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LTC Bullet:

AOK Article on LTC in AZ

Tuesday September 14, 1999

We rarely publish two LTC Bullets on the same day, but we like to apprise you of good news on the day of publication. The Arizona Republic published an excellent article on LTC insurance today (September 14, 1999). You can find "Long-Term Care Gamble" by Russ Wiles at It's the fifth story in the business section. If you're in no hurry, read the following excerpts whenever you like. Watch for Wile's next article on LTC insurance in the same newspaper a week from today, on Tuesday, September 21, 1999.

"The Dvoraks opted for private insurance because they don't want to risk going on welfare -- that is, Medicaid -- and they don't wish to become a family burden. 'I've seen how taking care of someone over the long haul creates a bitter hate, a situation where the caregiver basically wishes the person would die,' said Pat, an accountant and tax preparer. 'I don't want that to happen in my family.'

"It's a sentiment shared by millions of Americans, but only a fraction of them have purchased a long-term care policy.… Only one in 50 Americans owns a policy, even though every adult is a potential buyer. Despite longer life expectancies, rising health-care costs and more people moving into older age categories -- factors that normally would spur demand -- sales of LTC coverage have been sluggish, say the [The Myth of Unaffordability] report's authors, Stephen Moses and David Rosenfeld [of the Center for Long-Term Care Financing in Seattle].

"It's an interesting paradox, as demographers expect a sixfold increase within the next half-century in the number of Americans 85 and over -- precisely the demographic group that needs the most living assistance and runs up the highest health-care bills.

"Nursing-home care costs about $50,000 a year on average. In Arizona, some 27,400 individuals are served by the state's version of Medicaid, the Arizona Health Care Cost Containment System, and its long-term care division."

"Denial is one reason that a lot of people fail to consider LTC coverage. 'Whenever you're talking about chronic illness or disability, people don't think it will happen to them,' said Robert Davis, president of Long-Term Care Quote, an insurance information center and brokerage in Chandler [AZ]…."

"Another factor that's helping to stifle demand for LTC insurance is confusion over Medicaid. These federal/state programs pick up the nursing-home tabs for the poor and for thousands of middle-class seniors who have chosen to step through what critics claim are eligibility loopholes.

"Prospective Medicaid patients face a 'pretty stringent' medical evaluation before they gain admission to a nursing home, says Frank Lopez, a spokesman for AHCCCS. But he concedes that some patients, usually with help from elder-law attorneys, have found ways around the financial tests that -- on paper anyway -- require them to deplete their assets before receiving public assistance. It's not especially difficult for middle-class people to qualify for Medicaid, critics say. Although the programs are designed for individuals with just $2,000 to their names -- plus a home, personal property and other items -- the perceived loopholes sometimes seem wide enough to drive a Sun City golf cart through.

"'The often-quoted limit on assets of $2,000 is meaningless because Medicaid recipients can also retain a home, business, car, personal property and many other assets of practically unlimited value,' say Moses and Rosenfeld. Popular techniques for exploiting Medicaid loopholes include the purchase of a costly home, car and other assets -- even a new wedding ring. Such items are not counted for determining Medicaid eligibility. Also, the spouse of a Medicaid-bound patient could transfer money into investments that don't bear interest -- switching from, say, money-market funds into zero-coupon bonds. Plus, attorneys can set up trusts to shelter assets, a Medicaid-bound person can pay children for their help, and even a divorce can be used to shield assets.

"'The reality is that most seniors qualify easily for Medicaid nursing home benefits and almost anyone, regardless of in come or assets, can qualify quickly without spending down,' say Moses and Rosenfeld…."

"Critics also assert that the quality of care with Medicaid is an issue. '(Medicaid) has a dismal reputation for access, quality, reimbursement, discrimination and institutional bias,' say Moses and Rosenfeld. Because it pays nursing homes less than the cost of providing care, they contend, 'Medicaid recipients often face long waiting lists even for inferior facilities.'

"When a person becomes a nursing-home candidate, he or she might not be lucid. That raises the possibility that heirs, who may have a financial conflict of interest in wanting to salvage an inheritance, could condone inferior services or, at least, fewer choices via Medicaid.

"Long-term care insurance should be viewed as a means to preserve options and personal control, supporters say. Those options may involve home care and stays at assisted-living centers that may be more generous than what's provided by Medicaid. Medicare, by contrast, pays for skilled medical attention during short-term recuperative stays, not chronic assistance…."

"Another solution involves more welfare. In criticizing long- term care insurance as too costly, the Urban Institute instead advocates the expansion of Medicaid and other taxpayer-supported programs.

"But in light of government fiscal restraints, that suggestion seems unworkable, especially with the prospect of a huge number of baby boomers starting to retire in about a decade.

"'Government health-care expansions are highly doubtful because of inadequate financing sources,' say Moses and Rosenfeld. 'The best advice is to lock in at least some [private] catastrophic [insurance] coverage as early as possible.'"

To order the report cited in this article--The Myth of Unaffordability: How Most Americans Should, Could and Would Buy Private Long-Term Care Insurance--contact us at 206-447-1340 or click here.