LTC Bullet: Medicaid vs. LTC

Wednesday, November 17, 2004


LTC Comment: How does Medicaid impact long-term care? Let us count the ways. After the ***news.***

*** Benjamin Lipson, a Boston-area insurance author, critic, and agent, took issue with our rumor-based speculation in a recent LTC Bullet that he often recommended Medicaid estate planning in a column he used to write for the Boston Globe and that this could have resulted in the termination of his column. Based on a personal conversation with Mr. Lipson, we stand corrected, retract the comment and regret the error. ***

*** LONG-TERM CARE GRADUATE SEMINARS COMING TO PASADENA, MINNEAPOLIS AND ORLANDO (MAITLAND) THIS JANUARY! Steve Moses will present this highly regarded class on Thursday, January 6, 2005 in PASADENA, CA; Friday, January 21, 2005 in MINNEAPOLIS, MN and Thursday, January 27, 2005 in ORLANDO (MAITLAND), FL. Pre-registration is required. For more information on time, location, registration, etc., please contact Executive Director Amy McDougall at 425-377-9500 or Tuition is $225 for the full-day program. Check out the syllabus, rave reviews, and other details at . We call this class a "LTC graduate seminar" because it is intended for experienced and knowledgeable insurance agents, financial advisors, attorneys, and LTC providers. Instead of sitting through another dose of LTC 101, you'll be getting an advanced program available nowhere else from a leading national authority on long-term care service delivery and financing. ***

*** Full details about the Society of Actuaries' "Fifth Annual Intercompany Long-Term Care Insurance Conference" to be held at the Rosen Centre in Orlando, FL January 23-26, 2005 are now available at Check it out and watch this space for more about the conference in the weeks ahead. ***

*** NOTE THAT OUR JANUARY 27, 2005 LTC GRADUATE SEMINAR in Orlando, Florida is scheduled to coincide with the SOA LTCi Conference. Cover them both in one trip. ***

*** 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 #4-057--De-Voted Elderly (Should people in nursing homes with dementia vote and who should be allowed to "help" them with their choice?)

The LTC Reader #4-046--Talking About Medicare (A new information source on Medicare from the Kaiser Foundation falls short in Medicaid and LTCi sections.)

The LTC Reader #4-047--Therapeutic Lying (Is it OK, even recommended, to lie to Alzheimer's patients to keep them happy?)

The LTC Reader #4-048--Columnists Recommend LTCi (Links to two rare articles that are unequivocally positive toward private LTC insurance.)

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LTC Bullet: Medicaid vs. LTC

LTC Comment: Ever since Medicaid became part of the Social Security Act in 1965 it has impacted, often negatively, the long-term care marketplace.

By paying exclusively for nursing home care, it created "institutional bias" and discouraged the development of privately financed home and community-based services.

By exempting substantial income and assets, it anesthetized the public to the risk of long-term care and impeded the market for private financing alternatives such as LTC insurance and home equity conversion.

By paying too little for care, it created staff shortages, quality problems, tort liability, skyrocketing liability insurance premiums, and widespread nursing home and home health bankruptcies.

To reverse these problems, Medicaid should be re-directed toward its original intent: to be a safety net for the truly needy. For details on how to do that while improving access to and quality of care for everyone, see "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle" at and "The Realist's Guide to Medicaid and Long-Term Care" at .

In the meantime, following below are excerpts from and a link to a very disturbing "issue brief" about yet another negative impact of Medicaid on long-term care. It explains and analyzes Medicaid's treatment of long-term care insurance benefits.

For example, what if your LTCi policy pays too little for you to afford care, but too much for you to qualify for Medicaid?

Or, what if you still qualify for Medicaid, but all your LTCi benefit check has to go to offset your cost of care under Medicaid?

Why pay the premiums for private LTC insurance if you'll end up on Medicaid anyway with all the access and quality problems that entails?

We ask these disturbing questions and refer you to this provocative paper in the hope that long-term care providers, insurers, consumers, and advocates will take a greater interest in resolving the many conflicts between public and private financing of long-term care.

Welcome to the mind-bendingly complex world of Medicaid long-term care eligibility, which judges have likened to a maze and a "Serbonian bog."


