LTC Bullet--Long-Term Care, Medicaid, and the Government Fiscal Crisis

Thursday, December 5, 2002


LTC Comment: According to the National Governors Association, state governments are currently facing their worst fiscal crisis since World War II. The federal budget has turned from a large surplus to a bigger deficit almost overnight. Medicaid is a big part of the problem. (Donor Zone subscribers, see below: LTC E-Alert #276--States' Budget Crises Worst Since WWII.) And long-term care is the lion's share of the Medicaid problem. The Center for Long-Term Care Financing proposes "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" as the answer. But we also try to bring you other proposals when they have merit. After the ***news***, you'll find the recommendations of James Frogue, Director of the American Legislative Exchange Council's Health and Human Services Task Force.

It should go without saying that private long-term care insurance must be part of any solution to the long-term care financing crisis. Whether people are pointed toward private insurance by good public policy incentives in the future or whether the further collapse of public LTC financing leads them toward private insurance by default, the effect in the end will be the same. Already today, and even more so in the future, access to quality long-term care at the most appropriate level of care will be available first, and perhaps only, to people who can and will pay privately. The only hope to ensure access to quality care for the needy is to get everyone else insured privately.

*** Would you like to order a tape or CD of The Great Medicaid Planning Debate between Center President Steve Moses and NAELA President-Elect Bill Browning? Go to to order online. Or make a tax-deductible contribution to the Center of $250 or more and we'll send you a free recording of the debate. Mail your check to the Center for Long-Term Care Financing at 2212 Queen Anne Avenue North, #110, Seattle, WA 98109 or contribute online at . Then email and let him know whether you'd like a tape or CD. Keep in mind that there were many other great sessions at the LTC Producers' Summit in St. Louis. To buy tapes or CD's of sessions other than The Great Medicaid Planning Debate, go to . ***

*** Tidbit: "True, Medicaid planning remains a core element in an elder law practice and is probably the leading source of clients and revenues for almost all elder law attorneys." (Lawrence A. Frolik, "The Developing Field of Elder Law Redux: Ten Years After," The Elder Law Journal, Vol. 10, No. 1, 2002, pps. 3-4) ***

*** New content added today to the donor-only zone includes "The LTC Week in Review for December 2-6, 2002: LTC E-Alerts #276-#280." 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 #276--States' Budget Crises Worst Since WWII
LTC E-Alert #277--UnumProvident Rebuts 60 Minutes
LTC E-Alert #278--Major LTC Financier Files for Bankruptcy
LTC E-Alert #279--Fearing Dementia More than Death
LTC E-Alert #280--LTCI Deductibility for 2003

Also added to the Zone today are:

The LTC Reader #39--International LTC Comparisons: UK, Japan and Germany
The LTC Data Base #39--International Aging Vulnerability Index Shows Where America Ranks

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 by credit card or direct withdrawal at . ***


"Testimony to the Ohio House of Representatives Select Committee on Medicaid Reform," by James Frogue, Director, Health and Human Services Task Force, American Legislative Exchange Council, October 16, 2002

Thank you for the invitation to come testify this morning on the very important topic of Medicaid reform. Like nearly every other state, Ohio is suffering from a budget deficit that is being caused, in large part, by runaway Medicaid spending.

I will not discuss budget projections or demographics. We all know that Medicaid spending is on a trend that cannot continue and as one wag once commented, "If something can't continue, it won't." Instead I will focus on where to go from here.

Any discussion of Medicaid reform must start with what to do about long term care. It is the biggest chunk of Medicaid spending (at least a third and up to nearly 50 percent in some states) and is growing at a rate that is simply not sustainable.

To crack the long-term care nut, both a carrot and a stick approach are required. The carrot is tax incentives for the purchase of private long-term care insurance among younger people. Policies are very affordable if purchased at age 40 for example. They are cheaper still if purchased younger than that.

By tax incentives, I mean refundable tax credits. Deductions do not help enough people, and non-refundable credits can still leave out up to half the population. Refundable tax credits reach everyone.

Federal refundable credits would be ideal for the obvious reason that the federal government takes the biggest tax bite and the credit could be larger. Ohio can lobby its congressional delegation to support this. A state refundable credit would also be helpful however.

The stick is cracking down on the abuse of Medicaid by people rich enough to pay their own way. Medicaid is not a retirement program for middle and upper class taxpayers with crafty estate lawyers. Medicaid is a program for poor people with no resources. When richer people utilize the system because they feel like they would rather pass on their house to their kids, they are necessarily taking away from the people for whom this program was intended.

80 percent of seniors live in their own home, and 80 percent of those own that home free and clear. While seniors may be cash flow poor, they are asset rich. It is not fair that a 23 year old single mother with $25,000 in annual income and no assets should have to subsidize the long-term care expenses of a 72 year old who lives in a paid off $200,000 home.

Therefore, Ohio must get more creative in going after the assets of seniors who end up with large long-term care expenses. Penalizing estate lawyers who hide assets would be one way to do this. Another would be to increase the so-called look-back provision to ten years to prevent the gifting of assets to heirs so the seniors in question can qualify for Medicaid.

Finally, these laws must actually be enforced. Most state Attorney Generals are less than willing to be seen going after the assets of a senior who just went into a nursing home. It is not politically easy, but it must be done. This is a very tough issue to be sure, but there are precious few alternatives. . . .

[One promising alternative is the Center for Long-Term Care Financing's "LTC Choice" proposal designed to give cash poor, house rich seniors a line of credit collateralized by their estates so they can buy quality long-term care in the private market and delay Medicaid dependency or avoid it altogether. The Coalition for Long-Term Care Financing Reform is actively promoting LTC Choice in Washington State. See our November 8, 2002 "LTC Bullet: Let the LTC Revolution Begin" at and watch for more news soon about the Washington initiative. Ed.]

The Medicaid debate can be described as essentially two camps, having only four debates:

The two camps are the magicians and the spendthrifts. The magicians are those who claim that all we need is better management of Medicaid and everything will work out. Magicians also love lengthy and expensive studies that end up recommending minor tinkering with the system, if any, but never the kind of overhaul required. Spendthrifts would have you believe that the system only needs more money and everything will be fine. Of course they have to answer why, despite the fact the Medicaid has grown from $1 billion in 1966 to approximately $230 billion last year, it is still a system that none of us would recommend our family and friends to join.

The four debates heard almost exclusively in discussions of Medicaid are:

Should we:

1. Raise or lower eligibility requirements

2. Add or subtract benefits

3. Increase or decrease reimbursement rates to providers

4. Play around with the federal match in order to maximize revenue flowing to states.

No one ever seems to question if the system itself needs an overhaul. Maybe instead of having the debates I just outlined, we should focus on how to restructure the current system so that it is as doctor and patient friendly as it can be. . . .

In Washington [DC] the current debate is over whether or not Congress should give states additional billions to help them with ballooning Medicaid costs. This is despite the fact that most states are at fault for their deficits as a result of their aggressive Medicaid expansions during the recent boom years. Giving a higher allowance to a teenager who overspent is no way to teach responsibility.

The states are looking at all kinds of rationing mechanisms designed to hold the line on Medicaid spending. Unfortunately, too few involve giving the patient a greater stake in the system. . . . Going forward, it is important for states to pursue the kind of reforms that increase access to care by empowering patients and by extension, doctors [and other providers]. Ultimately, Medicaid is of no value if its beneficiaries are not getting access to care.