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LTCi Current Events

August 25, 2014 by Honey Leveen Leave a Comment

I’ve just returned from my third long-term care insurance (LTCi) conference of the year, where I again was told that sales of new LTCi policies were down 26.5% in 2013 in terms of premiums and 22.9% in terms of number of policies. That’s the bad news.

The good news is that we have many excellent products to help people prepare for the high risk and cost of needing long-term care. Some are new and some are traditional LTCi products. The newer products are non-traditional life insurance and annuity policies specifically designed to protect for LTC. These products greatly leverage premiums paid in if long-term care is needed. These new products are good; the bugs are out. They work.

LTCi premiums can be made reasonable and affordable. What may not be reasonable is needing LTC for anything but a short period of time and not owning LTCi.

If you are middle class-to-affluent, it is irrational to put off responsible LTC planning.

Sadly, most people remain irrational about the need for responsible LTC planning. There is something about the human psyche that dislikes having conversations about unpleasant, yet probable events in the future. I meet many people who can afford to own LTCi, yet instead they spend the cost of LTCi premium on “toys.” Such people are often financially and emotionally unprepared when the need for LTC arises. Sadly, such circumstances will increase as time passes.

This past year, the media has been more helpful than ever when it comes to broadcasting why the government can’t and won’t pay for LTC, as well as how important it is for Americans to plan for LTC on their own, in advance.

Despite this, Americans still refuse to acknowledge this grim, true advice.

Medicaid, a government funded program, pays for the majority of LTC in the US. Click on this link to see my blogs on why Medicaid-funded LTC is not the type of care people who own LTCi would choose.

Please share this information with people you care about. Do not be discouraged when they make up excuses to avoid LTC planning; instead, I hope you’ll keep trying to influence them. The time to plan and be prepared for LTC is now.

Generation Warfare is Brewing

May 12, 2014 by Honey Leveen Leave a Comment

In her April 9, 2014 column, one of my heroines, Terry Savage, describes looming Generation Warfare.

In a nutshell, our government is spending far more than it takes in. Check out Truth in Accounting, a nonprofit that keeps track of both our current national debt and the burden of future government payment promises. We now have an “official” national debt of more than $17.4 Trillion. The ticking clock on their website shows that we have promised to pay a total of $76 trillion to future Social Security and Medicare recipients, not to mention interest on our debt, along with military retirement benefits, etc.

In other words, we owe a lot of money! More than the government can raise in taxes.

In the meantime, Washington is playing a shell game. Instead of figuring out how to grow the economic pie, they are obsessed with dividing up the existing pie.

Generational warfare is brewing. Young people are enticed to take out student loans at interest rates many times what the government pays to borrow — and then graduate into an economy that is not providing jobs so they can repay those loans.

Younger workers pay into a Social Security “trust fund” that is scheduled to move onto shaky ground long before they can expect to receive benefits. They’ll be supporting government retirement benefits for someone else’s parents and grandparents.

And from the seniors’ side, isn’t it generation warfare for the Fed to keep interest rates low (depriving seniors of the opportunity to earn interest in their retirement years), so that the government’s unprecedented borrowing (a burden on the young) can continue?

And isn’t it generation warfare to reduce the government’s support for Medicare Advantage plans and limit Medicare reimbursements to physicians and hospitals, just when seniors most need the care?

Here’s another article about oncoming Generation Warfare that came out about the same time Terry Savage’s column did. It echoes what Terry predicts.

My April 9, 2014 blog is about how astonishingly huge and unsustainable our national debt is. Tax collection doesn’t put a dent in it. Medicare and Medicaid, the primary ways long-term care is paid in the US, are on the firing line and already suffering cutbacks. The giant bulge of Baby Boomers, most of whom are wholly unprepared to pay for their long-term care, is just beginning to hit our system.

At age 65, there’s a 70% chance any of us will need long-term care during our lives. I urge you not to depend on the government to provide your long-term care.

Long-Term Care Insurance is Good for America!

April 9, 2014 by Honey Leveen Leave a Comment

I want to share part of a powerful address that Tom McInerney delivered at the recent Society of Actuaries Long-Term Care Conference. His talk had great impact on me.

