LTC Bullet: The LTCI Roller Coaster

Friday, January 5, 2018


LTC Comment: The LTCI industry’s lowest lows are history, but its highest highs lie ahead. Why and how, after the ***news.***

*** HEROES: I have a lot of them in the LTCI industry and at least two of them were in the audience for the speech recounted below. Author and super-agent Harry Crosby is one. Another is Barbara Franklin, a pioneer who shunned leads early and built successful businesses in two related fields, LTCI and reverse mortgages. Here’s her feedback on the speech and on our LTC Clippings service.

Hello Steve - It was great to hear your optimistic view from 40,000 feet today as I remain in the “foxhole.” Actually I am relatively optimistic too - currently have five (!) long term care policies (traditional) on my desk awaiting delivery. I’m talking a lot more about hybrids too! I spend the bulk of my time servicing current policyholders which I take very seriously. Thanks again for all of your work and especially for the articles and news pieces you send as LTC Clippings. I am complimented frequently by the “centers of influence” I communicate with on my ability to keep them informed. Little do they know I have a “secret weapon” in the form of the Center for Long Term Care Reform to keep ME informed. *** 

1/3/2018, “LTC Costs Continue to Rise in 2018, but Some Buyers See a Drop,” by Melanie Waddell, ThinkAdvisor
Quote: “While long-term care insurance costs increased slightly in 2017, some coverage can be less expensive depending on the insurer, according to new data from the American Association for Long-Term Care Insurance. The 2018 Long-Term Care Insurance Price Index, an annual compendium of pricing prepared by the AALTCI, found that some costs have actually declined since a year ago.
LTC Comment: Onward and upward.

Subscribe to LTC Clippings by contacting Damon at 206-283-7036 or ***

*** ILTCI CONFERENCE special early bird registration discounts expire January 11. Jump on the special rate before it disappears. This year’s upbeat conference theme is “A Matrix of Opportunities.” The LTCI industry’s premier event convenes March 18-21, 2018 in Las Vegas, Nevada at the Paris Hotel. For details and registration go to Remember: “what happens in Vegas stays in Vegas” . . . unless it’s what you learn and the networking you do at this conference and put to work back home. ***

***ATTABOY: Hearty congratulations to Bob Vandy of Center-corporate-member Advisors Insurance Brokers (AIB), a New York Long Term Care Brokers, Ltd. (NYLTCB) Company, which just announced:

Robert M. Vandy, CLU, ChFC, LUTCF, CLTC, formerly Vice President, Marketing with the firm, has been promoted to President, effective January 1, 2018. Current President and CEO, Kevin J. Johnson, LTCP, CLTC, will remain at the firm, and focus his efforts in the CEO role, helping to provide vision and guidance to the AIB/NYLTCB management team, as they continue to build their brand as the preeminent provider of fixed insurance and annuity product and support to the insurance and financial services community. ***

*** ATLAS RISING: The Future of Applied Objectivism: Here’s another conference for which the early-bird registration rate is expiring soon (January 8!). Check out the details here. If you’ve ever been inspired by Ayn Rand’s Atlas Shrugged or The Fountainhead, this is a meeting not to miss. I’ll speak on “Objectivist Ethics: the Hazards of Morality” and there will speakers from the Atlas Society, Students for Liberty, Wikipedia, the Foundation for Economic Education (FEE), Freedom Fest, Reason, the Libertarian Party, Transhumanists, and Silicon Valley. Intrigued? This program happens over Presidents Day Weekend, February 16-18, 2018 in San Jose, CA, venue to be announced. I hope to see you there. ***


LTC Comment: I was privileged to address a large webinar audience brought together by Center-corporate-member GoldenCare this week. I thank the whole GoldenCare team for giving me that opportunity, for the critical work they do in pursuit of our common mission, and for the invaluable support the company has given the Center for Long-Term Care Reform for so many years. The speech I delivered follows.


The LTCI Roller Coaster
Stephen A. Moses

We were way up; we came way down; and now we’re on the upswing again. What happened? Why? and What’s next?

That’s what I’m going to explain today.

I’ve been watching long-term care insurance for over 30 years. I saw it grow from a budding, small business opportunity into a big, thriving industry with over a hundred carriers, rapidly growing sales, and a promising future.

Then something happened. What?

Well, it was kind of ugly, wasn’t it?

Carriers had no choice but to increase premiums; consumers rebelled; negative press followed; companies started leaving the market; some specialized distributors expanded their offerings beyond LTCI; many producers looked for other employment opportunities.

It was brutal there for a while. But that’s all behind us now, right? There’s nowhere to go but up, and fast.

The LTCI industry has shown remarkable resilience and ethical leadership. LTCI’s best years are ahead of it. You’re in on the ground floor of a huge opportunity.

