LTC Bullet: Out of the Medicaid Frying Pan, Into the Fire

Tuesday, November 30, 2004


LTC Comment: Florida is a stalking horse for socialized long-term care. More after the ***news.***

*** TODAY'S BULLET is sponsored by Target Insurance Services and Claude Thau, who serve LTCI producers nationwide. They say "Target has unique capabilities in helping brokers find and service sponsored markets -- carve-out, association, financial institution, etc. Contact Claude Thau at or 800-999-3026, x2241 to discuss opportunities." Thanks so much, Target and Claude, for your generous support of the Center. Won't you help too? Please go to to sponsor an LTC Bullet. Find out how you can sponsor other Center activities (e.g., articles, speeches, conference "embed" reports) by contacting Amy Marohn-McDougall at 425-377-9500 or ***

*** DAVID ROSENFELD, who co-founded the Center for Long-Term Care Financing with Steve Moses in 1998 and currently works for the Washington State House of Representatives, has accepted a position as Health Counsel to the U.S. House of Representatives' Energy & Commerce Committee.  David's new job will begin when the 109th Congress convenes in a few weeks.  Health policy falls under the jurisdiction of Energy & Commerce, so he will have a wonderful opportunity to help reform Medicaid, advance policy on consumer-driven health care and insurance market modernization, stimulate more private financing of long-term care, and pursue a national response to the medical liability crisis.  We wish David every success in this new, challenging and influential role.  If you'd like to wish him Godspeed, his current email address is . ***

*** WHAT DO PASADENA, MINNEAPOLIS, AND ORLANDO HAVE IN COMMON? That's where you can take the Center's highly praised LTC Graduate Seminar in January. For details on this advanced class--including a syllabus, list of free texts, and testimonials--please go to Pre-registration is required. To reserve your space, please send an email to Amy McDougall at with your complete contact information. Or call Amy at 425-377-9500. She will forward important Seminar details (directions, course texts, etc.) to you. The course fee is $225/person. Here are the details:

PASADENA, CA LTC Graduate Seminar; Thursday, January 6, 2005 from 8 a.m. - 4:15 p.m.; at the University of Phoenix's classroom facility, 299 North Euclid Avenue, Room 201, Pasadena, CA 91101-1531; approved for 7 California CEUs. Registration Deadline: Thursday, December 23, 2004.

MINNEAPOLIS, MN LTC Graduate Seminar; Friday, January 21, 2005 from 9 a.m. - 5 p.m.; location to be determined; approved for 7 Minnesota CEUs. Registration Deadline: Friday, January 7, 2005.

ORLANDO/MAITLAND, FL LTC Graduate Seminar; Thursday, January 27, 2005 from 9 a.m. - 5 p.m. at the University of Phoenix, 2290 Lucien Way, Room 408, Maitland, FL 32751-7057. Registration Deadline: Thursday, January 13, 2005. CEU Status: Approved for 7 FL CEUs. Provider #: 364786. Course #: 51111. This course has been designated by the Florida Department of Insurance as Advanced level. It is intended for the student who has significant knowledge of the subject matter and who has significant experience in the subject matter area. ***

*** CLTC MASTER CLASS SCHEDULE. The Center for Long-Term Care Financing does not endorse specific companies or professional designations, but we are acutely aware of the need for education and certification of LTC insurance agents. We've often found that LTCi agents with the "CLTC" certification rank high in professional knowledge and expertise. We also appreciate the financial support provided to the Center for Long-Term Care Financing by the Corporation for Long-Term Care Certification. As a public service, we will provide each month a schedule of forthcoming CLTC classes with a link to further information. The Corporation for Long-Term Care Certification will offer the "Certified in Long-Term Care" (CLTC) program in a classroom setting referred to as a Master Class on December 2 and 3 in Boston, MA; December 7 and 8 in Glastonbury, CT and Tampa, FL; December 8 and 9 in Richmond, VA; December 14 and 15 in Atlanta, GA and Lynbrook, NY; and on January 4 and 5, 2005 in Bethesda, MD. For more information, call 877-771-2582 or go to .***

*** 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 #4-049--Report Encourages More and Better LTCi Agent Training (Advocates of government financing acknowledge the value of LTCi agents.)

