LTC Bullet: Medicaid Planning Hits a New Low

Friday, March 17, 2017


LTC Comment: You may wonder why the public remains in denial about LTC when the risks and costs are so great. Maybe this will answer that conundrum, after the ***news.***

*** NO LTC BULLET NEXT WEEK. Damon and I depart for the 17th Annual Intercompany Long-Term Care Insurance conference in Jacksonville, Florida. We’ll provide our usual “LTC Embed Report from the LTC Policy Front” after the conference concludes on March 29. We hope to see you there. ***



Thanks to long-time Center member and friend Tom Hebrank of Advanced Planning Solutions for bringing this matter to our attention.

What follows is another shenanigan by Medicaid planner Roccy DeFrancesco. Recognize the name and the MO? We covered him and his tawdry methods in LTC Bullet: Freddy Krueger and Medicaid Planning, Wednesday, October 28, 2009.

He’s at it again. This time his goal is to derail U.S. House Bill 181. What is that bill’s purpose? It would prevent wealthy couples, like the Medicaid planners’ clients, from hiding unlimited assets in Medicaid-friendly annuities while qualifying immediately for the welfare program’s long-term care benefits. But H.R. 181 only goes half way. It still allows such couples to shelter 50% of the income from these annuities whose purpose is to disappear large assets. Nevertheless, it is a step in the right direction.

For background, have a look at our earlier coverage of the Medicaid-friendly annuity loophole: LTC Bullet: Annuity Blues, November 13, 2013; LTC Bullet: Medicaid Planning—The Rest of the Story, Friday, February 7, 2014; LTC Bullet: How to End Medicaid Annuity Abuse, Friday, February 28, 2014; LTC Bullet: Medically Underwritten Annuities for LTC, Friday, May 15, 2015; LTC Bullet: Medicaid Annuity Abuse: A Case Study, Friday, June 5, 2015; LTC Bullet: LTC Annuities: To Get or Avoid Medicaid?, Friday, June 19, 2015.

Now, what does Roccy DeFrancesco have to say about protecting these abusive annuities. The following quotes are drawn from an email he sent to his Medicaid-planner subscriber base on March 9, 2017. Our comments follow each quote.

Roccy: “The Certified Medicaid Planner governing board has launched a ‘Stop H.R. 181: Protect Community Spouse’ advocacy effort.”

LTC Comment: Anyone who cares about Medicaid’s ability to protect the poor, and certainly anyone in favor of early and responsible long-term care planning, should support H.R. 181 even more aggressively than the Medicaid planners oppose it.

Roccy: “Medicaid laws are implemented prospectively. This law will likely affect only those annuities purchased after the effective date of the law if it is ever passed. If your clients are a good candidate for a Medicaid annuity, now would be the good time to consider the purchase. Our Medicaid planning team can help you with this.”

LTC Comment: So this appeal is really just advertising for his services. Medicaid laws are not always implemented prospectively. When Congress clamped down on “Medicaid qualifying trusts” in the Omnibus Budget Reconciliation Act of 1985, it did so retroactively. Many Medicaid planners and their clients got caught with big trust assets that no longer qualified as exempt resources. The same thing could—and should—happen with Medicaid-qualifying annuities. The last thing aging Americans should do is to heed this advisor’s urging to stand in front of the oncoming legislative train.

Roccy: “A recent bill proposed by Oklahoma Representative Mark Mullin seeks to put some limits on the over-use of annuities in Medicaid planning. Ever since the passage of OBRA '93 and the resulting HCFA Transmittal 64, excess resources have been allowed to be converted into a narrowly prescribed single premium immediate annuity (SPIA).”

LTC Comment: What he doesn’t tell you is that Congress tried to end the abuse of such annuities in the Deficit Reduction Act of 2005, but failed, accidentally opening the way for abuse of the newly conceived Medicaid-friendly annuities that H.R. 181 is intended to curtail.

Roccy: “The bill's primary purpose is to close the so-called annuity loophole which allows for annuitization by the community spouse of unlimited excess resources in order to qualify the intuitional [sic, should be “institutional”] spouse for nursing homes. In 48 states, the community spouse can have an unlimited income and does not need to support the intuitional [sic] spouse's monthly care costs once the couple has spent down assets below the community spouse resource allowance.”

LTC Comment: Well, that’s a pretty clear confession that the real goal here is to shift Medicaid resources from their intended recipients—the needy—to the Medicaid planners’ wealthy clients. Ya think this might have a dampening effect on demand for long-term care insurance? Let’s see.  Pay LTCI premiums for decades and maybe never need long-term care vs. preserve your wealth and get LTC for free if you ever need it. That’s a tough one all right.

Roccy: “Because the purchase of the annuity is part of the federal safe harbor rules that exempt the purchase from transfer penalties, the purchase of large annuities with short durations has caught the attention of members of Congress who seek to impose some limits. The bill would treat one-half of the annuity income received by the community spouse's annuity as available to contribute towards the cost of care of the institutional spouse.”

LTC Comment: Safe harbor? What nonsense. Medicaid is a means-tested public assistance program. Many Congresses and Presidents have tried for decades to protect it from Medicaid-planning abuses and abusers. Medicaid has certain asset exemptions and spousal impoverishment protections to ensure no one in real need is ever excluded. The program was never intended to protect unlimited income and assets.

Roccy: “While this would not be the end of using immediate annuities to assist with Medicaid planning, it would curtail those with high net worth from using annuities altogether or from using annuities with a short duration.”

LTC Comment: Gee, we sure wouldn’t want to discourage his high-net-worth clients from getting Medicaid to pay for their long-term care, right? One of the reasons the Center for Long-Term Care Reform has had considerable success combatting Medicaid planners over the years is that they have often been careless about disclosing their true intent. This is a prime example.

And that should be enough to give you the sense of what this man and his ilk are all about.