LTC Bullet:  Medicaid Spend Down that Isn’t and Why it Matters

Friday, July 19, 2013

New York, New York--

LTC Comment:  Claiming “transitions” to Medicaid are evidence of catastrophic LTC asset “spend down” misrepresents the truth and should be publicly recanted.  Who, what, when, where and why, after the ***news.*** [omitted]


LTC Comment:  Does Medicaid long-term care spend down catastrophically impoverish wide swaths of the American public?  Do we need government to swoop in and “solve” the problem as it tried to do for retirement income (Social Security—unfunded by $21 trillion) and acute elder health care (Medicare—unfunded by $43 trillion)?  That’s what many analysts, public officials, legislators and reporters believe. 

Their arguments and advocacy hang on the assumption that Medicaid really does require impoverishment.  But anyone who understands Medicaid LTC eligibility knows that Medicaid spend down is a myth.  Income rarely obstructs eligibility because Medicaid deducts private LTC and other medical costs from income before applying its income test.  Assets are not a problem for most middle class people because exempt resources are virtually unlimited and countable assets are easily converted to exempt status.  Affluent people with income and assets above these generous levels hire Medicaid planners to make their wealth disappear prematurely into the hands of premature heirs.

There is no empirical evidence of widespread Medicaid LTC spend down.  Every time the usual suspects, i.e., researchers pushing for more government financing of LTC, try to prove Medicaid spend down devastates huge numbers of people, they come up short.  They tried in the late 1980s and early 1990s and proved the opposite.  They found that only 15% to 20% of people in Medicaid long-term care started as private payers and converted to Medicaid.  The rest were eligible for Medicaid from the start.  Furthermore, these researchers didn’t bother to ask whether the few people who converted to Medicaid did so by actually spending money on their health or long-term care.  Maybe they used countable assets to purchase exempt resources or hired a Medicaid planner.  Who knows?  They didn’t ask.  As low as the percentage of people who transitioned to Medicaid was, the researchers assumed without evidence that they spent down to qualify.

Today, we see another example of this intellectual sleight of hand regarding Medicaid spend down.  Josh Wiener of RTI International and his co-authors published articles recently that purport to prove Medicaid spend down is devastating large numbers of people.  Read those articles here and here.  They’re titled “Medicaid Spend Down:  New Estimates and Implications for Long-Term Services and Supports Financing Reform” and “Medicaid Spend Down: Implications for Long-Term Services and Supports and Aging Policy,” respectively.  Do you get the idea from those titles, not to mention the articles’ content, that they have something to do with spending down money on long-term care before qualifying for Medicaid?

That would be a reasonable assumption, but it would be wrong.  What these papers call “spend down” is nothing more than “transition” from non-Medicaid status to Medicaid eligibility.  Neither the articles nor the research they report contain any measurement whatever of money actually spent for health care, long-term care or anything else.  I pointed this fact out when I served on an American Enterprise Institute panel recently with Dr. Wiener.  (Watch C-Span coverage here.)  Evidently, he took notice.  He titled a recent presentation on the same research “What the Long-Term Care Commission Needs to Know about Transitions to Medicaid.”  Note the change:  “transitions,” not “spend down.”  Check out slides from that recent presentation to the DC-based LTC Discussion Group here.  You’ll find both terms (spend down and transitions) used interchangeably, so we haven’t carried the day completely yet, but the change from misrepresenting the facts to presenting them accurately is at least underway.

Why does this matter?  Consider some of the claims made in that presentation to the LTC Discussion Group last week.  (NB:  I attended that meeting, but I cannot report on what was said because the Group’s policy embargoes reportage in order to encourage presenters to speak candidly.  I do have permission, however, to reference the slides which are in the public domain here.)  For example:

Slide #3:  “High cost of long-term services and supports results in routine catastrophic out-of-pocket costs” and “People who have been independent all of their lives are impoverished and must depend on welfare”

LTC Comment:  Oh?  Where’s the evidence?  There is none.  Wiener cites the high cost of nursing home and home care, but only assumes people are spending their own money for such services.  The facts are that private-pay nursing home care is almost extinct; Medicare pays for most home care; and other assisted living and home care expenses are paid mostly from income, not assets.  See “LTC Bullet:  So What if the Government Pays for Most Long-Term Care, 2011 Data Update.”

Slide #4:  “Study goals . . . Track transitions to Medicaid -- Not Medicaid spend down in technical sense, which relates to depletion of assets.”

LTC Comment:  Aha!  There’s the confession finally.  Despite insisting that catastrophic out-of-pocket costs routinely impoverish people who were independent all their lives making them dependent on welfare, this research has nothing to say about “depletion of assets.”  So why imply and insist that it does?  The only reason is to advance the ideologically biased objective to expand public financing of LTC and curtail private financing alternatives.

Slide #15:  “Policy Implications . . . Medicaid spend down deserves to be higher on LTSS reform agenda”

LTC Comment:  Well, yeah!  I couldn’t agree more.  But how about actually studying spend down instead of transitions?  How about analyzing actual expenditures for long-term care instead of pretending that everyone who transitions to Medicaid had to do so by spending down assets?  How about looking at the Medicaid financial eligibility rules that allow people with substantial income and assets to qualify?  How about considering the vast literature on Medicaid planning?  Blank out!

Slide #16:  “Policy Implications . . . Few people who transition to Medicaid are likely to be able to afford private LTC insurance without large subsidy”

LTC Comment:  This research proves nothing of the kind.  It excludes “IRAs.”  It does not identify actual spend down.  It completely ignores the myriad ways people can shelter or divest assets.  It does not consider the fact that people could and would buy LTC insurance when they’re younger and it’s less expensive if it were not for the perverse incentive to ignore LTC risk and cost created by easy access to Medicaid LTC after the insurable event occurs.

Unless and until the research community stops obfuscating and misrepresenting the reality of Medicaid LTC eligibility, it’s unlikely the LTC Commission or anyone else will make much progress toward solving the LTC financing problem. 

We know Medicaid LTC eligibility does not require significant asset spend down.  Why pretend that it does?

We know from Brown and Finkelstein that Medicaid crowds out two-thirds to 90% of the potential market for private LTC insurance.  Why pretend it doesn’t?

We know from the Chicago Fed that affluent people gain as many or more benefits from Medicaid LTC as the poor.  Why ignore such facts?

The only explanation I discern is that researchers who hide from the facts are viscerally opposed to private market-based solutions.  They cling to the same government-based interventions that created the problems of poor access, low quality, stingy reimbursement, institutional bias and excessive cost in the first place.  They bend over backwards to force facts into their models instead of building accurate explanations from evidence.

Consequently, they’re exacerbating our long-term care problems, not contributing to their solution.