LTC Bullet: LTC Armageddon

Friday, October 13, 2017


LTC Comment: Is long-term care going to hell in a handbasket or is there something we can and should do now to stem the slide?

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*** WHAT ARE YOU MISSING? Visit the Center’s website at Scroll down to “The Moses LTC Blog,” and check out our two latest “LTC E-Alert” summaries. They list the 42 critical news, data, and report items we posted in September as “LTC Clippings.” Regular Center members receive a weekly report with all those clippings included. Premium members receive all the clippings daily in real time. See what you’re missing. Then contact Damon at 206-283-7036 or to join the Center as a regular or premium member. ***



The litany of what’s ailing long-term care is relentless. Institutional bias prevails, though consumers prefer home care. Medicaid dominates financing, though private payers command better care access and quality. Private LTC insurance struggles, though Medicaid’s deficiencies expand and worsen. The senior living business faces lagging occupancy, though 10,000 boomers retire daily. Aging Americans aren’t saving enough for retirement, though they can’t and shouldn’t count on the social “safety net.” Government is doing nothing to prop up Social Security, Medicare, and Medicaid, though these programs are hopelessly unfunded for the long term.

Without radical change, this whole flimsy house of cards can’t withstand the LTC Armageddon approaching in 2031. What happens then? Even the youngest boomers will be 67 and drawing full social insurance benefits. Their older brothers and sisters start turning 85, succumbing to Alzheimer’s, and needing heavy care for long periods of time. Simultaneously, in the 2030s, Social Security’s and Medicare’s phony “surpluses” evaporate and payouts to beneficiaries and providers plummet. That’ll also be the last straw for Medicaid LTC which depends on recipients’ social security income and generous Medicare reimbursements to survive, despite heavy federal general-fund financial support that will likely also retrench.

It’s obvious what’s coming. So why are responsible public officials doing nothing? What’ll have to change? And what is most likely to happen? The scary answers are worthy of a Friday-the-13th column with Halloween just around the corner.

Why no action? The Federal Reserve’s decade-long policy of near-zero interest rates, intended to supercharge a lagging economy, has lulled officials into thinking big spending and huge debt are sustainable indefinitely. Yet what that policy has actually caused is lackluster economic growth, stagflation and rapidly growing unfunded pension and social program liabilities. The malaise in long-term care services and financing is just one small aspect of this bigger problem.

What’ll have to change? Stop digging the hole deeper. Let the market set interest rates, balance government budgets, and end the moral hazard of subsidizing irresponsible personal behavior. Send a clear message that public assistance programs, including all forms of social insurance and welfare, are only for the poor. Middle-class and affluent people must fend for themselves until they genuinely qualify as needy. Do you see that happening any time soon? Of course not. So . . .

What’s likely to happen? Nations can defy economic gravity only for so long before the bottom falls out. Examples abound: Germany after WWI, Argentina repeatedly, Puerto Rico and the state of Illinois now, just to name a few. The USA is living on borrowed time and money. Sooner or later, our creditors will stop buying our bonds and expect us to begin repaying what they’ve already loaned us. We’ve managed to avoid the reckoning this long because of international confidence in the dollar as the world’s reserve currency. As Adam Smith said, “there’s a great deal of ruin in a nation.” But once it becomes obvious that America cannot pay back what it owes, ruin will come very quickly. When? Likely right around the LTC Armageddon of the 2030s, if not sooner.

If I’m right, a big test is coming for this country. When the economic reckoning occurs, we’ll find out whether the values that made America great in the first place—individualism, personal responsibility, and honest ambition pursued within freer markets—survived or whether eight decades of pushing people into government dependency wiped them out. The answer will determine whether the United States can rise from the economic ashes and become an economic powerhouse again or will evolve into a violence-prone full-fledged redistributionist welfare state.

In the meantime, what can we and should we do within our narrow sliver of the economy? It’s amazing and hopeful to watch the long-term care insurance business adapt. Unlike government, which is sitting on its hands, many LTCI producers, distributors and carriers are developing new products and strategies to confront the market challenges wrought by poor public policy. It’s a classic example of how the free market adjusts whereas public programs stagnate. My colleagues’ resilience in this field gives me hope that solid values and strong people endure and that we can re-emerge successfully after the economic bottom falls out.

At the Center, we’re planning to make the best of a bad situation too. In next week’s LTC Bullet, I’ll share what your Center for Long-Term Care Reform is planning. The health reform debacle turned our high hopes for Medicaid reform upside down. But there is a very promising direction for us to pivot. Tune in next week for “What’s Next?”