LTC Bullet: Feds Bite the Big LTC Financing Apple

Monday, January 26, 2009

Santa Fe, NM

LTC Comment: CMS is trying to stanch NY's LTC financing hemorrhage. Consequences for Medicaid, the poor, taxpayers, and LTCI after the ***news.***

*** ASBURY PARK PRESS, New Jersey's second largest daily newspaper, ran three stories on long-term care financing in Sunday's (1/25/9) edition. Steve Moses was quoted at length in one. Center friend and nationally syndicated financial columnist Terry Savage was quoted in another. Read all three at,, and But remember, media quotes represent a reporter's interpretation or misinterpretation of a source's statements. I'd correct a few of the opinions attributed to me in Jean Mikle's piece titled "Public Often Unaware of Long-Term Care Costs," but the thrust of the article is correct. ***

*** SALLY LEIMBACH, the Center for Long-Term Care Reform's Regional Representative for Baltimore, Maryland is the Center's charter "premium member." Sally played a critical role in making last year's National Long-Term Care Consciousness Tour such a big success. She's re-upped to help with our "2009 Save Medicaid LTC Campaign." (Learn how you can too by reading "LTC Bullet: Strike While the LTC Iron is Hot!," at Ms. Leimbach is Senior Consultant for Long Term Care Insurance with the FranklinMorris company ( ***

*** MIKE SKIENS' MasterCare agency ( has booked the first event of our "2009 LTC Consciousness Mini-Tour." I'll speak, with the Silver Bullet in tow, at MasterCare's Portland, Oregon event on March 17, 2009. Book us to enliven your event at a radical discount anywhere between Portland, Oregon on 3/17 and Reno, Nevada on 3/29. Book us anywhere in the West from 4/1 to 4/30. Details follow . . .

SILVER BULLET opportunity. I'm bringing the Silver Bullet of Long-Term Care to Reno, Nevada for the 9th Annual Intercompany LTC Insurance Conference (March 29 to April 1, 2009). Call it the "2009 LTC Consciousness Mini-Tour." The Western Region got short shrift on last year's Tour and I'd like to correct that this year. So, if you can work with me to schedule an event anywhere in the LTC Tour Western Region Plus (CA, NV, OR, WA, ID, MT, WY, CO, UT, AZ, NM), I'll bring the Silver Bullet to you and we'll do a day of media, publicity and speaking . . . including the LTC Graduate Seminar if you wish. If we can schedule this on a reasonable itinerary and timetable, we can make it happen for as little as $500 per sponsor. You keep any profits. And you may qualify as a Regional Representative of the Center for Long-Term Care Reform too! Initial inquiries to Damon at 206-283-7036 or Just do it! But act fast. These things take time to plan. But for $500, heck, you could do this for a weekly sales meeting. ***



LTC Comment: Saturday's (1/24/9) New York Times contained an article titled "Change in Medicaid Rules May Pose Stark Choice for the Chronically Ill" available at'&st=cse. It explains how the federal Centers for Medicare and Medicaid Services or CMS is trying to curtail New York State's generous Medicaid funding of home and community-based long-term care services. After you read the piece, return for our explanation of why the story is so important to long-term care financing.


LTC Comment: OK, why does it matter that the federal government is trying to enforce rules in place since 1988 that New York's Medicaid program chose to ignore and federal officials allowed them to disregard with impunity until now?

The following may seem like too much "inside baseball," but the truth is if you don't understand it, you'll never grasp why the American public is asleep about the risk of long-term care, why Medicaid is going bankrupt paying for most long-term care, and why the market for private long-term care insurance remains stunted.

Until the Medicare Catastrophic Coverage Act of 1988 (MCCA '88), Medicaid rules often impoverished community spouses of institutionalized Medicaid recipients. The rules required an institutionalized spouse (usually the man) to contribute most of his income toward the cost of his care, thus relieving the financial burden on Medicaid. But because most of a couple's income was usually in the husband's name, the wife at home was often left with too little to live on: an amount limited to around $350 per month, the SSI monthly allowance in those days.

MCCA '88 fixed that problem. It allowed community spouses of institutionalized spouses to retain up to $60,000 in assets and up to $1,500 per month in income. As these amounts were pegged to inflation, the "spousal impoverishment" protections have increased as of 2009 to $2,739 per month of income and $109,560 of assets. I wrote in favor of MCCA '88's community spouse protections in Medicaid Estate Recoveries, the U.S.D.H.H.S. Office of Inspector General's 1988 report which otherwise urged eligibility controls on Medicaid's burgeoning LTC expenditures. Read this report at My "Analysis of the Medicare Catastrophic Bill in the Context of the Office of Inspector General's Report on Medicaid Estate Recoveries" is on pages iii-vi.

