Complicated LTC Financing Made Easy

I believe the comments below, republished with permission from the Center for Long-Term Care Reform, are useful for the public. They explain why long-term care insurance (LTCi) is good not only for people, but also for America. 

Here is a simple, concise overview of the the complicated principles of long-term care financing in the US:

LTC Comment:  Let’s begin with a few facts:

• Medicaid pays for most formal long-term care whether in nursing homes or home care.
• Medicaid is a counter-cyclical welfare program.  It ramps up caseloads and expenditures, usually with extra help from the federal government, during recessions.
• The United States has experienced two major recessions in the 21st century, the Great Recession of 2007-2009 being the worst since the Depression.
• To combat recessions, the federal government employs deficit spending (as when it borrows to boost Medicaid assistance).  This is called “fiscal policy.”
• Deficit spending (fiscal policy) has created a huge national debt, currently nearing $18.4 trillion according to the US Debt Clock.
• To combat recessions, the Federal Reserve cuts interest rates and increases the money supply.  This is called “monetary policy.”
• Artificially low interest rates have discouraged savings, impaired the market for LTC insurance by reducing its profitability and increasing its cost, and diverted capital away from economically productive investments and into “bubbles” of real estate, stocks and bonds, benefiting mostly the affluent.
• The same monetary policies have hurt the poor and middle class by stifling job creation, repressing wage growth, and practically eliminating income on savings.
• Low interest rates and a bloated money supply (monetary policy) have failed to revive the U.S. economy fully after the Great Recession, making the Fed very reluctant to allow interest rates to increase.
• We find ourselves on the cusp of an unprecedented “Age Wave.”  The huge baby-boomer population cohort does not reach the age of heaviest LTC need (85+) until 2031.
• Social Security and Medicare run out of “trust funds” in the 2030s, but in the meantime the federal government has to make up these gargantuan entitlement programs’ annual revenue shortfalls and pay off their trust funds’ IOUs with interest out of general funds (taxes and borrowing).
• America’s fiscal and monetary tools are worn out.  We have too much debt to borrow more safely if interest rates increase and too much money supply to print more.
• Our artificially suppressed interest rates are too low to be lowered further in order to combat the next recession.
• In a nutshell, the U.S. economy may not be able to generate the revenue needed to support our long-term care safety net in the short-run and definitely cannot over the long-term without major changes in fiscal and monetary policies.
• Ironically, this state of affairs benefits the elite at the expense of the needy for whom the elite hypocritically profess noblesse oblige.