LTC Bullet: The Unspeakable, Spoken

Wednesday, January 14, 2004


LTC Comment: Skyrocketing health costs and plummeting retirement prospects for boomers raise the ultimate question: Will America be able to keep its promises to future seniors? More after the ***news.***

*** ATTN KANSANS: Center for Long-Term Care Financing President Stephen Moses will address a "Medicaid Forum" for state legislators in Topeka, Kansas on January 21, 2004. The event is sponsored by the Flint Hills Center for Public Policy. For details and registration, go to . ***

*** Spice up your next meeting with a nationally recognized speaker known for his passion and perceptiveness on long-term care issues. Steve Moses speaks across the country at conferences in the fields of gerontology, law, accountancy, financial planning, LTC service delivery, and insurance. For keynote and other addresses in person, the Center for Long-Term Care Financing requests a flat fee of $5,000 (including all travel expenses) for Mr. Moses's appearances. He'll "appear," however, by speaker phone or conference call at your next Board, sales, staff or any other meeting to educate and motivate your group. All you need to do is contribute a negotiated amount (as low as $150 for a 15 minute appearance) based on the duration of the call to the Center for Long-Term Care Financing. Contact Executive Director Amy McDougall at 425-377-9500 or to schedule a time. ***

*** We have an easy way to subscribe to LTC Bullets. Encourage your colleagues to fill out the simple online subscription form at . Subscriptions are free to everyone for the first three months. ***

*** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content followed by instructions on how to subscribe so you can receive these critical epistles daily by email.

The LTC Reader #4-001--Brits' LTCI Market Faces Same Problems as US (Low market penetration due to denial and crowding out by government financing plague the UK too.)

The LTC Data Update #4-002--States with Tax Incentives for LTCI--List and Description (Link to list current as of June 2003.)

LTC E-Alert #4-002--What's the Latest on Alzheimer's? (Four new articles. Are people who are the most likely to buy LTCI also most likely to get Alzheimer's Disease?)

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 .

Individual donors of $150 or more and corporate donors to the Center for Long-Term Care Financing receive our daily email LTC Bullets, LTC E-Alerts, LTC Readers, and LTC Data Updates for a full year. You'll also get access to the donor-only zone where these publications are archived along with other donor-only features. 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 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: Health spending jumped 9.3 percent in 2002, the largest increase in 11 years. Health care expenditures now represent almost 15 percent of America's economy. . The Congressional Budget Office recently warned that an aging U.S. population and rising health care costs could burden future generations with high taxes and insurmountable debt if spending on Medicare, Medicaid and Social Security remains unchanged.

Nothing new, you say? Maybe not, but one more straw on the camel's back for sure. What is new is that a leading national pundit is speculating in print that boomers may someday find themselves abandoned by social insurance and left to their own financial devices. Following are excerpts from Bob Samuelson's column "The Boomers' Time Bomb Denial" (The Washington Post, January 7, 2004) and from the CBO report on which he based his red-flag warning.

Whether or not the most drastic possibilities occur, it behooves boomers to expect the worst and get ready. The more individuals and families prepare by means of personal savings, investment and private insurance, the safer they will be. The less dependent they are on struggling government insurance and welfare programs, the better able those programs will be to provide for those in need. That's a win/win formula for the future.


Robert J. Samuelson, "The Boomers' Time Bomb Denial," The Washington Post, January 7, 2004, Page A21, for the full article:

"Just for the record, the Congressional Budget Office recently issued a report telling us what everyone already knows: The federal budget is drifting into a future of unprecedented tax increases, huge deficits or both. This is no secret, because the great driving force of change is the impending retirement of 77 million baby boomers and their heavy claims on federal retirement programs. But in Washington, the CBO's irrefutable conclusion won't produce any noticeable reaction, because there's already a clear bipartisan policy concerning the future: Forget about it. . . .

"In 2002 total federal spending (except interest on the debt) was 17.8 percent of GDP. Under one CBO projection, that increases almost two-fifths, to 24.5 percent of GDP, by 2030. Another projection shows an increase of only a sixth, to 20.8 percent of GDP. The main difference between the two projections involves assumptions about higher health costs, but unfortunately both projections may be optimistic. Why? Well, the CBO offsets some of the higher spending for the elderly by assuming modest reductions in other federal spending as a share of GDP from 2002 levels. . . .

"What's astonishing is that the problem has been known for decades. A prudent society would have prepared by adjusting federal retirement programs to emerging social and economic realities. People can pay for their own retirements through savings and, possibly, part-time work, or they can rely on others, mainly workers and taxpayers, to pay through government programs. As life expectancy improved, the obvious response was to begin gradually -- with much advanced warning -- raising eligibility ages and tying benefits more to income. This would have encouraged saving and tempered future increases in federal spending. . . .

"The longer choices are postponed, the harder they become -- and they've already been delayed so long that they can't be easy. Prospective baby boom retirees may assume that their children will always pay the costs of federal retirement programs. This may be an illusion. As Heller [author of a new book titled Who Will Pay?] notes, one possible response to a future budget crisis would be for government to 'abandon or suddenly scale back on' commitments to retirees. Abrupt benefit cuts would be arbitrary and unfair. But given baby boomers' role in sanctioning today's indifference and denial, they would be richly deserved."


Excerpts from Congressional Budget Office, "Baby Boomers' Retirement Prospects: An Overview," November 2003, footnotes omitted, for the full report:

"Having enjoyed historically high incomes over their working years, baby boomers (people born from 1946 to 1964) make up one of the most prosperous generations in U.S. history. In the past 15 years, however, their finances have become a source of concern in policy circles and in the press as doubts have arisen about whether boomers are accumulating enough wealth to maintain their current or expected standards of living after they retire. One worry is that low saving by boomers could hurt the economy by limiting the growth of investment, productivity, and wages. Such curbs on economic activity could compound the budgetary pressures that the federal government will face as increasing numbers of boomers become eligible for benefits from Social Security and Medicare. . . .

"Nearly all of the studies reviewed in this report assume that Social Security and other government benefits will be paid as prescribed by current law. However, budgetary pressures could result in lower benefit levels in the future. Because many baby boomers are likely to depend heavily on government benefits for the bulk of their income in retirement, their prospects may be less rosy than recent studies imply. Furthermore, people's saving behavior is influenced by their expectations about future benefits. To the extent that boomers believe that they will receive all of the government benefits to which they would be entitled under current law, that expectation may induce them to save less than they would otherwise. Conversely, to the extent that they recognize the looming difficulties in funding those programs, they may increase their saving or retire at a later age than they had originally planned."