LTC Bullet: Wall Street Journal Blasts Medicaid Estate Planning Today

Tuesday, February 25, 2003


LTC Comment: Today's Wall Street Journal comes down hard on lawyers who artificially impoverish affluent clients to qualify them for Medicaid nursing home benefits. It also takes insurance companies and agents to task who huckster "Medicaid-friendly annuities." More after the ***news***.

*** Thomas A. Scully, Administrator of the Centers for Medicare and Medicaid Services (formerly HCFA), wrote the following in a February 19, 2003 letter on Department of Health and Human Services stationery: "CMS is very interested in the findings of the Milliman/CLTCF study. We look forward to the information your research may provide, particularly as it involves public policy proposals in the Medicaid program and stimulation of the LTC insurance market." Please read the prospectus for the study to which Administrator Scully refers at . Unfortunately, only two of the 12 sponsors needed to fund this critical research have been found. Please review the prospectus, bring it to the attention of decision makers in your company or organization, and contact Center for Long-Term Care Financing President Stephen Moses ( or 206-283-7036 ) as soon as possible to pledge support. Financial supporters of this research will participate in the design of the project and analysis of the results under the objective direction and scrutiny of Milliman USA, the national actuarial firm. ***

*** Our last LTC Bullet, titled "CareScouting Assisted Living" elicited a critical response from Carl Young, President of the New York Association of Homes and Services for the Aging (NYAHSA) and a member of the Center for Long-Term Care Financing's Board of Directors. Mr. Young challenged CareScout's methodology of using CMS survey data to evaluate nursing homes. He referenced a study conducted by NYAHSA in 2001 titled "Bad Medicine: How Government Oversight of Nursing Homes is Threatening Quality Care." This study, available at : "Identifies a series of key issues surrounding the nursing home survey process, measuring and improving nursing home quality, and media coverage; factually discredits the existing survey process and demonstrates how the process itself is leading to compromised care of nursing home residents; provides the reader with unpublicized but highly relevant information about nursing home care such as resident and family member perspectives, staff quality, viewpoints of surveyors themselves and quality indicator data; and recommends over 40 constructive and achievable strategies to change the ineffectual survey process and focus on measuring and improving quality of care." CareScout President Robert Bua responded to Mr. Young's criticism by acknowledging the CMS survey data is imperfect, by opining that better comparative information is unavailable, and by insisting that his company tries hard to deliver useful and accurate information to consumers. Now let the reader decide. ***

*** LTC Graduate Seminars are definitely scheduled for Green Bay, Wisconsin on March 13, 2003 and New York City (Manhattan) on March 25, 2003. Contact Amy McDougall at 425-377-9500 or for details. ***

*** Donor zone content now goes daily by email to all paid subscribers. Our LTC E-Alerts, LTC Data Base and LTC Reader publications are designed to keep LTC insurance producers and other LTC experts at the forefront of knowledge and professionalism. We track the electronic, trade and academic literature in all LTC-related fields; we choose the reports and articles we think you will find most useful; we distill the information into a quick read (five minutes or less); we add a brief analysis to indicate why we think the information should matter to you; we email you the publication daily; and we archive it all at so you can find back issues when you need them. Our latest donor-only zone content sent during the past few days includes:

LTC E-Alert #3-014--The (Terry) Savage Truth on Long-Term Care Insurance

The LTC Reader #3-008--Oregon Provider Says Medicaid's a Dinosaur, More LTCI Needed

LTC E-Alert #3-015--Do You Pay More for Medicaid than for Your Own Family's Health Insurance?


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 donor zone content and the archives: . To Zone In, mail your tax-deductible contribution of $150 or more to the Center for Long-Term Care Financing, 2212 Queen Anne Avenue North, #110, Seattle, WA 98109. Then email your preferred user name and password (up to 10 characters each). You can also contribute online by credit card or direct withdrawal at . ***


Following are a link to and excerpts from Michelle Higgins' article titled "Getting Poor on Purpose: States Crack Down on Families That Shed Assets to Get Benefits" in today's Wall Street Journal:,,SB1046113343874461543,00.html . Access to the full article online requires a subscription to the WSJ's online edition, but you can find a hard copy (page D1 of the "Personal Journal" section) at any newsstand today.

