LTC Bullet: ACLI's Paean to LTCI

Thursday, March 6, 2003


LTC Comment: Dr. Barbara Stucki's latest report for the American Council of Life Insurers (ACLI) enumerates the successes, documents the value, and paints the dream of private long-term care insurance, but it does not explain the economic and political context that holds the product back. More after the ***news***.

*** This Bullet is sponsored by the National LTC Network, "Partners in Long-Term Care Insurance 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. Won't you help too? Go to to sponsor an LTC Bullet. Find out how you can sponsor other Center activities (e.g., articles, speeches, conference exhibits) by contacting Amy Marohn at 425-377-9500 or .***

*** Assisted living facilities plunged 23 percent in price last year, the first drop in six years. Skilled nursing facilities prices remained flat. No, these are not the prices residents pay for care. These are the prices investors pay to buy the facilities. Will this mean DEFLATION soon in rates residents or government must pay? Details in a donor-zone LTC Data Base next week. Sign up now for THE ZONE so you won't miss it! ***

*** Remember the "LTC Choice" campaign underway in Washington State? We covered it in "LTC Bullet: Where the LTC Action Is" on December 12, 2002 and in "LTC Bullet: Let the LTC Revolution Begin" on November 8, 2002 The latest news is that the Senate Health and Long-Term Care Committee approved Washington State Senate Bill # 5730 on March 4, 2003. This is the proposed legislation that would achieve several critical objectives of the Center for Long-Term Care Financing's LTC Choice proposal. You can review the bill at . (This link may not yet reflect minor changes in the version of the bill which passed the Senate committee.) The next hurdle for this legislation is the Senate Ways and Means Committee. We'll keep you posted on developments. ***

*** Send Steve Moses into "The Lion's Den." Tuesday's LTC Bullet recounted author and senior adviser Liz Taylor's adventure in "The Lion's Den of Medicaid Planning," where she stunned a group of Medicaid planners with the truth about the harm they cause. Coming up May 14-18 is the National Academy of Elder Law Attorneys' (NAELA's) 2003 Symposium. NAELA is the trade association of the Medicaid estate planning lawyers and this is the mother of all Medicaid planning meetings. By attending NAELA conferences, the Center for Long-Term Care Financing has been able to document the artificial impoverishment industry's latest loopholes, bring them to the attention of national media and public officials, and frequently get them closed. But we can't perform that function unless we attend the meetings, which costs the Center nearly $2,000, including tuition and travel expenses. Is there anyone out there who'd like to sponsor a Bullet documenting what NAELA is up to now? Contribute $2,000 to the Center's travel fund and we'll attend, cover and report on the NAELA conference and give you headline credit for making it happen. Isn't it ironic that Medicaid planners can make millions putting the affluent on welfare, but the only organization in the country working aggressively to replace Medicaid planning with rational LTC policy has to struggle for financial support? Here's a chance to be part of the solution. Contact Steve Moses at or 206-283-7036. ***

*** Our latest donor-only zone content sent during the past few days includes:

The LTC Reader #3-010--New HIAA Employer's Guide to LTC Insurance


Watch for our "Virtual Visit" to the 16th Annual LTC Insurance Conference recently held in San Antonio, TX . . . coming soon to The Zone.

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: . If you do not already qualify for The Zone, 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 . ***


LTC Comment: Barb Stucki's work is always a pleasure to read. She writes clear, crisp prose. She presents interesting and useful material. She delivers well-documented, logically organized, and thoughtfully interpreted information. So, our thanks to ACLI for publishing another excellent report by Dr. Stucki. A bibliographic citation, the Executive Summary and information on price and ordering follow our comments.

The publisher of this report, ACLI, is a trade association. It represents its members interests. Its job is to put the insurance industry's best foot forward. This report does exactly that for long-term care insurance. You would not expect any discouraging words from an industry cheerleader and you will not find them in this report. It documents some very impressive achievements of the long-term care insurance industry and it describes a bright future for that product and its purveyors. What it does not do is ask or answer the tough questions about why long-term care insurance has not already realized more of its potential and how the economic and political context in which LTCI is sold inhibits its market growth. So, we'll ask those questions here, offer our answers in brief, and invite ACLI to tackle these issues in a future report.

