Tuesday March 20, 2001
The United Seniors Health Council's (formerly the USH Cooperative) 2001 edition of its classic "Dollar and Sense Guide" to long-term care planning is now available. (Their press release says: "To order the $19.50 guide, consumers can call 1-800-637-2604 using a Visa or MasterCard or mail a check to USHC, 409 Third Street, S.W., Suite #200, Washington, DC 20024.")
Originally published in 1988, this booklet is probably the best-known and most publicized manual on the subject that is not produced by someone commercially selling or promoting LTC insurance. It is very good in most respects, adequate in others, and poor in only a few.
Usually, when we review a book we try to cite some of its good features, even if we focus on identifying and correcting its errors. Suffice it here to say, however, that USHC has produced the best version yet of this old favorite, having improved it in several ways including new sections on financial planning (by Ron Cavill) and reverse mortgages (by Ken Scholen of the National Center for Home Equity Conversion.)
So, now that we're clear this is a good product worth reading, let's get down to brass tacks. What's wrong with this publication? We'll examine and comment on some excerpts.
Quote: "Attitudes about Medicaid vary among consumers. Some people consider Medicaid a 'welfare program' and something to avoid at all costs. Other people recognize that they have helped to support the funding of Medicaid with their tax dollars and it is in fact something they are entitled to on the basis of medical and financial need." (p. 52)
Comment: America has two kinds of social programs for retirement security and health care. One kind is social insurance into which everyone pays premiums and from which everyone is entitled to receive benefits. The other kind is welfare, which is financed by general government funds and to which no one is entitled except on the basis of means-tested need. Social Security and Medicare are social insurance programs; everyone pays premiums, everyone gets benefits.
Medicaid and Supplemental Security Income (SSI) are welfare programs; everyone pays taxes, but only the poor are supposed to receive benefits from these social safety nets. Confusion between the meaning of social insurance and welfare is at the root of much of what's wrong in the USHC guide.
Quote: "It is usually easier to enter a nursing home of your choice if you are a private pay patient than if you are on Medicaid. Because the Medicaid-approved rate of payment is lower than what the nursing home charges private pay patients, many nursing homes are reluctant to accept Medicaid patients. . . . Once you are on Medicaid, the reluctance of some nursing homes to accept Medicaid patients may make it difficult for you to transfer to another facility, even though discrimination is illegal. . . . If while on Medicaid you have to receive acute care in a hospital . . . the nursing home may not readmit you. . . . All states are required to recover from the estates of deceased Medicaid beneficiaries the cost of care paid for by Medicaid. For most people their major asset is their home. Some states will place a lien on the property." (pps. 54-55)
Comment: These sound like excellent reasons to avoid Medicaid-financed nursing home care if possible. Yet, the USHC guide goes out of its way to explain how people can qualify for Medicaid without spending down. One way, for example, is to "foresee the potential need for Medicaid well in advance of applying and transfer assets to other people or institutions." (p. 55) Despite warning readers of the now-moot "throw granny's lawyer in jail law," and other ethical, legal, and tax-related pitfalls of artificial self-impoverishment, the guide insists on treating Medicaid estate planning as though it were an honorable and legitimate financial planning alternative. This is a major disservice to USHC's readers and to the viability of America's long-term care service delivery and financing system.
Quote: "People on Medicaid at the time of admission [nearly 80% of all people who enter nursing homes are already on Medicaid] have fewer choices of nursing homes. Because Medicaid pays less than private patients pay for care, some nursing homes do not or prefer not to accept Medicaid patients. However, people with income and assets that will pay for about a year of nursing home care usually have their choice of homes." (p. 72)
Comment: This one really rankles. When Medicaid planning attorneys artificially impoverish clients, they routinely warn that families should save out $50,000 or more to be able to pay privately for a year. They call this "key money." Because the Medicaid planners know it's hard to get into a decent nursing home without paying privately for awhile, they are able in this manner to get their affluent clients into the better nursing homes, i.e. those with a relatively small Medicaid census. Once in, state and federal laws make it almost impossible for nursing homes to remove them when they flip the switch and convert to Medicaid after awhile. Pretty clever, huh? What's wrong with that? Consider the inequity. Medicaid is supposed to be a safety net for the poor. Poor people don't have "key money." They're stuck with waiting lists to get into the most inferior facilities because Medicaid planners have filled all the good homes with their privileged clientele (while pulling down a nice fee in the process.) Where's the outrage?
Quote from the press release: "The book recommends that consumers consider buying long-term care insurance only if they: *own assets of at least $75,000 (excluding home and automobile); *have annual retirement income of at least $25,000 - $35,000; *can pay premiums without adversely affecting lifestyle; and *can absorb possible premium increases without financial difficulty."
Comment: This is terrible advice and yet we see it quoted like scripture in almost every national media article on long-term care planning. What's wrong with this seemingly common sense guidance? We answered that question at length in an LTC Bullet titled "Who Needs LTC Insurance" published May 4, 2000. Check it out in the LTC Bullets archives at www.centerltc.org. Suffice it here to say the main reason to buy long-term care insurance is not asset protection, but rather the ability to pay privately for quality long-term care at the most appropriate level, including home care and assisted living. Even people with no liquid assets to protect and little or no income, may have the wherewithal to purchase insurance protection to assure their access to excellent long-term care. They may lack cash flow, but perhaps they have loving children who are willing to pitch in for premiums. Or, they may have a large equity in a home from which a reverse annuity mortgage could generate sufficient cash flow to purchase long-term care coverage. Even if someone is only able to afford a year or two of insurance protection, that short-term ability to pay privately could assure access to a better facility while the insured waits for Medicaid eligibility to occur. The point is that advising people with very substantial income and assets not to consider every possible way to obtain insurance protection against the risk of long-term care is bad advice for individuals and a disastrous recommendation for public policy. It's a left-handed way of saying "Don't worry about long-term care, the government will provide." Very bad advice indeed!
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