Hegemony is a political and social concept that may best reside in our consciousness as the proverbial 500 pound canary. It is the force that holds sway with a dominant influence over a given current reality. Always follow the money—in the United States long term care costs have reached over $275 billion not including the insidious billions of families’ and friend’s unpaid care expenses. Uncompensated care is now estimated at an additional 450 billion. The majority of the hard dollar long term care costs continue to be paid through Medicare and Medicaid with an additional quarter paid with private out of pocket funding. Private insurance payments remain in the single digits. However our long standing and frankly valiant efforts to shift that claims control to individuals is clearly demonstrated by the fact that over $12 billion was paid by private health based sources and that does not include monies from annuity or life combination policies.
We are not alone. According to a recent market analysis, the global long term care markets where North America has the largest presence is expected over the next five years to have a composite annual growth rate of 5.6 percent. There are a number of new truths associated with our chosen market that significantly contribute to a positive outlook for growth. Care has shifted dramatically to a home based platform. Bear in mind only eight percent start benefits in a nursing home. COVID experience has turned up the heat on augmenting home care with managed care technologies. These efficiencies with medical data and direct access to patient care management are fueling growth. We need to bear in mind that this shift has not yet revealed a substantial reduction in cost.
A recent analysis of global trends summarized our position as, “The long term care market is expected to witness significant growth. However, the high cost associated with nursing home services and a lack of awareness of long term care services restrains the market’s growth.” When I got to this insightful revelation frankly I almost screamed out loud. The same brilliant analysis should have been archived from the last six decades.
We know the facts. Every day through 2029 another 10,000 will turn 65 and 70 percent of those will require some care with almost 20 percent lasting more than a year. The average median cost for a private room in a nursing home is over $92,000 and assisted living over $43,000. Yet consumers refuse to take action. Like many of those reading this column, I have spent the majority of my professional career beating my head bloody against the truth of the insurance profession’s most persistent conundrum.
In a world which now demands transparency, I wish to acknowledge that I am a happy retiree of State Life/One America as well as the proud owner of a long term care paid up policy from the company. I would like to commend their most recent consumer research attempting to understand the aftermath of the COVID catastrophe. The consensus of thought for many of us was that the concentrated effects of institutional confinement should have induced a greater understanding of the risk. Surprisingly only 15 percent of the consumers they surveyed confirmed that their perceptions of the problem had been enhanced. Of those surveyed a mere 16 percent had any plan in place with only 29 percent even researching their options for protection. The majority believed that cost was the most significant obstacle. What was not a departure from current wisdom is that, in regards to prioritizing financial goals, the survey clearly indicated that the number one concern was sufficient money for retirement. Of course, none of us could imagine a more lethal projectile on this primary destination than a need for extended custodial care. For those who are able, an asset-based insurance approach does significantly provide control of both care and money. Even though this consumer research indicated that an overwhelming majority of those surveyed indicated that their top motivation was to remove the financial burden from family members, I am not sure it struck at the motivation to buy at its beginning. Research over the last 20 years has consistently suggested that buyers take action to protect money. This has historically proven however to be a post sale rationalization. It is personal experience with the financial and emotional consequences of a claim that created the momentum to complete a sale. The wisdom of ownership confirmed by its legendary persistency has always been a banner of financial family pride.
Drum roll for the summary. The problem is bigger and more tangible than ever. The marketing opportunity is larger and more appealing from a potential profitability standpoint than ever before. As outlined in numerous previous columns, new and looming attempts to mandate government imposed funding strategies will only add fuel to the fire. Forgive me…my eternal optimism is bubbling to the surface again. However, I will lay claim to the notion that market algorithms are shifting a fresh wind to our sails.
Other than that I have no opinion on the subject.
Paranoia
Consider this column an exercise in fevered dream generalities. Sort of a hybrid train of consciousness somewhere between James Joyce and Salvador Dali. I would simply like to attempt to express a feeling of unease. It is more the growing weight of a persistent impression of an impending calamity. Since I can’t seem to shake it, I’ll graciously share with the hard-core readers of this column in the hope that I may again unload some of the burden on my friends. Specifically, those who refuse to give up this quest.
It seems we initially embarked on our journey with a clear vision of our destination; replace a visible retirement planning deficit (even if a little far over the event horizon) directly attacking a known, measurable risk clearly subject to amelioration with insurance. We took familiar well-known legacy vehicles of both the individual and group variety, adapted them to our perceived needs, and then somewhat innocently turned them out unprotected without adequate contingency plans into a basically virgin market. No one would deny that we may have missed the mark completely or that perhaps our audience was simply unprepared for our performance. The risk was bigger than anticipated which set the stage for brutal and onerous underwriting thresholds. Consumer resistance to understand the pending inevitable financial and emotional conflagration was much stronger than ever imagined and the cosmic irony that, when they did buy, it became the most loved and treasured insurance possession of all time. It was in its truest sense a case of the blind leading the blind.
The problem was baked in at the beginning and we have traveled down the same road for so long it seems impossible to turn around or back up. Every research project over the last twenty years aimed at understanding our consumers and product response in my humble opinion has simply chosen to begin its analysis at the point of sale or a public admission of perceived buying predispositions. Our universe is composed of matter that we can see and dark matter that we cannot. Nonetheless it is the background forces that impose the greatest motivational gravity behind all movement.
This is about control. Money may only provide a tape measure to best define identifiable parameters. It has little to do with who or what brought out a need to measure anything. It’s about control of the claim. It’s about basic personal human control. Control of location, quality, preference, maintenance, duration, transition. Will I or someone I love be making those most crucial decisions or not? It is specifically those who have witnessed personally or close at hand the loss of those decisions that have from the beginning provided any of us with successful sales histories.
What I am trying to suggest is that maybe we built this sale on the wrong foundation. Humor me for a moment that we have not adequately prioritized the value of “control of claim” issues or that my 25 years trying to get this right continue to point me in the same direction. If by some strange twist of fate I am right, the question should become who is best prepared to manage the administration of benefits. On the open market freedom side of the equation we have less than a handful of large companies or stand-alone TPAs. On the government controlled side we now have MLTSS, a state run Federal authorized program of Managed Long Term Services and Supports. These are “capitated” and regulated administrators of Medicaid both disabled and special needs. In addition, as home services expand under Medicare and its derivatives there has been substantial recent growth in dual eligible. Bottom line is these folks do anything and everything associated with long term care administration. In 2008 there were four states with an in-house claim manager; now there are 24. If you were to take a closer look at the relationship between existing/proposed Washington State Cares funding strategies and the existing expertise of these already in place in state and Federal long term care management bureaucracy you might pick up on some of the concerns building in the back of what is left of my mind. Capitated means finite and permanent control. Not yours. Theirs.
“Paranoia strikes deep…into your life it will creep.” The immortal lyrics of Buffalo Springfield inexplicably do come to mind.
Other than that I have no opinion on the subject.