LTC Bullet:  LTC Action
(LTC Embed Report #5)

Friday, September 16, 2011

Washington, DC--

LTC Comment:  Exciting things are happening as your Center for LTC Reform completes week two of our September-October LTC policy project in the nation's capital.  Read below about a CLASS attack, a Congressional hearing on our issues, plus CBO and GAO developments.



CLASS Act Attacked

The big news yesterday was that a Congressional working group published a scathing review and analysis of the CLASS Act.  Read about it here.  Review the full 19-page report here.  Some quotes from the "bicameral" Republican work group's members follow.  The source for these quotes is a September 15 press release from co-chairs Senator John Thune (R, SD) and Congressman Fred Upton (R, MI).

"It is no secret that the CLASS program is fiscally unsound and was used as a budget gimmick in the health care law. However, 'CLASS' Untold Story' reveals that during the program's development, high-level officials within HHS were already aware the program was likely to collapse and privately expressed their own doubts, but continued to publicly tout the program's benefits and savings," said Rep. Fred Upton (Mich.-06), co-chair of the Working Group.

"The CLASS Act is an ocean liner that was put to sea with a giant hole in the hull," said Rep. Joe Pitts (Pa.-16), co-chair of the Working Group. "This report clearly shows that the authors of last year's health care bill were aware of the flaws, and launched the program anyway. What we see here is legislative malpractice. When the CLASS program fails, the taxpayer will be left to foot the bill. The time to terminate this program is now, before it begins enrolling participants and taking premiums. The government has to stop making promises that it can't keep."

"To advance the president's healthcare agenda, it appears a deliberate effort was made by administration officials to hide CLASS's true cost from lawmakers and the public," said Sen. Jeff Sessions (R-Ala.). "The deception exposed in this report paved the way to imposing additional financial burdens on taxpayers, businesses, and cash-strapped states-at a time when they can least afford them. The unsustainable CLASS program should be immediately repealed and, without a doubt, this troubling evidence warrants further inquiry."

McKnight's Long-Term Care News Daily Update quoted me on the new CLASS report in an article titled "CLASS Act was doomed from the start, says GOP report":  "But Stephen A. Moses, president of the Center for Long-Term Care Reform, a proponent of private insurance and a vocal opponent of the CLASS Act, said the program is getting needed scrutiny. 'It had to hit a brick wall,' Moses said. 'We desperately need a viable financing system that will attract more private financing. CLASS is not the way to do it.'"

Hearing on Medicaid Eligibility Abuse

The House "Oversight and Government Reform Subcommittee on Healthcare, District of Columbia, Census, and National Archives" will hold a hearing on Wednesday, September 21, 2011 at 10:00a.m. in Room 2247 of the Rayburn House Office Building.  The hearing is titled "Examining Abuses of Medicaid Eligibility Rules." 

According to the Sub-Committee's chairman, Congressman Trey Gowdy (R, SC):  "The hearing will focus on eligibility rules for Medicaid long-term care services, the techniques used by individuals to qualify for Medicaid, and the overall impact of the eligibility rules."

Steve Moses will testify regarding Medicaid long-term care eligibility rules and how they  are stretched beyond Congressional intent to enable non-poor people to qualify for the program's most expensive benefits.  Other witnesses may include a state Medicaid LTC eligibility worker, an elder law attorney, and an academic who has studied the crowd-out effect of Medicaid LTC benefits on the market for private LTC insurance.

CBO Score?

I met with a Senate Budget Committee staff person this week.  I presented our proposal to save Medicaid $30 billion per year in LTC costs while improving the program for the poor.  For details, see our report "Pay for the Doc Fix by Fixing Medicaid LTC" here and our LTC Bullet "Super Committee Savings from Medicaid" here

The staffer asked for "specs" that he could send to the Congressional Budget Office to request a "score," i.e., an official estimate of the likely savings from implementing the proposal.  I explained that "the fuller argument and documentation are in our reports, but these are the bare essentials":

