LTC Bullet: The Post-Medicaid History of Long-Term Care

Friday, August 9, 2019


LTC Comment: We published the pre-Medicaid history of long-term care on March 1. The fascinating saga continues post-Medicaid today.

*** TODAY'S LTC BULLET is sponsored by Claude Thau, whose revolutionary “Range of Exposure” tool projects clients’ likelihood (joint for a couple) of spending $100,000; $250K; $500K or over $1,000,000 on LTC, based on their personal characteristics, and estimates how much of their cost in each range would be covered by various traditional or linked insurance designs. He also offers other ways to educate and help clients make informed final decisions in 15-20 minutes! Change work-site LTCi from a series of proposal deliveries to an interactive consultation! Claude is the lead author of Milliman’s annual Broker World LTCi Survey & a past Chair of the Center for Long-Term Care Financing. You can reach him at 913-403-5824 or ***


LTC Comment: In “LTC Bullet: The Pre-Medicaid History of Long-Term Care,” we identified several developments that paved the way for Medicaid’s peculiar approach to long-term care financing. In summary, and …

Setting the Stage for Medicaid

In the late 18th century, “outdoor relief,” cash payments to paupers, gave way to “indoor relief,” or poor houses for the indigent elderly. The 19th century saw basic principles evolve away from the notion grounded in British “poor laws” that help for the needy should be disagreeable in order to discourage indolence. Gradually, public attitudes distinguished between the “deserving poor,” needy through no fault of their own, and the undeserving poor, alcoholics or the shiftless. Throughout the 20th century, starting with the Progressive Era, the mostly voluntary, non-profit, non-governmental approach to old age support and care gave way to heavy federal and state government involvement. The Great Depression expanded and consolidated that change. In 1935, Old Age Assistance (OAA) and Social Security put money in the hands of elderly people which they often spent on non-profit or for-profit residential care facilities. Poor houses disappeared and nursing homes thrived.

By 1960, with passage of the Medical Assistance for the Aged (MAA) program, the basic structures were in place that Medicaid institutionalized in 1965: (1) virtually unlimited financing for nursing home care shared by the state and federal governments and (2) nursing home eligibility for people who “were not sufficiently needy to qualify for cash assistance to cover their ordinary expenses, but who were unable to pay their medical expenses.”[1] Those two characteristics guaranteed that the new Medicaid program would rapidly increase in cost, favor nursing homes over less expensive home care, and incentivize states to expand Medicaid services and reimbursement levels at drastically reduced cost by taking advantage of federal matching funds. One cost-controlling feature of earlier programs--strict eligibility criteria, transfer of assets restrictions, and mandatory liens--disappeared with the start of Medicaid.

What happened in 1965?

In 1965, America was just starting to have a serious problem with long-term care. People were living longer, but dying slower often with chronic illnesses that caused frailty and cognitive impairment. Older Americans needed more and more long-term care at the very time when women, the traditional caregivers, were entering the formal workforce in much greater numbers. This was a time when a prosperous private market for low-cost home- and community-based services, geriatric care management, and long-term care insurance might have developed in the United States. It did not.

Instead, the new federal Medicaid program offered publicly-financed long-term nursing-home care. This benefit--initially unencumbered by transfer of assets, liens or estate recovery requirements--confronted families with a difficult choice. They could pay out-of-pocket for the home care and community-based services seniors prefer or they could accept nursing-home care paid for by the government. Most people chose the safety and financial benefits of the government's Medicaid option. Therefore, Medicaid-financed nursing-home care flourished, the market for home care withered, and private long-term care insurance failed to develop. Here’s how that process unfolded.

Key Themes

Several key themes characterize the post-Medicaid history of long-term care. We list these themes here; emphasize them in the narrative; and revisit them when we sum up.

Theme #1: Government involvement in the long-term care services and financing markets is pervasive. The market for long-term care services was never allowed to function freely, based on consumers’ preferences and providers’ ability to satisfy them.

Theme #2: Government involvement in long-term care services and financing invariably addressed symptoms, never the causes of problems. Legislation, regulations and policies tackled explosive costs, poor quality, continuum-of-care imbalances, etc., but not the common cause or source of those problems, government funding itself.

Theme #3: Government involvement in long-term care services and financing was always crisis-driven, responding to budget shortfalls resulting from national economic recessions. Cost controls followed recessions, but heavy spending returned with recovery. That trend changed after the Great Recession of December 2007 – June 2009, presaging potentially catastrophic consequences as baby boomers age into senescence.

Let us see how these themes manifested in the post-Medicaid history of long-term care and what they portend for the future.

