LTC Bullet: Ominous Parallels--Medicine and LTC

Tuesday, October 29, 2002


*** Today's Bullet, which follows the ***news*** will help LTC professionals encourage the medical profession to educate the public about the importance of long-term care planning. This Bullet is sponsored by The Constellation Group, LLC, a Business and Tax Strategy Think-Tank in Miami Beach, Florida, founded by Mr. Fraser Allport. Visit them online at . Contact Mr. Allport at 305-532-1231 or . Thanks so much to The Constellation Group for their generous support of the Center and for their commitment to keeping LTC Bullets free to everyone. Won't you help too? Go to to sponsor an LTC Bullet. Find out how you can sponsor other Center activities (e.g., articles, speeches, conference exhibits) by contacting Amy Marohn at 425-377-9500 or ***

*** Forbes magazine has named Sunrise Assisted Living one of the "200 Best Small Companies of 2002." Congratulations to Chairman and CEO Paul Klaassen. Mr. Klaassen is a former Center for Long-Term Care Financing Board Member and current Honorary CLTCF Board Member. According to an October 17, 2002 report by Eli Digital: "It's no small honor for those who receive it. The McLean, VA-based company operates about 200 communities in the United States, Canada and United Kingdom. All of the companies on the list earned a minimum 5 percent net margin over the last 12 months, and all have a five-year average return on equity of 5 percent or greater. Sunrise came in at 141 on Forbes' list . . .." To see the list, go to . ***

*** New content added today to the donor-only zone includes "The LTC Week in Review for October 28 - November 1, 2002: LTC E-Alerts #251-#255." 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 #251--Depression Often Untreated in Nursing Homes
LTC E-Alert #252--Be Among First to Know 2003 Medicare Rates
LTC E-Alert #253--Even Non-Profit Nursing Homes are Losing Money Now
LTC E-Alert #254--Don't Let Your Clients Fall Over the "Medicare Cliff"
LTC E-Alert #255--Oregon Ballot Measure Would Wipe Out Private LTC Insurance

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 . ***


LTC Comment: About ten years ago, in the heyday of Medicaid estate planning, some attorneys tried to team up with medical doctors to encourage their patients to plan for Medicaid nursing home benefits. Several medical journal articles co-authored by lawyers and physicians encouraged MDs to advise their patients to plan early for long-term care by divesting or sheltering their assets to qualify for Medicaid. This partnership of law and medicine could have been a bonanza for the lawyers, but the doctors lost interest as Medicaid planning received increasingly bad publicity and laws were passed (however abortively) to criminalize the practice. Clearly, doctors should not encourage artificial self-impoverishment to qualify for Medicaid. They should, however, encourage their patients and their colleagues to take the risk of long-term care seriously and to prepare financially. Unfortunately, to date, few in the medical profession have taken an active role to encourage responsible long-term care planning.

Fraser Allport of The Constellation Group, LLC recognized this problem and commissioned the Center for Long-Term Care Financing to write a series of four short articles designed to encourage physicians to get actively involved in long-term care planning. What follows is the first article in that series. If you would like to use these articles to help educate the medical profession in your locality about the importance of long-term care financial planning, please contact Mr. Allport at 305-532-1231 or for authorization.

"The Unnecessary Tragedy of Long-Term Care: A Four-Part Series for Medical Doctors," by Stephen A. Moses, President, Center for Long-Term Care Financing ( for The Constellation Group (

Part One: "Ominous Parallels--Medicine and LTC"

If you like what happened to American medicine in the past three decades, you'll love what's happening to long-term care today. If not, read on. You can do a wonderful thing for your patients, your colleagues, your parents, yourselves and your country by helping everyone understand and avoid this unfolding tragedy. Just as physicians and their patients have lost control of health care decisions to impersonal "third-party payors," our most vulnerable aging citizens and their long-term caregivers are suffering a similar fate today. Because of your professional position and the respect you command, medical doctors are uniquely positioned to advise a wide ambit of people about the risk and cost of long-term care. With a little objective information, you can help them and yourself minimize the risk and prepare for the costs. You can also contribute toward solving a major social problem for America. These four brief articles will tell you what you need to know about the unnecessary tragedy of long-term care.

