LTC Bullet:  Board Chair Claude Thau on Medicaid Planning

Tuesday, July 16, 2002


*** Richard Rowland, President of the Grassroots Institute of Hawaii in Honolulu, HI wants to bring Center President Stephen Moses over to brief policy makers and others on problems with and alternatives to that state's CarePlus mandatory, government-run LTCI proposal.  See our LTC Bullet on the CarePlus program at:  If you're interested in sponsoring this project, with public recognition, contact Steve Moses at 206-283-7036 or  So far, we have $3,000 pledged and need $2,000 more.  All proceeds support the Center for Long-Term Care Financing. ***

*** LTC Graduate Seminars for August 26 through October 1 are listed below.  Pre-registration required; enrollment limited to 15 persons; continuing education credits approved or pending.  Details at  Pre-register or inquire by replying to any LTC Bullet.

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, 9AM to 5PM at the Alderwood Inn Hotel, 7025 Northeast Alderwood Road, Portland, OR, 97218, 503-255-2700 for directions.

September 26, 2002:  DALLAS, TEXAS, location to be announced (TBA), 9AM to 5PM

September 28, 2002 (Saturday):  HOUSTON, TEXAS, location TBA, 9M to 5PM

October 1, 2002:  NEW ORLEANS, LOUISIANA, location TBA, 9AM to 5PM 

The Center's LTC Graduate Seminar is a full day of instruction and discussion.  It will help (1) LTCI producers sell more insurance, (2) LTC providers attract more private payers, and (3) legislators and policy makers design better programs.  Don't miss the LTC Graduate Seminar when it comes to a location near you! ***

*** New donor-only zone content posted today includes:

The LTC Reader #25--Older Driver Fatalities to Skyrocket

The LTC Reader #26--Aging Boomer Women Will Strain LTC and Medicaid

The Data Base #25--How Many Nursing Homes and Who's in Them?

The Data Base #26--Utilization of Home Health Care by State

In "The LTC Reader" and "The Data Base," we report to donor-zoners on the latest reports and data.  We read and summarize the material and include a hyperlink to the original whenever possible.  To qualify for The Zone, donate $100 or more  per year to the Center (tax deductible).  To contribute online, go to or, better yet (it saves the online donation fee we have to pay), simply drop a check in the mail to Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA  98109.  Then just hit "reply" to any LTC Bullet, give us your preferred user name and password (up to 10 characters each) and we'll sign you up and confirm your access even while your check is in the mail.  Zone in now! ***


*** This LTC Bullet is longer than most.  You may wish to print or save it for reading later. ***

LTC Comment:  Connecticut wants to save Medicaid big bucks.  The state has requested a waiver from CMS (formerly HCFA) to (1) expand the transfer of assets look-back period from three to five years and to (2) stop the egregious "half-a-loaf" self-impoverishment strategy, which now reduces spend-down liability by half effortlessly.  This is a political hot potato.  CMS Administrator Tom Skully favored the plan, very delicately, at a recent Chamber of Commerce conference.  But advocates of loose and expanded Medicaid eligibility object strongly to it.  We covered the issue in depth with "LTC Bullet:  Connecticut Attacks Medicaid Planning to Save Money and Encourage Private LTCI," published Wednesday, June 12, 2002:  What follows is an op-ed attacking the CT waiver proposal and a rebuttal by Center for Long-Term Care Financing Chairman of the Board of Directors Claude Thau.  Enjoy the intellectual joust.

Ramon Castellblanch, "Rowland's Medicaid Proposal Would Punish Seniors," Hartford Courant, June 14, 2002

Right now, Gov. John G. Rowland is busy preparing a nasty shock for Connecticut seniors and their families.  The governor is proposing to punish seniors who have used assets such as their home equity to help their children - maybe by helping them to buy a house, helping their grandchildren get through college or getting their children out from under credit card debt.

The penalty would come through an idea projected to cut $10 million from the state's Medicaid budget for nursing home care.  The financing for nursing home care for many Connecticut seniors comes through Medicaid.  The program starts paying for people's nursing home care when they have "spent down" - that is, when they have virtually no money.

The way that the Rowland cut would work would be to go after seniors who decide to help their children.  Under normal Medicaid rules, if a senior gives her children some money, she would be disqualified from getting Medicaid help for nursing home care for a period of time known as a disqualification period.  For example, if a parent had $60,000 and gave her children $30,000, she might have a disqualification period of four months.  This could mean that she would have to pay for the first four months of nursing home care, or $30,000, out of her own pocket.

