and costs on the rise for long-term care providers; Aggressive plaintiffs' lawyers may contribute to increases [link],” by Stephanie Bouchard, Healthcare Finance News

Quote:  "Aon found that since 2010, claim frequency has been rising after a decade of remaining essentially flat. The consultant estimates a 2 percent increase in claims frequency in 2014. Coupled with a 3 percent increase in claims severity, Aon estimates that long-term care providers are facing an annual loss rate increase of 5 percent.  Why these increases are being seen is hard to pinpoint and varies from state to state, said Christian Coleianne, author of the report and associate director and actuary at Aon. Among the possible reasons are increases in the usage of long-term care and plaintiffs' attorneys who are more aggressive."

LTC Comment:  Medicaid planning attorneys manipulate the program’s rules to make affluent people eligible for Medicaid which, because of the resulting excessive utilization, is unable to pay nursing facilities adequately which results in poor care which ends in the attorneys bringing liability suits against the facilities.  The lawyers make money on both ends.  The poor and taxpayers lose.

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12/30/2013, “Medicaid On The Eve Of Expansion: A Survey Of State Medicaid Officials About The ACA [link],” by Benjamin Sommers, Sarah Gordon, Stephen Somers, Carolyn Ingram, and Arnold Epstein, Health Affairs Blog

Quote:  "Twenty-five states and Washington D.C. are currently planning to expand Medicaid in 2014 under the Affordable Care Act. We recently surveyed Medicaid directors in these expanding states (for simplicity, we refer to D.C. as a state throughout this article) to assess expectations and implementation strategies regarding enrollment, costs, and access. This blog post describes some of the most relevant findings from our analysis."

LTC Comment:  Even states that wisely opt not to expand Medicaid under the Affordable Care Act will suffer huge cost increases due to the “woodwork effect,” the influx of new Medicaid recipients who were eligible before but had not applied until the publicity about ObamaCare.

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12/30/2013, “3 things to know when hiring home health aide,” by Robert Powell, USA Today

Quote:  "In 2012, some 58,500 paid, regulated long-term care companies served about 8 million people in the U.S., some 4.7 million of whom received that care in their home. And more often than not, experts say those receiving that care - be it one, two or all of the basic activities of daily living - didn't know the first thing about hiring a home health care provider."

LTC Comment:  All the more reason to have a LTC insurance policies with a case management to help find a good home health provider AND pay for it.

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12/30/2013, “Cholesterol and Alzheimer's disease link strengthens in study,” by Melissa Healy, Los Angeles Times

Quote:  "Well before signs of dementia trigger a diagnosis of Alzheimer's disease, a person's cholesterol levels may be a bellwether of amyloid plaque build-up in the brain, a new study finds. Long considered a reliable predictor of heart attacks and strokes, worrisome cholesterol levels may now raise concerns about dementia risk as well, prompting more aggressive use of drugs, including statins, that alter cholesterol levels."

LTC Comment:  Eat well to think well.

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12/30/2013, “Some with Alzheimer's find care in far-off nations,” by Denis D. Gray

Quote:  "Faraway countries are offering cheaper, and to some minds better, care for those suffering from the irreversible loss of memory." 

LTC Comment:  This article reminded me of an elder law training session I wrote about in an LTC Bullet in April 2001, "International Long Term Care Options:  The Good, The Bad, and the Ugly." Here’s how I summarized it:  “Recognizing that they can no longer find decent nursing home care for clients they've put on Medicaid, these elder law attorneys want to ship the infirm seniors off to Thailand, Costa Rica or Uruguay where their Social Security checks will still buy quality professional care, their heirs' inheritances will remain untouched, and plenty will be left over for generous attorney's fees.  They call this the ‘globalization of long-term care.’  How can we get demented elders across the border?  Drug them with ‘happy pills.’  How can we make sure they get decent care?  Three hundred dollars a month will buy a geriatric care manager to look after Mom or Dad for a month in a third world country.  Visiting gramps at the home won't just be a Sunday outing anymore.  This presentation was so bizarre, you would have to hear it to believe it.”   

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12/28/2013, “Barbara Franklin helps seniors grow old with dignity,” by Wevonneda Minis, The Charleston South Carolina Post and Courier

Quote:  "It was 1990, and a relatively unfamiliar specialty in the insurance industry was becoming more well-known. While insurance wasn't a professional road Barbara Franklin had considered traveling, the new long-term care insurance being marketed by American Express piqued her interest and she joined its sales team."

LTC Comment:  This article profiles Center Premium Member and long-time supporter, colleague and friend Barbara Franklin of Charleston, South Carolina.  As you'll see from the article, Barbara is a prime example of the many top-notch people dedicated to long-term care planning.

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12/26/2013, “Elder Care Options: Help Clients Get Help,” by Jessica Ness, Financial Planning 

Quote:  "Most commonly, clients cover the cost with long-term care policies, because geriatric care managers can qualify as private care help. If the bill needs to be paid out-of-pocket, however, our recommendation for doing so depends on the financial resources and status of the patient. Patients who have the financial means should pay the bill and perhaps look to reduce the burden by writing off the medical expense.  If the patient is getting financial help from a relative or other loved one, that person could pay the provider directly to avoid making a gift. And if the patient is considered a dependent, the custodian could use their pre-tax HSA dollars."

LTC Comment:  LTC policies are the best option, of course, but most people are unprepared and end up with the other options, which may include ending up in a Medicaid nursing home.

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12/25/2013, “Guest: Depending on observation status, Medicare may not cover a hospital stay Medicare patients can be subject to exorbitant hospital bills if they don't carefully check their patient status [link],” by Tony Provine, Seattle Times  

Quote:  "Medicare currently requires that patients have at least three consecutive days of 'inpatient status' in the hospital to qualify for recovery time in a skilled-nursing facility.  Yet some patients are unknowingly kept in the hospital under a different category called 'observation status.' When this happens their admission is not covered by Medicare. Also, while hospitalized they can be subject to multiple co-payments for various medications, procedures and tests."

LTC Comment:  When the Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) repealed Medicare’s three-day hospitalization requirement (for SNF coverage), private LTC insurance policies dropped the same requirement.  But Congress repealed MCCA ’88 one year later thus reinstating the Medicare rule.  Private insurance policies never did return to the earlier more restrictive system.

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12/23/2013, “Connecticut rejects LTCI rate hike request,” by Allison Bell, LifeHealthPRO 

Quote:  "The Connecticut Insurance Department is refusing to let an insurer increase premiums for the holders of 28 individual long-term care insurance (LTCI) policies."

LTC Comment:  What’s the alternative?  Follow the government’s plan for Medicare and Social Security, i.e., let the unfunded liabilities build up until the programs collapse?

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12/23/2013, “How Seniors Manage to Adapt,” by Judith Graham, New York Times

Quote:  “Many older adults want to live independently, without relying on assistance from others, for as long as they can. But how often does that actually happen?  A study published recently in the American Journal of Public Health attempts to answer the question by examining how seniors adapt to disability, an issue that hasn’t received much scholarly attention. . . .

“And the results: an estimated 12 million older adults are fully able to manage on their own without any type of help (31 percent of all seniors on Medicare); 9 million have successfully adapted to disability (25 percent); 2.1 million have reduced their activities without acknowledging limitations (6 percent); 7 million find it hard to function independently (18 percent); and 7.7 million received assistance with at least one task over the last month (about 20 percent, including 1.1 million seniors living in nursing homes).”

LTC Comment:  What more do you need to know before starting to plan responsibly for long-term care?

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Updated, Friday, January 3, 2014, 1:35 PM (Pacific)

Seattle—

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LTC BULLET:  MINNESOTA MEDICAID ABORTS MOVE TO FOUR ADLS

LTC Comment:  If home care saves Medicaid money, why would Minnesota change from requiring one ADL to four ADLs for recipients to qualify for its home care waiver?  The answer 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. ***

*** ILTCI CONFERENCE.  The 14^th annual Intercompany Long-Term Care Insurance Conference will convene March 16-19, 2014 at the Rosen Centre in Orlando, Florida.  Get all the details and register here.  Chris Gardner will keynote the event on opening day.  His life was the basis for the book and movie “The Pursuit of Happyness.”  The conference will close with a general session on “The Future of the Industry,” by Marc Cohen, a nationally known and highly regarded industry analyst.  In between the opening and closing general sessions, you can expect the usual high caliber presentations, peerless networking, and excellent food and drink.  This is a convocation not to be missed if you can manage it.  Damon and I will be there to cover the program and report on it.  Say hello if you attend and, if you don’t (rue the thought), then watch for our “LTC Embed” accounts of the action. ***

***  THE INSTITUTE FOR THE AGES will host its Seventh Annual International Conference on Positive Aging on Florida's Gulf Coast, February 9-12, 2014, at Sarasota's Hyatt Regency.  Registration for the conference is open, with Early Bird rates offered through December 30.  Tickets may be found online at www.positiveagingconference7.eventbrite.com.  For more information about the Conference program, travel , hotel arrangements and other details, visit www.positiveagingconference.org. ***

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LTC BULLET:  MINNESOTA MEDICAID ABORTS MOVE TO FOUR ADLS

LTC Comment:  Minnesota planned effective January 1, 2014 to jump from requiring one ADL for Medicaid recipients to qualify for home-based LTC benefits to four ADLs.  Read all about it in the Minneapolis Star Tribune here.  This was the plan in a nutshell:

“Starting in January, thousands of low-income elderly Minnesotans could lose government benefits intended to help them stay in their homes and out of nursing care.

