LTC Bullet:  Book and Interview on LTC Planning--New Edition 

Tuesday, February 21, 2006 


LTC Comment:  Allen Hamm's book on LTC planning is coming out in a new edition, including a revised and extended interview with Center president Steve Moses updated to include his comments on the new Deficit Reduction Act.  More after the ***news.*** 

*** TODAY'S LTC BULLET IS SPONSORED BY Superior LTC Planning Services, Inc. which has just completed the prototype for the first LTC Planning Brand for exclusively serving financial professionals (financial planners, estate planning attorneys, and CPAs).  The company is searching for representatives in all major cities of the country.  Representatives will be awarded a protected territory using the Superior LTC Brand and processes.  To be considered for an interview, call 1-800-400-0577. *** 

*** RUN, DON'T WALK, TO BUY LTC INSURANCE.  That was the message from the authors of "Two for the Money" on CNBC this morning.   

Last Friday (2/19/6), the Wall Street Journal published Kelly Greene's "Medicaid's New Rules" saying "'Medicaid will no longer be a resource for middle- and upper-class people,' says Stephen Moses, president of the Center for Long-Term Care Reform Inc. in Seattle."  Read it at if you have a subscription to the WSJ Online. 

This morning, both the Washington Post and the Dallas Morning News had similar articles with the same warnings: 

"'This [Deficit Reduction Act] is a message to the American people that long-term care is no a longer a free lunch,' said Stephen Moses, president of the Center for Long-Term Care Reform, a Seattle group that says it encourages 'private financing as an alternative to Medicaid dependency for most Americans.'  Moses said that many wealthy and middle-class families have looked at Medicaid, the state/federal health program for the poor, as 'inheritance insurance,' using loopholes to qualify well-off seniors for expensive assistance."  (Christopher J. Gearon, "Getting Stuck With the Tab:  Tighter Asset Spend-Down Rules Will Force More Families to Cover Nursing Home Costs Alone," Washington Post, February 21, 2006,  

"'Medicaid shouldn't be used to protect the inheritances the baby boom generation is expecting,' said Stephen Moses, a leading proponent and president of the Center for Long-Term Care Reform.  He said the federal-state program started out as a safety net for the poor but has become an upper- and middle-class entitlement for people who know how to abuse it.  Mr. Moses says Medicaid's current standards are so loose that an affluent senior can protect hundreds of thousands of dollars through annuities, family gifts and trusts and still get Medicaid. . . .  Mr. Moses says reverse mortgages would let older adults convert that equity into assets that could pay for long-term care insurance or, if they're not insurable, for [long-term] care itself."  (Bob Moos, "Tighter Medicaid Rules 'Wake-Up Call' to Seniors," Dallas Morning News, February 21, 2006,   

*** STEVE SAYS "With enactment of the Deficit Reduction Act of 2005, the center of gravity in long-term care financing has moved away from Medicaid planning abuse and toward responsible long-term care planning.  Fewer people will ignore the risk and cost of long-term care until it's too late and hire legal shamans to impoverish themselves.  More people will save, invest, insure and use their home equity for long-term care.  We've finally turned the corner toward a realistic solution to America's long-term care financing crisis." 

*** BRAVE NEW WORLD OF LONG-TERM CARE.  That's the name of a new seminar Center president Steve Moses is conducting for senior financial advisors, LTC insurance agents, and reverse mortgage lenders.  Learn how the Deficit Reduction Act's changes in Medicaid eligibility and LTC Partnerships can unleash the market for private long-term care insurance and home equity conversion AND save Medicaid as a safety net for the poor in the process.  Steve says "Any LTCi agents and reverse mortgage lenders who do not double their production in the next five weeks will fail in their fiduciary responsibility to their prospects, their companies and themselves.  Find out how."  To schedule a conference call briefing or an on-site seminar with Steve, call or email him at 206-283-7036 or *** 



LTC Comment:  Does the world really need another book on long-term care planning?  Given how many good ones have already been published with little impact on the public's LTC denial, it's a reasonable question to ask.  But here's a new edition of an excellent primer on LTC planning that also tackles the big reason for long-term care financing's stagnant status quo.  

