LTC Bullet:  Kaiser Cover-Up Continues 

Thursday, April 27, 2006 


LTC Comment:  Urban Institute "scholars," aided and abetted by the Kaiser Family Foundation, employed an underhanded straw man argument in the foundation's latest unsuccessful attempt to debunk the impact of Medicaid planning abuse.  More after the ***news.*** [omitted]



LTC Comment:  My favorite logic text defines the straw man logical fallacy as one which "occurs in debate when someone distorts an opponent's position, usually stating it in an oversimplified or extreme form, and then refutes the distorted position, not the real one."  (David Kelley, The Art of Reasoning:  Second Expanded Edition, W.W. Norton & Company, New York, 1994, p. 151.) 

Even more intellectually dishonest than the simple straw man fallacy, is a version I call the "underhanded" straw man argument.  That's when someone distorts an opponent's position, refutes the distorted position instead of the real one, and doesn't even have the professional courtesy to identify the opponent.  That leaves readers unable to compare and contrast the underhanded straw man argument to the real argument it misrepresents. 

A new issue paper by Urban Institute policy advocates Timothy Waidmann and Korbin Liu titled "Asset Transfer and Nursing Home Use:  Empirical Evidence and Policy Significance," published April 2006 by the Kaiser Family Foundation at, employs the underhanded straw man fallacy with impunity.  Here's the story. 

Waidmann and Liu attack a simplistic argument while ignoring the carefully reasoned case they distort and failing even to cite the legitimate argument's source.  That's the very definition of the underhanded simple straw man fallacy. 

The straw man argument Waidmann and Liu employ is that "many 'well-to-do' elderly Americans transfer assets to gain Medicaid coverage for nursing home care . . . [and thus] distort the intent of the Medicaid program and unnecessarily inflate public spending."  (p. 1)  

On the face of it, that statement is true, but it is only a small part of the case against overutilization of Medicaid and Medicaid estate planning.  Therefore, even if the authors refuted the straw man argument they pose, which they don't, the real argument would be unaffected.  

We have a lot, and could soon have more than enough, hard evidence to support the statement that asset transfers to qualify for Medicaid are commonplace.  Last week's "LTC Bullet:  Spousal Refusal:  Who Wins?  Who Loses?" at documented nine cases of millionaires using a single asset transfer gimmick ("spousal refusal") to divest hundreds of thousands of dollars in just one county of a single state.  Thousands more examples of asset transfers to qualify for Medicaid could easily be identified by proper scholarly methods, i.e. by investigating a valid random sample of actual Medicaid long-term care cases and projecting to a reasonable estimate of the true incidence and cost of the practice.  The Urban Institute and the Kaiser Family Foundation have sufficient financial resources to undertake this much-needed research, but they don't. 

Instead, Waidmann and Liu equivocate on the word "many," employ a useless research strategy, and commit a serious error of fact and interpretation.  

They equivocate on the word "many" by implying that their unnamed interlocutor believes asset transfers are the only problem, that such transfers are rampant across the whole population of Medicaid long-term care recipients and that asset transfers alone cost Medicaid many billions of dollars.  Certainly, I've never made such a specious case, and I'm unaware of anyone who has.  

As I've explained so many times here and elsewhere, asset transfers and other fancy Medicaid planning techniques are only the "tip of the iceberg."  The real problem is that most elderly Americans qualify for Medicaid even without sheltering or divesting assets and without spending their resources for long-term care.  Last week's other LTC Bullet, titled "Who Still Gets Medicaid Without Spending Down" at, explains in detail how that happens.  Medicaid's income and asset limits are so generous that only the top 10 percent or so of seniors even need to transfer assets, or engage in other, more sophisticated methods of Medicaid planning, to qualify.  

So, when Waidmann and Liu conclude that the "pursuit of transferred assets would recover only about 1 percent of total Medicaid spending for long-term care," I say "Wow!"  That's over a billion dollars.  I think the real figure is much higher for reasons explained below.  But when opponents of my position try to defeat it by misrepresenting it and yet they still concede savings in ten figures from pursuing asset transfers alone, that is a huge victory for our side indeed. 

Now, let's get down to brass tacks.  The research methodology Waidmann and Liu used for their paper is worthless for their present purpose.  The "Health and Retirement Study (HRS)" on which their findings are based is derived from self-reporting by study participants and their families.  Although the surveyors carefully examine, cross-check and benchmark the data they collect, no independent research or verification is done with outside sources to determine whether or not all asset transfers are reported and reported in the correct amount.  

I know from examining many hundreds of actual public welfare and Medicaid case records since the early 1970s that people frequently fail, both unintentionally and intentionally, to disclose all relevant information about their income, assets and wealth transfers when they apply for public assistance.  The only way to get the whole truth is to query financial institutions and public records on a valid random sample of cases and project reasonable estimates of the total incidence and amounts of asset transfers and other artificial self-impoverishment techniques therefrom.  Survey data of the kind employed for this paper is worse than useless because it undeservedly implies credibility, reliability and accuracy without verification. 

Finally, Waidmann and Liu make a serious error of fact and interpretation.  They say "approximately 43% of all nursing home residents eventually become Medicaid eligible, while the balance remains 'always private pay.'"  The truth is very different. 

At any given time, roughly two-thirds (65.7 percent) of all nursing home residents in the United States, and the vast majority of all expensive long-stayers, are covered by Medicaid.  Another 12.4 percent are covered by Medicare.  Other payers, including the Department of Veteran's Affairs (DVA), major medical insurance, private long-term care insurance AND finally private payers account for only 21.8 percent of all payers.  (Source:  Reimbursement and Research Department of the American Health Care Association, The State Long-Term Health Care Sector Data Resource Book, 2005, "Nursing Facility Patients by Payor - Percent of Patients," p. 92, based on  CMS OSCAR Current Survey, June 2005.)  The only way the authors' statement that 43 percent of nursing home residents eventually qualify for Medicaid and the rest remain private pay could be true is if they count everyone who spends even one day in a nursing home and they consider Medicare and the DVA to be "private payers."  Neither such assumption makes sense because the first one illogically mixes expensive long-stayers with inexpensive short-stayers and the other one corrupts the meaning of private pay.  Any conclusions these authors reach based on such faulty assumptions and mistaken reasoning are spurious. 

Let me make an invitation and offer a challenge.  I invite the authors of this latest paper, and those of the dozen or so others of the same ilk published in the past year by the multi-million dollar Kaiser Family Foundation, to read and I challenge them to refute a serious articulation of the argument that over-utilization of Medicaid is undermining the program and driving up costs unnecessarily.  It's titled "Aging America's Achilles' Heel:  Medicaid Long-Term Care" and you'll find it on the Cato Institute's website at   

But does anyone really believe these advocates of public financing posing as objective scholars have not read that paper already?  Of course they have.  Instead of confronting its arguments frontally, however, they would rather ignore the real arguments and attack a distorted, and un-cited position that is easier to defeat.  Even at that, they failed.   

And that is precisely why we're winning the big public policy battles--witness the Deficit Reduction Act--with our tiny war chest, augmented by strong evidence and logic, in spite of their specious sniping, funded by deep pockets. 

Steve Moses