LTC Bullet: Make Long-Term Care Great Again

Friday, March 3, 2017


LTC Comment: To borrow a phrase, what are the key components we must put in place to “make long-term care great again?” After the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a GA whose proprietary tools help advisors find and educate clients, reducing the “Ping-Pong” in the LTCi sales process. Help clients project their exposure to LTC risk, compare Combo vs. Stand-Alone LTCi easily, and make informed final decisions about buying LTCi in 15-20 minutes!  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. Contact Claude at 800-999-3026, x2241 or to ask questions or get references. ***

*** THE 17TH ILTCI CONFERENCE convenes March 26-29 in Jacksonville, Florida.  Organizers have announced availability of an online version of their mobile app if you want to look at session descriptions and speaker details.  They ask attendees to choose their sessions immediately using a survey link to avoid standing room only crowds. Details here:  Hope to see you there. ***

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3/1/2017, “Insurance Commissioner Announces Court Approval of Liquidation of Penn Treaty and American Network Insurance Companies; Assures Policyholders Claims Will Be Paid by State Guaranty Funds Pursuant to State Law,” Pennsylvania Pressroom

Quote:  “Insurance Commissioner Teresa Miller today announced the Commonwealth Court approval of petitions to liquidate Penn Treaty Network America Insurance Company and American Network Insurance Company, with policyholder claims to be paid through the state guaranty association system, subject to statutory limits and conditions. . . . Commissioner Miller said the two companies have approximately 76,000 policyholders nationwide, with 9,000 residing in Pennsylvania.  More than 98 percent of Penn Treaty and American Network’s policies are long term care insurance. . . . ‘Policyholder claims will continue to be covered by the state guaranty association system pursuant to law, and policy claims will be paid subject to the applicable state guaranty association coverage limit and conditions. Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage,’ Commissioner Miller said.”

LTC Comment: This long, sad saga is finally coming to an end.



The Problem

Providing long-term care for the chronically ill elderly places a huge financial and emotional strain on families. Despite a 70 percent probability of needing long-term care someday, most Americans do not plan for this risk and cost, have not purchased private insurance to allay it, and will most likely end up dependent on public assistance should they ever require expensive, extended care. The cost of formal nursing home or home care provided by Medicare and Medicaid already stresses the U.S. and state governments’ ability to pay. Out of pocket costs for long-term care have plummeted while public costs have skyrocketed over the past five decades.

Medicaid, a means-tested public assistance program, began funding nursing home care in 1966. Although intended as a safety net for the truly needy, Medicaid gradually became the dominant long-term care payer for the middle class and some of the affluent as well as the poor. By making nursing home care virtually free, Medicaid impaired a market for privately financed home care, crowded out the market for private long-term care insurance, and desensitized the public to long-term care risk and cost. Over 50 years later, Medicaid struggles with severe problems of access, quality, reimbursement, discrimination and institutional bias.

Historically, Social Security and Medicare have propped up Medicaid’s ability to fund long-term care. Medicaid recipients must contribute most of their Social Security income to offset Medicaid’s cost for their care. Medicare reimburses nursing homes and home care agencies generously enabling them to survive despite Medicaid reimbursements at less than the cost of the care. But this system is at risk. A perfect storm of demographic and economic conditions threatens to upend the country’s half-century-old long-term care financing system in the 2030s.

Social Security and Medicare both face unfunded liabilities of approximately $32 billion each. Their trust funds contain only IOUs for money the U.S. government has already spent. Both programs have begun drawing down these ledgers at the expense of the federal general funds budget. In the 2030s, both trust funds will be depleted causing each program to reduce benefits or increase taxes. The bigger worry is that precisely at this time, the year 2031, baby boomers begin turning 85, the age at which long-term care needs and costs spike upward. These forces conspire to end Medicaid’s ability to fund long-term care for most Americans.

The Solution

To avoid a catastrophic outcome for long-term care financing in the 2030s, the United States needs to eliminate the perverse public policy incentives that discourage Americans from planning for long-term care risks and costs. Specifically . . .

