LTC Bullet:  How Will the LTC Plane Land?

Friday, May 17, 2013

Branson, MO—

LTC Comment:  Net results from 50 LTC experts opining about LTC financing after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a General Agent whose proprietary sales tools enable clients to make informed final decisions about buying LTCi in 15-20 minutes, let you evaluate a client's real interest in a combo product in a few minutes, and change work-site LTCi from a proposal-delivery process to interactive consultation. Claude is the lead author of the Milliman Broker World LTCi Survey, was named one of the 10 "Power People" in the LTCi industry by Senior Market Advisor in 2007 and was Chairman of the Board of the Center for Long-Term Care Financing. Test Claude by calling 800-999-3026, x2241 or email him at claudet@targetins.com to ask questions or get references. ***

*** AMERICAN ENTERPRISE INSTITUTE (www.AEI.org) presents “Long-Term Care: Markets or Mandates?” on Friday, May 31, 2013 from 9:15 a.m. - 11:15 a.m. at AEI headquarters in Washington, DC.  LTC Commission appointee Mark Warshawsky will “explain the implications of another publicly funded long-term care insurance program. A panel will then debate whether another government program is the best way to ensure that families can afford to provide the necessary services for their aging loved ones.”  Serving on the panel with Steve Moses (representing the market-based position) are Howard Gleckman (who writes op-eds for Forbes), Joshua Wiener (a highly regarded LTC analyst who favors public financing) and Matt Salo (Director of the National Medicaid Directors Association).  If you can’t be there in person, check out the program’s live stream here.  For more information, please contact Catherine Griffin at catherine.griffin@aei.org, 202-862-5920. ***

*** CENTER NEWS.  We have submitted our final report on the Center’s study of Medicaid estate recovery in Maine titled “Maximizing NonTax Revenue from MaineCare Estate Recoveries.”  More about that report and our findings soon.  We have begun our review of Medicaid and long-term care financing in Virginia.  The Center is conducting that study with the support and participation of the Thomas Jefferson Institute for Public Policy.  Finally, reprising our “2008 National LTC Consciousness Tour,” Steve Moses is headed east in the Silver Bullet of Long-Term Care.  He’ll be nearby and girded for the fight as the LTC policy battle in Washington, DC heats up.  Expect many “LTC embed” dispatches from that front in the coming months! ***

 

LTC BULLET:  HOW WILL THE LTC PLANE LAND?

LTC Comment:  There’s an old quip about flying in bad weather:  “It’s better to be on the ground wishing you were in the air than in the air wishing you were on the ground.” 

I thought of that maxim when I received the latest communiqué from the “Land This Plane Delphi Study” panel led by John O’Leary, Roger Loomis, and Ron Hagelman, all leaders and veterans in the LTC insurance industry’s ongoing struggles.  The Society of Actuaries’ Long-Term Care Section and the Forecasting and Futurism Section sponsored the project.

This study aims to identify the best solution for long-term care financing.  I and 49 other “experts” filled out a survey questionnaire some time ago and the results are in.  There will be a detailed public report published in the future, but for now LTC Bullets has permission to share with you the questions asked and the top-line results and analysis, which follow.

A round of applause and hearty thanks are due the subject matter specialists who generously gave of their valuable professional time to complete the questionnaire.  But a very special expression of appreciation goes to those who designed the questionnaire, identified the experts, compiled and published the results.  Three cheers!

For my part, I find a lot to agree with here.  After all, I’m 1/50 of the input.  But I find a lot to disagree with too, especially in the detailed comments that remain embargoed.  But that’s what makes a good discussion and a vigorous debate.  Which, heaven knows, long-term care financing policy certainly needs.

----------------

QUESTION 1: MEDICAID DISCOURAGES THE USE OF REVERSE MORTGAGES TO FUND LTC, FAMILY CAREGIVING, AND HOME CARE. FIXING THESE INCENTIVES WOULD PROVIDE SIGNIFICANT COST SAVINGS.

