LTC Bullet: Medicaid Maneuvers Are Dangerous, Warns WSJ

Tuesday, February 24, 2004


LTC Comment: You heard it all here first, but now the rest of the country knows. A Wall Street Journal article published yesterday alerts the widely-read newspaper's affluent readers to the potentially catastrophic downsides of Medicaid estate planning. More after the ***news.***

*** Want to know what the Centers for Medicare and Medicaid Services or CMS is thinking about long-term care? Read Steve Moses's article, titled "Medicaid and LTCI: The CMS Perspective," in Health Insurance Underwriter magazine, Vol. 52, No. 2, February 2004, pps. 41-44, or go online to . ***

*** THE 17TH PRIVATE LONG TERM CARE INSURANCE CONFERENCE, titled this year "Financing Long Term Care: Policy, Politics, and Practice," is scheduled for June 23-25, 2004 at the Marriott Wardman Park Hotel in Washington, DC. For more information, go to or call Diane Fulton at 703-968-8863. Stay tuned to this space for more details as the conference date approaches. In the meantime, visit our Virtual Visit to last year's 16th iteration of this meeting (in San Antonio) at . If you lack the user name and password to view our Virtual Visits, just keep reading for instructions how to Zone In. ***

*** LATEST DONOR-ONLY ZONE CONTENT: Here's the latest Zone content followed by instructions on how to subscribe so you can receive these critical epistles daily by email.

The LTC Data Update #4-007--States Cut the Poor But Leave LTC Loopholes (State Medicaid program cuts hurt poor women and children most, while leaving LTC easier for affluent elderly.)

LTC E-Alert #4-011--Bush Administration Seeks to Close Medicaid Loophole (But it isn't any of the loopholes for individuals you'd expect; the feds target is rather the states.)

LTC E-Alert #4-012--More Centenarians Mean More Need for LTCi (The New York Times Magazine warns at great length about the likely challenges of longer lifetimes.)

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LTC Comment: Kudos to Wall Street Journal reporter Kelly Greene for an eye-opening expose' of Medicaid planning pitfalls. Her article, titled "Medicaid Maneuvers: Getting Uncle Sam to Pay for Long-Term Care Has More Drawbacks Than You Think," published in the February 23, 2004 edition of the Journal, is a much needed wake-up call for prosperous baby boomers who are asleep to the risk and cost of long-term care--for their parents AND for themselves. There's nothing new in this article. You've read it all many times in LTC Bullets over the years. The difference this time is that millions of WSJ readers across the country have the same information. Get a copy of this article and put it in front of as many consumers, reporters, legislators, and policy makers as you can. Reprints are available at or by calling 1-800-843-0008, according to the article. Here's a link to the online version, although you'll need a subscription to access it:,,SB107712130499632726,00.html . Following are some excerpts to whet your appetite for the whole article.


Kelly Greene, "Medicaid Maneuvers: Getting Uncle Sam to Pay for Long-Term Care Has More Drawbacks Than You Think," The Wall Street Journal, February 23, 2004.

"Are you thinking of giving it all away?

"It sounds tempting: By 'spending down' or giving away most of your assets and savings, Uncle Sam will pick up the tab for long-term care, if needed.

"But the strategy -- better known as Medicaid planning -- has more pitfalls than you might imagine. . . .

"Defenders of Medicaid planning consider it a legal form of estate planning that helps individuals protect at least part of their life savings from the crippling expense of a nursing-home stay. Opponents contend that the practice abuses a safety net meant for people with little savings to give away in the first place -- and that Medicaid wasn't created to provide inheritance insurance for parents of baby boomers. . . .

"What follows is a look at some of the biggest snags, drawn from interviews with families of Medicaid patients, financial planners, a former Medicaid analyst and elder-law attorneys:

"o You could wind up in a dump.

"Nursing homes get paid less by Medicaid than by people paying their own bills or using private insurance. As a result, many facilities -- particularly newer, more popular ones -- try to limit the number of Medicaid patients they take. From 1998 to 2002, the total number of nursing homes certified to take Medicaid and Medicare patients dropped 5% to 16,491. . . .

"'It was dark and not as warm and inviting,' Ms. Blackwell recalls. 'The staff seemed a little more harried... . When you see the difference in nursing homes, you think, 'How could anyone in good conscience shelter their money?' All you'd have to do is walk into [the two types of facilities] and see the difference.' . . .

"If you have to enter a hospital, there's no telling where you'll end up afterward. . . .

"'If the nursing home can legitimately replace that person with a private payer, it's going to do it,' says Stephen Moses, president of the Center for Long Term Care Financing in Seattle, a group, with some funding from insurers, that pushes for public policy helping individuals buy long-term care insurance rather than use Medicaid planning. (Mr. Moses is a former analyst for the inspector general of the Department of Health and Human Services.)

"o Home care or assisted living may not be options. . . .

"But there's no way to be sure whether the Medicaid program in your state will be offering any of those alternatives when you need care. Under federal waiver programs, some states offer home health care, but they aren't allowed to spend any more than they would have for nursing-home care. And to qualify for such services, you typically would need to be in medical need of nursing-home care anyway. Assisted living is covered even less frequently under state Medicaid programs.

"'You're literally closing the door to extremely attractive options' by pursuing Medicaid planning, says Marilee Driscoll, an author and consultant on long-term care planning. . . .

"o It could take longer to get government help than you think.

"The federal government lets states go back three years in examining the finances of people applying for Medicaid (and five years for those who have established certain types of trusts). If a state finds that the applicant gave away assets during that time period, it can impose a waiting period before the benefits kick in. . . .

"But a small number of states, including Connecticut, Massachusetts and Minnesota, have asked the federal government for permission to toughen the rules, estimating that they could save tens of millions of dollars a year. . . .

"The federal Medicaid regulator, the Centers for Medicare and Medicaid Services, hasn't decided whether to let the states tighten the rules. But if the changes are approved, a few dozen other states are expected to follow suit. And when rules governing Medicaid planning change, there's no grandfather clause. That means that even if you gave away your assets years ago, you still would have to follow the rules in effect when you apply for the program.

"o States are cracking down in other ways, too.

"Local lawmakers are finding ways to close Medicaid loopholes without waiting for federal permission.

"Among the toughest changes: Starting last August, Washington state slashed the amount of assets that your spouse can keep if you qualify under Medicaid for nursing-home care. Now, spouses still living at home can keep only $40,000 -- down from $90,660. . . .

"o Is your lawyer representing you -- or your children?

"There's an inherent conflict in Medicaid planning. Sheltering the money means your family gets an inheritance. Not sheltering it means you get more control over your medical treatment in later life. That makes it tough for one lawyer to represent both generations fairly. . . .

"o Your assets might not be protected after all.

Some of the estate plans being hawked as ways to protect your savings are, as the saying goes, too good to be true. . . .

"-- Ms. Greene is a staff reporter in The Wall Street Journal's Atlanta bureau.

"Write to Kelly Greene at ."