LTC Bullet: The WSJ on LTCI--Reality Check

Wednesday, July 2, 2003


LTC Comment: Is media coverage of long-term care insurance improving? Today's "reality-check" Bullet gives a more positive review of a recent Wall Street Journal article than most of our past critiques. More after the ***news***.

*** This Bullet is sponsored by LTCi Decision Systems, creators of the "LTC Economic Impact Planning Model" (TM) which "helps advisors and clients project family estate erosion using client specific LTC planning scenarios with and without insurance." For more information, contact Ralph Leisle ( or toll-free at 1-800-360-9853 ) or visit LTCi Decision Systems online at . Thanks so much to LTCi Decision Systems for its 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 . ***

*** If we build it, will you come? We will offer the Center's LTC Graduate Seminar in Orlando, Florida on August 5 if 10 or more people sign up. Contact Amy McDougall at or 425-377-9500 to reserve a spot. For topics, testimonials, price and other details, see . We've received rave reviews for this class which is the only "advanced" training program available to senior advisors on long-term care service delivery and financing. The instructor is Stephen Moses, an expert and innovator in the field of long-term care, who has two decades of experience working with government, private insurance, and long-term care providers. ***

*** The Center for Long-Term Care Financing now qualifies for the John Hancock Matching Gifts Program. We encourage John Hancock employees and "captive agents" to contribute to the Center, double your donation through this matching program, and qualify to receive our donor-only "LTC E-Alerts, Readers and Data Updates." Our thanks to John Hancock for recognizing the Center in this way. After you make your matching gift of $150 or more (tax deductible) to the Center, contact , give him your preferred user name and password (up to 10 characters each), and he'll Zone you in immediately. ***

*** Rampant state fiscal crises, exacerbated by rapidly rising Medicaid LTC expenditures, are driving renewed media interest in Medicaid estate planning. Many states have legislation pending or passed to target the welfare program's LTC benefits more narrowly to the needy. A June 16, 2003 article in the New York Sun, "Retiring on Medicaid," by William F. Hammond, Jr., quoted Center for Long-Term Care Financing Board Member Carl Young: "'The notion that the taxpayers should subsidize private inheritance is so offensive, I'm surprised it hasn't become a source of public consternation much earlier,' said the president of the New York Association of Homes and Services for the Aging, Carl Young. 'The taxpayer is being ripped off.'" The article also quoted Steve Moses: "'The public has come to think of long-term care or nursing home care as basically an entitlement -- something you donít have to worry about because government pays,' said the president of the Center for Long-Term Care Financing in Seattle, Stephen Moses. . . . 'Youíve got to convert Medicaid into the program everybody thinks itís supposed to be -- which is public assistance,' Mr. Moses said. 'What we have now is a system that rewards people for ignoring the problem.'" To read the whole article, go to

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The LTC Reader #3-029--Your Mind: Use It or Lose It
The LTC Data Update #3-016--Who's Who in Assisted Living?
LTC E-Alert #3-042--Medicaid Stops Paying Nursing Homes in CO and CA
The LTC Reader #3-030--What is Reinsurance and Why Does LTCI Need It?

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LTC Comment: We desperately need good media coverage of long-term insurance. Unfortunately, most newspaper stories on this topic are inaccurate and misleading. Today's LTC Bullet, written by Eileen Tell of the Long-Term Care Group, is the latest in our series of "LTC Reality Checks." Our reality-check Bullets address inaccuracies and faulty data that abound in media coverage of long term care insurance. They also cover anecdotes from the popular press that highlight the benefits of planning ahead and taking personal responsibility for long term care. You can read the whole series of 61 LTC Reality Check Bullets at - reality_ck  We extend our sincere appreciation to Ms. Tell and to her employer, the LTC Group, for this informative critique of a recent Wall Street Journal article (Kelly Greene, "Buying a Security Blanket -- Revisited," WSJ Online, June 9, 2003). We encourage LTC Bullets readers to forward this Bullet to your local reporters who cover long-term care. To share this Bullet with the Wall Street Journal, send a copy to . Excerpts from the article follow Ms. Tell's review. To read the full WSJ article, go to,,SB105466466550788400,00.html , but please note you must have a paid subscription to the WSJ Online to access their content.

Reality Check on "Buying a Security Blanket - Revisited"
Eileen Tell

The Wall Street Journal article, "Buying a Security Blanket - Revisited," does a better job of asking and answering some key questions about long term care insurance than previous treatments of the subject, both by the WSJ and by others. It is encouraging to see a media outlet seeking answers from knowledgeable experts in the field and willing to explore various aspects of this topic carefully, rather than trying to grab readers' attention with "bad news," whether it is accurate or not.

First the good news. The article points out the hazards of self-insuring, the comprehensive and flexible nature of today's policies, the importance of planning ahead to address inflation in the cost of care, and some tips for how consumers can shop carefully for a sound and appropriate product. The article addresses concerns with rate stability, prudent underwriting, strong financial ratings and insurer commitment and experience. These topics are addressed clearly and accurately. The article raises important issues for people to think about without using "scare" tactics to raise the reader's anxiety level about either needing long term care or considering insurance.