For example: If the demographics of aging are so scary and people need LTCI so badly, why don't more consumers buy it? Why does America's long-term care service delivery system remain predominantly institution-based and welfare financed when no-one wants to go to a nursing home and we're the wealthiest nation in the world? Why are so many nursing homes bankrupt and assisted living facilities unprofitable? Why is debt and equity capital almost nonexistent to build and operate new long-term care facilities? Why are tort liability settlements exploding and liability insurance premiums skyrocketing for long-term care providers? Why are attorneys allowed to make huge incomes artificially impoverishing well-to-do clients to qualify them for welfare-financed nursing home care? Why do we have a dire shortage of nurses and nurses aides to provide long-term care? Why won't Congress and the President pass above the line tax deductibility for LTC insurance when it's such a slam-dunk, obvious measure? In other words, what's wrong and why isn't LTCI a bigger part of the solution? (Some of this commentary appeared earlier in our analysis of a recent HIAA report.)

The ACLI report shows that private long-term care insurance (LTCI) is gaining ground, but despite many years of annual sales increases averaging 18 percent (off a base of nothing of course), LTCI is still barely a fly speck on the windshield of the long-term care industry. Of 8.3 million policies sold since 1987, approximately 5.8 million policies remain in effect. America has 35 million seniors and 76 million baby-boomers. So, only about 5 percent of the people likely to need long-term care in the next 30 years are privately insured for the risk despite 15 years of intense marketing efforts to convince them of the need.

If you really want to understand what drives long-term care (and the long-term care insurance market): "Follow the Money." Long-term care insurance paid $839 million in claims during 2001. In that same year, America spent $98.9 billion on nursing home care and $33.2 billion on home health care. That means private LTCI paid only six-tenths of one percent of the cost of long-term care in the United States in 2001. So, who does pay for long-term care? Mostly, Medicaid and Medicare. For details on who pays for LTC and how this affects the LTC insurance market, see our "LTC Bullet: New LTC Expenditure Data Provide Clues to Low LTCI Sales and LTC Facilities' Financial Woes," published January 14, 2003 at .

Here's the problem, long-term care has become a public utility. Our long-term care service delivery system is nursing-home-based and welfare-financed. Most revenue to nursing homes and home health agencies flows through government. Assisted living facilities are 90 percent private pay but too few people can afford ALFs to fill the surplus of beds in their overbuilt facilities profitably. LTC providers and financiers see long-term care insurance as "pie in the sky, by and by." They focus most of their public policy advocacy on enhancing Medicaid and Medicare financing in the short term instead of creatively encouraging private financing sources like LTC insurance for the future. Financiers, who provide the debt and equity capital (scarce as it is) to build and operate long-term care facilities, pooh-pooh long-term care insurance and ridicule its role. They say "Show Me the Money." In other words, prove LTCI can play a significant part in financing long-term care or leave us alone.

Obviously LTC insurance will play an ever-bigger role in financing long-term care as time goes on when current and future policy holders finally move into claim status. In the meantime, however, heavy government financing of long-term care, even for the middle class and the affluent, impedes LTC insurance sales and keeps the proportion of privately protected Americans minimal. That reality creates a foregone conclusion that LTC insurance will only play a small role in LTC financing in the decades ahead. This fact diverts the attention of LTC providers and financiers from the urgent need to push for public policy to divert people from Medicaid LTC dependency toward early planning and insurance. In the meantime, our government programs, Medicaid and Medicare, continue to drift toward insolvency and the services they provide are already dismally inadequate. What's needed is for the long-term care insurance industry to work closely with LTC providers and financiers to push the government in the direction of public policy to encourage private financing through insurance and home equity conversion while discouraging excessive dependency on public safety net programs. That effort must happen now or very soon or it will be too late.

If any of this analysis piques your interest or curiosity, read the Center's Report titled "The LTC Triathlon: Long-Term Care's Race for Survival" available free in .pdf format at . For the diagnosis and treatment of the problem, read "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at . For a full day of training designed to explain the economic and political context in which LTCI struggles to survive and prosper, attend the LTC Graduate Seminar described in detail at .


Now, here's more on the ACLI report:

BIBLIOGRAHICAL CITATION: Barbara Stucki, Ph.D. (with the assistance of ACLI's policy research, long-term care, and editorial staffs), "Passing the Trust to Private Long-Term Care Insurance," American Council of Life Insurers, Washington, DC, January 2003. The 64-page report costs $50 for the general public. Orders can be placed at 1-800-589-2254.


