LTC Bullet:  Cassandra’s Quandary

Friday, July 17, 2015


LTC Comment:  With the gift of prophecy but cursed with doubters, Cassandra would be right at home predicting the future of long-term care financing, after the ***news.***

*** SHELTON REPORT:  LTCI author and trainer Phyllis Shelton reports that her July 8th Webinar on “How to Sell LTC Insurance that is Affordable in Today's Market” was a hit.  Get the details on this session and consider subscribing to her series of webinars here. ***

*** SAMPLE CLIPPING:  Every day we send LTC Clippings subscribers real time news they need to know about LTC services and financing with commentary.  Contact Damon at 206-283-7036 or to subscribe by upgrading your membership to “Premier” ($250 per year).  That’s just an extra $100 for most Center members and only a little more than $20 per month for new subscribers.

7/15/2015, “How much $100 is really worth in each state,” by Mandi Woodruf, Yahoo Finance

Quote:  “Nothing diminishes the value of a dollar quite like your ZIP code. In a fascinating look at the cost of living in all 50 states and hundreds of metropolitan areas, the Tax Foundation shows exactly how much — and how little — 100 bucks is worth depending where you live.

LTC Comment:  What’s your buck worth?  Click on your state to find out.  And consider this:  not only does LTC cost much more in some states than others, the dollar may not go as far in those states either. ***



LTC Comment:  In the ancient myth, Apollo granted Cassandra the ability to predict the future accurately, but when she declined his romantic advances, he doomed her to be disbelieved. 

The evasion of reality and denial of risk surrounding long-term care public policy reminds me of Cassandra’s quandary.  No matter how much irrefutable evidence we adduce for the unsustainability of the current LTC financing system, the stubborn minions of complacency persist and prevail.

I’ve seen some examples recently in my research on Medicaid and long-term care financing in New Hampshire. 

A long-term care provider expressed optimism that science would cure Alzheimer’s Disease and radically reduce future LTC costs.  My response:  “Hope for the best, but plan for the worst.”

A highly placed public official opined that LTC expenditures, which were predicted to explode two decades ago, haven’t.  My response:  “Yet!”

He went on “Besides, we can always print more money.”  My response:  “Eventually you run out of other people’s money,” as Margaret Thatcher warned.

Greek myth is a suitable lens through which to view predictions about the future of long-term care services and financing.  Modern day Greece, and Puerto Rico closer to home, are canaries in the mineshaft warning us to heed today’s LTC Cassandras. 

Can we relax about LTC financing because institutional and home care costs have not exploded yet?  Well, no, the first baby boomers won’t reach 85, the age at which long-term care becomes much more likely and expensive, until 2031.

Can we rely on current fiscal (deficit spending) and monetary (credit expansion, money printing, and interest rate manipulation) indefinitely?  Hardly.  Sooner or later, economic gravity prevails, interest rates will rise making public debt unserviceable.

But when?

My guess, to employ some tired but evocative metaphors, is that it will happen when the “silver tsunami” becomes a “perfect storm” causing an “economic freeze.”

Think about it. 

  • The boomers start coming of LTC age 85 in 2031.

  • Social Security and Medicare run out of “trust funds” in the 2030s.

  • Medicare and Social Security already collect less in payroll taxes than they pay out.

  • U.S. tax-generated general funds have to make up the entitlements’ shortfalls as well as pay off the trust funds’ bonds (IOUs).

  • Federal debt is $18.1 trillion and rising rapidly.

  • Heavy taxation impedes the economic activity necessary to generate the needed tax revenue.

  • The Federal Reserve domestically and central banks internationally are pushing the limits of their ability to expand credit in order to hide economic malaise.

  • The fiscal walls are closing on the U.S. and world economies.

  • Promiscuous spending leads to impoverishment for individuals, families (sooner) and national economies (later because of their ability to manipulate currency).

  • These lessons are legion throughout history and around the world.

Think this time is different?  See This Time Is Different: Eight Centuries of Financial Folly by Reinhart and Rogoff.

Economic bubbles expand until they don’t.  The internet and housing bubbles, inflated by easy money and credit, each lasted several years.  The current bubble, created by the very same fiscal and monetary policies that caused its predecessors, has been expanding about as long as they did before they burst.  What is different this time is that the latest economic bubble is much bigger than the others and the tools to hide it, artificially low interest rates and quantitative easing, are worn out from overuse and likely no longer effective.

So, when will Cassandra’s dire LTC predictions come true?  No later than 2030, but probably much sooner.  We’re compiling and organizing the evidence in one politically prominent state, New Hampshire.  Expect our report in September.