LTC Bullet: The Reverse Robin Hood Economy and Long-Term Care

Friday, May 22, 2020


LTC Comment: Does government take from the rich to help the poor? Or is it just the opposite? We scrutinize after the ***news.***

*** THE ILTCI EXECUTIVE COMMITTEE reports that the Intercompany Long Term Care Insurance Conference, cancelled for 2020 due to the pandemic, will convene in 2021on Monday, March 8th through Thursday, March 11th at the Sheraton Downtown Denver in Denver, CO. They say “In the coming months we will be offering a selection of our 2020 ILTCI break-out sessions/workshops in the form of webinars and podcasts. The first one will take place this month. We are happy to make this content available and wish to thank all session producers and speakers who prepared informational and educational content this year. In the meantime don’t hesitate to visit our updated FAQs on or email if you have any questions. ***


LTC Comment: The coronavirus pandemic has thrown millions out of work and ruined thousands of companies. But, not to worry, the federal government has taken unprecedented action to alleviate the economic pain until the virus goes away and we get back to normal.

Specifically, the Federal Reserve is printing money with no limit and the Treasury is borrowing and spending “whatever it takes.” Voila! People get paid whether they work or not and companies survive whether they’re open for business or not. Problem solved.

OK, but won’t someone, somehow, someday have to pay for all that printing, borrowing and spending? Yes, of course. TANSTAAFL: There’s No Such Thing As A Free Lunch. So who gets the bill? Presumably, the rich will pay as they have most of the money and they pay most of the taxes. This economy, therefore, is Robin Hood on steroids. Government takes from the rich to give to the poor.

Or does it? What’s really happening? Qui bono? That’s the apt question. Who benefits?

At first blush, it seems like the poor and unemployed receive a bonanza. They get money while remaining idle, sometimes even more income than when they were employed. But look under the economic surface. What happened to all that money the government created out of nothing?

Some of it will find its way into consumer spending, which means there will be much more money chasing fewer goods and services due to the economy’s shutting down. That is the definition of inflation. So the good news is government gave you money, but the bad news is that it won’t buy as much as before.

But the bulk of the new money will find its way into the stock, bond and real estate markets. That’s why equity values skyrocketed after the 2008 financial crisis when the same policies were employed. It’s why it is happening again now. In other words, the new money benefits the already well-to-do substantially, but only allows the unemployed to wait out the crisis less painfully.

So, what happens as we emerge from this pandemic-induced financial cataclysm? The government and the private sector have taken on unprecedented levels of debt. Debt is not free. It must be serviced. Even at artificially low interest rates, that’s difficult. There are only three ways to service debt: borrow more, raise taxes, or let inflation run rampant.

Borrowing more is possible only until lenders, i.e., the rest of the world, realize you’ve put no limits on debt. Sooner or later, they’ll figure out you’re unlikely to pay back what you’ve already borrowed, much less service even bigger liabilities. So, either you can’t borrow more or lenders demand higher interest rates. Either way, it’s harder than ever to service the compounding debt. It’s a vicious downward spiral.

Taxing to pay the interest and/or reduce the debt doesn’t work. People object to higher taxes. Politicians benefit by giving people what they want, specifically free stuff, not by raising taxes. Besides, taxes reduce private capital which is what creates jobs and prosperity which are the source of tax revenue in the first place. Everyone is better off when we leave money in the private sector where it can grow through wise investment.

Finally, inflation makes debt disappear instead of paying it off. Inflation hurts lenders who get their loans paid back in less valuable, or worthless, dollars. Inflation helps borrowers by letting them pay back their loans with cheaper dollars.

Who are the borrowers? Government and overleveraged companies. Who are the lenders? You’re looking at ‘em: the American people and all the suckers around the world who bought our bonds and let us use the proceeds to purchase their goods and services.

In other words, we’re in the middle of a big Ponzi scheme benefiting the rich at the expense of everyone else, especially the poor. As long as there is a bigger sucker willing to buy into the giant government debt bubble, it keeps getting bigger. But the coronavirus may just be the pin that finally pops this monetary balloon. We’re going to find out soon.

Long-Term Care

So where does long-term care come in? It’s similar in a way. Government purports to pay for long-term care for the poor by taxing the prosperous. Robin Hood again, right?

Think again. Medicaid, the government’s long-term care funding program, is readily available to the middle class and affluent as well as the poor. Find the evidence for that statement in Medicaid and Long-Term Care.

So, the poor end up in welfare-financed nursing homes with notoriously low quality care. But so do the affluent Medicaid recipients, right?

No. Prosperous people who take advantage of Medicaid hold back some cash so they can pay privately for a few months. That gets them into the best LTC facilities that have relatively few Medicaid recipients. Then they, or their Medicaid planning attorney, flip the switch and convert their payor to Medicaid.

The poor get the worst Medicaid has to offer. The well-to-do get the best.

Reverse Robin Hood redux.