LTC Bullet: New Book and Interview on LTC Planning

Thursday, April 21, 2005


LTC Comment: Allen Hamm has written and compiled a new book on long-term care planning which includes an extended interview with Center president Steve Moses. More after the ***news.***

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*** LTC PLANNING CD: The California Partnership for Long-Term Care, a special program under the CA Department of Health Services whose aim is to educate Californians on the need to plan ahead for the possibility of long-term care, is producing an interactive CD to be distributed to insurance agents, financial planners and CPAs to educate them and consumers on this issue. This is a state program; it does not sell anything; and its goal is to educate and help Californians begin the discussion of planning for the possibility of long-term care with parents as well as for themselves. Check it out at and contact Barbara Thor at 925-370-9777 if you have questions. ***

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LTC E-Alert #5-024--GE Kills Two Birds With One Stone (General Electric is pursuing early Alzheimer's diagnosis to improve treatment, but also help LTCi underwriting.)

(Steve Moses's three "LTC Embed" reports on recent long-term care policy and legislative developments in DC received rave reviews from dozens of Donor-Zoners. Sign up today for access to the Donor Zone and read immediately about the latest give and take on Capitol Hill. Upon informing us that your $150 or greater annual contribution to the Center has been made online or mailed, Damon ( will email you your user name and password for immediate Donor Zone access.)

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LTC Comment: Does the world really need another book on long-term care planning? Given how many good ones have already been published with little impact on the public's LTC denial, it's a reasonable question to ask. But here's a new primer on LTC planning that also tackles the big reason for long-term care financing's stagnant status quo.

"Long-Term Care Planning: Assuring Choice, Independence, and Financial Security," written, compiled and published by Allen Hamm, President of Superior LTC Planning Services, Inc., of Pleasanton, California deserves your attention. Especially the closing pages of the book (pps. 253-261), an interview with Center president Stephen Moses, even if we do say so ourselves. (Reprinted below with permission.)

Hamm's book is well organized with all the usual chapters on long-term care planning: What is LTC? Where do people receive LTC? How much does it cost? Who pays (or doesn't pay)? Why worry and plan? Why LTC insurance? How to choose the right coverage? You know the drill. What's different and especially valuable, however, is the focus throughout the book on the importance of integrating long-term care planning with general financial and estate planning.

We particularly enjoyed the "Key Points" summaries at the end of each chapter. Graphically, the book is well laid out with plenty of illustrations, graphs and charts. Bountiful quotes, many humorous, break the monotony of reading such serious material. For example, Yogi Berra: "You got to be careful if you don't know where you're going, because you might not get there." How apt for LTC: the American public has no idea where it's going (toward LTC someday) or where it will end up (too often in a welfare-financed nursing home) or what to do about it (LTC insurance).

The opening account of the author's personal family experience with long-term care is moving. In our experience, almost every successful LTC provider or insurer has a passionately felt personal story that committed them to the mission and steeled them to persevere in the face of tremendous obstacles. Telling that story is always a good place to start when we seek to wake others up to the importance of long-term care.

The book qualifies for certain kinds of continuing professional education credits: 15 hours for CFPs and CPAs. (Must get a 70% pass on a 150-question test online in order to receive credit.) For details, you'll have to consult the author (Allen Hamm) at the phone number below.

You can order "Long-Term Care Planning: Assuring Choice, Independence, and Financial Security," by calling: 925-484-5102. The cover price is $24.95, but LTC Bullets readers will receive a 20 percent discount, bringing the base price down to $19.95.

Finally, the concluding chapter consists of extended interviews with experts in financial, estate and long-term care planning. Here's a sample, which brings home the critical importance of changing public policy to encourage personal responsibility and early long-term care planning.


Chapter 19: Interviews

Stephen A. Moses

"If the baby boom is the Titanic, long-term care is the iceberg."

Stephen A. Moses is President of the Center for Long-Term Care Financing, a 501(c)(3) charitable, nonprofit, nonpartisan think tank and public policy organization dedicated to "ensuring quality long-term care for all Americans." For published articles, reports and speeches, see the Centerís website at

Q: How would you describe the challenge of long-term care?

A: If the baby boom is the Titanic, long-term care is the iceberg. Nearly 40 years of easy access to Medicaid nursing home benefits and, more recently, long-term home care from Medicare, have lulled the American public into a false sense of security about long-term care. Today, Medicaid is on the verge of bankruptcy and suffers from a dismal reputation for problems of access, quality, reimbursement, discrimination, and institutional bias. Medicareís fiscal crisis is closing like a vise and the program has already cut back on home care costs with draconian vigor. Can you imagine what these programs are going to look like, if they even exist, in 20 or 30 years when the boomers start to need long-term care? It will not be pretty!

