LTC Bullet: The Blind Men of Long-Term Care
Wednesday, April 24, 2019
LTC Comment: “There are none so blind as those who will not see” applies to long-term care in many ways. See how after the ***news.***
*** MOVIE UPDATE: Ross Schriftman’s “My Million Dollar Mom” movie continues to attract media attention. Check out this clip of TV news coverage. More information about his presentation-in-a-box community events program can be found here. Ross and his movie are helping people put a human face on long-term care risk, an otherwise easy-to-evade future possibility. ***
*** WHY SUBSCRIBE TO LTC CLIPPINGS?: To counsel prospects and clients responsibly, financial advisors--including insurance agents--need to know more than basic demographic facts and product knowledge. Good LTC planning requires understanding the “blind men” of long-term care and how they interact: government, consumers, advocates, elder lawyers, providers, financiers and insurers. For details on that observation, read my original 2003 article published in National Underwriter's LTC Online Edition titled “The Elephant, The Blind Men and LTC” here and check out the updated version below.
How can you keep abreast of those complicated topics and their interactions? You can spend dozens of hours every week canvassing the internet for relevant articles, speeches and reports. Then scan volumes of useless information to find and absorb the few valuable gems of knowledge they contain. Or you can subscribe to LTC Clippings and let us do that job for you.
We’ll send you an average of two tips per day to crucial articles, reports and data you need to know before your prospects and clients confront you with them. We’ll give you the title, the author, the source, the date of publication, a representative quote, and our “LTC comment” on the item’s significance in a sentence or two.
If you subscribe to LTC Clippings and invest a few minutes of your time each week to read and consider the items we send you, we promise you a plentiful and profitable source of actionable information and insights. Contact Damon at 206-283-7036 or firstname.lastname@example.org for details and to subscribe. ***
LTC BULLET: THE ELEPHANT, THE BLIND MEN AND LONG-TERM CARE
LTC Bullet: The Elephant, the Blind Men and Long-Term Care
Who are the blind men of long-term care and why can't they see how to solve the long-term care financing crisis?
Some blind men approached an elephant. One touched the elephant's trunk and exclaimed, "a hose." The second grasped the elephant's leg and said, "a telephone pole." The third reached for the elephant's tail and concluded, "a rope." The allegory of the blind men and the elephant teaches us the folly of reaching conclusions about any complex thing without first comprehending its entirety and the interrelationships between its parts. What can we learn about long-term care from this ancient parable?
Long-term care is a complex subject comprised of many interrelated subtopics. When people, even experts, analyze one facet of long-term care without taking into consideration all of its aspects and their relationships, they often reach wrong, incomplete or misleading conclusions. Who are the "blind men" of long-term care? What mistaken suppositions do they tend to make? And what can we learn if we remove our blindfolds and observe long-term care in its fullness and complexity?
To the government, long-term care is a major fiscal problem. Medicaid and Medicare pay for most formal nursing home and home care services in the United States. The proportion of long-term care costs paid by government has increased, while the share paid by consumers has declined, for decades. Medicaid rivals education as a burden on state budgets and long-term care is often a third to half the program's cost. Although government officials recognize the public's preference for home and community-based care, laws and policies still push many long-term patients into nursing homes. The public's aversion toward institutionalization discourages utilization and limits cost. Financing long-term care for an aging baby-boom generation is a daunting prospect for state and federal governments that are already facing crisis-level budget shortfalls.
To the public, long-term care is usually a non-issue. At any given time, only a small percentage of Americans give or receive long-term care. These caregivers and their patients suffer emotionally and financially. But their numbers are small and when their situation becomes dire, Medicare home care and Medicaid nursing home benefits mitigate consequences that might otherwise become catastrophic. Medicare has no means test and Medicaid is readily available to anyone unable to afford private nursing home care with little or no asset spend down. Thus, most Americans, who are not currently in the throes of a crisis, are barely conscious of long-term care as a health and financial risk. They are in denial, but their denial is understandable. If they ignore the risk, avoid the premiums for private insurance, but someday need long-term care, the government will pay. Most people do not choose this course of action consciously, but that is the point. They have been desensitized to the risk of long-term care so they fail to plan or insure by default.
To senior advocates, long-term care is a benefit-seeking enterprise. Groups like AARP, Families USA and the Alzheimer's Association examine the deficient status quo and conclude we need more government financing for long-term care. Among other things, they want tax credits for caregivers and more money for home and community-based services. They miss or ignore the irony that the more money government spends on long-term care, especially for desirable benefits like tax credits and home care, the less motivated the public becomes to save, invest or insure personally against the risk. Consequently, these groups advocate policies and programs that compound the underlying problem which is excessive dependency on perpetually inadequate government financing. Thus do well-intentioned senior advocates compound the long-term care problem by promoting counterproductive public policies that serve their intensely felt, but narrow, short-term interests.
The Elder Law Bar
Even worse is the impact of Medicaid estate planning attorneys who artificially impoverish their affluent clients to qualify them for welfare-financed nursing home benefits while dodging Medicaid’s toothless spend-down rules. This practice sends a disastrous message to the next generation that long-term care is a second-tier risk that can be safely ignored thanks to an elastic social safety net which protects not only the needy, but also the well-to-do,.
