Thanks to my friend and colleague, Stephen Moses, president of the Center for Long-Term Care Reform, for allowing me to republish this address on the future of long-term care financing and long-term care insurance in the United States. The following is an edited transcript of a speech he delivered on January 12, 2013.
Don’t miss the irony in Steve’s speech. The good news for LTC insurance is actually very bad news for the U.S. economy. The only way to reconcile this seeming conflict is to resolve the LTC financing crisis in the right way.
“The Good News and Bad News About Long-Term Care”
Stephen A. Moses
I have good news and bad news.
I’ll spend one minute on the bad news and the rest of my time on the good news.
The bad news is that all the reasons consumers have been in denial about the risk and cost of long-term care still apply and they are getting worse.
- Government programs still pay for most expensive long-term care in the USA.
- Government LTC benefits are much easier to get than most people realize.
- And the Federal Reserve still forces interest rates to near zero which compels carriers to raise premiums to compensate, making LTCI harder to sell.
OK. So much for the bad news.
Here’s why LTC insurance carriers, distributors and producers are in the catbird seat primed to do well doing good for your clients and for your country.
First of all, everything that makes LTC insurance necessary remains true and is becoming more so. For example:
- 8,000 Americans turn 65 every day and that will continue for the next 18 years.
- 70 % of people 65+ will need some LTC and 20% will need 5 years or more
- LTC is very expensive: As of 2012, over $80,000 per year for a nursing home; over $42,000 for assisted living; and over $60,000 for a home health aide on a daily 8-hour shift
But we’ve known all that since the inception of LTC insurance in the 1970s. Nothing new there.
So what is new? Why will the LTC insurance market explode within your career horizons and probably during the current four-year presidential term?
In a nutshell, all the obstacles to a strong LTC insurance market are about to come crashing down.
Let me walk you through them one by one.
- The demographic bombshell of aging boomers is only now beginning to explode with the first of the 77-million-strong generation becoming fully eligible for Social Security last year and for Medicare the year before.
- Government programs funding LTC are like Wylie Coyote in the Road Runner cartoon. They’ve gone over the fiscal cliff still wearing a silly grin, but they’re about to fall like an anvil. Why?
- Basic federal government debt is $16.5 trillion, over $52,000 for every man, woman and child in the country. Our debt to Gross Domestic Product ratio is 100 percent. We borrow 42 cents of every dollar the federal government spends. Can you believe that? We go $1 trillion deeper in debt every year. That can’t continue for long.
- Medicaid, which crowds out 2/3 to 90% of the LTC insurance market according to Brown and Finkelstein, has a terrible reputation for poor care and is bankrupting the states. Easy access to Medicaid and its big loopholes will end.
- Social Security pays for about 13% of LTC through Medicaid spend-through, but Social Security has a $21 trillion unfunded liability. It can’t continue funding LTC.
- Medicare pays generously for nursing home and home care which enables LTC providers to survive with most of their patients funded at less than cost by Medicaid. But Medicare has a $39 trillion unfunded liability, so it can’t continue either.
- All three – Medicaid, Social Security and Medicare – will be means-tested. That means they’ll be welfare programs, not social insurance, and most middle class and affluent Americans will get less, if anything, from them.
- Home equity will become a major source of funding for income security, health care and long-term care in retirement. That’s good for the reverse mortgage business in the short run and for LTC insurance in the long run as more people realize they need coverage to protect their home equity.
- 65 million Americans are unpaid caregivers, 7 of 10 of whom care for someone over 50 years of age. Those numbers will skyrocket as boomers age.
So what does this mean for you?
We’re about to enter a brave new world of long-term care. Keep doing what you’re doing and before long prospects will be knocking on your door instead of vice versa.
The public’s been asleep about LTC risk and cost because a government safety net has softened the financial consequences of going without LTC insurance since 1965.
As I’ve explained, that’s ending.
Already you see key changes indicating the public is finally getting the message. The age of purchase for LTC insurance has fallen by a decade from late ‘60s to late ‘50s.
You see and hear many more media stories about the risk and cost of long-term care.
Businesses worry more and more about absenteeism and “presenteeism” due to employees caring for elderly parents or worrying about them instead of working. That means you’ll sell many more group and multi-life policies.
Attorneys, financial planners and accountants are getting more questions from their clients about LTC. Just last week an estate planner called me to find out who could help him protect his clients. I referred him to a major distributor.
People are getting scared. They hear the news about the federal debt and deficit and unfunded entitlements. They’re caring for elderly loved ones in huge and rapidly growing numbers. The public programs they’ve relied on no longer instill confidence.
These trends develop slowly over time. They grow and grow like blowing up a balloon. Then they pop and all of a sudden everything is different. That’s what’s going to happen.