Whoa! Wait a minute? Say again?


Isn’t long-term care insurance on the ropes, struggling for survival?

Ethical leadership?

Aren’t private insurance companies, the profit motive and capitalism, in a word, greed, the source of all our problems? Think Bernie Sanders and Elizabeth Warren, not to mention all the academic studies insisting we need a new government entitlement program for long-term care.

LTCI’s best years are still coming?

Steve, are you out of your mind?

I don’t think so and I’ll prove all of this to you before I conclude my remarks today.

But first, let’s withdraw from the daily push and pull of industry challenges and personal professional trials. Let’s broaden our perspective. Let’s get out of the trees and look at the forest.

I’ve been surveying the forest of long-term care financing since 1981.

Back then, I worked for the HCFA, predecessor of CMS that now run Medicare and Medicaid.

I got interested in LTC when I found a program in Oregon that purported to recover 5% of Medicaid nursing home expenditures from the estates of deceased recipients.

That blew my mind. If Medicaid is welfare and you have to be poor to get it, how did a little state like Oregon recover millions of dollars from the estates of supposedly impoverished people?

I started researching Medicaid eligibility and found to my surprise that high income doesn’t disqualify as long as LTC costs exceed income. Most assets are exempt, so seemingly draconian spend-down requirements usually don’t matter.

This got me thinking. If you can ignore the risk of long-term care, avoid the premiums for private insurance, and shift the cost to tax payers if you ever need long-term care, why would people plan to save, invest or insure against the risk and cost of long-term care?

I predicted as much in national studies for HCFA and the HHS Inspector General in the late 1980s.

Despite some successes we’ve had in 1993 closing Medicaid eligibility loopholes and making estate recoveries mandatory and in 2005 capping the home equity exemption and unleashing the long-term care partnership program, the perverse incentives I identified over 30 years ago continue to obstruct the market for private long-term care financing.

I’m not going to dwell on this. It’s well-established in the peer-reviewed academic literature that Medicaid crowds out up to 90% of the potential market for LTC insurance.

If you want to learn more about all that, read just about anything I’ve ever written, most of which you can find on the handout you’ve been provided and on our website:

Now if your reaction is “no wonder we’ve had problems, it must be hopeless” then you’ve got it all wrong.

The right way to think about it is “look at how successful we’ve been even dragging that ball and chain.”

And “just think what it will be like when those obstacles are out of our way.”

Well, now, I can practically hear you thinking: “OK, Steve, what makes you think those obstacles are going away?”

And, “incidentally, you’ve been predicting it would happen for a long time. So why not yet?”

Fair questions. First the why; then the why not yet.

Why do I think it’s inevitable that the government will have to stop crowding out private long-term care insurance?

In a nutshell, public expenditures, mostly for entitlements, have gone through the roof. The national debt has doubled in less than a decade and is on course to double again as quickly.

We’re on a course that Social Security, Medicare, Medicaid and other such programs plus interest on the national debt will consume all federal revenue within a decade or two.

Trees don’t grow to the sky, and neither do economies. As the late economist Herb Stein used to say “Trends that can’t continue, won’t.”

Now let’s relate this specifically to long-term care. What do we know for an absolute certainly?

The long-anticipated “age wave” is finally cresting and will soon crash on the U.S. economy.

Baby boomers began retiring and taking Social Security benefits at age 62 in 2008.

At age 65 in 2011, they turned the Social Security and Medicare programs cash-flow negative.

Boomers began taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts in 2016, depleting the supply of private investment capital.

They will start reaching the critical age (85 years plus) of rising long-term care needs in 2031, around the time Social Security and Medicare are expected to deplete their trust funds, forcing them to reduce benefits.

That’ll be a disaster for Medicaid, which depends on collecting most of the Social Security of its LTC recipients and on Medicare’s far more generous reimbursements.

Just to explain. When you’re on Medicaid, you have to contribute most of your income to offset Medicaid’s cost for your care. Half of the so-called “out of pocket” costs for nursing home care are really just spend-through of Medicaid recipients’ Social Security benefits. When those benefits decline as they’re expected to do in the 2030s, it will be a devastating loss to Medicaid that will have to be made up by increased taxes or even lower provider reimbursements.

LTC providers make profits on Medicare patients that help make up for losses on the majority of their residents who rely on Medicaid’s reimbursements that are on average less than the cost of the care. So when Medicare hits the wall in the 2030s, that will devastate Medicaid too.

Reduce either or both of those sources and Medicaid’s ability to fund LTC (and crowd out private LTCI) goes south fast.

In other words, there’s a perfect gerontological and economic storm coming and to see it on the horizon, all you have to do is look.

