LTC Bullet: Let the Race Begin

Friday August 3, 2001


***This Bullet is sponsored by the National LTC Network, "Partners in Long-Term Care Coverage, Design, Education and Distribution." Visit the Network online at Contact Allen Mansfield, Executive Director, at 800-996-6789 or for more information. Thanks so much to Network members for their generous support of the Center and commitment to keeping LTC Bullets free to everyone. Find out how you can sponsor LTC Bullets or other Center activities (e.g., articles, speeches, conference exhibits) by contacting Amy Marohn at 425-467-6840 or***

Last year, the Center for Long-Term Care Financing conducted and published a study called "The LTC Triathlon: Long-Term Care's Race for Survival." We interviewed 119 of the leading private-sector financiers, providers and insurers of long-term care in the United States. We asked them what's wrong with long-term care service delivery and financing in the U.S. and what needs to be done to fix the problems. Our respondents' frank and colorful answers make a very interesting read. You can find the full report online at To pique your interest, we offer the LTC Triathlon's "Introduction" below. Sometime soon, we'll send you an LTC Bullet with the Triathlon's "Conclusions and Recommendations." Then, beginning in September, watch for the first of our reports on a forthcoming series of LTC Summit Conferences the Center plans to sponsor. These "Summits" will be invitation-only, CEO-level, small-group, three-hour intensive discussion sessions bringing together six each of America's leading financiers, providers and insurers of long-term care.

Introduction to "The LTC Triathlon: Long-Term Care's Race for Survival"

America has a rendezvous with demographic destiny. Our 77-million-strong baby-boom generation moves gradually, but relentlessly toward senescence. Just as the boomers critically impacted schools, culture, economics and politics in their unprecedented rampage through the last half of the twentieth century, they will lay siege to America's social safety net in the first half of the twenty-first century.

Today, we are passing through a wonderfully benign demographic period. A huge cohort of baby-boom workers swells income tax receipts and pays 60 percent of all payroll taxes, while a relatively small generation retires. In ten years, however, they will start taking money out of Social Security and Medicare instead of putting it in, while a much smaller generation struggles to support those programs. When the boomers sell their equities and big family homes to move into secure, fixed-income investments and smaller retirement housing, the stock and real estate markets will feel the pinch. Our economy may crash just as the age wave starts to crest.

In the meantime, America's narrow window of opportunity to prepare for the aging of the boomers is shrinking daily. Progress on retirement and health security reform remains elusive. Worst of all, long-term care for the elderly--the most challenging of our social problems--is already in terrible trouble even in these best of times.

Long-term care service delivery and financing in the United States are dreadfully dysfunctional. Seven major nursing home chains have recently declared Chapter 11 bankruptcy. One or more of these companies may slip into Chapter 7 bankruptcy and disappear from the marketplace altogether. New assisted living facilities are filling too slowly. America's home and community-based services infrastructure is under-developed and starved for financing. Capitalization of long-term care facilities, by debt or equity, is almost completely stymied. Long-term care stock prices are under water. The supply of both free and paid caregivers is drying up. Most Americans cannot afford expensive formal long-term care services, but Medicaid and Medicare pay too little to assure access to quality care. Few seniors and almost no baby boomers own private long-term care insurance. Aging demographics guarantee an ominous future for long-term care, yet the issue is barely discernible on the national agenda. What is wrong and how can we fix it? That is the question every public policy maven in America should be asking and attempting to answer.

Unfortunately, objective analysis and practical proposals in the realm of long-term care policy are scarce. Political ideology and competing financial interests color the discussion. Some observers blame long-term care's malaise on the alleged greed, incompetence and callousness of private industry. Others emphasize the supposed stinginess, inefficiency, and indifference of government. Name calling and distrust prevail. Public policy continues to drift toward constriction of government financing and increased regulation and oversight, but without adequate strategies to attract private long-term care financing sources. This trend impels long-term care providers to complain that government financing is inadequate, regulation is too severe, and profitable private revenue is dwindling. Some analysts say we need more public financing and stronger enforcement of access and quality mandates. Others say we should target public financing to the needy and encourage private financing and insurance.

