Making the intelligent call

Forward on Reverse: A conversation with Stephen A. Moses of the Center for Long-Term Care Reform Inc.: Part IIIAtare E. Agbamu, CRMSreverse mortgage, medicaid, long term care insurance, Long Term Care Reform Atare E. Agbamu: What do you think is going to happen if people don't get the message about the relationship between Medicaid and reverse mortgage sales? Stephen A. Moses: If people don't get the message, we'll just continue on the course we've been on. Medicaid will collapse. A lot of poor people will be hurt. And the baby-boom generation will have no way to pay for long-term care except [for] their home equity. They won't buy insurance; when the time comes, Medicaid won't be there for them and they will have to use their home equity. Regardless of whether we solve the problem through responsible public policy or just leave it alone and let Medicaid collapse, both the reverse mortgage industry and the long-term care insurance industry are going to explode in popularity, because that will be the only way to pay for decent long-term care. The tragedy is that a lot of poor people will get hurt. And a lot of young people won't get inheritances from their baby-boomer parents similar to what baby-boomer parents are getting from their World War II generation parents. AA: What do you say to people who say premiums for long-term care insurance are just way, way [expensive] for most people in their 70s? They will not be able to get the right policy at the right price because they may have pre-existing conditions and other factors that could disqualify them from getting a better policy. SM: Well, you can't buy fire insurance when your house is in flames, and you obviously can't buy long-term care insurance when you already have Alzheimer's disease. Most people who make those kinds of arguments are totally unrealistic about economics, and the idea that you can now transfer this risk to government programs that are already bankrupt just covering what they have already covered is just so economically and philosophically irresponsible that it's frankly kind of sickening. The reality is a vast majority of people can afford long-term care insurance if they purchase it at the most appropriate time of their lives. It's cheaper when they are younger. But if they are raising a family well, then maybe later on if incentives are in effect. The children that they raised, if they are in responsible positions, can supplement the parents to afford long-term care insurance. The main thing is that there should be an incentive to buy it and an incentive to use home equity if they don't have the other resources to afford it. Those incentives have not been there in the past; as a consequence, both the long-term care insurance and the reverse mortgage industries have been under-developed. Those incentives are developing, per small step of the Deficit Reduction Act of 2005. There will be more restrictions in the future. So you will see people re-evaluating the risk such that they're willing to pay more toward the purchase of long-term care insurance. As they see the need for it and as the need becomes real, they'll be more and more likely to tap their home equity to help them afford it. In your 70s, long-term care insurance gets expensive. I purchased it for my parents in their mid-70s in 1989. I've paid the premiums ever since, because I don't think they should have to pay the premiums on insurance that protects my inheritance. And I've a policy for myself and my wife that I've [been paying] for 10 years. I am part of the solution. I pay my taxes in order to preserve Medicaid as a safety net for the poor. What I resent is paying taxes that support people who hire attorneys to get rid of their assets in order to take advantage of a program that's supposed to be for the poor. They've basically ruined Medicaid as a safety net for the poor. And my mission and the mission of my organization, the Center for Long-Term Care Reform, is to give Medicaid back to the poor and encourage everyone else to plan responsibly for long-term care, which they can and should afford to do if they put the proper priority on that risk. AA: Do you have any closing remarks for reverse mortgage lenders? SM: I think they should wake up, smell the coffee, take it upon themselves to learn more about the relationship between public and private long-term care financing, and then get involved in publicizing this and educating their salespeople so that we can get the word out to the public that long-term care is a risk for which they need to take responsibility in the future. AA: Steve, thank you very much for this opportunity. For more information about Stephen A. Moses and his mission at the Center for Long-Term Care Reform, visit www.centerltc.com. Atare E. Agbamu, CRMS is president of ThinkReverse LLC, a reverse mortgage training and consulting firm based in the Twin Cities and is a consultant with Credo Mortgage. Atare is regarded as an emerging authority on reverse mortgages and is frequently consulted by financial professionals and families across America. His reverse mortgage interviews have been Web cast on MortgageMag Live! He can be reached by phone at (651) 389-1105 or e-mail [email protected].