This article is very important because it breaks a long spell of failure by the national media to cover the problem of Medicaid planning abuse. Renewed interest in the subject stems from the fiscal crises state and federal governments are newly facing. Politicians, policy makers, and the media are again asking the critical question: why are we using scarce public welfare resources to indemnify upper middle-class heirs when nursing home costs are driving Medicaid, properly the long-term care safety net for the poor, into insolvency? Here's the story:


Michelle Higgins, "Getting Poor on Purpose: States Crack Down on Families That Shed Assets to Get Benefits," Wall Street Journal, February 25, 2003, p. D1.

"States and counties have begun to crack down on people who purposely make themselves poor so the government will pay for their nursing-home care.

"For years, thousands of middle-class and even affluent retirees -- terrified that long-term health-care costs could wipe out their savings -- have transferred their assets to relatives in order to qualify for Medicaid, the government health plan for the poor. Their goal is to make themselves poor by Medicaid's definition . . ..

"The upshot is that families, in some cases with net worths of millions of dollars, are going through contortions to spend or give away all their money. Some simply write giant checks to their children, while others splurge on their house. Technically, a person can have a multimillion-dollar mansion and still be considered for Medicaid -- though many states will try to recoup some of the money after he or she dies. New York has an even more bizarre option: A sick husband or wife can transfer all their assets to a spouse, who then refuses to pay for their care. Medicaid then steps in.

"Such practices, while legal, are getting greater scrutiny as states -- which pick up roughly half the costs of Medicaid -- face their worst fiscal crisis in decades. Connecticut, where Medicaid accounts for 20% of state spending, has proposed a regulation that would make it harder for residents to shelter assets.

"If Connecticut receives approval from the federal government, Kansas and other states say they are likely to propose similar regulations. Separately, Nassau County on New York's Long Island has quietly begun sending dunning letters to people who have refused to pay for their spouses' nursing homes.

"There is a lot of money at stake. Medicaid paid $47 billion for nursing-home care in 2001, the most recent year available. Much of that goes to people truly in need. But much -- according to one earlier study, as much as 22% -- goes to families that could afford to pay for months or even years of their own nursing-home care.

"An entire industry has sprung up to help well-heeled seniors qualify for Medicaid. 'We make people poor,' boasts Jennifer Cona, an elder law attorney in Jericho, N.Y., who says she helps several hundred clients a year transfer assets -- sometimes as much as $2 million -- to qualify for Medicaid. Attorneys use trusts and other estate-planning techniques on the larger transfers to avoid gift taxes.

"Often, it is the children who are doing asset transfers on behalf of their sick parents. . . .

"Nursing homes aren't required to take Medicaid patients, but many do. Indeed, even some of the top homes have numerous Medicaid clients.

"Already, elder law attorneys, nursing-home operators and some advocacy groups are lobbying to stop Connecticut from cracking down on asset transfers. . . .

"Of course, Medicaid isn't the only arena where families try to appear poor. Some families also go through machinations to qualify for college aid.

"Exactly how many people shelter their assets in order to qualify for Medicaid isn't clear. The latest research was conducted in 1997 by the General Accounting Office which reviewed case files from two states and found that 13% to 22% of people who applied for nursing-home and other long-term care benefits through Medicaid transferred assets.

"The insurance industry offers its own method for married couples to formally dispose of their assets, while still retaining an income. The tactic works best for couples in which only one spouse needs nursing care. The couple puts all their assets in an annuity, which generates a monthly check for the healthy spouse. The sick spouse is still considered impoverished and receives government-paid long-term care. . . .

"But the main tactic people use is giving money to their heirs. States are allowed to limit this tactic under current Medicaid rules. If they find assets transferred during the three years before someone applies for Medicaid, they can force the applicant to wait for a period of time. The waiting period is determined by dividing the amount of money transferred by the average monthly cost of nursing-home care in the state.

"For example, if a Medicaid applicant made gifts totaling $70,620 in Connecticut, where the average nursing home bill is $7,062 a month, he or she would be ineligible for Medicaid for 10 months.

"But such a person could get around the restriction by transferring the assets at least 10 months before they need nursing-home care. Then Medicaid would pick up the tab from the first day. Connecticut wants to remove that loophole.

"A Fairness Issue

"'It's an equity and fairness issue,' says Claudette Beaulieu, spokeswoman for the Connecticut Department of Social Services. 'People that are able to transfer resources are the ones that can pay for it themselves.'

