LTC Bullet:  How Medicaid Short Changes LTC Providers, Insurers and Patients 

Tuesday, June 6, 2006 


LTC Comment:  Medicaid financing of long-term care does far more damage than meets the eye and to everyone involved.  Details after the ***news.*** 

*** TODAY'S LTC BULLET IS SPONSORED BY MARILEE DRISCOLL, a speaker and consultant where the worlds of LTC, PR and marketing align.  Attend her New York City PR Intensive June 22-23 to learn how YOU can be quoted in newspapers and magazines, how to use media to raise your profile, and get more referrals so you can help more people.  Use Coupon code Centerltc to save $50 when you register by June 10.  Go to  Call Marilee at 508-830-9975. *** 

*** STEVE MOSES SAYS:  "I've been called a lot of things.  The Lone Ranger of Long-Term Care for one.  An occasional reference to Paul Revere also comes to mind.  But maybe the allusion most often has been to Don Quixote tilting hopelessly at the illusive windmills of long-term care public policy.  That's why the cartoon you can find and download at is a welcome turnabout.  It suggests that the DQ of LTC finally nailed one of those windmills, to wit, Medicaid loopholes closed by the Deficit Reduction Act.  To clarify, however, it wouldn't have happened without the hard work of many other people, especially my co-founder of the Center for Long-Term Care Financing, and the current Chief Health Counsel for the U.S. House Energy and Commerce Committee, David Rosenfeld.  But that's where the analogy falls apart because David is no Sancho Panza, rather a full-fledged crusader in his own right for rational LTC policy." *** 

*** LTC ICON #1:  Read this first in a series of biographical profiles of people in the field of long-term care at  Guess who?  *** 



LTC Comment:  A couple days ago, we received the following inquiry from Kim Ketchum, CLTC, an LTCi producer who is a longtime supporter and member of the Center for Long-Term Care Reform. 


Steve:  It is my understanding that the nursing home Medicaid residents must turn over their monthly Social Security checks to the nursing home when becoming a Medicaid participant.  Wouldn't the monthly Social Security check more than make up for the $13.30 per day shortfall BDO Seidman cites?  Thanks, Kim


Kim refers to our mention recently of a study that showed Medicaid reimburses nursing homes on average $13.30 per bed day less than the cost of providing the care.  He wonders reasonably whether the requirement that Medicaid recipients contribute all of their income, including Social Security, except for a small personal needs allowance, toward their cost of care wouldn't offset that otherwise substantial loss. 

It's a good question and the answer elucidates just what a disastrous effect Medicaid financing has on most nursing homes' ability to provide quality care. 

For, you see, Medicaid pays nursing homes no more than its meager reimbursement levels whether a recipient has any income to contribute or not.  All the Medicaid recipient's contribution does is raise the nursing home's reimbursement up to the Medicaid level, which is the level at which their loss is $13.30 per bed, per day according to the study.  The total loss to nursing homes from Medicaid reimbursement is approaching $5 billion per year. 

On average, Medicaid reimburses nursing homes only 70 percent of their private-pay rate.  Thus, if private payers must pay $6,000 per month for care, Medicaid pays on average only $4,200.  If the Medicaid resident has $2,000 of income that must be contributed toward the cost of care, then the nursing home still gets only $4,200, the resident pays $2,000 and Medicaid contributes only $2,200.  Who makes up the difference between what Medicaid pays, including the amount paid by the recipients, and what it actually takes to run the nursing home properly?  You guessed it:  the few remaining private-payers who shell out full fees from their own pockets or the handful who have LTC insurance policies. 

The New York Times highlighted this problem recently in an article by Milt Freudenheim, "Low Payments by U.S. Raise Medical Bills Billions a Year," June 1, 2006,   "Employers and consumers are paying billions of dollars more a year for medical care to compensate for imbalances in the nation's health care system resulting from tight Medicare and Medicaid budgets, according to Blue Cross officials and independent actuaries."  Although this story was about acute care, exactly the same problem occurs with Medicaid-financed long-term care. 

That's why Medicaid can pay less than half the cost of nursing home care nationally, but it still covers two-thirds of all nursing home residents.  Medicaid recipients are making up the difference with their Social Security and other income.  And because Medicaid residents tend to be the longest stayers, Medicaid actually touches nearly 80 percent of all nursing home patient days with its impossibly low reimbursements.   

So what? 

The consequences of these facts are devastating for everyone involved in long-term care service delivery and financing. 

FROM THE NURSING HOMES' POINT OF VIEW:  How would you like to run a business where 80 percent of your sales bring in less than your cost?  You can't make up for that in volume!  If you've ever wondered why nursing homes struggle to survive financially, have trouble paying enough to attract competent caregivers, and provide care quality that is constantly criticized, there's your answer. 

FROM THE NURSING HOME RESIDENTS' POINT OF VIEW:  The good news is that Medicaid-subsidized long-term care is easy to get without spending down personal assets for care, especially if a Medicaid planner is consulted.  The bad news is that most people don't plan or insure for long-term care, end up on Medicaid by default and suffer the consequences in problems of access, quality and loss of control. 

FROM THE LTC INSURERS' AND REVERSE MORTGAGE LENDERS' POINT OF VIEW:  Few people buy their products to plan or pay for long-term care, because the path of least resistance is to ignore the risk and cost of long-term care, wait until expensive care is needed, and then shift the cost while protecting the home equity to Medicaid, taxpayers, and nursing home owners. 

FROM THE ASSISTED LIVING AND HOME CARE PROVIDERS' POINT OF VIEW:  Medicaid's institutional bias and easy availability to even affluent seniors siphons off a large portion of other providers' potential market by making nursing home care artificially less expensive for uninsured consumers. 

FROM THE POINT OF VIEW OF THE TRULY NEEDY:  Poor people don't have the "key money" that Medicaid planners' affluent clients use to buy their way into the best nursing homes.  So the poor pay in three ways:  (1) they can't protect the little wealth they have because they don't have access to high-priced attorneys to help them divest or shelter it, (2) they have to contribute almost all their income toward their cost of care, and (3) they end up in the worst nursing homes that have the highest Medicaid resident ratios because they can't buy their way into the best places. 

FROM THE RESPONSIBLE CONSUMERS' POINT OF VIEW:  They pay four times.  Once when they buy LTC insurance.  Again, when they pay taxes to support Medicaid.  A third time, when they have to pay on average half again as much for nursing home care as Medicaid pays.  And finally, a fourth time, when they get less care quality because heavy dependency on Medicaid drags down nursing home quality for everyone, not just Medicaid recipients. 

This is why nationally syndicated financial columnist Jane Bryant Quinn titled an article excoriating Medicaid planning attorneys "Do Only the Suckers Pay?" 

But it's not just the private-pay nursing home residents who are the suckers.  Nursing homes are suckers for putting up with this system.  LTC insurers and reverse mortgage lenders are suckers for letting public welfare steal their rightful affluent client base.  Tax paying consumers are suckers for letting themselves get ripped off.   

Bottom line, all the private sector players, who could and should be saving Medicaid by financing most long-term care, are sanctioning their own victimization by accepting the corrupt status quo.  They've ceded the moral high ground to Medicaid planners who profiteer on the welfare program at the expense of everyone, especially the poor. 

The solution?  More legislation like the Deficit Reduction Act to target scarce Medicaid LTC resources to the genuinely needy and encourage private financing of LTC through insurance and home equity conversion.  

This isn't rocket science, folks, much less tilting at windmills.  Just do it.