LTC Bullet: Center to Give Congressional Testimony

Tuesday, April 26, 2005

Washington, DC--

LTC Comment: Center president Steve Moses testifies tomorrow morning before the House Energy and Commerce Health Sub-Committee. Draft testimony and a link to the live webcast after the ***news.***

*** SPECIAL ALERT: National Public Radio ran an excellent piece on Medicaid planning abuse Friday morning, April 22, 2005. They emphasized the importance of buying LTCi. You can listen to the five minute program at . ***

*** 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 May 10 and 11 in King of Prussia, PA; on May 18 and 19 in San Diego, CA; on May 24 and 25 in Phoenix, AZ; on May 24 and 25 in Cincinnati, OH; and on May 25 and 26 in Columbia, SC. 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.

LTC E-Alert #5-025--How Medicare Consumes Social Security and Medicaid (A dimension of the Medicare meltdown you might not have considered.)

The LTC Reader #5-017--Who Will Pay for the New Nursing Home? (Will Green Houses become the new nursing homes? Will Medicaid pay? LTCi?)

(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.)

Special Alert: Donor Zoners can find many stories about the shortcomings of VA LTC benefits in our special donor-zone feature: "Reasons Why Veterans Should Not Depend on VA Benefits for Long-Term Care" at

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LTC Comment: Energy and Commerce is the germane committee for Medicaid in the United States House of Representatives. The committee is integrally involved in long-term care public policy development and legislation.

Tomorrow, Wednesday, April 27, 2005 at 10:00 AM, E&C's Subcommittee on Health will hold hearings titled "Long-Term Care and Medicaid: Spiraling Costs and the Need for Reform" in Room 2123 of the Rayburn House Office Building

You can watch the hearing live on webcast at 10 AM Eastern time by going to .

According to the Committee's website: "The hearing will begin at approximately 10:00 AM. The link to the broadcast will become active 10 minutes prior to the start of the hearing. Refresh your browser for the latest information. Committee web casts require the free Real Player."

Among others, Center president Stephen Moses will testify at this hearing. Following below is his formal, written testimony, as submitted to the Committee for distribution to interested parties. Oral testimony is limited to five minutes followed by questions and answers.

Later in the week, we'll bring you details on Steve's actual testimony as delivered including questions from the Committee, his answers, plus our comments on testimony and answers given by others.


Testimony before the House Energy and Commerce Committee's Health Sub-Committee by Stephen A. Moses, President, Center for Long-Term Care Financing ( on April 27, 2005

"Long-Term Care: Who Should Pay? Who Does Pay? Who Will Pay?"

Mr. Chairman and members of the Committee: thank you for inviting me to speak with you about the critical subjects of Medicaid and long-term care financing.

My brief remarks today are fully developed and documented in reports published on our website at .

If the question is "Who should pay for long-term care?," the average person will answer "Anybody but me." Denial is commonplace.

Next best, people say "Everyone should pay." Hence, we see a tendency to pass the financing burden on to government.

Finally, if nothing else works, most people will prepare to pay their own way. That's when they turn to private savings, investments, home equity or insurance.

Winston Churchill said "You can trust the Americans to do the right thing, but only after they've tried everything else first."

So, let's ask: What have we tried already in long-term care financing? That is, who does pay for long-term care and what have been the consequences?

Answer: the vast majority of all formal long-term care services are financed by government.

Although Medicaid pays only half the dollars for nursing home care, it covers two-thirds of nursing home residents and touches nearly 80 percent of all patient days with its notoriously low reimbursement rates.

Even the so-called "out-of-pocket" expenditures for nursing home care--which are down from 39 percent to 25 percent in the past 15 years--come mostly from Social Security benefits that Medicaid recipients have to contribute toward their cost of care.

At 13 percent, Medicare is a much larger payer for nursing home care than most people realize.

For home care, only 18 percent of the costs are paid by patients. The rest comes primarily from Medicare and Medicaid.

