LTC Bullet: The Sirens' Call, The Primrose Path, and Assisted Living

Wednesday, May 5, 2004

Las Vegas, NV--

LTC Comment: Will assisted living facilities that accept Medicaid reimbursement suffer the same fate as nursing homes? More after the ***news.***

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LTC Comment: Medicaid programs all across the country are tempted to divert recipients from expensive nursing homes into less costly assisted living facilities. Assisted living facilities are tempted to accept Medicaid recipients even at the low reimbursement levels they bring, because any revenue on an otherwise empty bed is better than nothing. But that's the same "Hobson's Choice" that nursing homes faced 40 years ago and look what's happened to them! Burgeoning Medicaid census, extremely low reimbursements, bankruptcies, staff shortages, quality problems, skyrocketing tort liability and so on and on. Will assisted living facilities that accept Medicaid face the same consequences? That's the subject of today's LTC Bullet.

The following article by Center President Steve Moses was published in the April 2004 addition of McKnight's Assisted Living magazine. You can also find this article on the Center for Long-Term Care Financing's website at . We thank John O'Connor, McKnight's Vice President and Editorial Director, for permission to reprint the piece. If you would like to subscribe to Assisted Living, contact Maciel Martinez at 646-638-6062 or . The annual subscription fee is $50.


"The Sirens' Call, The Primrose Path, and Assisted Living,"
Stephen A. Moses

Steve Moses is President of the Center for Long-Term Care Financing, a 501(c)3 charitable, nonprofit think tank and public policy organization ( Reach him at or 206-283-7036.

Be careful what you wish for . . . you may get it! That's good advice for the assisted living industry, which is sorely tempted today by the sirens' call of Medicaid funding.

When Medicaid started paying for nursing home care in 1966, reimbursement was generous and regulation was light. As costs rose, however, Medicaid officials clamped down. First, they capped bed supply with certificates of need. Then, they restricted reimbursement levels. With price and supply artificially controlled, demand skyrocketed and nursing facilities filled to 95% of capacity with mostly Medicaid residents. Providers quickly learned that when you're losing money on every customer, you can't make up for it in volume!

Gradually, the nursing home industry became a virtual public utility. Care quality suffered as Medicaid eligibility bracket creep undercut private-pay census. The government responded with increasingly onerous regulations and inspections. The plaintiff's bar piled on, extracting huge and ever-increasing court settlements. Liability insurance premiums skyrocketed leading to a dearth of affordable coverage. The end result is that we have today a welfare-financed, nursing-home-based long-term care system in the wealthiest country in the world where no one wants to be institutionalized.

In a nutshell, as an industry leader told me once, "Medicaid demands Ritz Carlton care for Motel 6 rates while imposing a regulatory Jihad." The assisted living industry should keep that in mind before accepting more Medicaid money.

There is a simple, cost-free solution to this dilemma. If Medicaid required seniors to use the $1.8 trillion of home equity they own before qualifying for public assistance, fewer people would end up on public assistance. The program could then afford to pay market rates for a wider continuum of care, including assisted living.

With reverse mortgages supplementing seniors' income, more of them could afford assisted living without help from Medicaid. More people would buy private long-term care insurance to protect their legacies. Medicaid could get back to its basic business of providing a safety net for the genuinely needy.

And the assisted living industry could avoid learning first hand the bitter lesson: "Who pays the piper, calls the tune."