Long Term Care Insurance… Inspiration from a modern day Don Quixote

When I worked in the retirement community business, I became aware of a fellow by the name of Steve Moses who founded an entity with the highly forgettable name of “The Center for Long Term Care Reform, Inc.” He showed up at our community one day with an RV that he was driving across the country trying to get his message out about the need for reforming how we pay for long term care in the United Sates. He’s a wonderful speaker with a wonderful message that absolutely no one is paying attention to. If the world were fair, he would have been on 60 Minutes last Sunday, and not Michael Vick.


Here’s my paraphrase of Steve’s message. We buy insurance for all kinds of things in this country. One thing that we ought to be buying insurance for is our long term care needs. Like most things we buy insurance for, like premature death or severe car crashes, there is very low risk that the thing we’re insuring against will happen to us, but a very high cost if it does. In the case of long term care, less than 10% of us will ever need it long enough to ruin us financially. However, if you do need it, ruin you it can and rather rapidly unless you can pay $10,000 a month without dipping into your savings.


This sounds like a good formula for entrepreneurially minded insurance company to make a lot of money. However, the few who have tried are not doing very well at all. They’ve done a bad job on the actuarial side (they underestimated how much they would actually have to pay out), and on the sales side. Turns out, this isn’t such an easy sale after all.


Why not? As Steve puts it on a recent blog post, “LTC insurers struggle to sell a product profitably that the government has given away (through Medicaid and Medicare) for forty-four years.”


The purpose of my blog is to prevent the crisis. If you are one of the many of us who has a hard time justifying paying for insurance that “the government” is already providing for free, I don’t blame you one bit. In all honesty, I don’t have one of those private policies either. However, my belief is that the handwriting is on the wall here, and the days of middle class and even wealthy people rearranging their assets to qualify for free care are numbered. Eventually common sense and an impending financial tipping point are going to prevail, and this entitlement will end or be greatly curtailed.


There’s a silver lining to this. Once the third party payer is out of the picture, I predict that the cost of getting long term care will go down, and the quality will go up as people start making these purchases on their own. More importantly, reforming this system will also be extremely good for our states which are already drowning in their long term care Medicaid obligations.


In the mean time, talk to a good financial planner, and consider buying private long term care insurance. Its time is coming soon, and the younger you are when you buy, the cheaper the premium will be, and the more control you will have about how and where you live should you ever require long term care.

You better shop around.... true life assisted living horror stories

I found this article on the Wall Street Journal website that I thought was well worth sharing. It’s an oldie but a goodie (published back in 2001.)

It talks about assisted living nightmare stories.

Here’s my take on the industry, which hasn’t changed much since the article was written. Most people move into assisted living for one reason: It is a more affordable and appealing alternative to a nursing home. That is decidedly not what the industry was set up to do. Assisted living communities were intended to be safe alternatives to toughing it out at home for folks who needed a little extra help with meal preparation, housekeeping, and, for some, remembering to take their medication.

Great idea, great model. The problem with it was that it wasn’t worth giving up your home and paying $4,000 a month for that, at least not for enough people to keep the places full. So what’s a poor entrepreneur to do? I guess there are two choices. The first would be to tighten up your operation, and get that monthly price low enough to make it a good deal for people (I didn’t observe a lot of that happening). The second, and more frequently taken tactic was to admit customers who had more needs than you were intended to serve, and to figure out a way to meet those needs.

Paying $4,000 a month for a small room in a place that looks like a Victorian Mansion is most appealing when it is compared to paying $10,000 a month for a semi-private room that looks more like a hospital (your local nursing home.) And so, the compromises began, and assisted living communities walked the tightrope of meeting the regulatory requirements of the industry, and scooping up folks that previously would have moved into a long term care facility.

This had the consequence of making the resident profile of both types of facilities, long term care and assisted living, more acutely needy than they were set up to serve.

And so, that’s the situation we find ourselves in. Assisted living communities that look like they’re serving a nursing home population, and getting lousy reviews from many in the process. Nursing Homes without the higher functioning residents they used to have, with an ever more acute and helpless group of residents, many of whom are no longer paying privately, but relying on Medicaid to pay for their costly care. And, as any nursing home administrator will happily tell you, Medicaid reimbursement barely covers the cost of the care these folks require, further exacerbating the problem.

I don’t mean to paint all assisted living communities or nursing homes with the same broad brush. There are some good ones out there, but sadly, not as many as there appear to be bad ones.

I remain convinced that the best way to avoid both of these bad choices is moving to a service enhanced independent living retirement community that has resources in place to enable you to age in place even if you do drop the turkey.

Hold onto that turkey.