LTC Bullet:  House Passes Historic LTC Reform; Center Helps Tip Balance; AARP Spurned 

Monday, December 19, 2005 


LTC Comment:  The U.S. House of Representatives approved LTC Partnerships and major Medicaid loophole closures early this morning after Senate conferees went along.  All hinges on full Senate passage now.  Details follow. 


LTC Comment:  At 6:00 AM Eastern, after pulling an historic all-nighter, the House passed long-term care reforms that exceeded our highest hopes.  Bottom line, we got everything the Senate proposed, plus everything the House proposed, and then some.  We're still on tenterhooks, however, waiting to see if the full Senate will go along.  Stay tuned to C-Span coverage of the budget bill for the suspenseful conclusion of this public policy cliffhanger.  

Details below, but first this.  Members of Congress who stuck their necks out to do the right thing, spurning harsh, personal and demagogic attacks by AARP, deserve tremendous thanks no matter what the final outcome in the Senate.  Joe Barton (R, TX), Chairman of the House Energy and Commerce Committee, is a case in point.  Sensitized to the importance of long-term care by bitter personal experience in his own family, he fought tirelessly for rational LTC policy reform.  Dropped by a heart attack only a few days ago, Barton rose again to address the House in the early morning hours today advocating passage of Medicaid and LTC insurance improvements.  Bravo, Mr. Barton.  Get well soon! 

No matter how dedicated and hard-working members of Congress are, little happens without staff.  So kudos to David Rosenfeld and his colleagues who sheparded this extraordinary legislation through to within a hairsbreadth of statutory status.  Rosenfeld co-founded the Center for Long-Term Care Financing, our predecessor organization, with Center President Steve Moses in 1998.  He fought unstintingly and against overwhelming odds to reach this point.  When last we communicated, he'd been up over 36 hours straight in this closing round of a long battle for these critical measures in the House. 

Your Center for Long-Term Care Reform had a thing or two to do with this progress too.  We spent half time in Washington, DC this Summer briefing (primarily) Senate Finance Committee staff on the importance of these reforms.  Our "Rule of Law" column titled "Welfare for the Well-To-Do" ran over the weekend in the Wall Street Journal and was widely circulated on Capitol Hill Saturday and Sunday before the vote.  Read on for a copy of that op-ed.  As you know, we've repeatedly exposed AARP's irresponsible attacks on members of Congress who seek to save Medicaid for the poor by diverting the affluent to responsible long-term care planning. 

And then this surprise this morning.  Even the New York Times is on board encouraging rational long-term care reform.  Their editorial today, titled "The Long-Term Care Conundrum," while it does not address last night's victories specifically, does conclude thus:  "Americans have to realize that there is no entitlement to long-term care and that few employers include long-term care in their health insurance packages.  That thought should lead to two things:  serious financial planning on an individual basis, and a long national conversation about how much responsibility the government should have in ensuring proper care for the elderly and disabled."  The Times rejects the idea that Medicare or Medicaid can handle long-term care financing and urges personal responsibility and individual financial planning.  Congratulations to the "old gray lady" for publishing some really good advice. 

Now, what's happened?  Read it for yourself in the Conference Report on the Deficit Reduction Act of 2005 at  A summary of the parts affecting long-term care and Medicaid begins on page 668 of that document.  But here are the highlights, always assuming final passage in the Senate followed by President Bush's signature. 

o  Long-term care partnerships allowed and expanded.  Great news, but it would mean little if Medicaid planning abuse were not curtailed also as below.  Why buy LTCi to avoid Medicaid spend-down if it doesn't exist in the first place? 

o  $500,000 cap on Medicaid home equity exemption with option for states and politicians who dare to go up to $750,000. 

o  Medicaid transfer of assets look back period extended from three to five years. 

o  Medicaid planners' favorite "Half-a-Loaf" giveaway strategy ended by penalty date change. 

o  Stronger undue hardship protections to protect elders from financial abuse and LTC providers may apply for hardship protection on behalf of Medicaid residents. 

o  Transfer-assets-before-income loophole closed. 

o  Use of "Medicaid friendly" annuities restricted. 

o  Purchase of "life estates" to qualify elders for Medicaid curtailed. 

o  Stops an egregious Medicaid planning dodge that allowed exemption of Continuing Care Retirement Community deposits of sometimes hundreds of thousands of dollars. 

o  Requires imposition of partial month's eligibility penalty thus ending some states' policy of permitting monthly penaltyless transfers of one dollar less than double the cost of private nursing home care. 

o  Allows states to accumulate multiple transfers into a single penalty period thus closing another abusive loophole. 

o  Prevents abuse of certain loans, promissory notes or mortgages to hide assets to qualify for Medicaid LTC benefits. 

Even if these measures pass the Senate and become law, this battle is not won yet.  We will have to fight to get the States to implement the provisions.  We will have to fight to get the federal government to enforce the new rules.  We will have to fight to prevent the Medicaid planners from circumventing the law and regulations.  We will have to fight to educate the public that Medicaid is no longer an option for the affluent.  We will have to fight for better education and stronger tax incentives to get people to buy private LTC insurance and use reverse mortgages.  We will have to fight for better reimbursement for LTC providers by Medicaid and Medicare.  But as we struggle on, no matter what happens, the forces dedicated to ruining Medicaid by stretching it to serve their own greedy ends have sustained a big loss.  We've won a major victory.  So celebrate in moderation, hope for the best in the Senate, and get ready for the next stage of the battle. 