Mr. McInerney is the CEO of Genworth Financial, a leader in the long-term care insurance (LTCi) marketplace. He stated the federal government faces at least $40-70 trillion in entitlement liabilities (Medicare, Social Security and Medicaid). A 2009 GAO Report supports a $45 trillion number. A more recent Heritage Foundation report estimates $45 trillion for Social Security and Medicare alone. All three of these programs are “Pay-As-You-Go”, which means they need to be paid for through current payroll or income taxes.

Our current federal tax revenues are $2.7T per year (see CBO Report FY 2013 estimate). If you add $40 – 70 trillion of entitlement to our existing $17 trillion deficit, even a doubling of taxes, which would further slow our economy, wouldn’t put much of a dent on the public sector’s true liabilities of $60 – 80 trillion! To add to this dilemma, we currently have a ratio of fewer than three workers per retiree supporting Social Security. According to the Social Security Administration, this ratio gets worse every day.

Let me add that our legislators know that Medicare, Social Security, and Medicaid need reform urgently. But for their own reasons, neither party will broach this subject. I have blogged about this here and here. With each passing day, the entitlement crisis grows worse, and Mr. McInerney states that counseling that we should rely exclusively on a taxpayer-funded solution to pay for long-term care in the US is irresponsible. I don’t think it’s irresponsible. I think it is off-the-deep end unrealistic and irrational to believe publicly paid long-term care is possible! Yet such irrational, “feel good” solutions seem to prevail.

Here’s a blog that gives an example of the prevalence of such irrational points of view. It’s called “Reaming Diane Rehm“. During her show on long-term care, Diane Rehm paid most of her attention to a supporter of government paid long-term care. She did not have a single representative of the insurance industry on this show, yet plenty of time was spent smashing and bashing LTCi. I pointed out some of the many false and irrational statements made on this show in a professionally written letter I sent to Diane Rehm by surface mail and email; I never even got an acknowledgement from her or her staff.

Meanwhile, Americans haven’t saved enough to cover their long-term care costs. The private long-term care insurance market can’t cover everybody, but it can cover some of us. The more LTCi policies issued, the less pressure on Medicaid budgets and other entitlement spending in the future.

The State of the Long-Term Care Insurance Industry

January 28, 2013 by Honey Leave a Comment

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

by 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.”

Thank you.

Stephen A. Moses is president of the Center for Long-Term Care Reform (www.centerltc.com). Contact him at 206-283-7036 or smoses@centerltc.com.

Why Are We Willing To Discuss Fixing Social Security & Medicare, But Not Medicaid?

December 10, 2012 by Honey Leave a Comment

In his November 15, 2012 New York Times editorial, Paul Krugman demonstrates again that neither party is addressing the changes that will be truly necessary to curb growing budget deficits.

The only solutions to Medicare and Medicaid’s skyrocketing budgets that I’ve seen recommended are lowering Medicare and Medicaid reimbursements, and increasing Medicare eligibility ages. These are merely band-aid solutions.

Neither party is willing to address the hard changes that will be necessary to remove Medicaid from its economically dire predicament. I address this in my blogs Medicaid in deep trouble, no matter who wins the election and Neither party has a solution for the oncoming deluge of Medicare/Medicaid services.

For one thing, Medicare and especially Medicaid are complicated programs that most legislators and the public do not understand well. Furthermore, many of the most intelligent people I meet appear to suffer from resistance to discussing depressing sounding future events, such as planning for their elder years. And, tragically, this lack of planning frequently has dire consequences. More specifically, we know conclusively that very few middle-class Americans have done responsible long-term care planning.

Mr. Krugman argues, and I agree, that raising eligibility requirements for collecting Social Security and qualifying for Medicaid is needlessly cruel and would be hardest on our most vulnerable citizens – those who work in physically demanding jobs for little pay. And these changes would have little impact on the bottom line because those who depend the most on Social Security will not live as long as more affluent Americans since longer life spans are related to education and income levels. Raising the Medicare eligibility age a couple of years will also save the federal government little because seniors in their mid-to-late 60’s generally have decent health and cost Medicare far less than the very old.

Readers will note that few pundits write about how to fix Medicaid, nor do legislators approach Medicaid reform. Medicaid is our most expensive and threatened entitlement program. It is Medicaid-paid long-term care that will cause the most catastrophic budget shortfalls as the Baby Boomers continue to age.

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