LTC Bullet:  Center Kicks Off New Year With Major Study

Friday, January 8, 2016


LTC Comment:  Medicaid’s large home equity exemption vastly increases the program’s LTC expenditures, contributes to its growing unfunded liability, and discourages responsible LTC planning.  Details on our new study to address these problems follow the ***news.***

*** MEDICARE has published “2016 costs at a glance” here:   We’ve posted the key numbers in The Zone here.  You’ll also find the comparable deductible and co-insurance numbers, etc. going back to 1993.  If you need your user name and password to access The Zone, or if you want to join the Center and get access to all our members-only resources, please contact Damon at 206-283-7036 or ***

*** AGENT REVIEW LIFTS OFF—We posted the following LTC Clipping to our clippings subscribers yesterday.

1/5/2016, “Agent Review, The ‘Yelp for Insurance,’ Closes Seed Round With Angel Investors to Drive Continued Growth,” Yahoo Finance

Quote:  “Agent Review (, a free online platform to connect consumers with non-biased insurance education and credible agents, today announced it has closed its seed funding round and will begin fundraising for its Series A investment in January 2016. The angel investment was led by insurance leaders Joe Pulitano and Doug May, and by industry investors Towpath and Anabranch. The amount of money raised was not disclosed.” 

LTC Comment: Congratulations to Agent Review and everyone associated with the ground-braking, pro-consumer initiative. ***



LTC Comment:  Until the Deficit Reduction Act of 2005 (DRA ’05), Medicaid allowed applicants and recipients to retain unlimited equity in a home and contiguous property.  DRA ’05 imposed the first-ever home equity limit of $500,000 or $750,000 at state legislatures’ discretion.  This cap has increased with inflation to $552,000 or $828,000 in 2016.  Inasmuch as the average senior’s home equity is only $130,000, Medicaid allows people with more than four to six times that level of wealth to qualify for LTC benefits. 

Theoretically, estate recovery—made mandatory in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93)—should recapture the exempted home equity after the Medicaid recipient and his or her last surviving exempt dependent relative pass away.  But state Medicaid programs have not pursued estate recoveries fully and the federal Medicaid program has not compelled them to do so as OBRA ’93 requires.  Consequently, Medicaid permits people to shelter hundreds of thousands of dollars in exempt home equity against the risk of long-term care expenditures. 

The Center for Long-Term Care Reform’s new study will (1) analyze the impact of Medicaid’s home equity exemption on the program’s LTC expenditures and unfunded liabilities, (2) examine the exemption’s impact on the LTC financing system in general and private financing alternatives in particular, and (3) propose solutions to reduce dependency on Medicaid, encourage responsible long-term care planning, and increase the use of home equity conversion and private LTC insurance to fund long-term care.

Following are excerpts from the formal description of this project, which we are conducting on behalf of the Foundation for Government Accountability.  We’ll report periodically on our progress.  Our final report will be due August 15, 2016.


“Medicaid Long-Term Care:
Ensuring Scarce Resources Reach the Neediest People”


Medicaid has a massive unfunded liability that will cripple taxpayers if no changes to the program are made. The biggest problem is that Medicaid has become inheritance protection insurance for too many middle-class seniors in nursing homes. That is not what it was created for. That reality is robbing Medicaid and taxpayers of scarce resources needed to serve the truly needy. Reforming that part of Medicaid is the first and biggest step toward fixing the entire Medicaid program and its unfunded liability. There are simple solutions, but we need to build the intellectual case for these reforms and market and mainstream them to state and federal policymakers.  . . .

The Problem

Medicaid is a means-tested public assistance program, i.e., welfare. Medicaid is also the principal funding source for long-term care (LTC) throughout the United States, not only for the poor, but for most middle-class Americans as well. Why is that? Because Medicaid’s basic LTC eligibility rules are different than traditional Medicaid, which only targets the poor. In many states, Medicaid’s basic LTC program allows elderly people who medically need nursing-home-level care to have income up to the annual cost of a nursing home—$80,300 per year on average as of 2015—to qualify. In addition to this high income limit, many large assets are exempt, such as equity in a home and contiguous property up to as much as $828,000 and, without a dollar limit, one business (including the capital and cash flow), one automobile, prepaid burial expenses, personal belongings, term life insurance, and IRAs.

Medicaid-compliant annuities and trusts, as well as other legal techniques, are used by prosperous applicants and their lawyers to protect even larger sums from Medicaid’s spend-down rules. Peer-reviewed research shows that easy access to Medicaid’s LTC benefits by people with substantial assets discourages early and responsible LTC planning and crowds out private LTC financing alternatives. Other research by the Federal Reserve Bank of Chicago indicates that affluent people benefit as much or more from Medicaid as the poor.

