LTC Bullet: Governors Get Going on LTC Reform

Tuesday, April 19, 2005


LTC Comment: Until recently, the National Governors Association (NGA) dragged its feet on Medicaid, especially LTC, reform because of the political sensitivity. No more. What's up? After the ***news***.

*** HEADS UP. This Bullet is longer than most, as it contains extended speech excerpts, so you may wish to save it for review later at leisure. ***

*** TODAY'S BULLET is sponsored by Superior LTC Planning Services, Inc. This independent agency trains agents to own the Superior LTC Brand of LTC Planning in local protected territories. To discuss opportunities, call 1-800-400-0577. Thanks so much, Superior and Founder Allen Hamm, for your generous support of the Center. Won't you help too? Please go to to sponsor an LTC Bullet. ***

*** CHICAGO TRIBUNE cites the Center for Long-Term Care Financing on Medicaid loopholes and long-term care. "That argues for a change in the law, said Stephen Moses, director of the Center for Long-Term Care Financing . . .. 'Many, many people have homes they own free and clear worth hundreds of thousands of dollars. Why should they be turning to a poverty program to pay for nursing home care?' he asked. The solution, Moses and others suggest, is to persuade more people to buy private long-term care insurance policies, which will cover the cost of nursing home and home health care when they become ill, or use creative financial arrangements like reverse mortgages to generate income to cover these expenses." To read the full article, see Judith Graham, "Medicaid Loophole for Middle Class at Risk," Chicago Tribune, April 17, 2005 at,1,3841230.story?ctrack=1&cset=true ***

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The LTC Data Update #5-013--State Health Facts (This excellent online source of state-by-state health data from the Kaiser Family Foundation is newly updated.)

LTC E-Alert #5-023--RAM Update (Latest news on the explosive growth of home equity conversion with information on consumer booklets.)

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LTC Comment: The National Governors Association is finally getting serious about Medicaid and long-term care reform. Until recently, all we heard from NGA were generalities about encouraging home care to save Medicaid money or jaw-boning people to buy LTC insurance. Neither strategy works as long as middle and upper-middle class people can routinely qualify for Medicaid LTC benefits. As we've said here often: If people can ignore the risk of long-term care, avoid the premiums for private insurance, wait to see if they every need care and protect their biggest asset (home equity) while receiving Medicaid-financed long-term care, don't expect them to buy insurance or use reverse mortgages to pay for their own long-term care. Given those conditions, why would you expect anything besides the status quo: heavy Medicaid dependency and skyrocketing costs?

So, what's new? First an overview. Here's a quote from "Governors Plot Revamping of Medicaid," by Pamela M. Prah, published April 15, 2005 on Read the whole article at . "The nation's governors are working behind the scenes on a Medicaid proposal to fundamentally change how states and the federal government provide health care for the needy. Governors are drawing up a reform proposal to present to Congress that goes beyond tinkering around the edges of the nation's most expensive health care program, which now covers 53 million Americans. The changes largely are aimed at curbing the explosive growth in the number of people who turn to government-funded Medicaid for medical care and at cutting the staggering public spending on long-term and nursing home care. . . . States spend an average of 38 percent of their Medicaid money on long-term care and more than half of that on nursing homes, which cost about $57,000 a patient per year. On this front, the governors agree with the president's proposal to clamp down on wealthy seniors who 'game' the system by transferring their assets to reach the poverty level and qualify for government-funded nursing home care through Medicaid."

Recently, Governor Mark Warner (D-Va.), chairman of the National Governors Association, spoke about the importance of reforming Medicaid to target it more effectively toward the genuinely needy. Following are some excerpts from his interview. Keep in mind these are extemporaneous remarks, not a prepared speech, so don't grade him too harshly on grammar and syntax. You can view the webcast and/or read the full transcript at .

"I think we start with the premise that Medicaid, as itís currently structured, over the long haul can't work - that the status quo for the long haul is not an acceptable option. . . .

"[T]he third cost shift is one that we probably don't want to talk about too much because it's one that increasingly is used by not poor or simply big businesses, but is used by maybe some of us in this room, with our parents and grandparents as we go through the process of asset transfers to impoverish our parents and grandparents, so again, they can fall upon the Medicaid. . . .

"I mean the Medicaid system we're currently grappling with, which services more people than Social Security, Medicaid at 53 million Americans, is going to bankrupt all of the states and indirectly then lead to further deficit problems at the federal level over the next decade. . . .

"[I]t ought to be a debate about . . . diminishing the number of people who need to fall onto the Medicaid rolls, while we're looking at things like tax credits like long-term care insurance . . . and we are kind of grinding through it. . . .

"What we have here is an opportunity. We have bipartisan consensus from the nation's governors because this is an issue that can no longer be postponed. This is an issue that when Medicaid reform has been raised in the past, it has often times fallen of its own weight. We think there is a change this year - not over the next few years, but this year - for the governors to come forward with some suggestions on how we can reform Medicaid. . . .

"If you're going to deal with - let's take for example, asset transfer - asset transfer issues need to be dealt with, but it ought to be combined again with incentives to purchase long term care insurance. Simply dealing with asset transfer without an incentive component on the other side is the hammer without the carrot. . . .

"At the same time, I don't think an approach that says, 'Well, the status quo is going to somehow be okay' isn't right either because where Medicaid has gone up and down in the past we have, and has not proven to be as big a burden at some points in cycles in the past, it's no longer the case. With an aging society; with the cost shifts going on by the changing nature of employers providing employee health insurance, the status quo is not going to stand. . . ."

