Bullet: The Brave New World
of Long-Term Care
Thursday, November 16, 2006
LTC Comment: What
is the "Pusillanimous Old World of Long-Term Care?"
How did good LTC intentions produce dismal unintended
consequences? Will the DRA
fix LTC? What bitter lesson
is government about to learn that almost ruined LTCi? Which way will the new Democratic majority in Congress lean?
Answers to all these questions, after the ***news.***
*** LTCI PRODUCERS SUMMIT.
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*** AGE WAVE PIONEER KEN DYCHTWALD, a long time
friend and supporter of the Center for Long-Term Care Reform, says:
"We invite you to visit our new, improved Age Wave
The time had come for us to make it easier for you to learn what
we have been up to, including: compelling new presentations, insightful landmark research
projects, and our various publications and media initiatives.
In addition, we have added a new section featuring tools for
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And we say: "Check
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JOB ANNOUNCEMENT. The
Center for Health Policy Research and Ethics at George Mason University
invites applications for a tenured or tenure-track position to serve as
the Center's Deputy Director/Director of Research to begin August 2007. For more information, see position F8941z at https://jobs.gmu.edu/applicants/jsp/shared/frameset/Frameset.jsp?time=1163693198633.
This is a full time research faculty position working Dr. Mark R.
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LTC BULLET: THE
BRAVE NEW WORLD OF LONG-TERM CARE
LTC Comment: Center
president Steve Moses addressed a symposium on aging at the Notre Dame
Law School on November 9. He
was on a panel with three law professors, two of whom addressed the
question "Who Should Pay for Long-Term Care?"
Richard Kaplan, Peer
and Sarah Pedersen Professor of Law at the University of Illinois
College of Law, thought we should solve the problems of
Medicaid-financed long-term care by adding the benefit to Medicare.
A. Frolik, Professor of Elder Law at the University of Pittsburgh,
preferred a mandatory long-term care insurance system, government
enforced, and based on compulsory payroll deductions along the lines of
systems now operating in Germany and Japan.
anticipate that each of the presenter's remarks will be published in a
law journal. We'll point
you to that source when it's available.
In the meantime, here's what Steve had to say.
"The Brave New World of Long-Term Care"
Thank you for inviting me to Notre Dame Law School.
It is an honor to address you and to share the podium with such
My background includes 18 years as a career U.S.
government employee working a decade with Medicaid and long-term care
issues for the HCFA and the DHHS Office of Inspector General.
I'm currently president of the Center for Long-Term
Care Reform, a private think tank and public policy advocacy
organization dedicated to ensuring quality long-term care for all
I chose "The Brave New World of Long-Term
Care" as my topic today. But
let me start by describing the "Pusillanimous Old World of
Long-Term Care," that is, the status quo.
America has a welfare-financed, institution-based
long-term care system in the wealthiest country in the world where no
one wants to go to a nursing home.
Long-term care in the United States is
characterized by access and quality problems, dismally low reimbursement
levels, discrimination against public benefits recipients, institutional
bias, loss of independence, welfare stigma, and imminent insolvency.
Most Americans don't worry about long-term care
until they need it. Consequently,
few save, invest or insure for the risk and they usually end up on
How in the world did we get into this mess?
Well, it's pretty simple.
Government started paying for nursing home care in 1965 through
Medicaid and Medicare. Its
good intentions had unanticipated and extremely unfortunate
Because nursing home care was free,
Home and community-based care languished for decades.
Since the government paid for nursing home care, no
one bought private insurance against the long-term care risk.
Costs exploded of course as they always do when a
benefit is free to consumers.
To control costs, Medicaid tried to contain
expenses by paying too little for care thus causing access and quality
When that didn't control costs, government tried to
restrict access to Medicaid by making eligibility harder to get, by
requiring recovery from recipients' estates, and even by making it a
crime to transfer assets to qualify or penalizing financial advisors for
rendering advice to do so for a fee.
Those measures failed because Medicaid eligibility
rules are generous to begin with and so elastic that they are easily
stretched to cover even affluent people.
How can that be when Medicaid long-term care
eligibility requires impoverishment?
Simple, it doesn't.
There is no limit on how much income people can have as long as
their medical expenses, including private nursing home care, are high
There is no limit on assets either as long as they
are held in exempt form such as a home, business, automobile, prepaid
burial expenses, term life insurance, home furnishings and other
personal belongings, etc.
Bottom line, most elderly people who have a
nursing-home level of care need, qualify for Medicaid.
Lawyers and other advisors who specialize in artificially
impoverishing people can easily qualify people far above these already
Medicaid eligibility is a very complicated topic.
I do not have time to explain in detail today.
But I invite you to read my monograph titled "Aging
America's Achilles' Heel: Medicaid
Long-Term Care" at www.centerltc.com.
After over 40 years of publicly financed long-term
care, consumers are anesthetized to the high risk and catastrophic costs
because government pays for the vast majority of all long-term care in
the United States.
Amy Finkelstein and Jeffrey Brown of the National
Bureau of Economic Research (www.nber.org)
have confirmed this fact in two papers.
They found that two-thirds to 90 percent of the potential market
for private LTC insurance has been crowded out by Medicaid.
The key point is that Medicaid and Medicare took on
too much of the burden of long-term care financing, distorted the market
so as to impede development of a home and community based care
infrastructure and to discourage private insurance to pay for it.
Both programs are both now spiraling toward
The good news is that if we stop doing what we've
always done, we'll get a different result.
After all, isn't that the very definition of "sanity."
