LTC Bullet: John Stossel on LTCi . . . Oops, Flood Insurance

Tuesday, March 2, 2004


LTC Comment: According to 20/20 star John Stossel, government flood insurance is a huge boondoggle. The parallels to government-financed long-term care are uncanny. More after the ***news.***

*** GET QUOTED and HELP THE CENTER. Would it help you to be quoted in the media as an expert on LTC and other age 50+ issues? Of course, but how? Getting quoted or published is a science and an art. Here's an opportunity to learn both AND support the Center for Long-Term Care Financing. Last week, Center co-founder Steve Moses and nationally-recognized LTC author and speaker Marilee Driscoll were both quoted in a Wall Street Journal article. That gave Marilee an idea. She markets a self-study training package on how to wage your own media campaign, in only 1-2 hours a month. It's called the "Publicist Combo" and includes six short audio training programs, and 12 months of ghost-written press releases. She's kindly offered to donate $150 to the Center for Long-Term Care Financing for every "Publicist Combo" our subscribers purchase, if, and only if, you put the following coupon code on your order: CLTCFIN. Here's a chance to start a publicity campaign AND qualify immediately for a full year of the Center's Donor-Only Zone at no extra cost. Check out Marilee's program at, sign up using the coupon code CLTCFIN, and we'll see you soon in the media and The Zone. ***

*** HALF PRICE SALE. To help raise financial support for the Center for Long-Term Care Financing, we are offering Center President Stephen Moses's appearances for half price. There is a catch, however. To get the usual flat fee for Steve's programs reduced from $5,000 to $2,500, you'll need to piggy-back on a trip he already has scheduled. So, check the following schedule. If you can organize something in the same general locale and time frame, let Center Executive Director Amy McDougall know ( 1-425-377-9500, or ) . She'll help you arrange the event whether you decide on a speech, legislative testimony, press contacts, training and motivation for agents, an LTC Graduate Seminar, or whatever else you think will best convey your message and ours of responsible long-term care planning. How do these dates look?

March 11-17: Washington, DC
April 21 - May 3: New Mexico
May 4-7: Nevada
May 17-21: New York
May 24-28: Texas
June 21-25: Washington, DC

*** 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 Data Update #4-009--Trolling for Data (Go fishing for health and long-term care numbers in the "Statistical Abstract of the United States.")

LTC E-Alert #4-013--Three-Day Hospital Stay: Medicare, Yes; LTCi, No (Medicare dropped the 3-day hospital stay requirement but slapped it back on a year later. It stayed off for private LTCi.)

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LTC Comment: Following are excerpts from an article by John Stossel published March 2004 in ReasonOnline: . Stossel is the co-anchor of ABC's 20/20 and the author of a new book titled Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media. When you finish Stossel's piece, keep reading as Steve Moses draws the parallel between flood insurance and long-term care insurance.


From "Confessions of a Welfare Queen: How Rich Bastards Like Me Rip Off Taxpayers for Millions of Dollars"
John Stossel

"Law grinds the poor, and rich men rule the law.
-- Oliver Goldsmith

"Ronald Reagan memorably complained about 'welfare queens,' but he never told us that the biggest welfare queens are the already wealthy. Their lobbyists fawn over politicians, giving them little bits of money -- campaign contributions, plane trips, dinners, golf outings -- in exchange for huge chunks of taxpayers' money. Millionaires who own your favorite sports teams get subsidies, as do millionaire farmers, corporations, and well-connected plutocrats of every variety. Even successful, wealthy TV journalists.

"That's right, I got some of your money too.

"My Life as a Welfare Queen

"In 1980 I built a wonderful beach house. Four bedrooms -- every room with a view of the Atlantic Ocean.

"It was an absurd place to build, right on the edge of the ocean. All that stood between my house and ruin was a hundred feet of sand. My father told me: 'Don't do it; it's too risky. No one should build so close to an ocean.'

"But I built anyway.

"Why? As my eager-for-the-business architect said, 'Why not? If the ocean destroys your house, the government will pay for a new one.'

"What? Why would the government do that? Why would it encourage people to build in such risky places? That would be insane.

"But the architect was right. If the ocean took my house, Uncle Sam would pay to replace it under the National Flood Insurance Program. Since private insurers weren't dumb enough to sell cheap insurance to people who built on the edges of oceans or rivers, Congress decided the government should step in and do it. So if the ocean ate what I built, I could rebuild and rebuild again and again -- there was no limit to the number of claims on the same property in the same location -- up to a maximum of $250,000 per house per flood. And you taxpayers would pay for it.


"I did have to pay insurance premiums, but they were dirt cheap -- mine never exceeded a few hundred dollars a year.

"Why does Uncle Sam offer me cheap insurance? 'It saves federal dollars,' replied James Lee Witt, head of the Federal Emergency Management Agency (FEMA), when I did a 20/20 report on this boondoggle. 'If this insurance wasn't here,' he said, 'then people would be building in those areas anyway. Then it would cost the American taxpayers more [in relief funds] if a disaster hit.'