LTC Comment: It is critical to have the political honchos like Governor Warner on board about Medicaid and long-term care reform. But frankly, nothing happens unless their staff are ready, willing and able to implement the necessary changes. That's why recent remarks by Matt Salo, Director of the NGA's Health and Human Services Committee, are so important. Following are excerpts from Salo's speech to the National Association of Area Agencies on the Aging on April 11, 2005. Watch the webcast or read the full transcript at .

"Medicaid Reform: What Changes are in Store for the Medicaid Program? . . .

"What is of acute interest lately, in terms of Medicaid reform, is the fact that while we've always known that Medicaid's been a very large, very important program, it's been the largest health care program in the country for a number of years now, Medicaid, just this past year, became for the first time ever, the single largest expenditure in state budgets. It exceeded K through 12 education and is now the largest part of state budgets.

"To be honest, that frightens a lot of people, especially the governors. So that kind of makes our interest in Medicaid reform a little bit more acute this year. And the things that we're looking at, again, probably come as no surprise to folks who have been around Medicaid and health care. . . .

"Another item, which I think should come of very intense interest to everybody in this crowd, again, an idea put forward by the President, is looking at the issue of assets transfers. People who transfer assets appropriately or inappropriately to become eligible for Medicaid long term care services. And with the great concern that whether through honest mistakes or through intentional or gaming of the system, there are individuals out there who are hiding or transferring or protecting significant or maybe not so significant, amounts of resources in order to end up, essentially, on the dole. And that, again, is of great concern, because the extent to which Medicaid becomes more than just a safety net, it becomes, and I very seriously fear that Medicaid is headed in this direction, a long term care program for all of America. That will very seriously hamper and be injurious to its ability to function and continue in the future as a real safety net. . . .

"And then the third and final point that I think is very critical to the future of Medicaid, and which I think again is coming full circle to things will interest this group a great amount, is the extent to which Medicaid has become the only long term care provider in this country. Medicaid pays for 50% of all long term care dollars in this country. Medicaid covers two-thirds of every nursing home patient in this country. And with the demographic trends the way they are, if that doesn't terrify you, it should.

"I'm not really all about pointing fingers of blame at people who are transferring assets appropriately or inappropriately, but the fact of the matter is, we have a serious trend, again, in the long term care area, where if nobody else steps up, it will continue to be Medicaid, sticking its fingers in all the little leaks in the dyke that are going on in the health care system. And we are going to need a very serious, and I think very painful conversation in this country, about what to do about long term care.

"Most people don't think they're going to need it, and then if they think they're going to need it, oh well Medicare will take care of them. And that's all well and good for you to think that, but it's just not true. And the extent to which we have in this country, sort of an entitlement mentality of I deserve to inherit my parents' house and I deserve to inherit my parents' business and the car and the paintings and the family heirlooms, but you know what, mom needs help, that's somebody else's problem. Federal government, state government will take care of that. They worked all their lives, that's not my problem. That is a problem. And unless we have some very difficult discussions about what are we going to do about this, then Medicaid will continue to be the default answer and as it goes from 22% of state budgets to 25% and 30%, and continues to squeeze out higher education and education and transportation and corrections, the Medicaid program will collapse. And I don't say that to be an alarmist, because it really is true.

"I'm not saying here that Medicare is the answer. I don't know what the answer is. Maybe it is Medicare, but I doubt that's going to happen. But maybe you look at tying the long term care reform to Social Security. Maybe you look at things like reverse mortgages along with cracking down on asset transfers. Maybe we find a way to invigorate the long term care insurance market. Or otherwise find ways to incentivize people to plan ahead for their own end of life needs.

"There is a lot of money out there. If you look at seniors right now, studies have shown that 70% to 80% of them own their own homes, and that represents roughly $2 trillion worth of equity out there. And if you look at IRAs and other sort of retirement accounts in this country, you're looking at another $8.5 trillion, $9 trillion worth of equity. Does it make sense to have all of that money out there and yet use none of it in a sort of thoughtful, productive way towards planning for long term care and end of life issues? I would say not. So, those are the real issues that need to get addressed.

"They are very difficult issues, they don't have easy answers, and they are all politically quite dangerous. But I think those discussions need to happen, because if they do not, the Medicaid program will die either of benign neglect or just collapse under its own weight. . . .

"I think, unfortunately, the way to sort of get these things on the national radar screen is for Medicaid to stop doing them. And to stop, because people have this mentality, well it's not really a crisis. It's not really a crisis until it comes home, and the problem with Medicaid and state and local governments is, when there is a crisis, we make sure it doesn't happen. Maybe there needs to be a crisis. Maybe Medicaid needs to stop covering long term care, I don't know.

"We need to find a way to force the issue at the forefront of our national elected leaders, and it's not a very good answer, because I don't have a very good answer. But I think it's about holding our elected leaders accountable for some of these things. . . .

"We need to find other ways to encourage long term care insurance. Above the line tax credits perhaps, or finding some way of bundling long term care insurance with health insurance or with life insurance or car insurance or Medigap insurance. Find some way to get it into people's hands. . . .

"The mood in this country is not one of, sure, I'll pay more taxes to fund Medicaid. And we can all love what Medicaid does, but that is a political reality. Not just here in Congress, but everywhere in this country. But even if that weren't the case, and more revenues were being created, if we don't do something to slow the growth rate in Medicaid and Medicaid long term care coverage, we're going to have real problems, because it's 50% of long term care dollars now, and if it continues to grow, we've got some serious problems. It's about, I think, minimizing the reliance on Medicaid. And sure, a lot of people who have no assets, who have no income, who have no means, those people are probably very appropriately going to end up on Medicaid. But whatever we can do to ensure that it's not the end result for the middle class or the upper middle class or the lower upper class, that I think is a very important policy objective.

"Assets transfers are a very small piece of that. They're probably more politically feasible this year than anything else."