Bullet: GAO on LTCI
Wednesday, June 20, 2007
LTC Comment: GAO
drops the ball again on the issues of Medicaid, long-term care financing
and private insurance.
After the ***news.*** [omitted]
LTC BULLET: GAO
ON LTCI PARTNERSHIPS
LTC Comment: GAO
has a top-notch, Paul-Revere-like leader who issues warnings about
America's unfunded entitlement liabilities in a long-running
cross-country "fiscal wake-up tour."
But when it comes to critical issues like Medicaid,
long-term care financing, and private insurance, GAO's rank-and-file
staff have repeatedly proven inadequate.
Either they just don't understand the complexity of long-term
care policy. Or their
prejudice against private-sector solutions and in favor of piling more
unfunded liabilities onto public programs is deliberate.
Either way, they are working in direct opposition to their boss's
more responsible public policy positions.
First, let's review what "LTC Bullets"
has had to say recently about GAO's work on this subject.
Links to our earlier coverage follow.
Then we'll tackle the GAO's latest misfire, regarding the
Long-Term Care Partnership program.
GAO AWOL on LTC TOA," Wednesday, May 2, 2007:
LTC Comment: The Government Accountability Office has again displayed
stunning miscomprehension of the Medicaid eligibility, Medicaid planning
and transfer of assets issues.
Georgetown, GAO and Kaiser:
The Bermuda Triangle of Good LTC Policy," Wednesday, January
25, 2006: LTC Comment: LTC doubletalk is not the exclusive province of Medicaid
planners and AARP lobbyists. Otherwise
often reliable analysts get long-term care policy wrong too.
Bullet: GAO on TOA
Wednesday, October 5, 2005: LTC
Comment: The Government
Accountability Office's new report on Medicaid asset transfers asks the
wrong questions, uses the wrong data, and so provides few helpful
LTC Comment: The
fundamental problem with GAO staff's analysis of Medicaid and long-term
care financing is their failure to understand how easy Medicaid LTC
eligibility is to achieve and how it crowds out any market for LTC
insurance (including Partnership policies).
I won't repeat the evidence and analysis already provided in the
preceding LTC Bullets, but here in a nutshell is why GAO's latest
foray into LTC policy is as specious as its earlier ones.
report in question is "Long-Term Care Insurance:
Partnership Programs Include Benefits That Protect Policyholders
and Are Unlikely to Result in Medicaid Savings," U.S. Government
Accountability Office Report to Congressional Requesters, GAO-07-231,
Washington, D.C., May 2007, http://www.gao.gov/new.items/d07231.pdf.
to GAO: "Available
survey data and illustrative financing scenarios suggest that THE
PARTNERSHIP PROGRAMS ARE UNLIKELY TO RESULT IN SAVINGS FOR MEDICAID, AND
MAY INCREASE SPENDING. The impact, however, is likely to be small. About
80 percent of surveyed Partnership policyholders would have purchased
traditional long-term care insurance policies if Partnership policies
were not available, representing a potential cost to Medicaid. ABOUT 20
PERCENT OF SURVEYED PARTNERSHIP POLICYHOLDERS INDICATE THEY WOULD HAVE
SELF-FINANCED THEIR CARE IN THE ABSENCE OF THE PARTNERSHIP PROGRAM, and
data are not yet available to directly measure when or if those
individuals will access Medicaid had they not purchased a Partnership
policy. However, illustrative financing scenarios suggest that AN
INDIVIDUAL COULD SELF-FINANCE CARE-DELAYING MEDICAID ELIGIBILITY-FOR
ABOUT THE SAME AMOUNT OF TIME AS HE OR SHE WOULD HAVE USING A
PARTNERSHIP POLICY, although GAO identified some circumstances that
could delay or accelerate Medicaid eligibility. While the majority of
policyholders have the potential to increase spending, the impact on
Medicaid is likely to be small because FEW POLICYHOLDERS ARE LIKELY TO
EXHAUST THEIR BENEFITS AND BECOME ELIGIBLE FOR MEDICAID due to their
wealth and having policies that will cover most of their long-term care
other words, 4/5 of people who buy Partnership policies would have
bought LTC insurance anyway (so that's no extra savings to Medicaid and
could be an extra cost if Partnership policy holders use up their
private insurance benefits and turn to Medicaid) and 1/5 would have paid
their own way for LTC and largely avoided Medicaid altogether (so no
savings there either).
