LTC Bullet:  How Great is Medicaid’s Unfunded LTC Liability?

Friday, April 24, 2015


LTC Comment:  The Center for LTC Reform and State Budget Solutions have teamed up to ask and answer the critical questions of whether, at what cost, and how Medicaid’s long-term care benefits can survive the age wave.  Details after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find clients and reduce the “Ping-Pong” in the LTCi sales process. Help clients make informed final decisions about buying LTCi in 15-20 minutes!  Gauge a client's true interest in a combo product immediately!  Change work-site LTCi sales from a series of proposal deliveries to a single interactive consultation!  Claude is the lead author of the Milliman Broker World LTCi Survey, one of Senior Market Advisor's 10 "Power People" in LTCi in 2007, a past Chair of the Center for Long-Term Care Financing. Test Claude by calling 800-999-3026, x2241 or email him at to ask questions or get references. ***

*** J. SCOTT MOODY is Chief Executive Officer and Chief Economist of State Budget Solutions, the think tank with which we’ve partnered to conduct the study described in today’s LTC Bullet.  Scott described the “Demographic Winter” facing the USA and the world in an interview recently.  We think you’ll find his economic analysis, including the potential impact of the “birth dearth,” very interesting.  The interview begins 2 minutes and 50 seconds into ***

*** ROSS SCHRIFTMAN is an LTCI producer, a long-term caregiver, an LTC policy activist, a frequent commentator, and a long-time Center for LTC Reform member and friend.  We’ve pointed you to his book “My Million Dollar Mom” in several earlier LTC Bullets and LTC E-Alerts.  Ross is now producing a film by the same name.  Learn more, watch a video about the project and consider contributing to his “crowd funding” effort here. ***

*** MEDICAID AND MEDICARE TURNING 50:  Our LTC Clippings subscribers received the following notice the day it was released.  If you’d like to get the most important articles, data, and analysis (3 per day on average) as soon as they go public, contact Damon at 206-283-7036 or to subscribe to LTC Clippings.

4/22/2015, “Medicare & Medicaid at 50 Video and Interactive Timelines Now Available,” Kaiser Family Foundation

Quote:  “With Medicare and Medicaid turning 50 in July, the Kaiser Family Foundation has produced an updated video that provides a brief history of both programs, including an examination of the health care, social and political landscapes that gave rise to them, the significant ways each program has evolved over five decades and the important roles they play in the U.S. health care system today. The video includes archival footage as well as commentary and perspective from policy makers, government officials and experts.  Also available are related interactive timelines that chart key milestones in Medicare and Medicaid over the years, and a short animated video, The Story of Medicare: A Timeline. 

LTC Comment:  This 16-minute video history of Medicare and Medicaid is well worth watching, but keep in mind both the known and the unknown.  We know what happened with these two giant and growing programs.  We’ll never know whether free market solutions as good or better would have evolved without them.  We know that Medicare has a $43 trillion unfunded liability, that Medicaid is hopelessly unprepared to deal with the Age Wave, and that both programs have crowded out private sector solutions, such as LTCI and home equity conversion, which could help enormously.  We do not know, but we will find out over the next three decades, what the cost and consequences of Medicare and Medicaid will be in the long term.



LTC Comment:  The Center for Long-Term Care Reform’s “Index of Long-Term Care Vulnerability” applies key metrics to measure the sustainability of America’s LTC financing system.  Recently, we applied the Index to three states: 

Our Index draws on available data sources, but it lacks one key element that no one has yet computed or published.  Specifically, what is Medicaid’s unfunded liability for future long-term care?  We know the answer to that question for Social Security ($25 trillion) and Medicare ($43 trillion), but Medicaid has no “trust fund” against which to measure its adequacy or inadequacy to meet future LTC benefit commitments.  How should we define, measure and evaluate Medicaid’s unfunded LTC liability?

Following are excerpts from an approved grant proposal for a study that is getting underway to estimate Medicaid’s 30-year LTC liability in a single state.  We anticipate that answering this question in one state will lead to similar studies in more states and a national Medicaid LTC liability review as well.  By selecting a key presidential primary state [to be announced (TBA)] for this study, we hope to draw media attention to the issue of long-term care financing policy.  The State Budget Solutions think tank proposed this study and contracted with the Center for Long-Term Care Reform to conduct the data collection phase and to consult on all aspects of the project.


