LTC Bullet: LTC Truth to Power
August 3, 2012—
LTC Comment: Center president Steve Moses gave as good as he got from a hostile member at a congressional committee hearing last year. Details and a transcript after the ***news.***
*** MEDICAID LONG-TERM CARE REFORM ACT OF 2012 (H.R. 6300): Congressman Charles W. Boustany, Jr., MD (R, LA) introduced a bill this week that would advance the cause of responsible LTC planning and rational LTC public policy. Original co-sponsors are Gingrey, Blackburn, Tiberi and Westmoreland. The short description of H.R. 6300 and the full text when available can be found on http://thomas.loc.gov. In the meantime, a few of its major features follow.
1. Expand LTC insurance coverage
2. Solicit ideas from listed stakeholders on ways to reduce state and federal Medicaid expenditures
3. Consider block granting Medicaid LTC
4. Study the effectiveness of Medicaid asset eligibility rules, estate recovery, and transfer of assets penalties.
5. Ascertain potential savings from policy options evaluated.
1. The percentage of middle class people who will rely in the next 20 years on Medicaid for LTC services compared to the percentage that will rely solely on private financing from savings, home equity or insurance.
2. The cost of such reliance on Medicaid.
3. The likely impact of potential policy options such as reducing Medicaid’s home equity exemption to $200,000 or $50,000; extending the transfer of assets look back period to 10 years; expanding the use of liens to preserve property for later estate recovery; and allowing LTC insurance to be included in employer “cafeteria plans.”
4. The potential savings from such policy options if Medicaid were block granted to the states.
LTC Comment: While it is unlikely that this “Medicaid Long-Term Care Reform Act of 2012” will pass Congress or be enacted this year, we can at least be encouraged to know that some in the national legislature are beginning to look seriously at some of the key issues. ***
LTC BULLET: LTC TRUTH TO POWER
LTC Comment: The United States House of Representatives Committee on Oversight and Government Reform’s Subcommittee on Health Care conducted a hearing titled “Examining Abuses of Medicaid Eligibility Rules” on September 21, 2011. Steve Moses testified. The next day, we brought you our report and analysis of that hearing in “LTC Bullet: Friendly Fire in the Class War (LTC Embed Report #6).”
What we couldn’t do then, but can do now, is bring you the actual words spoken at the hearing. It makes for pretty dramatic reading. Some Committee members asked Moses “softball” questions. But other members were hostile and, we think, unreasonable. Read the following transcript and judge for yourselves. In times like these, when everything seems to be going against reasonable LTC planning and rational LTC public policy, it’s encouraging to know we have strong evidence and compelling logic on our side.
To read the full hearing transcript, including the prepared testimony of each witness, the Committee members’ introductory statements and all of the questions and answers, go here. Our focus today is on the questions addressed to Steve Moses and his replies. If you read nothing else, check out the closing exchange of the hearing in which Steve fights back against the illogical ad hominem attack by one particular Congressman.
The following quotes are from the official transcript available online of:
OF MEDICAID ELIGIBILITY RULES
Steve Moses’s prepared testimony begins on page 9 of the transcript. It was also published on September 22, 2011 in “LTC Bullet: Friendly Fire in the Class War (LTC Embed Report #6).” We’ll skip it here and proceed directly to the Q&A.
On Spousal Refusal, p. 29:
“Mr. GOWDY. Speaking of spouses, Mr. Moses, what is spousal refusal?
“Mr. MOSES. Well, that is a practice recognized primarily in New York and Florida whereby the well spouse, as Ms. Eulau explained, simply refuses to contribute under normal Medicaid requirements for the cost of the care of the Medicaid recipient. Under the law, the Medicaid recipient has to have assigned his or her rights to the wealth in essence so that the State can go after the well spouse for what is legally owed but this rarely happens because it is so complicated to do. The Elder Law Bar in frequent annual conferences urges the rest of the country to take advantage of what they consider our right under the Federal law to simply have the spouse refuse to contribute to the cost of the care. It is very, very expensive in New York and Florida. Frankly, I don’t think most of the other States have the impunity to try to pull that off.
