LTC Bullet: Medicaid Planning Full Disclosure

Thursday, September 5, 2002


LTC Comment: LTC Bullets readers frequently send us examples of flyers and web sites promoting easy access to Medicaid nursing home benefits. Complaints about Medicaid planning are just as likely to come from state and federal welfare administrators as they are to come from insurance agents and financial planners. Over the years, eight Congresses and three Presidents have struggled to discourage the widespread practice of artificial impoverishment to qualify for Medicaid. The government even went so far as to make it a crime: "Throw Granny in Jail" (repealed) and "Throw Granny's Lawyer in Jail" (unenforceable). Nothing seems to work. Now come Ross Schriftman, Associate Chair for Long-Term Care, and the National Association of Health Underwriters (NAHU) Long-Term Care Committee with a fascinating idea they have under consideration. Why not require Medicaid Planners to disclose the nature, consequences, and suitability of the self-impoverishment products they offer just as insurance agents and carriers must do for the legitimate financial products they market? You'll find the proposal that the NAHU folks are considering below the following announcements. Contact Ross Schriftman at if you have any comments or suggestions.

*** Heads up! Please make a note. The Center for Long-Term Care Financing has dropped our rotary phone number at our old Bellevue, WA location (425-467-6840 is gone). Please put our new phone numbers and mailing address in your address files:

Stephen A. Moses, President, 206-283-7036,

Amy Marohn-McDougall, Executive Director, 425-377-9500,

Damon V. Moses, Administrative Coordinator, 206-283-7036,

Center for Long-Term Care Financing

2212 Queen Anne Avenue North, #110

Seattle, WA 98109

Fax: 206-283-6536

Web site:

Stay in touch. We appreciate your comments and suggestions. ***

*** The ORLANDO LTC GRADUATE SEMINAR is back on for Tuesday, September 10. As soon as we cancelled the program on Tuesday, the phone started ringing off the hook with folks wanting to attend. CNA Life has generously donated a conference room for the session. So if you'd like to join us for this extraordinary day of advance training and discussion, please call or email Steve Moses ASAP directly at 206-283-7036 or for location and cost. Here's the latest testimonial from our most recent LTC Graduate Seminar: "I really enjoyed an entirely different perspective on what is happening in the way of LTC health issues and demographics. It was refreshing to get information beyond what carriers typically present, and to look at why consumers really don't make the commitment to a LTC policy." Find out much more about the LTC Graduate Seminars at .

And now is the time to register for the DALLAS LTC GRADUATE SEMINAR to be held Wednesday, September 25 from 9AM to 5PM. Seven continuing education credits have been approved for this program. Call or email Amy Marohn-McDougall to hold your place: 425-377-9500 or . ***

*** New content added today to the donor-only zone includes "The LTC Week in Review for September 2 to 6, 2002: LTC E-Alerts #211-#215" If you already qualify for The Zone, click this link and enter your user name and password to go directly to the following items: )

LTC E-Alert #211--Stock Market Crash Drains Wealth Transfer to Boomers
LTC E-Alert #212--What Exactly is "Aging"?
LTC E-Alert #213--Ominous "Medicare Cliff" Approaches October 1
LTC E-Alert #214--Survey Says Only One-Third of Adult Children Recommend LTCI to Parents
LTC E-Alert #215--Fighting Pneumonia Scourge of Nursing Home Residents

To Zone In, mail your tax-deductible contribution of $100 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred password and user name (up to 10 characters each). You can also contribute online at . ***


Following is the proposal submitted by Ross Schriftman which is under consideration by the NAHU LTC Committee as referenced in the LTC Comment above. Material in brackets [ ] has been added for clarification by the LTC Bullets editor.


"As agents, we have to carefully explain the products and services we provide including disadvantages. This applies to advertising, sales presentation and on-going service.

"Unfortunately, I don't see the same kind of due diligence in the advertising that is done by the Medicaid Planning industry. For example, here are some lines from advertising pieces that are sent regularly to my Mother who is 77 years of age and a homeowner:

"'Protect Your Estate from Catastrophic Illness and Nursing Homes Without Purchasing Nursing Home Insurance and Which Assets are Exempt from a Nursing Home.' (Sponsored by Extension Education Senior Security Enrichment Workshop. Free continental breakfast)

"'Find out Why Experts Say Destroy Your Will. Don't Lose Your Estate to a Nursing Home.' (Sponsored by Senior Informational Services. Free Seminar. Space is limited.)