You already know what happened to acute health care over the past century. Employer-sponsored, tax-favored, low-deductible, private health insurance convinced consumers that health care was a "right." They consumed accordingly and drove the cost of health care through the roof. When poor and elderly people could no longer afford medical care, Medicaid and Medicare started paying for them. That went well at first, but demand and cost gradually shot up for these publicly financed programs too. So, government ratcheted down reimbursement and ratcheted up regulations and controls. Medicare instituted a prospective payment system which pressured physicians to discharge patients "quicker and sicker." Similar cost pressures led private insurers to pursue "managed care," by which they hoped to save money by co-opting care management from doctors and their patients. Some of them pursued managed care right into bankruptcy. Today, insurers and providers are dropping out of Medicare managed care programs as fast as medical doctors are dodging low-pay Medicaid patients. We're well on our way to a three-tiered health care system with "concierge care" for the rich, managed care for the middle-class, and low-cost Medicaid-financed care for the poor.

Now let me tell you something you may not already know. Long-term care for the elderly and disabled has followed a similar path. Life expectancy increased rapidly from 47 to nearly 80 years in the last century. By the early 1960s, people were living longer and dying slower, often in homes for the aged at considerable expense. Women, who traditionally provided care for elderly relatives in the home, were less available for caregiving as they entered the formal workplace. Left to their own devices, consumers would have demanded, and the market would have provided, low-cost home and community-based services for long-term care, such as chore services, adult day care, home care and assisted living. People would have ended up in nursing homes only as a last resort when 24-hour-a-day skilled care was required. But that's not what happened.

Instead, in 1965, Medicaid began paying for nursing home care. In the beginning, the program had few eligibility restrictions and paid nursing homes generously. You can guess what happened next. The public isn't stupid. They put grandma in a nursing home, whether she needed that level of care or not, because the government paid for nursing home care. The nursing home industry isn't stupid. They built new nursing homes as fast as they could raise the walls. Before long, demand and cost skyrocketed. So, Medicaid capped the bed supply and the reimbursement rates. Of course, with supply and price capped, demand skyrocketed. As nursing homes could fill all their beds easily by accepting low Medicaid reimbursement rates, quality plummeted. Lucrative private payers migrated to more desirable assisted living facilities, but most people could not afford formal long-term care in any venue. Unfortunately, the public has not saved or insured for this risk, because the government has been giving long-term care away for nearly 40 years.

So here's where we find ourselves today. America has a nursing-home-based, welfare-financed long-term care service delivery system that is faltering. Several nursing home chains have declared bankruptcy and eight percent of all nursing home beds in the country remain in bankrupt facilities. Low Medicaid and Medicare reimbursements, accounting for nearly 80 percent of all patient days, have undercut the nursing facilities' ability to attract quality caregivers. Staff shortages led to poor care, lawsuits, staggering court settlements, and skyrocketing liability insurance premiums. Surveys show many seniors would rather die than move permanently to a nursing home. Yet, more desirable, private-pay "assisted living facilities" are filling too slowly to be profitable. All long-term care stock prices are in the cellar. Our country's home and community-based care infrastructure, where most people would rather receive long-term care, is severely underdeveloped. Most middle-class Americans cannot afford formal long-term care services, but few--only seven percent of seniors and hardly any baby boomers--have private long-term care insurance to pay for the services they need. Finally, an "age wave" of baby-boomer retirees will exacerbate these problems exponentially by the end of the decade.

What's wrong and what can we do about it? To find out, tune in for Part Two of this series: "First Do No Harm."

[We'll publish the remaining three parts of this article as LTC Bullets over the next several weeks.]

*** Stephen A. Moses is President of the Center for Long-Term Care Financing in Seattle, Washington. He was formerly a Medicaid state representative for the Health Care Financing Administration and a Senior Analyst for the Office of Inspector General of the United States Department of Health and Human Resources. He is widely recognized as an expert and innovator in the field of long-term care. For further information, please consult

*** The preceding article was commissioned by The Constellation Group, LLC, a Business and Tax Strategy Think-Tank in Miami Beach, Florida, founded by Mr. Fraser Allport. The United States government encourages the purchase of private long-term care insurance with generous tax benefits for corporations and individuals. For more information, contact The Constellation Group at (305) 532-1231 or consult the company's website: .