Bullet: What's Really
Happening to Long-Term Care?
Wednesday, April 4, 2007
LTC Comment: More
coverage soon of the Seventh Annual Intercompany Long-Term Care
Insurance Conference in Dallas last week.
But for now, here's my favorite presentation at that excellent
industry gathering, after the ***news.***
GENWORTH ON LTC COSTS. Yearly
Long Term Care Costs Increase 15% Since 2004 to Nearly $75,000 in 2007.
Genworth Financial today released its "The 2007 Cost of Care
Survey," an annual survey of costs of long-term care.
The survey found the average annual cost of nursing home care, in
a private room, has risen to $74,806, while the average yearly cost of
assisted living has risen to $32,573 for a one bedroom unit.
The average cost of a 40-hour-a-week in-home health care aide was
found to be $52,977 a year. Regional
variations in the cost of long-term care are significant, with the cost
of care in a private nursing home in the northeast topping $100,000.
"The 2007 Cost of Care Survey" is available at http://www.genworth.com."
Source: AHCA / NCAL
Gazette - Tuesday, April 3, 2007. Go directly to the Genworth survey here.
Center members will always find it quickly and easily in
"The Zone" at http://www.centerltc.com/members/ltccostsurveys.htm.
DON'T COUNT ON THE VA FOR LTC. Here's
one more reason not to depend on veterans' benefits for long-term care.
We'll add this one to the twenty other documented reasons listed
and sourced in The Zone for Center members only at http://www.centerltc.com/members/veterans/main.htm.
"CO: VA nursing homes in sorry shape."
Karen Auge. Denver Post. Apr 3, 2007.
Source: AHCA / NCAL
Gazette - Tuesday, April 3, 2007. The article's lead: "Four
of Colorado's five state-run veterans' nursing homes are in disrepair,
and one has been unsafe and unfit for habitation for at least four
years, according to federal Veterans Affairs officials." ***
*** FREE WEBINAR.
Everywhere I go lately, people have been button-holing me to say
they loved our "webinar" on how to get the most of out of the
Center's public and password-protected websites.
If you haven't watched it yet, go to www.centerltc.com,
scroll down until you find the "View Webinar" button, and dive
in for a full-hour, in-depth tour of the most comprehensive source of
information on long-term care financing available anywhere.
It's the only way to get a peek at our comprehensive new
"Almanac of Long-Term Care" without joining the Center, paying
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Once you see it, however, we're confident that's exactly what
you'll do. To join, go to http://www.centerltc.com/support/index.htm
or contact Damon at 206-283-7036 or email@example.com.
BONUS WEBSITE. All
you have to do to have your very own LTC website designed by LTC
Connection is to join the Center for Long-Term Care Reform.
That's right, join the Center for $150 per year, get all our
publications and access to The Zone, including our new "Almanac of
Long-Term Care," and on top of that LTC Connection will design your
website and waive their usual $149 fee.
Or look at it this way, buy your website from LTC Connection
through the Center and get a year of membership in the Center for only
$1 more. Sure, you'll have
to pay LTC Connection's $39 per month website maintenance fee, but
you'll get a whole year of LTC Bullets and LTC E-Alerts
for no extra charge. So,
what do you have to do? Just
contact Damon at 206-283-7036 or firstname.lastname@example.org,
join the Center, pay your membership fee, and say "I want my
connect you with the right person at LTC Connection and you'll be on
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How can you beat it? Already
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LTC BULLET: WHAT'S
REALLY HAPPENING TO LONG-TERM CARE?
LTC Comment: Why
do most Americans fail to take the risk of long-term care seriously?
Why are LTC insurance sales declining or flat at a time when the
costs of care are rising steeply? Are
people really spending down into impoverishment for LTC?
If so, how can the public remain in denial about long-term care? Is the tax-paying public well-served when Medicaid and
Medicare pay for most formal LTC services for the middle class and
affluent as well as the poor? How
can home equity conversion or long-term care insurance ever get traction
in the marketplace when public policy is to expand government financing
of ever-more-attractive LTC services?
Puzzled by these conundrums?
Stay tuned. Following
are answers to all those questions and a simple formula to fix the
underlying problem. Keep
reading and you'll find a transcript of my talk at the Dallas LTCI
If you'd rather listen to it, go to http://www.centerltc.com/media.htm
and click on the WMA or MP3 formats, whichever works for you. To find the online "handout" I mention in the audio
version of the talk, go to http://www.centerltc.com/MosesHandOutDallasLTCI.htm
. You'll see many links
there to sources that support my analysis and recommendations.
