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Stephen A. Moses, "On the Lack of True Marketing of Long-Term Care Insurance," Health Insurance Underwriter, Vol. 51, No. 11, December 2003, pps. 65-67. To read this article online, go to: http://nahu.timberlakepublishing.com/article.asp?article=805 On the Lack of True Marketing of Long-Term Care Insurance Pull quote: Like the Marines, LTCI agents are expected to do the difficult immediately and the impossible over time. Lured by promising demographics, dozens of long-term care insurance carriers, hundreds of brokers and thousands of agents have tried to sell long-term care insurance only to give up and exit the market. Most of those who continue to sell the product are less than thrilled by the return on their investment. Yet the insurance industry continues to ignore the primary reason for the market's disappointing results: the government has been giving away its product since 1965. Even with full above-the-line tax deductibility, the public policy basket into which insurers have put all their eggs, most people won't buy long-term care insurance if they can ignore the risk, avoid the premiums and get the government to pay. That's exactly what happens most of the time. Without LTCI, people routinely end up in a nursing home on Medicaid. But Medicaid is a means-tested, public assistance program, i.e. Welfare. It has a dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias. Even though Medicaid planners can rejigger people's income and assets to qualify them for publicly financed care, the risk their clients run is that they will be trapped in a seedy nursing home under-financed by a collapsing, virtually bankrupt Welfare program. (See the "Dire Warnings from the Feds" comments later.) To some middle-class people, it may also matter that the Medicaid bed they may occupy could cause a poor person, who lacks "key money" to buy into a better nursing home, to end up in one of the 100% Medicaid hellholes. Instead of focusing primarily on asset protection, long-term care insurance marketers should emphasize access to quality care in the private marketplace at the most appropriate level, i.e., home care, assisted living and the very best nursing home care as a last resort. Independence, control and choice are the most important values added by long-term care insurance and they should be the benefits with which agents lead, return and finish. It won't suffice, however, simply to point out the negatives of Medicaid and the positives of private insurance. Most people are in denial about long-term care risk and cost. What agents need to understand is how prospects can be in denial when the risk and cost are so high. The reason is that more than four out of five dollars spent on nursing home and home health care in the United States comes from sources other that people's assets. With assets not at risk, most people are desensitized to the likelihood of needing long-term care. They don't know who pays for long-term care, but they figure someone must. And they're right! That's why the primary key to increasing long-term care insurance sales is not marketing. LTC agents have to be AMGs -- altruistic, masochistic geniuses -- to sell something the government has been giving away for nearly 40 years. Like the Marines, LTCI agents are expected to do the difficult immediately and the impossible over time. Long-term care insurance marketing will take off, and regular folks will be able to make decent livings selling the product, when and if the government starts targeting publicly financed LTC benefits to the genuinely needy and encouraging private insurance and home-equity conversion through above-the-line tax deductibility and other incentives. Dire Warnings from the Feds You know that statement you get from Social Security every year that estimates what you will have coming from the program when you retire or die? Read it closely and you'll find this caveat: "Unless action is taken soon to strengthen Social Security, in just 15 years we will begin paying more in benefits than we collect in taxes. Without changes, by 2042 the Social Security Trust Fund will be exhausted...At that point, there will be enough money to pay only about 73 cents for each dollar of scheduled benefits." This warning is not new. We checked. Social Security has been saying the same thing in its annual statements for several years running. But this is not the worst of it. The Social Security Trustees, the Congressional Budget Office, the General Accounting Office and many private think tanks have been sounding the same alarm for years about Social Security, Medicare and, lately, the Pension Benefit Guarantee Corporation and veterans' health benefits. Here's the point for individuals and families to take to heart: Plan now to save, invest and insure against every financial risk you may face in the future. If the government's social insurance and Welfare programs are there to help you some day, fine. But in the meantime, plan to manage on your own. Be part of the solution to America's long-term fiscal challenges, not part of the problem. And if you are in a position professionally to alert and advise others, spread the word. Here are excerpts of a speech by David M. Walker, comptroller general of the United States, on September 17 at the National Press Club in Washington, DC: "Let me start by reviewing the federal government's current financial condition. The federal government's fiscal 2002 annual financial report says a lot but not enough. The good news is that as of September 30, 2002, we had about $1 trillion