"Long-Term Care Planning:  Assuring Choice, Independence, and Financial Security," written, compiled and published by Allen Hamm, President of Superior LTC Planning Services, Inc., of Pleasanton, California deserves your attention.  Especially the closing pages of the book (pps. 255-263), an interview with Center president Stephen Moses, even if we do say so ourselves.  (Reprinted below with permission.) 

Hamm's book is well organized with all the usual chapters on long-term care planning:  What is LTC?  Where do people receive LTC?  How much does it cost?  Who pays (or doesn't pay)?  Why worry and plan?  Why LTC insurance?  How to choose the right coverage?  You know the drill.  What's different and especially valuable, however, is the focus throughout the book on the importance of integrating long-term care planning with general financial and estate planning. 

The new, improved edition, which you can order now for delivery soon (see below for order information), includes an even greater emphasis than before on the importance of a written LTC plan.  Put your plan in writing; give a copy to family members; make sure your financial advisors know your intentions.  Prioritize your insurance needs.  Evaluate your tolerance for risk.  And if you advise seniors on LTC planning, be sure to focus on these and all the other key points in this book. 

We particularly enjoyed the "Key Points" summaries at the end of each chapter.  Graphically, the book is well laid out with plenty of illustrations, graphs and charts.  Bountiful quotes, many humorous, break the monotony of reading such serious material.  For example, Yogi Berra:  "You got to be careful if you don't know where you're going, because you might not get there."  How apt for LTC:  the American public has no idea where it's going (toward LTC someday) or where it will end up (too often in a welfare-financed nursing home) or what to do about it (LTC insurance). 

The opening account of the author's personal family experience with long-term care is moving.  In our experience, almost every successful LTC provider or insurer has a passionately felt personal story that committed them to the mission and steeled them to persevere in the face of tremendous obstacles.  Telling that story is always a good place to start when we seek to wake others up to the importance of long-term care. 

The book qualifies for certain kinds of continuing professional education credits:  15 hours for CFPs and CPAs.  (Must get a 70% pass on a 150-question test online in order to receive credit.)  For details, you'll have to consult the author (Allen Hamm) at the phone number below.   

You can order "Long-Term Care Planning:  Assuring Choice, Independence, and Financial Security," by calling:  925-484-5102.  The cover price is $24.95, but LTC Bullets readers will receive a 20 percent discount, bringing the base price down to $19.95. 

Finally, the concluding chapter consists of extended interviews with experts in financial, estate and long-term care planning.  Here's a sample, which brings home the critical importance of changing public policy to encourage personal responsibility and early long-term care planning. 


Chapter 19:  Interviews 

The Coming Challenge of Long-Term Care

Stephen A. Moses 

"If the baby boom is the Titanic, long-term care is the iceberg." 

Stephen A. Moses is President of the Center for Long-Term Care Reform, Inc., a private think tank and public policy organization dedicated to “ensuring quality long-term care for all Americans.”  For published articles, reports and speeches, see the Center’s website at  

Q:        How would you describe the challenge of long-term care? 

A:         If the baby boom is the Titanic, long-term care is the iceberg. Nearly 40 years of easy access to Medicaid nursing home benefits and, more recently, long-term home care from Medicare, have lulled the American public into a false sense of security about long-term care. Today, Medicaid is on the verge of bankruptcy and suffers from a dismal reputation for problems of access, quality, reimbursement, discrimination, and institutional bias. Medicare’s fiscal crisis is closing like a vise and the program has already cut back on home care costs with draconian vigor. Can you imagine what these programs are going to look like, if they even exist, in 20 or 30 years when the boomers start to need long-term care? It will not be pretty! 

Q:        How do you see your organization, the Center for Long-Term Care Reform, Inc., helping with the problem of long-term care? 

A:         Our only hope to prepare for the demographic onslaught of exponentially greater long-term care needs is to wean the public off the expectation that Medicaid, Medicare or any future publicly financed program is going to pay for long-term custodial care. We must offer a better and affordable alternative to people when they are still young, healthy, and affluent enough to qualify for it. That is the mission of the Center for Long-Term Care Reform, Inc. We promote universal access to high-quality long-term care by encouraging private financing and discouraging welfare dependency for most Americans. We pursue this objective by warning the public about the risks of Medicaid Planning (artificial self-impoverishment) and by pointing out the benefits of good LTC insurance and home equity conversion alternatives. 

Q:        How did America’s long-term care service delivery and financing system become so dysfunctional? 

