LTC Bullet:  LTC Victory 

Thursday, February 2, 2006 


LTC Comment:  The Deficit Reduction Act of 2006 passed yesterday curbing Medicaid abuse and unleashing LTC Partnerships.  Celebrate?  Sure.  But don't take a victory lap until you consider what can go wrong.  After the ***news.*** [omitted]



LTC Comment:  Yesterday's passage by a razor-thin margin of the Deficit Reduction Act is a huge victory for the LTC good guys.  The new law curbs Medicaid planning abuse and releases the Long-Term Care Partnership program for nationwide expansion.   

For details on what this historic legislation does, see "LTC Bullet:  House Passes Historic LTC Reform; Center Helps Tip Balance; AARP Spurned" from December 19, 2005 at

In a nutshell, the DRA warns the public that long-term care is a personal responsibility, that its risk and cost should not be ignored, that Medicaid remains a safety net but only for those truly in need, and that everyone who is financially and medically qualified should begin now to save, invest and insure for long-term care. 

Properly delivered, that message can prevent a great tragedy that threatens this country.  It can save Medicaid for the poor while preparing most Americans to pay privately for top-quality long-term care across the full spectrum of LTC services from home care to skilled nursing facility care. 

So, pat yourselves on the back.  Toast your success.  You stood up to some of the biggest, most powerful, and richly financed demagogues in the country.  And you beat them. 

But don't assume it's all down hill from here.  I've been through this before.  I've seen what can go wrong.  Our fight to save Medicaid by expanding private LTC financing has only just begun in earnest.  So gird your loins and get ready for the next fight. 

Let me give you an example of what happened last time Congress took a major shot at curtailing Medicaid planning and encouraging private LTC insurance.   

The Omnibus Budget Reconciliation Act of 1993 closed numerous Medicaid eligibility loopholes, mandated estate recoveries as a condition of states' receiving federal matching funds, and thus encouraged the purchase of private long-term care insurance as the optimal means to avoid Medicaid dependency and estate recovery. 

In other words, OBRA '93 implemented most of the recommendations I made in the Department of Health and Human Services Office of Inspector General's "Medicaid Estate Recovery:  National Program Inspection" report of 1988.  Read it at  

We celebrated then as now, but here's what happened.  OBRA '93 passed because a recent recession had driven welfare rolls up and tax receipts down.  States' and federal budgets were in severe deficit.  Remember Ross Perot?  So Congress acted to discourage Medicaid abuse and encourage private LTC financing. 

But, then, the economy improved.  The welfare rolls declined.  The tax receipts increased.  All of a sudden, implementing the new law was more politically sensitive than simply throwing more money at the problem.   

Consequently, states did not implement the new rules aggressively.  The feds did not enforce them.  Advocacy groups mobilized in opposition.  Medicaid planners pried open a dozen new eligibility loopholes for every one closed.   

Ten years later we found ourselves climbing out of another recession, with states' and federal budgets again under water, and politicians desperate yet again to do something about exploding Medicaid LTC expenditures.  So they passed the DRA yesterday. 

But here we are more than a decade closer to the Age Wave's cresting and crashing.  We have important new federal statutory authorities, but they mean nothing unless the states implement them, the federal government enforces them, the private sector promulgates them, and the public understands them. 

Already the signs are clear that the Deficit Reduction Act of 2006 could meet the same dismal fate as OBRA '93 did.  Here are the risks: 

The states are flush with cash again:  "From Massachusetts to Hawaii, signs abound that the immense pressure placed on state budgets by the fiscal crisis early this decade has eased -- and put tax cuts and new spending in the realm of possibility for the first time in several years."  ("Rising Revenues Spur Tax Cuts, Spending," 1/31/6,,   

In other words, with the fiscal pressure off, states may shy away from enforcing the new Medicaid eligibility rules in DRA '06 just as they dropped the ball on OBRA '93. 

Advocacy groups are already mobilizing to fight positive LTC reform again:  "But even though we lost in Congress, the fight's not over yet.  It's now up to you.  State advocates will need to do whatever you can . . ..  Each governor and state legislature will be making its own decisions about how to implement the new legislation."  (FamiliesUSA email message, 2/1/6) 

In other words, what they couldn't stop in the above-board legislative process, they'll try to kill surreptitiously behind the scenes in the state legislatures and Medicaid agencies. 

Medicaid planners are already offering a fire sale on asset transfers and they'll soon be mobilizing to impede and repeal the DRA reforms:  "Although Congress passed a new law February 1 further restricting the ability of the elderly to transfer assets before qualifying for Medicaid coverage of nursing home care, many people in most states will still have time to plan under the old rules . . ..  [T]he old rules will likely apply to transfers if the Medicaid application is filed before the state passes the complying legislation. So it may not be too late to plan, and in many cases not too late to transfer assets."  ( email newsletter, 2/2/6) 

In other words, make hay while the sun shines.  Impoverish yourself before it's too late to get Medicaid to pay for your long-term care.   

Do you figure:  "Oh well, whatever happens with Medicaid eligibility, at least we have the LTC Partnerships now?"   

Unfortunately, that's cold comfort.  LTC Partnerships help on the margin, but without real Medicaid eligibility reform they will not be any more successful implemented nationwide than they have been so far in the four or five states that have had them for over a decade. 

Why?  People won't buy LTC insurance to avoid a Medicaid spend down liability that does not exist.  If the new Medicaid rules are implemented and enforced, the LTC Partnerships will be enormously successful.  If not, they won't.  Simple as that. 

Bottom line?  Our work has just begun.  Everyone who cares about saving Medicaid by increasing private LTC financing should stay focused on implementing and enforcing the Deficit Reduction Act of 2006.  Who and how? 

The private long-term care insurance industry should actively support efforts to help states implement the new Medicaid rules as well as the LTC Partnerships. 

Home equity conversion lenders should actively support efforts to educate the American public about the new and likely future Medicaid limits on exempt home equity. 

LTC providers should actively support efforts to implement the DRA in such a way as to prevent asset transfers that leave people ineligible for Medicaid but unable to pay their own way. 

The Center for Long-Term Care Reform will be active in all these areas.  But we cannot carry on without your continued support.  Please join the Center and help us make the most of this great new opportunity. 

Steve Moses