Bullet: Take Georgetown's
Facts With a Big Grain of Salt
Thursday, February 15, 2007
LTC Comment: Three new "fact sheets" from the Georgetown LTC Financing Project are spoiled by ideological bias.
LTC BULLET: TAKE
GEORGETOWN'S FACTS WITH A BIG GRAIN OF SALT
often say "Medicare doesn't pay for long-term care."
That's bunk, of course, as this quote from a new Georgetown fact
sheet correctly indicates.
spending represents a significant share of all spending on long-term
care. . . . Medicare spent $42.2 billion on home care and nursing home
care, representing roughly 20 percent of national spending on long-term
care in 2005. Individuals
and families contributed a roughly comparable amount ($37.4 billion),
while Medicaid spending accounted for nearly half of what the nation
spent on long-term care, with expenditures of $101.1 billion.
Medicare spending accounted for more than a quarter of spending
on home care, and about 17 percent of all nursing home spending."
Ellen O'Brien, "Medicare and Long-Term Care Fact
Sheet," Georgetown University Long-Term Care Financing Project,
February 2007, http://ltc.georgetown.edu/pdfs/medicare0207.pdf,
what should we make of the fact that Medicare pays more for home care
and nursing home care than do individuals and families and that Medicaid
pays for most of the remainder?
logic and common sense would suggest that because (1) government pays
for most long-term care and (2) out-of-pocket costs are only one dollar
in five (half of which, by the way, is really just Social Security
income of people already on Medicaid), that therefore (3) insurance
would play little role in financing LTC because consumers have only
minimal financial reason to buy it.
Sure enough: insurance pays only 7.2% of LTC costs and only ONE-TENTH of
that comes from long-term care insurance.
what public policy lesson would any thoughtful, ideologically unbiased
analyst take from these facts? Obviously,
the government pays for way too much long-term care, the public is
barely at risk for such costs, and therefore, few people plan or insure
for long-term care. Consequently,
the expense of LTC is bankrupting Medicaid and Medicare, and the end
result is the system's widespread problems of access, quality,
reimbursement, discrimination and institutional bias.
this the lesson Georgetown draws from the data?
No, far from it. They
suggest instead that Medicare should take on the whole cost of long-term
care for "dual eligibles" and/or add a colossally expensive
"personal care" benefit.
about Medicare's $71 trillion unfunded liabilities?
Blank out. What
about the access and quality problems associated with publicly financed
care? Blank out.
What about more government financing squeezing out even more
private financing? Blank
is only one conclusion to draw from Georgetown's "fact sheet"
on Medicare and long-term care. The
policies proposed do not follow from the facts adduced.
Instead, they reflect an ideological bias in favor of government
financing (the problem) and against private financing (the solution.)
The second Georgetown "fact sheet" I want
to bring to your attention is:
Ellen O'Brien and Mark Merlis, "Medicaid's Spousal
Impoverishment Protections Fact Sheet," Georgetown University
Long-Term Care Financing Project, February 2007,
footnotes omitted. Excerpt:
federal-state Medicaid program provides assistance with long-term care
costs to people who are poor or who deplete their resources paying for
care. Medicaid begins to
pay only once savings are nearly exhausted (nursing home patients must
typically reduce their assets to $2,000) . . .."
Comment: That statement is
ridiculous, of course. Income
rarely stands in the way of Medicaid LTC eligibility and unlimited
assets can be retained by recipients as long as they are held in exempt
form. Middle class people routinely qualify for Medicaid LTC
benefits without spending down for care.
In fact, nothing in the Medicaid law requires people to
"spend down" assets for long-term care as this quote from a
Medicaid planning book explains:
common misconception among [Medicaid] applicants is that excess
resources must be spent only on doctors, hospitals, nurses, medication,
and nursing homes. Nowhere
in the law is this indicated. Quite
literally, an applicant could spend all of his or her assets on
something 'frivolous,' such as a 90th birthday celebration of Ziegfield
Follies proportion and this should not be cause for denial of Medicaid,
because the applicant received 'value' for his or her money."
(Ira S. Schneider and Ezra Huber, Financial Planning for
Long-Term Care, Human Sciences Press, Inc., New York, 1989, p. 142)
their credit, O'Brien and Merlis provide a good explanation of
Medicaid's Minimum Monthly Maintenance Needs Allowance (MMMNA) and
Community Spouse Resource Allowance (CSRA) which together protect
spouses of Medicaid recipients from impoverishment.
On the other hand, they make no mention of how attorneys
manipulate those rules to allow some spouses to retain hundreds of
thousands of dollars over the CSRA.
Here's how that's done.
community spouse has $500 per month of (usually her) own income (mostly
Social Security). The
Medicaid husband has $1,000 per month of income all of which is
transferred to the community spouse instead of offsetting his cost of
care to Medicaid. That still leaves the community spouse over $1,000 per month
short of the MMMNA of $2,541. Under
federal law, she's allowed to retain extra assets above the CSRA limit
of $101,640 sufficient to generate the extra $1,000 per month of income
to bring her up to the MMMNA. (Note
that as of 2007 the MMMNA is really only $1,650 instead of $2,541 and
the minimum CSRA is only $20,328 instead of $101, 640, but as O'Brien
and Merlis point out, 35 states choose to set the Minimum Monthly
Maintenance Needs Allowance at the federal maximum AND 36 states set the
minimum Community Spouse Resource Allowance at the federal ceiling.)
the result. With a five
percent certificate of deposit (CD), the community spouse in this
example could retain only $240,000 extra from the institutionalized
spouse's wealth. That's the
amount over the $101,640 CSRA that she would be allowed to retain so
that the interest would bring her up to the MMMNA.
