LTC Bullet: The Florida Fulcrum

Wednesday, April 23, 2003

Tallahassee, Florida--

LTC Comment: Florida has today the demographics of aging the rest of America will face in twenty years. The state's experience to date with long-term care service delivery and financing does not bode well for the future. More after the ***news***.

*** The Fifth Annual National LTC Forum, nicknamed "Yes, You Can," will convene May 4-6, 2003 at Caesar's Palace in Las Vegas. Center for Long-Term Care Financing President Steve Moses will participate in the "Opening Session: The Lack of True LTC Marketing" on May 6. Go to for details. The two-day session is designed for producers and distributors of LTC insurance who want an advanced education in marketing. Sixteen workshops and all meals, hospitality functions, cocktail receptions and entertainment are included in the registration fee. A CLTC Master Class, taught by Harley Gordon, precedes the conference. ***


The LTC Data Update #3-011--Scary Numbers on Pensions and Senior Health Care

LTC E-Alert #3-027--Medicare to Cover PETs

The LTC Reader #3-017--Stroke Caregivers Guide

Don't miss our "virtual visits" to major LTC industry conferences in The Zone. You'll find our comparison of the conferences, session summaries, interviews and pictures.

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 archives: . If you do not already qualify for The Zone, 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 . ***


LTC Comment: Most states face budget crises today. Florida is no exception with a $2 billion shortfall. Medicaid costs, especially long-term care expenditures, contribute heavily to the red ink everywhere. The long-term care challenge in Florida, however, is unique. The whole country will watch to see what policy directions Florida takes to improve quality while lowering, or at least, leveling LTC expenditures. How Florida's policy choices turn out will guide other states in the right direction or away from the wrong ones.

Unfortunately, little progress has been made in Florida on long-term care in the past decade. The state's service delivery system remains biased toward nursing home care and heavily dependent on meager welfare financing. LTC providers complain of low Medicaid reimbursement rates and heavy regulation. Staff to provide care is in short supply. Capital to build, operate and maintain LTC facilities is scarce. Tort liability in nursing homes and assisted living facilities is out of control and premiums for liability insurance have skyrocketed. Attorneys profit in Florida's LTC system on the front end through rampant Medicaid planning and on the back end with lawsuits against Medicaid-dependent nursing homes for providing inadequate care. Still, few Floridians purchase private insurance for long-term care. All these problems seem to be getting worse and worse as time passes.

Governor Jeb Bush created an Office of the Long-Term Care Policy Advisory Council in late 2002 with a mandate from the Florida legislature "to examine the continuum of long-term care services in our state and recommend strategies to simplify the process and subsequently improve the quality of life for Florida's current and future elderly population." The Council's membership consists of the Office's Director, Legislative members, Secretaries of Florida's Health and Human Services agencies, and citizens with expertise in the aging field. The Council submitted its first report, titled "Report of the Long-Term Care Policy Advisory Council," on February 1, 2003 to Governor Bush and the 2003 Florida Legislature. This report is available online at . Center for Long-Term Care Financing Stephen Moses will address the Advisory Council's next meeting on April 23, 2003 in Tallahassee, Florida.

Steve's familiarity with Florida's long-term care system began with research conducted there in 1994. As Director of Research for LTC, Incorporated, he directed a study of long-term care service delivery and financing in Florida at the request of the State Legislature. The resulting report, titled "The Florida Fulcrum: A Cost-Saving Strategy to Pay for Long-Term Care," was publicly released on April 21, 1994, almost exactly nine years ago. Below are the Executive Summary and a section titled "The Senior Financial Security Program" from that report. You can read and copy the full report, including 44 specific recommendations to improve Florida's long-term care system, at . Little has changed since its publication, except that the problems identified in the report have become much worse. The recommendations proposed to improve Florida's long-term care system remain as sound and as needed as they were then.


