LTC Bullet:  LTC Bombshell 

Wednesday, June 29, 2005 

Washington, DC-- 

LTC Comment:  Results from a poll of state Medicaid programs by a Congressional office with subpoena power may blow the lid off a carefully orchestrated cover-up of Medicaid planning abuses. 


LTC Comment:  "What, Me Worry?"  So said Mad Magazine's Alfred E. Neuman.  You'd think he was the team mascot for all the academics pooh-poohing the impact of Medicaid planning abuses on the welfare program's exploding long-term care budget. 

First, there was the Georgetown Long-Term Care Project's report titled "Medicaid's Coverage of Nursing Home Costs:  Asset Shelter for the Wealthy or Essential Safety Net?"  Read it at .  We debunked that fruitless attempt to minimize the impact of asset transfers with "LTC Bullet:  Where There's Smoke, There's Fire."  Center members can read our rebuttal at .  If you aren't a member of the Center for Long-Term Care Reform, then join, get our publications regularly, and access our password-protected website Members Only Zone.  Just call or email Damon at 206-283-7036 or and he'll get you registered post-haste.   

More recently, the Kaiser Family Foundation published "The Distribution of Assets in the Elderly Population Living in the Community," which attempts to show that older people who need long-term care don't have many assets beyond their home equity.  Read this report here.  Well, duh, of course really old people on the cusp of needing nursing-home level of care don't own much besides their home equity.  That's why we need public policy that incentivizes them to save and insure for long-term care when they are still young, healthy and affluent enough to prepare responsibly for that risk.  The fact that older people in need of long-term care own little more than their home equity is precisely why public policy should encourage the use of home equity to help people remain in their homes, pay for their own home and community-based care, and stay off Medicaid as long as possible.   

Finally, see AARP's new study titled "Medicaid Estate Recovery:  A 2004 Survey of State Programs and Practices," which attempts to minimize the potential nontax revenue that could accrue to Medicaid by recovering benefits paid from the estates of deceased recipients and their spouses.  Read that report at .  Unfortunately, this latest study was conducted for AARP by the American Bar Association's Commission on Law and Aging, a strong advocate of expanding public financing of long-term care and no friend of private financing alternatives.  The study was actually directed by Charles Sabatino, a former president of the National Academy of Elder Law Attorneys (NAELA), the Medicaid planners' trade association!  Talk about the foxes guarding the henhouse! 

We'll tackle substantive rebuttals of these latter two studies when time permits, but for now just understand them in this context:  they represent the last best effort of the defenders of a dysfunctional and collapsing status quo to preserve and expand an obviously failed long-term care service delivery and financing system.   

Now for the important news.  We may soon have findings from a study that will give the lie to the academics' LTC cover-up.  The Oversight and Investigations Sub-Committee of the powerful (and critical to Medicaid) House Energy and Commerce Committee has polled all state Medicaid programs about their experiences with Medicaid estate planning.  How much of it goes on?  What are the most common techniques used?  How much does Medicaid planning cost taxpayers?  What is the potential for Medicaid estate recoveries? 

These questions have all been asked of and answered by state Medicaid programs in the past.  The Center has done several such national surveys ourselves.  Generally, however, states have been very reluctant to respond to such queries.  They fear reprisals if the "feds" find out they have difficulty enforcing Medicaid's complicated, elastic income and asset eligibility rules.  What is different this time around is (1) the Governors have openly acknowledged that Medicaid planning is a huge problem, (2) state budgets are so pinched by skyrocketing Medicaid costs that states can no longer afford to ignore the problem nicknamed "asset transfers," and (3) the entity asking the questions this time is an arm of United States Congress with subpoena power.   

So, if the state Medicaid programs queried are forthcoming, and we have every reason to believe they will be, the results of this study could eclipse the attempts by others to cover up the Medicaid planning, transfer of assets, artificial self-impoverishment and Medicaid estate recovery problems.  Now that we've explained the potential significance of this study, here's a copy of the letter of inquiry that went to all state Medicaid directors.  We've learned that results are pouring in but they remain confidential until formally released.  We've asked to be apprised as soon as any findings become available to the public.  The moment we know, you will too.  Stay tuned.


