Ronald R. Hagelman

When it comes to some of the important stuff, we just don’t seem to pay sufficient attention to the critical details. It’s not that we are intentionally allowing some issues or concerns to be swept under the carpet. There are a few however that continue to haunt the back streets of my slowly fading mind. If you haven’t noticed, this column is a form of therapy for an aging curmudgeon that has tried to loudly applaud any and every forward motion to protect more Americans. There has also been an enthusiastic attempt to expose and question market directions that may not have proven to be helpful.

During a recent social dinner conversation I was given my favorite opportunity to answer questions about the necessity of doing something, frankly anything, to blunt the effects of a long term care event. As would be expected, the interested consumer began with his knowledge that there had been an overall industry retreat from thIs genre of insurance options. It became immediately apparent that explaining the overused and abused infamous seven percent market penetration statistic would have to be where we began. The truth is our history has become a burden, not a blessing. This is perhaps our most misunderstood statistic as it refers to the total population. Again I had to begin with a standard defense explaining that those with very limited assets and income would need to look to government support and those with more than sufficient assets and income would be able to pay their own way. We have clearly done a much better job over the last 25 years of identifying and helping those in between these financial extremes, therefore exposing the most exposed financial weakness with the most to lose.

Perhaps it would be best to begin with a much wider lens. First I would ask you to google “LTC Market Size” both U.S. and global:

• According to the Congressional Budget Office the cost of long term care in America was 30 billion in 2000 and 215 billion in 2015, compounding at 15 percent per year.
• The size of the market for long term care services was 490.6 billion in 2022 and 517 billion in 2023.
• CAGR is projected to boom forward at a compounding of over six percent through 2030.

Covid deaths dramatically shifted the service market away from facility solutions with an all out assault on better answers for quality care at home. According to recent consumer research from Grand View, the home care market was valued at 142.9 billion in 2022 with an expected CAGR of 7.46 percent between 2023 and 2030. Technology is playing a major role in this market expansion. The stampede to HHC may be driven by the continuing increase in mortality. Successful management of a care claim is best defined by the number of contacts between the caregiver and the care recipient. Artificial Intelligence soon to be arriving on the wings of the next Zoom call. We are learning that more chronic care situations have become “manageable.” Care may begin in a hospital but it then fans out everywhere. This market (our market) will continue to grow rapidly. The current care service industry is having serious staffing problems. Assisted Living by definition is the perfect laboratory for experimentation with expanding technology support.

The bottom line is that patterns in our thinking need to be revised. We have done a much better job than our public persona might suggest. Clearly there is widespread growth of the care support industry and finding creative ways to finance that growth remains our game on our field.

Claims adjudication needs to become our new poster child for action and investment of time and resources. Out of sight and out of mind has become an inevitable result of an industry that automatically profits from time delay. To put a fine point on it, every day of delay is one day closer to when the claim ends. Acceptance of the validity of days of counted and approved elimination days should not look like a concertina fence. This can easily turn into an adversarial relationship. In my humble opinion there are simply too many minor opportunities to delay or deny a claim from bad documentation, vague policy definitions, facility or caregiver credentials, ADL approval and intentional excess paperwork. All I can say here is that the personal injury attorneys appear to be feeding happily on winning punitive damages for acts of “bad faith.”

The background financial rationalization market opportunity is bigger than ever. Unfortunately those sometimes five-fold past rate increases have also been gifted to our field force to wear like the Scarlet Letter “A.” The temptation of current claim management to delay payment may continue to lurk in the shadows and a sales history not well served by any of the above is simply not helpful.

Other than that I have no opinion on the subject.

The Intercompany Long Term Care Insurance Conference Association’s (ILTCI) vision is to create an environment for aging in America that includes thoughtful, informed planning that takes into account the most effective and efficient use of resources in addressing the risks and costs of long term care for all levels of American society. It is the desire of the ILTCI to recognize people and organizations that have made significant, long term contributions in attaining the ILTCI vision. This year the Association bestowed great friend and monthly Broker World commenter Ron Hagelman with their Recognition Award. To be eligible for this award, candidates must be engaged in the long term care field, such as a long term care service provider or financier, as a regulator or legislator involved in governance of long term care or these entities, or as a research or policy expert in long term care issues, and exhibit an extraordinary commitment to the industry through ingenuity, length of service and dedication. Following is Ron’s acceptance speech.

