LTC Bullet: You Get the Long-Term Care You Pay For

Thursday, October 23, 2008

Rochester, Minnesota (LTC Tour Mile 22,711; State #32)--

LTC Comment: 94 percent of for-profit nursing homes had quality violations last year. Who's at fault? We reach a different conclusion than the New York Times after the ***news.***

*** LTC TOUR UPDATE. After a super program in Detroit (reported in yesterday's LTC E-Alert), the Silver Bullet and I headed north, across the famous Mackinac Bridge ("Mighty Mac"), and on across Michigan's Upper Peninsula to Green Bay, Wisconsin. There we were hosted by Center for Long-Term Care Reform Wisconsin Regional Representative Romeo Raabe. Highlights included a visit to Door County, a tailgate party outside Lambeau Field, and a great Packers game. See the pictures for proof at . ***

*** GREEN BAY EVENT. It wasn't all fun and games in Green Bay, however. Romeo Raabe, the city's highly regarded "Long-Term Care Guy," arranged a well-attended two-hour LTC Graduate Seminar and breakfast at Brett Favre's Steakhouse. Here's some of the feedback from that program:

"A superb presentation connecting the history of and future of LTC progress and related risks." Virginia Elson-Yunker

"An enlightening program, which should be attended by all public officials at state and federal levels." Robert J. Reis

"Excellent! An eye-opening presentation. Should be attended by professionals, especially attorneys, CPAs and financial planners." Neelam Davison

"Thank you for a great program -- excellent information on the background of the LTC problem." Cheryl Moss ***

*** SUBSCRIBE TO LTC BULLETS. Please encourage your colleagues to fill out the simple online subscription form at . Subscriptions are free to everyone for the first month. After that, we'll ask you to help support the cause: rational long-term care public policy. ***



LTC Comment: The Cato Institute asked me for an "op-ed" about a report that nursing homes were providing questionable care. I submitted the following, but Cato didn't have time to "shop it" so close to the presidential election. So, here it is as today's LTC Bullet.

"You Get the Long-Term Care You Pay For"


Stephen A. Moses

Over 90% of nursing homes were cited for health and safety violations last year. For-profit facilities were the worst. Another case of greedy companies that short-change patients and profiteer on health care?

You wouldn't reach any other conclusion based on Robert Pear's reporting in the New York Times. ("Violations Reported at 94% of Nursing Homes," September 30, 2008) But the truth is more complicated and less pejorative toward private business.

Medicaid is a means-tested public assistance program. Yet, it pays for most nursing home care in the United States. Private payers have dwindled to a precious few. Although Medicaid contributes only 41% of nursing home revenue, it covers 2/3 of all residents. That's because people in nursing homes on Medicaid have to contribute most of their income to offset the welfare program's cost of care. Furthermore, Medicaid residents tend to be long stayers, often living many years in nursing homes with chronic diseases like Alzheimer's or Parkinson's. So Medicaid reimbursement actually touches over 70% of all nursing home patient days.

Medicaid's overwhelming domination of nursing home reimbursement is critical because the program pays facilities less than the cost of providing the care: $4.5 billion or $13.15 per bed day below break-even in 2006.

See why quality of care in nursing homes is problematical? You get what you pay for. For Medicaid, that means "low cost care of uncertain quality."

But why do for-profit facilities have more health and safety violations than non-profits? Greed and exploitation?

No! For-profit nursing homes have more Medicaid residents than non-profit facilities. So they lose money on a larger number of patients. Not-for-profit nursing facilities are less dependent on Medicaid's stingy reimbursement. They also have philanthropic funds to cushion their finances.

You might wonder how nursing homes survive when most of their revenue comes from Medicaid at a rate below their cost of providing the care. The answer is that Medicare pays very generously, contributing 17% of nursing home revenues. Profits from Medicare enable nursing homes to scrape by.

But MedPac, the agency that advises Congress on Medicare reimbursement has been urging cuts for years. Nursing homes barely dodged that bullet in 2008 and are unlikely to escape serious reductions next year because of skyrocketing federal deficits.

What's the real problem with long-term care financing?

Government made nursing home care virtually free with the passage of Medicaid in 1965. Nursing homes proliferated to take advantage of the initially profitable new funding source. Home and community-based care and private long-term care insurance to pay for it languished for lack of a market. Why pay or insure for care when the government was giving it away?

Forty-three years later we're still paying the price in deficient care quality and access. To this day, anyone with income less than the cost of a nursing home ($6,000 per month on average) qualifies for Medicaid-financed institutional care. (You may need a "Miller income trust" in a few states.)

Assets aren't a problem if you hide them in exempt resources such as a home (up to $500,000, $750,000 in some states including New York), a business (unlimited capital and cash flow), an automobile (no dollar limit), prepaid burial plans for the Medicaid patient and family members, unlimited term life insurance, etc.

On top of these already very generous eligibility rules, sophisticated legal techniques involving annuities, trusts, life care contracts, "reverse half-a-loaf strategies," and others are available to the very affluent with high-cost legal advice even after the Deficit Reduction Act of 2005 closed a few of the most egregious loopholes.

Here's the bottom line: if you want access to quality long-term care at the most appropriate level--preferably in your own home--you must pay privately for it. That's true now. It will be more true in the future as the social safety net sags with the crushing weight of aging baby boomers.

In the meantime, Medicaid crowds out 2/3 to 90% of the potential market for long-term care insurance, which is the only other source of private long-term care financing besides income and asset spend down or home equity conversion.

Get the picture? The private, for-profit marketplace is not the problem. If fact, it's your only solution to avoid long-term care access and quality problems.

My advice? Save, invest or insure now for long-term care. Or take whatever you can get someday from a bankrupt welfare program.

Stephen Moses is president of the Center for Long-Term Care Reform ( and author of "Aging America's Achilles' Heel: Medicaid Long-Term Care."