April 27, 2005 

Medicaid Director's Name and Address 

Dear Director [Name]: 

The Committee on Energy and Commerce is examining various rules, programs, and practices that States have implemented under their respective Medicaid programs.  We are committed to diligent oversight of Medicaid in order to ensure that the program's resources are appropriately and effectively used.  Medicaid beneficiaries are among the most needy in our society, and it is imperative that the Federal resources allocated for Medicaid are actually used to provide these individuals with vital care.   

            The single greatest expense in most State Medicaid budgets is payments for nursing home care.  We are concerned that some individuals who seek nursing home care under Medicaid may be engaging in certain financial practices - through their attorneys and financial planners - that are forcing the States and the Federal government to absorb the medical costs of individuals for whom Medicaid was never intended to cover.  These financial practices, often referred to as "Medicaid estate planning," may allow individuals to shelter their assets in ways that are exempt from consideration when a State determines Medicaid eligibility.   

            Recently, a bipartisan group of governors and State officials raised serious concerns about "Medicaid estate planning," and a number of States are assessing measures to curb some of these activities.  Some States have requested Medicaid waivers from the Federal government to prevent this circumvention of Medicaid's purpose and intent.    

            Pursuant to the Committee's jurisdiction over the Medicaid program, the Committee is writing to each of the fifty States in order to determine the extent to which they are taking action to address "Medicaid estate planning" or similar activities.  Therefore, pursuant to Rules X and XI of the U.S. House of Representatives, please provide the Committee with the following records and information by Friday, May 20, 2005: 

1. Describe the extent to which individuals in your State have utilized financial planning designed to transfer or shelter an individual's assets or income prior to applying for Medicaid nursing home benefits. 

2. With regard to Medicaid nursing home benefits, does your State expend Medicaid funds on individuals who have sheltered or transferred assets or income to achieve eligibility?  If so, provide a detailed estimate of the amount of Medicaid funds being expended by your State on such individuals that would be otherwise offset by those individuals' assets or income as well as a statement as to the legality of such shelters and transfers. 

3. Describe in detail the most common techniques individuals in your State have utilized when attempting to transfer or shelter assets to become Medicaid eligible. 

4. Describe in detail any actions your State has taken to address the sheltering or transferring of assets by individuals attempting to qualify for Medicaid nursing home benefits and/or to limit penalty periods associated with Medicaid nursing home benefits.

5. Describe in detail your State's actions to address the use of annuities for "Medicaid estate planning" purposes. 

6. Describe in detail your State's actions to address the use of trusts for "Medicaid estate planning" purposes. 

7. Describe your State's attempts to address the voluntary divestiture of assets and income by potential beneficiaries of Medicaid nursing home benefits during the process to obtain eligibility for Medicaid nursing home benefits, including: (1) what your State's applicable gift rules are; (2) what penalties are associated with the "spend-down" process; and (3) whether your State has altered the timing for the calculation of the penalty period. 

8. Describe in detail your State's Medicaid recovery procedures upon the death of a beneficiary receiving Medicaid nursing home benefits. 

9. List any measures that could be taken by the Federal government to assist your State in its efforts to address "Medicaid estate planning" and related services and maximize State recovery of assets or income. 

10. Describe in detail any waiver requests submitted by your State to the Centers for Medicare and Medicaid Services (CMS) in any way relating to "Medicaid estate planning" practices, including, but not limited to income and asset transfers.   

The breadth and timeliness of this investigation require each respondent to prepare and submit complete written responses, as appropriate; answers that simply refer to other documents will be insufficient and incomplete for the purposes of this investigation.  Please note that, for purposes of responding to this request, the terms "relating" and "regarding" should be interpreted in accordance with the attachment to this letter.   

We appreciate your prompt attention to this request.  If you have any questions, please have your staff contact . . . 


Joe Barton, Chairman
Ed Whitfield, Chairman, Subcommittee on Oversight and Investigations  

The Honorable John D. Dingell, Ranking Member
The Honorable Bart Stupak, Ranking Member, Subcommittee on Oversight and Investigations