Congress should end or radically reduce Medicaid’s home equity exemption, which as of 2017 varies by state from $560,000 to $840,000 (only $29,200 in Britain). Reverse mortgages enable people to use their home equity to fund long-term home care privately with no payments required until they sell, die or move out. Making home equity liable for long-term care costs would pump desperately needed private funds into the service delivery system, relieve the strain of Medicaid expenditures on tax payers, and create a much stronger incentive for families to plan early and save, invest or insure for long-term care.

Congress should end egregious Medicaid planning techniques that enable people with substantial wealth to dodge the welfare program’s spend down requirements and qualify immediately for publicly financed care. The worst of these techniques are Medicaid-compliant annuities and spousal refusal which both routinely divert hundreds of thousands of dollars per use from private to public long-term care costs. Likewise, the Centers for Medicare and Medicaid Services (CMS) should enforce the statutory requirement that states recover care costs from the estates of deceased Medicaid recipients by reducing federal financial participation in cases of inadequate compliance.

The Government Accountability Office and/or the Inspector General of the U.S. Department of Health and Human Services should conduct a forensic audit of private long-term care financing potential. That audit should analyze the wealth possessed by a sample of aging Americans at least 20 years before they are likely to need long-term care. It should review real property ownership (County assessors’ office records) and transfers (County recorders’ office records) to determine where the wealth people own goes before they need long-term care. If the audit shows, as it undoubtedly will, that huge amounts of private resources disappear before they can be used to fund long-term care privately, then Congress should extend the transfer of assets look back period for Medicaid long-term care eligibility from the current five years to ten (as in Germany) or 20 years.

In the Center for Long-Term Care Reform’s many state- and federal-level studies and reports available at, the Center for Long-Term Care Reform has analyzed these problems, provided many examples, and explained these recommendations at much greater length.


Taking the necessary measures to correct the country’s long-term care financing problems does not require spending more public funds. Rather, the opposite. Excessive use of public funds to pay for long-term care is what caused these problems. The challenge is instead to target such Medicaid funds as are available to people genuinely in need and to stop spending scarce public welfare resources on people who should, could and would have paid for their own care if it were not for Medicaid’s near monopsony of long-term care financing.

One way to achieve that objective cost-effectively is under consideration in the U.S. Congress today. Replacing Medicaid’s unlimited federal financial participation matching system with capped block grants for each state would cut federal costs substantially. If combined with fewer regulatory strings attached, block grant funds would enable states to experiment with different ways to handle long-term care coverage and eligibility. With 50 states trying creative new approaches to target public financing of long-term care to the most needy, we would learn very quickly what works and what does not without waiting for Congress to agree and pass the kinds of measures recommended above.

Targeting public funds to people in genuine need, as Medicaid was originally intended to do, will save state and federal government funds. But it will also attract much greater private financing into the long-term care service delivery system. If people can no longer protect home equity from long-term care liability by relying on Medicaid after they already need care, that home equity—seniors’ largest asset by far—will boost long-term care access and quality for everyone, rich and poor alike. Once home equity is at risk for long-term care, more people and families will begin to take the risk of long-term care more seriously and earlier while they are still young enough and affluent enough to plan ahead. So private long-term care insurance will become a much more viable and popular product.

What’s New?

I first offered this analysis and made these recommendations in a 1988 report titled “Medicaid Estate Recoveries: National Program Inspection” for the Inspector General of the US Department of Health and Human Services. Most of my recommendations in that report, including longer and stronger transfer of assets restrictions and mandatory estate recovery, became law in the Omnibus Budget Reconciliation Act of 1993.

Likewise, the Center for Long-Term Care Reform’s published reports and extensive educational efforts among long-term care interest groups in the early 2000s, including our co-founder’s becoming Chief Health Counsel to the House Energy and Commerce Committee, led directly to further reforms in the Deficit Reduction Act of 2005 including the first-ever cap on Medicaid’s home equity exemption and the closing of additional eligibility loopholes.

Success is possible. We’ve proven that is true. All that’s needed is to finish the job. The Center for Long-Term Care Reform will continue fighting for federal and state measures that preserve Medicaid as a long-term care safety net for the poor and encourage everyone else to prepare early and adequately so they can pay privately for long-term care should the need ever arise.