“In an effort to constrain runaway Medicaid spending, Minnesota is implementing stricter rules that will make it harder for senior citizens to qualify for home-based services, potentially leaving them with reduced care or no care at all. . . .

“Until now, it has been relatively easy for poor Minnesotans to qualify for the program. It was enough to show that they needed assistance in one basic activity of daily living, such as help with bathing or dressing.

“Under the new criteria, seniors must show that they need assistance in at least four activities of daily living; or, alternatively, they need help in a single critical activity such as toileting or transferring, for example, moving from a bed to a wheelchair.”

This new tougher rule was not implemented.  Minnesota Governor Mark Dayton postponed the change for a year due to “an outcry from advocates for senior citizens and the poor.”  Find details on the delay here.

What’s going on?  First, why would Minnesota Medicaid cut home care services to save money if home care itself is supposed to save money?  Second, why would the Governor delay the change if it makes sense?  The answers are an object lesson in why and how Medicaid distorts the long-term care market.

The answer to the first question is that Minnesota Medicaid would not seek to cut home care services if they really did save money.  They do not.  No empirical evidence shows that home care saves money.  It tends to delay, but not prevent institutionalization, thus causing higher costs overall.  State Medicaid expenditures for all long-term care—home and community-based care and nursing home care combined—continue to rise rapidly everywhere.  Furthermore, the availability of home care makes Medicaid much more attractive than when nursing home care was its only option.  Thus, when home care is offered, the public is less likely to plan privately for long-term care and more likely to rely on Medicaid.  Consequently, LTC expenditures, especially for home-based services, continue to skyrocket.

The answer to the second question is that the senior lobby and groups claiming to represent the poor brought political pressure to bear on the Governor leading to his decision to delay the change from one to four ADLs.  The irony is that seniors and the poor do not benefit from programs to make Medicaid more attractive.  The reason is that loose financial eligibility criteria make it too easy for middle class and affluent people to qualify for Medicaid LTC benefits.  By admitting too many people to Medicaid, the Medicaid program has distorted the market for long-term care resulting in the public’s denial of LTC risk, their failure to save, invest or insure for long-term care, and Medicaid’s burgeoning and insupportable LTC expenditures.  Those consequences do not help, rather they hurt the poor.

To put the issue in broader historical perspective, this is how Medicaid distorted the LTC market.  It made nursing home care free in 1965 which resulted in (1) widespread and unnecessary use of nursing homes for custodial care (Medicaid’s institutional bias), (2) public indifference to LTC risk and cost which prevented successful development of private LTC financing alternatives (LTC insurance and home equity conversion), and (3) impeded growth of a private home care infrastructure and delivery system.  We’re living with the consequences of these market distortions to this day.

What is changing is that state governments can no longer evade the budgetary consequences of providing most long-term care through Medicaid, a defacto entitlement masquerading as a means-tested public assistance program.  The only thing propping up Medicaid’s LTC financing is the federal government’s ability to borrow and spend beyond its means.  At some point, the federal deficit and debt will sow doubt among lenders (domestic and foreign bond holders) who will no longer provide needed funds except at higher interest rates.  Higher interest rates will make servicing the federal debt impossible.  States, which constitutionally cannot run budget deficits indefinitely, will be left holding the bag.

When economic gravity again prevails, the current system will come crashing down.  The lesson in all this is that state Medicaid programs should seek to return the program to what it was intended originally to be—a safety net for the poor.  When middle class people and the affluent really do have to spend down their own resources, including home equity, for long-term care, they will begin to understand why planning for LTC is necessary.  That process has already begun as we’ve successfully curtailed Medicaid abuse over the years by requiring transfer of assets penalties, extending the look back period, mandating estate recoveries, and capping the home equity exemption.  Much remains to be done, but Minnesota’s aborted effort to save money by cutting home care services is evidence the pressure for such changes remains heavy. 

The lesson for individuals and families is that people who want access to quality home care when they need LTC someday had better plan to pay privately.  The Medicaid safety net will no longer catch them, at least not for home care and, in the future, probably not even for nursing home care.

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Updated, Monday, December 23, 2013, 2:52 PM (Pacific)

Seattle—

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MERRY CHRISTMAS AND LTC NEWS AND COMMENT

LTC Comment:  With Christmas Eve tomorrow, everyone’s probably too busy to read today’s LTC E-Alert.  But just in case your eye scans this title in your email in-box, we wanted to wish you Happy Holidays.  Thanks for your support of the Center for Long-Term Care Reform and for the critical work you do all year long to advance our common mission—better long-term care for all Americans.

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12/21/2013, “State to Cut Medicaid Benefits for the Elderly,” by Chris Serres, Minneapolis Star Tribune

Quote:  “Starting in January, thousands of low-income elderly Minnesotans could lose government benefits intended to help them stay in their homes and out of nursing care.

“In an effort to constrain runaway Medicaid spending, Minnesota is implementing stricter rules that will make it harder for senior citizens to qualify for home-based services, potentially leaving them with reduced care or no care at all. . . .

“Until now, it has been relatively easy for poor Minnesotans to qualify for the program. It was enough to show that they needed assistance in one basic activity of daily living, such as help with bathing or dressing.

“Under the new criteria, seniors must show that they need assistance in at least four activities of daily living; or, alternatively, they need help in a single critical activity such as toileting or transferring, for example, moving from a bed to a wheelchair.”

LTC Comment:  Rebalancing from skilled nursing to home care is supposed to save Medicaid money.  So why is Minnesota cutting home care to save money?  Simple.  Rebalancing doesn’t save money.  It makes Medicaid more attractive.  Home care and nursing home expenditures continue to rise in tandem.  The only way Medicaid can fund a true continuum of care is to target benefits to the needy, reduce caseloads, and divert many more people to private financing alternatives.

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12/19/2013, “Senate panel still thinking about public LTC options,” by Allison Bell, LifeHealthPRO

Quote:  "Scott, who joined the Senate in January, pointed out that he is the grandson of a grandmother who died of Alzheimer's in 2001 -- and an insurance agent who sold private LTCI policies. 

"Scott said he thinks the right kind of support could help private LTCI benefit as many as 40 percent of Americans.

"He said one major problem with any kind of voluntary LTCI program is that letting workers know LTCI benefits are available is much different from actually getting workers to sign up for coverage, especially given how many people think Medicare or ordinary health insurance will pay for nursing home care.

"‘The misinformation really takes away the motivation,’ Scott said.

"But the emphasis has to be on making as much use of private programs as possible, because the country is having a hard time paying for the public benefits programs it already has, Scott said."

LTC Comment:  A former LTC insurance salesman who is a “tireless advocate for smaller government, lower taxes, and restoring fiscal responsibility in Washington” is now in the United States Senate.  Don’t expect a sea change in LTC policy overnight, but that has to be a good thing.

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12/19/2013, “Oregon State Fines Bankers Life $115,000 for Mishandling Long-Term Care Claims, Denying Benefits Without Full Investigation [link],” Albany Tribune

Quote:  "The Oregon Insurance Division has fined Bankers Life and Casualty Company, one of the state's largest long-term care insurers, $115,000 for improper claims handling."

LTC Comment:  Another black eye for the embattled carrier.

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12/19/2013, “Senators weigh need for individual mandate in long-term care financing reform [link],” by Tim Mullaney, McKnight's LTC News

Quote:  "Senators and panelists alike agreed that the current system is broken and that it is all but impossible for individuals to prepare for LTC needs in the absence of a stable insurance option, either public or private."

