LTC
Bullet: GAO AWOL on LTC TOA Wednesday, May 2, 2007 Seattle-- LTC Comment: The Government Accountability Office has again displayed stunning miscomprehension of the Medicaid eligibility, Medicaid planning and transfer of assets issues. After the ***news.*** [omitted] LTC BULLET: GAO
AWOL ON LTC TOA LTC Comment: GAO
recently published another in its series of misleading reports on
Medicaid asset transfers. Search
"GAO" with a "Control-F" at http://www.centerltc.com/bullets/date.htm
for my comments on those earlier reports: Their
latest is: "Medicaid
Long-Term Care: Few
Transferred Assets before Applying for Nursing Home Coverage; Impact of
Deficit Reduction Act on Eligibility Is Uncertain."
GAO-07-280, March 26, 2007.
Public release date: April
26, 2007. Full report:
http://www.gao.gov/cgi-bin/getrpt?GAO-07-280
Highlights: http://www.gao.gov/highlights/d07280high.pdf
Advocates
for expanding government financing of long-term care delighted in GAO's
latest findings: John
Dingell, Chairman of the House Energy and Commerce Committee (curiously
the germane committee for Medicaid in the U.S. House of Representatives)
effused: "This report
confirms that the Medicaid long term care program is not rife with
cheats and scam artists. . . . The
seniors who enter nursing homes and end up being covered by Medicaid are
truly needy." Elder lawyers gloried in the GAO's conclusion that
"few of
the elderly are transferring assets in order to become financially
eligible for Medicaid coverage of long-term care, and that of the
transfers that are made, the amounts are modest."
(ElderLaw News, May 1, 2007) Yet,
isn't it peculiar that the very same issue of that e-newsletter for
Medicaid planners contains a review of a new $47 book titled "How
to Protect Your Family's Assets from Devastating Nursing Home Costs:
Medicaid Secrets" which "provides advice on how readers
can qualify for Medicaid without losing all their assets." How
is it that GAO can find little evidence of widespread improper asset
transfers but lawyers and other financial advisors continue, almost
omnipresently, to advertise their services to qualify people for
Medicaid without spending down? A
Google search this morning for the term Medicaid planning turned up over
one million hits, including the elder law newsletter just cited. Allow
me to explain. Abusive
asset transfers, AKA "millionaires on Medicaid," are not and
never have been the big problem. They
happen. They're
unfortunate. They drain
desperately needed funds from the Medicaid safety net for the poor.
They're the "cash cow" that keeps Medicaid planning
attorneys in a very profitable business.
But they are only the tip of the iceberg.
Or, to use a different metaphor, the frosting on the cake for
people who make their livings artificially impoverishing affluent
clients to get them on Medicaid. By
definition, asset transfers involving large amounts by people with lots
of money are uncommon. Not
that many elderly people have so much money.
But some do. That's
why Medicaid estate planning is such a lucrative practice of law.
It's also why few big asset transfers show up when GAO studies
random samples of long-term care eligibility cases and then reports
their findings based on "median" averages.
It is not the median that matters in these cases, but rather the
outliers, the tip of the iceberg. The
proper emphasis for GAO's findings would have been to focus on the
relatively uncommon, but enormously costly, examples of large asset
transfers done to qualify successfully for Medicaid.
GAO mentioned these but only in passing. What's
underneath the asset-transfer "tip of the iceberg"?
The real problem with Medicaid and long-term care financing is
that most people do not need to transfer assets or use any of the other
myriad techniques employed by Medicaid planners.
Most elderly people who need long-term care qualify for Medicaid
without spending down their own assets.
Income is no obstacle for most because Medicaid subtracts medical
expenses, including the high cost of nursing home care, before
determining income eligibility. Assets
are no obstacle because unlimited assets can be retained in a
combination of exempt assets, such as a home (up to $750,000) and a
business, car, term life insurance, prepaid burial funds, and personal
belongings of unlimited value. The
reality that most people qualify for Medicaid long-term care without
fancy legal shenanigans is the "iceberg" of which asset
transfers are only the tip of the very top.
Easy eligibility for Medicaid is why the public is anesthetized
to the risk of long-term care. It's
why they don't plan responsibly for this risk and cost.
