LTC Bullet: Make LTC Simple Again

Friday, December 30, 2022

Seattle—

LTC Comment: There must be a better way to do LTC. There is. Read on after the ***news.***

*** HAPPY NEW YEAR ***

*** RON HAGELMAN deserves our special thanks and a shout out.  Here’s how we covered his latest column for Broker World in a recent LTC Clipping. ***

12/1/2022,Enemies,” by Ronald R. Hagelman, Broker World

Quote: “In my humble opinion no one has been a more consistent hard headed advocate of exposing the corrosive relationship between the public response to custodial care for the aged and the lack of success in private responses to reduce and return control of individual claims destiny than Stephen Moses. His most recent manifesto ‘Long-Term Care: The Problem’ recently released from the Paragon Health Institute once again provides conclusive irrefutable evidence that the still mushrooming consequence of current market conditions is the fault of existing misguided public response to the problem. The truth is we have always been fighting ourselves. It is the incestuous relationship between the holy trinity of Social Security, Medicaid and Medicare that has made it virtually impossible for us to adequately blunt this risk from the private sector. Private funding solutions including insurance, reverse mortgages and life settlements have had no room to breathe free when all the oxygen has already been sucked out of the room by State and Federal mandated, frequently capped and therefore underfunded, politically loose footballs. This exceptional white paper provides more than a sufficient arsenal of hard statistic ammunition to defeat any spurious attempt to defend the expansion of public taxpayer funded strategies. More of the same will not help. It will however most certainly exacerbate the problem.”

LTC Comment: Ron Hagelman’s monthly column for Broker World is a mainstay of thoughtful analysis and hopeful optimism in a struggling market. Ron is a friend and ally in our common mission to improve long-term care for all. I thank him for this recognition and urge his readers to take his advice: read Long-Term Care: The Problem and look forward to Long-Term Care: The Solution, forthcoming next year from Paragon Health Institute. To borrow Mr. Hagelman’s well-known tagline: “Other than that I have no opinion on the subject.”

*** OFF TO COLOMBIA. Honestly, I can’t remember a time in its almost 25 years that the Center for Long-Term Care Reform fully closed down for a holiday from our 24/7 mission to improve LTC public policy. But now we’re going to do just that. January 2 Damon joins Steve on a flight to Panama, followed by speedboats through the San Blas Islands to Colombia, with more boats and busses to Cartagena, and finally on through the Andes, to Bogota, Medellin and other points of interest. So please enjoy a respite from LTC Bullets and LTC E-Alerts until Steve returns February 8. He’ll keep the LTC Clippings coming to premium members though perhaps with a little less frequency. Hasta luego. ***
 

LTC BULLET: MAKE LTC SIMPLE AGAIN

America’s long-term care system is complicated, confusing and counterproductive. People want to receive care at home, but the system shunts them into nursing homes. They want qualified caregivers they choose for themselves, but they get whatever Medicaid offers at minimum wages. They don’t want to burden their families, but the financial and emotional strain of LTC on friends and families is worse today than ever. What happened?

This part is not complicated. Since Medicaid began in 1965, government has paid the cost of catastrophic LTC. No matter how often analysts, politicians or the media told them they could lose their life’s savings to LTC, consumers would not save, invest or insure against that risk. They didn’t believe the scary warnings, but most importantly, the warnings were untrue. Most people never ended up needing prohibitively expensive extended care and those who did got it paid for by Medicaid without catastrophic spend down.

Never mind for now all the complicating details such as “doesn’t Medicaid require impoverishment?” Why do people ignore the risk and cost of LTC? Are they stupid? Or just “in denial?” Don’t we have to take care of them if they can’t or won’t take care of themselves? Isn’t government the only solution? If not Medicaid, then what? Don’t we need a new compulsory, payroll-funded, social insurance entitlement for LTC? That’s the course most analysts’ reasoning and their argument usually takes.

Don’t go down that rabbit hole. I can refute that argument and I have done many times. For now, keep it simple, just consider the basic fact. That is, few people worry about or do anything to prepare for LTC until they need it. Then when the costs mount, they slip onto Medicaid. We’ll make no progress solving the LTC challenge until we confront that reality and change it. How can we get people to deal with LTC risk and cost while they are still young, healthy and affluent enough to prepare and avoid public assistance in the future?

We saw one way to do it when Washington State confronted its citizens with the threat of a .58 percent payroll tax for a lifetime benefit of $36,500, but gave them a way out by purchasing private LTC insurance. Almost half a million Washingtonians jumped at that chance overwhelming the insurance carriers with demand for minimal policies the industry feared would be quickly dropped. Clearly people don’t want more government compulsion or taxes and they’re willing to buy private insurance to avoid them.

There’s no denying that confronting people with the need to deal with LTC risk now, not later, worked. So, how could we get people to plan for LTC now without forcing them into a big new government entitlement program? Here’s a way.

Establish by law the responsibility to fund a certain limited amount of LTC by age 50. Let a private organization or agency determine the amount, which should be somewhere between a person’s actuarial probability of needing paid care someday and the higher amount that would be required if the worst happens, such as high cost need for an extended time.

People could meet their personal responsibility in any of many ways. They could buy private LTC insurance. They could tap their home equity, $11.1 trillion for people 62 or older. They could use life insurance, over $20 trillion in effect. They could apply a portion of current or newly created retirement accounts to prefund for LTC. They could pledge some of their future estate toward LTC, legally secured to avoid the failure of Medicaid’s estate recovery program.

Clearly, there is plenty of money available in the U.S. economy to fund top quality LTC for all Americans. All we need to do is get people to plan for LTC before it’s too late for them to avoid anything but Medicaid. Government’s role should be limited to establishing the individual LTC responsibility in general which the private sector would then price out actuarially for each citizen.

Most people would act responsibly as they do when they protect themselves against other risks such as early death, fire, accident, or health risk. For those who don’t, let the usual measures when people don’t meet their legal responsibilities suffice, such as tax collection, grant reductions, or LTC avoidance fees. In other words, government would enforce LTC responsibility only in cases where people have not fulfilled their responsibility voluntarily. Not in all cases against everyone as in the WA Cares program.