LTC Bullet: What's Wrong With This Advice?
Wednesday, November 10, 2004
LTC Comment: If you aren't financially or medically eligible for private insurance, should you pull out all the stops to get Medicaid to pay for your long-term care? More after the ***news.***
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The LTC Reader #4-044--"Son, Can I Have the Keys Tonight?" (The American Society on Aging offers a "webinar" for older drivers.)
The LTC Data Update #4-039--MetLife Reports Assisted Living Costs (How much do assisted living facilities charge throughout the United States?)
LTC E-Alert #4-056--Anesthesia and Surgery Predict Mental Decline (New studies suggest ways to help people overcome denial about long-term care risk.)
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LTC BULLET: WHAT'S WRONG WITH THIS ADVICE?
LTC Comment: An article currently posted, of all places, on ProducersWeb.com, presents specious arguments and excuses for Medicaid estate planning. Here's a citation and link to the piece, followed by excerpts and our comments.
Stephen J. Kaufmann, "Medicaid Spendown & Financial Planning (Pt
"Parts One and Two discussed the Medicaid Spendown rules. This article discusses some possible solution and planning strategies.
"Medicaid Planning Strategies
"An experienced Elder Law Attorney can assist a family in qualifying an individual for Medicaid assistance while preserving some, most or all of the assets and income for the person's community spouse, dependent children, disabled children or other family members."
[LTC Comment: If that's true, why buy private long-term care insurance? Note the lack of any disclosure of Medicaid's downside risks, such as access and quality problems, institutional bias, loss of control, discrimination, etc. Condemning people who could have paid for quality home care or assisted living to welfare-financed nursing home care is tantamount to financial abuse of the elderly.]
"It is strongly advised that Medicaid planning not be considered as an alternative for the better option of private long term care insurance - but only as a secondary to protect choices if long term care insurance is not possible or practical because of cost or unavailability due to health reasons. Some Medicaid planning can also be considered in conjunction with limited long term care insurance."
[LTC Comment: This is the disingenuous lip service toward private insurance that Medicaid planners routinely purvey nowadays. Privately and in their conferences, Medicaid planners pooh-pooh LTC insurance by saying most people are too young or too old, too sick or too broke to get it. Using Medicaid planning "in conjunction with limited long term care insurance" refers to the dubious practice of buying three years worth of insurance to cover the Medicaid transfer of assets look-back period. That constitutes coordinating benefits between a quality private insurance product and a bankrupt welfare program, definitely not in any client's best interest.]
"I prefer to call Medicaid planning 'Quality of Life Asset Protection Planning'.
[LTC Comment: No one who understands Medicaid's current weakened state, much less its dismal future prospects, would mention "Quality of Life" in the same breath with the medical welfare program.]
"Some strategies to use well in advance for your client may include:
"Converting Countable Assets to Non Countable Assets . . .
"To the extent that countable assets can be switched over, or converted to, non countable assets, the goal of maximizing the preservation of total assets can be achieved while still being able to qualify legally for Medicaid.
"The goal here is to look for opportunities to switch assets from countable to non countable. Assume an individual couple has cash or other countable liquid assets (CDs, investment accounts, etc. of $100,000 - well in excess of the minimum asset requirement of $2,000, or one-half the community spouse assets allowance. Some things, by way of illustration, they could do are:
"Buy Household Goods and Personal Effects
"Using countable liquid assets to purchase furniture, a new television, video recorder, etc. If, for example $3,000 were used to spend on these items, there would be less countable cash that would have to be spent down on care.
"Make Home Improvements or Repairs on the Personal Residence . . .
"For example, if the total of these items were $30,000, that would make a big dent on otherwise countable assets that would have to be spent down.
"Buy a New Home . . .
"In the extreme example, this strategy could consume up to all the couple's countable assets."
[LTC Comment: One of the reasons Medicaid is such a poor program for the poor is that affluent people are taking advantage of it by sheltering or divesting hundreds of thousands of dollars using techniques like these. They save out enough to pay privately for a year so they can get into the best nursing facilities. Alas, the poor do not have "key money" so they end up in the less desirable, heavily Medicaid-dependent facilities.]
". . . [States] can recover Medicaid cost by placing estate claims on a personal residence after the applicant's death. However, if the applicant is married, no recovery is made against the personal residence. The stay at home spouse may gift or sell the personal residence after the institutionalized spouse has qualified for Medicaid."
[LTC Comment: In other words, don't worry about estate recovery. You can dodge that responsibility too with the help of a Medicaid planner. Congressional intent in mandating estate recovery was to ensure that Medicaid would not be "inheritance insurance" protecting big windfalls for heirs at the expense of a program intended as a safety net for the poor.]
"It is very important to work closely with an Elder Law attorney before employing these strategies affecting the personal residence, or in fact, any of these Medicaid planning strategies." . . .
[LTC Comment: Is it any wonder that agents who sell long-term care insurance struggle to survive financially, whereas Medicaid planners, who can wave a magic legal wand and eliminate the cost of long-term care after the insurable event occurs, prosper easily with such dubious advice and practices?]
"Purchase a Newer Model Car
"Virginia [and federal law] allows the individual one motor vehicle without regard to value. The person, for example may choose to sell his 1987 Ford and buy a 2001 Buick for better security and comfort in traveling on the roads." . . .
"Virginia would not count an irrevocable funeral trust as a countable asset. . . .
[LTC Comment: Is it a legitimate function of Medicaid to pay for long-term care so that people can buy more expensive homes, cars and funerals? At whose expense? Taxpayers? Yes. But private-pay residents in nursing homes have to pony up half again as much as Medicaid for their care. That's called cost shifting. People who also pay LTC insurance premiums are thus triply taxed while the clients of Medicaid planners skate.]
"Medicaid rules are extremely complex. An error could result in outright denial or ineligibility penalties. Medicaid planning or applying for Medicaid should be done with the assistance of an Elder Law attorney." . . .
[LTC Comment: And so these prestidigitators of poverty protect their monopoly. As we've said before, as long as people can ignore the risk of long-term care, avoid the premiums for private insurance, and pass the cost of care to Medicaid, most won't buy insurance and Medicaid will continue its precipitous decline.]