LTC Bullet: LTC Policy Poll Results

Friday, April 14, 2017

Seattle—

LTC Comment: Attendees at the recent LTC insurance conference voted on some interesting questions about how the new political landscape is likely to affect the market for their product. Results and our comments after the ***news.***

*** DO YOU KNOW? How skillful RMD planning can sustain retirement portfolios and help close the LTCI sale? How advisers are warming to reverse mortgages? How LTC providers are just as worried about middle-market seniors as LTC insurers are and why? The pros and cons of converting Medicaid to a block-grant program? Why “Medicaid Part C for All” might actually be worth considering? That assisted living occupancy is way down? You would know the latest news on these subjects this week if you subscribed to our LTC Clippings service. We send subscribers an average of two emails per work day linking to critical news, reports or data you need to know to stay on the forefront of professional expertise.  Steve or Damon Moses scan the media, choose the key articles, and forward links to you with their one or two sentence analysis. To inquire or subscribe, contact Damon at 206-283-7036 or damon@centerltc.com. ***

 

LTC BULLET: LTC POLICY POLL RESULTS

LTC Comment: The 17th Annual Inter-Company Long-Term Care Insurance Conference’s closing general session on March 28 explored the topic “New President and Congress: Implications for Aging and LTC Finance.” For a summary and analysis of that session and the conference as a whole, see last week’s “LTC Bullet: The 17th Annual Inter-Company Long-Term Care Insurance Conference: A Virtual Visit.”

At the closing session, attendees were invited to vote by means of their smart phones on answers to the questions below. Conference IT Manager Christi Trimble of Meeting Masters, Inc. informs us that “the questions averaged 225 responses, which is about 40-50% of those in attendance.” Here are the queries and the polling results with our “LTC Comment” after each.

 

Q1. Given the results of Election 2016, how are you feeling about the prospects for our industry over the next 4 years? (NOTE: We define "industry" to encompass all private finance options - past, present and future product types) 

1. Very optimistic = 11%
2. Somewhat optimistic = 46%
3. Somewhat pessimistic = 27%
4. Very pessimistic = 6%
5. I'm too depressed to even answer = 10%

LTC Comment: I hold with the 57-percent optimistic group, not the 43-percent down-in-the-dumps crowd. LTCI has nowhere to go but up. Government policies (zero interest rates and easy access to Medicaid after care is needed) made the product unprofitable and unwanted, respectively. But LTCI survived somehow. Now it’s the government policies that are bound to fail. The more the public realizes Social Security, Medicare and Medicaid will no longer subsidize failure to plan, save, invest, and insure, the more we’ll see a resurgence of LTC insurance. Keep the faith!

Q2. Which of the following policies should the Trump administration and Congress pursue as ways to improve private LTC financing? (pick your top 3) 

1. Allow use of health/retirement accounts to buy LTCI = 26%
2. Employer tax incentive to offer LTCI = 18%
3. Tax credits for family caregivers = 9%
4. Medicaid reforms = 6%
5. Establish public LTC benefit = 4%
6. Reinsurance pools = 3%
7. Reduce regulatory burden on private coverage = 11%
8. Public education = 9%
9. Improve the economy for middle market Americans = 10%
10. Other = 2%
11. None of the above = <1%

LTC Comment: Thankfully, more government spending (tax credits for caregivers and a new public program) scored low. Reducing government interference (allowing IRA deductions for LTCI and cutting regulations) rightly scored higher. But, alas, Medicaid reform polled low. None of the other measures will help until Medicaid stops giving away what LTC insurers are trying to sell—to the very people who should, would, and could buy LTCI in the absence of perverse Medicaid policies that discourage its purchase.

Q3. Which changes in the political landscape do you think will have the most favorable impact on prospects for private LTC financing solutions? (pick your top 3) 

1. Republican President = 14%
2. Republican Congress = 14%
3. Proposed Medicaid program changes = 18%
4. Proposed changes to private health insurance 16%
5. Proposed Medicare reforms 10%
6. Administrative appointments 5%
7. None of these will favorably impact = 22%
8. All of these will favorably impact 2%

LTC Comment: I chose the first three options, but not for the obvious reasons. I don’t think it matters so much that the Republicans are in charge as that the whole political apple cart has been over-turned. We were on a set course locked in for eight years that seemed inevitable to continue in lock step. It didn’t! Now, anything is possible. That means danger, but also opportunity. One opportunity is to change Medicaid LTC financing for the better by targeting its scarce resource to the needy and directing some of the savings to educating and incentivizing the aging middle class to plan responsibly for long-term care. Will it happen? I’m optimistic despite the recent slap down of a plan to block grant Medicaid. That might have empowered states to close LTC eligibility loopholes and reduce the program’s gargantuan home equity exemption. But Medicaid will re-emerge because the potential savings are huge and they’re needed to facilitate tax reform which is critical to re-charging the economy. Finally, how sad that 22 percent of the respondents think nothing will help. Kind of shows how beaten down the LTCI business and some of its practitioners are.

