LTC Bullet: Big MOE

Tuesday, March 30, 2010


LTC Comment: "Big MOE" could be the beginning of the end for LTCI's largest competitor. Details after the ***news.***

*** Today's LTC Bullet is sponsored by Gelbwaks Executive Marketing Corp ( Peter Gelbwaks, his partners and their exceptional team, invite you to join with them in making 2010 your best LTCI sales year ever. View his short video on the Center's LTC-TV channel here. ***

*** FULL SPEED ASTERN. With all the hype about health reform, this article about how "most European countries are moving in the opposite direction" is particularly interesting: "A Tale of Two Continents," by Richard B. Saltman. Thanks to Center member and Author-Editor Nancy P. Morith for this tip. ***

*** NEW FROM AALTCI. "More women receive privately paid for care at home for lingering health issues with more obtaining this care at older ages than men according to a new report from the American Association for Long-Term Care Insurance. Nearly 60 percent of those receiving care were women with over 80 percent age 75 or older the study found." Read the full press release here when posted. ***

*** STUDIES SHOW more aging workers are staying on the job and that's fine with employers. (LTC Comment: This means more people with income to afford LTCI and more growing savings they'll want to protect.) According to the MetLife Mature Market Institute's March QuickFacts newsletter: "The MetLife Emerging Retirement Model Study found that 74% of employers are primarily concerned about a knowledge drain due to retirements, and only 26% are primarily concerned about the impact of delayed retirements on their overall workforce." Also: "In an annual survey of over 2,700 hiring managers and human resource professionals, conducted in November 2009 for, 30% of employers stated that they have received requests from employees approaching retirement age to remain in the workforce. In the previous year's survey, only 22% of companies reported this trend. At the same time, reflecting their concerns about losing intellectual capital, 10% of employers are considering providing incentives to keep older workers in the workplace. ***

*** ATTN CLTCs: Steve Moses will present a webinar about the CLASS Act tomorrow at 2PM EST. Sponsored by the Corporation for Long-Term Care Certification, participation in this webinar is a CLTC graduate benefit and is restricted to graduates who are certified current. "But if you qualify, don't miss this program," says Steve. "I'm poring over everything I can find about the CLASS Act. I'll bring you facts and analysis with all the clarity and wit I can muster." CLTCs can register here. ***



LTC Comment: OK, true, "Big Mo" was one of my nicknames in college, but that's not what I'm writing about today. Nor is my topic the huge and growing "Mojo" for private LTC insurance arising from passage of CLASS. Nope, today's subject is superficially less dramatic, but even more significant in the big picture.

MOE stands for "Maintenance of Effort" and here's why it's important. Medicaid crowds out 2/3 to 90% of the potential market for private long-term care insurance (Brown and Finkelstein, If Medicaid stops paying most high-cost LTC for the middle class and affluent, prosperous people who now ignore LTC risk will start buying LTCI in droves. But as the law now stands, if state Medicaid programs reduce LTC eligibility for the well-to-do, they lose the huge windfall of supplemental federal matching funds granted by the American Recovery and Reinvestment Act of 2009 (ARRA), AKA the infamous "stimulus." So, states have been tied in knots: damned if they cut eligibility (thus lose the extra federal funds) and damned if they don't (thus continue paying exorbitant LTC benefits they can't afford).

Here's what's new. The ARRA windfall and its requirement that states do nothing to control their hemorrhaging LTC eligibility were both due to expire on December 31, 2010. If allowed to happen, that would have forced state Medicaid programs to act responsibly and target their scarce public benefits to people truly in need. But, because "health reform" passed, that's not going to happen after all. Instead, according to Families USA (FUSA): "The health reform MOE will effectively extend the ARRA MOE on Medicaid until 2014." If you want the details, read the FUSA "Fact Sheet" here. I'll just focus below on the ramifications.

What happens when unstoppable forces (exploding costs) meet immovable objects (constitutionally mandated balanced state budgets)? Nobody knows for sure because we've never come up against a state fiscal crisis quite this huge before. But Dennis Smith (who ran the Medicaid side of CMS for eight years under the previous Administration) and Ed Haislmaier of the Heritage Foundation speculated thus in a recent "WebMemo":

Congress is about to set off a chain reaction that it has not planned for and will not be able to contain. The health care legislation currently in Congress [most of which just passed] not only imposes new costs on states through expansion of the Medicaid program; it also preempts state authority in management of the program. Faced with becoming merely an agent of the federal government, states will likely take the rational and reasoned approach of simply ending the state-federal partnership known as Medicaid.

Read "Medicaid Meltdown: Dropping Medicaid Could Save States $1 Trillion" here. That's $1,000,000,000,000, folks, a truly tempting payday for getting out from under the federal thumb. Hard to believe that at least some states won't take the flyer. If even one does, we'll have a state-level laboratory in which to test the potential of rational LTC public policy. That is, a high-quality public safety net for the truly needy backed up by excellent private LTC insurance for savvy planners with a reverse mortgage fall back for the less responsible non-poor.

If states start bailing out of Medicaid altogether as Smith and Haislmaier predict, Katy bar the door. Everything we ever thought we knew about long-term care financing will be thrown upside down and topsy turvy. It'll be a Category 9.9 public-policy temblor. Out of the rubble, the free market will build a rational, cost-effective LTC financing system. In the absence of perverse incentives that discourage LTC planning and cause people to end up in nursing homes on welfare, the system will fix itself. Private long-term care insurance will be a critical part of the solution.

So, hang in there. Whether it's this "Big MOE" or the broader impact of our rapidly approaching rendezvous with fiscal reality, big changes are afoot. There's never been a more exciting and potentially rewarding time to work in the field of LTC financing. There's never been a better way to "do well by doing good."