LTC Comment:  Yet another Congressional hearing that ignores the underlying problem and proposes "solutions" that would make the LTC financing system even worse.  Forcing people to buy LTC insurance might be seductive to the LTCI industry, but consider how the "individual mandate" worked out for the acute health care industry.  Ironically, LTC financing isn't hard to fix.  All that's needed is to recognize the real problem:  easy access to government financed LTC after the insurable even occurs.  Change that, give Medicaid back to the needy, and hold others accountable for their own LTC expenses and most will begin to take responsibility to plan and insure for their own LTC.

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12/18/2013, “Association Announces Long Term Care Insurance CEO Forum Participants [link],” by Jesse Slome, PR.com

Quote:  "The five panel participants announced today are:

Michael Doughty, President and General Manager, John Hancock Insurance
Michael Hamilton, Vice President, Lincoln Financial Group
Tim Kneeland, President, Transamerica Long Term Care
Scott McKay, Senior Vice President, Genworth Financial
Steve Sperka, President & CEO, Northwestern Long Term Care Insurance Company"

LTC Comment:  The 2014 Long-Term Care Insurance Solutions Summit will convene May 18-20, 2014 in Kansas City.  Registration is only $99.  Check out all the details here:  http://www.aaltci.org/2014summit/.

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12/18/2013, “Social Security to run 12% deficit for next decade,” by Stephen Dinan, Washington Times

Quote:  "Social Security has been running in the red for several years and will see a 12 percent gap between the taxes it’s collecting and the benefits it’s projected to pay out over the next 10 years, according to a report Tuesday from the Congressional Budget Office."

LTC Comment:  That shortfall is part of the 20 percent of the entire federal budget that we’re borrowing. 

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12/17/2013, “Carrier updates LTCI commission structure,” by Allison Bell, LifeHealthPRO

Quote:  "An insurer says it will return to an older, higher sales commission structure for some long-term care insurance (LTCI) products sold in some states."

LTC Comment:  A nice little package under the tree from Genworth.

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12/17/2013, “2014 Long Term Care Insurance Predictions Released By AALTCI,” by Jesse Slome, ExpertClick

Quote:  "'We expect sales of individual long term care insurance policies will increase between eight and 10 percent next year, though I wouldn't be surprised if growth was more than that,' declares Jesse Slome, director of the American Association for Long Term Care Insurance, the national trade organization. . . . Slome notes that election year politics at both the Federal and State level will refocus attention on the potential collapse of Medicaid. 'There will be a lot of finger pointing and dire predictions all of which will make Americans aware that government programs are not the desired solution,' Slome notes. 'Those with the ability to plan for their own future will recognize the importance of planning and long term care insurance provides a most viable alternative.'"

LTC Comment:  I agree that the implosion of ObamaCare and the increasing volume of reportage about budget shortfalls, excessive borrowing, and unfunded entitlement liabilities will create a growing sense of unease among consumers.  Whether that will translate into significantly higher LTCI sales . . . we’ll just have to wait and see.

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12/17/2013, “Retirement myths you need to ignore,” by Anthony Volastro, NBC News

Quote:  "Myth # 3: You're too young to start paying for long-term care.  Long-term care could be the next major retirement crisis in America. The Department of Health and Human Services expects that some 70 percent of Americans over the age of 65 will need it at some point. Currently, only about 8 million Americans have long-term care coverage."

LTC Comment:  Well, thank you NBC.  More of the same kind of advice would be welcome.

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12/17/2013, “Employed Family Caregivers Providing Complex Chronic Care:  A report of the AARP Public Policy Institute and the United Hospital Fund [link],” by Susan C. Reinhard, Carol Levine, and Sarah Samis 

Quote:  "This report shows that employed family caregivers, despite their workplace obligations, perform many of the tasks that health care professionals do-a range of medical/nursing tasks including medication management, wound care, using meters and monitors, and more. While an earlier report from the authors documented that nearly half of family caregivers nationally performed these types of tasks-in addition to familiar personal care and household supports-the new report is the first to document that those who have the responsibilities of full- or part-time employment take on this high level of support in similar proportions."

LTC Comment:  This report may help persuade younger generations to insure against LTC risk and cost--for their parents and themselves.

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12/16/2013, “5 predictions for the LTC insurance industry in 2014,” by Stephen D. Forman, LifeHealthPRO

Quote:  "As we look ahead to the New Year and ponder what changes lie in store for our beloved long-term care insurance industry, this author finds it easiest to place into five categories the major influences which impact whether 2014 will be sweet or sour.
. . .  There's no greater impediment to LTCI sales than government's 'free inheritance insurance for prosperous heirs,' as Steve Moses describes Medicaid.  2014 will see 9 years since the Deficit Reduction Act was passed — the last real attempt to curb Medicaid abuse — and time for renewed attention."

LTC Comment:  Another thought-provoking piece by Center supporter and corporate member Stephen Forman of Long Term Care Associates.

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12/16/2013, “Long-term care is free,” by Romeo Raabe, LifeHealthPRO

Quote:  “The partnership concept was designed to give an incentive to Americans of modest means to purchase at least some long-term care (LTC) insurance. . . .  This should have triggered a considerable number of people purchasing some LTCI, but nothing happened. Nobody knew the program existed.”

LTC Comment:  Center for Long-Term Care Reform Regional Representative Romeo Raabe is a passionate advocate for LTCI and the LTC Partnership program, but Wisconsin is a hard nut to crack.

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12/16/2013, “In denial that you've reached middle age? A survey identifies some telltale signs,” by Margaret Shapiro, Washington Post

Quote:  "The 2,000 people surveyed by Benenden, a health-care and insurance firm, also made clear that middle age was no longer something for 30- or 40-year-olds to worry about. The life change, they said, began at 53. In fact, nearly half of the older-than-50s who were surveyed said they personally had not experienced ‘middle age’ yet."

LTC Comment:  So, 53 is the new 40.

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12/16/2013, “Columnist Ellen Goodman wants families to have end-of-life talks before a crisis hits [link],” by Richard Harris, Washington Post

Quote:  "In a survey it commissioned, The Conversation Project found that more than nine in 10 Americans think it's important to talk about their own and their loved one's wishes for end-of-life care, but fewer than three in 10 actually engage in these conversations."

LTC Comment:  So a little over half, six in ten, think they should have the end-of-life conversation, but don’t.  Kind of a sad commentary.

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12/16/2013, “Groups call for tough LTCI rate rules,” by Allison Bell, LifeHealthPRO

Quote:  "The groups want regulators to create new conversion rights for any LTCI policyholder who has held a policy 10 years or more.  If an LTCI policy rate increase occurs after a consumer has owned a policy for 10 or more years, the consumer should be able to convert to a paid-up policy with benefits equal to the amount of premiums paid, the groups say." 

LTC Comment:  I wonder what a “paid-up” policy would look like after only 10 years.

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12/16/2013, “Expanded Medicaid's fine print holds surprise: 'payback' from estate after death [link],” by Carol M. Ostrom, Seattle Times

Quote:  "As thousands of state residents enroll in Washington's expanded Medicaid program, many will be surprised at fine print: After you're dead, your estate can be billed for ordinary health-care expenses. State officials are scrambling to change the rule."

LTC Comment:  With easy financial eligibility rules getting even easier under ObamaCare, the only remaining disincentive (other than poor access and quality) to shift health and LTC costs to the government is the requirement we got into federal law in 1993 that people repay the welfare benefits they receive from their estates.  Otherwise, Medicaid operates as free inheritance insurance for affluent heirs instead of as a safety net for the poor.  Such perverse incentives are ruining Medicaid and bankrupting government.

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Updated, Friday, December 20, 2013, 10:37 AM (Pacific)

Seattle—

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LTC BULLET:  WHAT HAVE YOU DONE FOR ME LATELY?

LTC Comment:  Our annual report on the Center for Long-Term Care Reform’s year follows the ***news.***

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

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

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

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

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

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

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

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

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

LTC BULLET:  WHAT HAVE YOU DONE FOR ME LATELY?

LTC Comment:  2013 was a frustrating year for long-term care policy.  We waited month after month for the LTC Commission to be appointed only to wait longer for them to begin deliberations and finally to produce an anti-climactic report which fell on deaf ears.  It was another fruitless effort and lost opportunity, despite the valiant efforts and hard work of a few clear-thinking members.

Then implementation of the Affordable Care Act, alias ObamaCare, stole the national spotlight.  So far, no one has formally identified the third graders who designed Healthcare.gov, but rumor has it they are being held back for a year.  In fact, the whole Rube Goldberg scheme to hijack health care is failing fast.  Now we worry, was that their goal in the first place—to pave the way for a single-payer system?  Will they snuff out the last embers of a free market in health care or will a better system rise like a Phoenix from the ashes, sloughing off both ObamaCare and the crony capitalist mixed system that preceded it?

