LTC Bullet:  LTC Action Plan

Friday, July 1, 2016

Seattle—

LTC Comment:  The best way to confront and change the growing LTC reform consensus into something better, after the ***news.***

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LTC BULLET:  LTC ACTION PLAN

LTC Comment:  Center members and LTC Bullets readers know we’re working on a six-month study of Medicaid and long-term care financing whose goal is “Ensuring Scarce Resources Reach the Neediest People.”  We explained in “LTC Bullet:  Losing Principles” how and why this study took a change in direction.  We expanded in “LTC Bullet:  Long-Term Care at a Crossroads” on why that change was necessary.  We describe today how we plan to proceed.

What follows is a rough, initial outline of the report we will complete in draft by August 15, 2016.  Many blanks remain to be filled in and much work remains to be done, but this first cut helps us organize our thoughts.  We welcome any feedback and suggestions readers may like to offer.

Draft Report Outline:

A policy consensus is forming based on reports from Leading Age, the Bipartisan Policy Center and the LTC Collaborative that America needs a compulsory back-end government long-term care financing program.

This consensus is based on the presumption that Medicaid requires impoverishment and that the welfare program’s LTC financing approach has failed.  Neither of these suppositions is correct.

The truth is that Medicaid does not require impoverishment and the Medicaid LTC financing program presumed to have failed has in fact never been tried.  This report will address each of those points.

I.  Does Medicaid require impoverishment?

The belief that qualification for Medicaid LTC benefits requires impoverishment is based on (1) a superficial reading of seemingly draconian income and resource eligibility rules, (2) evasion of evidence from key sources, and (3) research by economists and health policy experts grounded in HRS/AHEAD data.

The first two points are easy to substantiate.  Relatively high income and resources do not preclude Medicaid LTC eligibility as we’ve explained in detail often and will again in this report, with references to statutory and regulatory sources.

Advocates for an expanded government LTC financing program have ignored a vast, long-standing and current legal literature on Medicaid planning, i.e. artificial self-impoverishment to qualify for Medicaid, which we will cite and summarize.

Also ignored since the late 1980s and early 1990s are the opinions of Medicaid officials including eligibility workers, elder law attorneys, and the public regarding the ease with which people of substantial means qualify for LTC benefits. 

Less easy to rebut are the findings from more than two decades of longitudinal survey research based on the Health and Retirement Study (HRS) & Asset and Health Dynamics among the Oldest Old (AHEAD).  Journal articles citing these “big data” sources  downplay the use of “asset transfers” to qualify for Medicaid, show that most survey respondents decumulate wealth very quickly before they become eligible for Medicaid, and document how poor most Medicaid LTC recipients actually are.

We will analyze the most influential of these articles and refute their conclusions when mistaken.  For example:  their focus on asset transfers ignores the larger problem of easy and elastic eligibility rules and disregards other methods of Medicaid planning that do not involve divestiture.  They focus on survey respondents at the median of wealth, whereas we’ll show how people from the median to 95th percentile of wealth qualify easily for benefits.  We will explain why evidence of widespread, catastrophic asset spend-down for private long-term care is lacking.  Finally, we will point out deficiencies in the survey data itself based on non-reporting, mis-reporting, and misinterpretation. 

II.  Medicaid, as described by advocates of a big, mandatory public LTC financing program, has never been tried.

From its inception in 1965 until 1980, Title XIX of the Social Security Act (Medicaid) expressly permitted all people over age 65 with a need for long-term care to give away everything they owned in order to qualify for LTC benefits.  From 1980 on, through a long series of federal statutes—including ORA ’80, TEFRA ’82, COBRA ’85, MCCA ’88, OBRA ’93, HIPPA ’96, BBA ’97, and DRA ’05—18 Congresses and five presidents struggled to prevent, or at least discourage, access to Medicaid by the middle class and affluent.  Yet this problem still exists and it is getting worse as the stigma of accepting welfare recedes and the fiscal and monetary restraint of government declines.

Our report will trace these historical developments, describe the status quo, and explain the past consequences and future peril of relying excessively on public financing of long-term care.

Conclusion

Bottom line, the severely restrictive Medicaid LTC financing program, which allegedly forces millions of Americans into impoverishment due to catastrophic long-term care expenditures, does not now and never has existed. 

Historically and today, Medicaid crowds out much more than private LTC insurance.  It diminishes awareness of LTC risk and cost; it degrades personal responsibility; and it discourages early LTC planning and preparation resulting in excessive and ultimately insupportable dependency on the overburdened public welfare program.

A mandatory government program as proposed in the three early-2016 papers referenced above would exacerbate, not relieve, all these problems making the moral hazard of government interference even worse.

Far better to restore the original intent of the Medicaid LTC program, which was to provide long-term care for aged individuals “whose income and resources are insufficient to meet the costs of necessary medical services.”  The report will propose modifications to Medicaid LTC eligibility rules that would achieve that objective.