 

Strongly Agree

8

Somewhat Agree

15

Neither agree nor Disagree

9

Somewhat Disagree

5

Strongly Disagree

2

 

ANALYSIS

 

There is general agreement that Medicaid discourages use of personal means that might decrease the cost of LTC services to the government, but many think better protections for community, spouse, and care recipient are needed, as current reverse mortgage products are not great.

 

 

QUESTION 2: IF YOU BELIEVE MEDICAID IS HINDERING PRIVATE OR THE OTHER SOLUTIONS, HOW CAN MEDICAID BE MODIFIED TO DISCOURAGE ABUSE, FRAUD, AND USE BY PEOPLE WITH OTHER OPTIONS?

 

ANALYSIS

 

There is some agreement that the Medicaid "crowd-out" effect has been overstated. But there is also agreement that what is killing Medicaid isn't fraud or abuse as is often alleged, but legal loopholes. These loopholes need to be closed and other restrictions should apply to prevent less needy people from accessing benefits.

 

QUESTION 3: HOW CAN MEDICAID BE MODIFIED TO REDUCE COST AND MORE EFFICIENTLY PROVIDE CARE? PLEASE DESCRIBE.

ANALYSIS

There is general agreement that more emphasis should be placed on home and community based care delivery. HCBS viewed as cheaper and more popular except with a minority who view nursing homes as a step up from their own residence. If HCBS are expanded, more restrictions should apply.

 

QUESTION 4: SOCIAL INSURANCE IS INHERENTLY A FAIRER AND CHEAPER MECHANISM TO PROVIDE LTC INSURANCE COVERAGE. 

Strongly Agree
3

Somewhat Agree
10

Neither agree nor Disagree
11

Somewhat Disagree
4

Strongly Disagree
11

Blank

ANALYSIS

Most respondents are not convinced that public sector may not be able to deliver a more "fair" product, but they want to make sure that private market continues to receive a reasonable opportunity to market. Some see social insurance as always favoring current over future generations, but many would like to see a public-private partnership with private LTCI industry supplementing the standardized and universalized public offering.

 

QUESTION 5: THERE SHOULD BE A PUBLIC OPTION TO PURCHASE LTCI FROM THE GOVERNMENT. 

Strongly Agree
3

Somewhat Agree
7

Neither agree nor Disagree
9

Somewhat Disagree
8

Strongly Disagree
11

Blank
6

ANALYSIS

Respondents are largely indifferent to whether you could buy LTCI from the federal government, although few think it would be a bad thing if it were set up right away, perhaps as a supplement to Medicare.

 

QUESTION 6: THE GOVERNMENT SHOULD PROVIDE SUBSIDIES FOR THE PURCHASE OF LTCI FROM THE PRIVATE MARKET.

Strongly Agree
12

Somewhat Agree
13

Neither agree nor Disagree
3

Somewhat Disagree
6

Strongly Disagree
4

Blank
6  

ANALYSIS

While some regard government deficits as a serious impediment to any subsidies, others say that government funding is not impossible if certain changes to the private market could be made, such as maximizing the universality, either by uniform regulations, mandates, or both. Incentives should take the form of tax breaks from both state and federal government and would stipulate a minimum amount of coverage.

 

QUESTION 7: IF YOU BELIEVE THERE SHOULD BE A PUBLIC OPTION OR GOVERNMENT SUBSIDIES, HOW SHOULD IT WORK?

ANALYSIS

There is broad agreement that a public option or government subsidy for LTCI should not be ruled out, but that it should run like a private insurance plan, with underwriting, deductibles, and full, risk-based premiums. However, there is no agreement as to exactly how such a program would work, except that there is potential in a "Medigap" model, where a public program might carve out a gap to be covered by private LTCI, or private LTCI would begin after a minimum public benefit is exhausted.

 

QUESTION 8: THERE SHOULD BE A MEDICARE CHRONIC CARE BENEFIT TO REACH THE COSTLIEST OF THOSE NEEDING LONG-TERM CARE. 