In the meantime, the only viable alternative to welfare-financed long-term care is less than healthy.  More long-term care insurance carriers left the business or raised premiums and regulators threaten to make life even more difficult for the brave companies and souls who remain.  The Federal Reserve plans to keep interest rates near zero for at least another year propping up government’s deficit spending and Medicaid expansion while devastating the private insurance industry’s financial reserves and destroying its customers’ ability to afford its products.

Nor is home equity conversion yet a viable financing source for long-term care.  Starting January 1, 2014, Medicaid’s home equity exemption increases from a minimum of $543,000 in most states to a maximum of $814,000 in 13 states.  That travesty is only exceeded by the widespread abuse of Medicaid-compliant annuities, which were granted a longer lease on life by three major court cases this year.  The wealthy can easily divest unlimited amounts of money, qualify for Medicaid LTC overnight, and crowd out poor people from the best long-term care by paying privately for awhile.

How bad is this situation?  That’s exactly the question we set out to answer with the “Index of Long-Term Care Vulnerability” which figures prominently in the Center’s 2013 publications discussed below.  It’s probably too late now to avoid a catastrophic financial meltdown, so what’s important next year is to understand the risk and do whatever we can do to mitigate the damage.  That will remain the Center for Long-Term Care Reform’s focus in 2014.

Nevertheless, we expect 2014 to begin a turnaround.  Disenchantment with Medicaid expansion on the acute and long-term care sides will grow.  Political support for ever-more-deficit spending with borrowed funds will decline.  Disillusionment with entitlement programs and increasing evidence of their unfunded liabilities will compel thoughtful citizens to reassess their retirement risks and take more personal responsibility.  The more of them who do so the less disastrous the inevitable collision with financial reality will be when it occurs.

On that happy note, let’s turn to the Center for Long-Term Care Reform’s year in brief.

LTC Bullets

The Center for Long-Term Care Reform endeavors every year to keep our members educated and updated about important news and developments bearing on long-term care financing policy.

Once a week, usually on Fridays, we publish our LTC Bullet.  The Bullets are often policy pieces, sort of like op-eds.  You can always find the five latest Bullets here and archives of all 1025 Bullets (so far), by date here and by topic here.  These 1000 plus articles are a valuable historical resource.  Make use of them. 

In 2013, to celebrate the Center’s 15^th anniversary (April 1, 2013) and our thousandth LTC Bullet (published May 25, 2013), we began a retrospective series highlighting the most interesting and dramatic LTC Bullets that we’ve published since the Center’s founding in 1998.  We’ve completed four of our seven main topical areas.  Check them out as compiled, edited and published by Damon:

 “LTC Bullet:  The LTC Problem and Solutions:  Thousand Bullets Retrospective”

“LTC Bullet:  Reality Check: The Facts on LTCI:  Thousand Bullets Retrospective”

“LTC Bullet #1,000:  Medicaid Planning:  Thousand Bullets Retrospective”

“LTC Bullet:  LTC Services:  Thousand Bullets Retrospective”

In 2014, we’ll bring you the remainder of our retrospective series covering these topical areas:  “Politics and Legislation”; “Demographics and Other Data”; and “CLTCR News.”  Stay tuned.

Highlights of our 2013 LTC Bullets include:

January:  So What If the Government Pays for Most LTC?, 2011 Data Update

February:  Bipartisan Congressional Blast at New York Medicaid

March:  National LTC Commission Disbanded:  Did this April Fool’s report by spokesman “Tungan Sheek” catch you off guard?)

April:  SCAN the LTC Possibilities

May:  Let’s Play LTC Jeopardy

June:  The Role of Estate Recoveries in LTC Financing

July:  Medicaid Spend Down that Isn’t and Why it Matters

August:  Do the Rich Benefit from Medicaid?

September:  The Tarnished Name of Assisted Living

October:  Why Don’t Children Buy LTCI for Parents?

November:  Annuity Blues

December:  A twofer:  Government LTC is Getting Old announced publication of our Georgia report and The Index of Long-Term Care Vulnerability:  A Case Study in Virginia.

The Center for Long-Term Care Reform published a total of 43 LTC Bullets in 2013.

LTC E-Alerts

Our LTC E-Alerts serve a different purpose than the Bullets.  We scan the print and electronic literature on long-term care services and financing every day.  We identify the articles, speeches and reports that we consider most important for Center members to read, hear or see.  Then we cite them by date, title and author; we provide a representative quote from the source; and we give our “take” on what it means in our “LTC Comment.” 

The main idea behind the LTC E-Alerts is to lift the burden of time-consuming research off the shoulders of LTC professionals whose time is better spent providing financial planning advice to clients, selling long-term care insurance, counseling borrowers on home equity conversion, or supplying any of the many other critical services our members provide.  It’s called “division of labor.”  We have to stay abreast of everything that’s happening in the popular and professional media.  We pore over tons of material so you don’t have to spend nearly as much time doing so.

The Center for Long-Term Care Reform published a total of 38 LTC E-Alerts in 2013.

LTC Clipping Service

2013 was our second year offering a clipping service in real time.  In addition to getting a summary of the news and key professional developments once a week, we send our clipping service subscribers an average of three items per work day.  Reading them on the go keeps your professional knowledge at a peak minute-by-minute.  They make a nice break from other duties.  And you’re probably more likely to read a few items per day than to go through the whole list of publications in the weekly LTC E-Alerts at a sitting.

We explained all the details and pricing for the LTC Clipping Service in LTC Bullet:  New LTC Clipping Service.  Check it out.  If you’d like to subscribe, contact Damon at 206-283-7036 or damon@centerltc.com.

The Center for Long-Term Care Reform published a total of 742 LTC Clippings so far in 2013 or roughly 2.1 per calendar day and 3.0 per work day.

Publications

The Center for Long-Term Care Reform published three major reports in 2013.  One more is pending and we hope to report its publication before the end of this year.  Check them out at these links:

Maximizing NonTax Revenue from MaineCare Estate Recoveries, Center for Long-Term Care Reform, Seattle, Washington, May 15, 2013.

The Index of Long-Term Care Vulnerability:  A Case Study in Virginia, published simultaneously on November 26, 2013 by the Thomas Jefferson Institute and the Center for Long-Term Care Reform (archived here.)

The Index of Long-Term Care Vulnerability:  A Case Study in Georgia, published simultaneously December 3, 2013 by the Georgia Public Policy Foundation and the Center for Long-Term Care Reform (archived here.)

Pending publication:  The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey.

Our three most recent study reports all carry the title “The Index of Long-Term Care Vulnerability.”  The Index is a seven-part analytical tool with numerous subparts designed to help legislators and policy-makers measure the sustainability of their states’ Medicaid and long-term care financing systems.  Its objective and empirical metrics facilitate analysis of Aging Demographics, Morbidity, Medicaid viability, Federal financing, State financing, Private financing, and Entitlement mentality as these factors will impact long-term care in the future.  In each of our “Index” reports, you will find a version of the Index filled out by Steve Moses and another blank version which you are invited to fill out based on your own opinion of how each of the key factors should be weighted and scored.

Other publications by the Center this year included:

“States Decry Medicaid LTC Loopholes,” Long Term Care News, Issue Number 34, June 2013, pps. 20-23.

“Government Role in Long-Term Care:  It's Getting Old,” op-ed posted on December 6, 2013 by the Georgia Public Policy Foundation (link0

“Government's role in long-term care is getting old,” The Columbia County News-Times, December 11, 2013 (link)

Speeches

Steve Moses addressed 125 LTCFP partners at their annual all-partners meeting in San Diego on January 12, 2013; 15 dinner guests of the Maine Heritage Policy Center in Bangor, Maine on May 22, 2013 regarding MaineCare’s long-term care program, our studies, and the importance of estate recovery; 60 luncheon guests of the Maine Heritage Policy Center in Portland, Maine on May 23, 2013 on the same topic; 40 attendees and a live C-SPAN 2 audience at the American Enterprise Institute on May 31, 2013 for a program titled “Long-term care: Markets or mandates?”  Video here:  http://www.aei.org/events/2013/05/31/long-term-care-markets-or-mandates/; 70 agents on an AIM webinar on July 30, 2013 titled "Long Term Care Update -- Congressional Committee Status"; 40 MBA and other students at the Wharton Business School by Skype video on September 18, 2013; 40 state attorneys at the 46^th Annual Conference of the American Association of Public Welfare Attorneys in Newport, Rhode Island on November 12, 2013 and 28 attendees at the Virginia Health Care Round Table on December 12, 2013 sponsored by the Thomas Jefferson Institute for Public Policy.

