LTC Bullet: Dire Warnings from the Feds

Thursday, September 25, 2003


LTC Comment: Have you read "Your Social Security Statement" lately. If not, you'd best take a close look soon and beware the latest tidings from GAO as well. More after the ***news.***

*** Our thanks to Jesse Slome, Publisher and Editor-in-Chief of "Sales Strategies" magazine for publishing recently a complimentary ad introducing his readers to the Center for Long-Term Care Financing and pointing them to our information-packed website at . Mr. Slome's magazine is the official publication of the American Association for Long-Term Care Insurance (AALTCI). We read it regularly and recommend it to anyone interested in LTC insurance as a private sector source of long-term care financing. (Subscriptions are $36 per year by calling 818-597-3205 or email .) ***

*** Are you planning to attend THE 2003 NATIONAL LTCI PRODUCERS SUMMIT this November in New Orleans? If so, plan now for a late dinner on Monday, November 17. Immediately after the "Networking Reception" sponsored by Physicians Mutual and MetLife from 5:45 PM to 7:00 PM, Steve Moses will present a one-hour (7:00 PM to 8:00 PM) preview of the Center for Long-Term Care Financing's highly regarded LTC Graduate Seminar. Then join Steve for a "no host" dinner and further conversation. Contact Amy McDougall at 425-377-9500 or to reserve a place. For information on the conference, go to . For information on the LTC Graduate Seminar, go to . ***

*** Steve Moses' article "So What if Government Pays for Most Long-Term Care?" was featured in "Producer's Life: The Weekly e-Magazine for Insurance and Financial Advisors," September 15th, 2003 - Issue #59. You can read the article at . For subscription information, go to or contact . ***

*** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content followed by instructions on how to subscribe.

The LTC Reader # 3-038--HCBS vs. SNF: The Cost Comparison (Don't assume home and community-based services are cheaper than nursing facility care, much less that Medicaid saves money by shifting recipients from SNFs to HCBS.)

Don't miss our "virtual visits" to major LTC industry conferences in The Zone. You'll find our comparison of the conferences, session summaries, interviews and pictures at .

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LTC Comment: You know that statement you get from Social Security every year that estimates what you will have coming from the program when you retire or die? Read it closely and you'll find this caveat: "Unless action is taken soon to strengthen Social Security, in just 15 years we will begin paying more in benefits than we collect in taxes. Without changes, by 2042 the Social Security Trust Fund will be exhausted. . . . At that point, there will be enough money to pay only about 73 cents for each dollar of scheduled benefits." This warning is not new. We checked. Social Security has been saying the same thing in its annual statements for several years running. But this is not the worst of it. The Social Security Trustees, the Congressional Budget Office, the General Accounting Office and many private think tanks have been sounding the same alarm for years about Social Security, Medicare, and lately about the Pension Benefit Guarantee Corporation and veterans' health benefits. Here's the point for individuals and families to take to heart: plan now to save, invest and insure against every financial risk you may face in the future. If the government's social insurance and welfare programs are there to help you some day, fine. But in the meantime, plan to manage on your own. Be part of the solution to America's long-term fiscal challenges, not part of the problem. And if you are in a position professionally to alert and advise others, spread the word.

Here are some excerpts from the latest warning by a federal official. You can read the entire speech at .

"Truth and Transparency: the Federal Government's Financial Condition and Fiscal Outlook" by the Honorable David M. Walker, Comptroller General of the United States, September 17, 2003 at the National Press Club, Washington, D.C.

"Let me start by reviewing the federal government's current financial condition. The federal government's fiscal 2002 annual financial report says a lot but not enough. The good news is that as of September 30, 2002, we had about $1 trillion in reported assets. The bad news is that we had almost $8 trillion in reported liabilities. According to my math, that left us with an approximate $7 trillion accumulated deficit, or a little over $24,000 for every man, woman and child in the United States. . . .

"Furthermore, CBO estimates that, excluding Social Security surpluses, the total deficit for fiscal years 2003 and 2004 will be $562 billion and $644 billion, respectively. If all these numbers are making your head spin, don't worry; just remember that they are all big, and they are all bad!

"Importantly, while we are starting off in a financial hole we don't really have a very good picture of how deep it is. Specifically, there are a number of very significant items that are not currently included as liabilities in the federal government's financial statements; for example, several trillion dollars in non-marketable government securities in so-called 'Trust Funds.' In the case of the Social Security and Medicare Trust Funds, the federal government took in taxpayer money, spent it on other items and replaced it with an IOU. Given this fact, why aren't the amounts attributed to such activities shown as a 'liability' of the U.S. Government? At the present time, they are not! Does this make sense, especially when the government continues to tell Social Security and Medicare beneficiaries that they can count on the bonds in these 'Trust Funds'? Is the federal government trying to have its cake and eat it too?

"The current U.S government liability figures also do not adequately consider veterans' health care benefit costs provided through the Department of Veteran's Affairs nor do they include the difference between future promised and funded benefits in connection with the Social Security and Medicare programs. These additional amounts total tens of trillions of dollars in discounted present value terms. Stated differently, they are likely to exceed $100,000 IN ADDITIONAL BURDEN FOR EVERY MAN, WOMAN AND CHILD IN AMERICA TODAY [emphasis added], and these amounts are growing every day. These items may or may not ultimately be considered to be liabilities from an accounting perspective; however, they do represent significant commitments that ultimately have to be addressed. The burden of paying for these is not a very nice present for a child born today! Personally, I'd prefer a savings bond rather than a bill! . . .

"Specifically, GAO's long-range budget simulations show that this nation faces a large and growing structural deficit due primarily to known demographic trends and rising health care costs. In less than 10 years, due primarily to the retirement of the baby boom generation, the United States will be hit by a huge demographic tidal wave that is not expected to ever recede! This is unprecedented in the history of our nation. . . .

"While reasonable people can and will disagree about the nature and extent of our long-range fiscal challenge and how to best address it, the time has come for all responsible parties to recognize reality. Our nation has a major long-term fiscal challenge that is not going away and requires serious and sustained attention. . . .

"In closing, while I hope this serves as a 'wake up call,' it is also time for a 'call to action.' My fellow 'baby boomers' and others need to recognize the leadership and stewardship obligations that we have to our children, grandchildren and future generations of Americans. In addition, members of Generations X and Y need to become actively engaged in this debate because they and their children will bear a disproportionate portion of the burden and adverse effects if policymakers fail to act in a reasoned and responsible manner."