LTC Bullet: Whither We Are Tending in Long-Term Care

Wednesday, February 12, 2003

Santa Fe, NM--

LTC Comment: America's long-term care service delivery and financing system is headed toward collapse. The good news is that our dysfunctional LTC non-system is self-inflicted by well-intentioned but perversely counterproductive public policy and is, therefore, easy to fix. All we need is the wisdom to understand the problem and the will to confront it with rational public policy. More, after the *news.*

*** Come to The LTC Graduate Seminar on Tuesday, March 25, 2003 in the Big Apple. Please call Amy McDougall at 425-377-9500 or email her at by Friday, February 14 to reserve your place ($225). The Center for Long-Term Care Financing's LTC Graduate Seminar is a full-day with LTC expert Stephen Moses in a unique learning experience. The Seminar covers material critical to senior financial advisors that you just cannot find anywhere else. If you ever wondered why so few people plan for long-term care, you will understand after attending this program. You'll know how our country's long-term care system developed, why it's in such a mess today, what must be done to fix it, and how you can help protect more people from the risk of long-term care in the meantime. For details on the LTC Graduate Seminar, including a syllabus, instructor's bio, and extensive testimonials, please go to . The seminar will be held from 9AM to 5PM on March 25 at a location in Manhattan to be announced. The Center is no longer scheduling the LTC Graduate Seminar on a regular basis, so don't miss this opportunity if you can possibly attend. Please pass this notice on to anyone you know who could benefit from the LTC Graduate Seminar. ***

*** Reader poll: A highly influential long-term care insurance executive has expressed the opinion that the Center for Long-Term Care Financing should not publicize the existence of Medicaid estate planning even for the purpose of discouraging that practice and encouraging responsible long-term care planning. This individual believes that any information revealed regarding the public's ability to shelter or divest assets to qualify for Medicaid nursing home benefits discourages the sale of long-term care insurance and is therefore negative. Our position is that most people do not pay attention to the risk or cost of long-term care until they need it, and then they quickly learn about how to qualify for Medicaid from the thousands of attorneys and other financial advisers who purvey advice on how to qualify without spending down. Therefore, we believe the Center should warn the public of the risks of Medicaid planning (access and quality problems) and inform legislators and policy-makers so they can correct public policy to discourage Medicaid planning and encourage private financing alternatives. We'd like to know what you think. Please respond to this Bullet by stating your preference between Positions Number One or Number Two below.

Number One: The best practice is to publish nothing about the easy availability of Medicaid nursing home benefits and Medicaid estate planning even for the purpose of discouraging the practice and encouraging responsible long-term care planning. It is better to ignore the problem than to publicize it.

Number Two: The best practice is to inform legislators, policy makers and public administrators about the damage caused by easy access to Medicaid long-term care benefits and to encourage them to target Medicaid more effectively to the needy while encouraging everyone else to purchase private LTC insurance.

Please respond by voting for Number One or Number Two and feel free to add any comments on the subject that you may wish to share. ***

*** Donor zone content now goes daily by email to all paid subscribers. Our LTC E-Alerts, LTC Data Base and LTC Reader publications are designed to keep LTC insurance producers and other LTC experts at the forefront of knowledge and professionalism. We track the electronic, trade and academic literature in all LTC-related fields; we choose the reports and articles we think you will find most useful; we distill the information into a quick read (five minutes or less); we add a brief analysis to indicate why we think the information should matter to you; we email you the publication daily; and we archive it all at so you can find back issues when you need them. Our latest donor-only zone content sent during the past few days includes:

The LTC Reader #3-005--Medicaid and Medicare Spiraling In Toward a Crash

The LTC Data Base #3-003--We're Living Longer, Healthier and in the Suburbs

LTC E-Alert #3-012--Medicaid Buckles

If you already qualify for The Zone, you can click the following link, enter your user name and password, and go directly to the latest donor zone content and the archives: . To Zone In, mail your tax-deductible contribution of $150 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred user name and password (up to 10 characters each). You can also contribute online by credit card or direct withdrawal at . ***


Lincoln said in his "House Divided" speech "If we could first know where we are and whither we are tending, we could better judge what to do and how to do it." America's house is certainly divided over how to pay for long-term care. The first step toward finding a solution must be to define the problem and explain how it developed.