Plans for 2014

We’re still formulating our strategy for the coming year.  A likely target of our efforts is the egregious abuse of Medicaid-compliant annuities which we documented this year in two of our reports.  We have in mind a research project to review the loophole in federal law that enables the practice and to document more cases like the $450,000 and $900,000 examples we discovered this year.  If we can get the support for such a study and conduct it, we’ll produce the evidence and argument to convince Congress to end this Medicaid planning gimmick.

Further plans involve refining the Index of Long-Term Care Vulnerability, applying it in more states, and bringing the results to the attention of the powers-that-be who can adjust course and improve likely future outcomes.

Season’s Greetings

All in all, 2013 was a challenging year for long-term care financing and for your Center.  We look forward to a better 2014 as the ground becomes more fertile for public policy research and advocacy.  The pendulum has begun to swing back, away from expansion of government dependency and toward more fiscal responsibility.

We wish our many friends and members a Merry Christmas and Happy New Year.

The Center’s Clipping Service will continue without interruption, but for everything else, we’ll see you next year.

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Updated, Monday, December 16, 2013, 3:42 PM (Pacific)

Seattle—

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O’CARE EXPLAINED IN ONE PARAGRAPH AND LTC NEWS AND COMMENT

LTC Comment:  I usually dislike “fram”— email spam from friends.  But this item, purporting to represent Donald Trump’s one-paragraph assessment of ObamaCare, caught my eye:

“Let me get this straight....  We're going to be ‘gifted’ with a health care plan we are forced to purchase and fined if we don't, which purportedly covers at least ten million more people, without adding a single new doctor, but provides for 16,000 new IRS agents, who have recently demonstrated their objective and professional integrity; written by a committee whose chairman says he doesn't understand it, passed by a Congress that didn't read it but exempted themselves from it, and signed by a President who smokes, with funding administered by a treasury chief who didn't pay his taxes, for which we'll be taxed for four years before any benefits take effect, by a government which has already bankrupted Social Security and Medicare, Fannie Mae and Freddy Mac, and the Post Office all to be overseen by a surgeon general who is obese, and financed by a country that's broke!!!!!  'What . . . could possibly go wrong'??” 

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12/13/2013, “First-ever CDC report: Nursing homes provide most long-term care nationwide, alternative settings gain ground in the West [link],” by Tim Mullaney,

Quote:  "Research has shown home- and community-based care is increasing at a faster rate than nursing home care, the report states. However, nursing homes are still by far the most prevalent long-term care settings in most regions, the NCHS research found.”

LTC Comment:  But combined HCBS and nursing facility costs continue to increase rapidly giving the lie to the notion that rebalancing from institutional to home care saves money.  So what?  We should make the change even if it doesn’t save money.  The key is to rely less on Medicaid and more on private financing for LTC.  Otherwise, publicly funded care in all venues will continue to grow out of control.

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12/12/2013, “Cancer deaths rise to 8.2 million, breast cancer sharply up,” by Kate Kelland, Reuters

Quote:  “The global death toll from cancer rose to 8.2 million in 2012 with sharp rises in breast cancer as the disease tightened its grip in developing nations struggling to treat an illness driven by Western lifestyles.  Cancer deaths were up 8 percent from 7.6 million in a previous survey in 2008 and breast cancer killed 522,000 women last year, up 14 percent in the same period, according to the World Health Organisation's International Agency for Research on Cancer (IARC)."

LTC Comment:  Take note, CI.

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12/12/2013, “5 Steps To A More Affordable Retirement,” by Barbara Davis, Forbes

Quote:  "Long-term care insurance policies can help hedge your risk. If you’re able to afford the monthly premiums, buying a policy in your 50s or early 60s might be a smart investment to tamp down potential retirement costs."

LTC Comment:  Good advice.

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12/11/2013, “Genworth CEO Would Support Public/Private Long-Term Care Insurance [link],” by Howard Gleckman, Forbes

Quote:  "After Thomas J. McInerney took the helm of insurance giant Genworth Financial GNW +0.67% Inc. last January, he ordered an intensive review of the firm’s long-term care insurance business. Genworth was one of the biggest players in the market, but the industry was struggling and investors unhappy.  . . .  McInerney . . .  says is looking at ways to create a joint public/private insurance product where government would assume risk for catastrophic care. McInerney’s interest in such a solution is a major change for Genworth, which in the past had been skeptical of a public/private partnership."

LTC Comment:  It's good to know the person at the helm of Genworth is thinking creatively, but none of the ideas for reforming LTC insurance and LTC financing discussed in this article address the basic problem:  Medicaid LTC eligibility is easy to get after the insurable event occurs.  Fix that and everything else falls into place.  Leave it alone and most people won't buy LTCI regardless of its form, tax deductions, education campaigns or any other public efforts to encourage its purchase.  What's so hard to grasp?  Doesn't half a century of experience teach us anything? 

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12/12/2013, “On Avoiding Long-Term Care Insurance,” Susan Kaplan, Wall Street Journal

Quote:  "Although it seems like blasphemy, I don't recommend that clients purchase long-term care coverage. It's a burden on clients who have to move heaven and earth to pay extremely high premiums. Further, the odds that your client will continue paying for coverage until they actually need it are slim."

LTC Comment:  I'm undecided whether ignorance or stupidity prevails in this article, but both are present in nearly every sentence. 

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12/12/2013, “More than 8 million use long-term care services in USA,” by Sharon Jayson, USA Today 

Quote:  "More than 8 million people (mostly women and mostly older than 65) used services of a long-term care provider last year, according to the first-ever compilation of federal data profiling the types of providers in the USA and the people who use them. The report, released Thursday, is based on the National Study of Long-Term Care Providers, a new effort by the National Center for Health Statistics to get a better handle on the options for care and determine trends. . . .  The five areas of paid, regulated providers are adult day service centers, home health agencies, hospices, nursing homes, and assisted living and similar residential care communities. The report for 2012 includes some 2011 data; officials say numbers will be updated every two years."

LTC Comment:  America’s LTC service delivery system has changed radically over the past five decades.  Starting in 1965, free nursing home care provided by Medicaid created the system’s institutional bias compounded by inadequate reimbursement, poor access and low quality.  Disenchanted by Medicaid financed nursing home care, people able to pay privately started purchasing assisted living, home care and adult day care.  Now government is trying to rebalance Medicaid and integrate funding streams from Medicare and Medicaid in order to pay for more home and community-based care.  Unfortunately, state and federal governments have too few resources to make such a new service delivery and financing system work well.  So high costs and low quality remain for most people who rely on Medicaid.  Private payers suffer too but at least they can demand higher quality or change providers.

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12/11/2013, “USA's health improving; Hawaii ranks first, Miss. Last,” by Michelle Healy, USA Today 

Quote:  "An annual measure of the nation's health status finds evidence that Americans made 'a notable shift' toward better health in 2013.  Important gains were seen in more than two-thirds of the measures analyzed for the 2013 America's Health Rankings report, released today . . .."

LTC Comment:  Good news on the acute care side, but ironically, healthy people live longer and are therefore more likely to succumb to the debilitating chronic illness that require long-term care.

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12/11/2013, “Medi-Cal Clinics Recruit Long-Term Care Patients To Boost Billings [link],” California Healthline

Quote:  "Some rehabilitation clinics that receive funding from the Drug Medi-Cal Treatment Program have been using money and other incentives to recruit board-and-care residents in order to bill the program for more services, the Center for Investigative Reporting reports.  Medi-Cal is California's Medicaid program . . .."

LTC Comment:  Just another kind of "Medicaid planning."

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12/11/2013, “Government's role in long-term care is getting old,” by Stephen Moses, The Columbia County News-Times 

Quote:  “The single biggest expense senior citizens face is long-term care. The risks and cost are huge: a 20 percent chance they'll need five years or more, with costs of $181 per day for a nursing home in Georgia. Yet few Georgians plan for long-term care. Only 3.5 percent of Georgians over age 40 own private insurance; the national average is 4.5 percent. Why don't they?”

LTC Comment:  I wrote this “op-ed” to introduce our new report titled “The Index of Long-Term Care Vulnerability:  A Case Study in Georgia.”

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12/10/2013, “Feds to study LTCI attitudes,” by Allison Bell, LifeHealthPRO

Quote:  "The U.S. Department of Health and Human Services (HHS) is getting ready to conduct a long-term care insurance (LTCI) awareness survey."

