LTC Bullet: Center Begins Study in New York

Tuesday, October 12, 2010


LTC Comment: Two down, one to go. We've submitted drafts of our Pennsylvania and California LTC financing study reports. Plans for New York, after the ***news.***

*** MY HERO, David Walker, former head of GAO and current Chief of the Peter G. Peterson Foundation, held forth on "The Debt, the Deficit, and America's Role in the World" before the Foreign Policy Research Institute on August 12, 2010. Check out a downloadable podcast of the speech here. Or read the text here. Be scared . . . be very scared! ***

*** GOOD TIMING: Our new LTC financing study in New York begins as the Empire State struggles to sustain a huge and growing Medicaid program. Outgoing Lt. Governor Richard Ravitch reports: "Spending on Medicaid amounts to more than a third of the 'all funds' state budget. The state funds that are spent on Medicaid are expected to grow at an annual rate of 18 percent in the next four years. If we do not get control over the growth in Medicaid spending, we will never get out of our budget hole. . . . For example, almost half the state's Medicaid spending is on long term careónursing homes, home health care and home personal care services such as bathing, cleaning and cooking. New York has particularly generous personal care policies, and home health and personal care are areas in which Medicaid costs are rising fastest." How much of New York Medicaid's LTC burden could be picked up by private financing alternatives if the program's perverse incentives did not trap most New Yorkers in need of LTC on public assistance? That's the question our study will address. ***

*** MEDICAID CHOKES RMs TOO: We know easy access to Medicaid LTC crowds out most of the LTC insurance market (Brown and Finkelstein, But Medicaid LTC also suppresses the use of home equity to fund LTC. According to a recent piece in Business Week: "Fear of losing access to Medicaid-funded assisted living facilities has also damped interest in reverse mortgages, since eligibility is based not only on income but total assets, excluding a primary residence." Why tap the equity in your home to fund LTC when Medicaid exempts at least $500,000 and up to $750,000 in home equity and estate recovery is easy to avoid according to Medicaid planners? With home equity--seniors' biggest asset--protected by Medicaid from LTC costs--seniors' biggest liability--there's little wonder neither reverse mortgages nor LTC insurance play large roles in financing LTC . . . nor that Medicaid LTC is faltering. ***



LTC Comment: "The Empire Center for New York State Policy, a project of the Manhattan Institute for Policy Research, is dedicated to promoting freedom, opportunity and enterprise in the Empire State. Through research papers, policy briefings, commentaries and conferences, the Empire Center seeks to educate and inform New York State policymakers, news media and the general public." (From the Empire Center's website.)

The Albany, New York think tank has retained the Center for Long-Term Care Reform to conduct a study of long-term care financing in the state. A description of the project follows below. Preliminary research and identification of sources have begun.

I will visit Albany during the week of November 8-12, 2010 to conduct interviews and other field work. We have begun to schedule meetings with key interest groups and public officials. Our goal is to have a final report in draft by early December.

I will apprise the Center's New York mailing list of this project soon and seek the participation and assistance of interested parties. But if you know people in the state who might like to be involved as interviewees or respondents, please have them contact the Center at

Specifically, we want to schedule a briefing and interview with New York representatives of the long-term care insurance and reverse mortgage industries. Please contact Damon at 206-283-7036 or if you would like to participate in this session tentatively scheduled for Thursday or Friday, November 11 or 12 in Albany. We'll decide the exact date, time and location based on availability and preferences of participants.


Description of the project:

How to Reduce Medicaid Expenditures and Improve Long-Term Care

a proposal by the
Center for Long-Term Care Reform
submitted to the Empire Center for New York State Policy
on February 10, 2010

I. The National Problem

Medicaid is a means-tested public assistance program, i.e. welfare. Yet Medicaid is the principal funding source for long-term care (LTC) throughout the United States, not only for the poor, but for most Americans. Although LTC users are only seven percent of the Medicaid population, they account for more than half of the program's costs nationally. The only way Medicaid can survive as a long-term care safety net for the poor is if more prosperous people plan responsibly and pay privately for their own long-term care. But Medicaid crowds out most private LTC financing alternatives such as home equity conversion and insurance. The trend toward greater and greater dependency on welfare-financed nursing home care is reversible. It will be reversed by responsible public policy or by default as costs skyrocket and public resources dwindle with the aging of the baby boom.

II. The State Problem

New York spent $41,397,000,000 on Medicaid in 2007 of which $9,480,000,000 or 23% were LTC expenditures for older people and adults with physical disabilities, an increase of 7% since 2002. New York's age 85 plus population, the cohort most likely to require LTC, was 385,000 or 2.0% in 2007, but is expected to be 622,000 and 3.2% in 2030, a 62% increase. Medicaid is the primary payer for 72% of the state's nursing home residents. Another 13% rely primarily on Medicare. Medicaid and Medicare also pay for most home health care, 75% nationally. Our best estimate is that only 1%-5% of New York's 50+ citizens own LTC insurance. Very few use home equity to fund LTC.

Thus, financing Medicaid LTC is a large and growing strain on New York's budget. Private LTC financing is minimal and shows few signs of increasing. Demographic and fiscal pressures will exacerbate these problems. Yet federal law and regulations inhibit some effective corrective actions New York might take--such as tightening loose eligibility rules--and encourage other initiatives--such as "rebalancing" from institutional to home care--which may increase utilization and costs.

III. Substantive Proposal

New York can reduce its annual Medicaid budget by an amount equal to 10% of current nursing home expenditures for aged and disabled recipients or $675,000,000 per year within five years. We propose to conduct a study of LTC financing in New York that shows why such savings are possible and how to achieve them while improving access to quality LTC for everyone in the state.

Toward that end, we will . . .

  • Research and document federal and state Medicaid LTC eligibility laws and regulations that encourage public assistance dependency for LTC.
  • Interview state staff who make, interpret, and implement LTC eligibility policy to identify eligibility "loopholes" that circumvent spend-down rules.
  • Measure the level of Medicaid estate planning, i.e. artificial impoverishment to qualify for Medicaid LTC, in New York with a literature search and interviews.
  • Analyze how much revenue New York receives from federally mandated estate or lien recoveries and how much more could be recovered using best practices.
  • Examine the reverse mortgage market and interview lenders and loan representatives to identify ways home equity could offset Medicaid LTC costs.
  • Examine the LTC insurance (LTCI) market and interview carriers, brokers, agents and regulators to identify ways LTCI could offset Medicaid LTC costs.
  • Meet key state legislators and executive branch officials to discuss why Medicaid LTC expenditures are so high and how they could be reduced progressively.
  • Meet LTC providers (nursing home, assisted living and home health) to get their perspective and gauge their support for measures to increase private LTC revenue.
  • Meet senior advocates to get their perspective and gauge their support for measures to increase overall public and private LTC resources.

We propose to work with a representative of the Empire Center for New York State Policy and/or the New York Medicaid agency to identify interviewees and schedule appointments. We will visit New York for one week to conduct the onsite research and interviews. We will conduct other necessary research online.

IV. Business Proposal

Deliverables, within six weeks of project approval, will include (1) a comprehensive report (approx. 25 pages) that explains the problem of LTC financing and recommends solutions to achieve savings of at least $675,000,000 per annum; (2) one or more newspaper op-eds, and (3) an article suitable for publication in the Empire Center for New York State Policy's journal.

Stephen Moses (professional bio attached) will conduct all of the research and interviews for this project. He has conducted many similar studies over the years. Examples of his project reports are at

Respectfully submitted February 10, 2010

Stephen A. Moses
Center for Long-Term Care Reform