A:            Medicaid was originally an afterthought, a tag-on to Medicare in 1965. Advocates for the elderly had huge political clout so they got a big, new social insurance program (Medicare). Advocates for the poor were much weaker politically, but they argued successfully that the needy should not be left out entirely. They prevailed, but achieved only a smaller, welfare-based program (Medicaid). The focus of both programs was acute care. But Medicaid contained a kicker, a provision authorizing payment for nursing home care for the elderly. No one thought this portion of the program would cost very much, because formal fee-for-service long-term care was still relatively rare. 

            The rest is history. The nursing home industry exploded in size to take advantage of this new source of money. Lax eligibility rules allowed families to place their frail elders in nursing homes on Medicaid at little or no expense. Home care, assisted living and private LTC insurance languished for decades for lack of demand and financial oxygen. Why pay out-of-pocket or buy insurance when nursing home care was virtually free? Medi­caid long-term care costs skyrocketed even as the program ac­quired a reputation for inferior access and quality. Con­se­quent­ly, America finds herself at the start of the twenty-first century with a fragmented long-term care system suffering from institutional bias, an underdeveloped home and community-based services infrastructure, inadequate public financing, and low market penetration by private LTC insurance. 

            As Medicaid nursing home expenditures shot up in the 1970s and 1980s, our government began to clamp down on eligibility. Restrictions on asset transfers began in 1981 with the Boren-Long Amend­ment. Authorization for liens and estate recoveries came in 1982 with the Tax Equity and Fiscal Responsibility Act. Congress tackled trust abuses with the Omnibus Budget Reconciliation Act of 1985. The Medicare Catastrophic Coverage Act of 1988 made transfer of assets restrictions mandatory and longer. The Omnibus Budget Reconciliation Act of 1993 closed many loopholes and made estate recoveries mandatory. As soon as the government started restricting eligibility, however, the private Elder Law Bar began to offer “Medicaid Planning” to help prosperous seniors get around the new rules and qualify for public financing of their long-term care without having to spend down their assets. Beginning in the early 1980s, the rapidly expanding Medicaid Planning bar succeeded in opening many new eligibility loopholes to replace each one the government closed. 

            Finally, Congress and President Clinton became exasperated. They criminalized Medicaid asset transfers in the Health Insur­ance Portability and Accountability Act of 1996. This law came to be known as the “Throw Granny in Jail Law.” It attracted a lot of opposition. Consequently, in the Balanced Budget Act of 1997, Congress let Grandpa and Grandma off the hook and targeted the real culprits with the criminal penalty. Anyone who, for a fee, recommended a transfer of assets to qualify for Medicaid became vulnerable to a $10,000 fine and/or one year in jail. But President Clinton’s Attorney General, Janet Reno, concluded that it would be unconstitutional to enforce such a penalty. How could lawyers and other financial professionals be held legally culpable for recommending a practice that became legal again when the “Throw Granny in Jail Law” was repealed? Ecstatic Medicaid Planners quickly returned to marketing their artificial impoverishment schemes and the government went back to searching half-heartedly for new means to control these abuses. 

Q:        Isn’t Medicaid an entitlement program like Medicare? Why shouldn’t people manipulate their income and assets to qualify? 

A:            Medicaid is a means-tested public assistance program. It is welfare. Medicaid was intended to be a safety net for our nation’s neediest. One is not entitled to Medicaid as one is entitled to Medicare, which is social insurance, not welfare. People qualify for Medicaid if they meet certain income and asset limitations. The intent of Congress and the expectation of taxpayers is that people should spend down their wealth paying for their own care before they look to Medicaid for assistance. 

            Medicaid Planners short-circuit the spend down process. They encourage seniors (or more often, their heirs) to impoverish themselves artificially in order to take advantage of Medicaid benefits without following the intent of the rules. As a direct consequence, genuinely needy people have a harder time gaining access to beds in quality nursing homes; heirs get early inheritances at the expense of the taxpayers; nursing home owners receive less than the cost of providing the care from Medicaid (according to the accounting firm BDO Seidman), and America’s beloved World War II generation has largely died in nursing homes on welfare instead of aging in place at home. 

            While Medicaid Planners line their pockets with big fees, agents struggling to sell LTC insurance to a nation in denial have to be altruistic, masochistic geniuses to make a decent living. Is it any wonder private LTC insurance has penetrated only 15 percent of the senior market and very few of the baby boomers have purchased it? 

