LTC Bullet: Who Should Pay for Long-Term Care?

Wednesday, September 1, 2004


LTC Comment: Who should pay the enormous cost of long-term care? Is LTC a personal responsibility for which people should plan and prepare? Or should government carry most of the financial burden as boomers approach senescence? The SAGE Crossroads hour-long online debate between Steve Moses and Josh Wiener on this controversial topic is now available for viewing. Background and a hyperlink follow, after the ***news***.

*** LTC GRADUATE SEMINAR. Tired of taking LTC 101 over and over again? Want to learn how long-term care in America got so messed up and how you can do well helping to fix it one person at a time? There is nothing else like this course, personally instructed by Steve Moses. For details, including a syllabus and many testimonials, go to . To reserve a seat at one of our forthcoming California programs, contact Amy McDougall at or 425-377-9500. Pre-registration is required. Seven California LTC CEUs have been approved for this program. All registrants will receive detailed directions and links to course texts prior to the class.

Date: Friday, October 8, 2004
Time: 8 a.m. - 4:15 p.m.
Location: University of Phoenix; 2860 Gateway Oaks Drive, Room 113, Sacramento, CA 95833
Cost: $225 per person

Date: Monday, October 11, 2004
Time: 8 a.m. - 4.15 p.m.
Location: To be determined.
Cost: $225 per person
This San Francisco LTC Graduate Seminar will occur only if enough people pre-register. So, if you are interested, don't delay: Call or email Amy McDougall right away at or 425-377-9500 and reserve a seat. We'll let you know as soon as the program is confirmed. ***

Date: Wednesday, October 13, 2004
Time: 8 a.m. - 4:15 p.m.
Location: University of Phoenix, South Coast Learning Center, 3150 Bristol Street, Room 312 Costa Mesa, CA 92626
Cost: $225 per person
Special sponsored luncheon speaker this class only: Ralph Leisle, founder and President of LTCi Decision Systems, Inc., will address the topic "Why LTCi in High Net Households and Executive Markets?" For more information about their LTC Economic Impact Planning software, visit: ."

*** 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 Reader #4-031--Living Longer and Loving It (Link to the Alliance for Aging Research's summer issue of its webzine "Living Longer and Loving It.")

The LTC Data Update #4-032--Sixth Annual LTCi Survey (Who's in; who's out; who's selling what; what's the prognosis for LTCi and much more in this yearly review.)

The LTC Data Update #4-033--Poverty Isn't What it Used to Be (Poor people in the U.S. often have more than the middle class elsewhere reports the Heritage Foundation.)

LTC E-Alert #4-041--Become a Publicist for the Center for Long-Term Care Financing (Our appeal to donors for help distributing the press release on the Center's new report.)

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 .

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. 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: To view the debate immediately, go directly to We welcome your comments on the debate, win, lose or draw. Here's some background followed by Steve Moses' opening remarks.

The Sponsor:

SAGE Crossroads is the premier online forum for emerging issues of human aging. The onset of the senior boom, coupled with new discoveries in aging-related science and technology is setting the stage for great debate on medical interventions and longevity science. SAGE Crossroads aims to be the balanced, "go-to" site for those interested in engaging in lively discussions about the ethical, political, economic, and societal implications of aging-related science. At SAGE Crossroads, visitors will be able to watch, listen and, most importantly, interact with prominent experts in the field of aging. Launched in March 2003 by the Alliance for Aging Research and the American Association for the Advancement of Science (publishers of Science Magazine), SAGE Crossroads provides policymakers, journalists and interested consumers with the opportunity to explore the impact of science and technology on aging.

The Moderator:

A journalist for 35 years, 30 of them in Washington, MORTON KONDRACKE has covered nearly every phase of American politics and foreign policy, and has done so in newspapers and magazines, and on TV and radio. Mort is currently executive editor and columnist for Roll Call, Capitol Hill's feisty independent newspaper, and a co-anchor of Fox News's Beltway Boys. He writes a twice-weekly national column "Pennsylvania Avenue," covering politics, White House-congressional relations, domestic and foreign policy. Kondracke has served as Newsweek's Washington Bureau Chief, executive editor for The New Republic, a panelist on This Week with David Brinkley, columnist for The Wall Street Journal and White House Correspondent for the Chicago Sun Times.

The Debaters:

JOSHUA WIENER, Ph.D. and Senior Fellow at RTI International, has more than 25 years of experience as a health care researcher and government official. He has been involved in federal, state, and local government policy issues since the 1970s. His specialties are long-term care, Medicaid, and health care for the elderly. Dr. Wiener has directed projects analyzing changes in state health policies; the long-term care workforce; Medicaid eligibility for the aged, blind, and disabled; and Medicaid home- and community-based services. He is the author or editor of eight books and more than 100 articles on long-term care, health reform, health care rationing, and maternal and child health. Dr. Wiener has done research and policy analysis for the Urban Institute, the Brookings Institution, the Health Care Financing Administration, the Massachusetts Department of Public Health, and the New York City Health Department of Health.

STEPHEN MOSES is President of the Center for Long-Term Care Financing in Seattle, Washington ( The Center promotes universal access to top-quality long-term care by encouraging private financing and discouraging welfare dependency for most Americans. Mr. Moses is widely recognized as an expert and an innovator in the field of long-term care. McKnight's Long-Term Care News named him "one of the 100 most influential people in long-term care." He is the author of numerous studies and reports on long-term care service delivery and financing. Contact him at or 206-283-7036.