First, my most humble and heartfelt appreciation to the ILTCI. Thank You for this auspicious honor and prestigious peer recognition. I apologize for not being physically present where I know I have so many friends but, as I attempt every month in my column, I will try earnestly to make good use of the opportunity to momentarily hold your attention. I must begin by thanking my life partners. My wife Margaret who has had the courage and grace of putting up with me on a daily basis. No one in my humble opinion succeeds without the love and support of family and close friends. My business partner Barry Fisher has always been some amalgam of those roles. We have been tilting at windmills together for over 20 years. There is an ongoing cocktail conversation as to who represents Don Quixote and who is Sancho Panza. My response is “No Comment.”

I need to recognize my family legacy. My father, the creator of America’s first impaired risk life insurance company, Guardsman Life, in 1962, and my brother Curt, who served valiantly for over 20 years as CMO for Hannover Reinsurance, repeatedly helped me understand that insurance is always the best answer.

And this would all be moot without the freedom of speech provided by our industry’s premier independently owned magazine, Broker World. When the publisher, Steve Howard, discussed a possible LTCI column as I retired from State Life in 2004, I agreed if I owned my own words and an opinion column would not be subject to editing. Steve kept his word and I have not been able to walk away from that privilege.

This is now only the second meeting I have missed. I was here at the beginning. The first ILTCI cocktail party in Miami of a primarily actuarial persuasion and the pregnant conversation among each knot of participants expressing a furtive lament concerning our lack of claims experience. Careful what you wish for.

Ok, If you have ever suffered through one of my monthly rants you are painfully aware that I am a hopeless Pollyanna optimist. I know that mankind staggers forward over time. The good girls and guys always ultimately prevail.

Those valiant troops are in this room right now:

• The Veterans who never lost faith or left a client behind.
• The bright and shiny faces of each new crop of marketing and actuarial activists who continue to step forward to lend a hand.
• The company executives in this room and across this free country that know and admit publicly or privately that the sales opportunity of America’s largest unprotected risk does counterbalance the marketing and administration of the perceived risk.
• The folks in this room understand that yes, we all need to win—company, reinsurer, administrator, distributor, front line sales specialists and, please God, those American consumers most in need of our help!
• We have to be closer to an answer. The Long Term Care Conundrum fiercely fought for so many years must have yielded better direction. There has to be a better understanding of earlier planning, entrenched claims experience, consumer resistance and a balanced justice of thought as to where the responsibility of the cost of this risk must reside.

We may know more about what causes the problem and how to fix it than we are willing to admit.

• We know who should buy and why.
• We know that even a smaller amount of prevention balm can help dramatically.
• We know that the carriers, God Bless them, can do a much better job of working together loudly and publicly to help us emphasize just one concept—the risk is real!
• The game has moved home publicly and privately. Creativity and accommodation with this new reality are mandatory.
• We understand we got some past pricing assumptions wrong. It remains an innocent mistake. This must stop being an excuse for retreat but instead a fantastic opportunity to advance.
• Combo life policies are not a panacea. Claims will never be equal between the life and health risk.
• Experiments in Social Insurance will always require insurance support.
• And, finally, I must admonish all those who care. We may have struggled with sales. However, past experience with disability issues mandates that we must not struggle with the efficient and timely paying of claims.

As a proud long time member of the SOA Long Term Care Section Council and a frequent speaker at this Conference, and a lifetime believer in “The Cause,” I most humbly thank you. And I would like to confirm that your generous gift of a thousand dollars will go to the Episcopal Church of the Annunciation in Luling, TX, where we feed the poor, serving over 250 dinners mostly to seniors every Wednesday night for the last 8 years. Now wait for it…

“Other than that I have no opinion on the subject.“

My sons grew up on a farm. They learned responsibility early. The land and the animals demanded constant responsible intimate care and service. That requirement fell squarely on those who created the obligation from the moment we stepped onto that ground. There is no finger pointing on a farm. If you have ever sold or facilitated the purchase of an insured chronic illness or long term care financial instrument you are directly and permanently responsible for the exercise of that leveraged risk obligation. Renewals and service are merely a friendly reminder of what is a permanent obligation. For the last twenty years we have lived in a rapidly shrinking universe of dwindling sales particularly for stand alone LTCI health policies.

In relation to new sales vs growing claims adjudication, we long ago became a negative growth industry.

Although no one wants to discuss or loudly admit it, we are in the midst of what may ultimately prove to be an extended and truly unpleasant rate spiral. All but a handful of carriers still have an open for new business sign on the front door. We are an industry of claim management. Closed blocks of premium dominate our activities including corporate priorities and expenditures. Cries in a wasteland of needed premium growth appear to be dominated by managed care strategies and a plethora of claim management vendors. We are paying claims. Last numbers I saw were in excess of 12 billion. Our sales may not ever have been what we would have preferred but it is absolutely true that we have placed on the books trillions of potential claims dollars now waiting for us just over the horizon. Our industry has no choice but to be focused on the rear-view mirror hoping the police never catch up and prove that we were speeding ahead to avoid the inevitable.

