LTC Bullet: Why Couples Worry So Little about Long-Term Care

Friday, December 15, 2017


LTC Comment: If long-term care is such a huge risk and cost, devastating families’ life’s savings across America, how come so few people, even otherwise financially responsible couples, plan, save, invest or insure for LTC? Answers after the ***news.***

*** 2018 ILTCI CONFERENCE REGISTRATION IS OPEN: The Intercompany Long-Term Care Insurance Conference will convene at the Paris Hotel & Casino in Las Vegas, March 18-21, 2018. Register here: Through January 11, take advantage of the individual Early Bird registration rate of $895. If you are attending for the first time, you can qualify for special Early Bird pricing of just $395! This is the premier industry event of the year with outstanding educational and networking opportunities. For more details and to register, visit ***

*** NOMINATIONS ARE OPEN: Something new this year. ILTCI Conference organizers are asking “Who are the stars in the long term care industry that are demonstrating out-of-the-box thinking? Who are the best and brightest? Who demonstrates passion for our industry each day? Who is embracing innovation to pursue new business strategies to advance the industry and the vision of the ILTCI?” Do you know someone who should be recognized and acknowledged at the 18th Annual Intercompany Long Term Care Insurance Conference? If so, please fill out a nomination! Here’s the form. ***

*** WHAT HAVE YOU DONE FOR ME LATELY? 2017 was a prolific year for your Center for Long-Term Care Reform. In July we co-published with the Foundation for Government Accountability a major study by Stephen Moses titled How to Fix Long-Term Care Financing. We published 43 LTC Bullets (check them out here), 43 LTC E-Alerts (check them out in The Zone here), and 552 LTC Clippings. We’ve tried hard to keep members abreast of everything that happened in the current year affecting long-term care services and financing. We’ll do the same for members in the coming year. So if you’re not a Center member yet, consider the following benefits of membership and join. ***

*** MEMBERSHIP BENEFITS. Let’s take a moment to review the benefits of individual and corporate membership in the Center. For more details, see our “Membership Levels and Benefits Schedule.”

In a nutshell, as a regular member of the Center ($150 per year or $12.50 per month), you’ll get our weekly LTC Bullets and LTC E-Alerts and a user name and password for access to our “Members-Only Zone.”

In “The Zone,” you’ll find the “Almanac of Long-Term Care,” our compendium of LTC news, reports and statistics stretching back more than a decade with links to critical research materials covering eleven topics from “Aging Demographics” to “Unfunded Liabilities.”

Other features in The Zone include key Medicaid and Medicare numbers updated yearly and archived, a transcription of our highly regarded “Long-Term Care Graduate Seminar,” links to the major current and past “Long-Term Care Cost Surveys,” a couple dozen reasons why veterans should not rely on VA benefits for long-term care and much more.

If you’re really serious about a career in long-term care financing, then join the Center as a “Premium Member” ($250 per year). At that level, you’ll have all the benefits of regular membership plus email and phone access to Steve Moses with a 24-hour turnaround and a subscription to our “Clipping Service,” placing you on the pioneering forefront of up-to-the moment news, data and analysis in your field.

Premium Elite members ($500 per year) get all of the above plus a complimentary LTC Bullet or LTC E-Alert sponsorship with a banner ad, complimentary Center membership for one assistant, and quickest-turnaround email and phone access to Steve Moses.

Regional Representative members ($500 per year) get all of the above and, after they meet all the qualifications—including five years qualified experience and completion of our LTC Graduate Seminar—the status of Regional Representative of the Center for Long-Term Care Reform.

Every member of the Center gets the “Big Benefit”: the knowledge and personal satisfaction that you're supporting the indefatigable research and public policy advocacy of the Center for Long-Term Care Reform.

Corporate membership at the Bronze, Silver, Gold and higher levels is also available. Each level includes the same benefits individual members receive for increasing numbers of employees or producers plus additional benefits exclusively for corporate members. ***



LTC Comment: Conventional wisdom warns long-term care risk and costs are huge. People all across the country are supposedly spending down their life’s savings paying for caregivers, assisted living, and nursing homes. Yet most folks don’t worry enough about that ostensibly highly likely outcome to prepare in advance. Policy wonks, academics and public officials scratch their heads in wonderment at this seeming illogic, but we know what’s going on, don’t we?

