LTC Bullet: The Elephant, The Blind Men and Long-Term Care

Wednesday, March 12, 2003

Milwaukee, WI--

LTC Comment: Who are the "blind men of long-term care" and why can't they see how to solve the long-term care financing crisis? Find the answers after the ***news.***

*** published an eight-page interview with Steve Moses under the title "Expert Opinion" on Monday, March 10, 2003. You can read the piece at . We'll bring you some excerpts from it next week. is a great source of information about Skilled Nursing and Assisted Living Facilities. Hence, the acronym "SNALF." Today's Bullet emphasizes the importance of understanding the challenges facing long-term care service providers and financiers. The Center's LTC Bullets and our donor-only publications (LTC E-Alerts, LTC Readers and the LTC Data Base) rely heavily on to bring you the providers' and financiers' news and perspectives. ***

*** The Fifth Annual National LTC Forum, nicknamed "Yes, You Can," will convene May 4-6, 2003 at Caesar's Palace in Las Vegas. Center for Long-Term Care Financing President Steve Moses will participate in the "Opening Session: The Lack of True LTC Marketing" on May 6. Go to for details. The two-day session is designed for producers and distributors of LTC insurance who want an advanced education in marketing. Sixteen workshops and all meals, hospitality functions, cocktail receptions and entertainment are included in the registration fee. A CLTC Master Class, taught by Harley Gordon, precedes the conference. ***

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

LTC E-Alert #3-017--Will Insurance Cover LTC Robots Someday?
LTC E-Alert #3-018-- Medicaid Friendly Annuities and LTCI Rate Stability
The LTC Data Base #3-006--ALF Prices Plunge While SNFs Float


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 . ***


"The Elephant, The Blind Men and Long-Term Care," by Stephen A. Moses

Three blind men approached an elephant. One touched the elephant's trunk and exclaimed, "a hose." The second grabbed the elephant's leg and said, "a telephone pole." The third reached for the elephant's tail and concluded, "a rope." The allegory of the blind men and the elephant teaches us the folly of making conclusions about any complex thing without comprehending its entirety. What can we learn about long-term care from this ancient parable?

Long-term care is a complex subject comprised of many inter-related parts. When people, even experts, analyze one facet of long-term care without taking into consideration all of its aspects and inter-relationships, they often reach wrong, incomplete or misleading conclusions. Who are the "blind men" of long-term care? What mistaken suppositions do they tend to make? And what can we learn if we remove our blindfolds and observe long-term care in its fullness and complexity?

To the government, long-term care is a gigantic fiscal problem. Medicaid and Medicare pay for most formal nursing home and home care services in the United States. The proportion of long-term care costs paid by government has increased, while the share paid by consumers has declined, for decades. Medicaid rivals education as a burden on state budgets and long-term care is often a third to half the program's cost. Although government officials recognize the public's preference for home and community-based care, laws and policies still push most beneficiaries into nursing homes, because the public's aversion toward institutionalization discourages utilization and limits cost. Financing long-term care for an aging baby-boom generation is a daunting prospect for state and federal governments that are already facing crisis-level budget deficits. Yet, by treating long-term care primarily as a fiscal problem, government solidifies the status quo and impedes progress.

To the public, long-term care is usually a non-issue. At any given time, only a small percentage of Americans are giving or receiving long-term care. These caregivers and their patients suffer emotionally and financially. But their numbers are small and when their situation becomes dire, Medicare home care and Medicaid nursing home benefits mitigate consequences that might otherwise become catastrophic. Medicare has no means test and Medicaid is readily available to anyone unable to afford private nursing home care. Thus, most Americans, who are not currently in the throes of a crisis, are barely conscious of long-term care as a health and financial risk. They are in denial, but their denial is understandable. If they ignore the risk, avoid the premiums for private insurance, but someday need long-term care, the government will pay. Most people do not choose this course of action consciously, but that is the point. They have been anesthetized to the risk of long-term care so they fail to plan or insure by default.

To senior advocates, long-term care is a benefit seeking enterprise. Groups like AARP, Families USA and the Alzheimer's Association examine the deficient status quo and conclude we need more government financing for long-term care. Among other things, they want tax credits for caregivers and more money for home and community-based services. They miss or ignore the irony that the more money government spends on long-term care, especially for desirable benefits like tax credits and home care, the less motivated the public becomes to save, invest or insure against the risk. Consequently, these groups advocate policies and programs that compound the underlying problem which is excessive dependency on perpetually inadequate government financing. Even worse is the impact of Medicaid estate planning attorneys who artificially impoverish affluent clients to qualify them for welfare-financed nursing home benefits without spending down. This practice sends a disastrous message to the next generation that long-term care is a second-tier risk that can be safely ignored thanks to an elastic social safety net which protects the well-to-do, not just the needy. Thus do well-intentioned senior advocates compound the long-term care problem by promoting counterproductive public policies that serve their intensely felt, but narrow, short-term interests.