You are in the enviable position of being in the right place at the right time. Some of you have been pioneers in long-term care insurance. We know you by the arrows in your backs.
But your time has come now.
Watch for this scenario to play out.
- Assuming current government policies stay the same, the American economy will continue to lag.
- Domestic and international financial pressures will force interest rates up in spite of the Federal Reserve.
- Federal debt service will skyrocket putting more financial pressure than ever on government programs that fund LTC such as Medicaid, Social Security and Medicare.
- Policy makers will have no choice but to cut back on benefits, eligibility, and provider reimbursements.
- The quality of publicly financed LTC will continue to decline.
- It is true already and will be more true in the future that access to quality long-term care at the most appropriate level is assured only to those who can pay privately.
You are the heroes who will show the next generation how to avoid the pitfalls of publicly financed long-term care.
One of the things I love most about speaking with my many friends who have been selling long-term care insurance for two decades or more, is to hear their stories about clients who have gone on claim.
Those clients are so appreciative that they elevate the producers who sold them their policies to the status of demigods. How enormously proud that must make them . . . you . . . feel.
And that’s what the future holds for you if you stay on course. You are the last line of defense between the people you meet and the dismal future that awaits them if you allow their denial about LTC risk to prevail.
So my advice to you is “Go forth with confidence and pride. Know that long-term care insurance is good and people need it. Everyone you protect is one less person to drag down the social safety net for the truly needy.”
Here’s a link to the December 2012 Report on Shortfalls in Medicaid funding. This is an annual report commissioned by the American Health Care Association (AHCA) and performed by Eljay, LLC.
Not surprisingly, the report (page 6) states that:
“Between 2010 and 2012, the…. projected (Medicaid) shortfall climbed to $22.34 from $18.54 in 2010, a 20.5 percent increase in the shortfall amount.”
“We estimate that in 2012, state Medicaid programs, on average, reimbursed nursing center providers only 88.9 percent of their projected allowable costs incurred on behalf of Medicaid patients. This means that for every dollar of allowable cost incurred for a Medicaid patient in 2012, Medicaid programs reimbursed, on average, approximately 89 cents. This represents the lowest percentage since the inception of this study in 1999.
This is very scary stuff!
Obviously, the government is less and less capable of providing long-term care.
I hope that those of you who do not already own reasonably priced long-term care insurance (LTCi) will take heed and plan responsibly for your long-term care. LTCi is the reasonable—and sure—way to ensure you will have all the options you’ll prefer if long-term care is needed.
My very good friend and collegue, Marilee Driscoll, has given me this video as a wonderful holiday gift. Marilee is a noted author, consultantant and speaker, with special expertise in the area of long-term care insurance (LTCi).
Marilee has also demonstrated her skills as a talented video director. The attached video was not scripted and was completed in only three takes. Marilee prepped and prodded me to relate this true story as only a gifted director can.
The video is titled “LTCi Creates Choice Later in Life”. It is just over a minute long. It’s a very useful educational tool that helps people learn about why LTCi ownership can make such a huge qualitative difference in peoples lives.
The following was written in response to Scott Burns’s poorly researched column on long-term care insurance (LTCi) published yesterday:
Your premise is fallacy-based; you do your readers a true disservice. 1) Medicaid dependency should never be complacently recommended to the broad middle class who have income and some wealth. Care in Medicaid facilities is already very substandard. More budget cuts are in store. Imagine how foul already foul Medicaid-paid care will be in 15 years when Boomers start accessing it en masse.2) You pan the insurance industry. All it did was the responsible thing, unlike the government, which just “prints” money. The LTCi industry has shown prudent, responsible stewardship of LTCi. Policies will be honored when people need them. LTCi policies are now innovative and can be made reasonable for almost anyone willing to discuss them. The problem is people like you do not do your job as journalists and research properly. Many of your journalist peers “get” LTCi a lot better than you appear to. Columns like yours give the public more excuses to not have a conversation they prefer to avoid about responsible LTC planning. 22+ years of experience convince me this is the primary reason more do not own LTCi. 3) Where did you get your statistics? The statistics I have are that 70% of the public will need some type of LTC going forward from age 65. 50% of all LTCi policies pay. Average claim length is 2.5 years. At least 15% of claims last more than 5 years. I can introduce you to the leading LTCi actuaries who collect and interpret these statistics over many years. They will be glad to provide you with accurate information. You are hindering, not helping, your readers.
Workers may think delaying retirement is a solution to inadequate savings, but this may not a reliable strategy, finds Kiplinger’s Personal Finance reporter Eleanor Laise in her September 12, 2012 column.
More than one out of four workers now plan to retire at age 70 or later, according to the Employee Benefit Research Institute. That’s up from 16% in the pre-crisis days of 2007. Just 8% of workers expect to retire before age 60, down from 17% in 2007.
