LTC Bullet: Friendly Fire in the Class War
(LTC Embed Report #6)
Thursday, September 22, 2011
LTC Comment: Steve Moses's
Congressional testimony on Wednesday was well-received except for an ad
hominem attack, "friendly fire" in the class war. An explanation,
witness testimonies, and a video of the hearing follow.
LTC BULLET: FRIENDLY FIRE IN THE
LTC Bullet: On Wednesday, September
21, 2011 the House Oversight and Government Reform Committee's
Subcommittee on Healthcare, District of Columbia, Census and the National
Archives conducted a hearing titled "Examining Abuses of Medicaid
Eligibility Rules." Read witnesses' testimonies and watch the entire
here. A transcript of the hearing will be available in approximately
two weeks and we'll bring it to you then.
Hearing witnesses included Stephen
Moses of the Center for Long-Term Care Reform; New York elder law attorney
David Dorfman; Suffolk County (Long Island) New York Medicaid eligibility
specialist Janice Eulau; and Julie Hamos, Director of the Illinois
Department of Healthcare and Family Services, Illinois' Medicaid agency.
After opening statements by the Subcommittee Chairman Trey Gowdy (R, SC)
and by ranking member Danny Davis (D, IL), witnesses had five minutes each
to present their testimonies.
Steve Moses explained how most elderly
people who need long-term care qualify easily for Medicaid benefits
without spending down their savings. (Steve's testimony follows below.)
Attorney David Dorfman defended Medicaid planning for people who would not
qualify otherwise based on their income and assets. Eligibility expert
Janice Eulau explained that her county's average Medicaid applicant has
$300,000 in assets, that those with $500,000 are common, and that people
with over $1,000,000, though less frequent, do qualify easily. Illinois
Medicaid agency director Hamos derided Medicaid planning abuses and
explained how her program is trying to end them.
In the question and answer period
after witnesses testified, subcommittee members probed for details.
Chairman Gowdy's first question went to attorney Dorfman. He asked
whether the Medicaid planner considered Medicaid a program for the
indigent or "universal health care" for all. Mr. Dorfman replied that
Medicaid is a program for people who qualify, implicitly acknowledging
that he believes Medicaid is for all people who can arrange their income
and assets to qualify legally. He stated that his average client has a
home worth $500,000, $100,000 in retirement savings, and around $30,000 in
Eligibility expert Eulau said most of
the Medicaid applicants she sees have much more wealth than Mr. Dorfman's
average client. Nevertheless, they qualify for Medicaid LTC benefits
easily using techniques such as transfers, annuities, and promissory
notes. She explained in detail the most common Medicaid planning practice
in her county, which involves using promissory notes to reduce spend down
The most confrontational episode in
the hearing occurred when some members attacked Steve Moses for receiving
financial support from the insurance industry. Moses responded by
pointing out that such an ad hominem argument is a logical fallacy
and that he would respond only to questions about his analysis, evidence
and logic. He refused to list his organization's corporate donors on the
grounds that he receives no federal funds and it is none of the
questioners' business. "How ironic," Steve remarked after the hearing,
"to attack me as a tool of corporate interests when I live in a trailer
3,000 miles from home fighting to save Medicaid as a long-term care safety
net for the poor."
Steve's testimony follows. He titled
it "Medicaid Long-Term Care: Friendly Fire in the Class War" for this
reason: Easy access to Medicaid LTC benefits since 1965 has led to middle
class and affluent seniors crowding out the poor from access to quality
care. When your own troops shoot at you in war, it's called "friendly
fire." Politicians who oppose targeting Medicaid to people most in need
are really helping the well-to-do and hurting the poor, the opposite of
their stated objectives. Hence, friendly fire in the class war.
Testimony before the House Oversight and Government Reform
Subcommittee on Healthcare by Stephen A. Moses, President, Center for
Long-Term Care Reform (www.centerltc.com) on September 21, 2011
"Medicaid Long-Term Care Benefits: Friendly Fire in the
and members of the Committee: thank you for inviting me to speak to you
about Medicaid and long-term care financing.