in reported assets. The bad news is that we had almost $8 trillion in reported liabilities. According to my math, that left us with an approximate $7 trillion accumulated deficit, or a little over $24,000 for every man, woman and child in the United States... "Furthermore, CBO estimates that, excluding Social Security surpluses, the total deficit for fiscal years 2003 and 2004 will be $562 billion and $644 billion, respectively. If all these numbers are making your head spin, don't worry; just remember that they are all big, and they are all bad! "Importantly, while we are starting off in a financial hole, we don't really have a very good picture of how deep it is. Specifically, there are a number of very significant items that are not currently included as liabilities in the federal government's financial statements; for example, several trillion dollars in non-marketable government securities in so-called 'Trust Funds.' "In the case of the Social Security and Medicare Trust Funds, the federal government took in taxpayer money, spent it on other items and replaced it with an IOU. Given this fact, why aren't the amounts attributed to such activities shown as a 'liability' of the U.S. government? At the present time, they are not! Does this make sense, especially when the government continues to tell Social Security and Medicare beneficiaries that they can count on the bonds in these 'Trust Funds'? Is the federal government trying to have its cake and eat it too? "The current U.S government liability figures also do not adequately consider veterans' health care benefit costs provided through the Department of Veteran's Affairs nor do they include the difference between future promised and funded benefits in connection with the Social Security and Medicare programs. These additional amounts total tens of trillions of dollars in discounted present value terms. Stated differently, they are likely to exceed $100,000 in additional burden for every man, woman and child in America today, and these amounts are growing every day. These items may or may not ultimately be considered to be liabilities from an accounting perspective; however, they do represent significant commitments that ultimately have to be addressed. The burden of paying for these is not a very nice present for a child born today! Personally, I'd prefer a savings bond rather than a bill... "GAO's long-range budget simulations show that this nation faces a large and growing structural deficit due primarily to known demographic trends and rising health care costs. In less than 10 years, due primarily to the retirement of the baby boom generation, the United States will be hit by a huge demographic tidal wave that is not expected to ever recede. This is unprecedented in the history of our nation . . . "While reasonable people can and will disagree about the nature and extent of our long-range fiscal challenge and how to best address it, the time has come for all responsible parties to recognize reality. Our nation has a major long-term fiscal challenge that is not going away and requires serious and sustained attention... "In closing, while I hope this serves as a wake up call, it is also time for a 'call to action.' My fellow baby boomers and others need to recognize the leadership and stewardship obligations that we have to our children, grandchildren and future generations of Americans. In addition, members of Generations X and Y need to become actively engaged in this debate because they and their children will bear a disproportionate portion of the burden and adverse effects if policymakers fail to act in a reasoned and responsible manner." (You can read the entire speech at http://www.gao.gov/.) Walker's speech is frightening. Alas, his is only one voice among many saying the same thing. We have a brief window of opportunity in which to act before the baby-boomer "Age Wave" crests and finally crashes on America's social insurance programs. After the World Trade Center attack has been avenged and the threat of terrorism removed, our twin towers of vulnerability in this country will be our weakening health care and retirement security programs. We must bring to bear the same will, determination and wealth to defeat those perils as we are mobilizing today against the scourge of terrorism. Perhaps as individuals alone, we cannot solve the broad public policy problems that confront Medicare, Medicaid and Social Security. But we can take personal responsibility to save, invest and insure for our own family's future well-being. We can advise others on the risks and the need to plan early for a secure retirement buttressed by private investments and savings. By taking these simple steps, individual Americans can also make an important contribution to solving the larger public policy challenge. A wag once said, "The best way to help the poor is not to become one of them." Each of us who takes that advice to heart contributes to saving our country's social programs for those who need them most. _____________________________________________________________________________ Stephen Moses can be reached at smoses@centerltc.org or 206-283-7036. The Center for Long-Term Care Financing is a charitable, nonprofit think tank and public policy organization with the mission of ensuring quality long-term care for all Americans. You can subscribe to its online newsletter, "LTC Bullets," for three free months by emailing a request to info@centerltc.org. (c) 2003 National Association of Health Underwriters. All rights reserved. |
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