LTC Bullet:  LTC Culture Shock 

Tuesday, August 28, 2007 


LTC Comment:  LTC providers and insurers occupy two very different economic worlds.  When they visit each other, culture shock often occurs.  One example after the ***news.*** 

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LTC Comment:  There is a vast gulf of misunderstanding and distrust between LTC providers and insurers in the United States.  Providers think insurers should cover everything.  "After all, what good is insurance if you can't buy it when you have Alzheimer's Disease?"  Insurers think providers are just looking for a funder with deeper pockets than Medicaid.  "Don't they know we have to underwrite, price actuarially, and invest reserves, unlike government?"  Consequently, there has been very little successful cooperation between LTC providers and insurers. 

We studied this problem and reported on it in a paper titled "The LTC Triathlon:  Long-Term Care's Race for Survival."  Read it at
Misunderstanding between providers and insurers is deeply rooted in the history of LTC service delivery and financing in the United States.  We covered that topic in "LTC Choice:  A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at and more recently in "The Realist's Guide to Medicaid and Long-Term Care" at  

In a nutshell, Medicaid made nursing home a free (or heavily subsidized) good in 1965.  That was the origin of institutional bias.  With nursing home care funded by government, people were discouraged from paying privately for home- and community-based services (HCBS).  So an HCBS infrastructure didn't develop.  Nor did private insurance to pay for LTC get market traction.  Why insure for a financial risk that didn't exist?  But as Medicaid-financed nursing home care lost favor with the public, private HCBS, assisted living, and insurance to pay for them got a foothold.  Nevertheless, Medicaid and Medicare remain the overpoweringly dominant funders of long-term care, so LTC providers have put most of their lobbying efforts into a fruitless fight for more public funding.  Simultaneously, they've been disappointed by the private insurance that has been available because of the coverage and payment deficiencies of older policies. 

What's about to change this whole dynamic is the gradual implosion of publicly financed LTC over the next two or three decades.  In a very few years, LTC providers will have to depend much more heavily on private financing.  LTC insurers (and reverse mortgage lenders) will find their products far more in demand.  At that point, providers, insurers and lenders will collaborate, understand each other's challenges and needs, and adapt successfully.  But why wait for the crisis?  The time to start this process is now.  There is a lot of good to be done and a lot of money to be made for open-minded providers and insurers who get in front of the Age Wave and ride it.  Others will be capsized financially by it. 

Your Center for Long-Term Care Reform staff had the following exchange with the representative of a successful Continuing Care Retirement Community who is a long-time supporter of the Center.  He's desperately trying to improve long-term care and reaching out to insurers for help.  We want to encourage this kind of conversation and hope it leads to closer collaboration between these two critical sides of the long-term care business. 

My interlocutor in this exchange asked to remain anonymous. 



I'd appreciate your assistance in our efforts to get LTC insurance companies to recognize our model of care and permit coverage of the nursing care we provide under our LTC license.  Some time ago we decided to drop our nursing home license and combine assisted living and nursing home levels into a new modality of care.  We provide now essentially the same levels of care as offered under our old model of assisted living and nursing home care, except Medicare skilled nursing care.  

Our goals in establishing this new model were threefold: 

1. Eliminate the need for residents to move from assisted living to a nursing home setting thus reducing the stress to fragile elders as their health declines.  So far in the first year of operating this model we have avoided moves from one level to another for over 15% of our residents.  Families report high levels of satisfaction as we bring the care directly to the resident. 

2. Reduce the overall cost of care by providing essentially the same levels of nursing and personal care as in a nursing home in a less restrictive, lower cost setting.  We have demonstrated a notable reduction in care costs during the past year. 

3. Change the culture of care through a neighborhood, homelike care setting to improve the quality of life and the dignity of living. 

The problem we are encountering is insurance companies that do not specifically include assisted living in their policy coverage, typically a problem in policies written 12-15 years ago.  While we can demonstrate that we are providing care at the level equivalent to a nursing care center (our staffing levels, for example, are essentially the same as we had when operating a licensed nursing home), our residents have usually been denied coverage on the technical point that assisted living is not referenced in the policy.   

We have assisted residents/families in appealing their denials by insurance companies but to date have rarely succeeded in getting the companies to understand that we are actually providing a less costly service for their beneficiaries.  In a case just denied recently, a couple has been denied coverage on the very point that assisted living is not specifically stated as a service covered in their policy.  When we were providing the exact same care under our nursing home licensed program a couple years ago, coverage was approved by the company.   

Do you have any experience working with this problem?  Any strategy you could suggest to make our case more effectively in the face of companies that seem to be motivated exclusively with protecting their premium dollars? 

As a long time member of the Center for Long Term Care Reform, I hope we can make progress on this issue which affects more and more facilities like ours who are trying to provide the most cost-effective care for our vulnerable residents. 