If you'd like to get a sense of what others on the
"LTC Dynamics: Policy,
Providers, and Policy" panel had to say, go here
where you can find everyone's PowerPoint presentations and/or handouts.
The other presenters were Kathy Hamby of Genworth, who organized
the program; Lisa Alecxih of the Lewin Group, a major consulting firm;
Paul Forte, CEO of Long-Term Care Partners, which administers the
federal LTCI program; Janice Zalen of the American Health Care
Association, a leading long-term care provider trade group; and Mary
Alexander, President of Home Instead, a rapidly growing home health care
WHAT'S REALLY HAPPENING TO LTC?
Ladies and Gentlemen:
You have been sold a bill of goods.
My topic today is "What's Really Happening to
I could sub-title it:
"How Ideological Bias and Special Interest Politics Are
Ruining Long-Term Care for Everyone."
Do I have your attention?
What is the "bill of goods" you've been
It goes something like this:
Long-term care is expensive. People are spending down catastrophically all across the
country because of it. A
growing elderly population will need more and more LTC in the future.
Yet, people don't buy insurance against the risk.
They're in denial and, besides, the coverage is way too expensive
and (whisper) not very good. People don't even use their home equity for long-term care.
What a mystery!
So, given these circumstances, we have nowhere to
turn but to government programs. But
the ones we have, Medicaid and Medicare, they're no good either.
They trap people in nursing homes unnecessarily,
provide questionable quality at best, and they're still breaking the
best hope is social insurance: universal
publicly financed health care on the European or Canadian model, but
including long-term care, unlike most of those countries.
Failing that, we should "re-balance"
Medicaid to pay for less expensive home and community-based long-term
care (which people want) instead of nursing home care (which they
Like any slick sales pitch, some of this is true.
Most of it isn't.
Is long-term care expensive? Of course, but there is only a small risk of a catastrophic
loss, which means long-term care lends itself perfectly to a private
Are people spending down catastrophically for
long-term care? Of course
not. If they were, LTC
insurance policies would be flying off the shelves.
Three-dozen "spend-down studies" proved long ago that
asset spend down for long-term care is inconsequential.
Do people fail to buy long-term care insurance
because it is too expensive, too complicated, poor in quality? No!!! They don't
buy insurance for long-term care because the government has been giving
it away for 40 years.
But wait a minute, you say.
That can't be true. Everyone
knows Medicaid requires impoverishment and Medicare LTC financing is
Will Rogers said:
"It isn't what we don't know that gives us trouble, it's
what we know that ain't so."
Income is almost never an obstacle to Medicaid
long-term care eligibility. Anybody
who can't afford private nursing home care--and thatís almost
everybody--can qualify easily based on income.
Cash assets ARE severely restricted, but exempt
assets have no hard limits.
Home equity was capped at $750,000 by the Deficit
Reduction Act, but Medicaid LTC recipients can still keep a business,
automobile, home furnishings, personal belongings, term life insurance,
and pre-paid burial plans for everyone in the family--of unlimited
And that's before we even consider the unlimited
asset transfers five years in advance or the sophisticated
"Medicaid planning" techniques marketed widely by elder law
Well, OK, you say.
Virtually anybody CAN get Medicaid to pay for long-term care even
after the insurable event has occurred.
But, Medicaid has a terrible reputation for poor
access, quality, low reimbursement, discrimination and institutional
bias. No one in his right
mind would plan intentionally for that.
True, but the real problem is almost nobody's
planning intentionally for anything regarding LTC.
Few people think about long-term care until it's
too late for insurance. Why?
government has funded most formal, paid LTC for so long that the risk
and cost isn't on anyone's radar screen.
That's why 80% of the potential market for LTCI
never rises to a level of concern sufficient to speak with an insurance
agent. And it's why only
1/3 to 1/2 of the remaining 20% actually buy the product.
Rational people in possession of all the facts
would buy LTCI to avoid Medicaid dependency and to mitigate their
biggest risk: the impending
insolvency of Social Security ($15 trillion unfunded liability),
Medicare ($71 trillion), and Medicaid (bankrupt already.)
But that's not what rational people are being told.
The government (and its minions in the rent-seeking
domain of consultants and others who profit from the status quo) are
talking out of both sides of their mouths:
out loud they say, "beware long-term care; buy LTCI."