Medicaid pays for most expensive long-term care. Despite the common belief that Medicaid long-term care eligibility rules require financial devastation, the truth is that income rarely stands in the way as long as it’s less than the monthly cost of a nursing home. Excluded assets, including home equity, exempt as of 1/1/18 up to $858,000 in some states and no less than $572,000 everywhere else, plus, in unlimited amounts, one car, business, IRAs, prepaid burial expenses, term life insurance, home furnishings and other personal belongings, enable affluent people to qualify easily. Anyone who still owns too much can hire a Medicaid planning attorney to slip in under the income and asset eligibility screen. Given these facts, no one should wonder why (1) the public is asleep about long-term care, (2) home equity rarely pays for LTC, and (3) too few consumers buy private insurance for this risk.

But what about the special case of couples? Medicaid planners often defend the practice of artificially impoverishing an ill spouse for the purpose of Medicaid qualification by pointing to the healthy spouse’s future financial well-being. Until the Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) was passed, that was a serious problem. Nearly all of an ill spouse’s income had to go to offset Medicaid’s cost for his care. In that generation, it was nearly always the husband who had most of the income and needed care first. The healthy wife was left in the community, often in a home owned free and clear, but with little or no income. Some survived on cat food according to media reports at the time.

All that ended with passage of MCCA ’88. Although that law was mostly about Medicare, it included some very important measures bearing on Medicaid LTC eligibility. For example, MCCA ’88 required state Medicaid programs for the first time to penalize asset transfers for less than fair market value done for the purpose of qualifying for Medicaid long-term care benefits. Previously asset transfer penalties were voluntary. But in the same legislation, Congress and President Reagan balanced that more restrictive measure with a generous provision ending spousal impoverishment. Instead of devastating healthy wives remaining in the community when their husbands entered nursing homes on Medicaid, MCCA ’88 allowed them to keep up to $1,500 per month of the institutionalized husband’s income (which would before have gone to offset Medicaid’s cost for his care) plus up to half the couple’s joint assets not to exceed $60,000. These "spousal impoverishment" protections were set to increase with inflation each year.

On January 1, 2018, the comparable figures, updated for inflation, rise to a Maximum Monthly Maintenance Needs Allowance of $3,090 per month for income and a Community Spouse Resource Allowance of up to $123,600 for assets, more than double their original levels. Medicaid's spousal impoverishment protections may be below today's middle class income and asset standards, but that's why they're called "spousal impoverishment" protections. The purpose of Medicaid was never to replace personal savings, investments or insurance for long-term care, nor has it been to protect middle-class inheritances from the risk of parents' needing long-term care. The goal of these protections was to prevent community spouses from financial devastation without featherbedding their failure to prepare for long-term care costs. Premium members of the Center for Long-Term Care Reform with access to “The Zone,” our members-only website, can review increases in the spousal impoverishment numbers for every year since 1991 here:

Here’s another major benefit married couples enjoy when they rely on Medicaid for their long-term care. Prior to the Deficit Reduction Act of 2005 (DRA’05), Medicaid imposed no limit on home equity. A Medicaid recipient could own one home and all contiguous property of any value without its affecting his or her eligibility for long-term care benefits. The DRA ’05 capped the home equity exemption at between $500,000 and $750,000 with the limit set by state legislatures. Those limits were also pegged to inflation. In 2018, they’ll increase to $572,000 and $858,000, respectively. But, not to worry. “There are some exceptions to this rule. If your spouse or your child who is under 21 or blind or lives in the home, this rule does not apply. Also, the state can choose not to apply this rule if it determines that applying the rule would be an undue hardship.” In other words, there are still no dollar limits on the home equity exemption for married couples. 

Finally, married couples enjoy other special “loopholes.” Medicaid-compliant spousal annuities enable couples to shelter hundreds of thousands of dollars from Medicaid eligibility limits immediately before an ill spouse becomes eligible for care. In some states, notably New York and Florida, healthy spouses routinely refuse to share in the ill spouse’s cost of care, defying federal and state requirements, but dodging litigation because state Medicaid programs usually refuse to prosecute.

Get the picture? It’s no mystery why so many consumers fail to plan for long-term care. In most cases, most of the time, if they’re stricken by high and extended long-term care expenditures, the worst of the financial liability is picked up by tax payers. People don’t know ahead of time that they’re not at risk; they just don’t take warnings about losing their life’s savings seriously. Their denial has been enabled for 52 years by easy access to Medicaid after the insurable event occurs. There is nothing peculiar about consumers,’ especially couples’, seeming obliviousness about long-term care. They respond predictably to the perverse incentives created by government policy. We all pay the price for this poor public policy, both in taxes, and in a system that traps so many unnecessarily in welfare-under-financed long-term care.

SEASON’S GREETINGS. We wish all our friends in every aspect of the long-term care business unbounded happiness in this joyous time of year. Except for keeping up with our daily LTC Clippings, we’ll be offline now until the start of 2018. See you then!