LTC Bullet:  Disaster Come Disaster 

Thursday, September 15, 2005 

Washington, DC-- 

LTC Comment:  Medicaid and LTC reform were on a roll until Hurricane Katrina knocked the train off the tracks.  More after the ***news.*** 

*** LTC CONNECTION has made available a 1.5 hour tele-conference program featuring a presentation by Steve Moses titled "Why Don't More People Buy LTC Insurance?"  To listen to this program, go to  It takes a while to load, so be patient.  Feedback on the program has been excellent.  For more information on LTC Connection and its services, check out   Be sure to subscribe to their LTCi Digest online newsletter that summarizes news of interest to anyone concerned about long-term care. *** 

*** PROVIDERS APPROVE OF MEDICAID COMMISSION RECOMMENDATIONS.  McKnight's LTC News Daily Update reports that "Providers generally were favorable about the Federal Medicaid Advisory Commission's new recommendations, saying the suggestions are in the interest of the long-term care community.  In a statement Tuesday [9/6/05], the American Health Care Association said it supported the commissionís approach to finding $10 billion in Medicaid savings.  'Secretary Leavitt and the Commission members are to be commended for evaluating Medicaid reform from the perspective of the many seniors throughout our nation who need and depend upon this vital program,' said Bruce Yarwood, AHCA acting president and CEO.  Still, long-term care providers remain troubled over the recommendation in the commission's report to change the start date of the penalty period for Medicaid applicants who transferred assets for less than fair market value.  The proposed change in the penalty period's start date means providers would be responsible for uncompensated care, according to AHCA.  Instead, Yarwood recommends that the commissioners recognize that changes in the asset transfer policy 'must focus on encouraging personal responsibility, not penalizing providers.'" *** 



LTC Comment:  What a mess!  And I don't just mean the toxic soup bowl New Orleans has become.  Nor the human and economic tragedy of the whole Gulf Coast.  I refer instead to a specific public policy tragedy that may be emerging from the natural disaster.  

A few months ago, there was little hope that long-term care financing and Medicaid reform would make any more progress this year than they have in the past seven.  That is to say, almost none. 

Recently, however, Washington, DC was abuzz with talk about passing LTC Partnerships, closing Medicaid loopholes, tightening asset transfer rules, and extending the LTC awareness campaign. 

The Budget Reconciliation packages due out of the Senate Finance Committee and the House Energy and Commerce Committee on September 16 were arousing excited anticipation.  How would those committees propose to save the $10 billion targeted to come from Medicaid savings over the coming five years? 

Today, everything's on hold and budget reconciliation is postponed until late October if it happens at all.  Call it collateral damage from the Hurricane Katrina disaster.  Everything has been knocked into a "cocked hat" by the natural catastrophe.  

Politicians have naturally opened the fiscal floodgates to help those hurt and dislocated by the disaster.  Unfortunately, self-promoting Medicaid planners and self-styled senior advocates are using the physical tragedy in the Gulf to derail responsible Medicaid reform.  They seek to defend, even expand, the status quo of wasteful, self-destructive Medicaid long-term care spending.  

Interest groups that advocate using Medicaid as inheritance insurance for affluent boomers (while skimming the financial cream from the welfare program for themselves) are using Katrina as an excuse to stop reforms intended to save Medicaid as a safety net for the poor.  

A good example is AARP's new full-page newspaper ad which says:  "Real loopholes that allow people to improperly qualify for Medicaid should be closed.  But unfairly changing penalty dates and arbitrarily extending look-back periods could deny millions of people the nursing home coverage they desperately need." 

OK, what are the "real loopholes" that AARP supports closing?  Blank out.  How does protecting Medicaid long-term care benefits for AARP's affluent members help the poor?  Blank out.  Why should people be able to give away unlimited millions and qualify for public welfare three years later?  Blank out.  Why should Medicaid's transfer of assets penalty be reduced by half for those savvy enough to use the Medicaid planners' half-a-loaf strategy?  Blank out. 

The measures expected to be in a budget reconciliation package would help to save Medicaid for those genuinely in need by incentivizing those who are able to save, invest or insure for long-term care.  That doesn't hurt the poor or the rich but rather achieves a fairer distribution of Medicaid's scarce resources and attracts new private financing to improve long-term care for all economic strata. 

But don't despair.  This is only a temporary setback.  Medicaid expenditures, especially for long-term care, are spiraling out of control.  Something has to be done and the logical reform is to give Medicaid back to the needy for whom it was intended.  

GAO has completed and delivered its report on "Asset Transfers" to Congressmen Dingell and Waxman, who requested it.  The requestors cannot withhold release of the report beyond 30 days so we'll know soon what GAO found.  Even based only on what I provided to the GAO investigators, it should be a bombshell.  The House Energy and Commerce Oversight and Investigations Sub-Committee has also collected explosive evidence of Medicaid planning abuses.  We hope that report will also be available soon. 

Already, the National Governors Association has proposed, and Congress is seriously considering, elimination of Medicaid's wide-open asset exemptions and implementation of a hard-dollar limit on assets.  That would put home equity at risk for long-term care.  Once home equity is at risk, more people will buy private LTC insurance.  Those who don't will use reverse mortgages or other means to fund their long-term care with home equity.  Either way, new private financing will flow into the long-term care service delivery system improving access to and quality of care while relieving the fiscal burden on Medicaid. 

Extending the look back period for asset transfers is inevitable.  The average period from onset to death in Alzheimer's Disease is eight years.  The short three-year lookback in effect now is an open invitation to qualify for Medicaid by jettisoning wealth.  A longer lookback period will persuade more people to prepare privately for long-term care financing while they are still young, healthy and affluent enough to do so. 

The proposed change in the penalty start date threatens to put nursing homes at risk of providing even more uncompensated care than they give already.  That part needs to be fixed, but without the change people can give away half their assets, spend the rest on anything at all, and be eligible for Medicaid in half the time intended by Congress.  Public policy should not pull people onto welfare sooner than necessary. 

Having broken the political log-jam on Medicaid and long-term with measures like these, it will be easier in the future to reform and improve Medicaid even further so it can do a better job for those truly in need.  With Medicaid retargeted to be a true safety net again, long-term care insurance and home equity conversion will expand to protect more affluent people.  The savings in Medicaid could be used to fund tax incentives for LTC insurance and reverse mortgages, thus leveraging future Medicaid savings even further. 

The long-term care crisis bound to come with the Age Wave can be avoided.  But we have to remove the perverse incentives in public policy that currently discourage responsible long-term care planning.  Hurricane Katrina has impeded progress in that regard.  But we'll rebuild the Gulf Coast.  And we'll rebuild Medicaid and long-term care reform.  Keep the faith.