LTC Bullet: LTCI Conference Wrap

Thursday, March 18, 2010


LTC Comment: The Tenth Annual Intercompany Long-Term Care Insurance Conference in New Orleans built momentum and ended on optimistic notes. Details after the ***news.***

*** QUERY: The Congressional Budget Office reported today that the health insurance reform proposal currently under consideration would save $100 billion over ten years. Does that "savings" still include the five years of "reserves" expected to be collected by CLASS before it starts paying claims? It did before. Imagine if a private insurance company treated its reserves as revenue offsetting expenses instead of capital invested to ensure payment of future claims. Is Bernie Madoff really in jail or ensconced somewhere at CBO? ***


LTC Comment: A full day of meetings, sessions and 11 hours of travel interfered with our reporting to you yesterday from the 10th Annual ICLTCI conference in New Orleans. So here's a wrap up on that important meeting.

Day two (March 16) began for me in the second of two sessions on the LTCI Partnership program. Mark Meiners of Georgetown University, the "father of LTCI Partnerships," opened the program with an overview of the philosophy behind and the history of the Partnerships. Then we heard about challenges they've faced from several state officials involved in implementing partnership programs. For example: Idaho does not allow Partnership benefits to continue compiling after initial Medicaid eligibility determination, though some other states do, including Minnesota which presented next. Some states like Minnesota allow "reciprocity," while other states don't. Hunter McKay of DHHS-ASPE (Assistant Secretary for Planning and Evaluation) wondered out loud why states wouldn't allow reciprocity in that it isn't very onerous. After all, he explained, people have to need and receive LTC, qualify for benefits under their private insurance, then qualify for Medicaid, and move geographically to the reciprocal state before reciprocity becomes an issue. Few get to that point, so why demur on reciprocity, he asked. Colorado reported, for example, that they have no one on claim yet. Virginia brought home the point that Medicaid is an extremely unstable program financially and may not be the same or even be there at all when LTCI Partnership policyholders need and want it. VA is freezing enrollment to home and community-based services and looking at dramatic eligibility cuts. The state legislature even considered a bill to drop Medicaid altogether, although it didn't pass. Minnesota has raised its medical triggers for Medicaid eligibility to FOUR ADLs from two. Mark Meiners acknowledged these problems but pointed out again that even a little bit of private insurance helps salvage Medicaid. The session closed with the comment from a panelist to wide agreement that "The LTCI Partnership SHOULD NOT be marketed as supplementing Medicaid." Hear, hear!

The next session I attended was titled "The Economics of a Public Long Term Care Program," a euphemism for the "CLASS Act." Despite some very strong panelists speaking on behalf of logic, evidence and actuarial sanity (Steve Schoonveld of LifePlans; Malcolm Cheung of Prudential; and Al Schmitz of Milliman), everyone seemed to be bending over backwards to give CLASS the benefit of the (clearly overwhelming) doubt. Howard Gleckman of the Urban Institute represented the Obama Administration's latest slam/dunk talking points: "99.5% sure health insurance reform will pass and 100% sure it will include CLASS." We'll see. I still hold out a 50/50 chance cooler heads and sound reasoning will prevail. The CLASS proposal's lack of underwriting, actuarial insolvency, inadequate premiums, excessive promises, and vulnerability to hollowing out by the Secretary of DHHS were all covered, but with kid gloves. On a hopeful note: 60 minutes after the Academy of Actuaries published its critique of CLASS, CBO was on the horn picking their brains for details. If this thing does pass, implementation will be a nightmare for federal bureaucrats tantamount to the challenge of making "a silk purse out of a sow's ear." They'll need all the help they can get from clear thinkers in the private sector. I've covered and will continue to cover the structure and flaws of the CLASS Act in this space so won't rehash here the same old, same old points reiterated in this conference session.

Day Two's afternoon session for me was "New Directions for Medicare/Medicaid: What it Means for LTCI." The program was mislabeled as it was very narrowly focused on just one aspect of reform: expanding government financing of LTC. Sue Anderson, a Medicare specialist and former legal services attorney, talked about closing the Part D "donut hole," empowering MedPAC to cut nursing home reimbursements, de-fragmenting "dual eligible" funding for Medicare/Medicaid eligibles, bundling services, expanding counseling. And how is this going to help LTC insurers? Well, maybe, old people will get healthier because of massive government spending which might reduce LTCI claims. Yeah, right. Shawn Bloom, president and CEO of PACE (Programs of All-Inclusive Care for the Elderly) spoke about this wonderful but underfunded program that actually integrates Medicare/Medicaid funding for dual eligibles. He clearly sees the handwriting on the wall: public funding for PACE is doomed, but private LTC insurance does not lend itself to supporting PACE-like programs directly. "Never underestimate the power of government payment to influence long-term care," he warned. We agree. Medicaid and Medicare made nursing home care free in 1965. That well-intentioned intervention had unintended consequences. It choked the market for privately financed home care and condemned LTC insurance to permanent niche status. Bloom clearly sees the "vulnerability of Medicaid as an LTC funder because it is counter-cyclical; its costs go up when government revenues go down." He says at least the CLASS Act puts funds in the hands of beneficiaries to spend as they choose. But that's only wishful thinking as CLASS if it passes is just another huge unfunded liability to add to the fiscal anchors sinking Medicare and Social Security.

