LTC Bullet:

Kiplinger Comments Draw Medicaid Complaint

Wednesday March 15, 2000


Long-term care financing is a slippery issue. Personal anecdotes of family tragedies tug at the heartstrings. Most older people lack the income to pay for expensive long-term care. Few of them have private long-term care insurance. Medicaid benefits are easy to obtain without spending down for seniors who can find and afford savvy legal advice.

The Medicaid planners' message is subtle and seductive: "you paid your taxes; you have a right to free long-term care; do you want your savings to go to a nursing home or to your kids?" State and federal laws mandate equal treatment and quality care for Medicaid residents. In Jane Bryant Quinn's words: "Do only the suckers pay?"

That's the conclusion you might reach reading Mary Beth Franklin's article "Knowing the Score" in the March 2000 issue of Kiplinger's Magazine. Ms. Franklin is an outstanding journalist and an avid reporter on aging issues. Her article named the downsides and deficiencies of relying on Medicaid, such as estate recovery liability and potential problems of getting access to quality care. It encouraged the purchase of long-term care insurance for people who can qualify medically and afford it. Still, the piece closed with this quote from a "social-worker-turned-lawyer:" "People need to know that there are tremendous opportunities for coverage under medicaid". Some people say to me 'You're teaching everybody to cheat.' I see it as teaching people to survive." (p. 100)

What are some of the survival techniques presented in the article?

"'You could go buy a Rolls-Royce,' says A. Frank Johns, president of the National Academy of Elder Law Attorneys. 'You're allowed one car, but there's no cap on the amount. They ought to draw a line, but they don't.'" (p. 96)

"North Carolina medicaid rules would allow Vivian to buy any kind of income-producing real estate, such as a condominium, rent it out for a few months and then transfer it to her children. After that, the kids could do what they pleased with it: keep it, sell it or swap it for a vacation home." (p. 96)

"Pennsylvania is one of the few states that exempt a healthy spouse's IRA from being counted as part of the couple's assets for medicaid purposes. Since most of Grover's money was in an IRA, it was automatically protected. His business bank account was also exempt." (p. 98)

When the Massachusetts' Medicaid program attempted to encumber a family business to assure later recovery of benefits paid to a nursing home recipient, "[Boston elder-law attorney Harley Gordon] got the lien removed and had the business transferred to [the wife's] name. She later sold the business, and the $94,000 she netted became her sole nest egg." (p. 100)

The "half-a-loaf" strategy "allows a person to pass on some wealth to the family yet retain enough money in his or her own name to enter a nursing home as a private-pay patient and pay for care until the ineligibility period expires and medicaid kicks in." (p. 100)

Is it heartless and cruel to question the wisdom of public policy that eases prosperous elders onto welfare in this way? People who lament the decimation of Medicaid as a safety net for the poor don't think so. A state Medicaid official had this to say about the Kiplinger article in a letter to the editor of that magazine:

"Your article entitled 'Knowing the Score' was very disappointing. I have been the manager of my state's Medicaid estate recovery program for nearly fourteen years. My experience has allowed me to learn more about the 'business' of Medicaid planning than I care to know. Your article, however, leaves out much of what others should know.

"One planner tries to rationalize getting people on welfare by saying this is no different than tax planning. It is different. The latter is merely keeping your own money from being taken by the government. Medicaid planning is having the government take other peoples' hard-earned money to pay your way so you can keep yours to do with as you please. Welfare is welfare no matter what you choose to call it.

"Most people can afford long term care insurance and avoid this moral dilemma as long as they buy it soon enough. But why buy it when the government is giving it away for free? As long as there are Medicaid planners prowling the senior centers and magazine articles like yours to paint a happy face on a national tragedy, no one will realize there is a 'right thing to do.'

"Someday the Medicaid trough will dry up. I am sure glad my parents, my wife and I have long term care insurance to rely on. What will your readers do?

"(The above is my opinion and does not necessarily reflect that of my employer.)"

Terry Frisch
246 Brady St.
Helena, MT 59601

The tragedy of our current long-term care service delivery and financing system is perpetuated because clever people profit from taking advantage of it. No one's to blame and everyone's to blame. The only solution is to eliminate the perverse incentives that discourage people from planning early and insuring fully for long-term care. The Center for Long-Term Care Financing has proposed a new public policy called LTC Choice that encourages early purchase of private LTC insurance but also empowers the uninsured who own property to purchase quality care in the private market place through a line of credit on their estates. By relieving the long-term care burden on Medicaid in these ways, America can save and improve that now-fraying safety net for the truly needy.

Order a copy of the Center's report, "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" [$24.95; free to media and lawmakers], by calling us toll free at 877-557-3627 or by clicking here to email us a request.