LTC Bullet--How to Save Medicaid LTC

Thursday, October 24, 2002


Don't miss Claude Thau's thought-provoking article following the *** news *** below. We call it "How to Save Medicaid LTC," but it could be sub-titled "And Unleash the Market for Private LTC Insurance." Enjoy!

*** THE DEADLINE FOR DISCOUNTED EARLY REGISTRATION IS ONLY A FEW DAYS AWAY: "The Great LTC Debates" are coming November 17 to 19, 2002 in St. Louis. Get all the details online. Go to for the conference brochure and to for the full line-up of sessions and speakers. Center President Steve Moses will debate National Academy of Elder Law Attorneys President-Elect Bill Browning on November 18, 2002. Don't miss this great debate: "Medicaid Planning: Damned or Destined." Just write "Center LTCF" in the RED SUBTOTAL box on the printable registration form and deduct $50 from the cost. Only $345 for early registrants. ***

*** And don't forget! You can attend the LTC Graduate Seminar with Steve Moses sponsored by the Center for Long-Term Care Financing on November 20--the day after the Great LTC Debates conference--at the same St. Louis hotel. Save another $25 if you attend both events (otherwise the Grad Seminar is $225). Pre-registration is required so call or email Amy McDougall ASAP at 425-377-9500 or to hold a place. The Center's LTC Graduate Seminar is advanced training for experienced and successful senior financial advisers, including LTCI carrier executives whom we especially encourage to attend. The all-day program is receiving rave reviews from appreciative attendees. Get all the details at: . ***

*** New content added today to the donor-only zone includes "The LTC Week in Review for October 21-25, 2002: LTC E-Alerts #246-#250." Every LTC E-Alert contains some news or information that will help people understand the need to prepare early for the risk and cost of long-term care. If you already qualify for The Zone, you can click the following link, enter your user name and password, and go directly to the latest E-Alerts: .

LTC E-Alert #246--HHS Pushes the PACE
LTC E-Alert #247--On Hearing Loss; Does Drinking Help?
LTC E-Alert #248--People Buy Rental Houses to Qualify for Medicaid
LTC E-Alert #249--State Update--KY, MA, FL, OK, AR, IN
LTC E-Alert #250--How to Delay Brain Decay

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). He'll get you into The Zone ASAP. You can also contribute online by credit card or direct withdrawal at . ***


The following article by Claude Thau, President of Thau, Inc. and Chairman of the Board of Directors of the Center for Long-Term Care Financing, describes a key aspect of the Center's LTC Choice proposal. For more details on LTC Choice, go to .

Through Medicaid, we do two wonderful things for people who need long-term care (LTC). First, we all pay taxes so that indigent people can get commercial LTC that they otherwise would not be able to afford. We should all feel proud to contribute to that cause.

Secondly, we provide support to people who are NOT indigent. If people were to sell their homes in order to pay for LTC, and then were to recover, they would no longer have a home to return to. To avoid such an undesirable result, we give loans to these people, advancing their LTC costs, with the intention of recovering when their estate is settled.

Not only do we pool our money to provide a loan to such people, we provide that loan on an interest-free basis! It is a long-term loan as it does not require repayment until the care recipient dies. And, if the recipient's spouse is living in the house, the loan does not have to be repaid until (s)he dies. If disabled or minor children live in the house or if adult children who were care-givers for a couple of years live in the house, the loan continues until they die or sell the house.

It is wonderful that we provide such loans, but such loans should be provided OUTSIDE the Medicaid program. When we do it through Medicaid:

o Loan recipients feel the sting of being "on welfare." These people have been independent since their youth and have saved in order to maintain their independence. Why should they be placed on Medicaid when they are not indigent?

o Being on Medicaid, they are restricted to Medicaid-certified LTC providers. They cannot select the facility of their choice; nor can they have a private room; nor can they select an assisted living facility, commercial home care or reward relatives or friends for providing care.

o LTC providers, such as nursing homes, are paid the government Medicaid reimbursement, which is inadequate.

Medicaid reimbursements under-pay LTC providers for the cost of LTC. When state budgets are tight, as they are now, legislators and governors propose slashing such payments even further. Meanwhile government pushes provider costs upward with a variety of mandates, such as quality controls, mandatory staff training, etc.

Because of low reimbursements, LTC providers cannot afford a competitive salary. So when they train staff, the newly-trained staff quit, securing higher-paying jobs in hospitals or elsewhere. Such vacancies not only reduce the quality of care in the facility, but the facility incurs cost seeking and hiring a new employees, who typically are less experienced than those who left.

The best staff leave, as they are most in demand. But, providers get stuck with their hiring mistakes. Surely, they should fire these weak performers, right? Unfortunately, it is not easy to fire anyone when you are understaffed! Of course, as time goes on and they suffer 100 percent annual turn-over, the labor pool quality of care-givers, deteriorates. Even outstanding nursing home management has an extremely difficult time providing excellent care in such an environment.

Private-pay LTC recipients in Medicaid-certified facilities get "taxed" in three ways to support this system: 1) they pay income taxes to support Medicaid; 2) they pay higher fees to LTC providers because of cost-shifting; and 3) they suffer from inferior care in facilities which have many clients "on Medicaid".

Therefore, some savvy private payors now refuse to enter Medicaid-certified facilities. Instead of being seen as a badge of honor, "Medicaid certification" may be viewed as a public announcement that cost transfer will occur and that care might be inferior.

Another problem occurs when we, the tax-payers, try to recoup our loan. Various parties bewail the plight of "poor Sarah" who wanted to leave her house to her children, but whose estate had to sell the house because it was partially encumbered by a government lien. Of course, recouping payments from the "indigent" sounds questionable. However, those people were not "indigent." The critics never mention that we all gave Sarah a long, interest-free loan and all we are trying to do is to recover the principal (no interest) so that we can lend the money to someone else.

So, how can we get ourselves out of this mess? One key tactic would be to stop putting people on Medicaid if they have assets which could fund their LTC. Instead, such loans could be government-backed, but financed privately. This simple change would have dramatic impact:

a) Such care recipients would no longer feel the indignity of being "on welfare".

b) As they are using their own funds to pay for care (via the indebtedness), they would have flexibility to purchase the kind of care they want.

c) Many more care recipients would remain "private payors" rather than being on Medicaid. Providers would benefit from the resultant higher fees.

d) The additional provider revenue would lead to reduced cost transfer from Medicaid LTC recipients to private-pay clients and/or improved care.

e) Because fewer people will go on Medicaid, tax-payer money will be saved. We could afford higher reimbursements for Medicaid patient care.

f) We avoid the whole concept of "repaying Medicaid" and "government liens."

We need to continue to provide LTC to the indigent, but we should attempt to improve the quality of care. This can be accomplished indirectly if we continue to provide loans to people who need LTC but lack liquid assets, but do so through a private lending, government-backed program rather than through Medicaid.