Ronald R. Hagelman

It seems that it is primarily similarities that define generational progression, specifically as it regards common experience resulting from the age cohort’s place in history—social, political and economic. The most agreed upon period of time appears to be in the 30 year duration range per generation. More than enough ink has been spilled on the effects and affects of the Boomers and the incoming Gen X’s that find themselves participating in the proverbial financial and emotional stress as members of the “Sandwich Generation,” caring for both parents and children.  There does seem to be some unavoidable optimism brewing in the chronic illness marketplace. We are apparently back to levels of company participation in some form that we haven’t seen in over 15 years. While it is true that these attempts to address the problem at some level run across a very broad playing field of product option, quality of benefits paid and under what circumstances care dollars will be delivered, we do have choices!

Recently I was asked, “What seems to be making the pot boil again?” May I humbly suggest that it is exactly what made the pot boil 20 years ago. The underlying absolute of every consumer research I have ever seen is that those who buy are most often the adult children—those being scorched by the fires of the rising cost of care for their parents. The tinder of Baby Boomers caring for aging parents is rapidly building to a  fiercely combustible crescendo and their numbers will peak in the year 2022. The fuel for the current market movement should at this point be obvious to all concerned:

• Seventy-five percent of Boomers struggling to facilitate the longevity concerns of their own retirement are also burdened by family caregiving issues.
• There are 70 million plus Boomers and 71 percent of them have an aging parent, creating 50 million catalysts for purchasing action.
• As many as 60 percent of Boomers are already assisting an aging parent while at the same time as many as 90 percent are also financially helping their adult children.
• Boomers are, of course, also keenly aware that they are likely to live longer.
• Adding more fuel to the fire is a recent fact gleaned from the 2016 United Health Foundation that these same Boomers are, in general, in poorer health, as they are aging with higher rates of obesity and diabetes than prior generations.
• And to throw even  more gasoline on the fire, the largest and most consistent rise in inflation is in the wonderful world of modern medicine and health care.
• Just because you can reasonably expect to live 10 or more years longer than in the past, frankly the current most popular idea of working longer is not a terribly realistic expectation for all Boomers.
• A few miscellaneous Boomer facts might add some food for thought for those involved in sales: Twenty-six percent of the US population are Boomers; California has the greatest number; Vermont the greatest concentration; one-third have college degrees; there are now more females than males; two-thirds are married; and the majority own a home.

The inevitable sermon must now follow. It is expected by the loyal readers of this column and all those LTC specialists who I must honor because they also keep banging away at America’s largest unprotected risk. They do so because it is the right conversation to have to begin any and all insurance strategies—necessary for the economic health of an industrialized planet sharing a common fate and, based on the statistics outlined above, you probably have your own family personal story to drive you forward.  

There are three chronic illness markets:

1. Those five million households with enough income and assets to trade or leverage insurance dollars for catastrophic protection.
2. The 34 million middle class households who require supplemental protection to remain private pay consumers. According to a recent USA Today article, “The average nursing home patient runs out of money within six months and must go on Medicaid.” This is where you must draw the line in the proverbial sand. Leave no customer behind this time! Supplemental protection is very affordable and combo policies with inherent guarantees is where you must dig in and give no ground in a sales conversation.
3. The growing “Point of Need” market must be added to your practice. It is almost never too late to offer some form of help for those facing immediate care concerns.

Each of these feeds on the other. Each of these crisscrosses the generations, leading forward and backward to new sales opportunities. None should exist in a sales vacuum. No conversation about the cost of care can be complete without a basic knowledge of all three, as well as the courage and skills to take action on all three!

 Other than that I have no opinion on the subject.

The readers of this column I am sure understand that I make a living outside these musings and frequent pontifications. As a consultant I have been primarily involved in product development and wholesale brokerage distribution strategies directly associated with long term care insurance for over 20 years. The comments this month may be a little strident, created by a growing level of frustration generated by our 20 year lack of market penetration success. Because of our consulting relationships over the years, I suspect my partner Barry Fisher and I may  hold the record for executed Non-Disclosure Agreements.  It needs to be clearly understood before reading further that we are currently under contract to provide our normal responsibilities to one of the major companies involved heavily in the market outlined below. After almost 15 years of writing this column with all of the knowledge and passion I could muster, we would want it clearly understood that our involvement and the views expressed below come as a result of our desire to help direct life settlement buyers achieve goals that we believe are ethically consistent with what we believe is an unavoidable acceptance and acknowledgement  of our fiduciary responsibilities.