Excerpts from Enid Kassner, "Private Long-Term Care Insurance: The Medicaid Interaction," Issue Brief Number 68, AARP Public Policy Institute, May 2004, .

No set of excerpts could capture the complex eligibility issues described in this paper so we'll stick to its "Abstract" and "Hypothetical Example" here. Consult the issue brief itself, available at the hyperlink above, for details on Medicaid LTC eligibility rules and a discussion of the "Policy Issues" involved. Footnotes are omitted from the following excerpts.

Abstract: "Does long-term care insurance help purchasers preserve their assets and avoid Medicaid? The purpose of this issue brief is to explore the complex interaction of Medicaid and private long-term care insurance and highlight the policy implications for those who may 'fall through the cracks' in their coverage."

"Hypothetical Example

o Mrs. Smith, age 83, has a private long-term care insurance policy that reimburses her up to $80 per day for nursing home care - an amount that was considered adequate when she purchased her policy (and is close to the current average nursing home insurance payment of $81 per day).

o She now needs nursing home care and wants to enter a facility that charges private pay residents $150 per day (the current national average).

o Her only income is her $900 monthly Social Security benefit ($30 per day - close to the average monthly Social Security benefit of $922 in 2004).

o Mrs. Smith's insurance policy and Social Security income are inadequate to cover the private pay rate in her nursing home of choice.

[$150 - $110 ($80 private insurance + $30 Social Security) = $40 per day shortfall.]

o Assuming that Mrs. Smith meets functional eligibility requirements and has few assets, she would be eligible for Medicaid...or would she?

o Unless her insurer paid the nursing home directly (which few do), or she was able to assign her benefit to the nursing home, the Medicaid program would consider Mrs. Smith's $80 daily insurance benefit to be income. Combined with her Social Security benefit, Mrs. Smith's monthly income, for the purpose of determining Medicaid eligibility, would be $3,300.

[$80 x 30 = $2,400 (private insurance) + $900 (Social Security) = $3,300]

o The simplest way for states to determine nursing home eligibility is the income cap rule, which most often is 300 percent of SSI. With her insurance payment, Mrs. Smith's income would far exceed the 300 percent amount. [$80 per day insurance payment + $30 per day Social Security = $110 per day x 30 days = $3,300 per month - nearly double the 300 percent of SSI standard of $1,692 per month.] However, without the insurance benefit, her $900 Social Security benefit would easily qualify her for coverage under the income cap rule.

o Even if the state had a medically needy eligibility program for nursing home residents, Mrs. Smith is likely to have too much income to qualify for Medicaid. This is because the Medicaid nursing home payment rate is generally considerably lower than the private pay rate. Let's say the Medicaid daily rate in her state is $90 (close to the national average of $96).

o In making the Medicaid eligibility determination, the state would subtract $90 (the Medicaid rate, not the private pay rate of $150) from Mrs. Smith's daily income of $110. The result would be $20 per day in countable income, or $600 per month. This amount exceeds the monthly federal SSI payment of $564 - the most common income guideline used to determine Medicaid eligibility for the elderly. (Some states require even lower levels of income in order to qualify.) Unless the state allows additional deductions from income, Mrs. Smith may not qualify for nursing home coverage under the medically needy rules. If Mrs. Smith's policy required her to pay premiums even while in the nursing home, this would be one more eligible deduction from her income that could possibly help her to qualify for Medicaid. Many (but not all) private insurance policies allow the insured person to stop paying premiums when they are in claim status.

o If, on the other hand, Mrs. Smith did not have private insurance, the $90 daily Medicaid nursing home cost would be subtracted from her $30 daily Social Security benefit. She would be income-eligible for benefits, since her (negative) income would be far lower than the Medicaid payment rate.

o The net result is that Mrs. Smith could find herself in a "catch-22" situation, in which her insurance benefit is inadequate to pay privately for care, yet affords her too much income to qualify for Medicaid. Mrs. Smith has two alternatives:

o Keep her policy, disqualifying herself for Medicaid, and try to find a nursing home that will accept $110 per day; or

o Cancel her policy and qualify for Medicaid, resulting in increased public expenditures. (Under this alternative, she also loses the benefit of all the premiums she has paid.)"