There are only a few areas where the information in the article falls short. Under "What are the Odds," the reader is presented with statistics on the risk of needing nursing home care that sound contradictory. More importantly, the article gives the impression that "there are no good industry data" on this risk. The figure cited in the article--that a person who reaches age 65 faces a 43 percent chance of needing care in a nursing home--is accurate and is supported by independent research not, as implied in the article, a figure simply derived from an insurance industry trade group.

The article goes on to quote United Seniors Health Council saying that someone age 65 has only a 23 percent chance of living in a nursing home for more than a year. While that is a true statement IF one takes into account the people that will never need nursing home care, it may confuse the reader since these two statistics are using different frames of reference; one statistic uses "all persons age 65" while the other uses "all persons age 65 who need nursing home care." The problem with the latter frame of reference is that most of us don't know today which of those two cohorts we will fall into. If I'm one of the people in the 43 percent of those who will need nursing home care, then I want to know what my "exposure" might be. The important statistic there is that more than half of all people who need nursing home care will spend a year or more there, and 19 percent will spend 5 years or more in a nursing home. The article does include the very important point that looking at the risk of needing nursing home care is only one part of the equation; one must also consider the additional possibility of needing care at home or in an assisted living facility.

The article indicates that "preferred provider" discounts are not currently available to policyholders with long-term care insurance, but that is not an accurate statement. Some insurance companies have negotiated discounted rates with providers and make those discounts available to their insureds. Even insurers that do not have negotiated, pre-set discount arrangements may have experienced, local care coordinators who, at no cost, will help identify lower cost appropriate providers of care for insureds and even help them arrange and schedule services. These are important advantages of having private insurance.

The article also cautions against policies that pay "prevailing" charges instead of actual expenses. Very few policies ever used the "prevailing charges" concept, and most, if not all policies that we are aware of pay actual expenses up to a pre-set benefit amount that the insured can select. So raising this as a concern for consumers is really not relevant.

And finally, for those who remain uncertain about whether or not they should buy long term care insurance, after reading this or any other articles, the advice quoted from Nancy Morith about insuring part of the risk and self-insuring a portion, is a sensible and creative alternative to the "either/or" proposition that most articles pose. We're glad to see this option presented. And glad to have only a handful of clarifications to make on the article.

Following are excerpts from: Kelly Greene, "Buying a Security Blanket -- Revisited," WSJ Online, June 9, 2003,,,SB105466466550788400,00.html .

"To buy or not to buy long-term care insurance? . . .

"What Are the Odds?

"A number of readers asked the same two questions: What percentage of people actually end up tapping their coverage, and what percentage exhaust their benefits while they still need them? The former, of course, goes to the heart of most people's concerns about long-term care insurance: No one wants to pay thousands of dollars in premiums for a policy they might never use.

"Unfortunately, there are no good industry data on either question. The Health Insurance Association of America, a trade group in Washington, will tell you that a person who reaches age 65 faces a 43 percent chance of entering a nursing home. That sounds like a good reason to at least consider buying coverage. But the United Seniors Health Council, an education program that's part of the National Council on the Aging, a nonprofit advocacy group in Washington, notes that half of nursing-home stays last three months or less. Overall, according to the council, a person who hits 65 has only a 23 percent chance of living in a nursing home for more than one year.

"That statistic might indicate you could finance (or try to finance) a nursing-home stay on your own. But it fails to take into account what care you might require leading up to a possible nursing-home stay, including home care and assisted living. Remember: Long-term care insurance isn't just 'nursing-home' insurance; a good policy will cover several forms of long-term care, including services that allow you to continue living at home. . . .

"Are Discounts Available?

"Some readers wondered whether holders of long-term care insurance receive price breaks from long-term care providers. The thinking is that insurers are able to negotiate favorable rates with hospitals and doctor groups for traditional health-care services, so why not for long-term care? If people without a long-term care policy are forced to pay top dollar for, say, a nursing-home stay, writes Patrick Barlow of Basking Ridge, N.J., that 'would make the option of trying to self-insure by doing without long-term care coverage financially suicidal.' . . .

"As of yet, there are no discounts for policyholders, says Nathan Childs, director of legislative affairs for the American Health Care Association, a Washington trade group for long-term care providers. Because the bills for the 'vast majority' of residents are paid by federal and state government programs, 'the Medicare and Medicaid rate determine how much a nursing home charges per day per patient,' he says. However, as more people buy long-term care coverage, 'I would think the insurers would have more clout.' . . .

"'Actual' vs. 'Prevailing'

"Another reader, Karl Peterson of Fox Island, Wash., suggests checking whether policies reimburse 'actual charges,' the real cost of care, or 'prevailing expenses,' which could be a lesser amount if your costs are higher than average where you live. Mr. Peterson chose a policy that pays 'actual charges' after considering one from General Electric Capital Assurance Co. with the 'prevailing expense' language. 'There is no information ... about how they actually determine 'prevailing expenses,'' he says.

"A spokesman for GE Capital says the company developed the prevailing-expense language to alert policyholders 'if we became aware the rates they were incurring were far higher than others in the same area.' He described the language as an advantage for policyholders, saying it would help their benefits to last longer. Still, the insurer has decided to drop the language from its 'next generation' product, he adds. . . ."