LTC Bullet:  Connecticut Attacks Medicaid Planning to Save Money and Encourage Private LTCI

Wednesday, June 12, 2002


*** This is our first LTC Bullet in a month.  We'll be back online with new Donor-Only Zone content within a few days.  We hope you enjoyed the respite.  In the meantime, your Center for Long-Term Care Financing has been very busy with other business.  Center President Steve Moses conducted LTC Graduate Seminars in Pittsburgh and Philadelphia on May 13 and 14.  (See below for some feedback.)  He addressed the Pennsylvania Association of Non-Profit Homes for the Aging in Pittsburgh on May 15; the Private Care Association in Washington, DC on May 16; the 2nd Annual Life Insurance Selling, Selling to Seniors Conference in New Orleans on May 17; "A Long-Term Care Planning Summit:  What You Need to Know to Protect Your Future," sponsored by The California Association of Health Facilities and The California Partnership for Long Term Care in Sacramento, CA on May 19; and The Forum at the Evans School, University of Washington, Seattle on "The Personal and Public Challenges of an Aging Population" on June 11.  In between, Steve interviewed three experts on the new German long-term care insurance system in Bielefeld, Berlin and Heidelberg, Germany.  We'll report on those interviews in a future LTC Bullet. ***

*** On June 27, 2002, the National Chamber Foundation will host “Long-Term Care and Business:  Creating and Paying for Choices,” at the U.S. Chamber of Commerce in Washington, D.C.  This half-day event will gather senior government and industry leaders to examine the roles of business, government and consumers in preparing for and financing long-term care needs.  The symposium will address how providers, financial services institutions, regulators, and employers can work together to ease the financial burden that accompanies long-term care.  Center for Long-Term Care Financing President Stephen Moses will moderate a panel on "The Road Ahead:  The Financing Of Long-Term Care."  For more information on the event, including the fee to attend, and to register, please call Courtney Vital at (202) 463-5500 or go to  ***

*** Your next opportunities to attend a Center for Long-Term Care Financing LTC GRADUATE SEMINAR are:

August 26, 2002:  SEATTLE, WASHINGTON, 9 AM to 5 PM at the Courtyard Bellevue, 14615 Northeast 29th Place, Bellevue, WA, 98007, 425-869-5300 for directions.  Continuing education credits pending approval.

August 28, 2002:  PORTLAND, OREGON, 9 AM to 5 PM at the Alderwood Inn Hotel, 7025 Northeast Alderwood Road, Portland, OR, 97218, 503-255-2700 for directions.  Continuing education credits pending approval.

For details on the LTC Graduate Seminar including a syllabus and registration instructions, go to  You can also call or email Amy Marohn at 425-377-9500 or

Here's some feedback from our most recent LTC Graduate Seminars: 

"WOW! what a great meeting.  I really appreciate your insight."  (Pittsburgh LTC Graduate Seminar, May 13, 2002)  

"Just wanted you to know that the Graduate Seminar was everything we hoped for . . . a day to 'invest in ourselves,' to get away from the trees and 'see the forest' and to co-mingle with like-minded LTC professionals."  (Pittsburgh LTC Graduate Seminar, May 13, 2002) 

"Although I have attended many workshops on the topic of long-term care, your superb presentation offered a unique and enlightening perspective. . . .  You addressed the hidden reasons behind the challenges we face as long-term care specialists."  (Philadelphia LTC Graduate Seminar, May 14, 2002)

"Your presentation yesterday was excellent!  . . .  Anyone who is truly serious about selling LTCI needs to hear it."  (Philadelphia LTC Graduate Seminar, May 14, 2002) ***


(Our thanks to Center Board Member and former Executive Director David Rosenfeld, JD, MSW for the following report.  Don't miss the direct quotes from Connecticut's waiver which follow David's analysis.  They speak eloquently to the chilling effect of Medicaid planning on the market for private LTC insurance.)

The single greatest barrier to increasing the role of private LTC financing--and thereby reducing the strain on public programs and providers--is the steady expansion of public financing beyond its intended safety-net function and the resulting impact on perception and behavior.  Despite recent budget-related cutbacks across the nation, the extent to which Medicaid and Medicare do fund LTC services for a growing segment of the population anesthetizes the public from taking seriously the LTC risk.  Why save, invest or insure when it seems the government pays for long-term care?  This perception problem is made worse by the success of professional Medicaid planners who help their clients maneuver and manipulate Medicaid’s ostensibly strict eligibility rules to qualify for taxpayer-financed benefits without spending down.

The State of Connecticut recognizes the negative impact of Medicaid planning on promoting personal responsibility and a more evenly balanced LTC financing system and is proposing to do something about it.  Connecticut’s Department of Social Services recently submitted a groundbreaking waiver proposal to the Center for Medicare and Medicaid Services (CMS; formerly the Health Care Financing Administration).  The “Transfer of Assets Section 1115 Research and Demonstration Waiver Proposal” seeks to modify several Medicaid eligibility provisions with a central goal of reducing asset transfers for the purpose of qualifying for Medicaid and thus increasing the extent to which people pay privately for their care.  This change of behavior, in turn, would realize substantial savings for the state’s Medicaid program.  Section 1115 of the Social Security Act authorizes the Secretary of Health and Human Services to waive State Medicaid Plan requirements of Title XIX for purposes of carrying out an approved demonstration project.

