Bullet: WSJ Advises on
Thursday, July 26, 2007
LTC Comment: The
Wall Street Journal published an advice column Tuesday how to
self-impoverish to qualify for Medicaid LTC.
Excerpts, our analysis, a letter to the editor, and his reply,
after the ***news.***
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LTC BULLET: WSJ
ADVISES ON MEDICAID PLANNING
LTC Comment: Tuesday's
(July 24, 2007) Wall Street Journal contained an article by Tom
Lauricella titled "Solving Medicaid Assets Math:
Trusts Can Be Used To Pass On a Home; Annuities for Income"
on page D3. WSJ Online
subscribers can find the piece at http://online.wsj.com/article_print/SB118523476411775552.html.
The same article was published in the WSJ's
weekend "Encore" section, hence my July 22 email letter to the
author and his editor's reply, which follow.
After that set up, we'll analyze excerpts from the article and
tell you where to address your own concerns.
read your article in today's WSJ with dismay. You write about Medicaid estate planning without observing
that Medicaid is a means-tested public welfare program fraught with
problems of access, quality, reimbursement, discrimination and
institutional bias. You
cite Medicaid planning attorneys who make their livings artificially
impoverishing affluent clients so they can fill Medicaid beds intended
for people in genuine need. You miss entirely the point that Medicaid has become a
long-term care payor for nearly everyone and has thus crowded out
responsible LTC financing alternatives, such as savings, investments,
insurance or home equity conversion.
hope you will revisit this topic and give the other side of the story.
My professional bio is attached and so is a monograph I wrote for
the Cato Institute that puts this issue in context.
I've written on the topic since the 1980s, first as a career U.S.
government employee for the Office of Inspector General of the
Department of Health and Human Service and later as president of an
organization dedicated to ensuring quality long-term care for all
Americans. My article
titled "Welfare for the Well-to-do" was published in the WSJ
on December 17, 2005. [http://online.wsj.com/PA2VJBNA4R/snippet/SB113477649883625141.html]
Stephen A. Moses, President
The Center for Long-Term Care Reform, Inc. is a private
institute dedicated to ensuring quality long-term care for all
Americans. Sign up for our
LTC Bullets online newsletter and become a member of the Center at
July 23, 2007
from The Wall Street Journal.
Thank you for your note and comments, which we will forward to
to say you make some excellent points -- and we have addressed the
problems and/or pitfalls associated with Medicaid planning in other
articles in the Journal. For
better or worse, readers ask us questions about Medicaid planning -- and
Mr. Lauricella was trying to address some of these questions/issues in
will do our best to look at all sides of Medicaid planning in the months
and years to come. A gain, thanks for writing -- and thanks for the
LTC Comment: Now, here specifically is what is wrong with the Wall Street Journal's article on Medicaid planning.
Excerpts from and analysis of "Solving
Medicaid Assets Math: Trusts
Can Be UsedTo Pass On a Home; Annuities for Income," by Tom
Lauricella, Wall Street Journal, July 24, 2007, page D3:
than a year has passed since the federal government changed the rules
for qualifying for Medicaid assistance for long-term care, and experts
in the field are still sorting out the implications for those who want
to pass assets on to their children.
"The new rules made it tougher, for example,
to give gifts to children or grandchildren to help pay for their college
education. Individuals who
make such gifts can find themselves ineligible for Medicaid benefits
after they are already in a nursing home.
"But estate-planning experts say some options
remain open for those who want to pass on assets such as a home, through
a trust, or preserve some income for a spouse in certain kinds of
LTC COMMENT: The
"new rules" come of course from the Deficit Reduction Act of
2005 (DRA '05), the objective of which was to ensure that affluent
people pay for their own long-term care so Medicaid can do a better job
of helping the needy.
the new law, if you gave away money within the past three years, you
would be ineligible for Medicaid for a period of time based on how much
money was transferred or given away.
For instance, if you gave away, say, the equivalent of nine
months' aid, you would be denied Medicaid help for that period of time
-- starting from when you made the gift.
For those who were healthy, it was a risk many were willing to
"Now the so-called look-back period for any
gifts or transfers you may have made extends back five years from when
you apply for Medicaid. And
significantly, the period of time you will be denied aid begins not from
when you made the gift, but when you apply for assistance and are
otherwise fully qualified."
LTC Comment: This
is a perfect example of why responsible journalists should never take
information from biased sources (Medicaid planning attorneys) at face
value without considering other, more objective sources.
Before the DRA '05, anyone could give away any
amount of money and be eligible for Medicaid's LTC benefits within three
years. Now the look back is
five years. But it's ten
years in Germany, a socialized health care system.
We're much more lenient still.
And now the penalty period starts at the date of
Medicaid application instead of the date of the transfer. Know why? Because
Medicaid planners like the ones cited (as the only sources) in this
article used to advise the "half-a-loaf" strategy. In other words, give away half your assets, stow the rest,
and apply for Medicaid in half the time without incurring any further
penalty and without ever spending any of your own money for care. The new law stopped that abuse, and eliminated the Medicaid
planners' biggest cash cow.
means you could be in a nursing home, have exhausted your savings and be
unable to receive Medicaid for months or even years, depending on the
value of what you gave away or transferred.