The strength and freedom of thought provided by this magazine now allow me to knock the hornets’ nest out of the tree and run. I would ask you to take a moment and review the case study complaints concerning LTCI claims readily available at your State Board of Insurance or the Better Business Bureau. In my humble opinion they are not dominated as might be expected by rate increase concerns. They are drowning in complaints about confusing policy terms and poor service. Shame on us. We should all be extremely proud of those agent advisors and brokerage centers providing advice and counseling to those already caught up in the struggle to get claims paid. Many are already actively responding to the cries for help to understand how a claim is adjudicated and ultimately paid. Simply providing a toll free number in response to the very point in time in which every financial and emotional risk we were intent on leveraging against is, in my humble opinion, morally and ethically insufficient. There is too much here to complete in one column therefore lets just begin with a few shots across the bow of an industry doing it’s best to respond to current realities:

• Claims are already in the hands of a very limited number of seasoned claim adjudication administrators. Virtually all closed blocks of premium are not administering their own claims, they have been relocated to an experienced service vendor.
• The majority of those blocks had some reinsurance in place. Structurally, claim growth ultimately would end up as their responsibility. It is fair and reasonable to believe they would take actions to insure that claims are paid only on a valid demand for payment.
• There is a wide universe of benefits configurations that were sold. There is simply an endless opportunity to misunderstand, misconstrue, and misrepresent what the consumer thought was purchased or the agent thought was sold.
• A standardized “Warning” of what to expect when you begin a claim journey is a good place to start. It is often a slow process. There is an abundance of required paperwork prerequisites. It is almost certainly going to involve a face-to-face evaluation by a certified and approved health care professional. Although live computer technologies are also growing. There will be a cognitive evaluation component to the interview.
• Unfortunately, the devil will be in the details and fine print. Is it payment reimbursement, indemnity or cash? What are the definition nuances of the greatest major hurdle, the dreaded Elimination Period? How those days are totaled and then approved will be a major source of contention.
• There will ultimately be a required Plan of Care. How that becomes established is critical. How will the ongoing proof that a claim is continuing be handled? How and under what circumstances will the carrier allow an assignment of benefits?

The American consumer remains exposed to the wear and tear of an extended need for custodial assistance. We created and continue to market a complicated insurance leveraging of that risk. The obligations we install with those policies will demand our attention with hands on and standby assistance. We cannot ignore the reality of an adversarial relationship between marketing and claim adjudication that may have always been inevitable. Paperwork is after all just paperwork. I’m sure attempts at fraudulent claim acceptance are also quite real. I am also absolutely certain that we are perhaps inadvertently complicit in building a consumer black eye that may be very slow in healing. We can be better prepared to help navigate choppy water. We can acknowledge that these claims are extremely time sensitive. The need for care is most often immediate and intense. Our involvement and assistance in helping to facilitate expedited claim justice is mandatory.

Other than that I have no opinion on the subject.

We all find irony and humor in the strangest places. Like many my age I have suffered or strategically coexisted with arthritis for many years. Surgery and pain management have recycled me through a number of physical and occupational rehabilitation scenarios. For some strange reason television screens seem to inevitably decorate the walls to provide distraction to the exercise task at play. What strikes me as a little disconcerting is who gets to choose the viewing channels in this strange environment. Generic content seems to range between cooking and stupid video clips. In other words, reality programming. This therefore stands in stark contrast to why you are trapped for an hour trying to make sense of the necessity of rehabilitation in the first place. All of this to explain why one of those self inflicted wounds anthologies brought me involuntarily to this column. Remember when you were young with still unformed internal limitations having someone help you spin around and around until you were impossibly dizzy and then turning you loose allowing your internal compass to go haywire before your head stops spinning and you can reorient yourself to a stable and upright position? I found myself recently walking fast on a treadmill and watching a parade of theoretically grown men on a TV screen repeatedly performing this same childhood game with the same predictable results. I immediately thought of the history of long term care sales and this column.

Where is our learning curve? Are we simply doomed to keep getting back in line to be spun around to lose our equilibrium yet again? Each time, before we step forward again for that heavy spin, could we all just stop and remember the basic truths about the long term care insurance conundrum we should have learned the hard way over the last twenty five years?