"Universal access to top quality care for rich and poor alike across the entire spectrum from home and community-based to nursing home care." (Common Goal)

"Give me a lever long enough and a fulcrum strong enough and single-handed I can move the world." (Archimedes)

Florida is slipping faster and faster into a fiscal sinkhole. The swamp engulfing the state is health care financing. The mire's deepest quicksand is long-term care costs. As Florida's aging demographics forecast America's in 20 years, the whole country is in danger of sinking into the same morass.

Florida's Medicaid nursing home expenditures have been skyrocketing for years, but providers still say the program pays too little. State expenditures for home and community-based services have declined in real dollars, but seniors say they would rather receive care at home than in an institution. Catastrophic long-term care costs are the biggest financial peril elderly people face, but only four percent of them have purchased private insurance against the risk. Something desperately needs to be done before the baby boomers retire, but public policy is gridlocked.

A prosperous state in the world's richest nation should not despair of providing and paying for quality long-term care for all of its citizens. The current long-term care financing stalemate in Florida contradicts this principle. In nature, however, contradictions do not exist. The best approach to an apparent contradiction is to examine one's premises.

The fundamental premise underlying the long-term care financing system in Florida is that Medicaid is a social safety net which protects middle class people from utter devastation after they have spent down their life savings. Everything follows from this assumption, as I will explain in the text, including budgetary pressures, low reimbursement rates, institutional bias, quality problems, limited access, and discrimination. If the underlying premise is wrong, public policy will have to seek a new locus--a "fulcrum" from which to leverage a solution to these seemingly insoluble problems. That is what this report attempts to provide.

We discovered in this study that, contrary to conventional wisdom, the median elderly individual in Florida who needs nursing home care can qualify easily for Medicaid without spending down. Even people with higher incomes and assets can sometimes obtain public long-term care benefits if they have access to good Medicaid estate planning advice. Until very recently, anyone could give away unlimited assets overnight to qualify for Medicaid in Florida without triggering any penalty. Even now, people can shelter unlimited assets in exempt resources to obtain nursing home benefits immediately. Because Florida does not recover from recipients' estates, asset shelters are equally as desirable as transfers to achieve eligibility for public assistance: "heirs reap the windfall of Medicaid subsidies." (Footnote 1) Florida's infamous "income cap" is a major obstacle to Medicaid eligibility for the upper middle class, but it does not save the state as much money as most people believe.

Under these circumstances, there should be no surprise that very few people pay privately for long-term care or buy insurance, that Medicaid nursing home census and costs are steadily increasing, and that resources available for other critical state services like education, highways, and crime control are dwindling. If Florida moves aggressively to control asset divestiture and recover from Medicaid recipients' estates, the state can reclaim up to $62 million per year. The state can save an additional $160 million per year by reducing Medicaid nursing home census from 67 to 57 percent. These savings are more than sufficient to pay for a new, "medically needy" eligibility system which senior advocates prefer and most analysts recommend. This goal and these savings are achievable within three to five years by educating and convincing the public that long-term care is a major risk, that Medicaid nursing home care is no longer a grant but a loan, and that paying privately or buying insurance is preferable to relying on public assistance.

Florida is not spending too little money on long-term care. It is spending too much counterproductively. This report explains the problem and shows how to lift the state's long-term care financing system out of the hole into which it has been slipping. What this analysis requires from the reader is a willingness to entertain a radically new way of looking at the issue.

Footnote 1: Office of Inspector General, "Medicaid Estate Recoveries," Office of Analysis and Inspections, OAI-09-86-00078, San Francisco, California, June 1988, pps. 47-48.