We believe:

• Americans are virtually unprepared for retirement much less the insurance funding of the real cost of caregiving. It is negligent and remiss to ignore the current life insurance secondary market as a resource for funds needed for care and retirement support.
• We have been unable over the last 20 years to convince insurance consumers to protect themselves and their families—20 years ago 8 million owned a policy and today 8 million own a policy. The only thing to point to with any degree of certainty is the atmospheric rise of average premiums and the personal pride we must have in knowing we are only now even attempting to protect the wealthiest among us. As has been mentioned frequently, we have left over 50 million Americans behind totally unprepared for what we know as an almost certain  and potentially catastrophic need for financial assistance with custodial care.
• We believe that there must be a  residual responsibility to those we left behind. For whatever reason those who did not adequately  plan ahead cannot now be beyond your concern or professional responsibility.
• All possible funding sources must be exhausted; reverse mortgages, underwritten SPIAs, veterans benefits and the sale of life insurance policies for care and retirement dollars. Didn’t it ever strike you that those experiencing the greatest degree of mortality and morbidity issues and therefore anticipating the possibility of a lengthy journey though the inventory of expensive care vendors would have similar underwriting concerns and futures? If there was ever a homogenous cohort of need (and prospect for your services) it would be those facing a progressively diminishing ability to perform their ADLs!
• Although again, as stated repeatedly in this column, there have always been two potential customers. Those where we have unfortunately almost exclusively applied all our sales efforts—meaning the ones who can afford to replace the risk with insurance, and those who we can help supplement and enhance the assets and income they already have. But there must be only one goal: Remain a private pay patient if at all possible.
• This column also continues to beat the drum of enhancing your policy review practices. Do not wait for the frantic call for assistance with someone already at the point-of-care need precipice. Examine your own book of business for those clients based on age, family history, previous adverse underwriting, pending term conversion deadlines, obsolete second-to-die strategies and a “known” lack of an adequate chronic illness strategy.
• Regardless of your philosophical opinions concerning the secondary market, the National Association of Insurance Commissioners Long Term Care Innovation Subgroup on July 19, 2017, wholeheartedly endorsed and recommended the use of life settlements as a key component of “Private Market Options for Financing Long-Term Care.”  

Not including a review of policies  both now  and in the future that could be used to help fund care and supplement retirement has been accumulating a mounting collection of agent adverse case law. Be forewarned if you ignore your fiduciary duties—three lawsuits brought by life insurance policy owners against their insurer and advisors for not disclosing the settlement option have been settled since 2011.

In Texas we know you can lead a horse to water but you can’t make him drink. As an old cattleman, I was always told if you looked deep enough into the horses eyes you could see their intelligence. I was never convinced.

Other than that I have no opinion on the subject.

Like many readers of this column I am second generation “wholesale brokerage.” The promise that my father helped develop beginning in the early 1960’s was a guaranteed commitment to America’s consumers to deliver the best product at the best price. However I clearly remember his first insurance sales lesson: “Son, The best sale is an old sale!” Virtually every conversation concerning future product development or distribution strategy seems to circle back to a suggestion to work your own book of business. In the early days of LTCI sales we were continually asked for leads. The standard response was, “You do not need them, you need to work your own book of business.” There is true optimism again in our market. The only signs of life in the LIMRA production numbers involves some form of an approach to chronic illness risk. Combo, hybrid, linked and asset-based—they have all become fertile fields to plough. It now becomes impossible to resist the temptation to humbly suggest that the belief that companies would eventually line up to make sure they also had an option for chronic illness appeared frequently in this column.

