LTC Bullet: The Magic Bullet for Long-Term Care

Tuesday, May 13, 2003

Santa Fe, NM--

LTC Comment: To those who insist "There's no magic bullet for long-term care," we say "You just haven't read the report we posted on the Center for Long-Term Care Financing's website today." More after the ***news.***

*** Bitter Irony: A search for "Medicaid planning" on the New York Times home page found links to the following articles side-by-side with advertisements for Medicaid planners:

April 28, 2003, "Cutbacks Imperil Health Coverage for States' Poor," By Robin Toner and Robert Pear.

April 21, 2003, "States, Facing Budget Shortfalls, Cut the Major and the Mundane," by Timothy Egan.

April 8, 2003, "In Budget Fight With Legislature, Pataki Threatens to Run State With Emergency Bills," by James C. Mckinley, Jr.

The bitterest irony is that so many senior advocates, including LTC insurance supporters, continue to justify Medicaid planning, even as it undercuts the program for the poor and discourages early, responsible LTC planning. ***

*** LATEST DONOR-ONLY ZONE CONTENT: Individual donors of $150 or more and corporate donors to the Center for Long-Term Care Financing receive our daily email LTC Bullets, LTC E-Alerts, LTC Readers, and LTC Data Updates for a full year. You'll also get access to the donor-only zone where these publications are archived along with other donor-only features. Here's the latest Zone content followed by instructions on how to subscribe.

LTC E-Alert #3-031--Assisted Living Workgroup Report Disappoints

The LTC Reader #3-022--How to Plan for Your Own Aging

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: States are struggling to fund their Medicaid long-term care programs. Draconian cuts in eligibility, services and provider reimbursement threaten access to quality care across the country. Conditions are especially bad in Illinois where the state comptroller's office reported recently that Medicaid is more than $2 billion behind in paying creditors, including LTC providers. Illinois officials plan to borrow $1.5 billion to pay overdue Medicaid bills. When Illinois faced a similar Medicaid financing crisis almost a decade ago, the State Department of Aid commissioned a study to analyze the problem and recommend a solution. The result was "The Magic Bullet: How to Pay for Universal Long-Term Care, A Case Study in Illinois," authored by now-Center President Stephen Moses, and published February 1, 1995. We believe this report still correctly analyzes the long-term care financing problem as manifested in Illinois and elsewhere in the U.S. Therefore, we've decided to post "The Magic Bullet," including its dozens of specific recommendations, on the Center for Long-Term Care Financing's website. You can go directly to it at or scroll down to "Points of Interest" on the Center's website at .

Although this report's 88 recommendations can still save state Medicaid programs millions of dollars annually and improve their ability to provide quality long-care to the truly needy, we believe even more effective methods are available today--through enhanced Medicaid waiver opportunities--to achieve the same goals. State officials interested in pursuing Medicaid LTC savings and improvements should contact Amy McDougall at 425-377-9500 or email to schedule a conference call with Center staff. The Executive Summary from "The Magic Bullet: How to Pay for Universal Long-Term Care, A Case Study in Illinois" follows.

Citation: Stephen A. Moses, "The Magic Bullet: How to Pay for Universal Long-Term Care, A Case Study in Illinois," LTC, Incorporated, Seattle, Washington, 1994.


"There is no magic bullet." (Anonymous)
"Where there's a will, there's a way." (Anonymous)

We have all heard the cliché' "There is no magic bullet" applied to complex, seemingly intractable problems. This expression is a common refuge of pessimists and cynics in all walks of life. Especially in the fields of long-term care financing and state Medicaid budgeting, doom-sayers abound who proclaim that disaster lies imminently ahead and no simple solutions exist. The vast and scary literature on aging demographics and entitlement funding certainly seems to support their gloomy prognostications. Sometimes, however, it is possible to reconceptualize a difficult problem and discover an easy solution. That is what we attempted to accomplish in this study.