In her New Old Age article (“Children of Aging Parents Are Often Nearby, Study Finds,” New York Times, September 14, 2012), Paula Span reports on a new study by Michal Engelman, a University of Chicago gerontologist. In his study, Dr. Engelman gives insight into why parents move closer to their children as they age.
He found that people who own long-term care insurance (LTCi) are less likely to move closer to their children, apparently because “it shows potentially less need for family care. If they need more help, they’ll be able to get it.”
Here is additional proof that owning LTCi gives people options and increases independence. LTCi ownership reduces stress and burden to family members.
In this easy-to-read Chicago Sun-Times article, Suze Orman (August 22, 2012) gives an amazing testimonial for long-term care insurance (LTCi) ownership.
Reasonable LTCi premiums can still be found. What may not be reasonable, is needing anything longer than a short amount of long-term care, and not owning LTCi.
By the way, for years, Suze advised people to wait until age 60 to purchase LTCi. Colleagues and I often disputed this advice with her, but she would not yield. In this same story, Suze admits that we were right: she waited too long to buy her own policy. The best age to purchase LTCi is at age 50, or even younger. We can still find you decent rates at older ages, but you will save money and capture your insurability by buying LTCi at younger ages.
If you have a friend you care about who has not yet planned responsibly for long-term care, if your friend is pressed for time, if your friend may think all insurance agents are pushy, self-serving, uninformed and without wisdom, reading this brief article may help them.
Many thanks to my friend and colleague, Marilee Driscoll, for writing such a fun—and true—story on me.
A new study cited in the June 28, 2012 issue of Health Day http://consumer.healthday.com/Article.asp?AID=665947 reported that 21% of patients admitted to nursing homes in the U.S. suffered a fall within the first 30 days. The authors noted unfamiliarity with the facility and staff contributed to these accidents. On an optimistic note, the study found “…that higher levels of staffing with certified nursing assistants reduces the risk of patient falls.”
Most nursing home care in the US is paid for by Medicaid. Medicaid accepting facilities are notoriously understaffed. Since long-term care insurance provides additional financial resources, it often enables people to avoid Medicaid-paid nursing homes with poor staffing ratios. LTCi owners are much more likely than non-LTCi owners to be able to access long-term care at home and in facilities with better staffing.
Believe-it-or-not, not everything you hear on the radio is true! I’ve just mailed the following letter to Diane Rehm, who recently aired a show on Long-Term Care insurance (LTCi) that contained many inaccuracies.
I’ve been specializing exclusively in sales and support of LTCi for over 22 years. Sadly, I can still only dream of the day that long-term care insurance will be truthfully and accurately covered by the media.
June 21, 2012
Dear Ms. Rehm:
I enjoy listening to your show whenever I can.
As an expert who has specialized in the placement of long-term care insurance (LTCi) policies for over 22 years, I took great interest in your May 29, 2012 program.
I have just listened to this show again online, this time isolating many inaccuracies.
Not a single one of your panelists represented the LTCi industry! One is a journalist, three are academics and or work at a non-profit. None are insurance licensed or have direct experience selling LTCi.
This was not a program on long-term care insurance. This show was about exploring how and why the government needs to pay for long-term care. This show could or should have more aptly been called “Options for Publicly Paid LTC” or “How to Fix Long-Term Care,” or “Why Publicly Paid LTC Needs Re-vamping.” This is Mr. Gleckman’s area of expertise and you spent a lot of on air time with him. Mr. Gleckman is unqualified to answer many of the questions you asked about LTCi, however, as were your other panelists.
I know how strongly you must feel about helping your listeners, but this program has hurt them. I understand this was inadvertent, but because your guests attempted to address questions they were unqualified to answer, LTCi was unfairly disparaged.
On the following pages I have identified just a few specific instances where false on-air statements and/or answers were given, resulting or the unwarranted disparagement of LTCi.
Your listeners deserve to know the truth about LTCi. Studies show that over 95% of all LTCi claims are paid and that LTCi policyholders are very satisfied at claim time. The reasons that claims are rejected are straightforward and should have been clearly explained to your listeners.
LTCi premiums do not have to be expensive. What can be expensive is needing LTC for a lengthy amount of time and not owning LTCi.
LTCi is about making sure that people have the dignity, options and choices they’ve been accustomed to throughout their entire life, including at the end of life, when the cost of healthcare is most likely to be catastrophically high. You did not emphasize this, yet this is what should have been highlighted. In addition, LTCi preserves wealth. Most people buy LTCi for the first reason and consider wealth preservation to be a secondary benefit. (This is why people with high net worth AND people with barely any net worth often buy LTCi.)
