LTC Bullet: LTC Summit Conference in Miami

Tuesday September 25, 2001


The first in a series of "LTC Summit Conferences" sponsored by the Center for Long-Term Care Financing convened in Miami, Florida on August 20, 2001. As promised in a recent LTC Bullet ("Triathlon Conclusions and Recommendations," 8/24/01), the following is a report on that event.

The Center's LTC Summit Conferences are invitation-only, CEO- or executive-level, small-group, three-hour intensive discussion sessions. They bring together America's leading financiers, providers and insurers of long-term care to explore problems and solutions related to long-term care service delivery and financing. The need for a series of top-level meetings to discuss industry-cross-cutting issues became clear from the Center for Long-Term Care Financing's path-breaking study "The LTC Triathlon: Long-Term Care's Race for Survival." (Read the Triathlon report online at

Attendees at the Miami LTC Summit Conference by industry sector were:

Providers: Stephen J. Eaton of Centennial Health Care; Brad Markby of Sunrise Assisted Living; Gary Jacobs of Capitated Health Care Services; and Marc Catalano of Catalano's Nurses Registry

Insurers: Loida Abraham of John Hancock; Liz Georgakopolous of Conseco; Ken Grubb of New York Life; Ron Hagen of Northwestern Mutual; Claude Thau of Thau, Inc.; and Gary Corliss of AUL

Financiers: Walter "Skip" Frey of Herbert J. Sims; Alice Katz of The Vinca Group; Bill Shine of GMAC Commercial Mortgage Corporation; and Alex Converse of Credit Suisse First Boston

Mary Beth Senkewicz, President of the LTC Insurance Educational Foundation, welcomed Summit attendees and invited them to attend the opening reception of the 15th Annual Private LTC Insurance Conference, which was held coincident with the LTC Summit Conference.

Winthrop Cashdollar, Director of the Center for Disability and Long-Term Care Insurance at the Health Insurance Association of America, welcomed Summit attendees and gave an overview of his Center's and HIAA's initiatives in the field of LTC insurance.

Following the welcomes, self-introductions and sector overviews provided by experts on nursing home care, assisted living, home care, long-term care insurance, and debt and equity financing of long-term care, the Miami Summit attendees engaged in a structured discussion of some highly provocative questions. Three examples of the queries posed:

To LTC providers: "We hear so often that the problem with LTC service delivery is just mismanagement driven by greed. How do you respond to that kind of criticism?"

To LTC insurers: "LTC insurance sounds like such a great idea, given the demographics and costs of long-term care. Why hasn't it taken off faster?"

To LTC financiers: "The ability of Medicare and Medicaid to pay adequately for LTC has been declining for many years. Yet, LTC financiers seem to like government funding best and ignore private funding sources like home equity conversion and private LTC insurance. Why?"

(To see the complete LTC Summit Conference agenda including all 23 challenging questions addressed by the attendees, visit the Center's donor-only website zone at If you do not yet have access to the donor-only zone, follow the instructions at


We will provide a systematic analysis and report of our findings upon completion of the full series of LTC Summit Conference. For now, here are a few highlights in paraphrased quotes: (We promised not to cite speakers by name, but only by industry sector, in order to encourage complete openness and frankness.)  We particularly recommend that insurers and providers read the sobering comments made by financiers about long-term care service delivery and insurance.

*Quotes from Providers*

"Long-term care service delivery, especially nursing home care, is a business of pennies. Our people manage food and nursing costs to the hundredth decimal place. Operating margins in well-run facilities are incredibly slim. Operators can't find enough money to invest in training. It is hard to be pragmatic about investments – to focus on human AND capital resources. We have outdated physical plants from the 1960's and not a lot of replacement capital. I initially built for a population that was not as old and not as sick. They didn’t need the same technology applied to their care. We have a huge public policy challenge. Liability insurance is unaffordable and getting more expensive all the time."

"The best operating margin we’re making in this industry for Medicare patients is about 25% to 27%. Private payers are a little bit less, but still a good margin. In most states, however, we can't even break even on Medicaid patients (5%-6%). That isn't even enough to cover debts. [Medicaid pays for nearly 80% of all nursing home patient days in the U.S.] You can cover some variable costs, but as a long-term venture capital strategy, you will work yourself out of business."

"Why not look for private pay sources? We need to tighten up Medicaid so it can pay only for the indigent if we're ever going to get people serious about LTC insurance. This will take a major public policy shift."

"The biggest problem the LTC industry faces is the inability to attract, train and retain appropriate staffing."

"We must educate the public on what assisted living is. Assisted living is the platform for long-term care for the future. Nursing home stays will become shorter and shorter and assisted living stays will become much longer. But, people do not understand that the government doesn't pay for assisted living. In the meantime, overbuilding, aggressive competition, and rate-cutting which ultimately cuts care are the norm. This reflects short term needs, rather than long-term needs."