“Mr. GOWDY. Before I ask you about key payments, Mr. Dorfman and I disagree a little bit about the purpose of Medicaid. I think it is for the indigent, he thinks it is for whomever qualifies. What do you think?
“Mr. MOSES. Well, there are problems in how Medicaid eligibility is determined so that there are what some people call loopholes but there are provisions in the law that make it quite easy and feasible for people with substantial wealth to qualify. As I explained in my testimony, the real problem is not just the tip of the iceberg which is the egregious Medicaid planning millionaires onto welfare, as Mr. Dorfman was saying, the real problem is that the median elderly person in terms of income and assets walks right onto Medicaid because of all of the exempt assets without limit. So really it is difficult to characterize the program as a program for the indigent because over the years through the intent of Congress, the program has been expanded. I call it eligibility bracket creep to the point where virtually anyone, if they don’t plan ahead to prepare to pay their own long term care, can get Medicaid relatively easily no matter how much money they have.”
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On Medicaid Planning, p. 30:
“Mr. DAVIS. Thank you very much, Mr. Chairman. I think there is generally some consensus that individuals should not gain Medicaid eligibility by inappropriately shielding their wealth. In the studies I have looked at by GAO as well as Kaiser, and some others, it would suggest to me that the numbers of individuals who are able to shield large wealth portfolios is relatively small.
“Could I ask if your experiences would indicate that that’s the way it goes? Are we finding large numbers of individuals who are millionaires or close to who have large sums who are able to get around the requirements and are inappropriately receiving Medicaid benefits?
“Mr. MOSES. Mr. Davis, as I just explained, the egregious Medicaid planning of the millionaires, that is just the tip of the iceberg. What GAO looked at was just one technique of Medicaid planning, transfer of assets. That is not even the most common form of Medicaid planning. There are annuities, life care contracts, the reverse half a loaf strategy using promissory notes. There are any number of ways to get people qualified, but the transfer of assets technique, minor as it is, is still a $1 billion a year according to GAO.
“As I can’t reiterate enough, the real problem is that most people don’t have to use fancy legal planning because they are eligible anyway. This has the effect of having sent the message since 1965 when Medicaid became part of the law to the public that you can ignore the risk of long term care, you don’t have to save, invest or insure for the risk, and when the time comes, maybe you die with your boots on and you are home free, but if you do get one of the chronic illnesses of old age—Alzheimer’s, Parkinson’s and stroke—and you need the expensive care, families who provide 80 percent, as you said in your opening remarks, 80 percent of the care for free, if you have to have the expensive care, then virtually everyone ends up on Medicaid.
“The program cannot sustain that weight now so the secret is to target it to the people who need it most and thereby insure a quality safety net for the truly indigent.”
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On Rebalancing from Institutional to Home and Community-Based Care, p. 33:
“Dr. GOSAR. But it doesn’t exist. Mr. Moses, can you actually answer that question too?
“Mr. MOSES. I am not aware of any State that has actually reduced the cost of long term care due to rebalancing. There are certain countervailing factors to consider such as people would rather get their care at home. You make a popular form of service delivery available under Medicaid, it creates a stronger incentive for people to find ways to qualify, not to say we shouldn’t provide home and community-based care. We should but you need to understand why we have an institutional bias in long term care.
“That is because Medicaid made nursing home care free in 1965 and resulted in there being no market for privately financed home and community-based services. That is why that infrastructure isn’t out there. It is why we are trying to retrofit the home and community-based system on a nursing home-based system funded by welfare which never has enough money to provide adequate financing. So it is I think not a very satisfactory solution to expand home community-based care under Medicaid unless and until you get the eligibility hemorrhage that this hearing is about under control.
“Otherwise, you will just create more and more incentives for people to rely on Medicaid.
“The best way to get access to home and community-based care is to be able to pay privately. Then you get red carpet access to the best possible care.
