LTC Bullet: Square the LTC Circle Friday, December 17, 2021 Seattle— LTC Comment: How can we get government and private industry working together on long-term care financing? The answer after the ***news.*** *** ILTCICONF.ORG reports “Registration is Now Open for the 2022 Intercompany Long Term Care Insurance Conference! Our in-person conference will be March 20-23rd at the Raleigh Convention Center. Our agenda includes over 45 educational sessions with ample time for networking and reconnecting with colleagues. Register now to save $100 on your registration during our early bird. We still have room for exhibitors and sponsors! Please contact us at info@iltciconf.org if you are interested in either opportunity to showcase your products and services to our attendees.” *** *** RECENTLY PUBLISHED ARTICLES by Steve Moses. We hope you’ll read these articles, join the Center for Long-Term Care Reform, and help us “Square the LTC Circle.” The Center’s “Membership Levels and Benefits” schedule is here. Join individually or urge your company or association to join as a corporate member so you can receive all the benefits of membership at no cost to you. Universal access to top quality care for all Americans (the Center’s mission) is achievable. Join us and make it happen! *** “Long Term Care Irony,” by Stephen A. Moses, Broker World, December 1, 2021 (PDF version.) “What works for long-term care and what doesn’t,” by Stephen A. Moses, McKnight’s LTC News, November 17, 2021. “What’s better for senior living and care — the market or government?,” by Stephen A. Moses, McKnight’s Senior Living, October 25, 2021. “Long-Term Care’s Problems Are Bad, Getting Worse, but Fixable,” by Stephen A. Moses, McKnight’s LTC News, October 1, 2021. “Should Medicaid Protect $8 Trillion from Private Senior Living Costs?” for McKnight’s Senior Living, August 9, 2021 “The InLTCgentsia” for Broker World’s August 2021 issue. (PDF version.) “Panel Gives States Pass in Collecting Assets for Medicaid Long-Term Care,” by Stephen A. Moses, Health Care News, July 2021 “Government Violates the Long Term Care Social Contract to Your Detriment, by Stephen A. Moses, Broker World, June 2021. (PDF version.) “President Biden, tear down this wall,” by Stephen A. Moses, McKnight’s LTC News, June 23, 2021 “Using Medicaid to protect inheritances,” by Steve Moses and Brian Blase, The Hill, June 10, 2021. “LTC financing: Be careful what you WISH for,” by Stephen A. Moses, McKnight’s Senior Living, June 7, 2021. “The
social contract for long-term care,” by Stephen Moses for McKnight’s
Long-Term Care News, May 17, 2021. *** LTC BULLET: SQUARE THE LTC CIRCLE LTC Comment: What does it mean to “square a circle?” Answer: construct a square equal in area to a given circle (a problem incapable of a purely geometric solution). In other words, do something that is considered to be impossible. What does it mean to “square the long-term care circle?” Answer: find a way to get the government and private industry working together, instead of at cross purposes, to solve the long-term care financing problem. That is a very tall order. For decades, at least since the implementation of Medicaid in 1965, government and private insurance have tackled long-term care financing with different, often contradictory approaches. Government sought to provide long-term care to people who need but cannot afford it. So Medicaid offered nursing home care to anyone with an income below the cost of care and allowed them to retain practically unlimited exempt assets while receiving the benefit. Easy access to Medicaid long-term care benefits after the insurable event occurred desensitized the public to LTC risk and cost leaving most Americans unprotected by private savings or insurance and dependent eventually on public assistance. Attempting to pull the economy out of the “Great Recession” of 2008, government (the Federal Reserve) forced interest rates to near zero and kept them there still in order to encourage more capital investment and spending. But those low interest rates crippled LTC insurers’ ability to obtain actuarially anticipated returns on reserves and forced them to raise premiums which alienated beneficiaries and prospects causing the market to implode from 120 carriers to around a dozen. Bottom line, government and private insurance have pursued common goals by irreconcilable means for decades. That problem may be about to worsen exponentially. Frustrated by the growing population in need of long-term care, by the exploding cost of providing that care and by the tremendous financial and emotional stress on family caregivers, the state and federal governments are leaning toward imposing mandatory, payroll funded long-term care social insurance programs on their populations. That of course would be the death knell for private long-term care insurance. Why pay premiums for private coverage when the government has already compelled you to pay for it through taxes? But here’s the problem with that “solution.” According to a recent Gallup poll, “Americans' opinions of capitalism have generally been stable over the past decade, with around six in 10 having a positive view of capitalism and slightly fewer than four in 10 having a positive view of socialism.” In other words, the public doesn’t want more socialism. When governments try to impose more compulsory social insurance programs like Social Security and Medicare, voters rebel against their huge unfunded liabilities and doubtful ability to provide the benefits they promise. Rather, the public prefers capitalism, free markets, individual responsibility and choice, which private long-term care insurance provides. So, are government and private insurance hopelessly at loggerheads? Maybe not. Recent developments with Washington State’s foray into long-term care social insurance suggest a way to resolve their differences and square the LTC circle. Politicians in the Evergreen State pushed through WA Cares to compel state citizens to contribute .58% of payroll in order to fund their long-term care in the future. But they gave people an escape hatch. Buy private LTC insurance by November 1 and you can avoid the tax forever. To escape the tax, Washingtonians stampeded to buy the private coverage. That caused so much demand that overwhelmed private LTC insurance carriers had to shut down the market leaving thousands unable to get the coverage they needed in order to avoid the State’s new tax. Chaos ensued and today it looks like the WA Cares Fund will fail as have its predecessors including the CLASS Act. In the meantime, states all across the country are reported to be following Washington State’s lead by developing long-term care social insurance programs of their own, compelling their citizens to pay up for long-term care whether they want to or not. The big question is whether these developing programs will or will not include the escape hatch that Washington offered. If they don’t, they’ll wither and die eventually as all social insurance programs are doomed to do. If they offer the opt out, they can square the LTC circle. How? If state and federal governments insist on forcing people to prepay for long-term care through payroll deductions, they should leave open the choice to opt out by purchasing private long-term care insurance. Such a system captures everyone either coming or going in the long-term care financing net. But don’t make the mistakes Washington made. Offer the opt-out early so that as many people as want to can purchase private insurance to avoid the tax. Establish a certain minimum amount and quality of private coverage to qualify. Review the coverage annually to ensure it remains in place. If private coverage lapses, revoke the payroll exemption. This policy squares the LTC circle by getting all the potential benefits of a mandatory public insurance system while eliminating the downside of forcing people into the public program by giving everyone who prefers private coverage a way to remain independent and personally responsible. Voila! We have everyone protected for long-term care without relying on universal compulsion. Few will remain dependent on Medicaid so its costs will plummet relieving taxpayers. Access and quality will increase across the care continuum as more revenue flows through the service delivery system. More paid caregivers will receive living wages bringing relief to financially and emotionally stressed caregiving families. LTC circle squared! |