Long-term care insurance is no longer just the hope of the future. By the end of 1999, more than 6.8 million Americans had purchased a long-term care policy, either individually or through a group plan sponsored by an employer or association. This private coverage is already meeting the needs of thousands of families and businesses every day. By 2000, insurers' payments for long-term care benefits are estimated to have reached a cumulative $11 billion. People who bought long-term care insurance are glad they did so, recent government studies show. The majority are satisfied with their policy (86%). Policyholders who need help find that private insurance is more than just a check--it's peace of mind, help during a crisis, and ongoing support for the family. Today's policies handle the multifaceted challenges of family caregivers, from easing physical and emotional stress to reducing job disruptions.

New research shows that private insurance can promote as well as protect retirement savings among today's workers. Minnesota found that 37 percent of enrollees re-examined their employee benefits and overall financial plans as a result of deciding whether to enroll in the state's long-term care plan. About one-third of non-enrollees increased their personal savings and investments (36%).

This report examines the different ways private insurance enhances long-term care planning in the United States. It summarizes recent industry actions that are increasing the rate of private coverage. The report joins recent research with the insights of industry experts to show how changing consumer needs and perceptions, together with an evolving product, make private insurance an indispensable vehicle for long-term care planning.

From Awareness to Action

In these uncertain times, middle-income Americans realize they need help to manage their long-term care risks. For many, the idea of insuring for long-term care is catching on. In a 2000 survey, two-thirds of respondents who did not own a policy were aware of private long-term care insurance (65%). Almost half of these individuals indicated they are at least somewhat interested in purchasing a policy for themselves (46%).

Private insurance is rapidly becoming a mainstream tool for financing long-term care. Recent trends show how today's social, economic, and political realities are moving consumers from awareness to action:

o Government workers and retirees are interested in the new federal long-term care insurance plan. During the 2002 enrollment period, more than 860,000 requested enrollment kits.

o Among women baby boomers, 37 percent took specific actions to plan for their future as a result of their experience in caring for someone. Among these caregivers, 36 percent purchased additional life, health, or long-term care insurance.

o A recent survey found that almost half of Americans 45 and older had discussed their eventual need for long-term care with their adult children (48%).

As business and government start to see the value of long-term care insurance, they are more receptive to private-sector solutions:

o At least 22 states now offer long-term care insurance to their employees.

o In 2002, 35 percent of large companies (5,000 or more employees) offered long-term care insurance as an employee benefit, as did one in four businesses with 1,000 to 4,999 workers.

o Nearly two-thirds of business owners surveyed by the U.S. Chamber of Commerce in 2001 regard the high cost of long-term care as a major concern (63%).

Getting more Americans to prepare for long-term care requires a new way of thinking. As this insurance has evolved, new markets are generating new customers. Much of this progress is shattering stereotypes about the way long-term care insurance is perceived:


Financial Planners. Private long-term care insurance is a mainstream product that is becoming an integral part of retirement planning. About 65 percent of financial planners strongly agree that long-term care insurance can be an important financial planning tool.

Employers. Many companies subsidize the cost of their long-term care insurance plan for their employees. In 2001, seven of the top 10 insurance carriers in the group long-term care market had employer-subsidized plans on their books. For some of these carriers, employer-subsidized plans represent 31 to 98 percent of all their group long-term care insurance business.

States. State governments also are providing private long-term care insurance to their employees. In Oregon and Michigan, initial enrollment in state long-term care plans reached 14 percent. In Minnesota, almost one in five eligible people enrolled in the state plan (18%).


Americans are purchasing long-term care insurance at younger ages. In the individual market, one-third of current owners bought their policy under age 65 (33%).


Workers, including blue-collar workers in many industries, are enrolling in employer-sponsored long-term care plans. In the fields of transportation, communications, utilities, finance, real estate, and government, about three-quarters of employees 40 and older can afford a three-year long-term care policy offering comprehensive coverage with inflation protection (73-79%).


Families with a strong culture of caring for elders are buying long-term care insurance in growing numbers. Nearly three-quarters of Asian-Americans ages 45 to 55 feel they should be doing more or should have done more for their parents. Private insurance helps them fulfill traditional obligations to elders (72%).

These developments highlight the many ways in which private insurance supports long-term care planning among Americans. Insurance companies are building on these experiences to ensure that planning for long-term care continues to grow. As our nation's elders and family caregivers rise in number, the private sector has the knowledge and flexibility to respond with innovative insurance that supports families and their evolving long-term care needs.