With a 3 percent CD, however, she could retain $400,000, making
the total protected amount in excess of half-a-million dollars.
Medicaid eligibility workers interviewed for a recent study I
conducted spoke of one Medicaid disability case that was able to protect
a cool million dollars in this way.
This is how
and why Medicaid planners and their clients are incentivized by Medicaid
eligibility rules to shop for the lowest possible interest rates on the
clients' capital. It's how
Medicaid shelters an undetermined amount, but possibly hundreds of
millions of dollars nationwide, from private-pay long-term care spend
To fail to
point out this commonplace, stupendously wasteful abuse of Medicaid
long-term care benefits by affluent seniors and their advisors clearly
demonstrates the ideological bias of the Georgetown authors.
excerpts from the O'Brien and Merlis fact sheet:
2000, 35 states set the minimum monthly maintenance needs allowance at
the federal ceiling [$2541 as of 2007]."
have the option to raise the minimum [CSRA] to any level up to the
federal maximum [$101,640 as of 2007], and many do.
In 2000, 36 states opted to raise the minimum level, most of them
setting it at the federal maximum."
make Medicaid more equitable across states, federal policy makers could
establish a higher uniform threshold-mandating that all states set the
income and resource thresholds at the current federal maximums for
Medicaid long-term care beneficiaries with community spouses.
To offset increased state costs, federal matching payments could
incremental adjustment to Medicaid eligibility would improve Medicaid's
financial protection for married nursing home residents and their
spouses in some states. The
effects of the policy could be further enhanced if states were required
(rather than simply permitted, as they are today) to extend these
protections to married people receiving long-term care services in the
Comment: Get the picture?
Georgetown wants Medicaid to pick up even more of the tab for LTC
thus further crowding out private financing sources, like reverse
mortgages and LTC insurance, which are the only hope for Medicaid's
policy, misleading analysis, and ideological distortions like these have
been disastrous for Medicaid's ability to provide a long-term care
safety net for the poor. They
will prove fatal if allowed to continue.
third Georgetown fact sheet to receive our scrutiny today is:
Harriet L. Komisar and Lee Shirey Thompson, "National
Spending for Long-Term Care Fact Sheet," Georgetown University
Long-Term Care Financing Project, updated February 2007,
Our critique follows the excerpts below:
addition, all states currently provide home and community-based services
under a waiver that allows them to provide these services to a specific,
limited population (rather than to all Medicaid enrollees statewide).
Home and community-based services can consist of a wide range of
services, such as personal assistance, homemaker services, adult day
services, and respite care. The Deficit Reduction Act (DRA) of 2005 allows states,
beginning in January 2007, to provide some home and community-based
services without a waiver, to establish enrollment limits for those
services, and to restrict eligibility for them to certain locations.
the majority of Medicaid long-term care spending is for nursing home and
other institutional care, the proportion going to non-institutional care
has been growing. Non-institutional
care accounted for 37 percent of Medicaid's long-term care spending in
federal fiscal year 2005, compared with 19 percent ten years
payments by people receiving long-term care and their families financed
18 percent, or about $37 billion, of long-term care services in 2005.
The role of families of individuals with long-term care needs is
much greater, however. Most
people with long-term care needs-83 percent in 2000-live in community
settings (rather than in nursing homes), where the vast majority are
assisted by unpaid family members and friends.
The indirect costs associated with family caregiving, including
time away from paid work and other activities, can be sizable."
2005, private insurance-including both health and long-term care
insurance- accounted for 7 percent of national long-term care spending.
Like Medicare, private health insurance usually covers a limited
amount of nursing home and home health care for rehabilitation following
hospitalization or outpatient medical care.
Private long-term care insurance currently plays only a small
role in financing long-term care. In 2002, roughly 6 million people had private long-term care
insurance policies and insurers paid about $1.4 billion in claims."
Comment: The Georgetown
authors conclude from the foregoing facts that:
few people have insurance for long-term care, most people face a risk of
impoverishment if they need extensive care." They have it precisely backwards and upside down.
truth is that "Because few people face a risk of impoverishment if
they need extensive care, most people do not have insurance for
long-term care." That
is the conclusion that fits the facts.
further concludes: "Medicaid
is the nation's safety net for individuals with long-term care needs.
Given the wide variation in state Medicaid programs and their
vulnerability to changing state budgets, the security of that safety net
is uncertain. Also, despite
most individuals' preference for home and community-based care,
institutional care continues to account for the majority of both
Medicaid and total spending for long-term care."
check: From which one
should conclude that the solution is to return Medicaid to its proper
role as a long-term care safety net ONLY for the poor.
That's a job it can afford to do.
When the non-poor are truly at risk for LTC, they will use their
home equity or buy private insurance.
When they are paying for their own long-term care, they'll buy
home care and not nursing home care, until it's medically necessary.
Medicaid saved for the poor.
Middle class and affluent empowered to purchase better care.
Institutional bias eliminated from the system.
Quod Erat Demonstrandum