Although this is a stiff penalty, it's one that many families and nursing homes can accommodate.  The senior would have done something for the good of her family, and after four months, she would have "spent down" and Medicaid would start paying.

The governor is asking the Bush administration to let him change the date on which the disqualification period starts.  He wants it to start on the date on which the person had "spent down" - the date on which she went broke.

So, the nursing home with the senior described above would get the senior's $30,000.  Then the nursing home would get nothing for the next four months.

Nursing homes would be less likely to admit seniors in these circumstances.  As a result, Connecticut seniors would have a harder time getting nursing home care.  Gov. Rowland's plan would be a hard blow to many middle-income seniors.

If the plan is approved, Connecticut will have one of the most draconian sets of nursing home eligibility rules in the country.  People from Connecticut might have to leave the state just to get admitted to a nursing home or just go without necessary care.

Democrats and Republicans are standing in broad opposition to this devastating proposal.  The Legislature's Human Services Committee voted it down unanimously.  It has been opposed by Connecticut's U.S. Sens. Chris Dodd and Joe Lieberman.  Democratic U.S. Rep. Jim Maloney of the 5th District is urging its rejection. Republican U.S. Rep. Nancy Johnson of the 6th District is on record as opposed.  But still Rowland brazens it out and keeps pushing his request in Washington.

Strangely, the Rowland administration has claimed that its plan for balancing the state budget does no serious damage to Medicaid.  I guess it considers wrecking the last years of the lives of middle-income seniors - driving them out of state, perhaps - to be no serious damage.

I hope the Bush administration will hear what Connecticut's congressional delegation is telling it and stop this plan.  Otherwise, the final years of many Connecticut seniors will get much harder.

Ramon Castellblanch is assistant professor of management at the School of Business at Quinnipiac University in Hamden. His column appears the second Friday of every month. To leave him a comment, please call 860-241-3164. Or e-mail him at


Rebuttal by Claude Thau, President of Thau, Inc. and Chairman, Board of Directors, Center for Long-Term Care Financing.  Reach him at (913) 403-5824 or

Medicaid is a welfare program for the benefit of people who lack the assets to pay for their own care.  However, Medicaid planning attorneys have totally distorted it and well-meaning state employees help middle class and affluent people siphon money from other tax-payers by using Medicaid money to pass assets on to their children.  They do it out of good intentions ("just trying to help somebody”), but they don't look at the broad view of how they are destroying our Medicaid system by helping people, in essence, to steal money from future generations, particularly the future poor and future middle class whose parents did not avail themselves of this “opportunity”.

Here is how Medicaid is supposed to work for LTC: 

*  If you are indigent, Medicaid pays.  That is, tax-payers pay (a lot!), so that indigent people can get care.  This is great!  It would be even better if the providers could provide better care, but they can't because of the abuses in the system.

*  If you have assets (e.g., your house), but they are not liquid, the tax-payers give you a loan because we want to make sure that you can return to your house if you ever recover.  It would not make sense to recover and not have your house.  When we give a loan, we give a long-term loan.  It lasts until the later of:

   1)  the death of the last of:  a)  the Medicaid recipient, b)  their spouse, c)   any minor or disabled children, d)  any child living in the house who provided care for the Medicaid recipient for at least two years in that house

   2) or until the house is sold.

Not only do we provide such a long-term loan, but we give it interest-free!  Then, as required by the law which permitted these loans, the principal is supposed to be collected via the lien placed on the house.

However, rather than looking at the broad view, the Medicaid planning attorneys publish article after article about "poor Sarah."  All she wanted to do was to leave her house to her kids but it was encumbered by nasty Medicaid so it was sold and lost to the family.  They never point out that Sarah had a 20-year (for example) interest-free loan and that all we are doing here is trying to recover the principal; the interest is totally forgiven and all we are trying to do is to get that principal back so that we can loan it to someone else.

The upshot is:  This failure to collect the debt opens the door for tremendous abuse.  Every time the government closes a loophole, the attorneys find another.  For example, one automobile is exempt.  So the attorneys would give Granny's automobile away, then buy a Cadillac, then give it to another relative and continue doing so until all of Granny's relatives had Cadillacs.  Sorry, but I don't want to pay taxes so all of Granny's relatives can get Cadillacs.  When the government discovered that Granny did not even know that she had had those cars, they tried to stop the practice.  So the Medicaid planners advised each other that they needed to take Granny for a ride in each car before they gave it away.  Because of the failure to collect on the debt, affluent people and middle class people are flocking to such attorneys to "protect their assets" from Medicaid, that horrible government program that expects them to pay for their care as best they can, then is willing to supplement as needed. Medicaid is broke, partly because of the failure to collect on debts owed to it.  Squeezed as it is, Medicaid pays inadequate reimbursements.