Signed:  LTC Provider member of the Center for Long-Term Care Reform 


We replied: 

Dear LTC Provider:   

My heart goes out to you and your residents.  And to myself!  I've paid for my mother's LTC insurance policy for 20 years.  It is nursing-home only and requires a three-day hospitalization.  It was state-of-the-art in 1987.  My own policy, purchased in 1996, covers lifetime assisted living and nursing home care, so no problem there.  Both policies are with Genworth, an industry leader, for whose predecessor I worked at the time. 

Unfortunately, it is unrealistic to expect insurance companies to pay for a benefit that didn't exist when they priced their products.  It would be unfair to policy holders too.  Paying for assisted living on nursing-home-only policies would deplete reserves and force premium increases for everyone.   

Public programs can promise everybody everything and then deliver whatever taxpayers will bear, at least until the public financing system implodes, which it will in time.  Private insurance companies don't have the same luxury.  They are held to contracts enforceable in a court of law.  They cannot arbitrarily decide to expand benefits and then raise premiums or reduce benefits like government, with a vote and stroke of a pen.   

Anyway, I have little influence with the LTCi carriers.  Few of them support the Center.  And even fewer providers do.  Why?  Our mission is to preserve Medicaid as a safety net for the poor and to improve care for everyone by reducing dependency on low Medicaid reimbursements.  It just happens that the only way to do that is to get more people insured or using their home equity for their LTC.  There is not enough support for that mission even from the people and companies who would benefit most.   

Best wishes,   




Thanks for your response.  I appreciate the work of the CLTCR and will continue to support you with my membership renewal. 

I do want to challenge one assumption you are making.  In the case of our program we are providing nursing home equivalent care in a licensed assisted living setting.  In almost every case we are able to sustain all residents in assisted living except those who require Medicare skilled care post hospitalization. The care is not only equal to the nursing benefit it is better because it is more home-like and thereby more satisfying to the resident and it's also less expensive.  

These residents with LTC insurance policies, especially the ones with unlimited benefits could cost the insurance company more in the end by having to go to a nursing home for care.  Many CCRC's are transferring their memory support/dementia care from their nursing home setting to their assisted living facility so this is a growing issue for our elder care industry.  We believe we can demonstrate that our care levels justify the coverage and are more cost effective for insurance companies.  Insurance companies do have the ability to interpret their policies in such a way that they would not be taking on an additional liability.  This would be the case for our program participants, not for others who cannot demonstrate the nursing home equivalency.  In my opinion, it is unfair to all policy holders not to do so. 

Your thoughts? 

Best regards, 

LTC Provider   



Believe me, I hear you.  My own mother lives in an assisted living facility which seems to have a very similar arrangement for "aging in place."  Just this morning I received her latest assessment which will raise her care level and the monthly charge.  At some point in the future, the care level may reach nursing-home equivalency.  It certainly seems that at that point, it would be appropriate for her nursing-home only LTCi policy to pay.  But it won't.  Nevertheless, we'll keep her in assisted living as long as we can, because of the many amenities.  Our proclivity (and others') to do that is cost avoidance for the LTC insurance industry, without which it could not hang on by its financial fingertips as it does now.   

I often make the analogy between the bitter experience of private insurance over the past 15 years and what is about to happen to Medicaid.  When LTCi was nursing home insurance, no one wanted to file a claim.  Who wants to go to a nursing home?  After it became comprehensive coverage, everyone wanted to claim.  That's not the only or even the biggest reason, but it is an important part of why premiums have increased, sales have declined, and no one is making much money in the LTC business (except Medicaid planners.)  Now that Medicaid is moving toward HCBS to save money, the same thing will happen.  Demand will increase, costs will inflate, caps on slots and reimbursement will worsen and the market for private financing alternatives will decline even faster. The whole system is in a world of hurt.   

The insurance industry can't save the day unless and until government gets out of the way.  That's where the institutional bias comes from:  free nursing home care from Medicaid for 40 years.  It's just wrong to blame private insurance which is light years ahead of Medicaid in adapting to consumer preferences.  Indeed, only the old policies--that mirrored Medicaid and Medicare coverage and triggers--remain problematical.   

Brown and Finkelstein [search at for their papers] show Medicaid crowds out two-thirds to 90 percent of the LTCi market.  How can we expect the LTCi coverage, tiny by comparison to public coverage, to solve the problem public policy caused?  As it stands, LTCi insurers can only survive by enforcing policy language and depending on the public's aversion to nursing home care to keep claims within reasonable bounds.   

Thanks again for your thoughtful inquiry.  I wish I could be more helpful, but this whole problem has become intractable and is probably headed toward total collapse in the next twenty years just as I've predicted for past two decades.