“Dr. GOSAR. It is more about the qualifying than anything?
“Mr. MOSES. Yes.”
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On how private insurance can help save the LTC social safety net, p. 33, bottom:
“Mr. CUMMINGS. Mr. Moses, so you would have the government pay less money with regard to Medicaid and then for patients to do what? What would you have them do? Be brief because I have a lot of questions.
“Mr. MOSES. You have scarce public welfare resources available. All I am suggesting is that you target them to the people who are most in need and create incentives for the affluent and the middle class before they are too old to and too infirm to plan for long term care and prepare to pay privately so they don’t become dual [eligibles].
“Mr. CUMMINGS. So you would advocate for them getting insurance?
“Mr. MOSES. Well there are many ways to prepare, you can save and invest, but insurance is one way. Home equity is the huge pot of money out there.
“Mr. CUMMINGS. With people losing their homes in my district big time, value going down, I am not sure about that one. I want to go back to something Mr. Davis said. He said this is a multifaceted problem but one that we can find a reasonable solution. I want to thank you, Mr. Chairman, for calling this hearing, but I want us to be clear on where we are.
“Mr. Moses, you were invited by the majority and your bio states that you are the president of something called the Center for Long-Term Care Reform. I guess this is meant to sound like a think tank. Your bio also states that you have testified before most of America’s State legislatures, something that think tanks often do, is that right?
“Mr. MOSES. Yes.
“Mr. CUMMINGS. Mr. Moses, when I asked my staff to learn more about you, to try to understand where you were coming from, it seems that your views are really nothing more than the views of the insurance industry, hardly a disinterested or objective observer. Isn’t it true that the policy advocacy center you operate is a for profit company? Is that right, is it for profit?
“Mr. MOSES. Yes.
“Mr. CUMMINGS. Isn’t it true that when you applied to IRS in 2000 for recognition for tax exemption, your group was told it was better classified as a “business league” for the long term care insurance industry?
“Mr. MOSES. No. The organization was originally certified as a 501(c)(3) charitable nonprofit. I didn’t feel I could carry the overhead of that, so I decided to become what I call a no profit because I just couldn’t carry the overhead of being a nonprofit.
“Mr. CUMMINGS. I understand. Isn’t it true that your organization stated in June 2000 in correspondence to the IRS that historically all the Center for Long-Term Care Reform’s funding has been contributed by the long-term care insurance industry? Is that right?
“Did you report that?
“Mr. MOSES. I have a membership organization, so individual members contribute $150 a year in order to get my publication and I have corporate members as well.
“Mr. CUMMINGS. I just want to make sure we understand who is funding you.
“Was the funding to originate the Center paid for by the longterm care insurance industry?
“Mr. MOSES. Some of the funding for the Center.
“Mr. CUMMINGS. When you say some, was that 50 percent, 90 percent?
“Mr. MOSES. Probably most in the early stages, all the first year and less over time.
“Mr. CUMMINGS. Isn’t it true that your organization’s principal purpose is to advocate for the purchase of long-term care insurance?
“Mr. MOSES. No, that is not true. If you can permit me to answer the question fully, I will explain.
“Mr. CUMMINGS. Sure, briefly, because I have a lot of questions and what I may have to do is just get your written response, but I want to be fair to you.
“Mr. MOSES. Maybe another Member will allow me to answer your question in such a manner that can appease you.
“My roots are, sir, in government service. I was an 18 year, U.S. Government employee. I discovered that Medicaid is intended to be for the poor and was not being so used effectively. I have become an advocate first as a Federal employee working for the Health Care Financing Administration, then for the Inspector General, writing national studies that have led to changes in Federal law. When I decided I couldn’t get it done within the Federal Government, I left to be on the outside but my mandate, my mission is to preserve Medicaid as a safety net for people who need it such as the people in this room. [Advocates for the disabled attended the hearing in wheel chairs.]