As a result, when nursing homes train their staff, those staff leave the nursing homes.  Human resource (HR) execs in hospitals have told me that they hire such people from nursing homes all the time because once they are trained, they are valuable to the hospital and Medicaid facilities cannot afford to match the hospital salaries.  (Maybe Medicaid could afford a higher reimbursement if it was not paying for so many people who artificially impoverish themselves.)  So the nursing home becomes short-staffed until the person can be replaced.  Hence quality of care drops.

Then the nursing home incurs cost hiring the new person, who is less experienced than their predecessor.  So costs increase and service does not completely rebound. Then the nursing home incurs more cost training this person (the training is a good idea and is legally required), so the cycle repeats.  Over time, the good hires leave and the nursing home is stuck with the losers they unfortunately hired. They should fire the losers, right?  But they don't have enough staff, so they can't afford to fire people.  Meanwhile, as they repeatedly go through the hiring process, the quality of the HR pool deteriorates, so it becomes harder and harder to find good staff.

Nursing home staff turn-over can be 100% year!  Thus NHs cannot provide good care.  So sometimes the attorneys who cheated the nursing homes and tax-payers in the first place then turn around and sue the nursing homes for the poor care that resulted.  The only thing that keeps more people from playing this game are their personal integrity and the fact that Medicaid won't cover home care or assisted living facilities routinely and will only cover nursing homes if they are Medicaid-certified.  I, and others, would like to give people freedom under Medicaid to select their care-giver, but we can't afford to do that while allowing anyone to artificially impoverish themselves to get on Medicaid.  The gusher of expenses would be huge.

There are proposals to fix this system, but the issues are misrepresented (as in the preceding article), discouraging politicians from fixing the system.  If you pay for your nursing home charge with your own money, the nursing home charges you extra to pay for the Medicaid shortfall on their other patients.  So smart people are deciding that they don't want to go to a Medicaid-certified facility.  They know that at best they can expect to be overcharged and get adequate care.  At worst, they get overcharged and receive inferior care.  So they go to totally private pay facilities.  Basically, people who pay for private LTC are taxed in at least 3 ways because of this system that you are trying to protect: a) their normal taxes partly go to cover these costs; b) they get overcharged at the facility (tax #2); c) they get inferior care (tax #3).

This is somewhat parallel to some of our school district issues, where we create abysmal public education systems, resulting in affluent people opting for  private schools.  Once they have opted out, they care less about the public schools so the problems get entrenched.  Once someone has given away their assets (including as much income as possible), most of their remaining income must be applied to their LTC costs.  So Medicaid may only pay a portion of the cost of their care.  However, if Medicaid pays any portion of the care, the nursing home gets only the Medicaid reimbursement.  So for most of their patients the nursing home gets only Medicaid reimbursement.  This is killing the nursing home industry.

One of the Medicaid planning techniques (when they can't do a more aggressive approach) is to encourage people to give away half their assets, keeping the balance to cover their costs for the "look-back period".  Then, when the look-back period has expired, their "gifts" are no longer considered and you and I start paying for their care, no matter how rich they were before they gave away their assets!

The purpose of the [Connecticut] proposal is to stop this abuse, by making their gifts still count.  Just [recently], I got a call from a Marketing Officer of a particular business.  His (common) approach was to buy a 3-year LTCI policy.  Once he needed care, he would give away his assets.  Then after 3 years, he would be on Medicaid.  This person and his wife clearly have assets and income.  They are very healthy and 51/50 respectively in age.  But they are planning to misappropriate money from all of the rest of us. 

Who suffers?  Not the kids of the affluent!  They do great because the assets they misappropriate are worth more than their share of the additional taxes that result.  Those who are not wealthy (or do not play this game) suffer from the higher taxes without benefiting from the inheritance.  The poor also suffer from worse care in the facilities and worse public programs (schools, health, etc.) because of budget deficits. What is characterized as stealing from the rich to help the poor (which may or may not be an ethical thing to do) is really stealing from the poor to help the rich.