Q4. Which change in the political landscape do you think will have the most significant negative impact on prospects for LTC insurance? (pick your top 3)

1. Republican President = 12%
2. Republican Congress = 9%
3. Proposed Medicaid program changes = 14%
4. Proposed changes for private health insurance = 11%
5. Proposed Medicare reforms = 14%
6. Administrative appointments = 12%
7. None of these will favorably impact = 18%
8. All of these will favorably impact = 2%

LTC Comment: Negative impact? None. When you’re on a disastrous course, just about any change is for the better. I’ll elaborate below.

Q5. How do you think the proposed changes to Medicaid will impact market potential for private LTC finance products? 

1. Expand market potential = 41%
2. Reduce market potential = 17%
3. Make no difference = 41%

LTC Comment: Never mind the ObamaCare repeal and replace issue. That affects mostly young Medicaid recipients. What matters for LTC financing is the plan to block grant or cap Medicaid grants to states, ending the unlimited federal financial participation system that invites over-spending. Given less money and more flexibility, 50 state Medicaid programs will begin experimenting with new ways to control costs, including the ones we’ve recommended in dozens of state- and federal-level reports. For example, stop exempting up to $840,000 in home equity. Encourage people to rely instead on reverse mortgages to pay for home care. You’ll get more people receiving better care and aging in place as they prefer. That won’t go on long before their adult children start deciding LTC insurance isn’t so expensive after all. I can only assume the poll results, that 17 percent think fixing Medicaid would reduce the LTCI market and 41 percent think it would make no difference, reflects a lack of understanding on the part of too many attendees of Medicaid’s enormously constricting effect on LTCI demand.

Q6. How might the new political landscape impact insurers' ability to obtain rate increases? 

1. Make it easier = 22%
2. Make it harder = 24%
3. Make no difference = 53%

LTC Comment: I’ll side with the “make no difference” majority, although increased Republican domination in statehouses and state legislatures may help if the Rs are true to their avowed free-market ideology. It is hypocritical for government—local, state for federal—to oppose rate increases to ensure carriers’ ability to meet their obligations to insureds. Compare that responsible action by private sector companies with the vast unfunded liabilities for “social insurance” programs forced on the public by government—for which nothing has been done to ensure they can meet their obligations.

Q7. Do you think the next four years will bring an improved economic climate? Or will we see a continuation of low interest rates? 

1. Improved economic climate/higher interest rates = 76%
2. Stay pretty much the same = 13%
3. Get worse = 11%

LTC Comment: I think these voters are vastly over-optimistic. I’d agree with the stay-the-same or get-worse minority. The current “economic recovery” is long in the tooth; the “Trump trade” is already petering out as health and tax reform languish; we may already be in a recession; the Federal Reserve’s tightening cycle has nearly run its course; after perhaps one more interest rate increase, the next step is down and most likely we’ll see more quantitative easing (QE4). That means more and more debt with the age wave and entitlement insolvencies looming. The U.S. dollar is unsupported by real value and very vulnerable; foreign countries that give us real economic goods in exchange for paper (bonds that the U.S. cannot ever afford to redeem) could wise up any time, stop buying our debt, and start selling it in competition with The Fed; carrying costs on our $20 trillion debt will force a reversal of The Fed’s tightening soon as the economy worsens. The credit bubble, inflating for a decade, will pop. Sadly for the Trump Administration, the wages for the economic sins of its predecessors will come due in its first term. (Tickle your calendar to review this prediction on election day November 3, 2020. I’ll do the same.)

Q8. Taking everything into account, how do you think the current political climate will impact consumers' interest in private LTC finance options?

1. Increase it - they can't rely on government 17%
2. Decrease it - they have too much else to worry about 25%
3. Stay the same 25%
4. Could get better or worse - depends on specific policies and appointments = 33%

LTC Comment: The answer to this question depends entirely on how successfully the new Administration implements policies to reform and reduce wasteful, counter-productive programs, especially Medicaid. Results so far are disappointing, but let’s stay tuned. The reason consumers don’t worry about long-term care or take an interest in LTC planning is that they don’t think they’ll need it. No amount of “educating” them that they need LTC insurance will succeed as long as they can ignore the risk, avoid the premiums, wait to see if they ever need LTC, and if they do, transfer most of the cost to taxpayers while retaining the bulk of their estates for heirs.