Financing Longevity

China Seeks U.S. Input on Long Term Care

U.S, industry officials greet high-ranking Chinese delegation

Paul Forte, CEO of LTC Partners, LLC, was among a select group of U.S. government and other officials chosen to address a delegation from the People's Republic of China visiting Washington DC last week to study how national long term care (LTC) demands are handled and financed in the US.

The 22-member delegation included China's General Director of the General Office of the State Council, Xiangdong Lu, and the Deputy General Director of the State Council's Personnel Department, among other officials.

As the senior administrative arm of the central Chinese government, the State Council is made up Paul Forte, LTC Partners CEO, addresses a high-ranking Chinese government delegation on long term care. of numerous sub-departments, including the Ministry of National Defense, and is responsible for planning and executing policy and programs on a national basis.

China's LTC issues more severe than the U.S.?

Due to its aging population, in the coming decades China faces long term care needs projected to be even more severe than that those in the US.

By 2050, China's 65-and-over demographic is expected to grow from 115 million (1/5 of the world's total within this segment) to 322 million, by which time those over 65 will constitute nearly half of the adult population in China, according to a 2012 actuarial study.

In a country where family care has been prevalent for centuries, the "one-child" policy instituted in 1978 for population control purposes has greatly reduced the pool of potential family caregivers, a situation exacerbated by increased urban migration and more women entering the workforce.

"The delegation was very concerned about what they refer to as 'senior care,'" said Forte. "Because a large proportion of the Chinese population is aging, they are particularly interested in understanding the mix of public and private LTC financing available in this country for people who need assistance in their later years. Finding solutions over the next 20 to 30 years is as critical for the Chinese government as it is for ours."

A disproportionate burden of care

According to estimates, only 20% of the Chinese population has health insurance today, while only 30% have pensions, and nursing home beds exist for just 1% of the older population.

The burden of care falls heavily on adult Chinese children, whose jobs and child rearing duties create stress. Forte covered private financing approaches in his presentation, including both stand-alone long term care insurance policies and "hybrid" policies in which LTC riders are appended to life or disability insurance, or annuities.

In a country where family care has been prevalent for centuries, the "one-child" policy instituted in 1978 for population control purposes has greatly reduced the pool of potential family caregivers

Forte also touched on some features of the Federal Long Term Care Insurance Program (FLTCIP), which his company, LTC Partners, LLC, a subsidiary of John Hancock Financial has administered since its inception in 2002. The FLTCIP was created by an act of Congress in 2000 to provide employees of the US federal government and military personnel access to a federally-sponsored long term care insurance protection option.

According to Forte, FLTCIP policies are sold on a direct basis, with premiums deducted from wages, annuities, or billed directly. Enrollment is voluntary and 100% paid for by enrollees, while plan design elements such as daily benefit amounts, benefit periods and inflation options can be tailored to individual family needs.

"In the U.S., as in China, long term care is the single greatest unfunded liability most families will face," said Forte. "Medicaid, already the biggest payer of LTC services in this country by far, will be stretched even further as the Baby Boomers pass into retirement. Raising taxes to pay for a Medicare-like public LTC insurance program may not be practical or popular."

"The private LTCI industry offers flexible policy design options that can ease financial stress at both the individual and national level," said Forte. "But ultimately, the public and private sectors must work together to address the LTC financing problem and to identify authentic solutions."

In addition to Mr. Forte, the Chinese group also met during its visit with representatives of the Administration for Community Living and Administration on Aging offices in the Department of Health and Human Services, the American Council of Life Insurers, the World Bank, CARF International, and a number of senior care facilities in Washington, D.C.




LTC Partners Background
LTC Partners®, a diversified third party administrator of large-scale insurance and benefits programs, was founded in 2002. It administers both the Federal Long Term Care Insurance Program and BENEFEDS under the oversight of the U.S. Office of Personnel Management (OPM). The company is located at Pease International Tradeport in Portsmouth and employs more than 300 people full-time, not including contractors and temporary employees. It is a wholly-owned subsidiary of John Hancock Life Insurance Company, which is itself a subsidiary of Toronto-based Manulife Financial Corporation, a global insurance and wealth-management company.