LTC Bullet:  New LTCI Policy You Can Buy after the Insurable Event Occurs

Friday, May 3, 2002


*** We expect seven PA-insurance CE credits to be approved momentarily for each of the Center for Long-Term Care Financing's LTC Graduate Seminars scheduled for May 13 in Pittsburgh and May 14 in Philadelphia.  Enrollment is limited to 15 so register and confirm ASAP with Amy Marohn ( or 425-377-9500).  Jump to for details on content, tuition, and future scheduling. ***

*** The following "LTC Week in Review" items are newly posted in The Zone:

LTC E-Alert #122--Medicaid Has a Drug Problem, Worst in AK, NC, SC and WV

LTC E-Alert #123--More Problems for Medicaid Nursing Homes

LTC E-Alert #124--Second U.N. World Assembly on Ageing in Madrid

LTC E-Alert #125--Will Medicare Tax Have to Double?

LTC E-Alert #126--Fat Fish Fine for Fems

Retain the Center for Long-Term Care Financing to be your personal research assistant for one year in The Zone.  In addition to "LTC Week in Review," you'll find "The LTC Reader" and the "LTC Data Base" in the Center's donor-only zone.  Take these steps:  learn more at, contribute $100 or more at, then send your preferred user name and password to Amy Marohn at or 425-377-9500.  She'll zone you in usually within 72 hours.  That's all there is to it. ***

*** In a recent LTC Bullet titled "The Welfare Rush" (, we took the Center for Medicare Education (CME) to task over its issue brief titled "Increasing Enrollment for the Medicare Savings Programs" (  In response, we received a thoughtful and measured reply from CME's Executive Director, Marisa A. Scala.  You can read Ms. Scala's letter at ***


When the federal law criminalizing Medicaid asset transfers passed in 1996 (as part of HIPAA or the Kassebaum/Kennedy Act), Medicaid planners were on the ropes.  Their national conferences felt like funeral dirges.

When Congress repealed that ham-handed "Throw Granny in Jail" law, the Medicaid planners saw little improvement in their public image.  The legislators immediately passed and President Clinton signed the "Throw Granny's Lawyer in Jail" law (part of the Balanced Budget Act of 1997.)

To both of those statutes, the Medicaid planing bar responded with a combination of professional paranoia, personal bravado, and targeted litigation.  In the end, they won.  Today, nothing in federal law effectively controls their many techniques for artificially impoverishing affluent clients.

Consequently, Medicaid planners are once again confident and arrogant.  They are engaging in behavior that has always in the past led exasperated public officials to seek federal legislation to bring their legalistic abuse of Medicaid under control (for example, TEFRA '82, OBRA '85, MCCA '88, OBRA '93, HIPAA '96, and BBA '97).

Today's Bullet is one case in point.  A future Bullet will highlight an even more egregious example of unrestrained Medicaid planning.

The National Academy of Elder Law Attorneys met in Baltimore, Maryland for its National Symposium on April 17-21, 2002.  NAELA is the trade association of Medicaid estate planning attorneys.  Center President Stephen Moses attended the meeting.  This is his report.

NAELA is a large and well-financed advocacy organization.  Membership topped 4,000 for the first time recently.  NAELA's budget was $1.5 million last year.  Financial reserves exceed $300,000.  NAELA maintains a lobbyist in Washington, DC and advocates loose and elastic Medicaid eligibility rules in the short run and national social health insurance for long-term care in the long run.

This year's NAELA Symposium had a heavy emphasis on Medicaid estate planning.  Four hour-and-fifteen-minute "Medicaid case study" sessions stand out.  These sessions were titled:  "Medicaid Pre-Planning," "Medicaid Applications and State Hearing to Increase the CSRA [Community Spouse Resource Allowance], "Medicaid Planning for the Single Person," and "Medicaid Recovery and Liens," [i.e., how to avoid them.]

The Medicaid case study sessions were conducted as skits, with frequent comic relief.  Family members met with attorneys to seek ways to qualify for Medicaid while preserving "most or all of your assets."  The humor came mostly from telling, tongue-in-cheek efforts by adult heirs in the skits who tried constantly to get as much of their infirm parents' money as quickly as possible.

For all intents and purposes, the on-stage Medicaid planners offered government-financed long-term care (i.e. LTC insurance) after the insurable event had occurred for a relatively nominal fee.  Query:  how much fire insurance would people buy if they could hire attorneys to squeeze funds out of the government to rebuild every burned out home? 

