LTC Bullet: Did Janet Reno
Legalize Medicaid Fraud?
Friday June 5, 1998
The following article, authored by Stephen Moses, President of
the Center for Long-Term Care Financing, appears in the June,
1998 issue of LTC News and Comment.
Did Janet Reno Legalize Medicaid Fraud?
Attorney General Janet Reno recently informed House Speaker Newt
Gingrich that the Justice Department will not prosecute financial
professionals who advise and abet Medicaid asset transfers for
a fee. (See excerpts of Reno's letter in the May 1998 LTC News
The Medicaid planners are ecstatic. They interpret Reno's decision
as a vote of support for their arcane, but lucrative, legal legerdemain.
We can expect to see more articles and ads than ever before promoting
trusts, transfers, annuities, and other self-impoverishing machinations.
If the story ended here, the consequences for private long-term
care insurance would be devastating. How can insurance agents
sell something the government is giving away?
As usual, however, the Medicaid estate planning bar has miscalculated
the public policy significance of this latest development. Having
won a battle, they are about to lose the war. Here's why:
For the past 16 years, eight Congresses and three Presidents have
struggled to restrain Medicaid estate planning. In 1982, they
restricted asset transfers and authorized liens and estate re-
coveries. In 1985, they clamped down on the misuse of trusts to
hide assets. In 1988, they made restrictions on asset transfers
longer and stronger. In 1993, they closed many eligibility loopholes
and made estate recoveries mandatory.
None of this had any appreciable effect. The Medicaid estate planning
bar just became more creative and aggressive. For every loophole
Congress closed, private sector Medicaid planners and their allies
in the publicly financed legal services bar pried open a dozen
new ones. Medicaid long-term care costs continued to skyrocket.
Finally, President Clinton and a Republican Congress became completely
exasperated. They criminalized Medicaid asset transfers in 1996.
When public opposition to the "Throw Granny in Jail"
law arose, they exonerated Grandpa and Grandma, but targeted Medicaid
planners specifically with a year in jail and/or a $10,000 fine
for recommending and/or assisting
Medicaid asset transfers. How could they possibly send a clearer
message than that?
Throughout this tarnished history, the Medicaid estate planning
bar fought every step of the way against Congressional and Presidential
efforts to save Medicaid for the poor. No boundaries of professional
ethics or common sense restrained the Medicaid planners' creativity
and brazenness in qualifying their well-to-do clients for publicly
financed long-term care. They employed every conceivable legal
tool, including divorce, involuntary guardianship and private
powers of attorney, to divert the savings of vulnerable elders
away from the costs of long-term care and into their own and their
clients' pockets. No wonder that some erstwhile Medicaid planners
have begun to call Medicaid planning "financial abuse of
the elderly." Nevertheless, most Medicaid planners have not
yet gotten the message that the legislative and executive branches
of government have been trying to send.
So, why do I think the Medicaid planners have gone too far this
time? Reno's letter to Gingrich provided an important clue to
the Administration's intent. The Attorney General said "I
would like to stress that the Department of Justice is available
to assist Congress... to draft new legislation that would address
the concerns of Congress... and that meets other policy objectives
of the Congress and the Executive Branch." In other words,
by stirring up opposition to an extremely weak and unenforceable
criminalization statute, the Medicaid planning bar has inadvertently
attracted top-level political, legislative and judicial attention
to the underlying
problem on which they are so vulnerable - widespread abuse of
the Medicaid program for personal gain.
The challenge now for those of us who oppose Medicaid planning
and support private long-term care insurance is to expose the
Medicaid planners? past and present abuses, and offer a positive
alternative. That is exactly what the Center for Long-Term Care
Financing is mobilizing to do.
To expose these abuses, we have prepared an hour-long audiotape
consisting of excerpts from formal training sessions on Medicaid
estate planning. We call this tape "Medicaid Estate Planning:
The Smoking Gun." On it: professional Medicaid planners explain
and advocate complicated techniques to divest or divert hundreds
of thousands of dollars from infirm seniors in order to qualify
them quickly for Medicaid benefits. Leading elder law attorneys
ridicule and deride members of Congress, state legislators and
their staffs for their
futile attempts to discourage Medicaid estate planning. Some of
the lawyers declaim arrogantly on the tape that they have ignored
the criminalization statute with impunity. One even acknowledges
publicly that a Medicaid planning technique he is presenting is
immoral, to which admission his audience responds with a burst
of laughter. We intend to make the "Smoking Gun" tape
and other similar evidence available to legislators, public policy
makers and the media.
Merely exposing the disgrace of Medicaid estate planning is not
enough, however. We must have a positive alternative program to
offer. Therefore, the Center for Long-Term Care Financing is preparing
a white paper entitled "LTC Choice: A Cost-Free Solution
to the Long-Term Care Financing Crisis." We will offer complete
information to LTC News & Comment readers on this proactive
"LTC Choice" proposal sometime in the future.