• 25 Years ago we spent 20 percent out of every Medicaid dollar on home based care. Today it’s more like 60 percent. COVID just put a finite point on a mass shift to basic consumer and therefore what was already a publicly mandated claims focus.
• We understand we got initial pricing assumptions very wrong. Lapse assumptions wrong, duration wrong, utilization wrong, mortality wrong, longevity wrong, investments/inflation wrong. Whatever pricing issue I missed was also wrong. It was not intentional. It was an honest mistake or best guess based on previous experience and an economy based on polar extremes.
• We now clearly understand the risk was simply bigger, broader and deeper than we thought. We now have the necessary history to recognize who and what becomes a claim. Through 2022 we have paid over 13 billion in claims to 345,000 unable to do two or more ADL’s.
• Average claims now over six figures should be considered catastrophic by definition. We have also learned that a moderate amount of insurance can make all the difference and that the promise of $50,000 of initial protection can force state-wide mandatory social insurance that can possibly provide relief to state run Medicaid money hemorrhaging.
• The LTCI industry is no longer about establishing and leveraging future benefit dollars. We long ago stopped managing new sales and shifted to managing claims. And we seem to only admit privately that, as the flow of new water reduces to a trickle, the overly efficient recognition of claim adjudication may be the last black eye we can sustain without complete collapse. It may be more than a rumor that we are systematically tightening our claims belt. This is I suspect more than a matter of carrier default from a regulatory perspective or anticipated reserve restraints. In other words there may be a method to the madness but those who participate are still certifiable.
• Combo sales cannot just represent our new panacea flavor. They can only provide expanded options and a rock solid back up plan. Benefits are still paid with a tilted scale of justice highlighting one or the other—life or health—not completely even intentionally accomplishing both.

Now return in your mind’s eye to that short Video showing multiple slapstick crash and burns. The set up is the same based on a clear and certain knowledge of exactly what will certainly occur by spinning yourself around and around until barely able to stand and then abruptly letting go to implode into the ground or the nearest solid wall. Hold that thought in your head and you will understand with extremely vivid clarity why this column can legitimately appear to repeat itself.

Other than that I have no opinion on the subject.

In a distant past presentation I would begin by suggesting that you could take a prospect gently by the hand, lead them to the edge of a bottomless pit of risk and they would invariably ignore the obvious. The situation may have gotten a little better in 20 years but not much. A recently published consumer survey on the Affordability of Long Term Services and Supports from KFF Health news and the New York Times, November 14, 2023, again lays bare Americans’ stunning and at this point legendary ability to avoid what remains as our largest unprotected risk. We know the real burden falls on the caregivers yet half of those surveyed had ever talked to an aging loved one as to who will care for them when the time comes. Even fewer had ever discussed how in the hell that care would be paid for and 43 percent were unsure how they would pay when it does hit. I know many of us have grown hoarse screaming about the frustration of dug in consumer resistance. This research pours a large quantity of salt into that open wound.

“The overwhelming majority of adults say that it would be impossible to pay.” Ninety percent regard the estimated $100,000 for a nursing home or $60,000 from assisted living cost as a bill they have little chance of paying!

And to put a fine point on it the survey also concludes:

• As has been repeated over and over again almost half of those surveyed still believe Medicare will pay.
• 62 percent had difficulty even finding a facility to meet their needs.
• A substantial number were unhappy with the care they could locate.
• Half of those surveyed outlined the cost that splashed back on the family or loved ones providing care.
• Much of the care provided in America is delivered with love but without compensation.

The truth blazed across the sky is Americans remain unprepared. Perhaps we need to reiterate the obvious in some form of financial braille. Why do we continue to hear a cane tapping down an empty hallway? The brick wall is real. What must be done to expose the solidity of that barrier? Medicare pays a very limited amount and the balance is shared between private sources and state run Medicaid. Consumers know they are unprepared and that the burden is likely to fall on them directly. Four in ten surveyed lacked confidence that they would be able to pay. Fewer than half surveyed had ever even had a conversation with their loved ones about who would care for them or how it would be paid. Two-thirds surveyed felt anxious about affording care when needed. There was a clear socioeconomic component to the findings suggesting the obvious that as average income fell, anxiety and stress compounded. The “statistic” we know all too well is that fewer than half were doing anything to even try to plan ahead.

What rattles me the most is that we could have, exactly like a brilliant contestant on Jeopardy, anticipated these responses . There are no revelations here we have not seen before. I am not going to give in, without some reservation, to the temptation that we may have always been plagued by the blind leading the blind. From reinsurance to claims adjudication a handy blind eye may have impaired our ability to see the true nature of the risk or unveil the depth of perception required to avoid the obstacles we know remain in our path.

