LTC Bullet: Score One for Our Side

Tuesday, August 17, 2010


LTC Comment: Even small victories in the fight for good LTC policy are slow in coming but here's one to brighten the dog days of Summer, after the ***news.***

*** ANOTHER REASON to join AALTCI ( The current issue of Jesse Slome's online LTC "Sales Strategies" magazine, "exclusive for members of AALTCI," explains how you can--and why you should--establish a free, lead-generating "blog" in 60 minutes or less! Other features in the issue include "new E&O coverage + savings on 2009 summit audios" and a way to "chat" with 100 other LTCI agents. Consult to join the Association and access these and many other benefits. ***

*** HEALTH CARE COSTS: Increasing Burden for Older Americans. It is expected that health care costs will increase more rapidly than income for older adults between 2010 and 2040, and that the median share of household income spent on health care will grow from 10% to 19%. Increasing health care costs are anticipated to consume about 60% of the growth in the real household income of Americans age 65 and over between 2010 and 2040. Richard W. Johnson and Corina Mommaerts, Will Health Care Costs Bankrupt Aging Boomers?, The Retirement Policy Program, The Urban Institute, February 2010. Click for link to report Source: August QuickFacts from MetLife Mature Market Institute. Quote from report: "Our estimates exclude the cost of long-term care, which does not usually involve medical treatment." ***

*** UPDATED MEDICARE FACT SHEET Reflects New Medicare Solvency Data. Tuesday, August 10, 2010. The Kaiser Family Foundation's Medicare Spending and Financing fact sheet has been updated to reflect changes in the latest financial projections for Medicare from the 2010 Medicare Trustees Report. The report incorporates reductions in the rate of growth of Medicare spending, attributable to the 2010 health reform law. The fact sheet includes an updated estimate showing the law will extend the solvency of the Medicare Part A Hospital Insurance Trust Fund until 2029, 12 years later than was projected in last year’s report. The fact sheet is available online at For additional information, please contact: Chris Lee at (202) 347-5270 or LTC Comment: Take this with a grain of salt. For reasons we've covered here and will again, claims the Medicare "trust fund" has a longer lease on life are specious. See "The $50 Trillion Sleight of Hand." ***



LTC Comment: The Center for Long-Term Care Reform was formed in 1998 to promote rational long-term care public policy and responsible LTC planning.

In 2005, we had our biggest victory with passage of the Deficit Reduction Act. Special thanks to Center co-founder David Rosenfeld, who later became Health Counsel to the House Energy and Commerce Committee (the germane committee for Medicaid) and is directly responsible for the law's design, consideration and passage.

The DRA '05 not only reinvigorated the LTC Partnership program, it took important steps to save Medicaid for the needy, such as capping the welfare program's home equity exemption for the first time ever and closing some of its more egregious eligibility loopholes.

But, as we've learned from the federal government's and most states' failure to enforce mandatory Medicaid estate recovery, a federal law passed has no effect on consumer behavior unless it is implemented. To this day, few states aggressively enforce estate recoveries and Medicaid planners advertise their ability to help affluent clients legally avoid repaying Medicaid from their estates. (The Omnibus Budget Reconciliation Act of 1993 made estate recovery mandatory under federal law and implemented most of our recommendations in a 1988 report I wrote published by the DHHS Inspector General.)

So today's news that the State of Illinois is finally beginning to implement provisions of the DRA '05 is important. Better late than never. But where were they for the past five years?

Before the recession, neither states nor the federal government were motivated to enforce politically sensitive policies like limiting access to Medicaid welfare benefits by affluent voters. But now, states are desperate and, while the feds keep spending borrowed money to prop up profligate spending, states have found that no amount of federal subsidies is enough. They have to impose some fiscal restraint.

Where better to cut back than on wasteful Medicaid spending that takes scarce resources away from the poor and diverts them to free inheritance insurance for prosperous heirs of well-to-do seniors?

So, what's the news? Read the State of Illinois' press release from yesterday here or as follows. We'll highlight (bold) and comment on points of special interest:


August 16, 2010

HFS Proposes Changes in Eligibility Rules for Long Term Care to Comply with Federal Law: Open public hearing will be held so all interested parties may advise the department with input on the proposed changes.

SPRINGFIELD - The Illinois Department of Healthcare and Family Services (HFS) announced today that it has proposed changes in the rules that govern eligibility for long term care services. The proposed rule changes are mandated by federal law, including the Deficit Reduction Act of 2005. They are designed to encourage personal responsibility and to improve the efficiency of Illinois’ Medicaid-funded long term care program, while also ensuring that the state leverages the maximum federal funding for the program.