To service providers, long-term care is a race for survival. Nursing homes and home health agencies, once flush with cash flow when Medicaid and Medicare were more generous, are now public utilities starved for revenue by stingy and declining government reimbursements. Assisted living facilities, attractive private-pay alternatives to nursing home institutionalization, are filling too slowly to be profitable, because most people cannot afford them, few have insurance, and Medicaid nursing home care is a cheaper alternative for most families. Thus, America's long-term care service delivery system is steadily collapsing with rampant bankruptcies, diminishing revenues, scarce capital, dire staff shortages, deteriorating quality, and skyrocketing liability insurance premiums. Yet, addicted to public financing, the nursing home industry begs hopelessly for higher government reimbursements instead of demanding public policy to encourage private financing of long-term care. Even the assisted living industry looks greedily at Medicaid, tempted by the same false promise of easy money that led nursing homes down a thirty-year primrose path of constricting reimbursements and tightening regulations.

To financiers, long-term care means "show me the money." Financiers are the people and companies who provide the debt and equity capital to build and operate long-term care facilities. They seek profitable investments. They shun businesses that do not produce adequate financial returns. In the 1990s, financiers over invested in long-term care anticipating that aging demographics would make home care, assisted living and nursing homes into hugely profitable growth industries. They financed and built myriad long-term care facilities. Wall Street followed suit, pumping up long-term care stocks in anticipation of big future gains. When Medicare cut back on reimbursements for home health, skilled nursing facility, and auxiliary services in the Balanced Budget Act of 1997, however, the bottom fell out. Long-term care stocks collapsed, major nursing home and home health chains went bankrupt, and investors lost interest in the long-term care industry. Capital will always migrate to its highest and best use. When investors cannot safely anticipate a healthy profit, they take their money elsewhere. That is what happened to long-term care which now suffers from a severe dearth of debt or equity capital. At a time when America should be building up its long-term care infrastructure, our heavy dependency on inadequate government financing is driving profit-minded investors away from the business.

Finally, to insurers, long-term care is a golden opportunity tempered by disappointing results. Many carriers enter the long-term care market lured by promising demographics only to depart a few years later discouraged by disappointing sales. Likewise, most insurance agents and brokers attack the long-term care insurance market with stars in their eyes only to find the product too difficult to sell profitably. The insurance industry completely missed the point that America already has a national social insurance program for long-term care that finances the vast majority of all professional home care and nursing home services. Focused traditionally on selling asset protection to prospects who do not feel, and are not in fact, at risk of asset spend down, long-term care insurance companies failed to penetrate the senior or baby-boomer markets significantly. The primary benefit of long-term care insurance is not asset protection, which can be purchased from a Medicaid planning attorney after the insurable event occurs for a fraction of the cost of private insurance premiums. Rather, the major value added by private long-term care insurance is to empower consumers to purchase quality care in the private market at the most appropriate level, i.e. home care, assisted living, and when necessary, red-carpet access to top-quality nursing home care.

A brief article like this one cannot present or develop all of the viewpoints and perspectives necessary to comprehend long-term care in its full intricacy. Nevertheless, "in the land of the blind, the one-eyed man is king." If we only keep a few critical facts in view about the elephantine complexity of long-term care, we will be far better prepared to plot rational public policy to solve these problems. The public has been anesthetized to the risk of long-term care by decades of easy access to government-financed nursing home care. To awaken Americans to the risk of long-term care before it's too late, we must target publicly financed long-term care more effectively to the genuinely needy and create strong incentives for everyone else to save, invest or insure for this risk. By reducing government financing and increasing private financing of long-term care, America can (1) reduce the fiscal burden on Medicaid and taxpayers, (2) improve access to and quality of care for poor and rich alike, (3) breathe financial oxygen into the service delivery system, (4) build a strong home and community-based services infrastructure and (5) begin to attract new capital into the field of long-term care. All we need is the vision to see long-term care in its full complexity and the will to change public policy accordingly.

For a more comprehensive analysis of and prescription for the long-term care financing problem, see the Center for Long-Term Care Financing's three major reports ("LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle;" "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance;" and "The LTC Triathlon: Long-Term Care's Race for Survival") at .

Stephen A. Moses is president of the Center for Long-Term Care Financing in Seattle, WA. Reach him at or 206-283-7036. Or visit The Center for Long-Term Care Financing is a charitable, nonprofit think tank and public policy organization with the mission of ensuring quality long-term care for all Americans. Subscribe to the Center's free online newsletter "LTC Bullets" by emailing your request to