LTC Bullet: A Pedigree of Poverty-Making
Monday December 14, 1998
Would you buy insurance to protect against a financial risk that does not exist?
Would you purchase fire insurance now if you could wait until your house is in flames and still obtain coverage?
If your answer to these questions is "no," then you understand why Medicaid estate planning impedes the sale of private long-term care insurance.
For 20 years, Medicaid planners have advocated artificial impoverishment to qualify their affluent clients for welfare-financed long-term care benefits.
During the same period, numerous highly respected experts and commentators have pointed out the dangers of Medicaid planning and its chilling effect on responsible long-term care planning.
Nevertheless, most people--including many long-term care insurance agents, brokers, and executives--do not follow the issue of Medicaid estate planning closely. They may under-estimate its prevalence, audacity and impact.
To highlight the problem of Medicaid planning, the Center for Long-Term Care Financing has added a new feature to our web site called "Pedigree of Poverty-Making." Check it out on www.centerltc.com.
You will find a collection of quotations from Medicaid planners and their critics spanning almost two decades. A few highlights follow:
QUOTES FROM MEDICAID PLANNERS:
"...if the individual happens to have about $82 million lying around, he or she could even buy a painting by Renoir to hang on the walls of the house, Black said, adding that he calls this strategy 'burying money in the treasure chest of the house.'" (Medicaid planning attorney Howard Black quoted in Mary Schroeder, "Elder Law Expert Outlines Features of Asset Transfer, Power of Attorney," Financial Services Week, Vol. 3, No. 20, July 9, 1990, p. 19)
"We have committed an act of piracy--we have broken into the Fort Knox of Government benefits and uncovered the best legal strategies available to you for claiming your share of the gold from the Government's treasure chest.... We'll explain how you can 'strike gold' in the Social Security [including SSI], Medicare, and Medicaid programs.... With this book we are handing you the treasure map, deciphered from a mine of unintelligible government rules and regulations." (Amy Budish and Armond D. Budish, Golden Opportunities: Hundreds of Money-Making, Money-Saving Gems for Anyone over Fifty, Henry Holt and Company, New York, 1992, p. xiii)
"It is important to emphasize to the older client, who may be reluctant to utilize Medicaid because of pride or possible stigma, that participation in Medicaid is not a gratuity but an entitlement like use of a public library or a public park." (John J. Regan, Tax, Estate & Financial Planning for the Elderly, Matthew Bender, New York, 1991, 1993 update, p. 2-44)
"Medicaid is a middle-class entitlement, just like the deduction for mortgage interest and IRAs." (Mark Heffner, Rhode Island Coordinator of NAELA, in Providence, RI Journal, 2/22/94)
"Our goal is to take countable assets (those that have to be spent to zero), and make them either non-countable, and therefore protected, or inaccessible, which means that Medicaid can't get them." (Harley Gordon, How to Protect Your Life Savings from Catastrophic Illness and Nursing Homes, Financial Strategies Press, Boston, 1994, p. 66)
"The cornerstone of...long-term care planning is gifting ....to remove 'countable' assets from [individuals'] names to plan for long-term care eligibility under the Medicaid program. The primary motive for gifting...is to maximize the amount of assets that are available to pass on to the transferor's heirs . Of course, individuals don't have to incorporate gifting into [a]...long-term care plan.... [I]ndividuals can choose to private pay or purchase long-term care insurance to cover the cost of care.... The statutes and regulations governing Medicaid eligibility encourage, rather than discourage, the gifting of assets." (Baird Brown, "The Art of Gifting," NAELA Quarterly, Vol. 11, No. 3, Fall 1998, p. 21)
QUOTES FROM CRITICS OF MEDICAID PLANNING:
"Medicaid cannot afford to act as inheritance insurance for heirs, and a private LTC insurance market cannot fully develop if Medicaid plays this role." (Mark R. Meiners, "Reforming Long-Term Care Financing through Insurance," Health Care Financing Review: 1988 Annual Supplement on Post-Acute and Long-Term Care, Health Care Financing Administration, Baltimore, Maryland, December, 1988, p. 111)
