Take a deep breath and try to relax a little, we have survived another political season. Political winds of change whether progressive or conservative favoring reform, inertia or nostalgia for the past have always defined, inspired or restricted our carefully planned insurance responses. It has always been a perpetual progression of action—reaction involving a careful evaluation of potential risk mitigation opportunities. Within the nature of our discipline we have repeatedly tried to ameliorate the risk of insurable events. The balance of political alternatives reminds us once again that our choices come to a pivotal head at our perceptions of control. Personal control of an individual’s claim destiny or the acceptance of additional centralized perhaps even coercive management. Our universal hope of course is that these most essential components are able to find a balance that benefits the greater good. In LTCSS circumstances that hopefully translates into an acceptable level of mutual decision making and maximum level of quality managed care.

In my humble opinion no one has been a more consistent hard headed advocate of exposing the corrosive relationship between the public response to custodial care for the aged and the lack of success in private responses to reduce and return control of individual claims destiny than Stephen Moses. His most recent manifesto “Long-Term Care: The Problem” recently released from the Paragon Health Institute once again provides conclusive irrefutable evidence that the still mushrooming consequence of current market conditions is the fault of existing misguided public response to the problem. The truth is we have always been fighting ourselves. It is the incestuous relationship between the holy trinity of Social Security, Medicaid and Medicare that has made it virtually impossible for us to adequately blunt this risk from the private sector. Private funding solutions including insurance, reverse mortgages and life settlements have had no room to breathe free when all the oxygen has already been sucked out of the room by State and Federal mandated, frequently capped and therefore underfunded, politically loose footballs. This exceptional white paper provides more than a sufficient arsenal of hard statistic ammunition to defeat any spurious attempt to defend the expansion of public taxpayer funded strategies. More of the same will not help. It will however most certainly exacerbate the problem.

This statistically exhaustive presentation of the facts, clearly researched, reveals more than just a smoking gun. It provides irrefutable evidence of a massive self-inflicted wound:

  • The current response to the problem is not working. New taxpayer subsidized solutions will only throw gasoline on an existing hot fire. Half of Americans will need paid care and the number of those 85 and older will triple in the next 35 years.
  • Medicaid remains severely underfunded and Medicare currently has unfunded liabilities of almost 35 trillion.
  • Medicaid and Medicare currently pay for 70 percent of care in America. Medicaid has a direct negative impact on LTCI. Because it pays for three fifths of the expensive costs (nursing homes) but only reimburses two fifths of the cost. The shortfall lands on private pay patients.
  • It is often forgotten in the conversation but the largest source of Medicaid long term care expense comes from Social Security spend down. Some long term care funding does come from Medicare Part A. The projected demise of the trust funds for both these programs reflect a very short future shelf life. Can we guess where that shortfall may ultimately reside?
  • It is true that shifting the focus to HCBC has succeeded, now representing approximately 50 percent of current overall spending. What is not true is that it is saving any money. Even though claims for HCBS grow, combined costs also continue to grow.
  • Required Medicaid impoverishment remains a ghost story told around financial planning camp fires. It is pure fantasy.
  • Compounding problems remain the definition of a Dual Eligible. One-third of overall expenses now come from those qualifying for both Medicaid and Medicare.
  • LTCI has experienced reserve and persistency concerns that have caused onerous rate increases and carrier defection from the market. The striking difference is that insurance claims will be paid. Confidence in government programs may or may not be justifiable.
  • Claim location matters. Private insurance claims show that three-fourths begin at home. Medicaid would suggest just the opposite.

Stephen’s voice has been steady and spot on from the beginning. The system has always been our own worst enemy. His personal message could not be more timely, “Government subjugates, markets liberate.“

Other than that I have no opinion on the subject.

Ronald R. Hagelman, CLTC, CSA, LTCP, has been a teacher, cattle rancher, agent, brokerage general agent, corporate consultant and home office executive. As a consultant he has created numerous individual and group insurance products.

A nationally recognized motivational speaker, Hagelman has served on the LIMRA, Society of Actuaries, and ILTCI committees. He is past president of the American Association for Long Term Care Insurance and continues to work with LTCI company advisory boards. He remains a contributing “friend” of the SOA LTCI Section Council and the SOA Future of LTCI committee. Hagelman and his partner Barry J. Fisher are principles of Ice Floe Consulting, providing consulting services for Chronic Illness/LTC product development and brokerage distribution strategies.

Hagelman can be reached at Ice Floe Consulting, 156 N. Solms Rd., New Braunfels, TX 78132 Telephone: 830-620-4066. Email: ron@icefloeconsulting.com.