The great long-term care robbery

Don’t trust anyone when it comes to protecting your insurance and pension rights

By SHLOMO MAITAL
Updated: JANUARY 21, 2016 14:15
Zionist Union MK Itzik Shmuli (photo credit: REUTERS)
Zionist Union MK Itzik Shmuli
(photo credit: REUTERS)
I’ve been a senior citizen for eight years. I’m a card-carrying member of the tribe – the government mails each of us a senior citizen’s card, along with a brochure, on whose cover is an elderly person hunched over a cane. Apparently, the graphic artist understands that the elderly do often need care. But does the government?
I get angry when I hear how young criminals mug, rob, beat and otherwise mistreat the helpless elderly. Imagine, then, my outrage when the robbers are my own government and Finance Ministry, in cahoots with greedy insurance companies.
Here are the bare facts of the great longterm care (LTC) insurance robbery, as described by MK Itzik Shmuli (Zionist Union), a young man who leads the senior citizen Knesset lobby and who has made this robbery one of his causes célèbres.
Some one million people bought LTC insurance as part of group plans.
Group insurance offers moderate premiums because the risk is spread over large numbers of people. In 2011, the Superintendent of Insurance and the Finance Ministry declared that existing group insurance plans are no longer “actuarially viable” (Translation: We seniors are living too long and cost too much to care for) and, therefore, would be ended in 2013. To sweeten the bitter pill, the superintendent announced at the time that a solution, a substitute LTC policy, would be offered. We’re still waiting for it.
Meanwhile, the insurance companies jumped on the superintendent’s decision and now refuse to extend group LTC insurance policies, leaving many thousands without LTC insurance. They took our premiums, paid in our healthy years, and ran off with them before they had to pay up in our care-needing years.
Shmuli says the insurance companies made NIS 800 million in 2013 alone from “unviable” group insurance. This is plain robbery.
The Finance Ministry says in its defense that such group policies are issued for a fixed term and can be revoked, “even for the elderly.” There are other options, notes the ministry, including individual LTC insurance from the health funds. But often private insurance requires a medical exam, creating the Kafka-esque situation that only those who don’t need LTC insurance can qualify for it. And even if you qualify, the cost is very high and, for many, unaffordable. I myself was turned down for LTC insurance owing to a bout with prostate cancer. I’m cancer-free but still ineligible.
The Finance Ministry admits there is a “flaw” in current LTC policies and seeks a solution. The “flaw” is the fine print clause that legally enables insurance companies to revoke, or not renew, LTC policies. The clause was always there. But – who knew? How many of us read the fine print? How many of us understand it even if we read it? And who is the current Superintendent of Insurance Dorit Salinger bound to protect? Us senior citizens? Or the “viability” (i.e. enormous profitability) of the insurance companies? Did she bother to read the fine print? Superintendent Salinger’s “solution” is to propose an LTC policy for those hurt by the existing LTC cancelation, offered by the health funds. This solution is full of holes. Health Minister Ya’akov Litzman wants to implement a National LTC Insurance plan – desperately needed, but not likely to happen in the near future.
The Finance Ministry is a road block even Litzman will not pass.
Here is how the daily Haaretz describes the plight of Benny Ben-Eliezer, 79, who lives in Netanya. Ben-Eliezer had a group policy issued by the Menorah company, one of Israel’s largest insurance firms, since the early 1990s. He saw how his premiums rose almost yearly. At the time of signing, the insurance company told Ben-Eliezer and others to cancel their LTC policies with the health funds (“why pay double?”) and, now, he recounts, we have no LTC insurance at all, after the group policy was canceled.
As a substitute, Ben-Eliezer and his wife were offered a private policy for NIS 2,500 a month. But on a meager pension, they cannot afford it. And there are many other elderly who are even worse off.
One more distressing fact this disgraceful affair reveals is how illiterate we citizens are about economics, and not just the gray-haired ones. We are, to use a pejorative, suckers.
Prof. David Leiser, a Ben-Gurion University psychologist, has been studying this issue for years. He told Haaretz that based on his research, “people have knowledge that is distorted and erroneous from the ground up, from things we deal with every day to our understanding of how the national and international economic systems function.”
Leiser used focus groups to study our understanding of pensions. He found that we tend to use two models, both false. One is the piggy-bank method (each month you put money in, and at retirement you take the money and that’s your pension). The second is the contract model (you work for 40 years, then you get a percentage of something, maybe your last salary or average wage).
