Bullet: LTC on the House
Wednesday, May 9, 2007
LTC Comment: How
home equity can fund long-term care, unleash long-term care insurance,
and save Medicaid--after the ***news.***
TODAY'S LTC BULLET is sponsored by Long Term Care
Resources. LTCR is a
national insurance agency and marketing company dedicated to Long Term
Care Insurance and the senior market.
Long Term Care Resources represents the top insurance companies
in the LTC market through a national network of LTC Specialists.
The company specializes in marketing LTC insurance through
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CLTC PARTNERS WITH AMERICAN COLLEGE.
Center for Long-Term Care Reform member and supporter Harley
Gordon and his "Certified in Long-Term Care" (CLTC)
organization have made available to CLTC graduates The American
College's HS 351 course, "Health and Long-Term Care Financing for
Seniors," at a discounted registration fee.
The course is part of the curriculum for The American College's
prestigious CASL(tm) Retirement Coaching Program.
Says Gordon: "CLTC
is excited about the opportunity that this partnership offers our
graduates and looks forward to the results of our positive synergy in
the future." ***
LTC INSURANCE MARKETING TOOL KIT. To
help agents and brokers market tax advantaged long-term care insurance
to their clients who are business owners or self-employed, the American
Association for Long-Term Care Insurance (AALTCI) has introduced a
Marketing & Sales Tool Kit ($49 for members,$89 for non-members).
"The kit contains everything a producer needs to make the
sale simple including a 50-minute audio interview with four leading
experts who successfully focus on selling to business owners, two highly
colorful countertop office displays, generic marketing material and 20
copies of the 2007 edition of the Business Owner's Guide To
Tax-Qualified Long-Term Care Protection," AALTCI president Jesse
Slome explains. Order by
calling AALTCI at (818) 597-3227. ***
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LTC BULLET: LTC
ON THE HOUSE
LTC Comment: Medicaid
protects up to three-quarters of a million dollars in home equity from
the cost of long-term care. Consequently:
(1) critically needed private funds are diverted away from
long-term care financing, (2) Medicaid pays instead, but inadequately,
(3) LTC access and quality suffer, and (4) private financing
alternatives like reverse mortgages and long-term care insurance
languish. Once we
understand the problem, the solution is obvious.
In his latest article in Health Care News,
Center for LTC Reform president Steve Moses explains the problem and the
is The Heartland Institute's national monthly outreach publication for
free-market health care reform. The
Heartland Institute is a 501c3 charitable, nonprofit organization
devoted to discovering and promoting free-market solutions to social and
economic problems. Visit
Heartland at www.heartland.org.
Health Care News at http://www.heartland.org/Publications.cfm?pblId=2.
Find Steve's article in the June 2007 issue is at http://www.heartland.org/Article.cfm?artId=21166.
Republished below with permission.
Stephen A. Moses, "Long-Term
Care ... on the House,"
Health Care News, Vol. 8, No. 5, June 2007; http://www.heartland.org/Article.cfm?artId=21166.
Long-Term Care ... on the House
if America could wave a legal wand and make the huge government cost of
long-term care (LTC) shrink dramatically? Evidently, it's possible, so I
attended two conferences to find out how.
on that after we lay the groundwork.
has a "long tail"--it's a service consumers have to start
thinking about and planning for long before they need it, in order to
have adequate coverage when they do.
insurance industry understands that. LTC insurers have to underwrite
policies, collect premiums, set aside reserves, and earn a good economic
return on those reserves for decades. Otherwise, they can't pay claims
when policy holders start needing expensive, extended home care,
assisted living, or nursing home care.
the government doesn't get it.
(a means-tested public assistance program) and Medicare (its social
insurance sister program) pay for the vast majority of all formal LTC
services in the United States. Yet Medicare has a phony "trust
fund" with nothing in it except IOUs, and Medicaid is totally
pay-as-you-go out of general tax revenues.
program is setting aside anything real for the future.
will the money come from to pay for publicly funded LTC when 77 million
Baby Boomers are drawing down Social Security, Medicare, and Medicaid
instead of paying in?
will have to come out of the productive economy in the form of taxes to
support those programs. The worry is that a level of taxation that high
will kill the very economy that generates the profits to tax.
to the rescue, SuperHouse!
it turns out, older people in the United States collectively have around
$2.5 trillion in home equity, much of which they could convert to cash
flow through reverse mortgages, to pay for their LTC or subsidize their
incomes so they could afford private LTC insurance.