LTC Comment:  Another government boondoggle study.  They gave the contract to the Research Triangle Institute, probably under the guidance of Josh Wiener, a staunch advocate of government-financed long-term care and a stauncher critic of private LTC insurance.  It's like a fox study the henhouse.  Moreover, asking people what they think about LTC insurance or LTC financing policy doesn't work.  They tell researchers the same thing every time, i.e., they don't know who pays and if they think they know they're wrong, and besides they aren't very interested anyway.  The important question for researchers to ask is "why is the public asleep about LTC risk and cost if the danger is so great?"  That's the implicit and mistaken premise they never question.  Get Medicaid out of paying for most LTC after the insurable event occurs and people will quickly get serious about saving, investing, and/or insuring for LTC risk when it's real.

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12/10/2013, “Boomers Terrified of Future Health Care Costs:  Nationwide Financial Survey shows 30 percent jump in fear level [link],” Life & Health Advisors

Quote:  "More than three in five (61 percent) pre-retirees now say they are ‘terrified’ of what health care costs may do to their retirement plans. The annual survey by Nationwide Financial released today reveals the number of affluent pre-retirees jumped 30 percent from the fewer than half that used the word ‘terrified’ last year to describe their concerns about paying for health care costs in retirement."

LTC Comment:  In a rational world, people “terrified” by a financial risk buy insurance to protect against it.  What’s different in our world?  Government’s futile attempt to cover everyone by spreading risk without pricing it. 

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12/9/2013, “Federal exchange sends unqualified people to Medicaid,” by Jayne O'Donnell, USA Today 

Quote:  "The federal health care exchange is incorrectly determining that some people are eligible for Medicaid when they clearly are not, leaving them with little chance to get the subsidized insurance they are entitled to as the Dec. 23 deadline for enrollment approaches. . . .  Jessica Waltman, top lobbyist for the National Association of Health Underwriters, says she's heard a number of reports from around the country of people making as much as $80,000 a year being told they qualify for Medicaid on HealthCare.gov."

LTC Comment:  Just what Medicaid needs:  more ineligible recipients.

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12/8/2013, “Should you buy long-term care insurance?,” By Robert Digitale, The Press Democrat

Quote:  "Insurance actuaries have estimated that 35 percent of clients will get paid on a claim for a long-term care policy that requires the buyer to pay for the first 90 days of care before eligibility for coverage."

LTC Comment:  Used in the article as a reason not to buy LTCI, this fact is irrelevant.  Insurance protects against catastrophic risk, which a 90 day LTC stay is not.  Only 69 percent of people over age 65 need any care, which excludes most insureds from having claims.  That’s what makes long-term care an insurable risk, i.e., a risk private insurers can spread and price.  What matters is that most insureds with long-term stays (over 90 days) do have their claims paid, but that stat is missing from the article.

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12/7/2013, “ObamaCare created a Medicaid time bomb,” by Michael D. Tanner, New York Post

Quote:  "The good news, if you want to call it that, is that roughly 1.6 million Americans have enrolled in ObamaCare so far.  The not-so-good news is that 1.46 million of them actually signed up for Medicaid. If that trend continues, it could bankrupt both federal and state governments."

LTC Comment:  Like a gambler who doubles his bet every time he loses in the hope he’ll win before his stake runs out, the government’s expansion of Medicaid is a race against fiscal insolvency.

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Updated, Friday, December 13, 2013, 10:43 AM (Pacific)

Seattle—

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LTC BULLET:  GOVERNMENT LTC IS GETTING OLD

LTC Comment:  Georgia Medicaid is free inheritance insurance, after the ***news.***

*** Happy Friday the 13^th.  Be careful out there! ***

*** ILTCI CONFERENCE.  The 14^th annual Intercompany Long-Term Care Insurance Conference will convene March 16-19, 2014 at the Rosen Centre in Orlando, Florida.  Get all the details and register here.  Chris Gardner will keynote the event on opening day.  His life was the basis for the book and movie “The Pursuit of Happyness.”  The conference will close with a general session on “The Future of the Industry.”  Stay tuned here to learn who will deliver that challenging presentation.  In between the opening and closing general sessions, you can expect the usual high caliber presentations, peerless networking, and excellent food and drink.  This is a convocation not to be missed if you can manage it.  Damon and I will be there to cover the program and report on it.  Say hello if you attend and, if you don’t (rue the thought), then watch for our “LTC Embed” accounts of the action. ***

*** VIRGINIA HEALTH CARE ROUND TABLE.  The Thomas Jefferson Institute for Public Policy convened a conference in Richmond yesterday to discuss health and long-term care policy.  Some of the leading national critics of the Affordable Care Act (aka ObamaCare) spoke including Grace-Marie Turner of the Galen Institute and Michael Tanner of Cato.  Addressing the challenges to Medicaid and long-term care financing, respectively, were Bob Helms of the American Enterprise Institute and the Center for Long-Term Care Reform’s Steve Moses.  The audience of public officials, business and professional people came away educated but hardly edified.  National health and LTC public policy are on a rapidly accelerating deadly course. ***

LTC BULLET:  GOVERNMENT LTC IS GETTING OLD

LTC Comment:  For the second week in a row, we’re announcing publication of a major study by the Center for Long-Term Care Reform.  The Georgia Public Policy Foundation (GPPF) underwrote the project.  Steve Moses conducted the onsite research last summer and produced the draft report on deadline September 30, 2013.  You can read “The Index of Long-Term Care Vulnerability:  A Case Study in Georgia,” on the GPPF’s website here or on the Center for Long-Term Care Reform’s website here.

Now, if you’re thinking to yourself “Gee, that title sure sounds familiar,” give yourself a gold star.  Last week’s published report was “The Index of Long-Term Care Vulnerability:  A Case Study in Virginia.”  And, get ready for this, we have one more coming soon titled “The Index of Long-Term Care Vulnerability:  A Case Study in New Jersey.”  What’s with all this “Index” business you might ask.

The “Index of Long-Term Care Vulnerability” is an analytical tool we’ve developed to help legislators and policy makers (and anyone else who’s interested) assess the future sustainability of their state’s long-term care service delivery and financing system.  Check it out here as applied to Virginia and here (pages 27-28) as applied to Georgia in our latest report.  In both reports, you’ll find the Index filled out by me for the USA and for the state in question.  In each of the reports, you’ll also find a blank version of the Index inviting you to weight the key factors determining the sustainability of LTC and to score your own state’s vulnerability.  Check it out here and let me know what you conclude.

Op-Ed Published

I wrote an op-ed to introduce our Georgia report to the media.  I titled it “Georgia Medicaid is Free Inheritance Insurance.”  Editors change titles sometimes with or without telling authors.  That can be annoying, but this time I had no objection to the new title.  “Government's role in long-term care is getting old” was the title assigned by The Columbia County News-Times.  Read the piece here or below.

It’s true literally and figuratively that government LTC is getting old.  It started long before Medicaid and Medicare came along in 1965, but it has ballooned ever since.  Government interference in the LTC market is not only temporally old, it is deadly tiresome as well.  When will the powers-that-be learn that providing underfinanced LTC after the insurable event has occurred to consumers who should, could and would have planned responsibly and paid privately otherwise--is a recipe for insolvency?

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Here’s the op-ed for your consideration:

“Government’s Role in Long-Term Care is Getting Old”
by
Stephen A. Moses

The single biggest expense senior citizens face is long-term care. The risks and cost are huge: a 20 percent chance they’ll need five years or more, with costs of $181 per day for a nursing home in Georgia. Yet few Georgians plan for long-term care. Only 3.5 percent of Georgians over age 40 own private insurance; the national average is 4.5 percent. Why don’t they?

The answer is surprising. Most frail or infirm elderly Georgians don’t pay for their own long-term care. In fact, expensive long-term care in Georgia is financed mostly by the state and federal government through Medicaid, a means-tested public assistance program. Georgia Medicaid spent a billion dollars on long-term care in 2011, most of it for nursing home care (76 percent) but a substantial portion (13 percent) for the more popular, waivered home care services. Medicaid recipients occupy 72 percent of the beds in Georgia’s nursing homes.

The way Medicaid eligibility works results in most people qualifying for Medicaid-financed long-term care almost regardless of their income or assets. That’s the conclusion we reached in a study sponsored by the Georgia Public Policy Foundation and published recently in a report titled The Index of Long-Term Care Vulnerability: A Case Study in Georgia. Read it here: http://www.georgiapolicy.org/ftp_files/IndexofLong-TermCareVulnerability.pdf.

This is what we found:

Georgians can circumvent Medicaid’s $2,130 per month income limit by setting up Qualified Income Trusts (QITs). County eligibility workers provide “templates” to help families set up QITs, which enable people with substantially higher incomes to qualify for Medicaid-financed long-term care.

