LTC Bullet: On The New Math of Long-Term Care Insurance

Tuesday, March 30, 2004


LTC Comment: "There's no such thing as bad press," goes the old adage. And coverage in the New York Times is very good indeed. Even better when a few confusing elements are clarified. More after the ***news.***

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*** THE 17TH PRIVATE LONG TERM CARE INSURANCE CONFERENCE, titled this year "Financing Long Term Care: Policy, Politics, and Practice," is scheduled for June 23-25, 2004 at the Marriott Wardman Park Hotel in Washington, DC. For more information, go to or call Diane Fulton at 703-968-8863. Stay tuned to this space for more details as the conference date approaches. In the meantime, visit our Virtual Visit to last year's 16th iteration of this meeting (in San Antonio) at . If you lack the user name and password to view our Virtual Visits, just keep reading for instructions how to Zone In. ***

*** 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.

LTC E-Alert #4-017--Parkinson's Proclivity Proven for Men (One more reason for men to have private long-term care insurance protection for themselves and for their spouses.)

LTC E-Alert #4-018--Why Choice Matters: One in Four NHs Caused Actual Harm (To choose the best skilled nursing facility, you must be able to pay privately.)

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LTC Comment: Last Sunday's (March 28, 2004) New York Times contained an article by James Schembari titled "The New Math of Long-Term Care Insurance." You can read it at . The article is positive toward private long-term care insurance but discusses some common misconceptions about the product. The author is frustrated, for example, that convincing his parents to buy long-term care protection was impossible to do. Anyone who has ever tried to market private long-term care insurance will be able to relate to his concerns. To clarify some of the questions raised in the piece, Center for Long-Term Care Financing President Steve Moses emailed the following letter to the author to which Mr. Schembari responded appreciatively the following day.

Dear Mr. Schembari:

Thank you for covering the critical subject of long-term care insurance in your column last Sunday. You nailed two of the primary reasons most people fail to purchase this kind of protection: its presumed unaffordability and concern that the policies may not have to pay benefits.

May I offer the following comments that might help your readers see past these apparent obstacles?

Your article begins "LONG-TERM care insurance is one of those financial products you know you should have but can't imagine being able to afford. If you don't have it and eventually need it, you'll be kicking yourself. If you buy a policy and don't use it, you may still be kicking yourself."

The idea that private long-term care insurance is unaffordable is a myth. The vast majority of Americans should, could and would buy this protection, either when they are young and it's inexpensive, or when they're older, with adult children who could help with the premiums. Why don't they? Medicaid and Medicare have paid the bulk of formal long-term care costs in the United States since 1965. Bottom line, people think LTC insurance is expensive because government has been giving away this coverage for nearly forty years. Furthermore, Medicaid is much easier to obtain than is commonly understood. For details, see the Center for Long-Term Care Financing's website at , especially "The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance" at .

Regarding the point that policy-holders would kick themselves if their long-term care insurance policy never paid, consider this. Does fire insurance lack value if your house doesn't burn down? Have you wasted money on auto insurance if you never have a wreck? Fallacious reasoning about long-term care insurance protection is rampant. What enables Americans to evade the need for private LTC insurance is the same phenomenon that explains the lack of a market for private flood, crop, hurricane and earthquake insurance. If the worst happens, the government pays! For example, publicly subsidized loans and grants to uninsured flood victims encourage them to rebuild on the flood plain and to remain uninsured. Likewise, easy access to Medicaid-financed long-term care after the insurable event occurs overloads the program's scarce resources and undermines the market for private LTC insurance.

But what does the government pay for when it comes to long-term care? There's the rub. Medicaid is the 800-lb. gorilla of long-term care. It is a means-tested public assistance program, i.e. welfare. It has a dismal reputation for problems of access, quality, low reimbursement, discrimination, institutional bias, loss of independence and welfare stigma. Yet Medicaid's generous and extremely elastic LTC eligibility rules allow most people to qualify easily without spending down their assets significantly. Under the circumstances, there is little wonder that the public is in denial about long-term care and most people think private insurance protection is unaffordable.

Thus, the following advice provided by an AARP representative and cited in your article is very unfortunate:

"Ms. Kassner also cautioned that some elderly people who have few assets to protect might not need the coverage. 'It doesn't make sense to insure a person of modest means who would qualify for Medicaid,' she said. 'Medicaid is the public safety net.'

She recommended that, depending on family health history, only single people with assets of more than $75,000 ($150,000 for couples) should consider long-term care policies. 'It's the middle-income people,' she said, 'who want to look at the insurance.'"

Frankly, the most important reason to have private long-term care insurance is not asset protection. It is the ability to access quality long-term care in the private marketplace at the most appropriate level. Just because someone can easily quality for Medicaid--as can most Americans--is no reason not to buy private insurance protection. Even people with very limited income and assets often have adult children who could help them with premiums. They may have a home owned free and clear that could generate discretionary income through a reverse annuity mortgage to help with premiums.

It is true already and will become more true as time passes that assured access to quality long-term care, especially home care and assisted living, requires the ability to pay privately. That's why families need to pull together, help their elders obtain private LTC insurance protection, and then make sure they themselves are covered as well. If more people don't take this sensible course soon, the whole government-financed, welfare-based, nursing-home dependent system will collapse as the baby boom generation approaches senescence.

Thank you for covering this important topic. Please revisit the need for private long-term care insurance often and thoroughly.


Stephen A. Moses, President

Center for Long-Term Care Financing