LTC E-Alert #4-058--T-Day '04 is Family Health History Day (Identifying a family history of chronic illness might motivate more people to seek LTCi protection.)

LTC E-Alert #4-059--New Medicare Benefit (Free physical exams for new enrollees starting January 1, 2005 may disqualify many for LTCi protection, so insure first.)

The LTC Data Update #4-040--Low Savings, Later Retirement, More LTCi (People will work longer and save more, which makes LTCi more necessary and affordable.)

LTC E-Alert #4-060--GAO Warns About LTC from VA (Here's one more reason why no privately insurable veteran should depend on the VA for long-term care protection.)

The LTC Data Update #4-041--Aging Stats Galore (Data, charts, and PowerPoint slides about older Americans from a consortium of federal agencies.)

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: Thank goodness for Florida. It already has the aging demographics of the rest of America 20 years from now. We should watch closely what the Sunshine State does in long-term care policy. Emulate its successes if there are any. But avoid its failures.

Alas, Florida is currently on a course that will bloat government spending on long-term care, expand welfare dependency, supercharge Medicaid estate planning, and chill the markets for home equity conversion and private long-term care insurance.

Below are excerpts from a prescient story in the St. Petersburg Times by Stephen Nohlgren titled "Nursing Home Fix Could Backfire," November 26, 2004, . Our analysis follows the excerpts. Thanks to Center supporters Ric Schafer and Barbara Hansen for bringing this piece to our attention.

Excerpts from "Nursing Home Fix Could Backfire":

"Faced with voracious health care costs, Florida wants to change how it cares for its sickest elders.

"Instead of having Medicaid pay directly for costly nursing homes, legislators want to hire private HMOs to care for people at a lower, fixed price. The HMOs vow to keep people at home and use nursing homes as a last resort.

"Gov. Jeb Bush and many legislators have embraced the idea as a humane, money-saving venture. But bureaucrats hashing out the details have encountered a thorny snag: Managed care might end up straining state coffers by working out too well.

"Right now, tens of thousands of families spurn Medicaid because they don't want their relatives living in nursing homes. Offer them at-home care - courtesy of taxpayers - and they might turn up in droves.

"'If we ever put out a sign and say, 'We have these services to help you stay at home,' I think the phones would ring off the hook,' says Debra Shade, director of Neighborly Care Network, which offers meals on wheels, adult day care and other at-home services in Pinellas County.

"With Medicaid gobbling state budgets nationwide, nursing homes make tempting targets. They are so expensive that even middle-income people qualify for state aid. Two-thirds of Florida's nursing home residents are on Medicaid, which costs taxpayers more than $2-billion a year. . . .

"But what if home-based care proves too attractive? What if thousands of new clients come out of the woodwork?

"'That is the fundamental question. We are grappling with that,' said Beth Kidder, an agency analyst. 'We are pretty sure people are keeping out of (Medicaid) long-term care because they don't want to be in a nursing home.'

"If everyone wants at-home care, the potential caseload could be huge. Medicaid supports about 50,000 nursing home residents now. But that pales beside the numbers who might qualify for Medicaid if they tried. . . .

"In theory, many of those people should pay their own way because their income or assets are too high for Medicaid. In practice, elder law attorneys often find legal ways to rearrange finances so middle-class people can meet Medicaid's financial thresholds.

"Opening Medicaid's doors to more at-home services could, indeed, attract a flock of new clients, health secretary Alan Levine acknowledged this month, but Florida can't afford to stand pat. Medicaid takes up one-fourth of all state spending and is growing 15 percent a year.

"If nothing is done, he said, education, transportation, criminal justice and environmental programs will suffocate. . . ."

Read the rest of this article at .

LTC Comment: First of all, diverting people from nursing homes to home care does not save Medicaid money. That's a myth based on comparing point-in-time unit costs for relatively healthy people in or out of a nursing home. Sure, an individual low-acuity patient can be managed more cheaply at home. But across a caseload and over time, home care costs more than nursing home care because people thrive in it, live longer, and end up dying slower in nursing homes at greater total expense in the long run anyway. We should definitely fight for a system that provides home and community-based care for everyone, but we should not expect it to cost less. It will cost more.