don't do it, of course, for a very simple reason: Medicaid exempts the
home and all contiguous property, and Medicare doesn't care how wealthy
you are. So this resource lies fallow, those public programs shudder
under the fiscal burden, and the private markets for LTC insurance and
reverse mortgages that could help fund LTC languish.
to unleash home equity as the solution to Medicaid and Medicare's LTC
woes? Simple: Reduce or eliminate Medicaid's home equity exemption,
which is now at $500,000 to $750,000, depending on the state.
home equity at risk, more people will use reverse mortgages to pay for
LTC--or better yet, they'll plan early and buy LTC insurance.
way, the private markets for these products will surge; tax revenues
will come into state and federal treasuries instead of going out; and
people will get better LTC when they pay for it themselves instead of
relying on bankrupt public programs.
it feasible? I attended the National Reverse Mortgage Lenders
Association's (NRMLA) Western Regional Conference in February to learn
more about their product and its potential.
a nutshell, reverse mortgages allow people age 62 or older to pull money
out of their home equity in a lump sum, monthly payment, or line of
credit without having to pay back the principal or interest until after
they die, sell the house, or move out permanently.
mortgages have a reputation for being expensive compared to
"forward mortgages," so they're not appropriate for short-term
loans. But when you consider that borrowers are guaranteed the proceeds
of their loan and the use of their home for as long as they live
there--even if the amount borrowed exceeds the value of the underlying
collateral some day--some extra cost seems warranted.
Johnson, president of Financial Freedom, one of the larger companies in
the reverse mortgage business, said, "Roughly 300,000 reverse
mortgage loans have been made over the past 20 years. With in excess of
25 million senior households today, the industry has penetrated barely 1
percent of the eligible market."
President Peter Bell added, "I think that in the future we'll see
more products that integrate reverse mortgages with home maintenance
and, perhaps, home care services. In effect, these services would be
paid for by the proceeds of a reverse mortgage--with a single provider
coordinating the package."
line: The reverse mortgage industry is ready, willing, and able to step
into the LTC financing breach.
how about the senior advocacy community that usually wants nothing to do
with private industry and lobbies incessantly for more government
funding of LTC?
check out that question, I attended a meeting of the Joint Conference of
the American Society on Aging (ASA) and the National Council on Aging (NCOA)
in Chicago in March.
times are changing. Perhaps with the fiscal vise closing on their
favorite public programs, senior advocates are finally opening their
minds and their meetings to market-based financing alternatives. I
attended an excellent session on "LTC Partnership" programs, a
newly reauthorized way to incentivize private LTC insurance coverage by
forgiving some Medicaid spend-down liability.
more to the point of this article, the session on home equity
conversion--which includes reverse mortgages but is not limited to
them--was truly exceptional.
watched the reverse mortgage market develop at a glacial pace for two
decades," NCOA President Jim Firman said. "We're finally close
to the tipping point with over $2.5 trillion in home equity held by
seniors. There is a growing awareness this asset could help people age
in place. No one expects a new federal program to ride to the rescue
anymore. We need cooperation between the private, public, and voluntary
sounds very promising, and indeed, NCOA has sponsored invaluable
research on the potential of home equity conversion to help fund
it's not all sunshine and roses between senior advocates and the private
a "Panel of Pundits" at the ASA/NCOA meeting, Firman
congratulated the American Association of Retired Persons (AARP) and the
National Committee to Preserve Social Security and Medicare for being
"in the vanguard beating back privatization."
lobbyist John Rother said, "College students question whether
government can be counted on. We're not helping the cause of social
justice by letting future leaders become convinced that programs won't
be there for them."
after speaker pooh-poohed the idea that Social Security's and Medicare's
$86 trillion "infinite horizon" unfunded liabilities were
really such a big problem.
ignore those huge expenses and empty coffers is irresponsible. But at
least people who refuse to confront the reality that Medicare, Medicaid,
and Social Security haven't got the trillions of dollars it would take
to fund LTC are starting to come around on the potential of getting real
help from the private sector with LTC financing.
Moses (email@example.com) is president of the Center for Long-Term
Care Reform in Seattle.
LTC Comment: Just to close the loop: once home equity is at risk for long-term care, people will start buying long-term care insurance, thus unleashing that long-languishing product to save LTC financing for the baby-boom generation.