If the current problems of long-term care have been
caused by excessive dependency on public financing, the solution is
Target Medicaid to the truly needy and others will
plan early to save, invest or insure for long-term care.
That is finally starting to happen.
The Deficit Reduction Act of 2005 took several baby steps in that
Before the DRA, anyone could shelter unlimited
assets in a home and contiguous property.
Now there is a cap on home equity of $500,000 (or $750,000 at
With the average home equity in America only
$86,000, that's only a start. But
keep in mind, Britain, with its socialized health care system, only
allows people $36,000 of home equity while receiving publicly financed
The DRA extends the look-back period for asset
transfers done to qualify for Medicaid to five years.
This is also just a start as the average period of time from
onset to death in Alzheimer's Disease is eight years.
Medicaid planners are already urging people to begin much earlier
to plan for public welfare.
In Germany, another European socialized system, the
look-back period for asset transfers is 10 years, double ours.
Ironically, America's long-term care system is far more
generously available than are some of the ostensibly socialized systems
The DRA changed the penalty period for asset
transfers done to qualify for Medicaid to eliminate the half-a-loaf
strategy, the single commonest technique used to impoverish people
artificially for Medicaid.
Critics have claimed that imposing the asset
transfer penalty later than before will cause people in need of care to
be denied access, but that won't happen.
Why? Because we've
eliminated the main reason to transfer assets in the first place.
But even if someone does accidentally end up
penalized for transferring assets, in need of care, but penniless and
ineligible for Medicaid, the DRA strengthened the provisions for undue
hardship waivers to protect such people.
The DRA also blocked several other abuses
previously used to divert people to Medicaid who should have paid their
own way for long-term care.
There are more restrictions on the use of annuities
to convert countable, disqualifying assets into non-disqualifying
income. The income first
rule has replaced the asset first option, thus preventing huge extra
asset exemptions for community spouses.
I've described these and other provisions in the
Deficit Reduction Act bearing on Medicaid eligibility in testimony
before Congress which you can find and read at www.centerltc.com.
Finally, the DRA did two other critical things
related to long-term care. LTC
Partnerships may now be expanded to all states.
That's nice but not decisive.
The Partnerships allow people who buy LTC insurance to exempt
extra assets from Medicaid spend down.
So, if there is no real spend down requirement as
in the past, the Partnerships have, and indeed they have had in the four
states that tried them already, little effect.
The last key thing the DRA did was to unleash
Medicaid to pay for more home and community-based services instead of
nursing home care. States
will no longer have to obtain waivers to cover HCBS; they can do so
under their regular Medicaid state plans.
This is a double-edged sword, however, unless
states also control the hemorrhage in Medicaid eligibility. HCBS and assisted living are popular services that everyone
wants. When private LTC
insurance started paying for them, costs and premiums exploded. Government is about to learn the same bitter lesson.
The Deficit Reduction Act with its constraints on
Medicaid long-term care eligibility and its encouragement of personal
responsibility through private insurance and home equity conversion is
definitely the direction in which we must move.
When we target Medicaid's scarce resources to the
genuinely needy, they'll get better care across a wider spectrum of
When more people pay privately for long-term care,
they'll command red-carpet access to top-quality care at the most
appropriate level of care.
When people with money have to pay for their own
long-term care, they will buy LTC insurance and use their home equity,
which means those businesses will boom, provide more jobs and pay more
When long-term care providers have more private
payers, nursing homes, assisted living facilities, and all other
caregivers will be more financially solvent.
Debt and equity capital, desperately need to finance the
construction and operation of long-term care facilities will return to
Finally, what's wrong with other proposals commonly
offered to solve this problem?
Many seek to solve the problems of long-term care
service delivery and financing with compulsion.
They want to force people to pay for LTC insurance or load up
Medicare with a long-term care benefit.
That won't work and it hasn't worked.
If excessive public financing has caused the
problems we have now, then trying to solve them by adding more
government financing would be like trying to put out a fire by dousing
it with gasoline.
Social Security and Medicare have unfunded
liabilities totaling $86 trillion at latest count.
To fix them, we'd have to double payroll taxes or halve their
benefits. Neither is
The more likely outcome is that these programs will
be means-tested. In other
words, they will be turned into welfare programs.
In time they'll lose political support in the same way Medicaid
Adding long-term care to Medicare, therefore, would
be like adding deck chairs to the Titanic after the incident with the
Here's the irony:
our problems in long-term care are self-inflicted by
well-intentioned but perversely counterproductive public policy.
The good news is that the problems are easy to fix.
We can do it responsibly through public policy or
we can just stand by and let the existing social insurance and welfare
house of cards collapse.
The Brave New World of Long-Term Care is here.
My advice to you as individuals, families and citizens is to take
responsibility for your own long-term care.
Plan early and save, invest or insure.
Maybe you can't solve the public policy problem
alone but you can protect yourselves and your families.
Doing so is an important contribution.
After all, as a wag once said:
"The best way to help the poor is not to become one of
Politically, my advice to you is to support
targeting Medicaid to the poor in order to save the fraying safety net
and supplement long-term care with private financing sources.
Do you wonder how the new Democratic majority in
Congress will lean?
of the most stringent controls on Medicaid long-term care eligibility in
the past came under Democratic Presidents and Congresses.
Besides, for Democrats, this is a
"fairness" issue. Why
use scarce public resources to indemnify well-to-do heirs of affluent
seniors? They're probably all Republicans anyway!
That's all I can say in 15 minutes.
If you're interested in more, check out www.centerltc.com.
Feel free to call or email me anytime.
I've got plenty of business cards here so you can find me.
Thanks for your attention.