Strongly Agree
6

Somewhat Agree
9

Neither agree nor Disagree
8

Somewhat Disagree
6

Strongly Disagree
9

ANALYSIS

There is not much support for having Medicare pick up more of the cast of chronic care for those now receiving this care under LTC, because 1) Medicare already is running huge deficits and 2) Medicare would then be perceived as covering LTC.

 

QUESTION 9: THE RECENT COURT DECISION CONCERNING THE MEDICARE AT-HOME BENEFIT, JIMMO, ET. AL VS. SEBELIUS, WILL ALTER MEDICARE LONG-TERM CARE COVERAGE IN A SIGNIFICANT WAY. 

Strongly Agree
6

Somewhat Agree
10

Neither agree nor Disagree
12

Somewhat Disagree
4

Strongly Disagree
3

ANALYSIS

Most agree that the recent court decision will increase the cost of care under Medicare, and the increase could be significant. Most also agree that Medicare will be put under even more pressure that could jeopardize the solvency of Medicare itself.

 

QUESTION 10: MORBIDITY ASSOCIATED WITH UNHEALTHY LIFESTYLE CHOICES IS AN IMPORTANT NATIONAL ISSUE. 

Strongly Agree
23

Somewhat Agree
12

Neither agree nor Disagree
1

Somewhat Disagree
4

Strongly Disagree
0

ANALYSIS (FOR #10-12)

All commend healthy lifestyles. But it’s hard to prove the link between lifestyle and LTC service needs. While data will be available in the future, absence of tracking means it is hard to link lifestyle/behavior to actual long term care risk outcomes.

 

QUESTION 11: WHAT SPECIFIC CHANGES IN BEHAVIOR WOULD HAVE THE MOST SIGNIFICANT IMPACT IN REDUCING PEOPLE'S RISK OF NEEDING LTC SERVICES?

Rank

Walking and other physical exercise

Brain fitness exercises

Improve diet

Reduce stress

Improve social networks

1

32

1

6

1

4

2

10

15

11

3

5

3

2

8

20

7

7

4

0

8

5

25

6

5

0

12

2

8

22

 

ANALYSIS (FOR #10-12)

All commend healthy lifestyles. But it’s hard to prove the link between lifestyle and LTC service needs. While data will be available in the future, absence of tracking means it is hard to link lifestyle/behavior to actual long term care risk outcomes.

 

QUESTION 12: WHAT, IF ANYTHING, SHOULD THE GOVERNMENT DO TO PROMOTE MORE HEALTHY LIFESTYLES?

ANALYSIS (FOR #10-12)

All commend healthy lifestyles. But it’s hard to prove the link between lifestyle and LTC service needs. While data will be available in the future, absence of tracking means it is hard to link lifestyle/behavior to actual long term care risk outcomes.

 

QUESTION 13: WHAT POSITIVE INCENTIVES, IF ANY, SHOULD THE GOVERNMENT OFFER TO ENCOURAGE PEOPLE TO ADEQUATELY PREPARE FOR THEIR FUTURE LTC NEEDS?  

Tax Credits for Purchasing LTCi policy
24 support

LTC tax-qualified savings plans
27 support

Expanded partnership Plans
20 support

Other
17

 

QUESTION 14: WHAT NEGATIVE INCENTIVES, IF ANY, SHOULD THE GOVERNMENT OFFER TO ENCOURAGE PEOPLE TO ADEQUATELY...-LEVY A TAX IF ADEQUATE PREPARATION IS NOT BEING DONE (SIMILAR TO THE TAX LEVIED IF A PERSON DOES NOT BUY MEDICAL INSURANCE AS REQUIRED UNDER THE AFFORDABLE CARE ACT) 

Levy a tax if adequate preparation is not being done (similar to the tax levied if a person does not buy medical insurance as required under the Affordable Care Act)
11 support

Reduce projected Social Security benefits if adequate preparation is not being done
7 support

Other
15 Support

 

QUESTION 15: IF ABLE, ADULT CHILDREN HAVE A RESPONSIBILITY TO HELP THEIR PARENTS DEAL WITH LTC AS NEEDED. 