"This isn't the first time states have tried to crack down on people who purposely make themselves poor. In 2000, a similar waiver request by Minnesota was denied by the Clinton administration because it was more restrictive than the limitations that Congress already had in place.

"Just last week, Minnesota revived the proposal, and is hopeful it will be approved by the Centers for Medicare & Medicaid Services, the federal agency which must approve such waivers. 'We're hoping CMS has come to understand that states are in a budget crisis,' says Mary Kennedy, Minnesota's Medicaid director.

"CMS officials say the agency can't comment yet. However, Bush Administration officials have said they want to give states more flexibility to reform Medicaid.

"Write to Michelle Higgins at .

"How to Impoverish Yourself . . . "


If you want to read the portion of the Wall Street Journal article on "How to Impoverish Yourself," buy the newspaper. We won't repeat that information here. Instead, consider the following question.

Two Bullets ago we asked readers whether it's better to ignore Medicaid planning and hope it goes away or confront the practice openly even at the risk of giving some people ideas on how to abuse Medicaid. Read the responses to this questionnaire below.

Over the years, nationally syndicated columnist Jane Bryant Quinn has written several columns excoriating the practice of Medicaid estate planning, i.e. artificial self-impoverishment to qualify for Medicaid nursing home benefits. She explained once to Center President Steve Moses that she's reluctant to write such columns, even though she feels very strongly on the subject, because her phone "rings off the hook for months" with people wanting to find one of those attorneys who does Medicaid planning.

That got us thinking about the pros and cons of writing about Medicaid planning. Even when you explain the negatives--such as Medicaid's serious problems with access, quality, reimbursement, discrimination and institutional bias--it is impossible to describe Medicaid planning without giving out information people can use to abuse that ailing welfare program.

When we were taken to task by a long-term care insurance executive for explaining the practices and problems associated with Medicaid planning, we decided to bring the question to you, our faithful LTC Bullets readers. We posed it this way:

"Please respond to this Bullet by stating your preference between Positions Number One or Number Two below.

"Number One: The best practice is to publish nothing about the easy availability of Medicaid nursing home benefits and Medicaid estate planning even for the purpose of discouraging the practice and encouraging responsible long-term care planning. It is better to ignore the problem than to publicize it.

"Number Two: The best practice is to inform legislators, policy makers and public administrators about the damage caused by easy access to Medicaid long-term care benefits and to encourage them to target Medicaid more effectively to the needy while encouraging everyone else to purchase private LTC insurance."

No sooner had we posed the question than the LTC insurance executive in question wrote back to challenge our phrasing of his position, correctly predicting that most people would vote for position Number Two. He offered the following alternative:

"Number One: The best practice is to continue to extol the value of purchasing LTC insurance and discuss the negative implications for those pursuing Medicaid estate planning or choosing a 'wait and see' approach to responsible LTC insurance planning. It is better to avoid discussions of the ease with which Medicaid estate planning can be accomplished as well as describing LTC insurance as a sales failure due to the widespread availability of Medicaid estate planning."

If that rephrasing would change some votes, so be it. It is the principle of the thing we're trying to address. Does Medicaid planning impede the marketability of long-term care insurance and contribute to the collapse of that ailing public welfare system? And if so, how can we possibly confront the problem without explaining how Medicaid planning is done and without describing the detrimental influence it has on responsible long-term care planning?

That being said, here are the results of the poll (using the original position descriptions):

Number One: 1

Number Two: 37

Neither: 1

Our thanks to all of you who took the time to reply and comment. (Nearly one percent of subscribers responded.) Here are a few samples of the responses we received.

POSITION NUMBER ONE: The only person who voted for position number one said: "Too many people are not wise to Medicaid's possibilities and listing all the way people can use Medicaid to their advantage when they are not deserving is counterproductive."

POSITION NUMBER TWO: Those who voted for position number two said things like these:

"The best practice is to inform legislators, policy makers and public administrators about the damage caused by easy access to Medicaid long-term care benefits and to encourage them to target Medicaid more effectively to the needy while encouraging everyone else to purchase private LTC insurance. How can you create an argument for and discuss solutions to problems that aren't aired? The sole purpose to being an 'informed' person by its very nature requires you to know both sides of the argument. One cannot argue effectively in a vacuum."