Long-Term Care Providers
To service providers, long-term care is a race for survival. Nursing homes and home health agencies, once flush with cash flow when Medicaid and Medicare were more generous, are now public utilities starved for revenue by parsimonious and inadequate government reimbursements. Assisted living facilities, attractive private-pay alternatives to nursing home institutionalization, fill too slowly because most people cannot afford them, few have insurance, and Medicaid nursing home care is a cheaper alternative for most families. Thus, America's long-term care service delivery system is steadily declining with increasing bankruptcies, diminishing revenues, scarce capital, dire staff shortages, deteriorating quality, and high liability insurance premiums. Yet, addicted to public financing, the nursing home industry begs hopelessly for ever higher government reimbursements instead of demanding public policy to encourage private financing of long-term care. Even the assisted living industry looks greedily at Medicaid, tempted by the same false promise of easy money that led nursing homes down a fifty-year primrose path of constricting reimbursements and tightening regulations.
Financiers are the people and companies who provide the debt and equity capital to build and operate long-term care facilities. They seek profitable investments. To them, long-term care means "show me the money." Financiers shun businesses that do not produce adequate financial returns. In the 1990s, they over-invested in long-term care anticipating that aging demographics would make home care, assisted living and nursing homes into hugely profitable growth industries. They financed and built myriad long-term care facilities. Wall Street followed suit, pumping up long-term care stocks in anticipation of big future gains. When Medicare cut back on reimbursements for home health, skilled nursing facility, and auxiliary services in the Balanced Budget Act of 1997, the bottom fell out. Long-term care stocks collapsed, major nursing home and home health chains went bankrupt, and investors lost interest in the long-term care industry. Capital will always migrate to its highest and best use. When investors cannot safely anticipate a healthy profit, they take their money elsewhere. At a time when America should be building up its long-term care infrastructure, our heavy dependency on inadequate government financing is driving profit-minded investors away from the business.
Finally, to insurers, long-term care was a golden opportunity tempered by disappointing results. Many carriers entered the long-term care market lured by promising demographics only to depart a few years later discouraged by disappointing sales. Likewise, most insurance agents and brokers join the long-term care insurance market with stars in their eyes only to find the product too difficult to sell profitably. The insurance industry completely missed the point that America already has a national social insurance program for long-term care that finances the vast majority of all professional home care and nursing home services. Focused traditionally on selling asset protection to prospects who do not feel, and are not in fact, at risk of asset spend down, long-term care insurance companies failed to penetrate the senior or baby-boomer markets significantly. The primary benefit of long-term care insurance is not asset protection, which can be purchased from a Medicaid planning attorney after the insurable event occurs for a fraction of the cost of private insurance premiums. Rather, the major value added by private long-term care insurance is to empower consumers to purchase quality care in the private market at the most appropriate level, i.e. home care, assisted living, and when necessary, red-carpet access to top-quality nursing home care.
Understanding The Blind Men of Long-Term Care
Those are the blind men of long-term care. We've now taken the elephant of long-term care apart. Here's what we found.
• The government funds most long-term care but can't afford to do so in the future.
• The public is asleep about the risk of long-term care because the government has paid for most of it since 1965. So the public is about to get a rude awakening as government is forced to withdraw slowly from widespread LTC funding.
• Senior advocacy organizations, instead of working to wake the public up to the need for long-term care planning, have put all their lobbying energy and resources into promoting more government financing of long-term care. But that's a dead end.
• And ironically, at least for the time being, the easiest money of all to be made in long-term care is made by Medicaid planning attorneys who wave a magic legal wand and make the financial liability for long-term care disappear for their affluent clients--after the insurable event has occurred.
• Long-term care providers are hooked on "LTC crack." They invest all of their energy, resources and money into squeezing more revenue out of the government. But again, that's beating a dead horse, drilling a dry hole.
• Nursing homes remain a powerful lobby because they get and have gotten so much government financing for so long. Home and community-based services providers have little clout, because the government co-opted a private market for their services by paying mostly for nursing home care for over five decades.
• Long-term care financiers are few and far between, because they can make more money for their investors in other sectors of the economy. Hence, we have a shortage of debt and equity capital to build, operate and maintain long-term care facilities in the United States at the very time the demand for long-term care is about to explode.
• And finally, long-term care insurance remains a stunted market, because the government has paid for most long-term care since 1965, the public is therefore asleep about the risk, and the long-term care providers are hooked on public funding.
Get the picture? What a mess! When you look at the whole elephant of long-term care and take it apart, what you see is a very complicated interrelationship between many interconnected parts resulting in a totally dysfunctional whole.
Putting the Elephant of Long-Term Care Back Together
A brief article like this one cannot present or develop all of the viewpoints and perspectives necessary to comprehend long-term care in its full intricacy. Nevertheless, "in the land of the blind, the one-eyed man is king." If we only keep a few critical facts in mind about the elephantine complexity of long-term care, we will be far better prepared to plot rational public policy to solve these problems.
The public has been anesthetized to the risk of long-term care by decades of easy access to government-financed nursing home care. To awaken Americans to the risk of long-term care before it's too late, we must target publicly financed long-term care more effectively to the genuinely needy and create strong incentives for everyone else to save, invest or insure for this risk. By reducing government financing and increasing private financing of long-term care, America can (1) reduce the fiscal burden on Medicaid and taxpayers, (2) improve access to and quality of care for poor and rich alike, (3) breathe financial oxygen into the service delivery system, (4) build a strong home and community-based services infrastructure and (5) begin to attract new capital into the field of long-term care. All we need is the vision to see long-term care in its full complexity and the will to change public policy accordingly.
For a more comprehensive analysis of and prescription for the long-term care financing problem, see the Center for Long-Term Care Reform’s many national and state-level reports at http://www.centerltc.com/reports.htm.
Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, WA and recipient of the 2019 ILTCI Recognition Award. Reach him at email@example.com or 206-283-7036. Check out the Center’s website at www.centerltc.com.
* The original version of this article was published in National Underwriter's LTC Online Edition in February 2003.