[LTC Comment: Illinois is trying to implement mandatory federal rules five years late and is only now asking for public comment!]

"In developing these proposed changes, we have been mindful of the statutory mandate that the medical assistance program, funded with taxpayer dollars, should be the payer of last resort for those individuals who have no other means to pay for the cost of their long term care services," said HFS Director Julie Hamos. "These proposed changes take into account allowances to prevent spousal impoverishment, accommodate hardships and consider the individual circumstances of every person applying for and receiving long term care services at state expense. They are predicated on the principle that individuals should use their own income and assets to pay for their care before turning to the state for that support."

[LTC Comment: Hear, hear! Well said. Too bad Illinois didn't take our advice to do these things back in 1994 when we first recommended them in The Magic Bullet: How to Pay for Universal Long-Term Care, A Case Study in Illinois.]

The proposed rules, which are required by federal law, are designed to close loopholes that have been used to shelter applicants’ assets, rather than using those resources to purchase the long term care they may need.

The proposed rules also provide an incentive for purchasing and using qualified private long term care insurance to encourage individuals to prepare for the possibility that they will need long term care services in their later years.

[LTC Comment: See, folks, saving Medicaid for people in need really does encourage others to plan early and insure privately against the risk and cost of long-term care.]

A separate rule change will allow the state to capture more federal dollars to support the Department on Aging’s Community Care Program that allows seniors to stay in their homes and receive the care that they need, rather than moving into a nursing facility.

The Department will accept written comments on the proposed changes and has scheduled a public hearing for Sept. 13 in Chicago to receive ideas, questions and concerns. After reviewing and carefully considering all the comments received, HFS will determine whether the proposed rules should be revised. Before they can take effect, HFS must submit the proposed rules along with any revisions to the Illinois General Assembly’s Joint Committee on Administrative Rules for the committee’s consideration.

Among the major rule changes proposed are the following:

As dictated by federal law, the "look back" period will be changed from three years to five years, extending back to February 8, 2006, the date the new federal legislation took effect. This means that if the applicant gave away any money or property during the five-year period, the state must calculate a length of time for which the applicant would not be eligible for government aid for long term care services. The length of time is calculated by dividing the amount given away by the daily private pay rate of the nursing home.

• A hardship waiver process is established for cases in which the health or life of the applicant would be endangered, or the applicant would be prevented from residing in a facility with a spouse.

Commonly used loopholes under which applicants transfer assets that could have been used to pay for their own care are eliminated.

• New rules for the treatment of annuities are established, including a requirement that the state be named as the remainder beneficiary.

There is a limit of $500,000 of equity interest in a home for eligibility for government paid long term care services, unless the person’s spouse or a disabled, blind or minor child lives in the home. Reverse mortgages or home equity loans may be used to reduce home equity interest.

[LTC Comment: By encouraging the use of reverse mortgages to enable homeowners to pay for their own care, the DRA '05 not only saves Medicaid money, it encourages the public to plan responsibly for LTC in order to avoid depleting their home equity to fund LTC.]

Funds used to purchase a promissory note, loan, or mortgage will be treated as a non-allowable asset transfer unless there is a written transaction, the repayment term is actuarially sound, payments are made in equal amounts with no balloon payment, cancellation of the balance upon the death of the lender is prohibited and a consistent, verifiable repayment record exists.

A complete version of the proposed new rules, including instructions for submitting comments or participating in the public hearing, is available in the August 13, 2010 issue of the Illinois Register at

The Sept. 13 public hearing on the proposed rules will be held at the Michael A. Bilandic Building (MABB) 160 N. LaSalle St., Room 500, from 9 a.m. to 12 p.m.


LTC Comment: The DRA '05's changes in Medicaid eligibility rules are a step in the right direction, but much more needs to be done. Gaping loopholes remain that allow affluent people and their attorneys to "reap the windfall of Medicaid subsidies" as I wrote in that 1988 DHHS Inspector General report (pps. 47-48). But progress toward saving the Medicaid safety net by encouraging responsible LTC planning is speeding up as financial shortfalls force states (and soon the feds) to administer Medicaid in ways that help the poor without anesthetizing the affluent to LTC risk.

(Special thanks to friend and supporter Jesse Slome, president of the American Association for Long-Term Care Insurance [], for bringing this Illinois press release to our attention.)