“YOU HARDLY find people mentioning that this pension is affected by life expectancy, return on investment and, most of all, it’s a partnership with the other people in the fund. Then the person reaches retirement age with a mistaken understanding and is told that all sorts of [bad] things happened” Leiser said − as occurred with LTC insurance, when just too many people began to need it.
And the contract model has been largely abandoned for years, because it is too costly for employers.
Leiser drew attention to another kind of robbery – that of compensation funds, between 6 and 8.3 percent of salaries, set aside by employers in the event of termination or changing workplaces.
This component amounts to fully a third of pension savings, and is paid for by the employee.
People tend to cash the tax-free portion in this fund when they leave a job and, say, “renovate their kitchen,” Leiser noted.
When they do, they could wipe out up to a third of their monthly pension. But – who knew? Who bothered to explain that it is best to leave the money where it is? Leiser suggested simply changing the terms we use. Instead of “withdrawal of compensation fund,” call it “early withdrawal of pension funds.” That might tell people what their action really means.
Meanwhile, the Finance Ministry announced at the end of December that the government will “designate a single pension fund next year for all salaried employees who have not elected a pension fund on their own.” In doing so, the government seeks to “help choose citizens’ best pensions for them.” At present, the pension market is dominated by five funds, some of which charge exorbitant management fees.
Somehow, I am skeptical of a government seeking to help me on the one hand, and robbing other seniors, on the other, in the LTC scandal. Senior citizens are not stupid. But pension funds and insurance companies purposely hide behind complexity.
This is not new.
The global financial crash of 2008, which did huge damage to the world and to Israel, was caused by unscrupulous Wall Street financiers who fashioned mortgage-backed securities to conceal underlying “sub-prime” (worthless) mortgages, hiding behind the smokescreen of complexity.
This was equally true of “credit default – swaps,” whose name itself was a lie (called swap [assets] instead of insurance, to avoid regulatory scrutiny, from which swaps are exempt), which sank some of Wall Street’s largest firms. These nefarious purposeful complexities nearly destroyed the world, and the resulting mess is still not fully cleaned up.
The government can help all of us most by regulating that insurance contracts, in fact all financial and commercial contracts, be written in clear simple language understandable by all. This might slash lawyers’ income a bit, but will lead to better economic decisions by a perplexed populace.
The Great Long-Term Care Robbery is just one facet of a much larger problem, that of elderly poverty and inadequate pension resources (see The Jerusalem Report, February 23, 2015, “The pensions time bomb”). The Finance Ministry’s approach typically has been to improvise inadequate stop-gap “solutions” rather than solve the problem long-term. The painful fact is that the crisis telegraphed its coming long ago. Rising life expectancy and the “bulge” of elderly persons were predictable decades ago.
But who cared? Itzik Shmuli cares. On February 8, he will turn 36. As one of the youngest MKs, he is also among the most active. Together with MK Stav Shaffir (Zionist Union), who is only 30, he came to the Knesset as a leader of the 2011 “Rothschild Boulevard” Tent Social Protest movement. He was chairman of the National Union of Israeli Students.
Earlier, after his army service, he set up a restaurant and catering business with his father, who was born and raised in Iraqi Kurdistan. Shmuli then spent a few years as a volunteer in Argentina establishing a home for orphans. He studied special education at Oranim College. In the Zionist Union primary elections for the 20th Knesset list, he came in third, and so was placed fifth on the Zionist Union Knesset list itself, a surprisingly high position for a newcomer.
Shmuli is a pragmatist. In the 2011 social protest, he opposed other protest leaders and advocated constant dialogue with government ministers – an approach I think proved fruitful and led to legislation.
For my fellow senior citizens, both those already robbed and those who may be in the future, I can only advise that they have experts read carefully every single contract they sign, organize politically to make their voices heard and, most of all, never ever assume the government will care for their welfare, even if it promises to do so, but try instead to build their own resources.
Broken promises line the bed of thorns on which many elderly people now lie.
The prayer we say on Yom Kippur, “hear our voices, do not abandon us in our old age” is falling on deaf ears among those in whom we placed our trust. For this travesty, there can be no forgiveness.


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