That's why leading people to believe they can get attractive home and community-based services paid for by the government is a very dangerous proposition. For every person in a nursing home in America today, there are two or three others, of equal or greater disability--half of whom are bedbound, incontinent or both--who are managing at home with help from friends, relatives and loved ones. Make attractive home-based services more available through Medicaid and these people will flock to the program. This is the well known "woodwork" effect.

But that's not the worst of the problem. The more attractive states make Medicaid services, the more people will seek the help of Medicaid estate planners to qualify for generous benefits. The practice of artificial self-impoverishment to qualify for Medicaid will explode in Florida even beyond its current broad boundaries if the state follows through with current plans. If you doubt this, try a Google search of "Medicaid estate planning in Florida" and see what you find. Ours pulled 77,700 hits in .47 seconds.

With Medicaid more attractive and easier to obtain, even for the upper middle class, what do you suppose will happen to the public's sense of urgency about long-term care? Will they pull together as families to plan for long-term care, or continue as they do now to ignore the risk, avoid the premiums for private insurance, wait until chronic illness strikes, shelter or divert their income, assets and home equity to qualify, and use Medicaid as "inheritance insurance?"

The answer is obvious. Florida will slather grease on the slippery slope of Medicaid dependency if it follows the course described in the St. Petersburg Times article.

So what should be done instead? Medicaid in Florida and everywhere else in the United States could pay generously for all levels of long-term care within current budgets if it didn't have to support so many people. Thus, the key to saving and improving Medicaid is to stanch the program's eligibility hemorrhage and divert more people to private financing. How can we do that? For answers, read "The Realist's Guide to Medicaid and Long-Term Care" at .

"The Realist's Guide" presents an easy-to-understand model. It says: (1) the easier it is to qualify for Medicaid and (2) the more attractive Medicaid's package of benefits and (3) the less risk of Medicaid estate recovery families face, then (4) the lower we should expect a state's long-term care insurance and (5) home equity conversion market penetration to be and (6) the higher the state's Medicaid nursing home census will be.

Let's see what this "Realist's" model says about Florida today. First the independent variables.

Medicaid eligibility is generous in every state, including Florida, because of federal law. For details, consult "The Realist's Guide to Medicaid and Long-Term Care" report. But Florida uses an "income cap" Medicaid long-term care eligibility system which is relatively more restrictive than the "Medically needy" systems used in most states.

Florida ranks 45th in the country in Medicaid home and community-based expenditures per capita. Thus, Medicaid long-term care in Florida is relatively less attractive than in most other states.

On the other hand, Florida recovers only .49% of its total nursing home and HCBS Medicaid expenditures from the estates of deceased recipients ranking it 34th in the country for Medicaid estate recoveries.

Next, the dependent variables.

Florida's long-term care market penetration is relatively low at 6% to 9%. The state's home equity conversion market penetration is close to average, ranking it 28th in the country. Finally, Medicaid nursing home census in Florida is relatively low at 61.4%, ranking it 39th in the country.

In other words, if you think Florida has long-term care problems now with a relatively unattractive Medicaid long-term care program, just wait until they start paying for more attractive services without controlling eligibility. Expect Medicaid rolls and costs to grow exponentially. Expect private financing alternatives like reverse mortgages and insurance to decline precipitously.

What should Florida do instead? Here's a simple solution. Target Medicaid to the genuinely needy, require consumption of home equity by means of reverse mortgages as a condition of eligibility, and enhance estate recoveries. Then, use the savings from these measures to incentivize and educate the public about long-term care risk and encourage everyone to plan early to save, invest or insure for this cost. That is the waiver Florida should be requesting from CMS instead of the boondoggle course it is pursuing now.

Watch for our new report coming soon which applies these "Realist's Guide" principles to the State of Washington, a state already far further along the suicidal policy course that Florida is just beginning to embark upon.