Other than that I have no immediately visible opinions on the matter.

When I think of my friend Stephen Moses I imagine him as the proverbial town crier, speaking loudly with the courage of his convictions, who begins with what should be obvious that the earth is indeed not flat but concludes with the airtight conclusion that the Emperor has no clothes. Stephen was my first guest speaker in 1999 and the ingredients of his recipe to end the current long term care funding madness were already in the pot to boil. He was already clearly explaining that perhaps some of our basic assumptions concerning the source of our industry’s lack of sales success was our lack of understanding the true nature of the problem itself. That the threat of impoverishment was an illusion. That Medicaid was welfare which should be its only purpose. That perhaps a re-examination of our myopic vision of the risk itself must be at the beginning of potential reform. With assistance from the good folks at Paragon Health Institute he has recently released what can only be described as a very compelling manifesto based on a life of service to the same “Cause” I have attempted to chronicle in these columns for the last 20 years. Long Term Care: The Solution, October, 2023, should be mandatory reading for all stakeholders in the continuing struggle to blunt the still largely unprotected risk facing far too many Americans. In his previous work Long Term Care: The Problem 2022 and his preface to suggested reforms in the current work he carefully chronicles how we got here.

• There has never really been a visible risk for consumers. How in the hell did we expect sales success in that environment?
• The only real fuel burning anyone’s motivational fire is the robust and growing fire of state Medicaid costs. What’s worse is we sent out firefighters without sufficient water to change the course of events on the ground. The whole concept of possible mandatory impoverishment was pure fraud.
• What’s even more crazy is the government kept trying to return the cost and risk to the middle class. As an example, extending the look back period to five years. Those who could and should pay, however, continue to slip the noose. We still have massive fraud in Medicaid usage to pay for inevitable custodial care.
• Low interest rates only temporarily masked the financial pain which is returning to the political forefront. Experiments in yet another payroll financed social insurance cannot succeed as proposed. What the fire sale in Washington State has demonstrated is that, when the risk is clearly standing before you, private insurance will be the overwhelming first choice.
• As long as Medicaid pays for the middle class to shelter assets, the solution to the long term care conundrum shall remain caught in a financing trap of our own making.

Stephen has laid out a blueprint that attacks the problem at its core. He has once again boldly confronted what might be best described as the Naked Truth. Lawmakers must take practical actions to stop the State funding mechanisms. Severe and definitive actions need to be taken to finally alter the current failed trajectory.

Step One: Eliminate the Moral Hazard. Shut down all planning tools used to avoid personal responsibility—to include purchase of exempt assets, eliminate home equity exemptions, prohibit asset protection trusts and Medicaid compliant annuities. And perhaps most importantly extend the look back period to 20 years and then “monitor and enforce compliance.”

Step Two: Publicize the now exposed true risk.

Step Three: Reconceptualize the actual size of the risk.

Step Four: Proselytize affordable planning at younger ages.

Although the obvious solution is to tighten and reinforce the fences around our unique risk encampment, these proposals must appear somewhat draconian. As an old cattleman I know you must maintain effective fencing perimeters and nothing works better than new barbed wire. If those within the wire are to prosper they must accept that the only exit is single file with only one gate in the corner.

If by some miracle there were to arise the political will to actually fix a broken funding system, Stephen has provided a clear and precise blueprint to make a real difference.

Other than that I have no opinion on the subject.

One of my father’s favorites was “Talk’s cheap, takes money to ride the train.” Financial priorities must now be drastically changed. Institutional care business as usual must be served a cease and desist order. COVID took no prisoners, over half of all deaths in countries around the world took place in a nursing home. The pandemic vividly exposed the lack of care in institutional settings. COVID has reshaped many social interactions worldwide from a global glut of office space to further exposing the truth about the lack of care in nursing homes in countries all around the world. It has been suggested that very little nursing takes place and frequently it would be hard to describe these facilities as anything resembling a home.

Obviously, for those who have a home or the living family support necessary, to establish universally desirable alternate home care would be the unequivocal truth at the heart of all conversations about assistance with ADLs and IADLs. Nursing homes have unfortunately long held a less than stellar reputation for quality of care. Care quality is policed by the government in the United States, Medicare and Medicaid, hopefully guided by consumer choice with an established ironclad commitment to quality. Home and community based care is already driving the bus. Currently 65 percent of caregivers are a spouse or children. Shortages in the quality of institutional care in America are being exacerbated by increasing mortality, many living into their 90s and children who in the past might have succumbed to premature births or medical complications are increasing the number of those who will need disability care.