Strongly Agree
13

Somewhat Agree
12

Neither agree nor Disagree
7

Somewhat Disagree
3

Strongly Disagree
4

ANALYSIS

Most agree that whatever an adult child's moral obligation to his parents, government should not legislate or enforce it.

 

QUESTION 16: PEOPLE HAVE THE RIGHT TO DIE. 

Strongly Agree
19

Somewhat Agree
5

Neither agree nor Disagree
6

Somewhat Disagree
3

Strongly Disagree
5

ANALYSIS

The majority of the 38 respondents agree with a person’s right to die. However, there might be some confusion on whether right to die refers to “assisted suicide” versus refusing medical care. Also, only a few mentioned any potential impact on LTC.

 

QUESTION 17: WHAT CAN BE DONE ETHICALLY TO ALLOW PEOPLE TO DIE IF THEY WISH TO DO SO? 

Agree with the Right to Die Strongly Agree
19

Somewhat Agree
5

Neither agree nor Disagree
6

Somewhat Disagree
3

Strongly Disagree
5

ANALYSIS  

The majority of the 38 respondents agree with a person’s right to die. The most popular answer to this question is to promote education on the issue as well as promote advanced planning. A few stated that laws need to be changed to allow it.

 

QUESTION 18: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: TAX-QUALIFIED PRODUCTS WITH SHORT BENEFIT PERIODS (E.G., 6 MONTHS)

Strongly Agree
15

Somewhat Agree
12

Neither agree nor Disagree
1

Somewhat Disagree
7

Strongly Disagree
5

ANALYSIS

The group is divided between those who like shorter, more affordable offerings and those who think a six-month benefit period is too short to be meaningful, with most of the premium going to expenses and not benefits. However, most agree that the industry should offer products geared to supplementing the risk of LTCI, not covering 100% of it, making sure that there is protection against catastrophic loss.

 

QUESTION 19: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: PRODUCTS WITH LONG ELIMINATION PERIODS (E.G., OVER 1 YEAR). 

Strongly Agree
22

Somewhat Agree
15

Neither agree nor Disagree
1

Somewhat Disagree
1

Strongly Disagree
1

ANALYSIS

Most agree that policies with long elimination periods should be sold, because they make good economic sense if properly understood, but many note that they will not likely be properly understood after time of sale or at time of claim. In any event, such a plan should be sold as part of an LTC plan or solution, so as to ensure adequate cash flow during the elimination period.

  

QUESTION 20: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: PRODUCTS THAT REQUIRE STRICTER BENEFIT TRIGGERS.

Strongly Agree
4

Somewhat Agree
10

Neither agree nor Disagree
2

Somewhat Disagree
12

Strongly Disagree
11 

ANALYSIS

Most don't like the idea of stricter benefit periods. This is not necessary, nor would it be good for consumers.

 

QUESTION 21: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: PRODUCTS THAT OFFER HEALTHY-LIFESTYLE PREMIUM DISCOUNTS THAT ARE REMOVABLE IF THE HEALTHY LIFESTYLE IS DISCONTINUED.

Strongly Agree
9

Somewhat Agree
9

Neither agree nor Disagree
8

Somewhat Disagree
7

Strongly Disagree
6

ANALYSIS

Healthy lifestyle discounts hard to monitor, impractical. Most think they cannot be administered.

  

QUESTION 22: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: A SPECIAL TAX-QUALIFIED SAVINGS PLAN FOR LTC WHICH COULD BE USED FOR LTCI PREMIUM OR LTC COSTS DIRECTLY.

Strongly Agree
22

Somewhat Agree
10

Neither agree nor Disagree
3

Somewhat Disagree
4

Strongly Disagree

ANALYSIS

Tax qualified savings plan--while some see benefits, most think it will not really change the landscape: many will not save enough, low income will not participate, and high living costs make it impractical for older persons, and add complexity.

