LTC Bullet: Dueling
August 3, 2006
Comment: Should insurance
industry trade journals publish articles that promote Medicaid estate
planning? You decide after
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Comment: When I saw two
articles justifying and promoting Medicaid planning in Life Insurance
Selling magazine, I sent the following letter to the editor, Gordon
Bess. He published it with the Medicaid planner's reply in the
magazine's July 2006 issue. Both
letters follow, republished with permission from Life
resist the temptation to rebut the lawyer's reply. Most readers of these LTC Bullets will see easily and
clearly the self-serving fallacies in his arguments.
Medicaid and LTCI
am writing concerning Dennis Sunderman's articles in the April and May
issues of LIS [Life Insurance Selling magazine] on
"Solutions for People in Nursing Homes," and his discussion of
Medicaid planning options.
problem is that Medicaid is supposed to be a safety net for the poor,
not a substitute for responsible LTC planning and insurance.
Furthermore, Medicaid has a terrible reputation for problems of
access, quality, reimbursement, discrimination, and institutional bias.
It is never the preferred choice for anyone who has the ability
to pay for private care. And
no one does Medicaid planning except to protect assets from paying
responsibly for care. The result is that most people end up on Medicaid; Medicaid
pays too little to ensure quality care and long-term care facilities
barely survive financially. The
LTCI and HEC markets remain underdeveloped, and the future does not bode
well. This is what
producers need to know and what they should get from their trade
planners make fortunes abusing Medicaid and sustaining a system in which
LTCI producers can barely make a living unless they are altruistic,
masochistic geniuses trying to sell something the government and
attorneys are giving away. I
think Sunderman's article expresses a conventional wisdom that is flat
wrong and contributes to the failure of private LTC insurance and other
private financing options.
are many options agents can recommend for people who do not qualify
medically for LTCI. For
people who do not qualify financially, the proper course is to spend
down to Medicaid's very generous income and asset limits.
It is never ethical for LTCI producers to recommend artificial
self-impoverishment for the purpose of taking improper advantage of
agents who specialize in comprehensive LTC planning find solutions for
families regardless of their insurability.
The process typically requires the skill and knowledge to
coordinate insurance products, social services, Medicare and
supplemental coverage, and even Medicaid.
In a perfect scenario, everyone would be eligible for LTC
our experience reveals that outside of our guaranteed issue group LTC
cases, as many as 50% of applicants are declined or rated.
And many of the prospects referred to our office already are
the record, we have offered LTC insurance to our clients since 1987.
We are the LTC agency for one of the largest cities in California
and one of the largest non-profit private hospital systems west of the
Mississippi. We also
provide employer-sponsored LTC insurance to all of our eligible
employees. We appreciate
and understand the value of LTC insurance.
But we also know exactly where it does not work!
personal example includes my uninsurable parents, now at an advanced
age, who required substantial home care and facility confinement. They
are typical of the thousands of World War II veterans who own a home,
have a modest retirement account, and struggle with the issues of
independence and care. They
fought for our freedom, and we feel an obligation to help those like
them, even the uninsurable. And
we never charge any fees for this planning.
would agree that attorneys and financial advisers who impoverish wealthy
individuals for the purpose of obtaining Medicaid to reduce share of
cost is questionable. However,
I would also say that LTC policy peddlers who do not understand the
products they are pushing, don't understand Medicare or Medicaid, and
pressure consumers into large quantities of LTC insurance they cannot
afford and may not need are also questionable.
Obviously, there are good and bad people in every profession.
to CMS, the federal overseer of nursing homes, "80% of all
residents in nursing homes receive poor care - private paying does not
guarantee quality care." We
believe that an advocate in the facility such as a family member or a
professional care manager is a solution.
have met many people who are critical of Medicaid planning but change
their opinion when their family faces an LTC crisis.
They want entitlements just like everyone else.
Medicaid established the rules for the treatment of
"countable assets" and, specifically, how annuities are to be
structured to be compliant. For
an adviser who understands LTC planning, omitting planning options is no
different than a CPA who fails to recommend allowable tax deductions.
planners thrive when they have all the facts, satisfy the needs of their
clients, and make the best interests of their clients their only goal.
That's the difference between planners and salespersons.
This is not a "one size fits all" issue, and no one
should try to present LTC insurance as if it were the only option.
P. Sunderman, CSA