"Nurse registry and home health care services in the private sector are experiencing extreme growth. There are not enough hours in the day. We can't keep up with the work. In the public sector programs, however, problems abound. We don’t know if they are going to survive. Government is responsible for creating a system that was flawed from the get go. For example, Medicare home care has little or no competition. It was based on a cost reimbursement structure, which was not cost-effective. We must learn the lesson from what happened with Medicare and make sure it doesn’t happen in the private sector. In private sector home care, we have plenty of competition. No one gets arbitrary costs paid. We have to negotiate for everything. The market decides what is going to happen. That results in a better product."

"I don’t understand, financiers are saying they want to put their money in Medicare/Medicaid facilities. Wouldn’t you just love to have another source, a private source of financing? As a financier, aren’t you being short-sighted? A comment was made earlier that this is a bigger question than all of us. This is a societal question. Are we going to move to a society of self-accountability and self-responsibility. Or are we going to continue with a society we’ve come from now where everyone else caused this problem. They’re responsible, not me. I’m entitled. The government owes me something."

"We need background information on each other’s businesses. We need to understand the workforce loss due to parent care. We need a health care product that meets the real needs. LTCI may have to take a different form, but it will penetrate the market eventually."

*Quotes from Insurers*

"The insurance industry is on the horns of a dilemma. We have a huge, untapped, and growing potential market. We see greater awareness of the need for LTC insurance. Yet, most people still think government will take care of them."

"Insurance companies have to be responsible stewards of this product. We are selling a promise that insurance companies will pay for services when people need care. We are paying for something someone else--providers--are going to deliver. We don't provide the service/benefit ourselves; we’re just paying for it. What good is our promise if the service delivery infrastructure isn’t there when our beneficiaries need it? It would be irresponsible for the insurance industry not to address provider concerns. We must look to the future."

"I’m not sure that we really know whether LTC insurance is becoming more profitable and the prices are becoming more rational. The LTC insurance industry must insist: don't bring me someone who needs long-term care; bring me someone who needs long-term care INSURANCE."

"The LTC insurance industry needs to be creative. How do we provide something for people we have to say no to [the uninsurable]? How do we persuade people at the younger ages--when they can afford it, and when they qualify for it--to get LTCI? How do we make sure that we’re there collectively (insurers and providers) to deliver when they need the services?"

"If government follows through with an above-the-line tax deduction, that will send a strong message: 'take care of this yourself.' Then, LTCI will be there to take care of the insurance, but who will be there to take care of the service?"

"People still really don’t get it. The way we distribute this product relies on some level of knowledge within the public which I think still isn’t there. Consumer demand is still low. We as an industry have been focused on regulatory and legislative issues. The critical issues out there are about need, understanding, quantification, willingness to buy a product that a lot of people don’t even want to talk about."

*Quotes from Financiers*

"The reality is that Medicaid and Medicare provide most of the financing for long-term care. Even the largest LTC insurer covers an insured population of less than a million. Long-term care insurance is not significant. It's not even worth investing in."

"We like Medicaid and Medicare. They will always be around. They are cost-effective on a national scale. The public will demand publicly financed coverage of long-term care. And the government sets up the rules. When it comes to health care, the public perception is that we are entitled as tax payers to quality care."

"Financiers have a long-term interest. We are supposed to get the money back that we invest, and with a profit. It is easier over the short-term to finance skilled nursing facilities than assisted living. For SNFs, there are rules in place. Assisted living is all privatized financing; there are not enough rules and regulations to assure stability."

"Counting on development of a third party (private insurance to supplement Medicaid and Medicare) doesn't work. The U.S. is not a responsibility-driven country. There is a strong belief in the need and appropriateness of a safety net. Delivery of a service that is cost-effective today will get paid for by the government, period, full stop. It just doesn't make sense for us to invest in something uncertain like private insurance."

"From a financing standpoint, there is no value in bringing capital into where you [just] think the money will be. You need to KNOW you can show 20% growth rates in order to attract capital. That is not easy. In reference to public [investment] capital, we need predictability and better margins. The underlying business needs to be healthy. We need to reserve federal and state resources for indigent and have everyone else invest and save for long-term care."

What did attendees think of the First LTC Summit Conference?

Without exception, attendees indicated the meeting was worth "the expense of my time and travel." Some examples:

"I thought it was worthwhile, especially for the exposure to 'the other side of our business.' I thought the provider input was valuable and insightful. The financial side seemed a bit short-sighted and jaded to me, but it was interesting." (Insurer)

"I got a real sense of the provider and investment community's perspectives on the impact of Medicaid and Medicare vs. private LTC insurance." (Insurer)

"Interesting breadth of perspective. Clarified issues driving lack of coordination among parties." (Insurer)

This meeting was worth the time and expense because of …

"the opportunity to meet with other stakeholders in the industry and understand their different perspectives." (Provider)

"the knowledge level of the participants and their efforts to address these issues." (Provider)

"the insight into the challenges of long-term care and the financial community's view of LTC insurance." (Provider)

"I learned a lot about an issue that is important to the long-term health of the industry but is fairly low-profile in my world (public equities.)" (Financier)