LTC Bullet:  Kiplinger's:  Beware Medicaid, Buy LTCi, Get HEC 

Thursday, April 13, 2006 


LTC Comment:  The Center for Long-Term Care Reform is no longer a lone voice.  The best financial journalists in America are warning about Medicaid's deficiencies, recommending private long-term care insurance, and suggesting home equity conversion.  Another example after the ***news.*** 

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LTC Comment:  When Mary Beth Franklin called to interview me on February 8, the day President Bush signed the Deficit Reduction Act, I knew an accurate and thoughtful story about the new legislation was coming soon.  A long-time editor of Kiplinger's excellent Retirement Report, she's now Senior Editor of Kiplinger's Personal Finance Magazine.  Sure enough, the latter publication's May 2006 issue contains Franklin's piece titled "Medicaid Gets Tough:  Prepare to Pay for Your Own Long-Term Care" (pps. 87-89).  It's a dandy.  Pick up a copy at your newsstand. 

She starts with a story about a family caught in a Medicaid trap that didn't exist before the Deficit Reduction Act ended the "half-a-loaf" self-impoverishment strategy.  The family sold a house and paid privately for long-term care instead of being able to keep the house, get Medicaid to finance the care, and use the now defunct planning strategy to protect funds to maintain the house.  It's a perfect example of how the DRA's "tough love" is sending a new message to all Americans:  

"Don't count on public welfare to preserve your estate or inheritance from long-term care expenses."  

Do you think the elderly will get better long-term care paying privately than they would have received from Medicaid?  Do you think heirs may think twice about neglecting long-term care insurance for themselves?  How about home equity conversion?  Maybe reverse mortgages will be used more often to fund LTC in the future if home equity is genuinely at risk.  It looks like this is how things are shaking out:  exactly according to the new law's intent. 

Here's a direct quote from the article: 

"Thatís exactly as it should be, says Stephen Moses, president of the Center for Long-Term Care Reform, a Seattle advocacy group that has led the charge for tougher rules that restrict Medicaid to the truly poor instead of allowing it to be used as what Moses calls inheritance insurance for baby-boomers.  He says Americans can no longer ignore the stupendous costs of nursing-home care or count on a government bailout.  'There is no more free lunch for long-term care,' says Moses, who believes that unless things change, the future needs of todayís middle-aged baby-boomers will destroy an already overburdened Medicaid system. 

"Whether you believe families should be able to preserve assets for an inheritance or think itís only fair that they spend those assets on a family member who requires a nursing-home stay, the new Medicaid-reform law alters how you should plan for long-term care and how you will have to pay for it.  If you donít own a long-term-care insurance policy--or if you rejected the idea before--you should seriously consider getting one now (see 'A Fresh Look at Long-Term Care,' on page 92).  (pps. 87-88) 

"Also, in a major policy shift, seniors are now being encouraged to use their home equity for long-term care. . . . 

"Reverse mortgages allow homeowners 62 and older to borrow a portion of the equity and receive payment in a lump sum, as monthly income or via a line of credit.  No repayment is due until you move, die or sell the house.  But a reverse mortgage, which involves heavy up-front fees, makes no sense if a senior has to move into a nursing home after only a few years.  [The Center for Long-Term Care Reform's "Durable Reverse Mortgage" proposal would fix that problem and make reverse mortgages a viable funding source for assisted living and nursing home care.  See:  LTC Bullet:  The "Durable" Reverse Mortgage," June 2, 2005 at] 

"To stay at home longer and make the best use of a reverse mortgage, seniors could use the money to add ramps or refit bathrooms to accommodate a wheelchair.  Home equity can also pay for in-home assistance.  As a result, says Peter Bell, president of the National Reverse Mortgage Lenders Association, the law may create greater demand for quality home-care services and help keep seniors out of nursing homes."  (p. 88) 


LTC Comment:  All true so far, but the following statement is dead, flat wrong.  We can forgive an excellent financial journalist for such an error when self-righteous, ostensibly responsible elder lawyers and ideologues masquerading as policy "experts" are knowingly purveying such lies as the truth. 

Quote from the article:  "The new law is likely to crack down on intentional asset-shifting.  But seniors could unwittingly run afoul of the regulation.  Suppose, for example, that a grandmother gives her grandchild money for college.  Three years later she suffers a stroke and needs nursing-home care.  That gift would block her from receiving Medicaid immediately, even though she didnít intend to circumvent any rules." (p. 89) 

LTC Comment:  As we've explained repeatedly in this space, Medicaid's transfer of assets penalty applies only to assets transferred FOR THE PURPOSE OF QUALIFYING FOR MEDICAID.  Donations to charities or gifts to grandkids are exempt from the penalty unless they were done for the purpose of qualifying for Medicaid.  Self-impoverishment when someone is obviously on the slippery slope toward long-term care would trigger a penalty.  Well-intentioned donations or gifts followed by a sudden, unexpected illness or stroke would not.  That was true before the Deficit Reduction Act and it remains true after.  In fact, the DRA made Medicaid's "undue hardship waiver" protections stronger precisely to protect people just in case a transfer of assets penalty would somehow leave an infirm elder in need of long-term care but without the money to pay for it.  It's time for everyone, especially journalists, to stop accepting without challenge the self-serving misrepresentations of elder law attorneys who profiteer off Medicaid and policy analyst ideologues who seek to drag everyone onto government-financed long-term care.  


A final quote from the article:  

"Another effect of the new medicaid restrictions will be to encourage people to buy long-term-care insurance while they are young and healthy. . . . 

"Having long-term-care insurance has always been preferable to relying on medicaid because it gives you more options in choosing a nursing home.  The new law offers other incentives for buying such insurance.  It authorizes states to offer long-term-care partnership programs that promise consumers asset protection in exchange for purchasing insurance (see the box on the facing page).  'This is the biggest catalyst for long-term-care insurance in years,' says Phyllis Shelton, president of LTC Consultants, a training firm for long-termĖcare insurance agents in Hendersonville, Tenn.  'People wonít buy insurance to pay for long-term care if they think itís free under Medicaid.  Now theyíll know itís not.'" 

LTC Comment:  Hear, hear!  Buy the magazine today and get the whole story.  Then, help spread the word.