It also becomes impossible  to not now pause and again gaze into our own LTCI crystal ball.  Through the swirling mists of a troubled past now appear impressive new marketing and sales opportunities:

• Future sales will be governed by those we left behind over the last 20 years and finding new and better ways to approach the generations coming behind the Boomers. The evolving “point of care” initiatives providing options to those who previously failed to plan will continue to gain traction and success. And on the opposite end of that spectrum, the younger “transactional” buyers will profit from advances in technology and speed-to-issue philosophies. Younger buyers will be better able to take full advantage of their underwriting advantages.
• The “Mission” of all our efforts will shift from only helping those who can afford total risk replacement to just making sure that all customers in the private insurance buying market can remain private pay.
• The group market will return with a vengeance—large and small.
• New product will be form fitting. Superfluous benefits and excess premiums will begin to fall away as we accept the necessity of our new Mission definition outlined above.

All the above will require policy and benefit review. The review process has always lived at the heart of all our sales activities. It is impossible to not now challenge all readers of this column to verify the reality of their own book of business. Truthfully no one knows definitively what is in force at any moment in time. No one is always on top of the current insurance needs of all those past customers for whom we accept some level  of responsibility. Are you absolutely positive you have asked every member of your sales congregation if their life policy also covers chronic illness if they should need it? 

Not wishing to step on anyone’s planning toes, it would seem negligent to not suggest that whatever your policy review practices or habits might be that they now include several additional core considerations:

• Did your 1035 strategies include LTCI or chronic illness options?
• Did your offer to now include a “care”  alternative include a comprehensive discussion of IRC Section 101g vs 7702B benefits and could you define exactly what they would be paid if they accessed the benefit? 

As you evaluated potential conversions or lapses, did you at least consider converting those established and currently paid-for face amounts into care dollars in the secondary market?

We have slowly but surely returned to a market with well over a hundred companies offering some form of chronic illness risk abatement.  Wake up and smell the roses.

Other than that I have no opinion on the subject.

I know many of you have visions of a Grandmother or Aunt who wore one of those shapeless amorphous sack dresses. They covered a world of sins and no one really wanted to know exactly what was going on underneath. What we were sure of was that nothing really risky was ever going to see the light of day. Here’s what we know: Shortly after HIPAA we had approximately 8 million folks who owned some form of LTCI. Twenty years later we still have about 8 million. For the last dozen or so years about a half million Americans per year have been buying some form of chronic illness protection. I don’t think anyone would argue that this could be described as a seriously flat market. Active companies still trying to sell stand-alone individual accident and health policies can now be counted on fingers and toes, and those in the brokerage market on one hand. The only signs of life in the LIMRA numbers or new product filings at the IIPRC concern the growing addition of some flavor of combo offering. I think we can make this really short and sweet:

• We were wrong about persistency, investments, mortality, morbidity, the rise of non-insurance benefits, that ALF’s enhance mortality, and that our premium ceilings were not glass but tempered steel (to name just a few).
• We oversold benefits by a wide margin. Somewhere in the neighborhood of 80 percent of benefits sold will never be used.
• We ended up sweating bullets about the cost of overly aggressive future inflation COLAs but failed to recognize that the number just above made most of that a moot point.

As has been pointed out repeatedly in this column, there have always been two sales: 1) “Primary” replacing as much of the risk as possible with catastrophic coverage, and, 2) “Supplemental” adding sufficient additional dollars at the time of claim to maintain private pay status. Insurance does not exist in the cold vacuum of space. Everyone’s story is different. Again, here is what we know: 

• About 50 percent of Americans will be within reach of the 250 percent of poverty line, meaning Medicaid is just over the horizon awaiting them with open arms and bureaucratic indifference.
• About five million mass affluent households will buy insurance or chose intentionally or by benign neglect (yours or theirs ) to self-insure.
• And about 34 million middle class households will continue to set out there waiting on the insurance industry to make a serious attempt to be helpful, or wait for the wind that is already blowing in Washington to create Medicare Part E where we will be taxed to pay instead of encouraging individual decisions to do the right thing to protect ourselves and our families.