That could leave your family potentially liable for unpaid bills,
even if they didn't receive any of the gifts.
"This affects not only those trying to shelter
assets from future nursing-home costs, but even those who simply want to
make a gift to a child or grandchild, say, to help pay for college
education. (Gifts or
transfers made before the new law was signed in February 2006 were
"'You give your grandchild money for college
and three years later you're in a nursing home, you use up your
remaining money over the next year -- it's only then that the penalty
starts,' says Jeffrey Marshall, an elder-law attorney in Williamsport,
Pa. 'That's why it's so
devastating -- there's no other way you can make the payments to the
LTC Comment: That
is pure nonsense. Federal
law guarantees that no Medicaid eligibility penalty can be levied
because of an asset transfer unless the transfer is done for less than
fair market value and for the purpose of qualifying for Medicaid.
Reasonable gifts to charity or grandkids, done before the need
for LTC, do not cause a transfer of assets penalty.
The DRA '05 did not change that rule.
In fact, the DRA strengthened "hardship waiver"
protections that are in place in case someone were to get into a bind,
having given away assets improperly to someone who won't or can't give
Furthermore, do we really want Medicaid, which is a
means-tested public welfare program to be indemnifying wealthy seniors
for giving away their money to relatives or charities? Shouldn't they save their wealth against the risk of a
catastrophically expensive long-term care need? Or buy insurance against that risk before they give away all
their resources? Rewarding
irresponsible financial behavior is crazy public policy that discourages
sensible long-term care planning.
the new Medicaid rules complicate estate planning, they don't make it
impossible. Philip Bouklas,
a New York lawyer, says the change in the rule for gifts removed a
disadvantage for trusts used to protect assets.
Trusts previously had a five-year look-back period while gifts
had the three-year period (presumably because people who used trusts
were wealthier or more sophisticated and were doing so to skirt the
"Now that it is a level playing field, Mr.
Bouklas is more often using what are known as irrevocable income-only
trusts in situations where individuals want to pass on a house or other
assets to a child. By using
an income-only trust -- as opposed to just deeding the property over to
a child -- the parent can still live in the house and even sell it.
Plus, the trust offers tax advantages over just changing the name
on the deed. 'You might as
well use a trust since there's no extra penalty period and there's more
flexibility,' he says."
LTC Comment: This
advice is unspeakably irresponsible.
People with wealth, including home equity (seniors hold $4.3
trillion in home equity) should use it to fund their own LTC. When they hide their money in trusts to get Medicaid and
avoid estate recovery, they're passing on a personal financial
responsibility to overburdened taxpayers and hurting the poor whom
Medicaid is supposed to help. Furthermore,
because of Medicaid's terrible reputation for problems of access,
quality and institutional bias, people who listen to Medicaid planners
(and now the WSJ) leave themselves vulnerable to loss of choice
and independence and dependent on whatever care a virtually bankrupt
welfare program can provide. The
idea that an otherwise responsible national publication like the Wall
Street Journal would pass on such awful advice without scrutinizing
the self-serving source is disturbing.
changes to the Medicaid rules also tightened -- but left somewhat open
-- another planning loophole. It
used to be that many annuities weren't counted as an asset when
determining Medicaid eligibility. It
is still possible to put money in an annuity and have the funds
protected, but there are now greater restrictions.
"Here's how it would work. If a couple has $200,000 in assets and one spouse has to go
into a nursing home, the rules would likely require spending half that
money before the ill spouse is eligible for Medicaid.
However, by putting $100,000 into an annuity, the healthy spouse
could collect the income off the annuity and the spouse in the nursing
home would be eligible for Medicaid.
"'You're converting a countable resource into
one that's not countable,' says Mr. Marshall."
LTC Comment: My
understanding is that follow-up legislation closed the "spousal
annuity loophole" left after the DRA '05, but since the WSJ
author didn't check his "facts," most readers will take this
Medicaid planner's statement for truth.
I guess what bothers me most is that Medicaid
planners rake in six-figure incomes and seven-figure firm revenues
purveying this miserable advice, while responsible LTC insurance agents
and other financial advisers struggle to scrape out a living by telling
Americans they should plan responsibly to pay privately for LTC when the
time comes. "You can't
sell apples on one side of the street, when they're giving them away on
The consequences for America's LTC service delivery
and financing system are devastating.
Too many people end up on Medicaid in under-funded nursing homes
and receive questionable care. The
rich get the best beds because their Medicaid planners advise them to
keep back "key money" to buy their way into the best Medicaid
beds. Poor people, for whom
Medicaid is supposed to be a last resort, have no key money and end up
in the 100%-Medicaid hellholes that 20/20 featured in its exposÚs.
I could go on and on but the fundamental point is
this: the Wall Street
Journal did the public and all responsible LTC advisors a major
disservice by publishing this article without getting and presenting the
other side of the story.
be civil, evidence-based and logical, but by all means write to the
author of this article Tom Lauricella at firstname.lastname@example.org
and his editor Glenn
Ruffenach at Glenn.Ruffenach@wsj.com
and give them a dose of reality on this subject.
But seriously, I MEAN IT, present your comments in a professional and responsible way. However passionately you may feel and however right you may be, emotional rants reflect badly on the Center for Long-Term Care Reform and our membership.