Q:        What is the likelihood that we’ll ever see a government-financed model for long-term health care that provides for the middle class? 

A:         Nil.  Social Security is in dire straits and will probably have to be at least partially privatized soon. Medicare has been bailed out by general tax revenues for many years, but it still faces bankruptcy in the foreseeable future. Managed care, long presumed to be the savior of Medicare and Medicaid, has undergone a severe backlash against inferior access and quality. Long-term home health care financed by Medicare was brutally curtailed in 1997. Medicaid’s fiscal problems are legion and its reputation for access and quality is dismal and still declining. 

            In the meantime, private financing of long-term care has declined drastically even as public financing has skyrocketed. America spent $115.2 billion on nursing home care in 2004. The percentage of nursing home costs paid by government (mostly Medicaid and Medicare) has gone up over the past 16 years (from 49.6% in 1988 to 58.2% in 2004, up 8.6% of the total) while out-of-pocket costs have declined (from 38.5% in 1988 to 27.7% in 2004, down 10.8% of the total).  Source:, Table 8.  (Note:  The current version of this table has dropped 1988 data.  Data cited here for 1988 are taken from the version of this table posted by CMS in January 2004.)  The situation with home health care financing is very similar to nursing home financing.  According to CMS, America spent $43.2 billion on home health care in 2004.  Medicare and Medicaid paid 69.7% of this total and private insurance paid 12.0%.  Only 11.3% of home health care costs were paid out of pocket.  The remainder came from several small public and private financing sources.  Data source:, Table 10. 

            It does not take a demographic or economic genius to see what is happening here. The baby boomers are moving through Amer­ican society like the proverbial pig through a python. When their generation approached adulthood, America got drugs, sex, and rock and roll. When the boomers arrive at senescence, America faces an equally dramatic cultural impact, but this time it will not be fun and it will be very expensive. With the major social insurance programs imploding already, having struggled only with income security and acute health care, what hope does the public have that government programs will survive to confront the much bigger future problem of long-term care? Answer: none! 

            The smart money is already preparing to take personal responsibility for long-term care planning. If enough of the smart people plan ahead, save or insure, it is still possible that some remnant of a publicly financed safety net for the long-term care of genuine indigents may survive. But don’t count on it! 

Q:        If the government isn’t going to pay for long-term care, where can we turn? Many experts say LTC insurance is unaffordable, so our only hope is “social insurance.” 

A:         Experts like that still cling to an anachronistic social insurance model and ignore the massive empirical evidence that disproves it. Their argument boils down to this: widespread catastrophic nursing-home spend down and the unaffordability of private LTC insurance make publicly financed long-term care inevit­able. Neither of these premises is true. Few people spend down their life savings before qualifying for Medicaid. Therefore, the public has little financial incentive to buy LTC insurance. That is what makes the premiums seem “unaffordable.” 

            We used to think that 50 to 75 percent of all people in nursing homes on Medicaid spent down their savings to qualify. We now know the truth is that only 15 to 25 percent begin as private pay and convert to Medicaid. As low as these figures are, they include everyone who does artificial impoverishment to qualify for Medicaid as well as those who spend down the old-fashioned way, by paying for their own care. Actually, 78 percent of all people who enter nursing homes are already eligible for Medicaid and Medicaid pays for nearly 80 percent of all patient days in America’s nursing homes. Historically, Medicaid eligibility rules have been so generous that the average senior, in terms of income and assets, qualified for nursing home care without fancy legal planning. Virtually anyone else, irrespective of wealth, could qualify easily and quickly given the right legal advice. These facts, not its cost, account for the low market penetration of private long-term care insurance. People only buy insurance against a genuine risk. 

            Furthermore, private LTC insurance is not cheap. If every tenth house burned down, fire insurance would not be cheap either. This does not mean, however, that LTC insurance is unaffordable. Purchased when one is young and healthy, say between the ages of 45 and 65, good private coverage is available at affordable rates. Even for a person over 70, premiums are nominal compared to the cost of a catastrophic long-term nursing home stay. You could argue reasonably that no one could afford not to insure privately if the financial risk were real. The problem is that easy avail­ability of Medicaid financing after the insurable event occurs has anesthetized the American public to the risk of long-term care. Consequently, people do not think about private insurance until they are too old to obtain it or too sick to qualify medically. 