I've worked in
this field since 1981, first as a career federal employee with the Health
Care Financing Administration, then for the Inspector General of the U.S.
Department of Health and Human Services, and since 1989 in the private
sector. I am currently president of the Center for Long-Term Care Reform.
In each of these roles, I conducted national and state studies of Medicaid
and long-term care financing policy. My remarks today are fully developed
and documented in published reports available on our website at
supposed to be a long-term care safety net for people in dire financial
need. Instead it has become the dominant payer for most Americans who
require extended care at home or in a nursing home, including the middle
class and even the affluent. How can this be true if Medicaid is a
means-tested, public assistance program? That is the key question before
you today. Here's the answer.
everyone says Medicaid eligibility requires low income, that is untrue for
people over the age of 65 who need long-term care. Federal rules require
most states to deduct medical expenses, including the cost of nursing home
care, from applicants' incomes before determining eligibility. Some states
apply "income caps" but those are easily evaded by means of special
"income diversion trusts." Bottom line, income almost never disqualifies
anyone for Medicaid long-term care eligibility.
But what about
assets? It is true that cash or negotiable securities over $2,000 are
disqualifying in most states, but it doesn't matter how people spend down
to that level as long as they don't give their money away. Financial
advisors frequently tell clients to purchase exempt assets, take a world
cruise, or throw a big party, all non-disqualifying spend down methods.
Just how many
exempt assets can applicants retain and still qualify for Medicaid LTC
benefits? There really is no meaningful limit. Exempt home equity is
capped at $500,000 or $750,000--13 to 20 times the amount protected in
England's socialized health care system--but the following resources are
exempt without any limit:
business including the capital and cash flow
• Individual retirement accounts (IRAs)
• One automobile
• Prepaid burial plans for the Medicaid recipient and immediate family
• Term life insurance, which allows recipients to evade Medicaid's estate
• Household goods and personal belongings
regulations and policies that require these exemptions are documented in
our report titled "Medi-Cal
Long-Term Care: Safety Net or Hammock?," a copy of which has been made
available to the Committee.
applicants for Medicaid LTC benefits can retain substantially more income
and assets than single people: up to $2,739 per month of income and half
the couple's join assets not to exceed $109,500. If the healthy spouse's
personal income and assets are below these levels, the Medicaid spouse's
income and assets are transferred to bring her or him up to the limit.
These "spousal impoverishment" protections increase annually with
these very generous basic eligibility rules, the vast majority of
America's elderly qualify easily for Medicaid when they need long-term
care. The conventional wisdom that people must spend down into
impoverishment before Medicaid will help is demonstrably untrue. Only the
most affluent need to consult Medicaid planners and use special legal
techniques--such as trusts, transfers, annuities, life estates, life care
contracts and promissory notes--to qualify. The other panelists will
discuss Medicaid planning. The key point to remember is that egregious
Medicaid planning is only the tip of the iceberg. The bigger problem is
that Medicaid's basic eligibility rules allow most people to qualify after
they need long-term care and without spending down their wealth first.
Easy access to
Medicaid has the effect of desensitizing the public to LTC risk and cost.
Medicaid's home equity exemption prevents people from using reverse
mortgages to finance home care. With most of their assets protected by
Medicaid, few people plan early to save, invest or insure for long-term
care. Well intentioned public policy has turned into a perverse incentive
discouraging responsible LTC planning. Furthermore, consuming scarce
public welfare resources to indemnify affluent baby-boomer heirs of
well-to-do seniors hurts the poor instead of helping. It's like friendly
fire in the class war.
save up to $30 billion per year if people had to consume their home equity
before qualifying for public benefits as is true in England. The program's
most expensive "dual eligible" recipients could be reduced by 20 percent.
Reverse mortgages to fund long-term care would thrive and generate new
jobs and tax revenue. The private long-term care insurance market would
expand creating even more jobs and revenue. But most importantly,
relieving the financial pressure on Medicaid in this way would enable the
program to survive as a quality safety net for the truly needy.
My analysis explaining how Medicaid can save $30 billion
per year by encouraging financing of long-term
care through reverse mortgages and private insurance has been provided to
for your attention.