“Mr. CUMMINGS. Then you and I are in agreement on that. On that point, I have to ask you this consistently with what you said so you can have further opportunity to explain. In a fund-raising appeal letter, does your organization brag that it may be ‘‘long term care industry’s top producer’’ and isn’t it true that in your fiscal year 2000 fund-raising letter, you assert ‘‘the Center would open the floodgates of demand for your products?’’ In your 2000 fund-raising appeal, you were attempting to raise $1 million, and requested $10,000 from brokers and $20,000 from small carriers. Will you provide this committee with a comprehensive list of donors to your organization?
“Mr. MOSES. You are talking about 11 years ago. That organization, the Center for Long-Care Financing doesn’t exist anymore. That was a 501(c)(3) charitable nonprofit. We are now a no-profit, as I explained, and I do not have to and will not disclose all of my donors. Most of them, about a third, are individuals who just believe in what we are doing and make a contribution annually. There are corporate members, some from the insurance industry, some from the provider industry.
“Mr. CUMMINGS. Were Charles and David Cook included in it?
“Mr. MOSES. No.
“Mr. CUMMINGS. Thank you very much, Mr. Chairman.”
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On improving Medicaid for the poor by diverting others to home equity conversion and LTC insurance, p. 35:
“Dr. DESJARLAIS. Thank you, Mr. Chairman, and thanks to the panel.
“Mr. Moses, I think we will just kind of continue where we left off there because I find this really an interesting and important hearing. Clearly, we are facing Federal deficits that are unsustainable. We have health care programs that are in jeopardy whether it is Medicare or Medicaid. I think what we are trying to do here today is preserve Medicaid for those that really need it. We have a large group in here who should have been very interested in this because clearly those are the ones who need it. For the past two decades as a primary care physician, I have struggled with the frustration of getting care for people who really need it and everybody knows people getting it who don’t need it. To me this hearing should be a very bipartisan thing.
“[Elder law attorney] Mr. Dorfman mentioned the wife who is talking to the doctor of a husband who has just had a stroke, wondering what do I do and indeed, that is a frightening time. Clearly, if the government isn’t there, then what indeed does she do, who does she turn to? Does she turn to family, does she turn to her resources?
“We are hearing talk right now that the rich need to pay their fair share. This hearing is about people being responsible for themselves and not relying on the Federal Government when they can afford to do it. I applaud you and everyone who is here today trying to solve this problem because clearly our government cannot afford to pay long term care for everybody in this country. We have to have a better solution. I think that is why we are here.
“Do you think it is better that people have insurance and prepare for long term care than not?
“Mr. MOSES. Yes. Here is my problem. My goal is to preserve Medicaid as a safety net for people in need. Unfortunately, people in need don’t have money to donate to organizations like mine. The people who don’t are the ones who might benefit from a change in Medicaid policy that protects the program for the poor.
“Where would we go if there weren’t a $500,000 home equity exemption? Families would tap their home equity after age 62 through products like reverse mortgages which enable them to remain in the home and purchase that home and community-based care that we would rather people have.
“Once home equity becomes something that is at risk in case you have a long term care problem, once Medicaid stops being free inheritance insurance for the baby boom generation, then the boomers will plan ahead and will be more likely to buy the insurance that enables them to pay privately.
“If we could divert only 20 percent of the people who are likely to become the dual eligibles that are only 15 percent of the Medicaid population but 39 percent of the cost, 70 percent of their costs are long term care, if we could divert only 20 percent of them from ever becoming dual eligibles, it would save Medicaid $30 billion a year which is enough by the way to cover the doc fix.
“Dr. DESJARLAIS. Briefly, the way things stand now with proper legal counsel, somebody like even Bill Gates or Warren Buffet could qualify for Medicaid?
“Mr. MOSES. You could as long as you transferred all your assets 5 years in advance.
“Dr. DESJARLAIS. So there is means for people like that to do it if they wanted to do that?
“Mr. MOSES. Yes.”