But in practice they strive to make Medicaid LTC
ever more attractive by providing more HCBS that are easier to get with
more and more generous eligibility rules.
That's a disastrous path.
Because HCBS do not save money, but they do leave
the public thinking Medicaid is OK and getting better all the time.
That leads to a "woodwork factor," i.e.
induced demand, increased artificial impoverishment, and a reduced
market for private insurance.
That's the same path that has led us to the current
brink of fiscal disaster.
There IS an easy solution.
More on that in a moment.
But first, how'd we get into this mess where the
Bush Administration, most states, and all the academics and for-profit
consultants are pushing policy that can only make things worse?
First and foremost, the problem is that there is a
lot of money to be made by milking the status quo for all its worth.
But let's give the advocates of government
financing the benefit of the doubt and assume they're not just greedy,
self-serving, and taking advantage of the easy money.
Let's say they're just honestly confused.
How could that be?
They look at the status quo and assume there's no
solution but more government money.
They fail to ask the critical question:
how'd long-term care get so screwed up in the first place?
If they asked that question, they'd see that when
government made long-term care free in 1965, it choked off a private
market for HCBS and LTCI to pay for them, it generated a deadly
entitlement mentality, and it created the deficient welfare-financed,
nursing-home-based system we're struggling so hard to fix now.
When you understand that today's LTC system is the
way it is because of excessive and misguided government intervention in
the marketplace, the last thing in the world you'd recommend is MORE
government funding for MORE attractive publicly financed services.
That would be like trying to put out a fire by
dousing it with gasoline!
What's going to happen if we follow the course
recommended by most "experts," that is, expand public
financing of LTC and make it ever more attractive and easier to get?
To find the answer, look no further than the
experience of the private LTC insurance industry over the past decade.
When LTCi was mostly nursing home insurance, policy
holders were loath to file claims.
Who wants to go to a nursing home unless you really need to be
As LTCi expanded to include among its benefits home
care, assisted living, adult day care, respite care, case management,
etc., etc., the whole claims dynamic changed.
Now everyone with a policy wants to collect all the
LTC benefits they can legitimately claim and more if they can get away
claims from more insureds, higher costs, rising premiums, tougher sales,
lower profits, a flat or declining market, and companies exiting the
business. Sound familiar?
What makes the advocates of government-financed
long-term care think their experience will be any different? Certainly, it won't.
As Medicaid converts from funding primarily nursing
home care to primarily home and community-based care, the welfare
program--already a huge drain on state and federal budgets--will undergo
the same consequences as did the private LTCi industry.
To wit, demand for Medicaid will increase when the
program offers services people want instead of nursing home care.
Medicaid estate planning will grow if it gets
people home and community-based care, and even in some states, Medicaid
payments for relatives to provide the care.
Demand for private LTC insurance and reverse
mortgages--the two major private financing alternatives for long-term
care--will decline even more than already.
Why pay premiums or use your home equity if government will
provide the services previously only available to private payers?
Either Medicaid program costs will explode or long
lines will form of eligibles waiting for access to services.
Neither eventuality will please consumers or voters.
Clearly, both public and private financing of
long-term care are heading toward a total meltdown if we stay on the
And it's all so completely unnecessary.
The solution is obvious and easy.
Well, it's easy practically speaking if not politically.
The solution is to target Medicaid-financed
long-term care to people truly in need.
Stop using Medicaid as inheritance insurance for baby-boomer
heirs. Tighten up the
eligibility rules; shut down Medicaid estate planning; enforce liens and
Then take some of the savings from these measures
and use them to educate and incentivize people to purchase long-term
care insurance and to use home equity conversion.
Do these things and, within a decade, the long-term
care financing crisis will be resolved.
Extra private financing will save the public safety net.
The elderly will get better care in the most
appropriate settings whether they pay privately or depend on public
LTC providers will thrive with more private
financing and less dependency on inadequate revenues from fiscally
strapped public programs.
If they can make a profit, Wall Street firms will
again offer the debt and equity capital to build, operate and maintain
the huge infrastructure we will need someday to care for aging boomers.
In a nutshell, folks, this isn't "rocket
science" as they say in Washington, DC.
But it does require some clarity and objectivity:
a willingness to confront the facts, to understand how and why we
got into this mess, and to follow the medical profession's timeless
"First, do no harm."
Then, give Medicaid back to the people it was
originally intended to serve.
Do those two basic things, and savvy consumers in a
free market will do the rest.