Late in the afternoon on the conference's closing day came the piece d' resistance, the "CEO Forum." Conference Chair Carroll Golden of Transamerica LTC insisted on scheduling this major attraction earlier in the program than in past years--before attendees start leaving for home. A good move. The auditorium was packed. Like last year, attendees could vote electronically for various questions posed about the likely future and best paths forward for the LTCI industry. Unlike last year, however, I couldn't find the questions on the conference website, so can't yet give you a comprehensive summary of the queries and responses. When that's published, we will bring it to you.

The CEOs represented at this year's Forum were: Bruce Baude of the LTC Group; Malcolm Cheung of Prudential; Michael Fradkin of MetLife; Marianne Harrison of John Hancock; Tom Skiff of LTC Global; and Buck Stinson of Genworth. Here are my Q&D (quick and dirty recaps) of the questions and their answers:

How would "health reform" (read the CLASS Act) affect LTCI? Harrison: no big impact. Cheung: CLASS will get the sick people; LTCI will get the good risks. Stinson: how can LTCI oppose a program to help the disabled; big PR problem. Will CLASS's easy underwriting make people expect private LTCI to "rubber stamp" claims too? Fradkin: we lobbied and improved the bill but only on the margin.

Audience poll: 77% of the audience thought CLASS would be neutral or positive for LTCI.

How can we improve sales and distribution? Skiff: Personal favorite is winning over financial professional who oppose LTCI now. Cheung: Make whole process of selling LTCI easier to win over career agents. Stinson: Six million of total eight million policies sold by specialists. (Conflicts with others who say 80% of LTCI sold by non-specialists who sell only two or three policies a year. Who's right?)

Individual or Group in the future? Cheung: big change from 2000-02 (14%) to 2009 (25%) group. Group more "vigorous" though premiums less than half. Fradkin: Employers may be dubious of rate increases.

Combo products? Stinson: Traditional LTCI is tough sell to Congress; combo products have more public policy momentum. Baude: Lots of talk, little action; very expensive way to get LTCI. Skiff: Combos could be better fit with financial advisors. Harrison: Niche product today; not sure of potential. Fradkin: Need to be careful about combining two very complicated products.

Audience Poll: Which initiatives most important? 24% said awareness programs. 25% said expanding distribution. But eliminating "crowd out" by government financing wasn't even on the list. Sales trends for the next three years: 33% say steady increase, somewhat more optimistic than last year's prognostication.

Opportunities and threats to LTCI? Fradkin: Interest rates; hard to hedge against low interest rates. Cheung: Aging of boomers more and more of whom are caring for parents and gaining awareness. Financial crisis may reduce self-insuring. Stinson: Risk management back in vogue. Baude: Opportunity to not just pay for care but guide care. Harrison: Need more competition.

Audience Poll: Greatest risk to LTCI? Only 6% expansion of government program; 30% public perception of the industry; 28% over-regulation.

Last year's conference, 88% thought awareness programs very beneficial. Outcome? Harrison: Failed miserably; focus changed to shaping CLASS. Baude: didn't produce result we wanted in short term, but may in time. Stinson: Own Your Future participation "off the charts."

What has the LTCI industry learned in past decade of conferences? Cheung: Lots about underwriting, rates of return, lapse rates. We're much better positioned to succeed in the future. Baude: hard to believe the market won't improve with Medicaid in trouble. Stinson: Biggest challenge is still consumer apathy.

This year's CEO Forum and the audience's reaction were more optimistic than last year. The session ended with panelists invited by an audience member to list their "rainbows" about LTCI's future, which they did. After a few choruses of "Kumbaya," the session ended. Not really, but there is indeed a lot of hope in the air.

What struck me this year as every year is that the "elephant in the room" was totally ignored. And what's that? Medicaid crowds out 2/3 to 90% of the potential market for LTCI but no one (except me) ever talks about promoting public policy to target Medicaid to the poor thus saving enough money to finance tax deductibility for LTCI thus further saving Medicaid for those in need. It's ironic that LTC insurance is the only hope to save the Medicaid LTC safety net, but the industry never promotes that aspect. Well, that's what the Center for Long-Term Care Reform is for, I guess. Thanks for your support.

The Tenth Annual Intercompany LTC Insurance Conference closed with a big 10th anniversary celebration with free drinks, great food, and quiz-show-based entertainment. A good time was had by all.

A third day, on Wednesday, included a Think Tank sponsored by the Society of Actuaries. More on that when we have their report.

Having not found a good place anywhere else to include my only criticism of this year's conference, here it is. The Sheraton New Orleans' audio systems were dismal. From the opening keynote by Gail Sheehy (hard to hear) to the closing party (could not hear at all), sound magnification was simply awful. Hopefully that failure won't affect recordings of the sessions. But, hey, at least the Cajun food at all the exhibit and meal breakouts was yummy.