"That's government logic: Since we always mindlessly use taxpayer money to bail out every idiot who takes an expensive risk, let's get some money up front by selling them insurance first.

"The insurance, of course, has encouraged more people to build on the edges of rivers and oceans. The National Flood Insurance Program is currently the biggest property insurance writer in the United States, putting taxpayers on the hook for more than $640 billion in property. Subsidized insurance goes to movie stars in Malibu, to rich people in Kennebunkport (where the Bush family has its vacation compound), to rich people in Hyannis (where the Kennedy family has its), and to all sorts of people like me who ought to be paying our own way. . . .

"Government flood insurance is so 'compassionate' that the program didn't even raise my premiums when, just four years after I built my house, a two-day northeaster swept away my first floor. I could still use the place, since the kitchen and bedrooms were on upper floors, though some guests were unnerved when a wave sloshed through the bottom of the house. After the water receded, the government bought me a new first floor.

"Federal flood insurance payments are like buying drunken drivers new cars after they wreck theirs. I never invited you taxpayers to my home. You shouldn't have to pay for my ocean view.

"Actually, I don't have such a great view anymore. On New Year's Day, 1995, I got a call from a friend. 'Happy New Year,' he said. 'Your house is gone.' He'd seen it on the local news. (Or rather, he saw the houses that had been next to mine, and nothing but sand next to them.) The ocean had knocked down my government-approved flood-resistant pilings and eaten my house.

"It was an upsetting loss for me, but financially I made out just fine. You paid for the house -- and its contents. I'm not proud that I took your money, but if the government is foolish enough to offer me a special deal, I'd be foolish not to take it.

"I could have rebuilt the beach house and possibly ripped you taxpayers off again, but I'd had enough. I sold the land. Now someone's built an even bigger house on my old property. Bet we'll soon have to pay for that one, too. . . ."


Now here's an excerpt from an article by Steve Moses that drew the parallels between flood insurance and long-term care shortly after the huge Mississippi flood of 1993:

"Of Floods, Insurance and Long-Term Care," by Steve Moses, LTC News & Comment, Volume 4, No. 1, Sept. 1993, pps. 11-12.

This year's sodden catastrophe in America's heartland is a perfect analogy for the crisis in long-term care financing. The "flood of the century" swamped thousands of homes, dislocated millions of people, and destroyed countless farms and businesses. Costs may reach $20 billion or more. State and federal governments acted immediately to provide emergency aid. Politicians inundated the media with promises that tax-financed indemnification would follow. Although most of the damaged property was located on flood plains, few property owners had private insurance to cover the risk of flooding. Why?

"My home-owners' policy will protect me," some claimed. "The water could never reach me here in a hundred years," many affirmed. "Flood insurance is too expensive," most said. Local officials and bankers frequently bent the rules to approve building permits and bank loans without the technically required flood insurance. No one said "I'm not going to buy insurance, because the government will pay if the worst happens." But, vaguely and evasively, everyone knew it was true. If the floods came, the political compassion combine would replace any natural harvest lost.

Now compare the crisis in long-term care financing….

"My Medicare supplement policy will protect me if I have to go to a nursing home," some claim. "It won't happen to me; I'm too healthy," many affirm. "Long-term care insurance costs too much," most say. Elder law attorneys and many Medicaid eligibility workers bend the rules to qualify prosperous people for the welfare program's nursing home benefit. No one says "I'm not going to buy insurance, because the government will pay if the worst happens." But, subconsciously, everybody knows this is true. The reality is that if nursing home care becomes necessary, someone else usually pays. Who knows or cares whether the payer in fact is Medicare or Medicaid, Uncle Sam or Santa Claus?

The main purpose of private insurance is to replace a small risk of catastrophic loss with the certainty of an affordable premium. In a free market, private insurance also performs another vital function; it prices risk. Voluntary exchanges between willing sellers (insurers) and willing buyers (insureds) determine actuarially sound premium levels. Premiums tell the public as accurately as humanly possible what the precise danger is of living on a flood plain or 'going bare' for long-term care. Given this information, rational people who are free to choose can make intelligent decisions in their own best interests.

Ironically, for all its good intentions and altruistic justifications, government distorts this risk calculation and dangerously misleads the public by providing tax-financed grants or subsidies to indemnify the uninsured. By reducing or disguising actual risks, the government discourages responsible people from buying private insurance and rewards the irresponsible for failing to do so. This is the real reason why so few people have flood, crop, earthquake or long-term care insurance, self-serving evasions ('it won't happen to me' or 'insurance costs too much') to the contrary notwithstanding. When insurance truly costs too much, it means the risk is too great to take, by definition! If the government rebuilt every home that burned down, no one would buy fire insurance either.