Each interlocutor in the SAGE Crossroads debate was asked to prepare a five to seven minute introduction. The following are Steve Moses' opening remarks.

"Long-Term Care: Who Should Pay?"
Stephen A. Moses

If the question is "Who should pay for long-term care?," the average person will answer "Anybody but me." Denial is not a river in Egypt.

Next best, they'll say "Everyone should pay." Hence, the tendency to pass the financing burden on to government.

Finally, if nothing else works, most people will prepare to pay their own way. That's when they turn to private insurance.

Winston Churchill said "You can trust the Americans to do the right thing, but only after they've tried everything else first."

So, let's ask: What have we tried already in long-term care financing? That is, who does pay for long-term care and what have been the consequences?

Answer: the vast majority of all formal long-term care services are financed by government.

Although Medicaid pays only half the dollars for nursing home care, it covers two-thirds of nursing home residents and touches nearly 80 percent of all patient days with its dismally low reimbursement rates.

Even the so-called "out-of-pocket" expenditures for nursing home care--which are down from 39 percent to 25 percent in the past 15 years--come mostly from Social Security benefits that Medicaid recipients have to contribute toward their cost of care.

At 13 percent, Medicare is a much larger payer for nursing home care than most people realize.

For home care, only 18 percent of the costs are paid by patients. The rest comes primarily from Medicare and Medicaid.

Now, what has this heavy dependency on public financing of long-term care achieved?

We have a severely dysfunctional, welfare-financed, nursing home based long-term care system that serves no one well, least of all the poor.

Long-term care today is plagued by institutional bias, too little home and community-based care, bankruptcies, inadequate revenue, a dearth of capital, staff shortages, access and quality problems, huge tort liability, unaffordable liability insurance, too few full-pay private payers and too many low-pay Medicaid recipients.

How in the world did we get into such a mess?

In 1965, Medicaid came along and started paying for nursing home care.

The nursing home industry saw a huge new source of revenue and built more facilities as fast as they could raise the walls.

The public figured nursing home care was free, so why pay out of pocket for home care or insurance.

That's how institutional bias began and that's why a market for home care, assisted living and long-term care insurance did not develop until decades later.

Before long, of course, Medicaid nursing home costs exploded.

Figuring, "they can't charge us for a bed that doesn't exist," government capped the supply of nursing home beds by requiring certificates of need.

But capping supply only drove up the price as nursing homes raised their rates to compensate. So Medicaid capped what it would pay for nursing home care.

In turn, nursing homes raised rates for private payers to make up the difference. That was the origin of "cost shifting" from Medicaid to private payers.

Over time, Medicaid nursing home census grew and private pay census declined, as fewer people could afford the higher private pay rates and Medicaid eligibility became easier and easier to obtain.

A new practice of law--Medicaid estate planning--evolved to impoverish people artificially so they could qualify for Medicaid without spending down.

But the average person in terms of income and assets could qualify for Medicaid even without such legal machinations because of the program's generous eligibility criteria.

With supply and price capped and eligibility easier and easier to obtain, nursing homes could fill their beds by accepting Medicaid's low rates no matter what quality of care they offered.

Thus arose the access and quality problems that led to heavy government regulation of nursing facilities.

Today, nursing homes are caught between the rock of inadequate reimbursement and the hard place of quality regulation.

Or, as industry executives expressed it once: the government expects Ritz Carlton care for Motel 6 rates while imposing a regulatory Jihad.

In the meantime, both Medicaid and Medicare have played a growing role in financing home care, which most people prefer, but which those programs cannot afford.

The end result is that the public has been anesthetized to the risk of long-term care even as state and federal coffers have been emptied by government's efforts to help.

It's the same old story: good intentions led to unforeseen consequences.

Well, that brings us to the most important question to ask: who WILL pay for long-term care in the future?

Certainly not government. That well is dry. No one is so na´ve anymore as to expect a new publicly financed long-term care system to come along.

More and more, the hard reality is true: if you want access to quality long-term care at home or in the community, you must be able to pay privately for it.

As publicly financed long-term care continues to deteriorate, more and more people will turn to their home equity as the only way to pay for acceptable care.

80 percent of seniors own their homes and 73 percent of those own them free and clear. Nearly $2 trillion is available and easily accessible through home equity conversion, while still retaining use of the home.

As soon as the only choice is "languish in welfare-financed long-term care or spend down your home equity to get quality care," more people will turn to private insurance as a viable alternative.

With more people insured and paying privately at market rates, care choices and quality will improve for everyone, rich and poor alike.

With fewer people dependent on Medicaid, the welfare program will be better able to provide a wider range of higher quality care to the genuinely needy.

We will get to that point by default simply by staying on the current course, but many people will be hurt.

Or, we can remove the perverse incentives in public policy that currently trap people in nursing homes on Medicaid.

The single most important step to take is to stop using Medicaid as inheritance insurance for the baby boom generation.

We need to tighten eligibility, require spend down of illiquid home equity as a condition of eligibility, and enforce estate recovery requirements.

When the choice is "pay me now or pay me later," as in the old Fram oil filter commercial, most people will save, invest or insure for long-term care and everyone will be better off.