Although the IG's report favored MCCA '88's spousal impoverishment protections, it made clear that such big new income and asset protections would have to be balanced by stronger eligibility, lien and estate recovery controls. Otherwise, Medicaid LTC costs would continue to explode and responsible long-term care planning would be discouraged. In other words, if you're going to allow community spouses to retain middle class incomes and substantial assets while their institutionalized spouse's nursing home costs are funded by Medicaid, then you need to ensure that those costs will be reimbursed to Medicaid from the estate of the surviving spouse. The IG report urged changes in Medicaid eligibility, lien and estate recovery rules to guarantee that outcome. Most of those recommendations became federal law in the Omnibus Budget Reconciliation Act of 1993 (OBRA '93).

But New York Medicaid thumbed its nose at the OBRA '93 rules and expanded MCCA '88 far beyond Congressional intent. For example:

1) New York Medicaid pays for 24-hour-a-day home care with no transfer of assets provision.

2) New York Medicaid exempts $750,000 in home equity, the maximum allowed under federal law (DRA '06)

3) New York Medicaid allows community spouses to disavow financial responsibility ("spousal refusal"). I analyzed this egregious practice in "LTC Bullet: Spousal Refusal: Who Wins? Who Loses?," Tuesday, April 18, 2006  at

4) New York Medicaid recovers only a small fraction of potential estate recoveries.

5) New York Medicaid extended MCCA '88 "spousal impoverishment" nursing home protections to home care in violation of federal law.

For detailed analysis of New York's Medicaid LTC program, see "The Realist's Guide to Medicaid and Long-Term Care" at, especially pages 35-38. If you ever wondered how and why Medicaid crowds out 2/3 to 90 percent of the potential market for long-term care insurance, read this 2004 report. Here's the crux:

"Diagnosis: New York State has the single most generous Medicaid long-term care program in the country. Eligibility rules are generous to begin with and very elastic when stretched by the state's numerous Medicaid planning experts. Estate recoveries are low as compared to total Medicaid nursing home and HCBS spending. New York spends nearly double on personal care and HCBS compared to neighboring Connecticut ($692.67), which makes government-financed long-term care inordinately attractive to New York and other nearby consumers. Consequently, Medicaid is the primary payor of long-term care in New York; private-pay for long-term care is low and declining; entitlement mentality is very strong; senior advocates and the Medicaid planning bar are powerful political forces; and long-term care insurance market penetration is disappointing.

"Prognosis: New York is a long-term care disaster waiting to happen. The state budget is already stressed. The federal government is starting to balk at New York's creative financing schemes previously used to leverage up matching funds. Long-term care providers complain about inadequate Medicaid reimbursements. New Yorkers are asleep about the risk and cost of long-term care because it is considered a free good. If something is not done soon to change the center of gravity in New York's long-term care system from public to private financing, the fragile service delivery and financing structure is likely to implode soon after the baby boom begins to retire, if not before.

"Prescription: The State of New York should conduct a top-to-bottom review of Medicaid long-term care eligibility, coverage, services, and estate recoveries. The county-administered system in New York creates problems and complications that need to be monitored more closely, documented thoroughly, and corrected where possible. The state should put an end to the 'Spousal Refusal' eligibility dodge by pursuing its subrogated right to litigate on its and the Medicaid recipient's behalf in all such cases. New York should study and document the practice of Medicaid estate planning, develop hard-dollar estimates of the cost to state and federal taxpayers (who each pay half the cost of Medicaid), and close eligibility 'loopholes' that can be controlled at the state level. New York should renew efforts begun by Governor Pataki to seek federal waivers to help the state control its Medicaid long-term care eligibility hemorrhage. The state should mount a public relations campaign to educate the public that long-term care is a personal responsibility for which public financing will become less and less available as time goes on." (p. 39)

LTC Comment: If you've stuck with me this far, here's the point. CMS is trying to control hemorrhaging LTC costs in New York's Medicaid program by retroactively enforcing rules in place since 1988. CMS wants New York to stop allowing spousal impoverishment protections for home care that are statutorily limited to nursing home care. While this would slightly reduce New York Medicaid's LTC costs, the state will remain a long-term care basket case until the other gaping loopholes identified above and in our "Realist's Guide" report are also closed.

New York is the perfect "case study" to explain why long-term care financing in the United States is such a mess. New York pays so generously for home care and nursing home care through Medicaid that it has anesthetized the public to long-term care risk and cost. Consequently, few New Yorkers plan responsibly to save, invest or insure for long-term care. If and when they need long-term care, they slip easily into the Medicaid safety net, receive expensive home care benefits while preserving middle class income and assets, and qualify easily for nursing home care when they need it, especially if they consult the state's large and increasing Medicaid estate planning bar.

What a wasteful tragedy! And because New York Medicaid is half funded by federal tax payers, everyone in the country contributes financially to that failed system. Your own state may be relatively responsible about Medicaid long-term care financing, but you're still forced to subsidize New York's program with billions of federal tax dollars.

As I explained in the 1988 Inspector General's report cited above, these problems are easy to fix. Give Medicaid back to the poor, let middle class community spouses preserve their dignity with generous spousal impoverishment protections, but make sure Medicaid recovers from surviving spouses' estates. Medicaid must operate only as a long-term care loan for the middle class and not as free inheritance insurance for baby boomers.