Currently Medicaid spends 57 cents of every dollar of HCBC, however only 15 percent of those receiving those dollars are over 80. More importantly, as a percentage of those receiving care at home in relation to overall, health expense is among the lowest in the world with America spending only five percent. The average in the world is three times that amount. We cannot keep throwing discounted dollars, meaning knowingly insufficient funding, at a problem that is about to explode. I am among the oldest Boomer generation. Thank God I am facing that aging certainty with a paid-up comprehensive TQ long term care indemnity policy. I will, of course, struggle with the notion that not all who read this column have already put their own protection plan in place. And I will not over excite my blood pressure by even remotely thinking this conversation is not a sacred component of every agent’s fiduciary responsibilities.

Maybe we could all agree to make just one change. Think small! Even those states beginning to mandate a payroll tax are only creating $50,000 plus of financial support. The truth is $50,000 can provide substantial support, particularly if that support takes place at home. Average claims are between two and three years and 50 dollars per day would certainly strengthen a well-managed HCBC plan. I don’t think the industry could make it any easier to add a rider which only gently affects a life sale pricing, again focusing on a small step but always in the right direction.

Please do not misunderstand. The government must now make this a national priority like a war on drugs or poverty. The private insurance industry can continue to aid and supplement a newly enhanced focus to augment quality care in an HCBC environment. There are those who have always claimed we may have originally bit off more than we could chew. If we can increase sales by thinking small, we reduce underwriting friction, decreasing cost and accelerating access, again by thinking small and accomplishing achievable goals. It has also been strongly suggested that HCBC needs to think small, creating a much smaller setting for care to take place. The “Small House” care experiments are showing great promise.

Thinking small may finally create a basis for sustainable sales success. We may again reclaim the middle class as our own. We may escape some of the restrictions of pre-existing underwriting taboos. We may give carriers the optimism of some reserve restraint, growing policies under management with reduced manageable risk.

I can’t believe I’m saying this but please let us Think Small!

Other than that I have no opinion on the subject.

Somewhere in the cacophony of political talking heads I keep hearing the proffered wisdom that “age is only a number.” Which is of course perfectly okay as long as it’s not your number that is up… My suspicion however is that this antiquated gem of cultural wisdom is however being offered as a rationalization to maintain the status quo. Clearly there are many voices on both sides of this far too often called upon chronic social euphemism.

The success or failure of directly addressing the needs of the long term care conundrum has always been just a number. Therefore, in no particular order of significance:

• When is the optimum age to acquire protection? At what young age do I simply just postpone an inevitable conversation? At which age mile marker do I stop asking if my client is ready now? At what age do I simply give up the quest per potential client?
• What is the age at which age related disability will become your number one financial and emotional consideration ?
• What is the number of days that I can personally pay for care before I can depend on government dependence? How many days can my savings hold if I need 24 hour care at home?
• What is the number of discretionary dollars I can commit for long term care premium or savings before my finances implode?
• What is the number and cost of claims risk that will actually await me in 20 or 30 years of inflation? “Where is your million?”

Yes, these are only numbers and I need to stop here as by now you should have had the thought that this list is infinite and this is a finite column.

I have never been a fan of simply hurling statistics at our wall of denial. It is after all the composite generational numbers of the age of birth that may best define statistical predispositions. For almost 30 years I have walked to the front of the room to tell our story. I inevitably began with some version of Paul Revere’s ride: “The Boomers are coming! The Boomers are coming!” This frequent observation now reminds me of the Stephen Sondheim ending of the song Send In The Clowns:

Don’t you love farce?
My fault, I fear
I thought that you’d want what I want
Sorry, my dear
But where are the clowns?
Quick send in the clowns
Don’t bother they’re here

Those born in the mid-20th century between 1946 and 1964 have, during the length of tax qualified LTCI, been our primary target market.

Boomer numbers peaked in 1999 and remained the largest adult population until 2019. Most notably for retirement planners who include long term care risk in their practice, the number turning 65 has grown to 12,000 per day and those hitting 65 peaks next year. There is not enough room in this column to adequately document the retirement shortfalls of all Americans. And I don’t think anyone knows the status of the problem better than those long term care insurance promotion veterans who fought and continue to struggle to do all they can to blunt and hopefully soften the blow of potentially catastrophic risk.