"analysis" is silly. It
completely ignores the facts about LTC financing in the United States.
Between them, Medicaid and Medicare pay for the vast majority of
all formal, paid LTC services in the United States.
For the details on that, see "LTC Bullet:
So What If the Government Pays for Most LTC?, 2005 Data
Update" at http://www.centerltc.com/bullets/archives2007/670.htm.
Add in spend-through of Social Security income, which Medicaid
recipients are required to contribute toward their cost of care under
the program, and you account for over three-fourths of all LTC
expenditures without touching a penny of anyone's assets.
In fact, there is zero evidence that Americans are spending down
significant cash assets, much less home equity, for long-term care.
LTC Partnership study relies on asking policy holders what they would
have done in the absence of the Partnership's offer of Medicaid
spend-down forgiveness. Anyone
who has ever asked the public anything about long-term care planning
knows that the answers are totally unreliable.
Most people have no clue who pays for LTC, nor do they care,
since even though they don't realize it, the government does pay if
worse comes to worst. Who's to say whether people who bought a Partnership policy
and say they'd still have insured otherwise would actually have done so,
when 90 percent of the public does not insure for LTC at all? Who's to say whether the 20 percent who bought a Partnership
policy, but reported they would otherwise have self-insured, would
actually have done so? All
the evidence suggests that uninsured people quickly find paths to
truth, income and assets obstruct only a small minority of infirm
elderly from Medicaid LTC eligibility and those obstacles are easy to
remove in most cases after the insurable event occurs and without asset
transfers. My guess is that
in the absence of the LTC Partnership incentive, many of those who
bought a policy would not have done so, regardless of what they say.
Furthermore, those who bought but indicate they would otherwise
have self-insured would, regardless of what they say, have responded as
most Americans do when confronted with the high cost of LTC:
they'd have applied for Medicaid.
Most would be eligible with little or no manipulation of assets;
the rest could qualify quickly by consulting a Medicaid planner; and
only a handful would need to "transfer assets."
That's how it works in the real world.
GAO remains fixated on asset transfers as though that were the only way
to qualify for Medicaid without spending down.
In its comments on the GAO report, the Department of Health and
Human Services' (DHHS) Assistant Secretary for Legislation made a
critical observation: "We
believe that [GAO's] simplified scenarios are flawed in their lack of
accounting for individuals who do engage in estate planning prior to
expending all of their own funds on long-term care costs." (p. 62)
GAO brushed aside this fatal objection by saying:
"While some Medicaid savings could result from people who
purchase Partnership policies INSTEAD OF TRANSFERRING ASSETS, they are
unlikely to offset the costs associated with those who would have
otherwise purchased traditional policies."
again, GAO falls back on the fallacy that asset transfers are the only
form of Medicaid planning and that Medicaid eligibility is so hard to
obtain that most people have to spend down or divest assets.
It isn't true. Most
people qualify for Medicaid LTC benefits without transferring assets or
spending down significantly. No
wonder they don't buy LTC insurance, with or without the Partnership's
So, here's the bottom line: GAO's director U.S. Comptroller General David Walker's next "wake up" tour should be into the bowels of his own organization to shake his own staff into consciousness about Medicaid and LTC financing. Otherwise, Medicaid's unfunded liabilities, especially on the LTC side, will someday trump those from Social Security and Medicare about which he has been such a visible spokesman.