Nor are assets a significant obstacle to qualifying for Medicaid. The $2,000 limit applies only to cash or assets easily convertible to cash. Medicaid recipients in Georgia may also retain up to $536,000 worth of home equity, plus one automobile, prepaid burial plans, personal belongings and home furnishings of unlimited value.

Income and asset eligibility rules are even more generous for married couples and Georgia Medicaid is more lenient in this area than federal rules require. The spouse in the community can draw on the institutionalized spouse’s income to bring monthly income up to $2,898. The non-institutionalized spouse may retain $115,920 of the couple’s joint assets. Federal rules limit the income to $2,184 (without a household to maintain) and set the minimum asset limit to only half the joint assets, not to exceed $115,920.

Even wealthier Georgians qualify by retaining Medicaid planning attorneys to impoverish themselves (or more often, their parents) artificially. Common Medicaid planning techniques used in Georgia include asset transfers, promissory notes, annuities and purchase of exempt assets. For example, according to county eligibility workers, annuities worth hundreds of thousands of dollars are established in ways that prevent the state from capturing any of the money to offset Medicaid costs.

Isn’t this retained wealth recaptured from the estates of deceased Medicaid recipients? Georgia Medicaid finally implemented an estate recovery program a decade after the federal Omnibus Budget Reconciliation Act of 1993 made one mandatory. Georgia’s program is set up in such a way, however – exempting, for example, the first $25,000 of an estate – that it is unlikely to recover much revenue.

Georgia Medicaid makes free or subsidized long-term care available to most residents of the state. The consequences of this generous policy are that few Georgians plan for long-term care or purchase insurance for it, and most expensive long-term care is paid for by Medicaid, a large and rapidly growing program that consumes more and more state and federal resources.

Georgia should seek ways to return Medicaid to its original intent: a long-term care safety net for people in need. Without that, Medicaid will remain free inheritance insurance for relatively prosperous heirs, deflating their sense of urgency about long-term care risk and cost, and resulting in too many ending their lives on Medicaid for that program to survive.

(Stephen Moses is president of the Center for Long-Term Care Reform and author of The Index of Long-Term Care Vulnerability: A Case Study in Georgia.)

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Updated, Monday, December 9, 2013, 1:20 PM (Pacific)

Seattle—

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ANNUITY ABUSE AND LTC NEWS AND COMMENT

LTC Comment:  Today’s lead article is about an appeals court case argued by Bill Browning, a former President of the National Academy of Elder Law Attorneys whom I debated eleven years ago at one of Jesse Slome’s national conferences:

“Listen to "The Great Debate": Steve Moses v. NAELA (National Academy of Elder Law Attorneys) President-Elect Bill Browning, held at the National LTCi Producers Summit, November 18-19, 2002 - St. Louis, Missouri.”
 
The net result of Mr. Browning’s “win” in this case is that his client diverted $175,000 from Medicaid spend down rules thus transferring the cost to taxpayers at the expense of a program intended to help the poor. 

In the greater scheme of annuity abuses, this one is small potatoes.  I’ve documented examples of $450,000 and $900,000 annuities in recent reports available here and here.  In fact, there is no limit on how much money can be divested through Medicaid compliant annuities.

This is a quote from a Virginia Medicaid eligibility worker frustrated by the problem of annuity abuse: 

“Medicaid is a program that pays for pretty much anyone who needs care and knows how to get it, not just for the poor.”

(Source:  Stephen A. Moses, “The Index of Long-Term Care Vulnerability:  A Case Study in Virginia,” The Thomas Jefferson Institute for Public Policy, November 2013, p. 7; http://www.thomasjeffersoninst.org/files/3/LongTermCare.pdf.)

December 2013, “Community Spouse's Purchase of Annuity Before Medicaid Determination Is Not Improper Transfer [link],” ElderLaw Answers

Quote:  “In a case argued by Ohio ElderLawAnswers member attorney William Browning, the U.S. Court of Appeals for the Sixth Circuit rules that an annuity purchased by a community spouse before a Medicaid eligibility determination is not an improper transfer and that the annuity does not need to name the state as a remainder beneficiary. Hughes v. McCarthy (6^th Cir., No. 12-3765, Oct. 25, 2013).”

LTC Comment:  Waste, fraud and abuse are rampant in Medicaid’s long-term care financing program, but the worst of these is abuse that is legal.  Waste can be fixed and fraud can be prosecuted, but legal abuse goes on and on unless and until Congress acts.  Yet, year after year, nothing happens to close this gaping loophole and the Centers for Medicare and Medicaid Services (CMS) remains silent about Medicaid annuity abuse.

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12/7/2013, “Long Term Care Insurance Association Praises Virginia LTC Vulnerability Report [link],” by Jesse Slome, American Association for Long-Term Care Insurance

Quote:  "The Association director praised a new report researched and written by Stephen Moses, president of the Center For Long-Term Care Reform and presented by the Thomas Jefferson Institute. 'This is a very well prepared look at the current environment that draws some very dire conclusions if we continue to hide our heads in the sand,' Slome explains. 'Kudos to Moses and the Center for another excellent look at the problem in an extremely fair and balanced way.'"

LTC Comment:  Thanks to our friends at AALTCI for this endorsement.

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12/6/2013, “Government Role in Long-Term Care: It's Getting Old,” by Stephen A. Moses,” Georgia Public Policy Foundation

Quote:  "Georgia should seek ways to return Medicaid to its original intent: a long-term care safety net for people in need. Without that, Medicaid will remain free inheritance insurance for relatively prosperous heirs, deflating their sense of urgency about long-term care risk and cost, and resulting in too many ending their lives on Medicaid for that program to survive."

LTC Comment:  This is the op-ed I wrote for the Georgia Public Policy Foundation announcing publication of our report titled “The Index of Long-Term Care Vulnerability:  A Case Study in Georgia [link].”

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12/6/2013, “2014 Long Term Care Insurance Tax Guide Published by AALTCI,” by Jesse Slome, American Association for Long-Term Care Insurance  

Quote:  "Long term care insurance premiums remain one of the tax deductible expenses few individuals are aware of according to the American Association for Long Term Care Insurance. A new guide produced by the organization explains the current rules and the new IRS tax deduction limits for 2014."

LTC Comment:  Heed and lead.

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12/5/2013, “Nursing home $10,000 suicide fine upheld,” by Dave Surico, McKnight's LTC News

Quote:  "A federal appeals court has upheld a $10,000 fine against a skilled nursing facility for leaving a suicidal patient unattended, who then walked out of the facility and killed himself. The U.S. Court of Appeals for the Ninth Circuit said the Department of Health and Human Services' ruled that the decision (Del Rosa Villa v. Sebelius, 2013 BL 330965, 9th Cir., No. 12-71685, 11/26/13) to fine petitioner Del Rosa Villa was supported by substantial evidence. The court denied a petition to overrule decisions that led to the fine."

LTC Comment:  Care to make a guess whether this facility was mostly Medicaid or mostly private pay?

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12/5/2013, “Russian diplomats charged in $1.5M Medicaid scheme,” by Associated Press, Politico

Quote:  "More than three dozen Russian diplomats and their spouses enjoyed luxury vacations and spent tens of thousands of dollars at the finest stores as they lied about their incomes to get the government to pay their health care bills, federal prosecutors in New York said Thursday."

LTC Comment:  Medicaid planning:  it’s not just for elder law attorneys anymore.

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12/4/2013, “How is Medicare Advantage really doing?,” by Allison Bell, LifeHealthPRO

Quote:  "Two witnesses painted completely different pictures of the state of the Medicare Advantage program today at a House Energy & Commerce health subcommittee hearing."

LTC Comment:  Who are you going to believe?  An employee of a research firm that depends on government grants or the former chief of the Congressional Budget Office? 

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12/4/2013, “Nursing homes lagging in palliative care, researchers say,” by Dave Surico, McKnight's LTC News 

Quote:  "Nursing homes have lagged in the area of palliative care, and need to take a seat at the table, according to researchers in a Health Affairs blog. The lack of intertwinement between nursing homes and palliative care is due to a number of factors: regulations that favor rehabilitation, inadequate staff education around palliative care, financial disincentives, lack of reimbursement and misconceptions, write authors Mary Ersek, Ph.D., RN, David Stevenson, SM, Ph.D., and Justine Sefcik."

LTC Comment:  All sorts of perverse incentives are built into government financed long-term care which makes providers, instead of patients, the customers.