If age is just a number, perhaps we simply need to move on to a different set of numbers. Boomers are now on the precipice of those needing care. They and we may have crossed a line in the insurance sand where assets and income are frozen and progressive aging disabilities severely restrict insurance planning options. Simply meaning that, for us, underwriting resistance is now dug in like Russian trenches in eastern Ukraine. I will not admit defeat nor certainly stunning success. We have placed billions of insurance dollars ahead of the claims that will certainly push through our collective defenses.

Perhaps it is time to fall back and regroup our attack on a different statistical cohort. Millennials born between 1982 and 2000 are, as of July 1, 2019, the biggest age group in American history. They are primarily the children of Boomers currently wading into the necessity of additional care. As of July 1, 2019, they are the largest generation in our “currently at work” force, just beginning to turn 40.

As you might expect, much has been researched about their buying predispositions. They still believe in a bright future. Technology is their friend, not a daily adversary. The recession in 2008 left indelible marks on their psyche. Their fear of a financial catastrophe is more than of the Great Depression. They are known as the “Me” generation although they live more with parents than roommates. They have a more communal nature than their parents and thrive in a network of social media platforms. They currently command a trillion dollars of buying power and four out of 10 are willing to buy a product that supports a cause.

Based on our LTCI marketing limitations of the last 25 years, how could we not recognize a fantastic potential sales opportunity? If you carefully reread the last paragraph, how could we even imagine a more fertile ground for future sales success?
Other than that, I have no opinion on the subject.

Having the ability to reflect back on 35 years of considering the long term care conundrum should afford me some level of comfort that progress has been made. That we have systematically learned from our mistakes. That we have with purpose and growing experience influenced the normally progressive course of history. The vision in my mind that will not leave me alone however is my dog chasing its tail. According to Google, dogs chase their tails for several reasons: Something bit them and spiked their curiosity; they are young and simply exploring their own physical limitations; or, they are really bored. Albert Einstein famous quote concerning the definition of insanity rushes to mind but I like this one better: “We cannot solve our problems with the same thinking we used when we created them.”

Just for fun let’s meander through the big concepts which appear to repeatedly coalesce through our public thinking.

• There is a consistent chorus from all quarters that we need to focus on the middle class. That those with and without the ability to fend for themselves will proceed to fall into solutions based on their circumstance. Our focus must again be on those with the most at risk. Once upon a time, before we understood the true nature of long term care claims, this was our purpose and frankly our greatest historical sales success. As underwriting restricted and premiums rose we simply abandoned our original quest and have satisfied ourselves with picking up the low hanging fruit—those with sufficient wealth to leverage the risk. It is the original crusade that haunts our purpose and brings us back again and again to acknowledge and attack the real need.
• There seems to be a growing acceptance that Custer’s 7th Cavalry is riding hard to our rescue, yet we also privately suspect that he will find the same overwhelming circumstances waiting just over that rise. The problem, as we know, is that the intended solution speaks with a forked tongue. Medicaid and Medicare are already bursting at the administration and financial seams. Adding the administration cost and homogenized managed claim bureaucracy of yet another national social insurance plan would not be built on previous government success stories. We will again come to realize that there are more Indigenous Americans than we thought. Yet the mounted cavalry with sabers extended presses forward. Recent consumer research by the NORC-Center for Public Affairs Research claims 88 percent of Americans wish to receive care at home and 60 percent want the government to pay for that care. Washington State is now collecting employee payroll premium. California has now basically removed the means tested restrictions of access to Medicaid. A number of states are keeping their eye on this cavalry charge. Ultimately those who become enamored with the bugles blowing will suffer the same fate. Underwriting liberties will fester, bureaucracies will bloat, public trust funds will be depleted and the quality of care can only suffer.
• The market reality of all current pricing assumptions is that institutional care is more expensive than home care. There is an almost religious belief that building on home care saves money. In my view it is the same gaslighting that proclaims that electric cars save money. It is the same Utopian fantasy future currently being espoused that AI robotics are at the core of future home care scenarios. According to the Nationwide Retirement Institute: “One third of Americans and over half of millennials believe AI robotics will provide their future in home long term care.” The survey further explained that they would talk to their robots if they were lonely, depend on them to help provide physical safety and trust them with their medical history. You do not have to read Issac Azimov or Ray Bradbury to get a funny feeling in your gut about weaponized self-aware AI.

Honestly, I am tired of worn out excuses. Exhausted by more of the same formula thinking. Frustrated by the continuing lack of a united and industry coordinated education crusade. I am therefore specifically weary of the recurrence of perceived easy answers and utterly dismayed by the continued lack of consumer awareness. I cannot shake the vison of the circular motion of that dog intent on some form of personal gratification when all that will be actually accomplished was perpetual redundant motion and the continued illusion of potential success.

