LTC Bullet: LTC Study Seeks Sponsors

Wednesday, August 21, 2002


LTC Comment: LTC insurance sales have not achieved most people's expectations, much less their highest hopes. What if the explanation for this frustrating commercial inertia is much simpler and easier to fix than we thought? Milliman USA and the Center for Long-Term Care Financing propose to test a hypothesis that, if proven, could help break the logjam and unleash the potential of long-term care insurance. Read about it in today's LTC Bullet below and follow the link there to the full project prospectus, posted today on the Center for Long-Term Care Financing's website. Now the news.

*** The study described in today's LTC Bullet will be the topic for a special session at 5:00 PM on Thursday, September 12, at the "LIMRA-LOMA-Milliman USA DI and LTC Insurer's Forum" (September 10-13) in Orlando, Florida. Representatives from LTCI carriers are especially urged to attend. RSVP to Darrell Spell (Millimanís Tampa, FL office) at (813) 282-9262 or . If you are not already registered for the conference, go to for the details and BE THERE. This is too good to miss. ***

*** And here's another reason to attend the "LIMRA-LOMA-Milliman" conference and arrive early. On Tuesday, September 10, Steve Moses ( or 206-283-7036) will lead an "LTC Graduate Seminar" at the conference's Disney Swan Hotel. After eight hours (9AM to 5PM) of stimulating presentation and discussion, you'll be ready for refreshments at the conference's Welcome Reception beginning at 6 PM. Steve says "this LTC Grad Seminar is specially targeted to LTCI executives who want to explore how long-term care service delivery and financing came to be in the mess they're in and what we can do working together to solve a major national crisis AND unleash the potential of private LTC insurance." Attendees of the LTC Graduate Seminar will see clearly why the study described in this Bullet is critically necessary and has enormous potential. Contact Amy Marohn-McDougall to register: 425-377-9500 or ($225). ***

*** Can't make it to Florida? How about attending the LTC Graduate Seminar in Seattle on August 26 or Portland, OR on August 28, or Dallas, TX on September 25, or Houston on September 28, or New Orleans on October 1? Read all about the LTC Graduate Seminars at or jump straight to the information at . All programs listed above (except Florida) have been approved for 7 CONTINUING EDUCATION UNITS (in case those matter to you) and we're applying for Florida CEUs. Pre-registration is critical ($225). Contact Amy Marohn-McDougall at or 425-377-9500 ASAP. ***

*** New content added today to the donor-only zone includes "The LTC Week in Review for August 19 to August 23: LTC E-Alerts #201-#205" (donor-zoners can jump right to The Zone by clicking this link and entering your user name and password: )

LTC E-Alert #201--Smoothing the Transition to Senior Housing
LTC E-Alert #202--High Tech LTC, No. 2
LTC E-Alert #203--Nurse Shortage Deadly
LTC E-Alert #204--Staggering End-of-Life Costs Add Reason to Insure for LTC
LTC E-Alert #205--Medicaid HCBS Spearheaders OR and WA Reverse Course

To Zone In, mail your tax-deductible contribution of $100 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred password and user name (up to 10 characters each). You can also contribute online at . ***


The following are excerpts from the prospectus for the Milliman USA and Center for Long-Term Care Financing proposed Long-Term Care Financing Study. To read the full background, rationale and methodology for this study, consult the complete prospectus at . Please attend or send a representative to the special session (described above) to unveil this project on September 12. To fully comprehend the why and wherefore of the project, attend the LTC Graduate Seminar on September 10 (also described above.)


"Experts in the long-term care insurance industry have long predicted a 'breakthrough' in sales. Many placed their hope in tax deductibility, but passage of the Health Insurance Portability and Accountability Act of 1996 had little effect. Some believe that publicity about the Federal Employees LTC program could break the market wide open, but others expect only marginal gains. Could it be that genuine 'above-the-line' tax deductibility is the answer or will that high hope prove to be just another red herring also?

"Why are LTC sales lagging expectations? Given the obvious importance of protecting oneself from impoverishment caused by a long-term illness, why are only seven percent of seniors covered by long-term care insurance? For retirees, the risk is urgent yet those who are at risk do not seem to feel the urgency. Why not?

"One possible answer to this question has been proposed by the Center for Long Term Care Financing in their report titled 'LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle.' If the Center's theory is correct, a critical obstacle to substantial growth in the sale of private long-term care insurance is the socialization of long-term care risk through the current Medicaid system.

"The Center theorizes that a different approach to the government's funding of long-term care through Medicaid could reestablish the individual's sense of responsibility to prepare for long-term care. That in turn could substantially reduce the financial threat to Medicaid and bring about the long expected breakthrough in the sale of private long term care insurance.

"We propose to test the Center for Long-Term Care Financing's theory so that policymakers, consumers, and insurers can make better-informed decisions regarding the appropriate means of funding long term care treatment. . . .


"If current public policy-- which allows middle and upper-middle income people to qualify for long-term care benefits without spending down--results in . . .

* excessive Medicaid dependency,

* non-use of home equity for long-term care expenses, and

* low long-term care insurance sales, then . . .

"A change in public policy to require an actual spend down of assets and income would . . .

* reduce Medicaid long-term care expenditures,

* increase the use of home equity for long-term care expenses, and

* enlarge the demand for private long-term care insurance.

"In the absence of such a change, the already unsatisfactory status quo will continue to deteriorate . . .

* Medicaid nursing home costs will continue to explode,

* Medicaid's ability to provide quality long-term care for the poor will continue to erode, and

* long-term care insurance sales will remain flat or decline.

"Project Proposal

"We propose to test this hypothesis by answering two questions:

"1. If Medicaid required the politically infeasible standard of total impoverishment including spend down of all assets currently exempted and all income with no provision for spousal support or personal needs of the recipient, what would be the effect on Medicaid long-term care expenditures and on the demand for private long-term care insurance?

"2. Instead of the foregoing draconian measure, what would be the effect of giving all persons with income or assets a line of credit secured by their estates to supplement their income so they could purchase long-term care of their choice in the private market? Under this option, participants would retain the use of their assets (home, personal effects, etc.), but gradually surrender their equity, which would be repayable after death of the last surviving dependent relative. They would go on Medicaid only after their entire estate equity has been consumed on paper and is secured for recovery after death. (See "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle," a report by the Center for Long-Term Care Financing for details.)

Presumably, people who truly stand to lose their savings to the cost of long-term care would be more likely to plan early and save, invest or insure to cover the cost of long-term care. To the extent they did so, they would be less likely to end up needing a line of credit on their estate or requiring public welfare benefits. This change in public policy would relieve the fiscal burden on tax payers and the Medicaid program, while simultaneously expanding the market for private long-term care insurance and increasing desperately needed private-pay revenue for providers. The purpose of this project is to model both of these public policy changes, estimate the impact on consumer behavior, and price out the effect on Medicaid expenditures and long-term care insurance sales."

To read the full prospectus, go to .