Who's right? Who can say for sure? The questions and answers seem hopelessly muddled. One reason for this confusion is that we rarely probe deeply into the views and motivations of the opposing sides in this ideological divide. For example, most long-term care study groups, commissions, and projects try to be all things to all people. Whether they originate in the private sector or the public sector, these well-intentioned initiatives attempt to bring everyone into the discussion all at once in order to achieve consensus. Such consensus as they achieve, however, is rarely more than the lowest common denominator of competing perspectives and interests. Instead of finding a new way that works, these studies tend only to solidify and expand the status quo. Thus is perpetuated a welfare-based long-term care system that serves well neither the poor nor the affluent and pits the private and public sectors in bitter conflict to no one's better interest.

The Center for Long-Term Care Financing has done something entirely different in this study. We decided to lend an attentive ear to a side of the long-term care issue that rarely gets a full and fair public hearing. There are two major constituencies that will determine the future of long-term care in the United States: private industry and the public sector. Years of personal and professional experience have convinced us that both groups deserve some measure of criticism and praise. If the private sector succumbs sometimes to greed and venality, it often produces stunning social benefits from competition among dedicated, hard-working, self-interested individuals. If government succumbs sometimes to inefficiency and waste, it often supplies idealistic, well-intentioned people committed to improving long-term care for all Americans. Both the public and private sectors claim to have constituents' and consumers' best interests at heart. Government, however, has been the locus of attention in long-term care since the origins of Medicaid and Medicare in 1965. We chose, therefore, to focus on the side that has been most criticized and least heeded in the on-going public policy debate: the long-term care business or profession.

The private long-term care profession is comprised of three main groups. Financiers--including lenders and investors--supply the debt and equity capital to build and operate long-term care facilities. Providers--including home health agencies, assisted living facilities, and nursing homes--offer long-term care services directly to the public. Insurers--including agents, brokers, and carriers--help consumers plan, save, insure, and pay privately for expensive long-term care services in order to avoid dependency on their families or government.

Each of these groups, but especially the providers, has borne the brunt of severe public criticism. The General Accounting Office and the Health and Human Services Inspector General have lambasted providers for alleged fraud, abuse and waste. Opinion surveys show that many older people would rather die than move permanently into a nursing home. Critics say assisted living is fine for the well-to-do, but fails to provide affordable care for those of lesser means. People complain they want long-term care in their homes and communities, but that such care is either unavailable entirely or out of reach financially. Everyone blames the private sector for failing to provide the quantity, quality and variety of long-term care services that Americans need and in the manner they prefer.

Is this criticism accurate? Is it fair? Is there a credible counter-argument? Could the underlying cause of these problems actually reside as much with the source as with the target of the censures? If they pulled together, could the private sector components of long-term care muster a compelling public policy proposal that would solve these problems and enhance their business interests? How can we possibly know? They don't talk to each other.

Unfortunately, the three big private sector powers in long-term care rarely communicate, much less cooperate, to identify and promulgate a common perspective on long-term care's challenges and problems. Their conflicting interests drive them apart: The financiers seek profitable investments; they take their money to more lucrative alternatives when long-term care markets fail to perform. The providers seek to fill their facilities' beds or their home care service calendars; they don't care who pays, but mainly they pursue public financing out of habit and simplicity. The insurers seek to keep their claims payments within actuarial expectations; they fear the selfsame moral hazard and induced demand that would directly benefit providers and financiers.

Despite these centrifugal forces, however, long-term care financiers, providers and insurers do share a common public policy interest. They all stand to benefit if more Americans are able to pay privately at the full market rate for their long-term care and if fewer Americans become dependent on public financing programs like Medicaid and Medicare, which are notoriously low or unreliable payers today. Nevertheless, their differences have trumped their common interests so far. They have not joined forces in any significant way to identify or pursue their mutual benefit. Why is this true? To answer that question, we first needed answers to several other questions: how do these private sector stakeholders account for the country's problems of long-term care service delivery and financing? What do they know about each other's businesses? How do they perceive their separate and mutual interests? What kinds of misunderstanding or distrust pull them apart? Are their basic interests fundamentally and primarily in conflict or is there really an underlying basis for agreement? Could they benefit from more communication? How might cooperation among them occur? These are the questions this project attempted to answer.