Other than that I have no opinion on the subject.

Even the veteran voices of our sales struggles past and present have died down concerning a fantasy return to the “good old days.” There is nothing standing in front of us that will resurrect surging individual sales and meaningful penetration of the middle market that would resemble our successes of 20 years ago. It is past time for new beginnings, new directions, new goals and rejuvenated primary stakeholders willing to support what the readers of this column would call the “Cause.” Meaning substantial sales that strike directly at those most at risk (my estimate—incomes of $50,000 to $150,000). I would strongly recommend that you review a recent publication from the New York State Department of Financial Services Long Term Care Insurance—Looking Back and Thinking Ahead—June 7, 2023. It is an exceptional historical summary of exactly how we got here. It is a well documented admission of past Department of Insurance culpability in not recognizing the necessity of allowing sufficient and timely rate increases. It includes a detailed summary of the past events that fueled market forces. In my mind it provides an accurate backdrop for understanding what must happen to once again move forward.

Here are the Highlights:

• In 2018 alone Americans paid out $55 billion for long term care expenses and Medicaid paid out triple that amount—$59 billion.
• By 2050 long term care expenses are expected to climb to three percent of gross domestic expense.
• The long term care market has struggled since it began 35 years ago. Recent experience in New York (probably true across all 50 states) reveals policy ownership has fallen from a high of 754,000 insured in 2002 to 394,000 in 2020.
• Our struggles can be largely attributed to “pricing errors made from its inception.” Premiums were initially severely underpriced. Insurers lost money, maintaining adequate reserves became systemic. Departments facing consumer backlash took a very conservative approach to needed rate increases throwing gas on carrier retreat from the market. A retreat that became an exodus.
• Long term care expenses are very expensive. Current per person nursing home expense is $108,000, home care is $61,000.
• New York has been a leader in providing managed long term care services for Medicare Advantage, PACE and Medicaid participants. About half of the states have growing MLTSS programs.
• Reliance on Medicaid “may prove infeasible.” Consumer private pay would have to rise. Private insurance has simply not been the answer with only two percent of Americans owning a policy. This sentence screams off the page: “Private long term care insurance is underutilized relative to potential demand.”
• In New York’s view they have tried to help consumers with cost offering one of the first Partnership initiatives and relief with state income taxes. They even added a 10 percent tax credit in 2020. Ownership continued to fall. NY speculates that the still high cost, the possibility that they may not ever use benefits and prevalent Medicaid planning strategies have contributed to poor sales. Yet they acknowledge that ”consumer reliance on Medicaid in its current form is untenable.”
• The NY department has presented an extensive “Mea Culpa.” Like others they approved rates based on projected lapse rates, mortality rates, morbidity rates and interest rates. Insurers and regulators now freely admit they relied on “erroneous assumptions.” We simply got it all wrong. Projections utilized by carriers and regulators relied on “inaccurate projections.” Current financial losses projected down the road accelerated company retreat from the battlefield and a strong and immediate cry for more ammunition in the form of higher rates. It was acknowledged that the reluctance to grant timely and sufficient rate increases lies at the root of our current predicament. History must record that the approval rate across most jurisdictions can only be described as too little too late. The truth is that further rate increases will be needed; “increases are burdensome to consumers but they are necessary to safeguard policy holder benefits over the long term.”
• It was acknowledged that rate actions can be mitigated by the use of “landing zones” and tiered increases that can exclude the oldest policy owners.
• NY is clearly and painfully aware of the subsequent financial stress on our sparse product market both on insurers and consumers. They have liberalized their acceptance of different forms of insurance designed to reduce cost. They have installed a new Health Insurer Guaranty Fund. They are currently working on a new NY State Master Plan for Aging and they are keeping a close eye on developments in Washington State.

I think the initial and most important ingredient of behavior modification is open acceptance of personal guilt and core responsibility in the creation of the dysfunction. NY has faced its own culpability and established a platform for meaningful reform. I believe all stakeholders now recognize there are absolute certainties that are required if a sales renaissance has any chance of success. There must be a problem solving partnership between the insurers’ necessity to offer profitable policies and the States desire to soften the strain of Medicaid dependence. Innovation and reality must be shaken up in the same cocktail. We must stop only paying lip service to our desire to provide risk sharing options to the mass middle market, recognizing that the dimension of that risk may be our industry’s greatest doughnut hole. Posterity has loudly provided Google maps with the shortest distance between two points. We cannot “return to the route” but we don’t have to go exploring directions to find our destination.

Other than that I have no opinion on the subject.

Free Stock photos by Vecteezy