LTC Bullet--ALEC Says Abolish the Medicaid Ghetto and Put Patients First

Tuesday, June 25, 2002


*** Seattle has only two seasons: August and the rest of the year (when it rains.) So, vacation in Seattle this August and while you’re here, take in the Center for Long-Term Care Financing’s LTC Graduate Seminar: a full day of advanced instruction and discussion with Center President Steve Moses. Choose Portland, Oregon if you’d rather. Pre-registration required; call or email Amy Marohn (425-377-9500 or Here are the essentials:

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.

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.

Jump to for a course description, syllabus, curriculum vitae of the seminar leader, testimonials, and a schedule of LTC Graduate Seminars to be offered through February 2003. Oregon CEUs approved; Washington CEUs pending. The LTC Graduate Seminar is limited to 15 enrollees and both sessions are filling fast. Please pre-register ASAP. ***

*** New content added today to the Center’s Donor-Only Zone includes:

The LTC Reader #20--Former CBO Director on Social Security

The LTC Reader #21--Book Report: Mary Helen McSweeney's Long-Term Care: An Emerging Employer Benefit

The Data Base #20--Data on LTC Costs from the MetLife Mature Market Institute

The Data Base #21--More Nursing Home Cost Data

"The LTC Reader" and "The LTC Data Base" are features offered by the Center for Long-Term Care Financing to donors of $100 per year or more. In The Reader, we review the trade and academic literature on long-term care and give you brief summaries of the "must know" articles. In The Data Base, we track new studies and reports and give you key data and statistics you need to know. We hope these features will help you maintain a high level of knowledge and competency.

Jump to for details on how to qualify for the DOZ or call Amy Marohn at 425-377-9500. If you’re in The Zone, you’re in the "Know," Know The Zone Now. ***


LTC Comment: The American Legislative Exchange Council has published "Abolishing the Medicaid Ghetto: Putting 'Patients First'," by Richard Teske, April 2002. Most of Teske's report addresses Medicaid's acute care side. We've pulled out his section on long-term care eligibility, minus the footnotes, so you can peruse it below. Read the whole text at For a lecture titled "How to Cope with the Coming Crisis in Long-Term Care," presented by Mr. Teske, Robert E. Moffit, Ph.D., and Center President Stephen Moses, at the Heritage Foundation on December 7, 1999, go to

"Middle Class Abuse of Medicaid Long Term Care. The worst eligibility problem is the ability of the middle and even upper classes to use Medicaid as their long-term care insurance. Contrary to reasonable expectation, one need not be impoverished to qualify for Medicaid. In most cases, income and/or asset based qualifications are either nonexistent or easily avoidable with the right lawyer. Indeed, a whole cottage industry exists that teaches seniors how to qualify. This gaming of the system by middle class seniors is grossly unfair to taxpayers. Laws to prevent this have unfortunately not been successful.

"Federal and state lawmakers, however, have repeatedly tried to deal with this problem. Consider these efforts: The 1993 Omnibus Budget Reconciliation Act (OBRA) that permitted states to get LTC costs from the deceased estate; the 1996 Health Insurance Portability and Access Act (HIPAA) that tightened transfer of asset loopholes; the 1997 Balanced Budget Act (BBA) that targeted estate planners, tapping insurance values like life, IRA's, MIRAs, and MSAs, changing inheritance taxes, seizing liquid assets or savings, threatening assets unless LTC insurance is purchased, providing tax deductions for LTC insurance (HIPAA); and Public/ Private partnerships permitting retention of greater assets if LTC insurance is purchased. Sadly, none of these attempts have even approached a level of success.

"The result of the middle class using this loophole is now painfully obvious. Although Medicaid pays for only one-seventh of all national health expenditures, it pays for almost half of all nursing home costs and two-thirds of all home health costs. By comparison, private insurance covers about one-third of all national health expenditures but only 5 percent of long-term care. And because long-term care is so costly, it represents almost 43 percent of all Medicaid expenditures, but only 9 percent of all recipients use the services. Combine the rapid aging of the population with the fact that those over age 85 are the fastest growing part of our elderly population, not to mention the costliest, and the financial picture for America's taxpayers is bleak.

"The result is that by 2030 when the baby boomers are fully retired, Medicaid long-term costs will increase at least fourfold in real dollar terms. This is not only a catastrophe for Medicaid, but also for all other statewide programs that will be crowded out of the state budget. As a matter of equity, permitting the middle class to abuse Medicaid's long-term care eligibility requirements at the expense of the poor is inexcusable. By continuing this abuse, Medicaid will eventually absorb almost all state revenue. This means that if your primary concern is education, Medicaid must be reformed. If it is highways, Medicaid must be reformed. Reforming Medicaid is a prerequisite for states if they wish to fund any other issue in a generation.

"Congress should soon find a way to provide incentives for the middle class to stop hiding their assets and to purchase private long term care insurance. Although somewhat outside the thrust of this paper, all people must begin to buy private LTC insurance if this Medicaid catastrophe is to be avoided. The only way to have people rely on private insurance is twofold: 1) provide a refundable tax credit based on age to all Americans over 18 to purchase LTC insurance, and 2) make it a catastrophic plan with a high but knowable deductible that provides incentives for people not to hide assets because they then can know their exact financial exposure. If this is not done, almost any Medicaid reform may be doomed. It is crucial to self-insure the baby boom generation before it retires. Present nursing home populations may not be insurable, but they could be 'carved out' with a grandfather clause funding them. Over time, however, as this population decreases, the LTC insured population will remove the catastrophic fiscal time bomb from the Medicaid program in the private sector." (p. 10)