LTC Bullet:  Russian Mafiosos, Medicaid and LTC

Tuesday, July 19, 2011

Branson, MO--

LTC Comment:  Can it get any weirder than this?  Adventures in Medicaid fraud and abuse, after the ***news.***

*** 3IN4 NEED MORE UPDATE.  Here's the second “Week in Review” video segment from the 3in4 Need More National Bus Tour and Caregiver Make Over Contest:  Stay tuned for 6 more video segments - one to follow each week of the tour. 

Like what you see?  Click the “Like” button located below the video screen when on YouTube.  Share this video and the campaign website ( with anyone you know in the long term care planning industry or the media. ***

*** BRANSON, MO.  I'm in the uniquely American entertainment venue of Branson.  Ten-hour, 500-mile, 3-gas-tank days in the Silver Bullet are exhausting, so I'm taking a 24-hour breather to catch up with email, schedule DC appointments, and take in a show or three.  But first thing tomorrow, I'm back on the road.  Expect our "LTC Embed" reports from the policy front in DC to begin next week.  Read about our new DC project with the Cato Institute here.  Support the Center here. ***



LTC Comment:  Remember the film maker who posed as a pimp and brought down ACORN?  Well, James O'Keefe is at it again.  Only this time, his hidden camera is aimed at Ohio's Medicaid eligibility workers.

Following are excerpts from "New O'Keefe investigation uncovers Medicaid fraud" by Matthew Boyle in yesterday's "The Daily Caller."  Read the whole article and view the 23-minute video here.  Then read our "LTC Comment" on this scandal's relevance to LTC financing.


"[F]ilmmaker James O'Keefe released the first installment in a new video investigation Monday morning, this one focused on Medicaid fraud. The first video in the series shows government employees in Ohio assisting two men who have described themselves as Russian drug smugglers with applications for Medicaid. . . .

"Ohio employees tasked with disbursing federal Medicaid dollars are shown coaching the men through the process of applying for benefits. 'If [the car's] not something registered here, maybe I just wouldn't mention it,' a Franklin County Medicaid officer . . . tells the men, when asked whether they should mention owning a vehicle that retails for nearly $1 million, as they apply for government aid designed to help poor people. 'Not that I can say that. You didn't hear that from me.' . . .

"[The worker] also tells the men to describe their occupation as babysitting, though she apparently believes they are drug dealers.

"The two men also ask the Medicaid workers about whether the government health plan covers abortions for their underage sisters, who they say get pregnant often because they're performing sexual favors for their clients. [She] recommends they go to Planned Parenthood. . . .

"In Madison County, [another] Medicaid worker . . . told the two men that her office would not report illegal aliens to federal authorities. 'Even if we run into people that are illegal aliens, it's not like we report them to INS or anything,' [she] said. 'That's not our purpose here.'

"O'Keefe told The Daily Caller he created an edited video for storytelling purposes, but is offering up unedited videos for anyone who wants to see them. O'Keefe also put the full unedited video from the Franklin County office meeting with Daniels at the end of the edited version. . . ..

"O'Keefe told TheDC he's sending these videos to state investigators nationwide. 'Complete footage is being released to state attorneys general offices around the nation as well as other government organizations for investigative purposes,' O'Keefe said in an email."


LTC Comment:  OK, so what's the relevance of this expose' to LTC financing?  Over the years, I've interviewed hundreds of Medicaid eligibility workers.  They routinely complain about how easily the well-to-do qualify for Medicaid LTC benefits while the poor lose everything they own. I've summarized these workers' angry, frustrated comments in dozens of reports, many of which you can read here

While I've never observed behavior as egregious as that portrayed in this video, I have noted and documented extensively the fact that affluent people with virtually unlimited income and assets qualify quickly and easily for Medicaid LTC benefits.  That's usually not the fault of Medicaid eligibility workers.  It's just how federal Medicaid rules work. 

For example, Medicaid exempts one home and all contiguous property up to a minimum of $500,000 and a maximum, in some states, of $750,000.  Applicants and recipients (A/Rs) may also retain one business, including the capital and cash flow, of unlimited value.  A/Rs can keep one auto with no limit on its value and, because it's exempt, they can give it away without penalty, buy another, and so on until they "spend down" to Medicaid's ostensible $2,000 liquid asset limit.  Add unlimited prepaid burials, term life insurance, and personal belongings.  You can see why assets aren't much of a problem.  And income almost never gets in the way of Medicaid eligibility because in most states all LTC and medical expenses are deducted from income before eligibility is determined.

These basic eligibility rules enable virtually anyone who knows the rules or consults a Medicaid worker to qualify for LTC benefits.  But there is also a tip to this iceberg.  People with lots of money, who might not qualify otherwise without spending down, can consult Medicaid planners who will impoverish them artificially.  They use special trusts, transfers, annuities, or care contracts to make large estates disappear into early inheritances for heirs at the expense of Medicaid's dwindling coffers.

All this creates a culture of permissiveness in state and county Medicaid eligibility offices.  For the most part, I've found that state Medicaid directors and legislators are unaware of how Medicaid eligibility actually works in the real world.  They buy the myth, portrayed universally in the media and academic journals, that Medicaid requires catastrophic asset spend down and that only the poor qualify.  If these new O'Keefe videos do nothing more than explode the myth of Medicaid spend-down, they will have served a valuable purpose.

In the meantime, the powers-that-be in Washington, DC are struggling to find a way to unleash even bigger government debt and deficits.  They've finally acknowledged that something has to be done to reduce Medicaid expenditures.  But they can't bear to cut benefits to "the poor."  Well, don't cut the poor!  Cut the waste, fraud and abuse by changing Medicaid eligibility rules so that the program only protects people most in need.  Encourage everyone else to plan early for long-term care and save, invest or insure privately.

How to do that?  I'm glad you asked.  Find our recommendations here including "How to Save Medicaid $20 Billion Per Year AND Improve the Program in the Process."  I wrote that piece almost a decade ago.  Imagine how much Medicaid could save now, while improving the program for poor people and nudging the affluent toward early LTC planning.  The potential savings are more than enough to fund the "Doc fix," the next fiscal cliff federal legislators face, several times over.

Call me radical if you want, but I'd like to see Medicaid restricted to people who need it and who could not have planned responsibly to pay for their own LTC.  No Russian mafia, nor boomer heirs, need apply.