LTC Bullet:  The Senior Financial Security Program, Again

Friday, July 22, 2016


LTC Comment:  Fundamental things apply as time goes by, even in long-term care policy, after the ***news.***

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In the spring of 1992, I sat before Wisconsin Governor Tommy Thompson.  He was famous already for pioneering welfare reform and later to become Secretary of Health and Human Services.  Governor Thompson wanted to do for Medicaid long-term care what he’d done already for welfare:  eliminate the program’s counterproductive incentives and incentivize positive solutions.  He asked me to study his state’s Medicaid long-term care program and propose changes to improve it.

On June 26, 1992, I presented this report to Governor Thompson:  “The Senior Financial Security Program:  A Plan for Long-Term Care Reform in Wisconsin.”  Read the full report here.  Its crux follows, but stay tuned for the rest of the story after this excerpt.


Excerpt from “The Senior Financial Security Program:  A Plan for Long-Term Care Reform in Wisconsin,” by Stephen A. Moses, LTC, Incorporated, June 26, 1992, Kirkland, Washington, pps. 30-31. 

Who are the main parties to the long-term care financing debate and what do they want?

Seniors want access and quality in home or institutional care without impoverishment or welfare.  

Taxpayers, and their stewards in government, want limits on Medicaid's explosive growth.

Nursing homes and home care providers want more private patients at full-pay, non-Medicaid rates.

Long-term care insurers want a level playing field without the competition of free public benefits for the upper middle class.

Younger and future generations want to inherit more than a huge public debt.

Today, these constituencies are pulling in opposite directions, drawing and quartering the broader public interest. What could harness their energies in a common purpose?

First, we must establish in principle a moral high ground on which everyone can stand with pride and agreement. This is the common philosophy that I found in Wisconsin:

We have very limited dollars available for public assistance; we must take care of the truly poor and disadvantaged first; the middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation; prosperous people who rely on Medicaid for long-term care should reimburse the taxpayers before giving away their wealth to heirs; seniors and their heirs who wish to avoid such recovery from the estate should plan ahead and purchase private long-term care insurance.

Next, we must imagine a program structure that achieves everyone's goals without violating these principles. Such a program would have to do six things:

(1) Maximize income and asset protections for single and married seniors who need long-term care.

(2) Eliminate divestiture and estate recovery avoidance.

(3) Secure property in a beneficiary's possession as a condition of eligibility for publicly financed care. 

(4) Recover publicly financed benefits from estates when dependents no longer need the assets.

(5) Encourage the sale of long-term care insurance as an alternative to public benefits and estate recovery.

(6) Educate the public on the advantages of avoiding Medicaid dependency and paying privately for care.

Finally, we must show how this program delivers the key values that each constituency wants to achieve.

By maximizing income and asset protections, the program eliminates catastrophic spend-down for seniors. By requiring a pay-back from estates, it removes the stigma of welfare.

By making people pay their own way (pay me now or pay me later), the program creates an incentive (now nonexistent) for people to purchase private insurance.

By empowering people to pay privately for care with insurance, it diverts families from dependency on Medicaid.

By sending the home care and nursing facilities more full-pay private patients, the program enhances the providers' commercial viability and reduces their reliance on public financing. By infusing new money into long-term care, it enhances the industry's ability to provide good access to quality care for all patients, private-pay and Medicaid alike.

By making people spend their own money, i.e. their insurance benefits, on care, the program encourages a wide continuum of cost-effective home, community-based, and institutional options.

By stimulating heirs to plan ahead for their own long-term care needs and to protect their parent's estates (i.e. their own inheritances), the program ameliorates the biggest danger we face as a nation from the aging of the baby boom generation.

LTC Comment:  Here’s the rest of the story.  On August 10, 1993, President Clinton signed the Omnibus Budget Reconciliation Act into law.  OBRA ’93 incorporated all of the key principles and policies recommended in the Senior Financial Security Program.  It preserved Medicaid’s generous income and asset protections, but tightened controls on Medicaid planning (artificial self-impoverishment) and encouraged responsible LTC planning by making estate recovery mandatory.  OBRA ‘93’s goal was to save Medicaid as a long-term care safety net for the poor by creating stronger incentives for the middle class and affluent to plan early, save invest or insure for LTC, and avoid dependency on public assistance.

Wait, you say, it didn’t turn out that way.  True.  States did not enforce the new rules aggressively.  The federal government did not require their compliance.  The media didn’t publicize the new program.  And the public, unaware that Medicaid payments on their behalf were supposed to be deducted from their estates, did not respond by planning more responsibly for LTC.

So here we are, 24 years later, after dozens of studies, commissions and failed proposals, in the same fix we were in a quarter century ago.  The difference is that we are that much closer to the demographic nightmare we’ve known all along was coming.  Worse, we seem to be on the verge of doubling down on past mistakes by leaning toward a new payroll-financed government program to fund LTC’s catastrophic back-end risk.

At the Center for LTC Reform, we’re working on a new report, due out this fall, aimed at pointing out the error of pursuing such a new public LTC financing program and explaining, again, why pursuing policy based on enhancing the same principles and proposals in the Senior Financial Security Program is a much wiser and promising approach.  Stay tuned.