LTC Bullet: Consumer Reports Targets LTCI, Hits Self

Wednesday, October 15, 2003

Lincoln, Nebraska--

LTC Comment: The latest Consumer Reports' broadside against long-term care insurance dupes the unwary, enrages the knowledgeable, and embarrasses the magazine. Read our "reality check" after the ***news.***

*** HILL BRIEFING ON THE LTC PARTNERSHIPS: Organizers urge state government officials especially to attend: October 16, 2003, 12 noon (lunch is provided), at 2168 Rayburn House Office Building - Gold Room. Space is limited, so please RSVP to John Greene by October 14th at 703-276-3807 or . ***

*** The Certified Senior Advisor organization has offered to make a contribution to the Center for Long-Term Care Financing for every new enrollee to their program who mentions the Center and cites the "source code" number 8196. Although the Center does not endorse any companies or professional designations, we've heard a lot of good things about CSA and we've met many capable professionals who have attended their training and received that designation. For information on the CSA course and certification, go to . If you enroll in the CSA program, please mention the Center for Long-Term Care Financing in your application and reference source code 8196. Drop us an email to and let us know you've enrolled. Then send us your evaluation of the program when you've completed it. CSA classes are coming up October 22-25 in Houston, TX; November 5-8 in Las Vegas, NV; November 19-22 in Newark, NJ; and December 3-6 in Orlando, FL. ***

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

The LTC Data Update #3-024: Demographic Profile of Baby Boomers (Explore the MetLife Mature Market Institute's fascinating compendium of demographic data on baby boomers.)

LTC E-Alert #3-054--Hill Briefing on LTC Partnerships (Heads up for a Capital Hill luncheon, briefing, and appeal for repeal of the OBRA '93 provision holding back the Partnerships.)

The LTC Reader #3-041--The Irony of Means Testing Medicare (What's left of the "social insurance" concept when Medicare is means tested, while Medicaid becomes ever more available to the affluent?)

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: Nothing boils the blood of an A.M.G. like the latest Consumer Reports article debunking long-term care insurance. A.M.G.s are the altruistic, masochistic geniuses trying to sell private long-term care insurance to a public in denial about the risk. Consider what they are up against. The government pays for the vast majority of all professional long-term care services through Medicaid and Medicare. Never mind that publicly financed long-term care generally means limited access to underfinanced nursing home care of widely questioned quality. Most of the public has not awakened to those downsides yet. That's why it is so important to promulgate accurate information about the risk and cost of long-term care and to educate the public about the financial tools available to mitigate that risk.

Now comes Consumer Reports with inaccurate, misleading, and dangerously ill-advised mis-information and equally cock-eyed advice on long-term care planning ("CR Investigates: Do You Need Long-Term Care Insurance," in the November 2003 print edition, or online at ). Author and trainer Phyllis Shelton has dissected the CR article and corrected the record in a penetrating critique available on her website at . Excerpts from Ms. Shelton's rebuttal follow below.

Suffice it here to point out an irony brought to our attention by Henrik Larsen of Advanced Resources Marketing in Allston, Massachusetts. He observes that the same issue of Consumer Reports which blasts LTC insurance also contains an article criticizing nursing home care ("Safety Alert: The Quality of Nursing-Home Care," November 2003, or online at ).

According to CR: "Study after study by independent researchers and government agencies have documented problems with the quality of care in hundreds of the 17,000 nursing homes in the U.S. . . . Why do the studies tell such a grim story? Much of the problem stems from a reimbursement system that many experts say does not adequately compensate facilities for providing good care." The significance of this admission is that half of all nursing home costs, 70 percent of all nursing home residents and nearly 80 percent of all nursing home patient days are paid for by Medicaid at notoriously low reimbursement rates, often less than the cost of providing the care. Arguably, the cause of the care quality problems highlighted in this article is that too few people are able to pay privately for nursing home care because they lack the insurance coverage CR attacks in the other article. (Private-pay nursing home rates are half again as high on average as Medicaid rates because of the "cost shifting" facilities have to employ to offset underpayments from Medicaid.)

