LTC Bullet:  The Long-Term Care DRAma in Congress 

Friday, September 1, 2006 


LTC Comment:  Moses defends Maryland congressman's vote for the Deficit Reduction Act before a congressional hearing.  After the ***news.*** 

*** TALK RADIO INTERVIEW:  Steve Moses was interviewed live on the syndicated "Lynn Woolley Show" on August 28, 2006.  Check it out in the "Media" section of or go directly to listen at  Scroll down until you see "Lynn with Stephen A. Moses," then click on the Segment A or Segment B links. ***  

*** REVERSE MORTGAGE ARTICLE big hit.  Atare Agbamu's interview of Steve Moses regarding the importance of home equity conversion for funding LTC services and LTCi premiums attracted these comments: 

"BRAVO! . . . Great interview. I have forwarded it to rich and famous in our reverse mortgage world. I am hoping to get my bank to be a member/contributor of the Center. (I'm a member, but want the lender . . . to [join].)"  --  Valerie VanBooven RN, BSN, PGCM, Director of Marketing and PR, Next Generation Financial Services, a division of 1st Mariner Bank, St. Charles, MO 

"I recently forwarded a copy of your article with Stephen Moses to two insurance professionals in the Lexington, Kentucky market. Both of them complimented the content and quality of the article. This kind of information is critical to educating the marketplace, including not only financial professionals, but more importantly those with intimate contact with the senior population."  --  Mike Cornette, Reverse Mortgage Consultant, Lexington Investment Mortgage Company, Lexington, KY 

Read the interview in question in the members-only Zone at or scroll down on the LTC Blog at until you find "LTC BULLET:  FORWARD ON REVERSE MORTGAGES." *** 

*** CPAs GET THE MESSAGE:  Following is a note from a LTC provider member of the Center:  "Steve...  The September Issue of the CPA Client Bulletin [published by the American Institute of Certified Public Accountants] includes an article, 'New Rules That Restrict Medicaid Transfers.'  You should be pleased that they concluded with these comments:  'Why impoverish yourself to qualify for government subsidies?  Especially when a number of excellent nursing homes won't accept residents who are on Medicaid?  Instead, consider providing for long-term care (LTC) in your overall financial planning.  Buying LTC insurance may be a viable method of protecting your assets from a long term nursing home stay.'"  --  Dave Lawrenz, Administrator, Timbercrest Senior Living Community, North Manchester, Indiana *** 

*** AND LAWYERS GET IT TOO!:  According to an electronic flyer from the American Bar Association:  "The Deficit Reduction Act of 2005 (DRA) drastically altered Medicaid eligibility rules. As a result, estate and financial planning for long-term care that was effective prior to the Act may now face significant problems."  The flyer offers an online training class by two well-known Medicaid planners.  Will they recommend buying LTCi or will they push new Medicaid planning gimmicks to circumvent the DRA?  Check it out at  While we hate to put money it the pockets of these poverty-making professionals, it would be good to know what they're up to lately.  If you take the ABA's 1.5-hour online class on Sept. 15, be sure to drop us a note at and give us your opinion. ***     



LTC Comment:  Steve Moses's article on the DRA and LTC is republished below with permission from Health Care News.  Health Care News is The Heartland Institute's national monthly outreach publication for free-market health care reform.  The Heartland Institute is a nonprofit organization devoted to discovering and promoting free-market solutions to social and economic problems.  Visit Heartland at  Read Health Care News at  Find Steve's article in the September 2006 issue at


"Long-Term Care DRAma in Congress" 

Written By: Stephen A. Moses
Published In: Health Care News
Publication Date: September 1, 2006
Publisher: The Heartland Institute 

When a local Medicaid planning attorney in U.S. Rep. Roscoe Bartlett's (R) district in Hagerstown, Maryland criticized him on July 10 for voting for the Deficit Reduction Act of 2005 (DRA), which President George W. Bush signed into law in February, Bartlett didn't take it lying down. He called in some experts, and he confronted his accusers in the media. He called a hearing in his district to set the record straight.

Bartlett took the moral high ground on a politically sensitive issue and he carried the day when his main critic backed down. 

Exploding Costs 

Faced with exploding Medicaid costs for long-term care, Congress set out in the DRA to save the program money by ending commonplace abuses of it. They did so through several controversial measures, including: 

o  lengthening the "look-back" period for penalizing self-impoverishing asset transfers from three to five years; 

o  eliminating a "loophole" in the law that allowed people to give away their assets and qualify for Medicaid in half the time intended by previous law; 

o  capping Medicaid's formerly unlimited exemption of home equity at no more than $750,000; and 

o  restricting the use of annuities, loans, life estates, and other "Medicaid planning" techniques that allowed people to qualify for Medicaid without spending their own assets for long-term care. 

