LTC Bullet:  LTC Predictions

Friday, December 9, 2016

Seattle—

LTC Comment:  Yogi Berra said “It’s tough to make predictions, especially about the future.”  I should have listened.  Find out why after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find clients and reduce the “Ping-Pong” in the LTCi sales process. Help clients make informed final decisions about buying LTCi in 15-20 minutes!  Gauge a client's true interest in a combo product immediately!  Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation!  Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, a past Chair 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. ***

*** 17TH ANNUAL INTERCOMPANY LONG-TERM CARE INSURANCE CONFERENCE, themed this year “Navigating the Future” has announced:  “Early Bird discounts of up to $1,995 for Sponsors and Exhibitors have been extended through December 16th! We also offer a First Time Exhibitor/Sponsor Discount of $250 and a Non-Profit discount of $500.”  For details:  http://www.iltciconf.org/The conference will convene March 26-29, 2017 at the Hyatt Regency in Jacksonville, FL. ***

 

LTC BULLET:  LTC PREDICTIONS

On November 14, 2008, ten days after the historic election of Barack Obama to be President of the United States, we published some predictions about the future of health and long-term care public policy.  Recently, a long-time Center friend and member, LTCI producer Jack Smelser, reminded me of those predictions, as he does every so often.  Today, we’d like to share the original predictions with you and explain how we think we did and how we would modify the predictions going forward.  Following is the original publication containing our predictions with our LTC Updates added in italics.   

When this LTC E-Alert was sent, I was about to complete a full year on the road in the Silver Bullet of Long-Term Care on the National Long-Term Care Consciousness Tour.  I was a little over 25,000 miles into that tour and visiting its 37th state.

Those were some pretty heady times.  Expectations were high that the new Administration could achieve many policy goals that had evaded politicians up to then.  (Kind of like now, though from a vastly different political perspective.)  I was dubious and tried to temper the enthusiasm.

-----------

LTC E-Alert #8-110: LTC Predictions

Friday, November 14, 2008

Newport Beach, California (LTC Tour Mile 25,232; State #37)--

LTC Comment: Lately, I've heard some Panglossian prognostications about the future of health and LTC public policy.

People think the time has finally come for all they've worked for to be realized.

Universal health care?  Good as done.

Tax incentives for LTC insurance?  Section 125, at least, maybe above-the-line tax deductibility.

Recession?  [LTC Update:  We were right in the middle of the December 2007 to June 2009 “Great Recession.”]  Just the usual cycle that a "New, New Deal" will fix.

Sorry, but this looks to me like the victory of wishful thinking over hard economic reality.

So, I've decided to lay down a few markers.  What follows are predictions.  Not what I hope will happen.  Rather, what I expect to happen.

Read this now.  Then set it aside.  Tickle your calendar to read it again in five years and ten.  I will too.  Let's review then.

LTC PREDICTIONS

  1. No broad-based health reform will come to pass, much less reform that includes long-term care. 

LTC Update:  For eight years, it looked like I’d gotten half this prediction wrong.  The Patient Protection and Affordable Care Act, AKA “ObamaCare,” passed in 2010.  Its LTC section, the Community Living Assistance Services and Supports Act (or CLASS Act) was repealed on January 1, 2013.  The new Congress and President elected on November 8, 2016 intend to repeal the rest of ObamaCare.  So, it’s taking a while, but it looks like I got this one right.  Whatever replaces ObamaCare is much more likely to rely on market forces than government control and micro-management.

  1. Another economic "stimulus" will fail as they all do, only shifting wealth, not creating it.

LTC Update:  Sure enough, “The American Recovery and Reinvestment Act of 2009 (ARRA) (Pub.L. 111–5), commonly referred to as The Stimulus or The Recovery Act,” which was supposed to pump $787 billion into “shovel ready” infrastructure projects was a huge flop mostly enriching friends and supporters of the new Administration.  The U.S. economy has yet to return to pre-Recession growth levels despite unprecedented fiscal and monetary stimulus.  Unfortunately, expect those same economic errors to continue until the next crash occurs.

  1. Huge increases in the federal deficit and debt will require additional borrowing to the point where interest on the public debt will crowd out new--and even much current-- social spending.