Q: How do you see your organization, the Center for Long-Term Care Financing, helping with the problem of long-term care?

A: Our only hope to prepare for the demographic onslaught of exponentially greater long-term care needs is to wean the public off the expectation that Medicaid, Medicare or any future publicly financed program is going to pay for long-term custodial care. We must offer a better and affordable alternative to people when they are still young, healthy, and affluent enough to qualify for it. That is the mission of the Center for Long-Term Care Financing. We promote universal access to high-quality long-term care by encouraging private financing and discouraging welfare dependency for most Americans. We pursue this objective by warning the public about the risks of Medicaid Planning (artificial self-impoverishment) and by pointing out the benefits of good LTC insurance and home equity conversion alternatives.

Q: How did Americaís long-term care service delivery and financing system become so dysfunctional?

A: Medicaid was originally an afterthought, a tag-on to Medicare in 1965. Advocates for the elderly had huge political clout so they got a big, new social insurance program (Medicare). Advocates for the poor were much weaker politically, but they argued successfully that the needy should not be left out entirely. They prevailed, but achieved only a smaller, welfare-based program (Medicaid). The focus of both programs was acute care. But Medicaid contained a kicker, a provision authorizing payment for nursing home care for the elderly. No one thought this portion of the program would cost very much, because formal fee-for service long-term care was still relatively rare.

The rest is history. The nursing home industry exploded in size to take advantage of this new source of money. Lax eligibility rules allowed families to place their frail elders in nursing homes on Medicaid at little or no expense. Home care, assisted living and private LTC insurance languished for decades for lack of demand and financial oxygen. Why pay out-of-pocket or buy insurance when nursing home care was virtually free? Medicaid long-term care costs skyrocketed even as the program acquired a reputation for inferior access and quality. Consequently, America finds herself at the start of the twenty-first century with a fragmented long-term care system suffering from institutional bias, an underdeveloped home and community-based services infrastructure, inadequate public financing, and market penetration by private LTC insurance of less than 10 percent.

As Medicaid nursing home expenditures shot up in the 1970s and 1980s, our government began to clamp down on eligibility. Restrictions on asset transfers began in 1981 with the Boren-Long Amendment. Authorization for liens and estate recoveries came in 1982 with the Tax Equity and Fiscal Responsibility Act. Congress tackled trust abuses with the Omnibus Budget Reconciliation Act of 1985. The Medicare Catastrophic Coverage Act of 1988 made transfer of assets restrictions mandatory and longer. The Omnibus Budget Reconciliation Act of 1993 closed many loopholes and made estate recoveries mandatory. As soon as the government started restricting eligibility, however, the private Elder Law Bar began to offer "Medicaid Planning" to help prosperous seniors get around the new rules and qualify for public financing of their long-term care without having to spend down their assets. Beginning in the early 1980s, the rapidly expanding Medicaid Planning bar succeeded in opening many new eligibility loopholes to replace each one the government closed. Finally, Congress and President Clinton became exasperated.

They criminalized Medicaid asset transfers in the Health Insurance Portability and Accountability Act of 1996. This law came to be known as the "Throw Granny in Jail Law." It attracted a lot of opposition. Consequently, in the Balanced Budget Act of 1997, Congress let Grandpa and Grandma off the hook and targeted the real culprits with the criminal penalty. Anyone who, for a fee, recommended a transfer of assets to qualify for Medicaid became vulnerable to a $10,000 fine and/or one year in jail. But President Clintonís Attorney General, Janet Reno, concluded that it would be unconstitutional to enforce such a penalty. How could lawyers and other financial professionals be held legally culpable for recommending a practice that became legal again when the "Throw Granny in Jail Law" was repealed? Ecstatic Medicaid Planners quickly returned to marketing their artificial impoverishment schemes and the government went back to searching half-heartedly for new means to control these abuses.

Q: Isnít Medicaid an entitlement program like Medicare? Why shouldnít people manipulate their income and assets to qualify?

A: Medicaid is a means-tested public assistance program. It is welfare. Medicaid was intended to be a safety net for our nationís neediest. One is not entitled to Medicaid as one is entitled to Medicare, which is social insurance, not welfare. People qualify for Medicaid if they meet certain income and asset limitations. The intent of Congress and the expectation of taxpayers is that people should spend down their wealth paying for their own care before they look to Medicaid for assistance.

