LTC Bullet:  Why LTCI?

 Wednesday  August 1, 2001


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The following article by Center President Stephen Moses was published in the June 2001 issue of Senior Market Advisor (p. 14).  To learn more about Senior Market Advisor magazine and to subscribe, go to Who reads it?  According to their website:  "Over 35,000 insurance agents and financial advisors who are looking to succeed in the over-50 market, that's who."

Now here's Steve's article.  Let us know what you think.


With the Government's System in Shambles, Private Funding Has Never Been More Relevant

by Stephen A. Moses

For this issue, Senior Market Advisor has invited Stephen A. Moses, president of the Center for Long-Term Care Financing, to share his views on the state of the industry.

People who ought to know have predicted a boom in long-term care insurance sales for over a decade.  "My goodness," they say, "just look at the aging demographics.  Look at their risks.  Look at nursing home costs.  The public needs long-term care insurance!  Offer it; they'll buy it." 

Yeah, right. 

After 25 years of hard selling, anywhere from four to seven percent of seniors and virtually no baby-boomers have bought long-term care insurance.  How many carriers licked their chops looking to make a killing and left with their tails between their legs?  Dozens.  How many brokers tried to specialize in LTCI only to give up?  Hundreds.  How many agents entered the market wide-eyed only to quit in frustration?  Thousands. 

What's going on?  If the need is so great, why aren't more people buying long-term care insurance?  The answer is very simple.  For the past 35 years, with every good intention, the state and federal governments have paid for long-term care through Medicaid and Medicare AFTER the insurable event occurs.  As a result, the public has been anesthetized to the risk and realities of long-term care.  As long as they can ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need expensive care, and if they do, transfer the cost to government programs and the provider industry, most will not buy long-term care insurance. 

"Wait," you object, "everyone knows Medicaid requires impoverishment and Medicare doesn't pay for long-term care."  Wrong again.  The average senior, in terms of income and assets, who needs nursing home care can qualify for Medicaid without significant spend-down and without any fancy legal planning.  Virtually anyone else, regardless of income or assets, can qualify quickly by obtaining the right legal advice. 

Medicare expenditures for nursing home care are up three-fold since 1990 to 11 percent of total nursing home costs and the program's expenditures for long-term home care roughly doubled between 1991 and 1998.  In the meantime, so-called "out-of-pocket costs" for long-term care--most of which are just Social Security or other income of people already on Medicaid, i.e. not savings or assets--have plummeted from 38 percent in 1990 to 27 percent in 1999. 

The bottom line is that if you opt not to purchase long-term care insurance, and the worst happens, the government will step in to preserve your assets for your heirs.

Now, here's the kicker:  Although everything I've said so far is true, there are still many pieces to this puzzle.  Our welfare-based, government-financed, nursing-home centered long-term care system is falling apart.  Home health and nursing home bankruptcies are rife; LTC stocks are in the tank; debt and equity capital are unavailable; staff are scarce and underpaid; quality of care is down; lawsuits are common; liability insurance is unaffordable or non-existent.  The whole system is collapsing, but the public doesn't know this . . . yet.  We are in a turbulent transition phase from an institution-based, welfare-financed long-term care system in which private insurance was in low demand to a home and community-based, privately financed long-term care system in which private insurance will be in much greater demand. 

In the future, the only way to obtain quality long-term care at the most appropriate level (home care and assisted living, with nursing home care only as a last resort) will be to pay privately.  The only way to pay privately without spending one's own money will be to own private long-term care insurance.  We must all sound this alarm and wake up the public before it's too late.

The old system that suppressed private long-term care insurance is dying.  The new system struggling to be born will rely more heavily on private financing.  Private long-term care insurance will soon have its day in the sun.  If you are toiling in that market, hang on.  If you're thinking about getting into long-term care insurance, now is a very good time.  In fact, there never was a better time.

The Center for Long-Term Care Financing's mission is to ensure quality long-term care for all Americans.  Consult for the evidence to support the argument made in this commentary and to subscribe to the Center's free online newsletter "LTC Bullets."  The views expressed by Mr. Moses do not necessarily reflect those of Senior Market Advisor.