Are YOU Well-Trained in Long-Term Care Insurance?
The long-term care insurance industry is finally starting to mature, and I like to think I've had a little to do with that. When I started selling long-term care insurance in 1988 and even when I started my training and consulting business in 1991, I felt as though I were on a lonely planet, watching most everyone else whiz past. In 2002, there's no room in the parking lot on the LTCI planet. Today, there is tens of thousands of professionals selling long-term care insurance: 37,000 agents have been through my private or corporate training classes. But of all the people who are selling this much-needed financial and family protection product, I worry about how many of them REALLY know what they're selling? Have they kept up with the myriad of changes that are happening every year? I can tell you that only a faithful core buy annual updates to the information - updates that I spend months accumulating. There seems to be a perception that once you learn the five decisions a prospect must make, you're home free with no more training needed.
How much do YOU know about LTC insurance? Rather than give you a quiz, let's look at the 9/24/02 Washington Post article, "Long-Term Thinking" (http://www.washingtonpost.com/wp-dyn/articles/A46975-2002Sep21.html)
Someone with a cursory knowledge of the subject will immediately spot the error in the Medicare benefits. The article says Medicare pays 100% for the first 20 days in a nursing home, then $100 a day for an additional 80 days, and after that nothing. The website cited as a reference (www.medicarehelp.org) has the correct information that the beneficiary is responsible for $101.50 per day co-payment for days 21-100, not the other way around.
Inaccurate Medicaid information
But how many agents licensed to sell in Maryland will have no problem with the inaccurate information that in this state, a person's income must be below $350 a month to qualify for Medicaid? In fact, after certain allowable deductions, income must be below the average cost of nursing home care as defined by the state's Medicaid department.
And how many will spot the error that "almost half the people in nursing homes are on Medicaid assistance"? Actually, the "almost half" applies to the DOLLARS paid by Medicaid (Centers for Medicare and Medicaid Services, 2002). 1 About two-thirds of people in nursing homes are on Medicaid (American Health Care Association, 2002), 2 except in a handful of states that have a higher than average long-term care insurance market penetration - proof that LTCI can keep people off Medicaid.
The True Cost of Waiting to Buy LTCIAnd the real misdirected advice comes under the heading "If So, When?" which explores the age at which most people should buy. The article cites $1,512 premium for a 44-year-old, $2,196 for a 54 year old, and $3,348 for a 65 year old, then multiplies the premium to age 74. The answer makes a case for waiting from a pure mathematical sense, even though the author at least encourages people to buy younger for insurability purposes.
This article completely misses the point on the true cost of waiting because it doesn't consider the impact of inflation. If a 44-year-old were buying a $150 daily benefit, at age 54, that person would probably be considering a $250 daily benefit and at age 65, a $350 daily benefit. THOSE premiums multiplied to age 74 would make a clear case for buying younger. In other words, the younger you buy, the longer you pay, but the less you pay.
Benefit periods aren't just about nursing home stays
Then the article suggests shorter benefit periods based on nursing home statistics. Shorter benefit periods are certainly fine if it's an affordability issue, but that decision shouldn't be based on just nursing home utilization. The National Center for Health Statistics shows an average nursing home length of stay of 2.4 years in the 1999 National Nursing Home Survey, but the average time people are cared for at home is about 4.5 years (Harris Interactive Survey, Inc., 2001) . 3 We don't have a good figure yet for how long out of that 4.5 years the benefit trigger for a LTCI policy would be met, but however long it is, that has to be added to the average nursing home stay. Then throw assisted living into the mix in addition to family longevity, and it's a much bigger picture than the average nursing home stay.
Is 75 too old for inflation coverage? Finally, the article suggests that individuals over age 72 might save money by just buying a higher daily benefit to handle inflation protection instead of buying the 5% compound rider. I compared a 75-year-old buying a $150 daily benefit with 5% compound inflation vs. a $240 daily benefit, which is what the $150 will grow to in ten years at 5% compound, and the premium is similar for those two plans. If the person doesn't live longer than 10 years, no problem. After 10 years, the benefit gap really kicks in, using a 5.8% average growth rate, which syncs with the Center for Medicare and Medicaid Services' projection for LTC growth for 2001 - 2011 (CMMS, 2002). 4 And do people, especially women, live longer than age 85? Everyday.
Being able to spot these flagrant misconceptions and explain them in a clear manner to your clients and prospects are what set you apart from "all the rest", and that person, my friend, is ultimately who gets the check.
Don't forget about errors and omissions
Of course a secondary and equally as important reason for being thoroughly trained is to reduce errors & omissions exposure by making sure you understand current trends in LTC insurance so you can truly meet the needs of your clients with the appropriate benefit package. Because it is a relatively young industry, products are changing rapidly. On my semi-annual policy comparison, 10 major companies had new products in the March 2002 issue and another 10 in the October 2002 edition. Part of the frenetic activity in new product development is in response to changing delivery systems for providing long-term care, and part of that change is attributable to the demands we are just starting to see instigated by the baby boomers.
Baby boomers will change the course of LTC
Baby boomers who are managing the care of their parents and some spouses are not as accepting of conventional caregiving methods. Reflective of this is "The Eden Alternative", a movement spawned by Dr. Bill Thomas that includes 237 nursing homes nationally that more closely resemble gardens, with a plethora of plants and pets, than the traditionally sterile environment of nursing homes. Assisted living facilities look like resort properties, and I predict a name change for them shortly to focus attention away from the need for "assisted living:" baby boomers are notorious for wanting to look independent, even if they aren't.
Baby boomers in ALF's will often demand a home health aide in the ALF unit - someone who can stay 8-12 hour shifts. How will LTCI policies handle this request? A home health benefit will not usually be paid on the same day as a benefit for the assisted living facility.
