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LTC Bullet:

The Myth of Unaffordability

Friday August 27, 1999


The Center for Long-Term Care Financing's newest white paper titled "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance" is about to be published.

"The timing couldn't be better," says Center VP David Rosenfeld. "A recently released Conning and Company study highlights the lackluster growth of LTC insurance sales (see Mr. LTC's web site at for details and an interview with the study's author). The Center's new paper explains the fundamental underlying problem and lays out how to reverse this disturbing sales trend. Now, it's time for stakeholders to step up to the plate and address this issue head-on."

The following article by Center for Long-Term Care Financing President Stephen Moses describes the Center's "Myth of Unaffordability" paper. A version of this article appears as the cover story in the Sept. '99 issue of LTC News & Comment. The Center's press release announcing publication of the paper has been sent to 11,000 contacts via postal mail and will be issued as an LTC Bullet on September 1, 1999-the official public release date.


The Myth of Unaffordability
Stephen A. Moses

When I first started watching the private LTC insurance market carefully in 1989, I was not favorably impressed with what I saw.

The industry had a terrible reputation. Critics lambasted LTC products for high cost, low quality, narrow coverage, restrictive benefit triggers, stingy claims payment ratios, and abusive or unqualified marketing agents. Most financial advisers recommended against private LTC insurance. Consumer Reports accused insurance carriers of playing "Gotcha!" with vulnerable elderly clients. Nearly everyone assumed the government would somehow find a way to meet the long-term care financing needs of an aging population. "Who needs LTC insurance?" was the conventional wisdom.

What a difference a decade makes! Nowadays, most objective observers agree that private LTC insurance has vastly improved, that excellent products covering a wide continuum of care are readily available, and that most of the objections raised previously by consumer advocates have been resolved. Today, almost all financial advisers strongly recommend private LTC insurance over planning for Medicaid or "going bare." Consumer Reports concedes that "...many consumers need to consider the protection this insurance can offer." And no one still thinks the government will pay for widespread access to quality long-term care. "Everyone needs LTC insurance" has become the conventional wisdom.

Consequently, private LTC insurance sales are skyrocketing and public dependency on government-financed long-term care has plummeted, right? Wrong!!! To this day, LTC
insurance has penetrated only seven percent of the senior market and almost none of the critical baby-boomer market. Furthermore, between 1985 and 1997, the share of nursing home care paid for by Medicare and Medicaid increased from 49 percent to 60 percent and between 1990 and 1998, the share of home health care paid by these same government programs jumped from 39 percent to 57 percent. In other words, exactly the opposite is happening in the marketplace compared to what we would expect given the improvements in private LTC insurance and the public's declining confidence in government-financed long-term care. What gives?

That is the question the Center for Long-Term Care Financing set out to study in our latest research project. The answer is contained in the Center's newly released white paper "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance." In a nutshell, increasingly easier access to publicly financed nursing home and home care has anesthetized the public to the underlying financial risk of long-term care. Consequently, even though the quality and reputation of private long-term care insurance have vastly improved, most people do not perceive a high level of need for the coverage. This reality has translated in the marketplace into the perception that private LTC insurance is good in principle, but unaffordable. Quite reasonably, if one does not perceive the need for a product, almost any price to purchase it is "unaffordable." Thus, presumptive unaffordability has become the consumer's strongest and most credible objection to the purchase of private LTC insurance.

The Center for Long-Term Care Financing's "Myth of Unaffordability" report deconstructs the idea that LTC insurance is unaffordable and demonstrates that 70 percent to 80 percent of all Americans should, could, and would purchase this important coverage if perverse incentives in current public policy did not undermine the market. For example, the report provides thoroughly documented answers to the following (and many other) questions:

o What are the current effects and future prospects for public financing of long-term care?

o Is long-term care insurance affordable? How and by whom?

o Why is the demand for certain kinds of insurance, including long-term care insurance, so low?

o How do the middle class elderly end up in nursing homes on welfare?

o How do long-term care insurance companies market the product and why doesn't this approach work more effectively?

o How widespread is Medicaid planning and does it really influence whether or not people purchase private long-term care insurance?

o Why doesn't the government clamp down on skyrocketing Medicaid nursing home costs and program abuse?

o What should government do to make long-term care more attractive, available and affordable for all Americans, rich and poor alike?

o Are the long-term care insurance "partnerships" a workable solution?

o How can people increase their ability to afford the cost of long-term care insurance?

o Who should purchase long-term care insurance?

o How is long-term care insurance changing and how do these changes affect one's choice of a product to buy?

o If long-term care insurance is affordable and people need it, why don't they buy it?

Ironically, with every benign intention, the government has duped the public into a false sense of security about the financial risk of long-term care by providing highly subsidized nursing home and home health care through Medicaid and Medicare. Such care is easily available without spending down not only to the poor, but also to the middle class and well-to-do. This fact has engendered the provably mistaken perception that private LTC insurance is unaffordable. Consequently, to quote the last paragraph of the new report:

"Unless and until lawmakers show the courage to correct our flawed public policy for long-term care financing, The Myth of Unaffordability will persist and grow in acceptance. If nothing is done, we are heading inexorably toward a demographic train wreck in the United States. The Center for Long-Term Care Financing is raising the alarm. We hope this report contributes toward the objective assessment and timely correction of the long-term care financing problem."

"The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance" is available free of charge to legislators and the media. To purchase a copy of the report for $34.95, call us toll free at 1-877-557-3627 or click here.

For more LTC news and views, visit LTC News & Comment on the web at