The CT Department of Social Services is seeking waivers specifically to:

(1)   change when a penalty period is imposed for individuals who transfer assets for less than full market value in order to qualify for Medicaid--tolling the penalty period from the date of eligibility for Medicaid LTC services rather than the date of the transfer because the latter method allows for transfer strategies which render meaningless the imposition of a penalty (see below for an explanation of the notorious “half-a-loaf” strategy);

(2)   lengthen the look-back period for transfers of real property from 36 to 60 months; and

(3)   create threshold transfer levels that would allow cumulative transfers within certain dollar and date ranges to be disregarded in order to streamline the application process. 

The Department predicts savings of more than $87 million over five years and expects the project to be a model for others states and the federal government.  The proposal submitted to the State Legislature can be viewed online at  The proposal itself does an excellent job of presenting the desired rule changes, gives helpful scenarios to explain how the changes would affect Medicaid applicants, and provides detailed budget, caseload and cost projections with and without the requested waiver changes. 

Most important to friends of the Center for LTC Financing, however, is the extent to which the CT Department of Social Services makes the critical connection between Medicaid planning and the demand for private financing alternatives such as long-term care insurance.  It is this connection that lawmakers across the country must address sooner or later if they intend to preserve a public safety net program for the truly needy in the face of higher costs, lower tax revenues, and daunting demographics. 

The Center for LTC Financing proposes reforming our LTC financing system along the lines of its “LTC Choice” framework described online at  By requiring Americans to address long-term care planning early and by modifying the spend-down requirement for government assistance, the “LTC Choice” plan would virtually eliminate the market for Medicaid planning services.  In the meantime, however, the CT Department of Social Services should be commended for its honest articulation of the problem, proactive approach, and thoughtful defense of its positions.  We only wonder aloud how quickly industrious Medicaid planners would learn to evade even the newly proposed rules. 

Below are a few excerpts from the waiver proposal and the Department’s responses to public comments submitted during a formal comment period.  Please direct all questions and requests for additional information to the CT Department of Social Services (; 860-424-4908):

“Although the federal transfer of asset (TOA) policy was intended to treat all individuals equitably, advance planning could significantly nullify its intended purpose.  The current federal TOA policy has resulted in the widespread use of estate planning to intentionally shift assets to third parties while allowing the transferors to qualify for the Medicaid payment of LTC services.  Estate planning literally diverts millions of dollars that could be used to pay for LTC services and discourages individuals from seeking and purchasing LTC insurance to meet their needs for a continued quality of life.  These tactics have impeded Medicaid in fulfilling its intended role as payer of last resort.”  (p. 1)

“Through this proposed Demonstration project, the behavioral changes of applicants would be evaluated with the expectation that the revised TOA policy would encourage personal responsibility and the use of LTC insurance, while also realizing substantial savings to the Medicaid program.  Nursing facilities should also benefit as this Demonstration project will increase the duration and number of privately-paid periods. Additionally, the State believes that this Demonstration project could be replicated by other states as a model.  Finally, this Demonstration project would provide the Centers for Medicare and Medicaid Services (CMS) with the empirical evidence needed to re-evaluate the transfer of asset rules under the State Medicaid Plan and effectuate the necessary policy changes to discourage estate planning to circumvent these rules.”  (p. 2)

“The Department acknowledges the desire of individuals to provide for their families.  We believe that currently exempt transfers of assets to spouses, disabled children, individuals who provided care that delayed the need for institutionalization and transfers made exclusively for reasons other than to qualify must be allowed to continue.  However in those situations where gifting is done in order to avoid paying individuals’ long term care needs, we object to the shifting of this responsibility onto the Medicaid program. 

“We believe that current transfer of asset rules result in unfairness -- unfairness to those not savvy enough to take advantage of the loopholes and unfairness to the taxpaying public.  The length of a transfer of asset penalty period is determined by dividing the amount transferred by the average cost of private nursing home care in Connecticut, currently $6,779 per month.  Current Medicaid rules, however, start the penalty period when the transfer occurs – not when Medicaid is needed.  As a result, individuals can transfer up to $6,779 every month, regardless of whether they are institutionalized or even need home care services, provided that they retain enough assets to pay for nursing home or home care services (if needed) for the month in which the transfer occurs.  This strategy, commonly referred to as the “half-a-loaf” strategy, shifts millions of dollars to third parties that could be used to pay for long term care services.  Given the current state of the economy, preserving the wealth of others could come at the expense of other important programs.

“Current transfer of asset practices, although perfectly legal, will cost the Medicaid program more than $87 million during the next five years. . . .  The $87 million cost is borne by a program designed to serve the neediest individuals and is ultimately paid by the public.  With this waiver, the Department seeks to restore Medicaid as the payer of last resort for needy individuals.” (DSS Responses to Public Comments, pps. 1-2)

“In our waiver proposal, we describe long term care insurance as a mechanism that individuals who make non-exempt transfers may use to meet their long term care obligations.  The argument that individuals who make non-exempt transfers cannot afford long term care insurance fails to account for the fact that part of the transferred assets could be used to pay for this insurance.  We also believe that it is reasonable to expect that recipients of transferred assets could help pay for long term care insurance as they benefit from the gifting.

“In addition, individuals may not presently be inclined to purchase long term care insurance as current transfer of asset penalty rules are easily circumvented.  The Department stands by its contention that strengthening penalty periods will make long term care insurance a much more viable alternative.  The waiver would encourage individuals to seek long term care insurance at a younger age when health considerations and affordability considerations are not as great.”  (DSS Responses to Public Comments, p. 5.)