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
*** 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 www.centerltc.com
or go directly to listen at http://www.belogical.com/audio.htm.
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:
. . . 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.
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,
the interview in question in the members-only Zone at http://www.centerltc.com/members/ltcbullets/652.htm
or scroll down on the LTC Blog at www.centerltc.com
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:
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 http://www.abanet.org/cle/programs/t06mcm1.html.
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 firstname.lastname@example.org
and give us your opinion. ***
LTC BULLET: THE
LONG-TERM CARE DRAma IN CONGRESS
LTC Comment: Steve
Moses's article on the DRA and LTC is republished below with permission
from Health Care News. Health
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 www.heartland.org.
Read Health Care News at http://www.heartland.org/Publications.cfm?pblId=2.
Find Steve's article in the September 2006 issue at http://www.heartland.org/Article.cfm?artId=19601.
"Long-Term Care DRAma in Congress"
Written By: Stephen A. Moses
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
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
the "look-back" period for penalizing self-impoverishing asset
transfers from three to five years;
a "loophole" in the law that allowed people to give away their
assets and qualify for Medicaid in half the time intended by previous
Medicaid's formerly unlimited exemption of home equity at no more than
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.
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
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
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
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.
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
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.
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
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
Stephen Moses (email@example.com) is president of the Center for Long-Term Care Reform in Seattle.