LTC Bullet: USA Today Blasts Medicaid Planning, Urges Reform

Tuesday, July 8, 2003


LTC Comment: State and federal budget crises, worsened by exploding Medicaid costs, are inciting renewed local and national media criticism of Medicaid estate planning. Growing interest in home equity conversion and private LTC insurance, the logical solutions, won't be far behind. More after the ***news.***

*** Remember our LTC Bullet about Liz Taylor, the intrepid senior advocate and health care columnist who "told it like it is" to a group of Medicaid planners? ("LTC Bullet: In the Lion's Den of Medicaid Planning," March 4, 2003, ) Ms. Taylor has a six-part series on long-term care insurance coming out bi-weekly in the Seattle Times. You can read the first column, titled "Longer Lives, So Long-Term Insurance is Becoming a Must," at . The remaining five columns will be published every other Monday starting July 14. ***

*** Tapes and CDs of The Great Medicaid Planning Debate between Center President Steve Moses and NAELA [National Academy of Elder Law Attorneys] President-Elect Bill Browning are still available. To get yours, go to to order online. Or make a new 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 . ***

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LTC E-Alert #3-043--Latest Medicaid Eligibility Cuts Hit Poor Women and Children More than Seniors

LTC E-Alert #3-044--LTCI is for the Giver As Much As the Receiver of Care

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Based in part on a long interview with Center President Steve Moses, USA Today editorialized yesterday (July 7, 2003) against the practice of Medicaid estate planning. You can read the article, titled "Loopholes Let Well-Off Seniors Skirt Medicaid Rules," at . Bill Browning, President of the National Academy of Elder Law Attorneys, defended Medicaid planning in a side-by-side counterpoint article titled "Expand Long-Term Care," which you can find at . (Steve Moses debated Bill Browning at the National LTCI Producers Summit in St. Louis, Missouri last November in a program titled "Medicaid Planning: Damned or Destined." See the ***news*** item above for how to order an audiotape or CD of the program.)

Below are some excerpts from the USA Today article and from Browning's rebuttal followed by our comments on both.

From "Loopholes Let Well-Off Seniors Skirt Medicaid Rules" by the USA Today editorial board.

"[M]any states are cutting aid only to the poor while sparing a huge - and unintended - Medicaid benefit enjoyed by middle- and upper-income families: nursing-home stays. These households are taking advantage of loopholes in the law to hide elderly relatives' wealth so the seniors can qualify for costly long-term care at public expense.

"A fairer way to limit Medicaid costs would be to curb services for those best able to afford them. States, however, have been reluctant to tighten eligibility rules exploited by middle-class voters. As a result, all taxpayers are being forced to pay higher nursing-home bills, which top $40,000 a year per patient and consume one in five Medicaid dollars. . . .

"According to a recent Connecticut survey, more than a third of seniors in the state shifted assets to qualify for Medicaid, instead of dipping into their personal savings to cover nursing-home bills. An earlier federal study found that as many as 22% of nursing-home patients relied on tricks to qualify for Medicaid payments. If such loopholes were closed nationwide, the savings could total $4 billion a year. . . .

"While limiting access to Medicaid's nursing-home benefits won't solve state budget crises alone, it is a fair place to start.

"The need to rein in spending does not require states to make the poor suffer even more so those who are better off can protect their inheritances."

LTC Comment: One critical point the USA Today editorial missed is that most middle class people qualify for Medicaid nursing home benefits without any fancy legal footwork, much less outright illegality. Anyone with too little income to pay private nursing home rates and unlimited assets (as long as they're held in exempt form such as a home, business, auto, etc.) qualifies. Only the most well-to-do need the help of a Medicaid planner. Thus, Medicaid planning is only the tip of the iceberg. The best solution is to require spend down of illiquid assets through a reverse mortgage as a condition of Medicaid eligibility. This will supplement seniors' income, allow them to retain the use of their home as long as they need it, empower them to purchase quality LTC of their choice in the private market, and delay or eliminate their need for public assistance. See our proposal "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at . For more on what states are doing to target Medicaid more effectively to the needy, stay tuned for Thursday's LTC Bullet.

From "Expand Long-Term Care," by William J. Browning

"State efforts to restrict Medicaid nursing-home eligibility for senior citizens is tantamount to blaming the victim while avoiding the fundamental problem faced by the nation. While Medicare protects seniors from catastrophic illnesses, it doesn't cover most long-term nursing care. And long-term care insurance is either too expensive or not available to most seniors. Meanwhile, the elderly population is increasing at an unprecedented rate, as are health costs. The states and federal government have failed to address this looming problem and even today choose to procrastinate rather than address the underlying problem. . . .

" The facts indicate that a small percentage of middle-class elderly citizens engage in estate planning to limit financial risk of a long-term stay in a nursing home. . . . The data also debunk the myth that millionaires are making themselves poor to get on Medicaid.

. . .

"The state proposals - born from the need to cut state spending, not thoughtful policy discussions - could easily end up hurting seniors who need the help, such as those who failed to maintain all financial records, then suffered a stroke or other illness that led to placement in a nursing home. These proposals will also force many 'well spouses' to choose divorce to keep themselves out of poverty.

"The answer to this national problem is to expand Medicare to include long-term coverage. That might result in an increase in Medicare premiums, but it would fix the nation's fatally flawed system for providing long-term care benefits."

LTC Comment: Browning's rebuttal on behalf of NAELA is full of fallacies and self-serving arguments. For example:

o Medicare does not cover long-term care and never will. The program is insolvent over the long run already, even before the impending addition of a pharmacy benefit. Adding long-term care coverage for the elder boom would be like adding deck chairs to the Titanic.

o Long-term care insurance is neither unavailable nor unaffordable for most seniors. Disappointing LTCI sales are rather a function of the fact that most nursing home and home care is paid for by Medicaid and Medicare already which has desensitized the public to the risk and stifled demand for private insurance.

o The elderly population is not "increasing at an unprecedented rate," at least not yet. But it will soon with the aging of the baby boom generation. If America's LTC service delivery and financing system is failing already, imagine what will happen when the number and proportion of seniors explodes after 2011. We have a narrow window of opportunity to wean the public off Medicaid and Medicare for LTC and to get most people insured privately for this risk.

o The argument that Medicaid planning for millionaires is uncommon is a straw man. Only the most well-to-do need Medicaid planning. The vast majority of elderly who need nursing home care qualify based on income and assets without fancy legal planning, as explained in the LTC Comment above.

o The scare tactic that responsible controls on Medicaid eligibility would cause seniors to divorce is disingenuous and irresponsible. Divorce has been a major weapon in the Medicaid planners' arsenal all along. By targeting Medicaid to the needy, states will encourage most Americans to use home equity and long-term care insurance to purchase quality LTC in the private market. That will save Medicaid for those who really need it, ensure that everyone--rich, poor, and in between--has access to a wider range of higher quality LTC services, vastly increase the incentive for the boomer generation to plan ahead for long-term care, and eliminate the need for anyone to divorce as a means to qualify for Medicaid while preserving assets for heirs.