LTC Bullet: Foxes Guarding the Chicken House

Thursday, December 2, 2004

Washington, DC--

LTC Comment: What would a Medicaid planner and a nursing home litigator have to say about the ethics of Medicaid estate planning? The answer after the ***news.***

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LTC Comment: Medicaid estate planners load up nursing homes with Medicaid residents by artificially impoverishing their affluent clients. Then Medicaid, shrugging under the fiscal strain, pays nursing homes too little to ensure quality care. When bad outcomes inevitably occur, nursing home litigators--another kind of attorney--sue the nursing homes. The resulting multi-million-dollar court settlements drain much-needed resources from America's long-term care service delivery system. But they provide a windfall to the litigators and the Medicaid recipients' heirs, who--thanks to the Medicaid planners--didn't even have to pay for their parents' long-term care.

This symbiotic relationship between Medicaid planners, nursing home litigators, and adult children with financial conflicts of interest is technically legal but utterly corrupt ethically. It hurts the elderly by diverting them from privately financed home and community-based care into welfare-financed nursing homes. It hurts the genuinely needy who depend on Medicaid as a safety net by undercutting the program's ability to pay for quality care at any level. It hurts home care and nursing home providers by reducing the number of market-rate private payers and increasing the number of low-pay Medicaid payers. And of course it chokes the market for private financing alternatives like home equity conversion and private long-term care insurance.

Thus, our ears perked up when we came across an article in an elder law journal co-authored by a Medicaid planner and a nursing home litigator about the "ethics of Medicaid planning." What follows are excerpts from that article followed by our closing comment. We've edited out long passages of psycho-babble about "principlism," "nonmaleficence," "beneficence," etc. What we've included makes sense until you reach the "kicker" at the end.


Excerpts from Timothy L. Takacs (the Medicaid planner) and David L. McGuffey (the nursing home litigator), "Revisiting the Ethics of Medicaid Planning," NAELA Quarterly, Vol. 17, Issue 3, Summer 2004, pps. 29-37, footnotes omitted.

"In this article, we turn our attention to whether Medicaid Planning is ethically justified in the context of family wealth preservation. More to the point, does Medicaid asset protection planning, if its principal purpose is to pass those assets to the next generation, serve the interests of our Client-Elders?

"We don't think so - not if the goal of protecting the Elder's assets takes priority over the goal of bettering the Elder's life. Asset protection, alone, abandons the well-being of the living Elder and, thus, is contrary to the purpose of Elder Law. Asset protection, alone, pits the Elder's well-being against the interests of her heirs, creating a conflict. Our conclusion is that Elder Law Attorneys should resolve this conflict in favor of the Elder and that a failure to do so is unethical. . . ." (pps. 29-30)

"There is, unfortunately, no compelling reason to assume the elder's needs will be met in a nursing home. The shortcomings in nursing home care are well known. Recent studies indicate that the quality of care in nursing homes remains deficient. Deficiencies in good nursing home care have been laid directly at the doorstep of inadequate staffing. According to a major federal study, more than 90 percent of nursing homes do not have enough workers to take proper care of residents." (p. 34)

"In problem-solving for clients, Elder Law Attorneys should be mindful of general demographic trends and should make themselves aware of the Elder's [sic] client's specific wishes. Generally, when needs must be addressed, most Elders want them satisfied at home. Of those persons over age 70 living in the community and seriously ill, research shows that 29 percent say they would rather die than go to a nursing home. Of equal significance, home care tends to improve overall health. Regarding the specific client, there is no substitute for taking the time to speak with the Elder or, if that is not possible, exploring other means of determining the Elder's wishes.

"Absent an understanding of Medicare and Medicaid home health programs, as well as other caregiver resources available in the community, the Elder Law Attorney's planning will focus primarily, if not solely, on asset protection. Elder Law Attorneys who do not familiarize themselves with those programs and resources will be more likely to leap directly to nursing home care. Nursing home care, however, will separate the Elder from a familiar environment, will impose a more rigid schedule on the Elder and, even if family visits are not physically impeded, will make them more clinical. Where the Elder Law Attorney lacks expertise necessary to recommend home health options, utilization of a geriatric care manager may be appropriate." (p. 35)

"The [mostly Medicaid-financed] 'system' does not fund assisted living and provides home health care in an inconsistent fashion. As a consequence, the long-term care financing system is biased in favor of providing long-term care in an institutional setting, which usually means a nursing home, even though it costs less to support individuals in their own homes and communities." (p. 35)

"The Elder Law Attorney should be able to discuss understaffing and related problems that occur in nursing homes and other long-term care facilities and how the Elder's funds can be used to ameliorate those problems. That is, the Elder Law Attorney must be familiar with the resources available in her community and how much those resources cost.

"Mom's Children are the remainder beneficiaries of her estate. Money she does not spend for her own care can be expected (and it is expected, by the Children) to accrue to the benefit of the Children. The Children, one of whom is Mom's attorney-in-fact, acknowledge that they have a conflict of interest. If Mom could speak clearly and loudly in her own voice, what would she want? All of her money to be paid to the nursing home? None of it? Some set aside for supplemental care? Self-serving declarations that 'Mom and Dad would never want all of their money to go to the nursing home' do not rise to the level of certainty of choice required to implement a Medicaid Plan that sets aside nothing for Mom's supplemental needs during the remainder of her actual life expectancy." (p. 36)

"The current recession brought on diminished government revenues, which has caused a tightening of eligibility for Medicaid. The elder law attorney with a solely transactional practice, focused on Medicaid, will see a drop in case numbers as the eligibility gateway closes. The elder law attorney who can handle health-care crises will see an increase in the number of such cases, and an increase in demand for good fiduciary management to make the private pay dollars last longer." (p. 37)


LTC Comment: Now, here's the kicker. After all this verbiage about the best interests of the elderly client and the adult children's conflict of interest and the deficiencies of Medicaid and nursing home care, the authors recommend a "Medicaid plan" in closing that results in a client with $100,000 becoming eligible for Medicaid in only three months instead of seven months as in the unethical plan they presented and criticized at the beginning of the article. Their "ethical" plan gives the Medicaid planner a fee of $7,500 instead of a paltry $5,000 in the unethical plan. In both plans, $10,000 still goes to an "irrevocable funeral contract," thus indemnifying the heirs for the cost of burying their parents while transferring the cost to Medicaid. To paraphrase an old saw: "oh what a tangled web we weave when first we practice to justify Medicaid planning."

And lest you think these apologists represent the mainstream of Medicaid planning, here's what the Naela Quarterly's editor said about the article: "Timothy L. Takacs and David L. McGuffey team up to focus our attention on the question of whether Medicaid Planning is ethically justified in the context of family wealth preservation. The article directs a provocative inquiry that may well raise the hackles of some by contending that Medicaid asset protection planning does not serve the interests of our clients if the primary purpose of preserving those assets for the next generation takes priority over the improved quality of the Elder's life." (A. Frank Johns, "Guest Editor's Column," NAELA Quarterly, Vol. 17, Issue 3, Summer 2004, p. 3.) In other words, the preceding comments about the ethics of Medicaid planning are far from the prevailing view among Medicaid planners, most of whom are far less self-critical.

[We know, respect, and often quote attorney Tim Takacs, a co-author of the article excerpted above. He is one of the few Medicaid planners struggling to come to grips with the dangerous consequences and ethical complications of Medicaid estate planning. Stay the course, Tim.]