Adding insult to injury, Consumer Reports has itself promoted Medicaid estate planning, the artificial self-impoverishment of prosperous seniors to qualify them for Medicaid nursing home benefits. We reported the following in "LTC Bullet: More Bad Advice from Consumer Reports," published Monday, November 15, 1999, :

"Over the years, we've observed that the individuals and organizations most critical of private long-term care insurance are usually the ones lining their pockets with Medicaid estate planning profits. Consumer Reports is notorious for its virulent attacks and dubious advice on private long-term care insurance products. Now, one reason for the magazine's antagonism is clear. A promotional flyer hawking Consumer Reports' $29.95 publication 'How to Plan for a Secure Retirement' promises you will learn from it 'how to protect your assets without paying for costly long-term-care insurance' and 'how to qualify for Medicaid without impoverishing your spouse.' Leaving aside the fact that Medicaid has not required spousal impoverishment since 1988, the Consumer Reports article is irresponsible for failing to mention Medicaid's dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias."


Following are excerpts from Phyllis Shelton's article "Consumer Reports Wields the Ax Again in November 2003 Issue." You can find the rest of the piece at . Phyllis Shelton is the author of Long-Term Care: Your Financial Planning Guide, Kensington Books, April 2003. (For reviews of her book, see "LTC Bullet: Shelton Does it Again," July 10, 2001, and "LTC Bullet: Shelton's 2003 LTC Planning Guide is Good and Current, June 12, 2003, .) Ms. Shelton is also President of LTC Consultants, a Nashville-based company specializing in web-based and live long-term care insurance training and marketing materials.

"Consumer Reports has done its usual hatchet job on long-term care insurance - with one gigantic difference: they used ME to help make their case! After spending hours with them, both in person and on the telephone and email, they quote me about a large rate increase that occurred on a block of business sold from 1984 through 1999, and don't mention all the things I told them that have happened to virtually prevent that ever happening again - namely, the NAIC LTCI Model Regulation of 2000. I feel used and violated to have been even an unwilling party to their scheme to accomplish their longstanding agenda concerning LTC insurance. . . .

"Worst Mistake #1: Consider buying at around age 65 as you may not use it for 20, 30, or more years if at all . . . less than 1 percent under age 65 receive nursing home care.

"Response: First, they ignore their own advice on p. 22 that one out of four 65-year-olds on average [is] declined. Most horrendous is they ignore the 4+ million people under 65 who are receiving long-term care outside of a nursing home!!

"Worst Mistake #2 - There is nearly a 50% chance that a person will require 24-hour care in a skilled nursing facility.

"Response: This is totally incorrect. The LifePlans, Inc. statistic that was published in a HIAA Buyer/NonBuyer survey is that there is greater than a 50% chance that we will require some type of long-term care in our lifetime. For most of us, it probably won't be nursing home care, as less than 20% of LTC occurs in a nursing home (Congressional Research Service, 6/01). Once again, the article is stuck on nursing home care.

"Worst Mistake #3 - Consider a plan if you have no willing or available family member to take care of you.

"Response: How many family members (or anyone else) can provide 24-hour care??? Long-term care insurance may be the only thing that keeps someone out of a nursing home by providing the family with money to hire help so the primary caregiver gets enough rest to keep the care recipient at home. . . .

"Worst Mistake #4 - Don't buy LTCI if your assets exceed $1.5 million.

"Response: A couple in their mid-50s will sustain a $1.8 million impact on their estate over a 30 year period if only one of them needs five years of care in their mid-70s. This example uses the same starting cost of $180 per day as the CR article uses and a 6% lost investment opportunity for pulling the money out of the estate and self-paying. I assumed the 5.8% inflation rate as predicted by the Centers for Medicare and Medicaid Services in Health Affairs, March/April 2002, p. 208. Even using a 5% inflation rate, the impact is $1.5 million. If they have around-the-clock care as most affluent families want, the impact ranges from $3 to $3.5 million, depending on which inflation factor is used. . . .