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On how easy Medicaid eligibility traps people on welfare and discourages responsible LTC planning, p. 37:
“Dr. DESJARLAIS. I was thinking about this hearing and the idea of getting people on insurance. I think people are very naive. I think a lot of people think Medicare will pay for this. Do you think this would be an area that public service messaging, if they knew this was going away and they didn’t have this option, public serving messaging to help get people to obtain long term health coverage might be useful?
“Mr. MOSES. It can’t hurt but the problem is the public doesn’t fail to buy long term care insurance or plan for long term care because they aren’t aware of the problem. All the surveys show people know it is a big risk, but they still don’t buy. Why, because ignore the risk, avoid the premiums, wait to get sick and the government pays.
“Dr. DESJARLAIS. So all the loopholes right now are allowing people to skirt the system, maybe even cheat the system?
“Mr. MOSES. Not just the loopholes, just the basic eligibility rules let most people on.
“Dr. DESJARLAIS. Once again, it is a case of our government enabling people to skirt the proper channels?
“Mr. MOSES. Well intentioned, perverse incentives.
“Dr. DESJARLAIS. I yield back.”
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Congressman Clay attacks the Center’s funding, but not our evidence or logic, p. 38:
“Mr. CLAY. Thank you for that response.
“Mr. Moses, I noticed that your fund-raising solicitation ends by asserting that ‘‘Our established credibility as an independent third party voice allows us to perform an essential role that no one else can fill for reasons perceived by self interests.’’ Do you normally disclose to congressional committees and State legislatures that you have testified before the details of your ties to the long term care insurance industry?
“Mr. MOSES. It is public knowledge. As your researchers have determined and provided you the information, that is out there. But as I explained earlier, I am not about selling insurance. I am about saving Medicaid. The problem is, as one of the testimonies explained, between two-thirds and 90 percent of the potential market for long term care insurance is crowded out by the availability of Medicaid. That was in the American Economic Research Journal. As long as that is the case, as long as the public can ignore the enormous cost of long term care, no financial product is affordable if you don’t think you need it.
“Mr. CLAY. Will you provide the subcommittee the names of your corporate donors?
“Mr. MOSES. No.
“Mr. CLAY. Thank you and I yield back.”
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On “Key Money” or how the affluent on Medicaid crowd out the poor from the best LTC facilities, p. 39:
“Mr. GOWDY. I thank the gentleman from Missouri.
“Given the impressive panel of witnesses that we have, with your indulgence, we would like to have a second round of 2 minutes each if that is amenable to you all. We are so fortunate to have witnesses like yourselves. We want to be good stewards of your time, so if you have time, 2 minutes. My math’s not great, maybe 8 minutes.
“Mr. Moses, key payments, is that a phrase you are familiar with and what is it?
“Mr. MOSES. The idea of key payments, the notion is that if you are doing Medicaid planning and sheltering or divesting hundreds of thousands of dollars, you don’t want to end up in one of those awful Medicaid nursing homes.
“Mr. GOWDY. That is exactly why I asked you because there have been two witnesses who have said wealthy people don’t want to wind up in one of those gosh awful Medicaid places. The good news for them is there is a way around that.
“Mr. MOSES. Absolutely, there is.
“Mr. GOWDY. Tell Mr. Dorfman how he can keep his rich clients from having to stay in one of those horrible Medicaid facilities.
“Mr. MOSES. This is routinely recommended in the Elder Law Journal articles. Don’t worry Mr. and Mrs. Client, we can get you into a nice place because when we divest the rest of your assets, we will hold back $50,000 to $100,000 so that you can pay privately for 6 months to a year. Why does that make a difference? You will get red carpet access to the best quality care because nursing homes, for example, only get about two-thirds from Medicaid what they would get from a private pay resident, so they will roll out the red carpet to attract people who can pay privately. They may have only a few Medicaid beds and be mostly private pay and Medicare. They are the really nice nursing homes and the Elder Law Bar always knows which ones those are.
“The problem is while the nicest beds and the best facilities are being filled by people who could have, would have and should have paid their own way, Medicaid people, the appropriate indigent people, can’t get into the nice places and they end up in the 100 percent Medicaid places that are the kind of places that 20/20 goes in with the minicams showing people lying in their own waste with bed sores down to the bone.