  • Medicaid LTC eligibility exempts a minimum of $500,000 in home equity, 13 times what England's socialized health care system allows.
  • 81% of US seniors own homes; 2/3 of those own their homes free and clear; NCOA ( says 48% of America's 13.2 million households age 62 and older could get $72,128 on average from reverse mortgages.
  • If Medicaid's home equity exemption were eliminated or radically reduced (e.g., to $50,000), aging Americans would spend down home equity before becoming eligible for Medicaid LTC by means of a reverse mortgage (to fund home care) or by selling the home (to fund institutional care).
  • Dual eligibles, who receive both Medicaid and Medicare benefits, are 15% of Medicaid recipients, but account for 39% of Medicaid expenditures of which 70% are for long-term care.
  • Queries: 
    • How many people in their 60s and 70s today would avoid becoming Medicaid's most expensive recipients (dual eligibles) in the future if home equity were used to pay for LTC? 
    • How many more would fund their LTC through reverse mortgages? 
    • How many more would buy LTC insurance to avoid having to spend down their home equity? 
    • How much money would Medicaid save over 10 years, 20 years, 30 years?

We estimate that by reducing Medicaid's long-term care eligibility home equity exemption from a maximum of $750,000 to $50,000--still more than in England--Medicaid could save $30 billion per year.  These savings would accrue because people who would otherwise have become dual eligibles would remain private payers instead.  It remains to be seen what CBO will say.

GAO Study? 

I presented our analysis and proposal to another Senate staff person, who then asked me what the "right questions" would be to ask the Government Accountability Office to study.  He'd like to get GAO working on the issue and substantiating our findings from dozens of state and national studies.  Here's what I suggested:

To introduce these questions, I recommend saying something like this:  Although Medicaid is considered a means-tested poverty program intended as a safety net for the poor, it actually allows people with substantial incomes and very high exempt assets to qualify.  Even people with still higher incomes and assets can qualify with the help of sophisticated legal techniques utilized by Medicaid planners.  Medicaid should be a quality LTC safety net for the poor, not free inheritance insurance for heirs of affluent seniors.  Answers to the following questions will help us evaluate whether or not federal and state Medicaid dollars are serving the purpose intended by Congress

  • How many people are denied eligibility for Medicaid long-term care benefits based on excess income? 

(Although Medicaid is reputedly a program for low-income people, the fact is that most states [35 with "medically needy" eligibility systems] deduct LTC and medical expenses from income before determining eligibility.  Low income is not required, only inadequate cash flow to pay all health care expenses.  In "income cap" states, applicants with excess income can obtain "Miller income diversion trusts" to qualify as long as their income is less than the cost of a private nursing home.  Again, not low income.)

  • Isn't it true that income almost never excludes anyone from eligibility for Medicaid LTC benefits?
  • How many people qualify for Medicaid long-term care benefits while retaining the following exempt assets and how much wealth is sheltered in this way?:
    • One home and all contiguous property up to the DRA '05 limit of $500,000 ($750,000 in CA, NY, ID, etc.)
    • One business including the capital and cash flow of unlimited value.
    • One automobile of unlimited value.
    • Unlimited prepaid burial plans for the Medicaid recipient and immediate family members.
    • Unlimited term life insurance.
    • Unlimited household goods and personal belongings.

(For citations to the applicable federal regulations requiring the foregoing asset exemptions which apply to all states, see pages 20-21 of "Medi-Cal Long-Term Care:  Safety Net or Hammock"  by Stephen A. Moses, published by the Pacific Research Institute ( of California and the Center for LTC Reform ( in 2011.

  • Beyond these "exempt assets," applicants can also "self-impoverish" with the help of Medicaid planning attorneys.  GAO has studied one Medicaid planning technique already, i.e. asset transfers.  Many other Medicaid planning techniques are used. 
    • How prevalent are the following techniques and how much wealth do they divert from Medicaid eligibility limits:  irrevocable income-only trusts and other special trusts; "Medicaid-friendly" annuities; life care contracts; reverse half-a-loaf strategies; life estates; purchase of exempt assets, etc.? 
    • Please identify all common Medicaid planning techniques, determine how often they are used and estimate their cost to the Medicaid program by their impact of facilitating and hastening eligibility for applicants who could have paid for their own care.
  • How much does each state Medicaid program recover from the estates of deceased recipients as required by the Omnibus Budget Reconciliation Act of 1993?

LTC Comment:  Clearly LTC policy issues are getting more attention on Capitol Hill all of a sudden.  We're stirring the pot vigorously, but the real driving force is a desperate need to identify savings and relieve the fiscal pressure on Medicaid and state/federal budgets.  What better way to achieve that goal than to save the LTC safety for people most in need and incentivize middle class and affluent people to plan ahead for LTC risk and cost?  Stay tuned to our "LTC Blog" for further developments.