LTC Bullet: We Critique WSJ on Medicaid Planning

Friday, January 16, 2009


LTC Comment: Within 24 hours, we replied to a Wall Street Journal column that promoted Medicaid planning for long-term care. After the ***news.*** [omitted]



LTC Comment: We tipped you yesterday to Victoria Knight's Wall Street Journal article that endorses Medicaid planning for long-term care. Following is our letter challenging her arguments, sources, and conclusions. A WSJ editor asked us for an abbreviated version of this letter, which I supplied. We'll let you know if it's published. So far, no reply from the author, Ms. Knight.


Dear Ms. Knight:

I'm writing in reference to your article titled "Relatives Can Be Paid To Look After Elderly" in today's (1/15/9) Wall Street Journal. [This article remains available to subscribers in today's WSJ Online:]

You write favorably about "caregiver agreements" used as one means to qualify for Medicaid without transferring assets illegally. You cite several lawyers who make their livings marketing caregiver agreements and other "Medicaid planning" techniques.

I'd like to explain some of the negative issues and side effects associated with caregiver agreements and Medicaid planning in general.

Medicaid is a means-tested public assistance program. It is welfare. Medicaid was intended to be a long-term care safety net for people in financial need. Over decades, however, it has become the predominant long-term care financing source not only for the poor, but for the middle class, and even for the affluent who engage the services of attorneys like the ones you quoted.

Medicaid has a dismal reputation for problems of access, quality, reimbursement, discrimination and institutional bias. Although Medicaid reimburses providers less than the cost of providing the care, the program's expenditures are bankrupting state budgets. Without substantial help from recipients' Social Security income and generous Medicare reimbursements, two federal programs also in danger of financial collapse, Medicaid long-term care financing could not, and soon, will not survive.

If Medicaid funded long-term care is so poor, why do elder law attorneys recommend it? Several reasons apply, all of them technically legal, none of them ethical.

Medicaid planners rely on "key money" to ensure their clients have access to the best long-term care facilities. In other words, when they impoverish an affluent, but infirm elder artificially, they hold back enough cash to pay privately for several months. LTC facilities receive half again as much for private payers as they do for Medicaid recipients. It's called "cost shifting." So facilities roll out the red carpet to attract anyone who can pay privately for any length of time. That's how Medicaid planners get their affluent clients into the nicest facilities that have only a few Medicaid beds and where the staff hardly know who's on Medicaid and who's private pay.

But once admitted, the facility cannot remove residents simply because their source of payment changes to Medicaid. That's not allowed under state and federal law. This is true even though Medicaid reimburses facilities only about 2/3 of the private pay rate. The tragedy is that poor people don't have key money. They end up in the 100% Medicaid hell holes that 20/20 visits with mini-cams showing people lying in their own waste with bedsores down to the bone. So, the rich get the scarce Medicaid beds in the nicest nursing homes. The poor get the shaft. Ironically, Medicaid planners also make money on the back end of this system. They sue nursing homes for providing deficient care when bad long-term care outcomes are often directly caused by their overloading the homes with low-reimbursement Medicaid residents.

Medicaid planners usually represent adult-child heirs, not the vulnerable parents who need care. The heirs and the attorneys have a financial and health care conflict of interest. They leave an elderly person who could have paid privately for quality care at the most appropriate level of care vulnerable to predominantly nursing home care financed inadequately by the public welfare system. The heirs get the parents' assets. The attorney receives generous fees. The Medicaid program, taxpayers, private payers and long-term care providers bear the cost. The poor suffer the brunt of poor care.

The "caregiver agreement" you write about is very problematical. Your article acknowledges that caregiver agreements are used for the purpose of Medicaid planning. They are a device to move money from older people, who need it to purchase quality long-term care in the private market place, to their children and heirs, who by transferring the cost of their parents' long-term care to Medicaid, are further desensitized to the potential risk and cost of their own long-term care. Because Medicaid has paid for most long-term care since 1965, we have a public asleep about the risk and cost of long-term care. Thus, few consumers plan responsibly, insure privately, or tap home equity to pay for long-term care. (Medicaid exempts at least $500,000 in home equity, $750,000 in New York. By comparison, the home equity exemption is only $42,000 in the UK, a socialized health care system.)

A few years ago, at one of the elder law attorneys' annual conventions (NAELA is the National Academy of Elder Law Attorneys, I heard a Medicaid planner sing the praises of "caregiver agreements." She said all you have to do is write a simple contract in which daughter promises to give mother lifetime long-term care in exchange for Mom giving daughter her $500,000 estate. Stipulate in the contract the life expectancy and the comparable cost of services to be provided if they were delivered professionally instead. Make it clear that once the mother's care acuity reaches the level of needing help with three ADLs (activities of daily living) that the agreement becomes null and void. At that level, the mother needs skilled nursing care which daughter is not qualified to provide. "Voila," said the Medicaid planner, "if Mom has a stroke in six months, she's eligible for Medicaid." Any transfer of assets was for "value" so there is no eligibility penalty. The lawyer's fee for drawing up a simple boiler-plate contract? $15,000. And that was ten years ago.

Ms. Knight, if I haven't piqued your interest to dig deeper by now, it's pointless to continue. I hope you will contact me to get the other side of the story. I've debated leading Medicaid planners, including past presidents of NAELA (video and audio recordings are available); I've published extensively on this topic; I've conducted many national and state-level studies and published reports for the Health Care Financing Administration (now CMS); the Office of Inspector General of the U.S. Department of Health and Human Services; and for major state and national think tanks. (Examples of all at

In the meantime, your story is out there. It's based exclusively on one-sided viewpoints of prominent Medicaid planners who actually sell the product you write about. People will read your article. They'll consult those attorneys and thousands more like them throughout the United States. They'll end up on Medicaid. They'll overburden that struggling program. They'll crowd the poor out of decent care. They'll hasten the collapse of Medicaid's long-term care safety net which is already on the brink. And their heirs, who reap a windfall from free, welfare-financed inheritance insurance, will remain asleep about the need to plan responsibly for long-term care. Justice cries out for more balanced coverage.


Steve Moses
Stephen A. Moses, President
Center for Long-Term Care Reform