Now, what has this heavy dependency on public financing of long-term care achieved?

We have a severely dysfunctional, welfare-financed, nursing-home-based long-term care system that serves no one well, least of all the poor.

Long-term care today is plagued by institutional bias, too little home and community-based care, bankruptcies, inadequate revenue, a dearth of capital, staff shortages, access and quality problems, huge tort liability, unaffordable liability insurance, too few full-pay private payers and too many low-pay Medicaid recipients.

How in the world did we get into such a mess?

In 1965, Medicaid came along and started paying for nursing home care.

The nursing home industry saw a huge new source of revenue and naturally built more facilities as fast as they could raise the walls.

The public figured nursing home care was free, so why pay out of pocket for home care or insurance?

That's how institutional bias began and that's why a market for home care, assisted living and long-term care insurance did not begin to develop until decades later.

Before long, of course, Medicaid nursing home costs exploded.

Figuring, "they can't charge us for a bed that doesn't exist," government capped the supply of nursing home beds by requiring certificates of need (CONs).

But capping supply only drove up the price as nursing homes raised their rates to compensate. So Medicaid capped what it would pay for nursing home care.

In turn, nursing homes raised rates for private payers to make up the difference. That was the origin of "cost shifting" from Medicaid to private payers.

Over time, Medicaid nursing home census grew and private pay census declined, as fewer people could afford the higher private pay rates and Medicaid eligibility became easier and easier to obtain.

A new practice of law--Medicaid estate planning--evolved to impoverish people artificially so they could qualify for Medicaid without spending down.

But the average person in terms of income and assets could qualify for Medicaid even without such legal machinations because of the program's generous eligibility criteria.

With supply and price capped and eligibility easier and easier to obtain, nursing homes could fill their beds by accepting Medicaid's low rates almost without regard to the quality of care they offered.

Thus arose the access and quality problems that led to heavy government regulation of nursing facilities.

Today, nursing homes are caught between the rock of inadequate reimbursement and the hard place of quality regulation.

Or, as I've heard industry executives express it: "the government expects Ritz Carlton care for Motel 6 rates while imposing a regulatory Jihad."

In the meantime, both Medicaid and Medicare have played a growing role in financing home care, which most people prefer, but which those programs cannot afford.

The result is that the public has been anesthetized to the risk of long-term care even as state and federal coffers have been emptied by government's efforts to help.

It's the same old story: good intentions led to unforeseen consequences.

That brings us to the most important question to ask: who WILL pay for long-term care in the future?

Certainly not government. That well is dry. No one is so na´ve anymore as to expect a new publicly financed long-term care system to come along.

More and more, the hard reality is true: if you want access to quality long-term care at home or in the community, you must be able to pay privately for it.

As publicly financed long-term care continues to deteriorate, more and more people will turn to their home equity as the only way to pay for acceptable care.

Eighty percent of seniors own their homes and 73 percent of those own them free and clear. Nearly $2 trillion is available and easily accessible through home equity conversion, while still allowing borrowers to retain the use of their homes.

When the only choice becomes "inadequate welfare-financed long-term care or spend down your home equity to get quality care," more people will turn sooner to private insurance as a viable alternative.

With more people insured and paying privately at market rates, care choices and quality will improve for everyone, rich and poor alike.

With fewer people dependent on Medicaid, the welfare program will be better able to provide a wider range of higher quality care to the genuinely needy.

We will get to that point by default simply by staying on the current course, but many people will be hurt.

Or, we can remove the perverse incentives in public policy that currently trap people on Medicaid.

The single most important step to take is to stop using Medicaid as inheritance insurance for the baby boom generation.

We need to tighten eligibility, require spend down of illiquid home equity as a condition of eligibility, and enforce estate recovery requirements.

When the choice is "pay me now or pay me later," as in the old Fram oil filter commercial, most people will save, invest or insure for long-term care and everyone will be better off.

Thank you for your attention. I'll try to answer any questions you may have.