OK, so why not yet?

For most of the time I’ve followed long-term care financing, there has been a clear economic pattern.

The government would spend way beyond its means in good times, then a recession would happen. Budgets would get tight and suddenly politicians and bureaucrats would struggle to control costs.

That’s when we made progress closing Medicaid loopholes, requiring estate recoveries, encouraging private LTC planning, and supporting LTC insurance with programs like the LTC Partnership. We even had a shot at getting above-the-line tax deductibility or cafeteria plan coverage in some years.

But then the business cycle would turn. Tax receipts would go up; welfare rolls would go down and all of a sudden no one cared any longer about controlling spending, until the next downturn happened.

I’ve traced this whole history in detail in our latest major report titled “How to Fix Long-Term Care Financing.” You can find a link to it on the handout too.

Now, this economic pattern prevailed until the last recession, the Great Recession, the worst since the Great Depression.

That economic downturn ended in June 2009. But it didn’t cause serious constraints on government spending like earlier recessions did. Federal and state budgets continued to explode. We got no traction on reforming public policy to discourage Medicaid dependency and encourage responsible LTC planning.

What’s different? Why did Uncle Sugar have to behave with good budget sense before or face dire fiscal consequences, but he can spend with impunity now?

The answer is critical because it is the same reason that nearly ruined the long-term care insurance industry.

After each recent recession, the Federal Reserve forced interest rates artificially low, trying to encourage economic recovery.

What happened instead as a result of this exceptionally careless monetary policy is that with interest rates so low, the federal government was able to spend without the usual constraints.

The consequences have been very serious including economic malinvestment by businesses; individuals, families and pension funds chasing higher, but unsafe investment returns; expanding asset bubbles especially in real estate and stocks; greater wealth inequality; and an historically slow recovery with few wage gains for the working and middle classes.

We’re experiencing the biggest economic bubble in the history of the United States. When this bubble pops, like earlier ones created by similar but less egregious interest rate policies resulting in the internet bust of 2000 and the real estate bust of 2008, the consequences will be far more dire than what followed those recessions.

But our focus here is on long-term care insurance and that’s where the Fed’s artificially low interest rates caused tremendous damage to our industry.

Unable to get the returns on reserves that the actuaries originally anticipated, carriers had to raise premiums to compensate.

That led directly to the consequences we mentioned earlier: consumer rebellion, negative press, declining sales, company attrition, etc.

So, bottom line, folks. You have the government to thank for all the problems we’ve faced. Medicaid crowded out demand for your product. The Fed’s monetary policy of near-zero interest rates made LTCI unprofitable without premium increases that started the industry down a slippery slope.

But here’s the good news. There are only two likely outcomes going forward, both of which are highly favorable to the LTC insurance industry.

The Fed has begun to increase interest rates. As those increases ramify through the economy, which they are already beginning to do, the short term impact on the long-term care insurance business will be highly beneficial.

Having already taken the unpopular measures to adapt to lower returns on reserves, LTCI carriers will benefit directly and disproportionately from higher returns going forward.

They’ll be able to make marketing the product more attractive to distributors and producers than ever before.

If on the other hand, the government’s profligate monetary and spending policies drive the economy into a disastrous tailspin, the market for LTC insurance will rapidly expand exponentially.

That’s because Medicaid will have to stop being the primary payor for long-term care for the middle class and many of the affluent in addition to the poor. Eligibility loopholes will close. The home equity exemption will disappear. Medicaid planners, who artificially impoverish people to get them on Medicaid, will have to file for unemployment or seek other, more responsible means of gainful employment.

When consumers actually have to face the true risks and cost of long-term care; when they really do have to spend down their life’s savings; when their biggest asset, their home equity, is at risk; then they’ll see the value proposition in long-term care insurance much more clearly.

They’ll beat a path to your door instead of vice versa.

It’s been a rough ride, but it’s over. The evidence is all around us. Let’s close by returning to the points I made at the beginning. The LTCI industry is resilient; its ethical leadership is noteworthy; and its best years are ahead.

What do I mean by resilience?

I’m so proud of the industry I joined when I left government in 1989 to become research director for an LTCI marketing company.

You’ve shown amazing resilience.

You’ve stabilized the LTC insurance market against all the odds.

Faced with challenges to the market not of your own making nor your own fault, you’ve responded with creative new products and policies.

Carriers that stayed the course adapted to lower-than-expected interest rates and higher-than-expected utilization, positioning themselves for a bonanza when interest rates turn up.

Experts agree future premium increases, if any, will likely be moderate, thus relieving consumers’ concerns in that regard.