"'Avoid Medicaid Trap: How to Protect Your Assets from Catastrophic Illness and Nursing Homes.' (Senior Financial Survival Workshop. Free seminar)

"Are You Gambling with Your Retirement Stability? Topics include: How to avoid losing your [nest] egg to long term care expenses, WITHOUT buying long term care insurance.' (Sponsored by Serve our Seniors. Free breakfast) [Emphasis in the original]

"What should be disclosed [by Medicaid planners] is the following:

o The purpose of Medicaid (assist the poor and indigent)

o The fact that transfers are permanent and irreversible losing control over those assets.

o The fact that assets are [placed] in other people's names (i.e., adult children) and are subject to their creditors and/or divorce agreements.

o The fact that assets in an adult child's name could jeopardize grandchildren's chances of qualifying for financial aid for college.

o The restrictions on the type of services and facilities available [from Medicaid].

o The low reimbursement rates that have created bankruptcy and low quality of care in Medicaid facilities.

o The shortage of nursing staff for community as well as facility care that may [impede access to Medicaid-funded care at any level].

o The loss of other resources such as most of a person's Social Security check to offset Medicaid expenditures. [Medicaid requires recipients to contribute all of their personal income, including Social Security benefits, toward their cost of care except for a small personal needs allowance, usually between $30 and $60 per month.]

o Estate recovery requirements upon death that can severely damage family inheritance. [Recovery of benefits paid from the estates of deceased recipients has been mandatory since the Omnibus Budget Reconciliation Act of 1993, although this requirement is not uniformly enforced and Medicaid planners routinely circumvent it for their clients.]

o The cost to taxpayers and future generations that is taking money away from other programs.


"Who regulates this [Medicaid planning] industry?

"Who would police this and make sure information is accurately provided? (As we know in the insurance and investment field, home offices have compliance departments that must approve advertisements.)

"What penalties would be levied against planners who are not fully disclosing the advantages and disadvantages of their planning techniques?

"What should state and federal regulators be doing to properly inform the public?


"'Buyer beware.' Unless the public understands the ramifications of [Medicaid planning] in advance, they may spend a lot of time and money (i.e., legal fees) and then realize all the negatives before they stop the process. This is unfair and therefore up front full disclosure in advertising material is needed.

"Truth in advertising is something that is part of most industries today. The financial planning/ legal advice industry should not be an exception. In fact it is probably more important [in this field than in others]. If someone has a bad experience purchasing a refrigerator or even a more expensive item like an automobile, the financial, personal and emotional consequences are far less severe than a bad experience creating a financial plan that locks in for the rest of his or her life.

"Although a legal option, this type of planning is hurting communities, providers and shifting scarce government dollars away from other important priorities such as education, the need for a prescription [drug] program, and defense. It also hurts the government's ability to focus Medicaid dollars on those whom the program was designed for, the poor.

"Only through proper disclosure can people make an informed decision if they want to pursue such a course of action.

"Promoters [of Medicaid planning], by implication, have made the idea of buying long term care insurance [seem like] a foolish choice for consumers with such statements as 'Find out how you can get the government to pay for your nursing care without buying long term care insurance.' This is contrary to government policy which is now encouraging private insurance as a solution to the Medicaid budgetary crisis.

"Other financial products such as bank accounts, credit cards and insurance are promoted with a regulatory authority approving or denying the use of certain advertising. There are also disclosure documents for nearly every financial product at the time of sale as well.

"Since a Medicaid Plan includes trusts which are legal documents, the courts have authority to regulate this activity.


"Through regulatory authorities, promoters should be required to submit advertising for approval before distribution.

"Just as insurance agent seminars are periodically monitored for content, regulatory authorities should monitor 'Medicaid Planning' seminars to determine if the content is deceptive or hype rather than accurate and full disclosure of the advantages and disadvantages of the product and services being promoted.

"There should be a regulatory approved disclosure form at the initial consultation with the advisor disclosing the advantages and disadvantages of such planning. The prospective client signs and receives a copy of this form. The planner must keep this document on file for possible audits by regulatory authorities.

"Upon completion of the plan, the advisor must have the client sign another document listing the advantages, disadvantages and recommendations of the planner. The client receives a copy of this document as well. This document would be signed and maintained by the planner for future audits by regulatory authorities."