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12/4/2013, “Genworth Says Higher Premiums Blunt Long-Term Care Errors,” by Dan Reichl, Bloomberg  

Quote:  "Genworth Financial Inc., the largest seller of long-term care coverage, is counting on periodic rate increases of 2 percent to 4 percent to maintain profit targets, after larger insurers retreated from the business to limit risk. 'I don't think it's prudent to be in this business unless you can, over time, re-rate policies to reflect the difference between how actual reality played out versus your original assumptions,' Chief Executive Officer Tom McInerney said today in an interview. 'You have to ultimately have a return in the mid-teens range. If it's less than that, on a risk-adjusted basis, investors shouldn't invest in the business.'"

LTC Comment:  “If at first you can’t succeed, try, try again.”  The irony is that government has set aside nothing to ensure it will be able pay its entitlement promises.  Yet the private sector is criticized for doing the responsible thing, i.e., making sure reserves will suffice to pay future claims.

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12/3/2013, “Carriers slam Medicare Advantage moves:  AHIP says carriers should be able to cut MA networks [link],” by Kathryn Mayer, BenefitsPRO 

Quote:  "Because of the Patient Protection and Affordable Care Act, seniors enrolled in Medicare Advantage plans are paying higher premiums and experiencing a reduction in benefits and disrupted coverage. And that's just the beginning. That's the dire message from America's Health Insurance Plans, which predicts will hit seniors even harder over the next two years."

LTC Comment:  Unfortunately, the insurance industry cozied up to the Administration to help pass the Affordable Care Act (aka ObamaCare) and now we’re all living with the disastrous consequences:  higher premiums for worse coverage.  The private sector (Charlie Brown) never seems to learn that government (Lucy) always offers a sweet deal (the football) and then reneges after companies adapt to take advantage.  

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12/3/2013, “Post-hospital care spending jumps,” by Dave Surico, McKnight's LTC News 

Quote:  "Bundled payment experiments are growing while Medicare spending on nursing homes continues to come under scrutiny, according to a Kaiser Health News/Washington Post report. Widely varied care, additional services and costs from state-to-state have drawn the attention of regulators."

LTC Comment:  The risk is that cutting Medicare payments to nursing homes will undermine access to and quality of care funded (at less than the facilities’ cost of care) by Medicaid.

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12/3/2013, “North Dakota drafts short-term care insurance regs,” by Allison Bell, LifeHealthPRO   

Quote:  "The North Dakota Department of Insurance may add a section on short-term care insurance (STCI) to the state administrative code."

LTC Comment:  Better some insurance than none.

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12/2/2013, “NIH deposits first batch of genomic data for Alzheimer's disease [link],” NIH News and Events

Quote:  "Researchers can now freely access the first batch of genome sequence data from the Alzheimer's Disease Sequencing Project (ADSP), the National Institutes of Health (NIH) announced today. The ADSP is one of the first projects undertaken under an intensified national program of research to prevent or effectively treat Alzheimer's disease."

LTC Comment:  One more step in a Sisyphean effort to conquer Alzheimer’s.

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12/2/2013, “Doctors Face A 24% Pay Cut In Both Medicare And Medicaid Reimbursements [link],” by Merrill Matthews, Forbes 

Quote:  "In 1997 Congress passed legislation, known as the 'sustainable growth rate' (SGR), to try and reduce Medicare spending.  If Medicare spending grew faster than a predetermined amount, doctors' Medicare reimbursements would be cut the next year by enough to offset the overspending. Not surprisingly, Medicare spending didn't hit the target rate, and, again not surprisingly, Congress didn't want doctors to take the financial hit.  So Congress has passed legislation, known as the 'Doc Fix,' multiple times to postpone the cuts and keep the reimbursement levels roughly the same. But those postponed deficits keep piling up, and come January doctors will see, on average, a 24 percent cut in Medicare reimbursement levels.  And here comes the double whammy: Medicaid reimbursements will face the same 24 percent cut."

LTC Comment:  The Center for Long-Term Care Reform proposed a solution to the “Doc Fix” problem that would save $30 billion per year and solve the LTC financing problem too.  Read it here.

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12/1/2013, “Oversight of nursing home trust funds limited,” by Peter Eisler, USA TODAY

Quote:  "Many states do not require criminal background checks on nursing home staff who manage residents' trust funds, and few demand audits of those accounts - a regulatory gap that contributes to scores of cases in which the money is stolen or mismanaged. Nearly every state requires background checks for nursing home staff in caregiving roles, but 20 states don't apply that requirement to office workers who do not routinely have direct patient contact, a USA TODAY review of state laws finds. Those office employees typically manage the trust accounts that nursing homes must maintain for residents who request that the facility safeguard their money."

LTC Comment:  And why must nursing homes maintain “trust accounts” for residents? Because 2/3 of their residents are on Medicaid and the nursing homes have to help ensure that Medicaid residents’ assets never exceed $2,000 and throw them off the program that pays for their care.  Private-pay patients don’t need nursing home trust accounts and don’t have to worry about crooked nursing home employees ripping them off.

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11/29/2013, “Why your clients need a care coordinator,” by Margie Barrie, LifeHealthPRO 

Quote:  "Q. The policies I’m selling contain a care coordinator benefit. How can I explain the value of that benefit to clients? A. Having hired a care coordinator for my mother, I am a big advocate of that benefit. When I tell my mother’s story to clients, they really understand how valuable a benefit caregiving is."

LTC Comment:  Someone should do a study that compares the care coordinator benefit in a private long-term care insurance policy with whatever benefit, if any, is available under Medicaid.

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11/28/2013, “Large discrepancies found in Medicare spending on post-hospital care [link],” by Jordan Rau, Washington Post

Quote:  "After years of trying to clamp down on hospital spending, the federal government wants to get control over what Medicare spends on nursing homes, home health services and other medical care typically provided to patients after they leave a hospital.”

LTC Comment:  Great idea except that the only thing enabling nursing homes to provide custodial long-term care to two-thirds of their residents--who rely on Medicaid at less than the cost of providing the care--is that Medicare has paid very generously in the past.  Take that away and the whole government LTC financing scheme collapses. 

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11/27/2013, “Long-term care: The silent Medicaid killer,” by Kathryn Watson, Watchdog.org

Quote:  "ALEXANDRIA, Va. — A silent threat to the commonwealth looms as the baby boomer generation gets older — long-term care costs like nursing home expenses, paid for by taxpayer-funded Medicaid.

“'Income, I found, is almost never an obstacle to qualifying for Medicaid,' said Stephen Moses, a former Medicaid state representative who is now president of the Center for Long-Term Care Reform and recently wrote a report on the state of long-term care in Virginia. [Emphasis in the original]

"Moses said Virginians need to take personal responsibility to save and find ways to finance nursing home care in the future, and lawmakers need to put more restrictions on eligibility so long-term care doesn’t cripple the system."

LTC Comment:  This article reviews and recommends the first of our three state-level studies introducing a new analytical tool:  “The Index of Long-Term Care Vulnerability.”  Watch for subsequent reports applying the index to Georgia and New Jersey.

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11/26/2013, “Group wants Virginia to tighten Medicaid rules,” by Chelyen Davis, The Fredericksburg Star 

Quote:  "A conservative think tank is advising Virginia to tighten its rules for Medicaid coverage of long-term care to discourage reliance on the public program. The Thomas Jefferson Institute for Public Policy, which advocates for public policy 'based on a philosophy of limited government, free enterprise and individual responsibility,' said in a report Tuesday that Virginia is going to see big growth in the over-85 population in the next 40 years."

LTC Comment:  The Thomas Jefferson Institute, which published our report reviewed by this article, is more accurately described as a libertarian, not as a conservative, think tank.

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11/26/2013, “Inspector General Scrutinizes LTC Industry on Rehospitalizations,” by Jason Oliva, Senior Housing News

Quote:  "Government inspectors say there's not enough attention being paid to the readmissions problem in long-term care settings, specifically nursing homes. A recent study by the Office of the Inspector General (OIG) found that of the 825,765 Medicare residents who stayed in nursing homes for at least one day in fiscal year 2011, 24.8% experienced hospitalizations."

LTC Comment:  Frail, infirm and elderly people need a lot of care, both acute and long-term.  It’s very hard to say how much is too much.

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11/26/2013, “How a toddler's brain may indicate if they'll get Alzheimer's in old age: Children with a genetic risk have brains that develop differently [link],” by Anna Hodgekiss, MailOnline

Quote:  "Toddlers who have a genetic risk from Alzheimer's have brains that develop differently, new research suggests. Infants who carry a gene associated with increased risk of the condition tend to have differences in brain development compared to children without the gene. The gene variant is called APOE-E4 - a known risk factor for late-onset Alzheimer's - and researchers say this study shows some of the earliest differences in people who have it." 

LTC Comment:  A whole new age demographic for the LTCI market to target.