Taking advantage of Medicaid’s home equity limit is the biggest and easiest way for people with substantial wealth to access the program’s expensive long-term care benefit. In response to a Congressional inquiry on which the Center for Long-Term Care Reform consulted, North Dakota Medicaid reported that a couple with $700,000 in liquid assets qualified for Medicaid LTC by purchasing a more expensive house and car and buying an annuity, all the while receiving $8,000 of income per month from pensions, Social Security, annuity payments and oil lease money.

According to Tennessee Medicaid officials: “Taking substantial home equity and other assets currently exempt under the law into account in determining eligibility for Medicaid reimbursement of LTC would result in fewer people with substantial means qualifying for Medicaid-reimbursed LTC until such time that those assets have been exhausted, and target Medicaid reimbursement to those with the greatest financial need.”

Whether provided in someone’s home, in an assisted living facility, or in a nursing home, long-term care is Medicaid’s most expensive benefit. In 2014, taxpayers spent almost $106 billion on Medicaid-financed nursing home and home care services. Although LTC users are only seven percent of the Medicaid population, they account for more than half of the program's costs nationally. For Medicaid to survive as a last-resort LTC safety net, the program must direct its scarce resources to the neediest people and away from those able to plan wisely to pay for their own long-term care.

Yet there is strong political opposition to eliminating or radically reducing the limits. Why? Because Medicaid’s generous LTC eligibility limits have, in effect, become an inheritance protection program for the adult children of middle class elderly. To make matters worse, some states such as Texas and Florida actually provide special protections from creditors, including Medicaid, for home property.

One of the biggest changes Congress could make to reduce the taxpayer burden and dependency impact of Medicaid’s LTC program would be to narrow the front door and exclude the middle class by changing these generous and elastic financial eligibility rules, especially the home equity exemption. 

Goals and Outcomes

The primary objective of this proposed study is to forge a politically feasible strategy to

(1) put home equity to use paying for long-term care in ways that improve access to and quality of care for everyone,

(2) save taxpayers money while

(3) re-targeting Medicaid LTC benefits to those most in need and

(4) encouraging most Americans to plan privately for long-term care so they do not become dependent on public assistance.


We propose to select two target states . . . where officials have shown concern for federal Medicaid’s excessive financial exemptions and mandatory eligibility loopholes . . .. We will interview key Medicaid officials in those states, develop a methodology to measure the cost of the home equity exemption, propose recommendations, and draft state and federal legislation to correct the problem. We will publish a report on the project, write op-eds for local and national newspapers, and encourage the introduction of legislation at the state and federal level.

Toward those ends, we propose to:

  • Contact numerous officials who are knowledgeable about Medicaid long-term care’s financial eligibility at the state and federal level to identify two highly concerned states willing to work with us on this issue.

  • Apply the Center for Long-Term Care Reform’s “Index of Long-Term Care Vulnerability” to the two states selected as a means to demonstrate and document the magnitude of their potential risk and cost in financing LTC for a burgeoning elderly population.

  • In both states, interview the state Medicaid director, the LTC financial eligibility policy specialist, and LTC eligibility supervisors and workers for the purpose of documenting the incidence and cost of the Medicaid LTC home equity exemption.

  • Interview Medicaid estate recovery officials in both states to get their views on specifically how much home equity is lost to attrition before mandatory estate recovery from the recipients’ estates can be actualized.

  • Seek permission to identify and review a random sample of valid Medicaid long-term care eligibility case records in one state with the goal of estimating the total loss to Medicaid expenditures from the home equity exemption.

  • Review and document historical Congressional action on Medicaid, supporting its proper role as a safety net for people in need rather than the dominant long-term care payer it has become.

  • Work with members of Congress and their staff who have demonstrated concern for this problem and seek their guidance in proposing federal legislation.

  • Interview the principal researchers who have published on related topics and seek their advice and counsel.

  • Compile all findings, write a report, promulgate the report electronically, and draft model state and federal legislation.

This project for the Foundation for Government Accountability will be led by renowned Medicaid long-term care policy expert Stephen Moses.


Deliverables, within six months of the project start date, will include (1) a comprehensive report (approx. 25 pages) that explains the problem of Medicaid LTC financing and recommends modifications to the Medicaid home equity exemption which, if implemented, could achieve substantial savings of Medicaid long-term care expenditures in each state and nationally; (2) draft state and federal legislation to implement the proposed solution; (3) submit several newspaper op-eds, and (4) prepare an article suitable for publication in an appropriate journal.

Stephen Moses will conduct all of the research and interviews for this project. He has conducted many similar studies over the years. Examples of his project reports are at