LTC Bullet:  What's Really Happening to LTC? 

Wednesday, July 11, 2007 


LTC Comment:  Still mystified why America's LTC system is so messed up and impervious to improvement?  Read on, after the ***news.*** 


*** THIS LTC BULLET IS SPONSORED BY PETER GELBWAKS in celebration of LTC Global Solutions' ( acquisition of Gelbwaks Insurance Services (  Gelbwaks and LTCGS's Tom Skiff, both veteran leaders and innovators in the LTC insurance industry, believe they and their professional teams will make a real difference working together to build and improve long-term care insurance.  We congratulate both companies and their directors and representatives on this promising merger and thank them both for their past and on-going support of the Center for Long-Term Care Reform. ***  

*** CHALLENGE MET:  Last week, we invited readers and Center members to pitch in so Steve Moses can attend and report from the Long-Term Care Partnership Summit meeting in Arlington, Virginia August 1-2.  We set an ambitious goal of $2,000 to cover travel, lodging, and to offset time otherwise spent on fund raising or revenue-producing work to sustain the Center.  We offer very special thanks to the following persons for their pledges of support.  In the order received:  Charles Arnold, Teresa Eagan, Gurdon Horner, Bill Lee, Bob Vandy, Pete Gelbwaks, Jerry Dock, Phyllis Shelton, Phillip Sullivan, and Sally Leimbach.  Amounts varied but every pledge of support is greatly appreciated.  We dedicate the "LTC Embed Reports" that will spring forth from this important meeting to all those who pitched in so generously. *** 

*** SPEAKING OF THE LTC PARTNERSHIP SUMMIT MEETING:  Here's the scoop.  Mark Meiners, Professor and Director of the Center for Health Policy, Research & Ethics at George Mason University, has announced the revival of the LTC Education Foundation (which previously put on the original 17-year-running "Private LTC Insurance Conference") for the purpose of sponsoring "The First Annual Partnership Summit:  Charting the Future of Long-Term Care Insurance" to be held August 1-2, 2007 in Arlington, VA.  The meeting begins with a "pre-conference" on July 31.  For all the details and to register, go to  (Scroll right if your browser doesn't catch all the links.)  Be there if you can.  This one's important. *** 



LTC Comment:  If you're still wondering . . . why most Americans are in denial about long-term care . . . why our system remains plagued by institutional bias . . . why a welfare program pays for most LTC in the wealthiest country in the world . . . why access to and quality of care are so questionable . . . why lawyers prosper but caregivers and LTCi producers struggle in today's LTC system, read on.  Answers follow. 

The following opinion column by Steve Moses is published in the current issue of Health Insurance Underwriter (HIU).  Members of the National Association of Health Underwriters ( receive HIU for free.  Learn more and read the magazine online at   

Rather listen to the speech as originally delivered?  Access an MP3 or WMA audio recording at  


"What's Really Happening to LTC?," Health Insurance Underwriter, Vol. 55, No. 7, July 2007, pps. 48-52;  

What's Really Happening to LTC?
by Stephen A. Moses
July  2007  

Comments Presented at the 7th Annual Intercompany LTCI Conference in Dallas on March 27 

Ladies and Gentlemen: You have been sold a bill of goods. 

My topic today is "What's Really Happening to Long-Term Care?" I could subtitle 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 sold? 

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 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! Given these circumstances, we have nowhere to turn but to government programs. But the ones we have, Medicaid and Medicare, are no good either.   

They trap people in nursing homes, unnecessarily; provide questionable quality, at best; and they're still breaking the bank. 


Our 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 dread). 

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 insurance solution. 

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 and 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 severely limited. 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 that's 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 value. 

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 attorneys. 

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/her 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? Simple. The 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) is 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 even more attractive by providing more HCBS that are easier to get with more and more generous eligibility rules. 

That's a disastrous path. Why? 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. And, 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," and 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 there? 

As LTCI expanded to include among its benefits home care, assisted living, adult day care, respite care, case management, 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 with it. 

Result?  More 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 current course. 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 estate recoveries. 

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 assistance. 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 admonition: "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. Thank you.