LTC Bullet: What Happens to LTC if States Secede from Medicaid?

Thursday, January 7, 2010


LTC Comment: The man who ran Medicaid from 2000 to 2008 says dropping the program could save states $1 trillion. What will it mean to LTC . . . and LTCI . . . if that happens? After the ***news.***

This Bullet is sponsored by LTCI Partners, who would like to thank the Center for Long-Term Care Reform for helping increase awareness of LTC Financing issues. You can learn more about LTCI Partners and its solutions for financial distributors at

*** TERRY SAVAGE is perhaps the strongest supporter of responsible long-term care planning in the major media. A standing ovation for her keynote address capped the kudos she's earned from a grateful profession at the recent LTCI Producers Summit in Kansas City. Ms. Savage's mother passed away last Saturday. The Chicago Sun-Times obituary included this quote from Terry: "My mother was always an optimist and taught us we could achieve anything we set as a goal." We thank Paulette Markoff posthumously for giving the world her exceptional daughter and we offer Terry our sincerest condolences. ***

*** SPEAKING OF THE LTC INSURANCE SUMMIT, recordings are now available of 36 sessions (including Terry Savage's) focused on everything from marketing and sales to experts sharing new information on the length of LTC insurance claims and State Partnership programs. If you order a CD-rom containing the complete set of audios with synchronized PowerPoint presentations ($339), $75 of the cost will be paid to the Center for LTC Reform. To order the complete set, call the American Association for Long-Term Care Insurance at (818) 597-3227. Be sure to mention the Center offer. If you would like to download or order individual audios from the LTC Summit (starting at $15 each) simply click on this link: ***

*** AND SPEAKING OF LTCI CONFERENCES, the Tenth Annual Intercompany Long Term Care Insurance Conference will be held from March 14 to March 17, 2010 at the Sheraton New Orleans. Find details and register here. Conference organizer Jim Glickman asked us to give you the following special information: 1. The early-bird registration ($100 discount) deadline is Thursday, January 14th. 2. Information on a "Producer Scholarship," which provides $700 towards the attendee fee of $995 plus an additional $100 off prior to January 15th, is available at including a downloadable application form. Steve Moses says "I'll be there to cover this meeting for LTC Bullets and I hope to see you there as well." ***



LTC Comment: For as long as I've studied long-term care financing . . . say 25 years . . . I've warned that making Medicaid the dominant LTC payer is dangerous.

Sooner or later, the Age Wave will crest, Medicaid will fail, and the bottom will fall out of our welfare-financed, nursing-home-based LTC system.

Well, folks, that's no longer an iffy prognostication off in a scary distant future. It's an immediate likelihood on the cusp of occurring.

The health reform bills in both the House and Senate would load up Medicaid with millions of new welfare recipients at a cost states cannot sustain. So says Dennis Smith, the Bush Administration's director of the Medicaid side of CMS.

In a Heritage Foundation "WebMemo" titled "Medicaid Meltdown: Dropping Medicaid Could Save States $1 Trillion," Smith and co-author Ed Haislmaier opine:

"Faced with becoming merely an agent of the federal government, states will likely take the rational and reasoned approach of simply ending the state-federal partnership known as Medicaid." (p. 1)

"If all states withdraw from Medicaid, their collective savings would be $725 billion over the 2013- 2019 period, but they would exceed $1 trillion over 10 years." (p. 1)

"The cost to the federal government to replace the state share of Medicaid, however, would be greater than $1 trillion as the entire Medicaid population would become eligible for the new, more expensive federal subsidies for premiums and cost-sharing." (p. 1)

"By piling billions of dollars in new costs onto states and imposing greater federal control over the states, Congress is recklessly increasing the likelihood that states will exert their own authority as sovereign units of government and end their participation in Medicaid entirely.

"The savings to state budgets are so enormous that failure to leave Medicaid might be viewed as irresponsible on the part of elected state officials. The federal government, however, would be left holding a trillion-dollar-plus tab." (p. 4)

LTC Comment: If Smith and Haislmaier are correct and health reform passes, Medicaid as we've known it will cease to exist. Will what happens next be better or worse for long-term care?

Well, it'll probably be better AND worse. We'll see many state experiments in health and LTC financing instead of a one-size-fits-all, centrally planned and federally enforced welfare program. Some states will improve on the status quo; others won't. But at least we'll have an opportunity to test what works and what doesn't instead of staying on the current course, which is doing more of the same year after year and expecting a different result, Einstein's definition of insanity.

So, what if cash-strapped states respond to health reform by seceding from Medicaid? How could they improve access to and quality of long-term care while saving money in the process?

Simple. Target scarce state LTC resources to people most in need. Eliminate eligibility loopholes and enforce estate recovery. Use some of the savings to incentivize responsible LTC planning and private financing alternatives like reverse mortgages and insurance. Find numerous national and state-level studies that explain in detail how to do this here.

States that follow that formula after they escape Medicaid's Lilliputian constraints will have fewer people dependent on public assistance for long-term care. They'll have more private financing at market rates uplifting LTC access and quality for everyone. Their public expenditures for LTC will plummet and their people will enjoy better LTC services across a wider continuum of care. What's not to like?

As White House Chief of Staff Rahm Emanuel once said: "Never let a serious crisis go to waste . . . it's an opportunity to do things you couldn't do before." Carpe diem.