The primary reason why more people do not own LTCi is because they are simply unwilling to discuss or imagine a future in which they might require long-term care, not because premiums are high.
Mr. Gleckman’s goals for public LTC financing sound great in theory, but in light of practical issues like today’s political environment and huge budget shortfalls, LTCi policyholders do not and will not count on this. And neither should Americans without LTCi.
Currently, the majority of LTC in the USis paid for with government dollars. Few things in life are easier to demonstrate than the already inferior quality of government-paid nursing homes, and this is before the deluge of Baby Boomers starts overwhelming this system.
This program has hurt your listeners badly. You would do your listeners a true service if you would invite some guests who are actually experts on LTCi onto your program. I would be happy to help you identify such individuals.
Please see the following pages for examples of falsehoods aired on your program.
Documentation of May 29, 2012 Diane Rehm Show LTCi disparagment
Ms Langford states that Lifetime benefits are “extraordinarily expensive,” which is false and disparaging of LTCi.
Ms. Langford states that built-in 5% compounding is what has driven recent Long-Term Care Insurance (LTCi) rate hikes. This is patently false. The primary reasons are: higher than anticipated persistency and artificially protracted, low interest rates on the sizeable reserves that insurance companies are required by law to maintain to cover claims. For more information on the causes of recent LTCi rate hikes, read the article National LTC Events, found at
Ms. Langford quotes the average cost of care as $238/day. This is the average cost of nursing home care. People who own LTCi are highly unlikely to receive care in nursing homes because LTCi enables them to afford preferable options like assisted living and home health care. However, people who do not own LTCi and spend down their life’s savings until they qualify for Medicaid will likely wind up in nursing homes. It is wrong to peg the average cost of care for a LTCi policyholder at $238/day.
Mr. A states that LTCi is for the relatively affluent, this is false.
Repeatedly, points are made about LTCi preserving wealth. LTCi is primarily about preserving dignity and options, then wealth. I did not hear discussion of how much choice LTCi offers at all. This was a very large omission.
LTCi is not just for the top 15%, it predominantly for the middle class, who are most exposed. Very affluent people, as well as those with little net worth, also purchase it. Virtually all my policy holders want to ensure their dignity by having options and to reduce and/or avoid family arguments about money. LTCi is a solution that can be reasonably priced for almost anyone insurable, if they willing to learn about it.
Ms. Langford states the Lifetime benefit periods have driven recent LTCi rate hikes. Again, consult the brief article National LTC Events at
for the correct explanation of recent rate hikes. Ms. Langford also stated that Lifetime benefit periods and 5% compounding have caused recent LTCi market contraction. The cause of LTCi market contraction is the same cause as the recent LTCi rate hikes: higher than anticipated persistency and artificially protracted, low interest rates.
The discussion was on nursing home care. This is not where most LTCi policyholders get their care. People who own LTCi can normally get care at home or in an assisted living facility.
Mention was made that LTCi premiums are too high for moderate income people. This is false! What a disservice to your listeners! The panelist further discourages purchase of LTCi by stating that it is not a product for the broad middle class. This is false. LTCi can be made very affordable. The conversation was steered towards the use of Medicaid for LTC provision. This is economically irrational and unsustainable, and what about the quality of Medicaid-paid LTC? What is your preference? To be marooned in a Medicaid LTC facility, or would you prefer to receive your LTC at home or in an assisted living facility? The quality of Medicaid-paid LTC is a subject that was simply not addressed by your panelists. Furthermore, they are unqualified to answer your in-depth questions about LTCi and came to you with a clear anti-LTCi bias.
There was discussion of the stability of LTCi carriers. If you’d had actual LTCi experts on, they would have explained how and why LTCi carriers are enormously stable, and in fact a lot more trustworthy and capable of paying for LTC than the government is. What a pity LTCi was again disparaged.
A comment was made about the “disarray” of the LTCi industry, I believe by you. This is an inflammatory, false, and disparaging comment. The LTCi industry is in a state of contraction, not disarray. This comment was not useful to the public who are eager to actually learn about LTCi. Instead, throughout this program, the public was dissuaded from carefully evaluating LTCi. This was a true disservice.
Mention of LTCi’s high cost was made. LTCi can be made very affordable. What’s not affordable is needing LTC for a lengthy amount of time and not owning LTCi. If your panelists were qualified to talk about LTCi, they would have said this.
Minute 30:50 and again at minute 51:40
There was discussion of “surprise” rate hikes. LTCi rate hikes are unusual. LTCi rate hikes are neither arbitrary nor easy to get, due to strict government regulation. Disclosure of the possibility and carriers history of rate hikes is made obvious in all LTCi sales materials. Agents are carefully trained to explain this possibility and can be sanctioned if they don’t. All clients should understand this can happen when they place their applications.