“Mr. GOWDY. To summarize it, because I only have a couple seconds, just save back enough money to be a private pay patient for 3 months at a minimum, perhaps up to 6 months, then quit paying your private pay, that very nice facility can’t kick you out because of your former payment, you could just live off your Medicaid?
“Mr. MOSES. Correct.
“Mr. GOWDY. There is a way contrary to what has been said this morning. Wealthy people don’t have to wind up in those gosh awful Medicaid facilities, they can be at a super nice place if they just get the right legal counsel, right?
“Mr. MOSES. A Medicaid planner simply flips the switch, the Medicaid plan kicks in and your private payer becomes a Medicaid recipient overnight.”
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On how Medicaid discourages responsible LTC planning, p. 41:
“Dr. GOSAR. Mr. Moses, do you worry about the exploits to the taxpayer contributing to a free rider culture in this Medicaid planning?
“Mr. MOSES. Yes. The research shows that people don’t plan for long term care because Medicaid pays for most of the expensive care later on. It is not that the public knows all there is to know about long term care and plans to go on Medicaid, it is the fact that Medicaid has always paid for most expensive long term care that has kind of desensitized the public to the risk.
“That is why all the survey studies show that people are aware that they should have a plan for long term care but they think Medicare covers it which doesn’t, but Medicaid does and that is the simple, basic fact that if you could change that, we could preserve Medicaid as a safety net for people in need and if you had to spend some of your own resources before you got help from the government, as you do in England, England only protects $38,000 worth of all assets including home equity. If you had that in place, then you would have a demand for planning, saving, investing and insuring.”
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Steve Moses fights back against a Congressman’s ad hominem attacks, p. 42:
“Mr. CLAY. Thank you, Chairman Gowdy.
“Mr. Moses, going back to the point about the names of your corporate donors, I just don’t find you as a disinterested, public policy expert expressing a personal opinion but in fact, a paid, long term care industry advocate. In the interest of full disclosure, why wouldn’t you want to provide the names of your corporate donors to this subcommittee?
“Mr. MOSES. I am not required and I choose not to do it. The point is that kind of argument, Congressman Clay, is a logical fallacy. It is called the ad hominem to attack somebody based on aspects other than the quality of their work. I would encourage you to read the many reports that are on our Web site and make a judgment based on facts and not personal attacks.
“Mr. CLAY. Mr. Moses, before I came here, I was a State legislator for 17 years and I see the trends of what is going on in the States, that they are quickly shirking their responsibility to take care of the disabled and the people that are older because, first of all, they don’t want to raise the necessary revenues to pay their share of Medicaid and are putting less and less in annually to pay for those people who helped build those States and build this country, especially our seniors who happen to be in a long term care facility. You don’t want to provide the subcommittee with full disclosure for whatever reason.
“Mr. MOSES. I spent 30 years, my career, trying to find ways to save Medicaid for people in need. The only tools I have are private sector industries that stand to gain from a system that would save Medicaid for people in need. If we save Medicaid for people in need, others, the more affluent people, will need to spend their money instead of hiring attorneys.
“They will need to use their home equity through things like reverse mortgages so they can get quality care in the private market. Once their home equity is at risk, they will see the need to buy the insurance and we will take some of the burden off the public programs currently unable to provide guaranteed access to quality care across the whole spectrum of care for people truly in need and we will increase the jobs in the private sector and the tax revenue that enables Congress to do worthwhile things. Right now, we are operating a system that does not achieve its original intent.
“Mr. CLAY. I thank you for your response.
“Mr. GOWDY. I thank the gentleman from Missouri and on behalf of all of us, we want to thank each of our panelists. It has been informative for all of us and we appreciate your expertise, your professionalism and how you interacted with one another and especially how you have interacted with questioners.
“With that, the committee is adjourned and we thank you again.
“[Whereupon, at 11:40 a.m., the subcommittee was adjourned.]”
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