These are the assets in question, which the family sought, and the lawyers promised, to preserve:

A home worth $350,000

A condo worth $50,000

An IRA worth $200,000

Another IRA worth $20,000

Stocks, bonds, etc. worth $150,000

Certificates of deposit worth $60,000

A limited partnership worth $10,000 (vacant property in New Mexico)

Savings and checking accounts worth $20,000.

Life insurance policies with cash values of $20,000 and $10,000

Two automobiles of indeterminate value

Total assets to be protected from Medicaid spend down requirements:  $890,000

Estimated cost in attorneys fees to (1) divest or shelter these assets while qualifying one or both of the owners for Medicaid and to (2) avoid or minimize estate recovery, was quoted as approximately the same cost as one month of private pay in a nursing home.  That could be $12,000 in Manhattan or $5,000 to $6,000 on average elsewhere in the U.S.  One of the attorneys charged $450 for an initial consultation with potential clients and boasted he had a 98-percent retention on retainer of such prospects. 

One attorney in the skits stated unequivocally to his "clients" that Medicaid-financed long-term care is indistinguishable in quality from privately-financed care.  Little or no mention was made of Medicaid's dismal reputation for severe problems of access, quality, reimbursement, discrimination and institutional bias.  

If you would like to listen to these four "Medicaid case study" sessions for yourself, audiotapes are available for $10 each from ADC Services at  We don't know whether NAELA receives royalties from these tapes, but the Center for Long-Term Care Financing does not.

NAELA advertised that Thomas Scully, Administrator of the Centers for Medicare and Medicaid Services (CMS) would keynote a general session at the conference on the "Future of Medicaid and Long Term Care."  Scully found out who NAELA is and what its members do and cancelled his appearance two weeks before the meeting.  He sent a third-tier CMS bureaucrat in his place to discuss the much narrower topic of HCBS waivers. 

One presenter at the NAELA conference predicted with foreboding that, having defeated criminalization, Medicaid planners should expect a backlash as public officials mobilize yet again to discourage Medicaid estate planning.  "Get ready," he said, "things are going to get worse." 

One thing is for sure, nothing will get better for the poor in need of long-term care, for the Medicaid-financed providers of long-term care, or for the insurers who struggle to sell a product Medicaid planners are giving away, until the government finds an effective means to curtail Medicaid planning abuse and fraud.

LTC Comment:  Every time we publish an LTC Bullet critical of Medicaid estate planning, we receive a handful of replies defending the practice.  Here are the arguments Medicaid planning defenders make and our responses:

"Medicaid planers don't help the wealthy, just the unlucky middle class."  Today's Bullet gives the lie to that argument.  Seniors with assets in excess of $895,000 are in the top tier of property owners nationally.  Even the average Medicaid planning client has a home owned free and clear worth $150,000 to $250,000, other assets worth $150,000 or more and income of $35,000 per year or more.  Such people are not rich, but they are far above the income and asset limits most people associate with welfare (Medicaid) eligibility.  There are two problems with putting such people on Medicaid:  (1) it eliminates the need for private LTC insurance in the public's mind thus exacerbating the problem for Medicaid and the poor in the future and (2) it consumes scarce public resources intended and desperately needed for the indigent.

"Life is unfair.  If you get cancer or heart disease, Medicare pays liberally.  But if you have the ill fortune to get the wrong disease--Alzheimer's, Parkinson's or stroke, for example--you face impoverishment before Medicaid helps."  Two points.  First, we are likely to lose Medicare financing for cancer and heart disease long before government provides adequate financing for long-term care.  (Comptroller General of the United States David M. Walker recently testified to this probability before Congress: .  Second, Medicaid planners offer Medicaid eligibility while preserving assets and thus avoiding impoverishment, so their argument that Medicaid requires impoverishment is false, misleading and hypocritical.  The key issue is that Medicaid is supposed to be a safety net for the poor, but it cannot perform that function properly and simultaneously provide indemnity insurance for the heirs of affluent seniors clever enough to hire Medicaid planning lawyers.

"Medicaid planners encourage long-term care insurance, but for the people they help, it is too late for insurance.  They cannot qualify medically."  Medicaid planners give lip service to long-term care insurance, but they make their six-figure incomes obviating the need for LTCI.  That is why long-term care insurance agents rarely report success exchanging referrals with elder law attorneys.  Every client encouraged to buy long-term care insurance is a lost Medicaid planning prospect for the lawyer.  There is a far better way to protect the poor and middle class.  See the Center for Long-Term Care Financing's report titled "LTC Choice:  A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at