The politics of aging is changing in America (and in Florida). Today, we are in the latter stage of "third rail" politics. To criticize a senior benefit can still bring instantaneous political death--like touching the middle rail on the subway. But things are beginning to change. The 1989 repeal of the Medicare Catastrophic Coverage Act was the watershed that brought us into the first phase of "greedy geezer" politics. One can already foresee the time when (no matter how inaccurate, unfair, and over-simplified the charge) some politician will lose an election for lavishing one more benefit on "wealthy" seniors at the expense of the long-suffering middle class. The latest furor over Generational Accounting (Footnote 69) is only an early skirmish in the on-coming intergenerational war. The only way to avoid the inevitable carnage in our public benefits programs is to bring all the interested parties to the bargaining table now and begin the diplomacy and negotiation. We have to give something to everybody without undercutting anybody.

Who are the main parties to the long-term care financing debate and what do they want? Seniors want access and quality in home or institutional care without impoverishment or welfare. Taxpayers, and their stewards in government, want limits on Medicaid's explosive growth. Nursing homes and home care providers want more private patients at full-pay, non-Medicaid rates. Long-term care insurers want a level playing field without the competition of free public benefits for the upper middle class. Younger and future generations want to inherit more than a huge public debt. Today, these constituencies are pulling in opposite directions, drawing and quartering the broader public interest. What could harness their energies in a common purpose?

First, we must establish in principle a moral high ground on which everyone can stand with pride and agreement. This is the common philosophy that I found in Florida:

"We have very limited dollars available for public assistance; we must take care of the truly poor and disadvantaged first; the middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation; prosperous people who rely on Medicaid for long-term care should reimburse the taxpayers before giving away their wealth to heirs; seniors and their heirs who wish to avoid such recovery from the estate should plan ahead and purchase quality private long-term care insurance if it is available and affordable."

Next, we must imagine a program structure that achieves everyone's goals without violating these principles. Such a program would have to do six things:

(1) Maximize income and asset protections for single and married seniors who need long-term care.

(2) Eliminate divestiture and estate recovery avoidance.

(3) Secure property in a beneficiary's possession as a condition of eligibility for publicly financed care.

(4) Recover publicly financed benefits from estates when dependents no longer need the assets.

(5) Encourage the sale of long-term care insurance as an alternative to public benefits and estate recovery.

(6) Educate the public on the advantages of avoiding Medicaid dependency and paying privately for care.

Finally, we must show how this program delivers the key values that each constituency wants to achieve. By maximizing income and asset protections, the program eliminates catastrophic spend-down for SENIORS. By requiring a pay-back from estates, it removes the stigma of welfare. By making people pay their own way (pay me now or pay me later), the program creates an incentive (now nonexistent) for people to purchase PRIVATE INSURANCE. By empowering people to pay privately for care with insurance, it diverts families away from dependency on MEDICAID. By sending the HOME CARE AND NURSING FACILITIES more full-pay private patients, the program enhances the providers' commercial viability and reduces their reliance on public financing. By infusing new money into long-term care, it enhances the industry's ability to provide good access to quality care for all patients, private-pay and Medicaid alike. By making people spend their own money, i.e. their insurance benefits, on care, the program encourages a wide continuum of cost-effective home, community-based, and institutional options. By stimulating HEIRS to plan ahead for their own long-term care needs and to protect their parent's estates (i.e. their own inheritances), the program ameliorates the biggest danger we face as a nation from the aging of the baby boom generation.

Footnote 68: This section is borrowed in principal part from earlier reports on Wisconsin and Montana by the author. It articulates the goals to be achieved by the recommendations in the following section. I found no significant differences in the needs and preferences of the key interest groups in Florida.

Footnote 69: Laurence J. Kotlikoff, "Generational Accounting," The Free Press, New York, 1992. According to Kotlikoff: ". . . the baby boom generation has inherited tremendous fiscal liabilities. Yet the fiscal obligations confronting the boomers' children and grandchildren are even larger. Unless generational policy is adjusted and adjusted soon, future Americans will pay at least 21 percent more, even after adjusting for real income growth, than those who have just been born. This 21 percent figure is based on an optimistic scenario concerning prospective government health care expenditures. Ten more years of excessive growth in health care spending could, by itself, more than double the extra payments required of future Americans." (P. 218)