Medicaid Planners short-circuit the spend down process. They encourage seniors (or more often, their heirs) to impoverish themselves artificially in order to take advantage of Medicaid benefits without following the intent of the rules. As a direct consequence, genuinely needy people have a harder time gaining access to beds in quality nursing homes; heirs get early inheritances at the expense of the taxpayers; nursing home owners receive less than the cost of providing the care from Medicaid (according to the accounting firm BDO Seidman), and Americaís beloved World War II generation has largely died in nursing homes on welfare instead of aging in place at home. While Medicaid Planners line their pockets with big fees, agents struggling to sell LTC insurance to a nation in denial have to be altruistic, masochistic geniuses to make a decent living. Is it any wonder private LTC insurance has penetrated less than 10 percent of the senior market and only very few of the baby boomers have purchased it?

Q: What is the likelihood that weíll ever see a government financed model for long-term health care that provides for the middle class?

A: Social Security is in dire straits and will probably have to be at least partially privatized soon. Medicare has been bailed out by general tax revenues for many years, but it still faces bankruptcy in the foreseeable future. Managed care, long presumed to be the savior of Medicare and Medicaid, has undergone a severe backlash against inferior access and quality. Long-term home health care financed by Medicare was brutally curtailed in 1997. Medicaidís fiscal problems are legion and its reputation for access and quality is dismal and still declining.

In the meantime, private financing of long-term care has declined drastically even as public financing has skyrocketed. America spent $103.2 billion on nursing home care in 2002. The percentage of nursing home costs paid by government (mostly Medicaid and Medicare) has been going up for the past 14 years (from 49.6 percent in 1988 to 64 percent in 2002, up 14.4 percent of the total) while out-of-pocket costs have been declining (from 38.5 percent in 1988 to 25.1 percent in 2002, down 13.4 percent of the total). (Source:

The situation with home health care financing is very similar to nursing home financing. According to the Centers for Medicare and Medicaid Services (CMS), America spent $36.1 billion on home care in 2002. Medicare and Medicaid paid 55.4 percent of this total and private insurance paid 18.6 percent. Only 18 percent of home health care costs were paid out of pocket. The remainder came from several small public and private financing sources. (Source:

It does not take a demographic or economic genius to see what is happening here. The baby boomers are moving through American society like the proverbial pig through a python. When their generation approached adulthood, America got drugs, sex, and rock and roll. When the boomers arrive at senescence, America faces an equally dramatic cultural impact, but this time it will not be fun and it will be very expensive. With the major social insurance programs imploding already, having struggled only with income security and acute health care, what hope does the public have that government programs will survive to confront the much bigger future problem of long-term care? Answer: none! The smart money is already preparing to take personal responsibility for long-term care planning. If enough of the smart people plan ahead, save or insure, it is still possible that some remnant of a publicly financed safety net for the long-term care of genuine indigents may survive. But donít count on it!

Q: If the government isnít going to pay for long-term care, where can we turn? Many experts say LTC insurance is unaffordable, so our only hope is "social insurance."

A: Experts like that still cling to an anachronistic social insurance model and ignore the massive empirical evidence that disproves it. Their argument boils down to this: widespread catastrophic nursing-home spend down and the unaffordability of private LTC insurance make publicly financed long-term care inevitable. Neither of these premises is true. Few people spend down their life savings before qualifying for Medicaid. Therefore, the public has little financial incentive to buy LTC insurance. That is what makes the premiums seem "unaffordable."

We used to think that 50 to 75 percent of all people in nursing homes on Medicaid spent down their savings to qualify. We now know the truth is that only 15 to 25 percent begin as private pay and convert to Medicaid. As low as these figures are, they include everyone who does artificial impoverishment to qualify for Medicaid as well as those who spend down the old-fashioned way, by paying for their own care. Actually, 78 percent of all people who enter nursing homes are already eligible for Medicaid and Medicaid pays for nearly 80 percent of all patient days in Americaís nursing homes. Medicaid eligibility rules are so generous that the average senior, in terms of income and assets, qualifies for nursing home care without fancy legal planning.