You AMGs, “altruistic masochistic geniuses,” who out of a passion for protecting your fellow Americans from the risks and costs of long-term care, have successfully sold this product even though the government was giving away an inferior alternative, you deserve high praise and our unstinting thanks.

More good news stories are being published, both warning of the consequences of unanticipated long-term care expenses and more-often-than-ever-before actually recommending long-term care insurance as the solution.

AALTCI just reported that “A couple in their 60s purchasing new long term care insurance coverage can expect to pay $3,490 for a potential benefit of over $666,000 in coverage should they begin needing care at age 85” and that “some costs have actually declined compared to a year earlier.”

New products linked with life insurance or annuities answer common objections such as “what if I don’t need it.”

Chronic illness policies bridge the features of traditional and combination LTC policies. Insureds pay an annual premium instead of a large single premium, but they’re still guaranteed to get all their money back over time whether they ever need long-term care or not.

In this new, exciting environment, opportunities abound to do well for yourself while doing good for others.

Want an example? Just consider the potential of Genworth’s expertise and experience informing and supercharging long-term care insurance in China, the world’s biggest market. China is doing everything wrong so far in LTC insurance; Genworth could set them straight.

What about my claim that you’ve shown tremendous ethical leadership?

Ignore the specious criticism you get for selling a product, making a profit, participating in capitalism and enjoying its fruits. That’s what makes the world go around and makes everyone in it better off.

Compare how your industry handled its challenges with the way the federal government has operated.

When you faced rising costs and declining revenues, caused as I explained by government policies to cut interest rates and pump trillions into your biggest competitor, Medicaid, you responded by raising premiums to ensure adequate reserves so you could pay the future claims you contracted to pay.

Compare how government has handled its similar responsibility. Social Security and Medicare face upwards of $100 trillion of unfunded liabilities backed by nothing more than IOUs in their “trust funds” for money the federal government has already spent on other priorities.

Medicaid, the biggest obstacle to fixing long-term care and unleashing the power of private financing, doesn’t even have a phony trust fund and is doomed to continue trapping otherwise responsible people on welfare, causing excessive dependency on nursing homes, and impairing access and quality of long-term care until the program collapses entirely.

Finally, what about my claim that the best times for LTCI are ahead of you?

The problem of long-term care risk and cost hasn’t gone away.

Two in three aging Americans will need long-term care.

Alzheimer’s Disease is a huge and growing plague. Research breakthroughs are few and far between.

Most people don’t think about long-term care until they or their loved ones need it.

Then their options are few: provide care themselves, pay for professionals, or seek Medicaid’s low-cost, uncertain care.

Suddenly needing care for parents or spouse can ruin lives and tear families apart.

You’ll be in the bulls-eye if you haven’t prepared your clients for this likelihood when the government programs most have relied on in the past no longer meet their needs.

If I’ve assessed the problem, the likely eventualities, and the solution correctly, you, my friends are in the cat-bird seat going forward.

All you have to do is stay the course, persevere.

Just remember these immortal words of Calvin Coolidge, a rare, free-market capitalist in the White House:

“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan Press On! has solved and always will solve the problems of the human race.” Calvin Coolidge

If you need encouragement to stay the course, go see the movie “Darkest Hour,” in theaters right now. It’s the story of Winston Churchill’s struggle to mobilize Great Britain against a seemingly unstoppable Nazi scourge.

Compared to that our struggles to overcome the obstacles government has placed in the way of private long-term care insurance are a walk in the park.

Thanks for your dedication, hard work, collegiality and friendship in our common mission to improve long-term care for all Americans.

Before I conclude, I’d like to tell you a little bit about how we pursue that mission at the Center for Long-Term Care Reform.

We conduct state-level and national studies of long-term care financing with a focus on the problems created by government interference in that market.

You can find and read dozens of our reports at our website,, and on the handout you’ve been given for today’s presentation.

We publish a weekly essay, usually on Fridays, called the LTC Bullets. The Bullets discuss and analyze current topics related to long-term care service delivery and financing. We’ve done over 1200 of them and you can find them archived chronologically and by topic on our website.

We publish a weekly compendium of long-term care news called the LTC E-Alerts designed to keep members abreast of everything they need to know to remain on the forefront of professional knowledge and expertise.

Our daily LTC Clippings give premium members access in real time to the latest stories, articles, reports and data as these are released along with our “take” on what they mean in a sentence or two.

Our Members-Only website, AKA “The Zone,” is full of invaluable resource material including our voluminous “Almanac of Long-Term Care,” where we archive all important news about long-term care organized within 11 sub-topics.

Finally, I want to thank GoldenCare and its staff and management for this opportunity to share some ideas with you today and for their long and invaluable support for our work at the Center for Long-Term Care Reform.

I’ll be glad to take questions now.