"To seriously believe that the public is not 'already' aware of such 'Medicaid Planning Techniques,' is like being the proverbial 'Ostrich with his head in the sand.' The public does know! They already know that they do not have to pay for all of their LTC. Somewhere they have heard, read or just deduced that the government is going to pay, - some how, some way! They may not know the name for it, or who to contact, - but believe me they know about it. And it is not that hard for them to find out more about the practice, and the biased advice associated with Medicaid Planning. Pick up any Sunday newspaper, or 'Senior Supplement', (Medicaid Planners love them), and you will find at least one half page to a full page ad with an invitation in it for a, 'Free Seminar To Learn How Not To Lose All Your Hard Earned Money To Pay Nursing Home Costs.' Somewhere down the line in that ad you will also see a cloaked remark about 'really' needing LTCI. An LTCI marketing strategy of, 'They Don't Know About It, So Let's Not Tell Them,' in my opinion, leaves the advisor exposed to some very relevant issues that a client can misconstrue into a misrepresentation or a nondisclosure event. When clients then find out more about Medicaid Planning, (and they will), the outcome of such a concealment practice can then only be one that leads to 'buyers remorse', - in the product and in the advisor, - which will then ultimately lead to the client's distrust of that advisor, and all future recommendations. Therefore, my vote is for 'Position Two'. Better to be truthful and honest upfront, - and that includes full disclosures of the alternatives to LTCI. In doing so, the client, if he/she becomes one, now has a better understanding of the issues involved, and can now defend his/her choice for buying LTCI, - and hopefully convince others that LTCI is the 'Right' decision. Yes, you can lose potential clients this way, - but on the other hand you do sleep better!

"As an asset preservation specialist, I do bring up Medicaid planning in my seminars, but emphasize not to plan for this due to quality and choice issues. These seniors are smart and well read. They already know about Medicaid availability. In our education, we need to dispel this notion that the government will take care of you, not ignore it."

"We need to spread the word that too many people depend on Medicaid and the quality of care suffers because of it. Medicaid budgets are in trouble and states are trying to find ways to cut benefits or restrict eligibility. . . ."

"I have always been a proponent for full disclosure. Unfortunately, many Americans, including the narrow minded politicians, have taken the stand of the ostrich. Put you head in the sand and the problem will go away. And WHAM! the demise of the ostrich . . . never knew what him. I feel we all have the responsibility to make everyone we come in contact with to understand the ramifications of their decisions, and most importantly make informed decisions."

"Number Two, because armies of financial planners are telling seniors of the benefits of easy Medicaid access, and estate planning, anyway. There is clearly some risk in publicizing the issue, but in the longer term, we need to function in a transparent market with all the facts on the table."

"If you DO NOT alert people, then those who are promoting the use of Medicaid for LTC will suggest the reason we never mention it is because it undermines our ability to 'sell a product.' Thereby increasing their argument."

"We can bury our heads in the sand and assume that people are not aware of the estate-planning option. But realistically, I know they talk to their friends, they get postcards in the mail, they see ads in the newspaper that strongly hint at the availability of methods 'to help protect you from nursing home expense without purchasing Nursing Home insurance'. (That in itself is deceptive since most long-term care is provided outside the nursing home.)"

"We simply have to broadcast effectively and efficiently the message to public policy leaders/officials that Medicaid planning will render the current LTC system for the indigent bankrupt (if it isn't already in fact) and incapable of meeting the needs of those truly in dire need of ltc services in facilities."

"To be honest, I would ask the Long Term Care executive to identify 100 people who DON'T already know that Medicaid pays for Skilled Nursing Care. Significant growth in LTC insurance has been stagnant since its inception for this very reason. What people NEED to know is how it negatively affects the care they will actually receive and how it will ultimately collapse the system. Keep up the education of both the policy makers and the public. That's how change is made."

NEITHER POSITION: The one person who took neither position said:

"I don't think this is an either/or situation: I agree with the position that it can be counterproductive to publicize the ease of qualifying for Medicaid. However, I don't agree that it is better to ignore the problem. This situation is like a bank robbery: We don't want to teach the general public the details of a successful robbery. However, instead of ignoring the problem altogether, we need to determine who is in charge of bank policy and security and teach them how to prevent the drain of funds. I prefer a positive message to the consumer about the advisability of preserving choice with LTCI, at the same time informing legislators, policy makers and public administrators about the damage caused by easy access to Medicaid."