What is needed is custom built Italian Suits—no more Muumuus. Just for fun let’s take just one small, yet glaring, overpricing regimen. Three fourths of all stand-alone policies are sold as couples in some form. Yes, we even give small discounts because someone will be there who cares when the first one needs assistance—in theory reducing the claim. However when we sold the couple and explained the discount we probably at least let it be believed that the risk was somehow equal for both spouses. We knew, and the customer knew, that that is not what happens. Men claim sooner and shorter, women later and longer, and the chance is greater that they both pass away before any real possibility  that they both would have a catastrophic claim. My own suspicions are that we have allowed for catastrophic risk involving both joint policyholders and that much of that risk and premium is wasted and severely detrimental to sales. Somehow we forgot the basics: Sell to our new understanding of the real nature of the risk, price to what we can afford that covers most of the claim, and begin with an evaluation of how little–not how much—insurance is needed to remain free!

Other than that I have no opinion on the subject.

The 500 pound canary squatting squarely in the middle of any conversation about custodial care remains our gift from  Lyndon Johnson. I do not mean to extend any normative values to Medicaid.  In many ways it may be our single most effective exercise at establishing and funding social justice. Because it is primarily a state run program there are naturally many variations of its benefit availability, severity of debt collection from heirs, and the basic rules of interaction with Medicare and the adult children who become entangled in it’s execution. It is difficult to put it in perspective. Medicaid’s codependence with the Affordable Care Act continues to percolate at the center of today’s political debate. It is important to remember that although long term care costs are it’s greatest expense, in terms of head counts children are the largest beneficiary of  needed assistance.

Medicaid is not bad care, it is simply limited and discounted. What is lost as a participant in the program is, in my opinion, profound. Choice of location is gone. Any extras in service and movement in your community are gone. Control of any remaining assets is gone. Care at home is most likely either not available or the waiting list is beyond your mortality. Choice of a roommate is gone and your spouse can usually only see you during visiting hours. In 2017 funding for Medicaid was $7 billion “short.”  Some of that difference has to be assessed to the private pay patients.

We know members of the “mass affluent” segment of our population, representing about five million households, will either choose to leverage the risk with insurance or, in our opinion, unwisely opt to self-fund.  At the other polar end of that spectrum, almost 50 percent of Americans will fall below the 250 percent of the poverty line. Where we must turn our attention is to the 34 million households in the “middle” market. There is now a plethora of product options for those who can afford to replace the risk with insurance, and Medicaid is waiting for those in the greatest need. Why must the choice for those American’s in-between those extremes be to hire an attorney and artificially impoverish themselves, deplete or demolish their hard earned savings, call upon the available largesse of family members, or simply count the days until the money runs out?

It’s the great “in between” where we can do the most good and frankly have the greatest effect. Forgive me, but the Class Act’s $50 a day was a pretty good number. Ultimately the only remaining mystery is, “Where will that dollar come from?”  Private insurance or an expanded welfare system? The question that cannot be avoided is, “What happens when (and perhaps more importantly if) you run out of sufficient monthly income and assets to maintain private pay status?” Let’s touch on a few issues  that immediately come to mind. Most care communities do have Medicaid beds. They are, in my opinion, there specifically to “catch” residents that were private pay and have exhausted resources.  We are aware that the basic premise of government assistance usually prevails: “If you take money from them (as in Medicare skilled nursing dollars) it follows that you must take Medicaid as well. Therefore beginning your journey for care assistance in private pay status accommodations will most likely help you to be allowed to remain at that address. You will be  moving into a semi-private room of course, and you will not be able to choose your “roomie.” There are states that mandate that care must be equal between private and Medicaid care. This is rare and, at least in my mind, hard to accept as true in practice.

Now, for fun, you might ask in your state if you can “upgrade” Mom to a private room. Happy to pay the difference to restore some quality of life. There is no consistency by state. Some do allow it, in some it is by practice of the nursing home, and some will not allow it at all. Once declared basically indigent you must wear and live with that Scarlet Letter for the duration. The last item I suggest that you do some investigation of is how “aggressive” your state Medicaid program will be in trying to recover the loan. Medicaid did not give anyone anything. It is a debt, and many heirs have been shocked when the notice for sale appears on the old family home.

 I have been accused of writing the same column over and over. There may some truth to that.  Just to be perfectly clear, I am not afraid to talk about the largest provider of care—I just don’t like to do so. Medicaid is not the enemy, it is simply the court of last resort. When we come to understand that it takes so little additional funding to maintain the freedom of choice and personal dignity that we would wish for all our clients, then and only then do we change our sales success.