According to the formal contract between LTC, Incorporated and the Illinois Department of Public Aid, the objective of this project was to "produce a step-by-step plan to save the state of Illinois $320 million per year in Medicaid nursing home expenditures while simultaneously assuring universal access to top quality long-term care for rich and poor citizens alike across the whole spectrum from home and community-based to nursing home care." The final three chapters of this report provide the promised plan to realize this result. (Footnote 2)

To have any hope of achieving such an ambitious goal, however, we had to show that the apparent insolubility of the long-term care financing problem is not a function of the problem itself, but of a fundamental misunderstanding and misinterpretation of the problem. Therefore, we began by distinguishing between two models of the long-term care financing system: the "welfare paradigm" that pervades virtually all analysis of long-term care financing today and the "entitlement paradigm," which represents a radical departure from the common view. In a nutshell: if the welfare paradigm is true--if people have to impoverish themselves to qualify for Medicaid--then the public's failure to avoid welfare-financed nursing homes, seek out inexpensive home and community-based care services, and purchase private long-term care insurance is inexplicable. On the other hand, if the entitlement paradigm is true, if people can obtain free or highly subsidized long-term care benefits from Medicaid even at the last minute, then the otherwise strange behavior of long-term care consumers is completely rational. We should not be surprised that people fail to purchase private long-term care insurance or pay privately for home and community-based services if they can ignore the risks of long-term care and still receive subsidized nursing home care from Medicaid if and when catastrophic illness strikes.

As we examined which of these two paradigms more accurately describes long-term care financing in Illinois, we discovered the following highlights:

o "...nursing home residents in Illinois can easily have several thousands of dollars of income per month and still qualify for public assistance."

o "...someone with a home worth $200,000, plus home furnishings of reasonable value, plus a car worth $50,000, plus burial allotments worth $10,000, plus a term life policy with a $100,000 death benefit, plus $72,660 (or more under court order) to transfer to a community spouse would qualify routinely for Medicaid nursing home benefits in Illinois."

o the "average [Medicaid] caseworker would routinely tell [Medicaid applicants] how to get rid of assets. As long as the applicant gets rid of the assets, the case is easier to handle for the worker, because [we] do not have to set up a spenddown program."

o "I don't identify myself as a public aid worker, but only as a state worker. Once someone finds out where I work, they all have an aunt or a parent or someone who needs to qualify for Medicaid and they insist on asking questions about how to get on."

o "I cannot think of a time that we have found someone ineligible because of an improper transfer."

o "We feel we are left out swinging in the breeze. We try to follow the letter of the law, but when someone squeaks a little, they can make us look stupid by challenging our decision. Pretty soon we don't even question those cases. That is one of the reasons the long-term care system is in a shambles. There are so many special interests. We cannot kowtow to everyone and carry on."

o "If [like the general population]...three-fourths of the caseload once owned real property (mostly free and clear), but divested it in anticipation of potential long-term care costs, then the cost of private liabilities assumed by Medicaid is [close] to $2 billion [for real estate alone]."

o "If half of Illinois' 55,000 Medicaid nursing home recipients have set aside an average of $5,000 each for burial arrangements instead of spending the money for long-term care, the cost to the state in additional Medicaid expenditures is $137,500,000."

o "If two-thirds of Illinois' 55,000 Medicaid nursing home recipients once possessed an average of $4,000 worth of personal property that is exempted at eligibility and excluded from estate recovery, then Medicaid expenditures are $146,520,000 higher than they would otherwise have to be."

o Medicaid nursing home census [in Illinois] has increased "from 60.9 percent in 64.9 percent in 1993."

Clearly the welfare paradigm is undermined and the entitlement paradigm is confirmed by these findings. We believe it is possible to build a solution to the long-term care financing problem from this conclusion. The evidence, the reasoning and the proposed solution form the body of this report. We estimate that Illinois' Medicaid program could save $339 million per year by implementing this report's recommendations. Nationwide implementation of the same recommendations could save the state/federal Medicaid program upwards of $5 billion annually.

Footnote 1: See Appendix A for the original proposal and work plan of this project.

Footnote 2: This Illinois plan applies equally well to other state Medicaid programs that use "medically needy" nursing home eligibility criteria. States that use "income cap" eligibility criteria should refer to The Florida Fulcrum: A Cost-Saving Strategy to Pay for Long-Term Care by the same author at the same address and phone number on the cover of this report.