How does "Rosie" get paid?
Of all the occupations, health care aides represent the occupation with the largest shortage. This is true whether we're looking at home health aides or nurses' aides who work in nursing homes. We will definitely see robotic care in our lifetime: how will LTCI policies handle this new addition to care? Will robots be paid as durable medical equipment for rental or purchase? Will that cover replacement computer chips to repair "Rosie"?
Many new policies have a cash benefit for unanticipated needs, a number of which require that no covered services be performed. That definitely allows flexibility for the consumer, but what will it do to the rate stability in the future?
And what about the shortage of geriatric physicians and gerontologists in our country? Who will review these claims and say what is reasonable?
Understanding all of these issues is complex. One of the many things I love about the CSA designation is that it focuses on the total picture.
Administering long-term care is a very complex issue. National attention to this issue is long overdue. The little information made available either comes in soundbites - short nuggets of information with little depth - or hours of focusing on the need side of the equation, with little time devoted to the financial side.
The #1 Need - Better LTCI Tax Incentives
Nowhere was this more clearly evident than in the October 2002 PBS special, And Thou Shalt Honor. Hosted by Joe Mantegna, this two-hour documentary presented the very emotional side of caregiving. Caregivers around the country raised their voices in unison as they identified with the universal painful, and yes, sometimes gratifying experiences linked to caregiving. At the end, the documentary demanded a national solution to a national dilemma, and one that I frequently refer to as "the real health care crisis in America". The private-sector solution, long-term care insurance, had been given perhaps a minute and a half on the big screen... A great opportunity was missed to at least focus more attention on what Congress can actually do to help, and that is to pass badly-needed tax incentives.
There's a very large clock on the wall, and it is ticking inexorably closer to 2030, when over half of the baby boomers will be in some type of long-term care and elder care will have far surpassed child care as the #1 dependent care need in America. Will we be prepared with private funding to pay for the baby boomers? Or will we allow the worst economic crisis this country has ever seen to be caused by allowing the baby boomers to fall onto public assistance for their long-term care needs? Today we are spending 44% of total federal revenue for Social Security, Medicare, Medicaid, and a little of that figure goes toward interest on the national debt (General Accounting Office, 2002). 5 The Comptroller General says if we do nothing, it will be 75% by 2030, at a time when the ratio of workers to Social Security beneficiaries will be 2 to 1 (GAO, 2002). 6
Is Anyone Listening?Congress isn't listening. Most providers of care aren't listening as they badger the government for more Medicare and Medicaid funding. The legal profession isn't listening as they continue to help people impoverish themselves on paper to qualify for hemorrhaging Medicaid dollars. All but a handful of state regulators and officials aren't listening as they refuse to educate consumers about long-term care insurance. The few that have listened have watched their Medicaid nursing home population drop from 2/3 to half, which proves that LTC insurance WILL work to take the pressure off government funding (Health Insurance Association of America, 2002). 7
It's Up to Us
It's up to the members of the financial services community, and that's us. We hold the future of our economy in our hands today, and it's our responsibility to talk with every client we have, regardless of age, individual or corporate, about the long-term care crisis and the private sector solution, long-term care insurance. Everyone needs to consider the possibility of the costs of long-term care. I know of a 22-year-old college student recently paralyzed from the shoulders down from an automobile accident and a 23-year-old wife of a 25-year-old motorcycle victim. As this young woman summarized after three years of meeting her young husband's most basic needs, "I guess you couldn't have enough insurance for something like this.
If we don't take action, who do you suppose will shoulder the blame for the outcome? We will be, because we're supposed to be the financial experts in our society. The October 22, 2001 article, "Cracking the Nest Egg", in The Wall St. Journal wasn't underestimating the problem when it named not planning for long-term care as the #1 mistake investors are making in retirement planning. As financial advisors, WE are allowing that to happen and WE have to stop it by uniting and educating Americans of all ages about this national problem... but we won't stop there. We will tell them "the rest of the story", and that is for pennies on the dollar, we can save our national economy and most importantly, we can save the dignity of the American family... and there is no price tag for dignity.
Shelton is President of LTC Consultants, a Nashville-based company specializing in long-term care insurance training and marketing materials. LTC Consultants has trained over 37,000 agents and delivered 2,000 employee education meetings for the FLTCIP. Author of Long-Term Care: Your Financial Planning Guide (2001, new edition due out in 4/03), Shelton is a nationally recognized speaker. (www.ltcconsultants.com).
12000 statistics, Centers for Medicare and Medicaid Services, 2/02
2"The Nursing Facility Sourcebook, 2001", American Health Care Association, 2002, p.71
3 "Chronic Illness and Caregiving" survey conducted by Harris Interactive, Inc. on behalf of The Robert Wood Johnson Foundation, Johns Hopkins University, and Partnership for Solutions from March 17 - November 22, 2000, published 2/26/01 and "Toward a National Caregiving Agenda: Empowering Family Caregivers in America, Proceedings of a Caregiver Empowerment Summit", July 2001 (Convened by The National Alliance for Caregiving in collaboration with Partnership for Caring, sponsored by MetLife Mature Market Institute and Pfizer, Inc.)
4Heffler, Stephen, et al, "Health Spending Projections For 2001-2011: The Latest Outlook", Office of the Actuary, Centers for Medicare and Medicaid Services, Health Affairs, March/April 2002, p. 208 (5.8% projected growth rate for home health and nursing home care 2001-2011)
5Walker, David M., U.S. Comptroller General, "Long-Term Care: Aging Baby Boom Generation Will Increase Demand and Burden on Federal and State Budgets", General Accounting Office, GAO-02-544T, 3/21/02, p. 7
6Ibid7Coronel, Susan "Long-Term Care Insurance in 1998 and 1999", Health Insurance Association of America, February 2002
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