LTC Bullet: How Middle Class Medicaid Ruins LTC for Everyone

Wednesday, May 26, 2004


LTC Comment: A Wall Street Journal column mindlessly recommended gifting half a million dollars to qualify for Medicaid which set off two far-more-thoughtful commentators. More after the ***news.***

*** ONLY TWO DAYS LEFT! Early Bird Registration has been extended until Friday, May 28, 2004 for the "17th Private Long Term Care Insurance Conference" in Washington, DC. For more information and to register, visit the conference web site at . Titled this year "Financing Long Term Care: Policy, Politics, and Practice," the longest-running LTCi conference is scheduled for June 23-25, 2004 at the Marriott Wardman Park Hotel. Following are major topics to be covered:

* Public Sector Innovation - Thinking Outside the Medicare / Medicaid Box
* Informing and Educating the Consumer on Long Term Care Financing Options
* Insuring Home Care: Provider and Insurer Perspectives
* The ABCs of Long Term Care
* A National Perspective from Association Leaders
* Medicaid & Money: State Struggles in Long Term Care Cost Control
* Caregiving and Consumer Choice in Long Term Care
* Product Design Trends: Focusing on Core Benefits of Long Term Care Insurance
* Public / Private Innovation - Hear From the Authors

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 on how to Zone In. ***

*** DONOR ZONE HOLIDAY. The Center for Long-Term Care Financing will not publish our daily LTC E-Alerts, LTC Readers and LTC Data Updates for the remainder of this week and Memorial Day. Enjoy the break. But if you just can't bear to go without, take a look at the archives of these informative publications in the Donor Only Zone: . You'll need your user name and password, so if you still don't have Donor Zone access, keep reading for how to contribute and enroll. ***

*** 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.

LTC E-Alert #4-029--Congressional Appeal for LTCi Endorsement Letters (Congressman Lee Terry's (R, NE) office seeks help for a bill to permit distributions from IRAs, 401(k)s and 403(b)s to pay for LTCi premiums.)

The LTC Data Update #4-025--The World of Aging (Access AARP's World Map of Aging with nation by nation demographic data.)

The LTC Reader #4-021--More Reasons Why People--Especially Hispanics--Should Prepare to Pay Privately for Alzheimer's Care (More fuel for good LTC planning.)

The LTC Data Update #4-026--Letter to the Editor on the LTC Counselor (How to get the most out of the "LTC Counselor" highlighted in a recent LTC Reader.)

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 at .

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LTC Comment: Following is a letter to the editor published in the Wall Street Journal (WSJ) on May 17, 2004. It takes WSJ columnist Jonathan Clements to task for a column in which he recommends transferring $500,000 to adult children in order to qualify for Medicaid long-term care benefits. The author of the letter is Ric Schafer. Ric is a Center for Long-Term Care Financing donor, supporter and all-around cheerleader for responsible long-term care public policy. The Clements column, on which Schafer's letter comments, is available online (if you have a subscription to WSJ Online) at,,SB108310487233995209,00.html?mod=article-outset-box

Following Ric's letter are excerpts from a scathing critique of the Clements article by columnist Liz Taylor in the May 10, 2004 Seattle Times: . Ms. Taylor is also a Center supporter and a strong advocate for responsible LTC policy. We've highlighted her work before: "LTC Bullet: In the Lion's Den of Medicaid Planning," Tuesday, March 4, 2003, . Liz Taylor's column runs Mondays in the Northwest Life section of the Seattle Times. As a specialist on aging and long-term care, she consults with individuals and teaches workshops on how to plan for one's aging - and aging parents. E-mail her at or write to P.O. Box 11601, Bainbridge Island, WA 98110. You can see all of her columns at


Letter to the Editor of the Wall Street Journal from Ric Schafer: "Medicaid Can't Be Used as Inheritance Insurance"

The April 28 Getting Going column by Jonathan Clements started as an interesting piece about keeping family retirement money within the family. Sadly, it ended with inane advice that further desensitizes Americans to the possibility of needing long-term care. Mr. Clements writes: "If the parents make an outright gift and later need nursing-home care, they will have fewer assets and income, and thus Medicaid is more likely to pay their long-term-care costs." The "deal" that started with the efficient use of $500,000 now regresses to the suggestion of using Medicaid to pay for care. Sad.

Such commentary is more likely to encourage the belief that, doggone it, Medicaid should pay for my parents' public assistance long-term-care costs even though they might be vulnerable to low-cost care of uncertain quality. After all, my parents might not even recognize the difference in the care they receive, so why spend their money (read: my money) on more expensive home care or care at an assisted-living facility?

State budgets across the country are hurting. Medicaid, America's long-term-care safety net, is suffering. Medicaid was always intended to be, and conventional wisdom still maintains mistakenly that it is, primarily a safety net for the poor. In reality, however, this means-tested public assistance program has gradually become the primary long-term-care payer for nearly everyone, including those who read your article and those with expensive homes, farms, properties and children protecting family assets.

The better message might well be: Medicaid can no longer afford to be inheritance insurance. Therefore, plan early, save, invest or insure for your own longevity. Your family will thank you.

The solution is to reform Medicaid eligibility. Eliminate all asset exemptions and require all applicants to consume their illiquid equity in currently exempt assets, such as homes, farms and businesses, through reverse mortgages before they qualify for Medicaid benefits.

Doing that will save Medicaid for the poor, protect lifetime home use by the middle class, enhance access to quality care for rich and poor and in between, relieve taxpayers, encourage home equity conversion (reverse mortgages) and long-term care insurance, and pump desperately needed private financial oxygen to long-term care providers.

Richard A. Schafer, Minneapolis


Excerpts from Liz Taylor, "When the Well-To-Do Scheme To Use Medicaid, They Get What They Pay For," Seattle Times, May 10, 2004,

". . . It's the old trick of transferring your savings to a family member so that the taxpayers (Medicaid) foot the bill for your care, no matter how wealthy you are. In a newspaper long known for its well-heeled readers, the nonchalance with which this advice was given speaks volumes for how commonly it's assumed to be OK.

"Here's another way to look at it.

"Let's say you want to buy a car. The price of your dream car, a new Lexus, is around $50,000. Rather than use your own money, an attorney suggests you give your savings to your kids and plead poverty. Voil, the state buys you a car.

"You anticipate the delivery with glee. But instead of a Lexus, you get a 1982 Chevy. There are big dings on the sides, the odometer has six digits, and the motor runs rough. 'Hey,' you yell, 'what happened to my beautiful Lexus?'

"'We said we'd buy you a car,' says the state, 'because that's the safety net society has created. But we never promised a nice car. After all, you came to the welfare department for assistance, and we don't have the money for a Lexus. You're poor, so be grateful.'

"And that's what the advisers who propose these eldercare schemes fail to tell you: that Medicaid - our country's safety net for the poorest of the poor - may pay for your care, but beware of the care you get. Medicaid is the payer of last resort because it offers you the poorest quality, provides the fewest choices, and gives you the least control over what happens to you. You don't decide; the welfare department does. . . .

"The outcome? In almost every state, Medicaid budgets are going through the roof. We're a rapidly aging nation, and now, with voters zealously cutting taxes, most states are cutting back on Medicaid, dividing an already small pie among a growing number of people. According to the Center on Budget and Policy Priorities (CBPP), the states are in the midst of the most severe budget crisis in recent memory. . . .

"Cuts are being made, all right, but not to plug those loopholes - almost half the people losing state-paid health insurance (of about half a million people) are children, while generous eligibility rules for affluent older people remain untouched. You can read more at ."