“Soften the Boom:  Preparing Medicaid for Aging Americans’ Long Term Care Needs”

Executive Summary

Currently, Obamacare is dominating the Medicaid discussion at the state level, and, unfortunately, many states have already fallen for the siren call of Medicaid expansion. Lost in the debate, however, is the demographically driven crisis that Medicaid will face over the next several decades. In particular, long-term care for the aging will send Medicaid spending into the stratosphere. Yet, no one state is even estimating these future costs let alone preparing for them. This project will perform a 30-year Medicaid cost projection in a pilot state, [TBA], run an educational campaign targeted at the media and state legislators, and draft model legislation that would direct the state to perform such analysis on an annual basis.

Project Outline

While common perceptions are that America’s aging population will strain Medicare resources, it will also adversely impact Medicaid and its long-term care (LTC) coverage. This is already a problem. Three-fourths of Medicaid recipients are impoverished adults or children, but they account for only one-third of the program’s expenditures, whereas only one-fourth of Medicaid recipients are aged or disabled, but they consume two-thirds of the program’s costs. As alarming is that Medicaid’s most expensive “dual eligible” recipients—those also receiving Medicare—comprise only 15% of total recipients but account for 39% of Medicaid spending, of which 70% is for their long-term care. 

Unfortunately, policymakers lack the necessary tools to discern future costs of LTC in their states. Yet, this type of analysis is feasible; Social Security already makes such projections at the federal level, and pension systems do so at the state and local levels. A similar analysis for Medicaid, particularly future costs of LTC, would fill this informational void.

State Budget Solutions proposes to partner with the Center for Long Term Care Reform to conduct a two-part pilot program in one target state, [TBA], where LTC is already a critical problem. [The study state and its region] in general, will be the first place where the fiscal pressure of the retirement of the baby-boomer generation will be felt. At the same time, [state TBA] has a relatively friendly media and legislative atmosphere where a genuine discussion on Medicaid reform can occur.

First, the Center for Long-Term Care Reform, utilizing its “Index of Long-Term Care Vulnerability” and a wide range of peer-reviewed research sources, will analyze ways to best quantify the long-term costs of [state TBA]’s Medicaid system over a 30-year period. The Center will apply its expertise in examining state Medicaid systems by conducting extensive demographic and budget data analysis, interviews with key state Medicaid personnel, and requests under [state TBA]’s Right to Know Law.

Second, State Budget Solutions will draft model legislation with the goal of having the state’s Department of Health and Human Services perform this cost calculation on an annual basis. This model legislation is critical if this analysis will help reshape the Medicaid debate away from expansion toward one of reform and sustainability.

Given the magnitude of this issue, it should be a public policy priority for policymakers and citizens to be aware of our work. Ensuring that this information reaches a broad audience is vital to the process of enacting positive LTC reforms.  SBS will undertake a multifaceted media relations and publicity campaign to raise awareness. SBS will host a major event launching the analysis, including national and state partners including the Mercatus Center, the Manhattan Institute, and the Foundation for Government Accountability, in [state TBA’s capital]. We will also work to educate activists, the media, and legislators throughout [state TBA].

The ultimate goal of this project is to develop, test and implement a successful strategy, transferable to other states, to minimize state and federal Medicaid financial risk.


Two federal programs—Social Security and Medicare—are notorious for their unfunded liabilities: $25 trillion and $43 trillion, respectively. Yet, another federal program—Medicaid—consumes a growing proportion of state and federal budgets but attracts less scrutiny of its long-term fiscal viability. The future viability of Medicaid as a health and long-term care safety net for the poor depends critically on predictable growth in the aging population and on the elderly’s likely need for acute and LTC services. 

Future debates around Medicaid will continue to focus on expansion until policymakers begin to recognize the immense liability of long-term care. This pilot study will help to change the terms of the debate and pave a clear path towards true reform. In fact, the ground-breaking efforts and materials, such as the analysis, study, and model legislation, stemming from this project can then be easily duplicated in other states.

With the financial support of _______, State Budget Solutions and The Center for Long-Term Care Reform will uniquely stand within the nexus of policy makers, journalists, and activists, and focusing all of its energy and resources to collaboratively and fundamentally change how state and municipal governments do business.

J. Scott Moody
Chief Executive Officer
State Budget Solutions

Stephen A. Moses
The Center for Long-Term Care Reform