 

QUESTION 23: ALLOWING (OR FAVORING) THIS PRODUCT DESIGN WOULD BE IN THE PUBLIC'S BEST INTEREST: "UNIVERSAL LTC" WHERE PREMIUMS NET OF POLICY CHARGERS BUILD AN ACCOUNT VALUE

Strongly Agree
12

Somewhat Agree
16

Neither agree nor Disagree
6

Somewhat Disagree
6

Strongly Disagree

ANALYSIS

Universal LTC--While it may actually be a better, more balanced product, it will not really expand the market and is therefore not really in the general public's interest. Universal LTC is viewed as niche product too few can afford, not best use of funds, complicated, expensive to administer.

 

QUESTION 24: WHAT OTHER INNOVATIVE PRODUCT DESIGNS WOULD BE IN THE PUBLIC'S BEST INTEREST?

ANALYSIS

Other innovative products: lots of ideas, but little agreement. Some prefer revised insurance risk / transfer products, some insurance plus savings vehicles. More talk of catastrophic coverage, alignment with health plans / longevity cost-sharing a la major medical.

 

QUESTION 25: THE CURRENT APPROACH TO RATE STABILITY REGULATION DISCOURAGES COMPANIES FROM OFFERING LTC PRODUCTS THAT THE MARKET NEEDS.

Strongly Agree
4

Somewhat Agree
13

Neither agree nor Disagree
7

Somewhat Disagree
5

Strongly Disagree
6

 

ANALYSIS

There was no overall consensus about the effect of rate stability regulation. However, with one exception, there is universal support for retaining the rate stability provisions.

 

QUESTION 26: INSURANCE COMPANIES COULD OFFER MORE AFFORDABLE PRODUCTS IF THEY COULD AUTOMATICALLY CHANGE CURRENT PREMIUMS BASED ON CURRENT INTEREST RATES.

Strongly Agree
8

Somewhat Agree
15

Neither agree nor Disagree
6

Somewhat Disagree
4

Strongly Disagree
3

ANALYSIS

Respondents agree by a margin of more than three to one that carriers could offer more affordable products with premiums based on current interest rates but overwhelmingly disagreed that this was appropriate for the market.

 

QUESTION 27: HOW COULD RATE STABILITY REGULATION BE IMPROVED?

ANALYSIS

The common opinion was that rate stability regulation should be more closely followed with a defined approach that leaves little room for ambiguity. Regulators and carriers should fully use the regulations that exist.

 

QUESTION 28: THE GOVERNMENT SHOULD FUND A PUBLIC AWARENESS CAMPAIGN ABOUT THE NEED FOR LONG-TERM CARE PLANNING.

Strongly Agree
20

Somewhat Agree
11

Neither agree nor Disagree
3

Somewhat Disagree
4

Strongly Disagree
2

ANALYSIS  

Most believe government should fund public awareness. Public Education is necessary but not a sufficient condition for success. Products need to be viable, affordable. No real agreement on whether this has helped or not. Some think it has, some think it is a waste of time and money.

 

QUESTION 29: FINANCIAL ADVISORS HAVE A FIDUCIARY RESPONSIBILITY TO MAKE SURE THEIR CLIENTS ARE AWARE OF THE RISKS AND COSTS OF LONG-TERM CARE…

Strongly Agree
27

Somewhat Agree
9

Neither agree nor Disagree
3

Somewhat Disagree
0

Strongly Disagree
2

ANALYSIS

Financial advisors have fiduciary responsibility. Most think it should be built into training or otherwise reinforced.

 

QUESTION 30: WHAT ELSE CAN BE DONE TO IMPROVE AMERICA'S PROSPECTS FOR DEALING WITH LONG-TERM CARE ISSUES THAT WEREN'T PROMOTED BY THE PRECEDING QUESTIONS?

ANALYSIS

Government needs to take constructive action, education & also risk management. While not advocating a social insurance approach, a number see and understand that the failures of the private market and the failures of government officials are leading us in this direction. There is some agreement that the insurance industry has failed to live up to its responsibility. They see the exit of carriers post CLASS rate increases as the only real response the industry has made for mitigating risk. They think that private LTCI needs a backstop in place until more consistently credible experience develops.