Here's the text of my Wall Street Journal op-ed published over the weekend. 

December 17, 2005  


Welfare for the Well-to-do 


December 17, 2005; Page A11 

With expenditures topping $300 billion and rising 8% annually, Medicaid is a huge entitlement -- larger even than Medicare.  State governors in particular are howling that their share of the overall costs -- 43% -- are burning through state budgets uncontrollably.  As Virginia's Mark Warner put it, "We are on the road to a meltdown." 

Now, as the first session of the 109th Congress winds down, House and Senate members are attempting to hash out a compromise in conference that could provide some overall budget relief.  The spoiler is AARP, which is dispensing clouds of self-serving rhetoric while attempting to divert the program's scarce resources to the senior lobby's more affluent members.  What's going on? 

Most people think of Medicaid as the health-care payer of last resort for poor women and children.  But long-term care is Medicaid's biggest single cost -- and many recipients of this largesse are anything but poor.  One reason is that, for purposes of Medicaid nursing home eligibility, people are allowed to retain unlimited income as long as their medical expenses -- including long-term care -- are high enough.  Another big reason is that they can also keep unlimited assets in the form of home equity, a business or other kinds of wealth. 

In theory, once they die the government could recover Medicaid costs from their estates.  In practice, most of this wealth disappears, often in gifts to family members. 

Consider home equity, seniors' largest asset.  According to the National Council on the Aging, 81% of America's 13.2 million householders aged 62 and over own their own homes, and 74% own their homes free and clear.  Altogether, seniors possess nearly $2 trillion worth of home equity.  Yet, by the time they apply for Medicaid, few own their homes.  Are they giving the homes away to their grown-up children or other relatives?  Such a transfer of assets carries no legal penalty as long as it is done at least three years and a day before applying for Medicaid. 

That's just one of hundreds of eligibility "loopholes" that allow individuals, especially those advised by Medicaid planning attorneys, to qualify for Medicaid long-term care benefits without spending down their own wealth for care.  If you doubt this, try an Internet search for "Medicaid planning" and read some of the sales pitches on the more than six million hits.  You'll learn how to purchase noncountable assets, buy and give away a string of luxury cars without penalty, hide wealth in exempt annuities, sell your ailing parent a "life-care contract," even buy a farm or business -- all for the express purpose of "impoverishing" yourself or a loved one artificially and qualifying for Medicaid long-term care benefits. 

Ten Congresses and four presidents have tried to stop these legal scams.  They've closed loopholes, discouraged Medicaid qualifying trusts, made recovery from recipients' estates mandatory, and offered tax incentives to encourage private insurance.  They even criminalized Medicaid planning in 1996, only to be accused of "throwing granny in jail." When they repealed that measure and replaced it a year later with another to "throw granny's lawyer in jail," the law was deemed unconstitutional. 

Congress is trying Medicaid reform once again.  The House of Representatives recently passed legislation to curtail a few of the most egregious abuses.  It would move the look-back period for asset transfers from three to five years, eliminate Medicaid planners' favorite "half-a-loaf" giveaway strategy, and cap exempt home equity at $750,000.  Even if these measures move out of the conference committee with the Senate and become law, elderly Americans could still give away $10 million (actually unlimited assets) without penalty five years and one day before applying for Medicaid.  They could still retain a home worth three-quarters of a million dollars while getting taxpayers to pick up the costs of their long-term care. 

AARP has nevertheless gone ballistic, claiming that the House reforms "seriously threaten the ability of millions of Americans to get needed long-term care services" and "will deny millions of older and disabled Americans the long-term care services they need and leave them vulnerable to substandard care."  They've targeted members of Congress with advertisements in their hometown papers attacking the House's efforts to curtail Medicaid abuse; they've run radio and TV spots, and full-page ads appear in Capitol Hill papers almost daily.  House staffers report that scared and angry AARP members have been deluging members' offices with calls and letters parroting AARP's distortions and hyperbole. 

AARP's position and tactics are wrong, hurtful and dangerous.  Preventing asset giveaways to qualify for public assistance does not threaten one's access to quality long-term care:  If people keep their wealth instead of giving it away, they will command red-carpet access to top-quality care in the private market instead of becoming dependent on Medicaid's low-cost nursing home care of highly questionable quality. 

Denying public welfare to people with three-quarters of a million dollars in home equity does not reduce their access to care.  With a reverse mortgage, such people can tap their home equity to pay for long-term care, or indeed to pay for private long-term care insurance.  As private payers, such people will have better access to a wider range of higher quality long-term care services than they would have as Medicaid dependents. 

The more fundamental questions to ask are why Medicaid should be used as a kind of inheritance insurance for middle-class baby-boomer heirs -- and how this practice protects Americans most in need?  AARP's resistance to Medicaid reform anesthetizes boomers to the risk and cost of long-term care at the very time in their lives when they should be saving, investing and insuring against such risks.  It lines their pockets now at the expense of taxpayers, to the detriment of the poor, and with a huge risk to Medicaid's solvency. 

Boil it all down and you're left with only one conclusion.  Faced with the choice of supporting the use of Medicaid for people genuinely in need, or grabbing what it can for its well-heeled members and their heirs, AARP took the low road. 

Mr. Moses is president of the Center for Long-Term Care Reform in Seattle. 

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