LTC Bullet:  Shelton Does it Again

Tuesday  July 10, 2001


Phyllis Shelton has cemented her status as an authority on long-term care planning with the publication of  “Long-Term Care:  Your Financial Planning Guide,” the 2001 version of Shelton’s excellent long-term care planning primer.  This recently published volume contains easy to follow and persuasive discussions about the importance of planning ahead, long-term care insurance and other financial tools, the pitfalls of planning for public assistance, and much more.  The appendices contain up-to-date information about several important Medicare topics and a very useful “Who to Call for Help?” national resource directory.  According to U.S. Senator Bill Frist, M.D., Shelton’s book is “essential reading for anyone concerned about their long-term health care needs.”  We agree.  Author Shelton recommends visiting your local bookstore to pick-up or order a copy.  You can also order online at  Contact Lori Odom at LTC Consultants (, (800) 844-4893) for more information and bulk discount rates.

Most notable to the Center for LTC Financing is the oft-visited topic of planning for public assistance (i.e., Medicaid planning) versus private financing alternatives.  Shelton explains not only the impact and limitations on an individual level, but also the corrosive effects on our long-term care service delivery and financing system--not to mention the growing burden on taxpayers!  Shelton weaves these sobering discussions into clear descriptions and advice on a plethora of long-term care planning options, moving vignettes, and clear illustrations and examples where helpful.

Our endorsement of this excellent resource is tempered only by Shelton’s suggestion to contact the National Academy of Elder Law Attorneys (NAELA) for a registry of lawyers who can help with Medicaid eligibility among other services.  While Shelton herself makes clear the downsides of Medicaid planning and does indeed characterize Medicaid as a resource of last resort, NAELA, as an organization, has not taken such responsible positions.  On the contrary, NAELA’s conferences and publications emphasize sophisticated Medicaid planning techniques for clients with significant income and assets.  We worry NAELA members who specialize in Medicaid planning will contradict much of Shelton’s thoughtful advice, especially when dealing with seniors who are vulnerable to the seductive appeal of supposedly “free” long-term care.  We hope Shelton’s apparent trust in NAELA is not misplaced.  Elder law attorneys do, in fact, perform many valuable services for their clients.  Artificially impoverishing clients to capture welfare-financed nursing home care is not one of them.  

Following are a series of excerpts that focus on the pitfalls of planning for public assistance.  We commend to you Shelton’s entire volume in order to appreciate these discussions in the context of more comprehensive long-term care planning advice.

“You should be aware of anyone who advises you to transfer assets to your children or trusts in order to qualify for Medicaid.  Children may misuse or lose the assets . . . .  Also, many nursing homes no longer accept Medicaid patients because a Medicaid patient represents a financial loss to most nursing homes.  A Medicaid patient is at the mercy of the system and may have nowhere to go if nursing homes are full, or may have to go to a rural area if urban homes are full.  It’s not unusual for a Medicaid patient to be placed hours away from family members.”  (p. 16)

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“Also, in most states, being on Medicaid means being in a nursing home.  The option for home care is eliminated because most Medicaid programs pay very little for home health care and nothing for eight hour shifts in the home.  Less than 17% of home care costs in 1998 were paid by Medicaid.  To have options for home care, assisted living, adult day care, and to be able to choose any nursing home, a number of adult children are purchasing long-term care insurance policies for parents, even though financially the parents will either immediately or in a short time qualify for Medicaid.”  (p. 17)

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“In addition to the legal pitfalls . . . there are significant problems with transferring assets [to obtain Medicaid], such as:

“* Children can lose the money due to divorce or lawsuits. . . .  Children may be tempted to spend the money in a financial crisis by subconsciously thinking they will inherit it any way, so why not use it now when they really need it?  Then when you need long-term care, the money simply isn’t there anymore.

“* We tend to judge ourselves by what we have, either consciously or unconsciously.  Once we have turned our assets over to someone else, either a child or a trust, we have lost control of them.  We may not enjoy the feeling of not being able to access our assets ever again.

“* Transferring assets and using government money means using our own money as taxpayers. . . .  One fourth of the Medicaid budget in the United States is being spent on nursing home care.  Two-thirds of nursing home patients are on Medicaid.  The impact of people who have transferred assets to qualify for Medicaid is hurting all of us as taxpayers.”  (pps. 124-125)

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“The aging population combined with the escalating cost of long-term care and loopholes in Medicaid eligibility laws have encouraged a growing number of older Americans to transfer assets to capture public funding for nursing home expenses.  However, shrinking tax dollars caused by the severe decline in the ratio of workers to Social Security beneficiaries, due to the aging population, have cause dire financial straits for the Medicaid program just as it has for Medicare.  There have been several attempts to actually criminalize asset transfers either for the person who is seeking Medicaid benefits or for the advisor who paved the way.  These attempts to date have been unsuccessful, but many legislators believe the issue is too important to let it drop.  The purpose of legislation of this nature is to restore Medicaid’s original purpose--to help poor people.  (pps. 129-130)

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“Why does such a strong interest exist to close the loopholes for Medicaid planning?  Because there aren’t enough tax dollars to pay for a national long-term care plan, and that’s the direction this program is taking when you consider that Medicaid pays 46% of nursing home costs and two-thirds of all nursing home residents are Medicaid recipients.  44 cents of every Federal income tax dollar in the U.S. goes to pay for entitlements (mainly Social Security, Medicare and Medicaid), and this is only a prelude *before* the baby boomers start applying for Medicaid nursing home benefits.  In view of these facts, it is reasonable to expect that legislative activity to curtail Medicaid planning will continue.

“The Biggest Problem:  All of the above are problems, but the biggest problem is that by giving away your assets, you lose access to them, and you lose the one thing that matters most--*your independence and control.*  That’s why you gave your assets away to start with--to keep from losing them to a nursing home--and now for one or more of the above reasons, you’ve lost them anyway.

“Here’s what it means to be a Medicaid patient in most states:

“* You can’t get into strictly private-pay facilities that don’t accept Medicaid patients.

“* Medicaid pays very little for home health care, so being on Medicaid in most states means being in a nursing home. . . .

“* Medicaid pays less than private-pay rates in most states, so the waiting lists are long-for Medicaid patients.

“* You have to go wherever there is a bed, which could be hours away from your family.

“* If a facility doesn’t accept Medicaid and you run out of your own money, you can be required to move to a facility that accepts Medicaid, and that’s a hard situation for families to deal with.

“* Nursing homes that operate with predominantly Medicaid patients don’t have as much funding as private-pay facilities to upgrade services, furnishings, etc.     

“* You simply don’t have as many choices as a private pay patient--a private room, for example, is not allowed--because as a Medicaid patient, you aren’t paying the bill.”  (pps.  146-147)  (emphasis in the original)