Other than that I have no opinion on the subject.

Fast review: It’s what you don’t have that creates the problem. Everyone wants the best available level of care at home or in a care community. (Stop using the word “facility”.) LTCI sales will remain stuck among only the most affluent until we change the basic goals of the exercise. The purpose of our professional actions must be to maintain “Private Pay” status. We understand the polarity of the economic spectrum—those wealthier citizens who will never go near the government welfare system and those who by circumstance will have no choice. It gets fuzzy in between. When the adult children assemble and determine who will have the Power of Attorney, the conversation is about The Gap. The difference between what is readily available for a monthly commitment  and the best choice for the added need for care. Making up that difference may be complicated by differences in state Medicaid eligibility regulations. Regardless of the size of the shortfall, some careful thought must be given as to where all this may end up. Frankly consideration must be given to the possibility of running out of “sufficient” funds to remain among those receiving the highest level of care.

On the day the family members who care accept the inevitability of the need for custodial  assistance, the first order of business is to assemble and attempt to leverage every available source of monthly funding. Remember all ALF leases are month to month. HHC is in essence the same: Ordered and scheduled “pay as you go.” As a target monthly requirement and for discussion purposes only, I am generally comfortable with the notion of  “assembling” about $4,000 a month for basic services at an ALF and about $25 dollars an hour for HHC  (I know it can vary greatly by state). As a life-long Texan I understand that there may be those who  have trouble accepting Texas as average regardless of their viewing perspective.

First I need to fix an image in your mind. Please tell me who would “want” a semi-private room. Of course under Medicaid you will have nothing to say about the relative congeniality of your very near and intimate neighbor.  If you can jumpstart your thinking before each conversation with everyone’s obvious and intrinsic desire for a private room today, tomorrow and forever, you begin at the heart of the matter. The most important component of our offered assistance is the combination of personal freedom, choice, respect, dignity and privacy—particularly from Government hegemony!

Again, for consideration only, let’s run down the available inventory. Insurance dollars never stand alone:

• Begin with Social Security, which it may help to remember is the first thing you sign over at a Medicaid nursing home admission.  The average monthly payment was $1,360 in 2017. The maximum possible benefit is now $3,538, with many Americans receiving over $2,000 per month.
• American’s do have savings. At age 75 or more, the median available for retirement savings accounts is $35,000, but when you add in all assets including home equity, the family net worth median jumps to $213,000.
• Median home equity at age 75+ is $130,000. Reverse mortgages should be considered but bear in mind only about 10 percent of these were used to fund care. Most are used to establish an early “line of credit” with favorable tax treatment.
• Potential Aid and Assistance VA Benefits for Veterans and widowed spouses should always be recommended. However, if your goal is to die in a government (semi-private) welfare bed, Medicaid  income planning must be considered. Monthly benefits for a Veteran and one dependent is $2,160 a month.
• Seniors also walk away from billions of dollars of life insurance death benefits that could have been converted to monthly income for care. On average, as someone currently defined as disabled, they could have gained access to 30 to 40 percent of the face value or approximately 10 times remaining cash values.  You wouldn’t walk away from your home mortgage without taking the equity with you, why would you knowingly walk away from the intrinsic value of all those premium years? Particularly when those dollars could be converted into tax privileged income for care.

My suspicions are that if you are reading this column your goal is not to take advantage of our seriously underfunded  government bureaucracy social safety net. There is also an extensive conversation concerning filial responsibility that would require another column. Suffice it to say the adult children, the proverbial “loved ones,” may need to kick in to fill the The Gap. Unable I can understand. Unwilling I  will never understand! Replacing the risk with insurance  (now available in all sizes, shapes and colors) as the primary source of funds for those able to afford that option remains constant and immutable. But, understanding how little it takes to fill a very small gap that can dramatically transform the quality of care is so  much more important. Remember that 83 percent of all claims have been less than $100,000. Until we transform our mission into providing “supplemental” assistance in the form of available resources to fill up The Gap we will never move this market forward.

Other than that I have no opinion on the subject.