LTC 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. 



People 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.   

"Medicare 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."   

Source:  Ellen O'Brien, "Medicare and Long-Term Care Fact Sheet," Georgetown University Long-Term Care Financing Project, February 2007,, footnotes omitted. 

So, 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?   

Simple 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. 

Now, 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.   

Is 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. 

What 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 out. 

There 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:  

Source:  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: 

"The 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) . . .." 

LTC 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: 

"...a 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) 

To 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. 

Assume a 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.)  

So, here's 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 down. 

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. 

Further excerpts from the O'Brien and Merlis fact sheet: 

"In 2000, 35 states set the minimum monthly maintenance needs allowance at the federal ceiling [$2541 as of 2007]."  

"States 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."   

"To 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 be increased." 

"This 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 community." 

LTC 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 long-term survival. 

Poor 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. 


The third Georgetown fact sheet to receive our scrutiny today is: 

Source:  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,, footnotes omitted. 

Our critique follows the excerpts below: 

"In 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. 

"Although 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 earlier." 

"Out-of-pocket 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." 

"In 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." 

LTC Comment:  The Georgetown authors conclude from the foregoing facts that: 

"Because 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.   

The 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. 

Georgetown 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." 

Reality 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.   

Result:  Medicaid saved for the poor.  Middle class and affluent empowered to purchase better care.  Institutional bias eliminated from the system. 

Quod Erat Demonstrandum