Bullet: Book and Interview on LTC
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 http://online.wsj.com/article/SB114031355392377966-search.html 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
"'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, http://www.washingtonpost.com/wp-dyn/content/article/2006/02/20/AR2006022000997.html)
"'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, http://www.dallasnews.com/sharedcontent/dws/bus/stories/022106dnbusnursingcare.d0fc284.html)
*** 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
*** 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
LTC BULLET: BOOK
AND INTERVIEW ON LTC PLANNING--NEW EDITION
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.)
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
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.
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).
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.
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
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.
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
Chapter 19: Interviews
PERSPECTIVE FROM THE PRESIDENT OF THE CENTER FOR LONG-TERM
CARE REFORM, INC.
The Coming Challenge of Long-Term Care
Stephen A. Moses
"If the baby boom is the Titanic, long-term care is
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 www.centerltc.com.
How would you describe the challenge of long-term care?
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!
How do you see your organization, the Center for Long-Term Care Reform,
Inc., helping with the problem of long-term care?
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.
How did America’s long-term care service delivery and financing system
become so dysfunctional?
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.
Isn’t Medicaid an entitlement program like Medicare? Why shouldn’t
people manipulate their income and assets to qualify?
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?
What is the likelihood that we’ll ever see a government-financed model
for long-term health care that provides for the middle class?
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
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:
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:
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
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
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
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.
All right, so how would you change public policy to meet the challenge of
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.
How should smart consumers plan for long-term care?
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
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.