"Worst Mistake #5 - Policy features are misrepresented.

"You must keep paying to keep the policy in force - this ignores the limited pay plans offered by most major policies, which says policies can be paid up in 5, 10, 15, 20 yrs or by age 65, depending on the policy.

"Don't buy at younger ages because new systems of care in the future won't be covered by a policy purchased today - this ignores the 'alternate plan of care' feature that is in many policies today. The article states that older policies didn't pay for assisted living facilities, when in fact, some of them did through the alternate plan of care provision. This advice is less than intelligent, because it is like telling people to not buy health insurance because today's policies won't cover health care technology of the future. The better companies will find a way to keep the coverage contemporary, and the Office of Personnel Management has taken a public position that the Federal LTCI policy will be kept current.

"Benefit triggers include walking as one of the Activities of Daily Living; make sure bathing is on the list and medical necessity is an alternate benefit trigger.

"Ninety-two percent of policies sold at the end of 2002 were tax-qualified per LIMRA. Walking is not an ADL in a tax-qualified policy. All major companies are using all six ADLs, so therefore bathing is on the list. Medical necessity is only in a non-TQ policy, which represents a very small portion of the LTCI market today.

"An indemnity plan only pays up to a specified amount so you could run out of money.

"A reimbursement plan only pays up to a specified amount as well, and an indemnity plan can actually be more flexible as you receive the daily (or monthly) benefit regardless of the charge, which means you can build in extra for the drugs and supplies that most reimbursement plans do not cover.

"Group plans may allow employees to pay premium with pre-tax dollars.

"TQ plans do not allow any payment of premium with pre-tax dollars - this was specifically excluded in the Health Insurance Portability and Accountability Act of 1996, the legislation that governs long-term care insurance today.

"The only nonforfeiture option mentioned was the shortened benefit period.

"A few tax-qualified plans and several NTQ plans have a return of premium option, either less claims or regardless of claims. Most plans have the ROP at death; a few have it during the policyholder's lifetime, recognizing that a ROP during life on a TQ policy means a taxable event to the extent premiums were deducted.

"Worst Mistake #6 - using Weiss ratings

"Response: I've caught so many mistakes over the years by this rating service pertaining to LTC insurance and have never valued whatever opinion the service issues. And I'm not alone. This report came out in June 2003 concerning malpractice payouts:

"WEISS 'STUDY' QUESTIONED - According to the PIAA, a trade association of over 50 physician and dentist owned and/or operated medical professional liability insurance companies, 'Martin Weiss and his rating organization have engineered a report that is getting lots of media attention in spite of the fact that it is fatally flawed. Weiss says it found that from 1991 to 2002 the median malpractice payout rose 37.8% in states with caps, compared with a rise of 71.3% in states with no caps. While the use of median payment data shows that cap states fare better than others, it greatly understates the difference by ignoring the spiraling rise in total claim payments caused by a greater proportion of large payments.' . . .

"SUMMARY: There were miscellaneous mistakes as well, such as with the Medicaid information on p. 22 but nothing that hurts overall as much as saying LTCI is a really bad deal for Americans.

"I know from first-hand experience as a caregiver for my mother who passed away at age 54 with breast cancer after two years of caregiving at home that it is almost impossible to get through a meal without the patient calling your name. Patients with severe dementia require an average of 45 hours per week of care, according to a University of Michigan study (Journal of General Internal Medicine, 11/01)

"This [Consumer Reports] article shows zero awareness of the stress that families suffer every day with home caregiving and ignores all the statistics from think tanks like The Conference Board that project that elder care is almost ready to replace child care as the #1 dependent care need in America in the next few years. By 2008, almost 40% of the work force with an approximate age of 51, will be at the prime age for caring for their elderly family members (Census Bureau) and twelve percent of caregiving families use money allocated for college funds and 26% use money set aside for retirement (John Hancock study as reported in the Journal of Financial Service Professionals, 9/99)."