Q:        All right, so how would you change public policy to meet the challenge of long-term care? 

A:         The solution to the problem is clearly not more government financing. That would be like trying to put out a fire by dousing it with gasoline. Rather, the answer is to invite the public to look realistically at the risk of long-term care while they are still young, healthy and affluent enough to afford and qualify for private LTC insurance. To get them to take this danger seriously, we must advise people no later than when they apply for Medicare and Social Security that Medicaid will not pay for long-term care while they retain significant assets, that they will genuinely have to spend down to qualify, and that Medicaid only pays for nursing home care, not the preferred choices of home care or assisted living. Faced with a real risk, the public will buy private insurance to avoid the consequences of Medicaid spend down and to assure access to home care, assisted living, and higher quality private nursing homes. 

            Affordability of LTC insurance will no longer be an issue as people begin to purchase policies at earlier ages. Recognizing the need, seniors will consider reverse annuity mortgages as a means to supplement their incomes in order to afford coverage. Faced with the loss of their inheritances, adult children of seniors will help their parents afford private insurance to protect the estate. Between the nearly $2 trillion in home equity held by seniors today and the $10 trillion their baby boomer children will inherit, there is more than enough wealth in America to solve the long-term care financing crisis with private insurance in a free market. If the government stopped destroying the market for private insurance by indemnifying upper middle class heirs for the cost of their parents’ long-term care, we could unleash private insurance and save Medicaid for the genuinely needy. 

Q:        How should smart consumers plan for long-term care?

A:         As one of the all-time-great LTC insurance agents once told me, “Denial is not a river in Egypt.” Most people fail to plan for long-term care by purchasing private insurance, because they think, “It will never happen to me. I’ll never go to one of those places.” What they don’t realize is that most people who need expensive long-term care are cognitively impaired. Half of all people over the age of 85 already have Alzheimer’s Disease. 

            The fact that people are in denial about long-term care is not the most important point. Of course, no one wants to think about the possibility of becoming frail and incapacitated. Who wants to live in an institution? What interests me is the question, “How is it that people can be in denial about the long-term care risk when nine percent of all seniors will spend five years or more in a long-term care facility at $50,000 to $100,000 per year?” If Americans really faced a one in ten chance of being wiped out by a catastrophic long-term illness, they would not have the luxury to be in denial and they would plan ahead to insure against the risk. 

            That is the primary point I want to make. Medicaid financing of long-term care has enabled the American public’s denial of the long-term care risk. Because Medicaid, with all its faults, has been there for the last four decades paying the bills after the insured event occurs, most Americans do not feel a sense of financial urgency about the risk of long-term care expenses. The solution is to encourage our fellow countrymen to take long-term care more seriously by assuring that Medicaid only goes to the genuinely needy. 

Q:  Do you think that will ever happen? 

A:  Can you believe it?  It just did!  A year ago when you first interviewed me for this book, I said "we have faint hope that politicians and bureaucrats will fix these problems in time."  But then things started to happen.  The president proposed a major reduction in entitlement spending, $10 billion of which was to come from Medicaid.  Democratic and Republican Governors proposed achieving those savings by discouraging Medicaid planning abuse and encouraging more long-term care insurance and home equity conversion.  A battle of words and wills transpired in the Congress and finally, on February 1, 2006, the Deficit Reduction Act of 2005 was passed. 

            We don't have time or space to go into the details here, but you and your readers will be hearing much more about this legislation.  It closes many Medicaid eligibility loopholes.  It lengthens and strengthens the Medicaid transfer of assets penalty.  It replaces Medicaid's unlimited home equity exemption with a maximum cap.  It unleashes the Long-Term Care Partnership program for nationwide expansion.  In a nutshell, this legislation sends exactly the message that is so desperately needed. 

            To wit:  Long-term care is a personal responsibility.  Medicaid is a LTC social safety net but only for the truly needy. If you don't want to spend your own money for long-term care, including your home equity, then buy long-term care insurance.  Be part of the solution, not part of the problem. 

            If the states implement the DRA's provisions and the federal government enforces them and the media educates the public that long-term care is no longer a free benefit, we'll see huge beneficial changes in long-term care financing.  But those are big "ifs," so we need to keep the pressure on politicians, public officials and news reporters at all levels to finish the job.