"...for there to be a general movement toward private saving and insurance as the source of funds to pay for long-term care, there must be a widespread expectation that Medicaid is not going to provide adequate care.... The availability of public funding will drive out private efforts." (Gordon R. Trapnell, "Can We Afford The Elderly?," unpublished paper presented at a conference of actuaries, April 25, p. 9)
"On the matter of nursing-home costs, the law is quite clear. The bills are your responsibility as long as your money lasts. When you run out, you're rescued by the Medicaid program.... Thousands of older people resent that arrangement. They'd rather get support from the taxpayer right from the start. In this low endeavor, they're counseled by an army of "poverty makers"-law firms, accounting firms, legal-aid offices, social-service centers, nursing homes, even some Medicaid offices." (Jane Bryant Quinn, "Do Only the Suckers Pay?," Newsweek, December 18, 1989)
"I am offended by wealthy individuals--with the aid of lawyers like Mr. [name deleted]--taking advantage of the Medicaid program for the poor to finance the transmission of wealth to their heirs at federal and state taxpayer expense. I believe we need to stop this abuse...." (Congressman Henry Waxman quoted in The ElderLaw Report, 10/93, p. 3)
The New York Times editorialized against "the blatant and often unethical misuse of the [Medicaid] program by well-to-do patients in nursing homes. These patients exploit legal loopholes to transfer their wealth to their children, thus technically impoverishing themselves and providing themselves with inexpensive nursing home care. What was supposed to be a program for the poor has turned into a boondoggle for everyone else.... The system is a scandal." (NYT editorial, 4/14/96)
"Thousands of lawyers around the country study the 'nooks and crannies' of Medicaid eligibility policy and make their livelihood off helping middle- and upper-class people protect their wealth and still qualify for Medicaid long-term care benefits. . . . Instead of striking it rich, Medicaid estate planning is truly a process of 'striking it poor.'" (Brian Burwell and William H. Crown, "Medicaid Eligibility Policy and Asset Transfers: Does Any of This Make Sense?", Generations, Fall, 1996, 78-83)
"...millions of Americans are so eager to have the government pick up the tab for their own or their parents' long-term care that they are willing to bend the rules.... The availability of long-term care benefits provided by Medicare and Medicaid causes many middle-class, middle-aged Americans to conclude that they have no need to purchase private long-term-care insurance or otherwise save up for the real cost of their old age." (Phillip J. Longman, U.S. News and World Report, 8/11/97, pps. 19, 20)
"Easy access to Medicaid only feeds a related problem: people's tendency not to plan ahead. Only 40% of seniors say they'll be responsible for their long-term care costs.... Result: Few people prepare for the very real risk of $40,000-a-year nursing home stays. Why bother when you can wait until the last minute and let taxpayers pick up the tab? With the 75-million boomer bulge moving inexorably toward their Geritol years, the country can ill afford this massive denial.... A good first step toward ending the indifference would be to send a message loud and clear: If you're not poor, the government won't bail you out-or your heirs." ("Loopholes Let Wealthy Seniors Access Medicaid Funds," USA Today, 5/27/98, 14A)
The Center for Long-Term Care Financing has prepared an audiotape of excerpts from a Medicaid estate planning training conference. We call this medley of machinations "Medicaid Estate Planning: The Smoking Gun." If you would like to receive a copy of this tape, send a self-addressed, stamped envelope with at least $1.01 in postage to The Center for Long-Term Care Financing, 800 Fifth Avenue, Suite 4100, Seattle, WA, 98104-3122.
On the positive side of the issue, the Center for Long-Term
Care Financing has published a white paper entitled "LTC
Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing
Puzzle." The LTC Choice program would solve the Medicaid
planning problem and unleash the long-term care insurance market.
To purchase a copy of this report, call Amanda Cooke at 206-447-1340
or send your request to email@example.com.