Despite the catastrophic financial risk of long-term care, most Americans do not save, invest or insure to prepare for the expenses of chronic long-term illness. This behavior is not irrational. For 38 years, since the inception of Medicaid and Medicare, people have been able to ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they ever need expensive professional care, and if they do, transfer the cost of the care fairly easily to these government programs. (The preceding statement requires proof, which the reader can find at .)

Since 1965, Medicaid and Medicare have paid an ever-increasing share of long-term care costs, whereas out-of-pocket expenditures (nearly half of which are really only Social Security benefits contributed toward their cost of care by people already on Medicaid) have declined proportionately. From the beginning, heavy government financing of nursing home care co-opted the development of a private market for home and community-based services and impeded the demand for private long-term care insurance to pay for them. Consequently, we have today an institutionally-biased, welfare-financed long-term care delivery system that is failing in myriad ways.

Proposals that call for more public long-term care financing alone will not succeed. No one wants to pour more resources into the current nursing-home-based system. But plans to merge Medicaid with Medicare and cost-manage care across the continuum of services contain the seeds of their own failure. They will unleash a "woodwork factor" of excess demand, encourage far more Medicaid estate planning, and undermine the primary incentive to save or insure privately (i.e., the ability to purchase quality care in the private market at the most appropriate level). Ironically, the more government spends on long-term care and the better services it provides, the faster it is overwhelmed by demand and swamped by cost, forcing it to restrict supply and cut reimbursement (i.e., quality).

As we see it at the Center for Long-Term Care Financing, there is only one way to resolve this paradox. We must target scarce public resources to the genuinely needy and encourage everyone else to take the risk of long-term care seriously at an early enough age to prepare financially. If we could get most Americans to save or insure for long-term care, then we could relieve the burden on Medicaid and Medicare so those programs would be able to provide adequate reimbursement for a full range of high-quality long-term care services for people who have no choice but to rely on public assistance for care.

That goal is precisely what we try to achieve with our public policy proposal called "LTC Choice." In a nutshell, the idea is to give seniors who (1) need professional long-term care services, (2) lack private insurance, (3) have significant income and assets, but (4) possess insufficient resources to pay privately for their care, a line of credit on their estates to supplement their income and enable them to purchase quality long-term care in the private marketplace at the level of care of their choice. The program would be (1) administered by private financial institutions, (2) fully collateralized by the estates of participants, and (3) backed by government re-insurance. Loans extended to participants would be due and payable from their estates, but only after the death of their last, surviving, exempt, dependent relative.

We do not intend LTC Choice to become the long-term care financing option of choice. Rather, its purpose is to institutionalize the principle that long-term care is a personal responsibility for which every individual and family should plan early and save, invest or insure. LTC Choice is a safety net for those who fail to prepare responsibly for long-term care, but who have substantial illiquid assets such as a home, which they would prefer not to liquidate and spend down for the purpose of qualifying for Medicaid, i.e. public welfare. In other words, LTC Choice is a "soft landing" for uninsured middle class people which allows them to spend down their illiquid resources without having to liquidate the assets prematurely or impoverish themselves artificially.

We believe that when the only alternatives to pay for long-term care are (1) to save, invest or insure early, (2) to spend down gradually through an LTC Choice line of credit, or (3) to qualify for publicly financed care only after an estate is totally consumed (on paper), most people will plan early and save or insure fully for the risk. Some of course will fail to prepare in this way either because they (1) could not afford to insure or save, (2) could not qualify medically for private insurance, or (3) ignored the risk and intentionally went "bare." Those are precisely the people for whom we are trying to preserve an adequately financed public program as a high-quality, but last-resort safety net.

In a brief article, we can barely give a hint of the analysis and reasoning behind the LTC Choice plan, much less explain it operationally. We have developed our arguments in considerably greater detail in two reports: "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" and "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance." Both of these reports are available in .pdf format on our website at Invest the time to read these reports and we promise you a thoughtfully reasoned and thoroughly documented public policy proposal to ameliorate our country's long-term care service delivery and financing malaise.