Virtually anyone else, irrespective of wealth, can qualify easily and quickly given the right legal advice. These facts, not its cost, account for the low market penetration of private long-term care insurance. People only buy insurance against a genuine risk. Private LTC insurance is not cheap. If every tenth house burned down, fire insurance would not be cheap either. This does not mean, however, that LTC insurance is unaffordable. Purchased when one is young and healthy, say between the ages of 45 and 65, good private coverage is available at affordable rates. Even for a person over 70, premiums are nominal compared to the cost of a catastrophic long-term nursing home stay. You could argue reasonably that no one could afford not to insure privately if the financial risk were real. The problem is that easy availability of Medicaid financing after the insurable event occurs has anesthetized the American public to the risk of long-term care. Consequently, people do not think about private insurance until they are too old to obtain it or too sick to qualify medically.

Q: All right, so how would you change public policy to meet the challenge of long-term care?

A: The solution to the problem is clearly not more government financing. That would be like trying to put out a fire by dousing it with gasoline. Rather, the answer is to invite the public to look realistically at the risk of long-term care while they are still young, healthy and affluent enough to afford and qualify for private LTC insurance. To get them to take this danger seriously, we must advise people no later than when they apply for Medicare and Social Security that Medicaid will not pay for long-term care while they retain significant assets, that they will genuinely have to spend down to qualify, and that Medicaid only pays for nursing home care, not the preferred choices of home care or assisted living. Faced with a real risk, the public will buy private insurance to avoid the consequences of Medicaid spend down and to assure access to home care, assisted living, and higher quality private nursing homes.

Affordability of LTC insurance will no longer be an issue as people begin to purchase policies at earlier ages. Recognizing the need, seniors will consider reverse annuity mortgages as a means to supplement their incomes in order to afford coverage. Faced with the loss of their inheritances, adult children of seniors will help their parents afford private insurance to protect the estate. Between the nearly $2 trillion in home equity held by seniors today and the $10 trillion their baby boomer children will inherit, there is more than enough wealth in America to solve the long-term care financing crisis with private insurance in a free market. If the government stopped destroying the market for private insurance by indemnifying upper middle class heirs for the cost of their parentsí long-term care, we could unleash private insurance and save Medicaid for the genuinely needy.

Q: How should smart consumers plan for long-term care?

A: As one of the all-time-great LTC insurance agents once told me, "Denial is not a river in Egypt." Most people fail to plan for long-term care by purchasing private insurance, because they think, "It will never happen to me. Iíll never go to one of those places." What they donít realize is that most people who need expensive long-term care are cognitively impaired. Half of all people over the age of 85 already have Alzheimerís Disease.

The fact that people are in denial about long-term care is not the most important point. Of course, no one wants to think about the possibility of becoming frail and incapacitated. Who wants to live in an institution? What interests me is the question, "How is it that people can be in denial about the long-term care risk when nine percent of all seniors will spend five years or more in a long-term care facility at $30,000 to $80,000 per year?" If Americans really faced a one in ten chance of being wiped out by a catastrophic long-term illness, they would not have the luxury to be in denial and they would plan ahead to insure against the risk. That is the primary point I want to make. Medicaid financing of long-term care has enabled the American publicís denial of the long-term care risk. Because Medicaid, with all its faults, has been there for the last four decades paying the bills after the insured event occurs, most Americans do not feel a sense of financial urgency about the risk of long-term care expenses. The solution is to encourage our fellow countrymen to take long-term care more seriously by assuring that Medicaid only goes to the genuinely needy. Anyone else who receives the welfare programís benefits while retaining exempt assets must pay the system back out of his or her estate. Once heirs cannot get a free ride at the taxpayersí expense, they will encourage and help their parents to buy LTC insurance. More importantly, they will buy it themselves!

If we donít change public policy in this way, baby boomers will pay the price. Their income security is at risk because of Social Securityís insolvency. Their acute health care is at risk because of Medicareís impending bankruptcy. And their long-term care will be entirely their own responsibility because Medicaid is already collapsing. If the boomers donít buy insurance, they will pay for their long-term care out of their home equity. Their children, the echo boomers, are too small a population cohort to support Social Security and Medicare, much less Medicaid. The front cusp of a generation that will overwhelm Americaís long-term care service delivery and financing system is already approaching seniority.

Bottom line: we have faint hope that politicians and bureaucrats will fix these problems in time. The only good news is that individuals and families can protect themselves. The tools to do so are LTC insurance, for those who qualify, and home equity conversion, such as reverse mortgages, for others who will not qualify and own homes. If enough people pay privately for long-term care, we can hope that some kind of safety net will survive for the poor.