LTC Bullet:  Special Alert--Medicare to Cover Alzheimer's Disease

Saturday, March 30, 2002


At 12:41 PM Eastern time on Saturday, March 30, 2002, the New York Times broke the following story in its online edition.  Print editions of every major paper will carry the story tomorrow, Easter Sunday, March 31, 2002.  Here are some excerpts followed by our interpretation of the news.  Read the whole story at:

Robert Pear, "In a First, Medicare Coverage Is Authorized for Alzheimer's," The New York Times,  March 31, 2002,

"WASHINGTON, March 30, 2002 - The Bush administration, in a major change, has authorized Medicare coverage for the treatment of Alzheimer's disease, which afflicts nearly four million Americans and is expected to grow to epidemic proportions with the aging of the population.

"The new policy means that Medicare beneficiaries can no longer be denied reimbursement for the costs of mental health services, hospice care or home health care just because they have Alzheimer's.

"In the past, many claims were automatically denied on the assumption that treatment was futile because people with Alzheimer's were incapable of any medical improvement.  Now, federal officials say, new studies show that people with Alzheimer's can often benefit from psychotherapy, physical and occupational therapy and other services." . . .

"Neither federal officials nor advocates for the elderly provided estimates of the cost of the new policy.  Experts said the direct cost to Medicare could be several billion dollars a year."  . . .

"The policy is set forth in a memorandum sent late last year from the government to the companies that review and pay Medicare claims.  These companies have just begun to put the change into practice.

"The government gave no public notice of the new policy, but it has already made a difference in the lives of some people with Alzheimer's.  Some patients have received benefits that were once denied, and some medical practitioners have secured payment for services that Medicare once refused to cover." . . .

"Mr. [Stephen R.] McConnell of the Alzheimer's Association estimated that 10 percent of people over 65 and nearly half of those over 85 had Alzheimer's, a brain disorder that causes loss of memory, changes in personality and behavior, and a decline in thinking abilities.

"Under the policy, Medicare will pay for more therapy and outpatient services.  Dr. Steven T. DeKosky, a neurologist who directs the Alzheimer's Disease Research Center at the University of Pittsburgh, said these services would 'keep people out of nursing homes,' avoiding costs that would otherwise be borne by the government, patients or their families." . . .

"Christina A. Metzler, director of federal affairs at the American Occupational Therapy Association, said the new policy was 'tremendously significant' for patients. 'In the past,' she said, 'a diagnosis of Alzheimer's could prevent a patient from getting Medicare coverage for therapy to treat other conditions - a broken hip, a broken wrist or a stroke.  If a diagnosis of Alzheimer's showed up anywhere on the claim, Medicare tended to deny payment.'"

LTC COMMENT:  Medicare coverage of health conditions incidental to Alzheimer's Disease is big news and good news.  Unfortunately, this news is not as big or good as most people will think.  If misunderstood, it could hurt more people than Medicare helps.  Here's why: 

Despite the impression given by the headlines and the story itself, Medicare is not going to cover any more kinds of services than it did before.  The only difference is that Medicare carriers will no longer be allowed to deny the same covered services to beneficiaries based on a diagnosis of Alzheimer's Disease.  Medicare beneficiaries will still have to jump through all the other, severely restrictive eligibility hoops that limit access to Medicare's home health care benefit.  Medicare still won't pay for long-term custodial home health, assisted living or nursing home care, the single biggest financial risks seniors face. 

As we all know, Medicare covers only rehabilitative care, not long-term custodial care.  That fact is not changing.  If Medicare were truly going to cover the enormous care costs incidental to Alzheimer's Disease, the extra expenditures would not be "several billion dollars a year" but rather, hundreds of billions of dollars per year.  And where is Medicare going to find even a few extra billions?  Congress is planning to chop Medicare costs, not augment them:  "A scheduled 17% reduction in Medicare reimbursement rates for nursing homes could have a  'significant ' impact on quality of care at those facilities, according to a new study released March 25 by the American Health Care Association and the Alliance for Quality Nursing Home Care (Wheeler, Gannett News Service/Asbury Park Press, 3/24)." 

If  the public interprets Medicare's "coverage" of Alzheimer's Disease as one more reason to ignore the financial risk of long-term care, they may be even less likely than they already are to prepare for that risk.  Even before this latest news, many studies showed that an alarming percentage of the public already believed that Medicare covered long-term care.  Will more people fail to plan early and save, invest or insure for long-term care because they believe, mistakenly, that Medicare covers that cost?  Will seniors all across America be canceling their appointments with financial planners and insurance agents on Monday, April 1?  If so, it will be one of the biggest and most damaging April Fools jokes ever perpetrated on the American consumer.  Our advice to LTC insurance producers and other senior advisers is: 

(1) expect the objection that "Medicare will cover me" to become even more common than it already is,

(2) re-arm yourself with all the facts about limitations on Medicare coverage,

(3) tell your prospects and clients the hard truth, but without using "scare tactics,"

(4) remember that even though Medicare does not provide "long-term care" coverage, Medicaid often does, and

(5) be prepared to warn people about Medicaid's problems of access, quality, reimbursement, discrimination and institutional bias as you advise them against the temptation of Medicaid estate planning.