It's why they don't buy long-term care insurance.
It's why they don't tap their home equity with reverse mortgages
to fund long-term care. It's
why economists at the National Bureau of Economic Research concluded
that Medicaid crowds out two-thirds to 90 percent of any potential
market for private LTC insurance. On
top of easy eligibility for Medicaid LTC benefits, lying near the top of
the "iceberg" but below the tip, is Medicaid estate planning.
This is a practice engaged in by lawyers and other financial
advisors who help people with more income and assets than the generous
Medicaid rules allow, to restructure their income and assets so as to
qualify without spending their own money for care. Medicaid planners use a wide variety of techniques including
trusts, annuities, and life-care contracts to make large sums go away
for purposes of qualifying for public assistance.
To learn more about those techniques, buy the book referenced
above, or any of scores of similar books readily available that explain
the more esoteric methods of self-impoverishment.
Better, however--if you'd rather not subsidize the Medicaid
planning industry--check out the hundreds of articles we've published on
the subject which are archived at http://www.centerltc.com/bullets/subject.htm#medicaid_plan.
Asset
transfers are one, relatively minor Medicaid planning technique.
Assets transferred five years before applying for Medicaid are
not counted, so Medicaid planners routinely advise clients to "plan
early" for long-term care. Such early transfers are not even recorded in Medicaid case
records. Therefore, GAO
could not have found any evidence that they occur.
Finally, so-called "illegal" asset transfers, transfers
done for less than fair market value for the purpose of qualifying for
Medicaid, are an even smaller subset of legal asset transfers which are
a small subset of Medicaid planning techniques, which affect only a
small number of relatively affluent people who consult Medicaid planning
specialists. Without
going on at much greater length, this is why GAO's findings are
specious. GAO focused on a
relatively minor problem affecting relatively few people while ignoring
the "elephant in the room," i.e. easy Medicaid eligibility for
LTC as exacerbated by Medicaid planning specialists.
GAO didn't mention Medicaid planning anywhere in its report even
though the practice is rampant in one of the states reviewed (Maryland),
commonplace in a second (Pennsylvania) and occurs in the third (South
Carolina). Naturally, they
found little to get excited about.
In
its defense, GAO was only asked by Congress to explore this relatively
minor issue. The reason for
that is that defenders of Medicaid planning--including members of
Congress--routinely use the "straw man" fallacy to debunk
their critics. In other
words, they misrepresent their opponents' position and then attack this
straw man, rather than addressing the much more powerful argument (ours)
for which they have no explanation.
I explained this illegitimate debate strategy as used by Urban
Institute "scholars" in "LTC Bullet:
Kaiser Cover-Up Continues, April 27, 2006" at http://www.centerltc.com/bullets/archives2006/630.htm. Having rebutted GAO's findings in logic and
principle, let me quickly make this observation about their flawed
methodology. GAO examined a judgmental sample of Medicaid
nursing home cases in three states.
Never mind that their findings are not generalizable in any
significant way. The big
problem is that GAO did no independent verification of the states'
Medicaid eligibility determinations. Here's proof:
"Since the selected
counties used the information in these application files to determine
eligibility for Medicaid coverage for nursing home services, We Did Not
Independently Verify The Accuracy Of The Information Contained In The
Files." (p. 48,
emphasis added) I learned
as a Federal AFDC Quality Control Re-Reviewer in the 1970s that state
welfare eligibility determinations are routinely wrong in half or more
of the cases. That's
because state welfare programs are overworked and understaffed.
Without independent verification, e.g. checking with banks for
resources, assessors' offices for home ownership, and recorders' offices
for real estate transfers, GAO's findings and conclusions are worse than
meaningless--they're grossly misleading. Unfortunately,
my little internet megaphone reaches few, but GAO, Congress, and
Medicaid planners reach many. What
can I tell you? That's why
this corrupt, counterproductive system continues.
But at least now you understand what's going on.
So stand up, keep the faith, and do your best to protect people
from the risks and costs of long-term care.
When the creaky superstructure of publicly financed LTC finally
comes crashing down, you and your clients will be the only ones left
standing. |