LTC Update:  I got this one mostly right.  According to FactCheck.org, during the Obama years:  “The federal debt has more than doubled — rising 116 percent — and big annual deficits have continued.” According to the National Debt Clock we’ll tip over $20 trillion soon.  The “crowd out” I predicted has not occurred to the level I expected . . . yet.  The reason is that the Federal Reserve forced interest rates to near zero enabling the Federal Government to deficit spend with carrying costs a fraction of what they were 20 years ago.  Interest on the national debt in 1996 was 6.58%, but only 2.42% in 2014.  Inevitably, reversion to the mean historical interest rates will sooner or later unleash major crowd out of social programs.

  1. The present economic crisis will worsen precipitating immediately problems with Social Security and Medicare unfunded liabilities ($102 trillion) that Pollyannas think we won't confront until 2041 and 2017 respectively.

LTC Update:  Thanks to trillions of dollars of money printing and bond buying by the Federal Reserve, the economic crisis didn’t worsen . . . yet.  But we’re experiencing the slowest post-recession recovery in American history.  The stage is set for a “Greater Recession” when the stock, bond and real estate bubbles created by Fed policy finally pop.  When?  I’ve predicted before that the reckoning could come anytime, but will come no later than when the perfect demographic storm occurs as boomers begin turning 85 in 2031.

  1. Several states will declare bankruptcy, or whatever they choose to call acknowledging their financial insolvency.

LTC Update:  Stay tuned.

  1. Medicare will cut reimbursements to skilled nursing facilities dramatically leaving the nursing home industry unable to meet even current standards of care access and quality for publicly financed patients.

LTC Update:  This prediction was too pessimistic.  Medicare is still on a glide path to insolvency, but doomsday is delayed due to the federal government’s fiscal and monetary shenanigans already described.

  1. Medicaid costs will skyrocket. After a one-time federal matching fund supplement, state and federal Medicaid programs will cut reimbursement, then benefits, and finally eligibility. Expect a new Deficit Reduction Act within five years that will make DRA '05 look like child's play.

LTC Update:  Ditto the update to Prediction #6 above.  The next DRA has been delayed indefinitely for reasons I explain in detail in our forthcoming report titled “Long-Term Care Financing:  The Myth and the Reality.”  So you’ll have to wait for the full explanation, but in a nutshell:  major reforms to target Medicaid to the needy and transfer LTC liability to the middle class and affluent usually occur shortly after economic recessions, but didn’t this time because of massive money printing, quantitative easing, and interest-rate manipulation by the Federal Reserve. 

  1. Medicaid will not increase funding for home and community-based services significantly and Medicaid financing of nursing home care will be dramatically reduced.

LTC Update:  Medicaid HCBS funding continues to increase rapidly while nursing facility spending has tapered off.  Medicaid reimbursements for home and institutional care remain below the cost of providing the care and continue to exacerbate access and quality problems.  When Fed monetary policy hits a wall, asset bubbles pop, and interest rates return to the historical normal (or higher), this prediction will come to pass.

  1. No new federal tax deductibility for LTC insurance will pass, not even Section 125.

LTC Update:  Unfortunately, I was right about this prediction.  But government policies to encourage LTC insurance will likely happen when Medicaid and Medicare finally have to retreat and more middle class and affluent elders need to turn to savings and home equity to fund their long-term care.  For why and when it will happen, see above.

  1. Middle class and affluent people will be far more personally responsible for their own long-term care in the future.

LTC Update:  Not yet, but this too is coming as explained.

  1. Within five years, reverse mortgages will become a major source of financing for long-term care.

LTC Update:  Oops, way too optimistic, but again, it would have happened if not for irresponsible fiscal and monetary policy and it will happen when those policies end—either through more responsible economic policy or due to market-induced imperatives.

  1. Within ten years, the market penetration of private long-term care insurance will have doubled at least.

LTC Update:  Ditto the update to prediction #11.

  1. The "New, New Deal" will prove as infeasible to finance as the old "New Deal," and the United States will slowly return to the principles that made our country great in the first place:  personal responsibility, self-sufficiency, free minds, free markets, competition and risk without moral hazard.

LTC Update:  Be patient; it’ll happen yet.

There you have them. Thirteen predictions. Unlucky? Maybe. But if everything plays out as I forecast, we'll come out all right in the end.

And with even a little luck, we'll preserve a vestige of the now-fraying social safety net for the most needy.

LTC Update:  It’s harder than ever to sustain an optimistic outlook.  Our political world is in chaos.  But whatever you may think of the incoming Administration, consider this:  The disastrous course we were on is no longer inevitable.  If we all redouble our efforts to promote rational long-term care policy and responsible LTC planning, hope springs eternal.