Competing Reports 

So, what's wrong with that? Nothing, if you're a taxpayer and responsible citizen. Everything, if you're a Medicaid planner who makes a living by artificially impoverishing prosperous clients to qualify them for publicly financed long-term care benefits. 

Elder law attorney R. Thomas Murphy wrote in a March 25 op-ed for the Herald-Mail, the biggest newspaper in Bartlett's district, "Individuals who have given money or property to a loved one for simple things such as paying debts, college costs, helping with family medical bills or have donated money to their church, may find that they are denied Medicaid eligibility once they need long-term care." 

Bartlett defended himself in an April 4 letter to the newspaper's editor. "Inaccurate reports are causing unnecessary worry and a misunderstanding of changes to the Medicaid program made as part of the Deficit Reduction Act that will save taxpayers $39 billion over the next five years," he wrote. 

Michael Day, a local Medicaid planning specialist, responded in an April 16 op-ed in the same paper, claiming the DRA will "punish seniors for normal charitable giving, including to their church, children and grandchildren, and penalizes seniors for having family values." 

Who's right? And why are feelings on both sides running so high? 

Qualifying for Aid 

Medicaid is, in a word, welfare. People are supposed to have very low incomes (after deducting their medical expenses) and no more than $2,000 in cash before qualifying for Medicaid's long-term care benefits. Assets given away for less than fair market value to qualify for Medicaid incur a penalty imposed as a delay in a Medicaid applicant's date of eligibility. 

For many years, however, practitioners of a specialized area of the law called Medicaid estate planning have taken advantage of certain "loopholes" in the Medicaid eligibility rules to qualify their well-to-do clients for Medicaid long-term care benefits by artificially impoverishing them or making them appear poorer than they were. 

For example, Medicaid planners would recommend that aging clients transfer assets to their heirs earlier than the three years that Medicaid looked back to consider whether assets were transferred to qualify for the program. If the need for long-term care was urgent, they'd propose giving away half the clients' assets so the client could qualify for Medicaid in half the time intended by the rules. They would suggest "hiding money in the home" because Medicaid exempted one home and all contiguous property of unlimited value. They used sophisticated legal techniques to shelter and divest assets, including the use of annuities, "self-canceling installment notes" (SCINS), "life estates," and many other similar measures. 

As one might imagine, making the huge financial liability of long-term care disappear--to be paid by the taxpayers through Medicaid after someone needed expensive care and was no longer medically qualified for private insurance--was a lucrative law practice. But although practitioners of "elder law" did well under that system, the effect was to anesthetize the public to the need for private long-term care insurance and to shift enormous costs from the private sector to the public sector, principally to Medicaid and Medicare. 

Perpetuating Fallacies 

To curb these abuses, Congress passed the measures described above to close some of the more egregious Medicaid eligibility loopholes. Predictably, individuals and organizations who benefited from the dysfunctional status quo fought those changes before and after passage. 

For example, The Washington Times reported on December 5, 2005, "The nation's top senior citizen advocacy group [AARP] has targeted members of Congress with advertisements in their hometown papers opposing House spending cuts, largely because of the bill's provision to change Medicaid." Since the DRA's enactment, four lawsuits have attempted to enjoin enforcement of its provisions. Medicaid planners have complained bitterly in the media about the alleged negative consequences.  [Two of those lawsuits have since been thrown out of court.] 

The complaints, however, are specious. The allegations that the new rules will deny access to long-term care for people truly in need are false. The Social Security Act clearly states Medicaid's transfer of assets penalties do not apply unless assets are transferred for the purpose of qualifying for Medicaid. Tithes to one's church or gifts to grandchildren that are not made in contemplation of achieving Medicaid eligibility are exempt. 

The average home equity of seniors in the United States is only $85,000, so Medicaid's new limit on the home exemption of up to three-quarters of a million dollars will affect only the richest of the rich. 

Making Changes 

The artificial impoverishment tricks Medicaid planners used to qualify their clients for public welfare by means of annuities, special loans, etc. benefited only the affluent, so eliminating them from the program benefits the poor who have no choice but to rely on Medicaid, and it also relieves the financial burden on taxpayers. 

The lawsuits challenging the DRA are based on an argument that the law did not pass in identical form in both chambers of Congress. That argument is unlikely to convince the courts because everyone agrees the discrepancy between the bills was a clerical error and therefore a distinction without a difference. 

The bottom line is that Congress took some small steps in the DRA toward making Medicaid a more fair, efficient, and cost-effective long-term care safety net for the poor. As a result, some people who are not poor who used to be able to take advantage of Medicaid will not be able to do so in the future. The interest groups who represent such people and the legal professionals who helped them game the Medicaid system in the past are up in arms. 

But targeting Medicaid to the genuinely needy and encouraging everyone else to plan early and save or invest for long-term care is good public policy. Legislators who take that position and defend it effectively have every reason to be proud of their vote for the DRA. 

Stephen Moses ( is president of the Center for Long-Term Care Reform in Seattle.