The Post-Medicaid History of Long-Term Care

On July 30, 1965, President Lyndon Johnson signed Medicaid into law providing “medical assistance on behalf of . . . aged, blind, or permanently and totally disabled individuals, whose income and resources are insufficient to meet the costs of necessary medical services.” The new program’s costs exploded immediately for several reasons.[2]

  • States had no real choice but to participate or lose lucrative federal matching funds.[3] 

  • Medical prices increased rapidly because Medicaid and Medicare contributed “large sums of money to the demand for medical care without substantially increasing or efficiently organizing the supply of medical services available.”[4]

  • Expensive hospital and nursing home expenditures absorbed the bulk of Medicaid money.[5]

  • From Medicaid’s inception in 1965 until 1980, federal law explicitly permitted asset transfers for the purpose of qualifying for long-term care benefits. Anyone could give away everything and qualify for benefits immediately.[6]

Bottom line, Medicaid gave everyone--states, families, and long-term care providers--strong incentives to participate with few effective limits on expenditures.

The nursing-home industry took full advantage of this new public financing source by building many new facilities. As fast as the industry could build them, the new nursing-home beds filled with Medicaid residents. Roemer's law--in paraphrase, "a built bed is a filled bed"--became a nursing home industry standby.[7] Stunned by the cost crisis, Medicaid attempted to control the construction of new beds with Certificate of Need (CON) programs based on the principle that "we cannot pay for a bed that does not exist." By the mid-1970s, health planning for nursing homes was in full swing. It worked. Fewer new beds were built.

Addressing Symptoms, Avoiding Causes

The CON laws restricting nursing home bed supply to control Medicaid costs were an early example of government attacking a symptom not the cause of high long-term care expenditures. Costs were not increasing because there were too many nursing homes. There were too many nursing homes because Medicaid long-term care funding was virtually unlimited. That was the neglected cause that government would have had to address to solve the solution.

Instead, capping bed supply predictably drove up price and demand even further. The nursing-home industry raised charges to compensate for the limitation on new beds. What the government saved by restricting bed supply, it lost to nursing-home rate increases. Consequently, Medicaid nursing-home costs grew faster than ever. In response, Medicaid capped reimbursement rates. This move impelled the nursing-home industry to increase private-pay rates to compensate. The more the government pushed Medicaid rates down, the more the industry pushed private-pay rates up. So began the highly problematic differential between low Medicaid rates and much-higher private-pay rates. Today, on average nationally, Medicaid pays only 70 percent of private-pay market rates.

So again, addressing the symptom (high nursing home charges) instead of the cause (easy access to unlimited Medicaid funds) led to an unintended consequence. It created a strong incentive for former private payers to convert to Medicaid in order to escape higher private-pay rates which were caused by nursing homes counterbalancing the rate caps imposed by Medicaid. When prices, and hence incentives, are set by markets, instead of politicians and bureaucrats, this kind of thing cannot happen. But once begun under political control, it can and did build on itself through generation after generation of public policy interventions as future developments will show.

How did long-term care evolve in the 1980s?

Higher private-pay rates made Medicaid eligibility more attractive than ever to private payers. With no limits on asset transfers to qualify, easy access to Medicaid drove up expenditures and drove out higher paying private patients. In 1970, when Medicaid was only five years old, out-of-pocket spending still contributed 49.2 percent of national nursing home costs. Medicaid paid 23.3 percent and Medicare, only 3.5 percent. By 2017, out-of-pocket spending had declined by nearly half to 26.7 percent, while Medicaid and Medicare climbed to 30.2 percent and 22.7 percent respectively.[8]

The problem of nursing homes’ declining private-pay revenue and greater dependency on Medicaid is worse than these numbers suggest. In 2011, the Centers for Medicare and Medicaid Services began reporting nursing home and Continuing Care Retirement Community (CCRC) expenditures together. CCRCs are much more likely to have private-payers than are nursing homes. So the 26.7 percent private-pay figure above is higher than it would be if nursing homes only were measured. Evidence of this is that nursing homes’ private revenue mix declined from 12 percent in 2012 to 7.9 percent in the first quarter of 2019, whereas Medicaid’s share of nursing home revenue has continued to increase from 47 percent to 49.2 percent.[9]

Because Medicaid pays nursing homes notoriously low reimbursement rates, arguably the cause of nursing home quality problems, it is even more important to understand the proportion of patient days that Medicaid pays for at its low rates as compared to the proportion of days paid by private payers at their higher rates. Based on data through March 2019, Medicaid paid for 65.8 percent of patient days, whereas private payers contributed only 8.2 percent of patient days. Clearly, private payers in nursing homes have declined radically whereas Medicaid’s role has increased substantially. So, while nursing homes get only 49.2 percent of their revenue from Medicaid, the welfare program’s low rates touch 65.8 percent of patient days. This, forces nursing homes to attract as much revenue as possible from higher paying sources such as Medicare and private pay, both of which sources are highly vulnerable.[10]

The Crisis Theme: The Role of Recessions

An economic downturn in the late 1970s led to a recession in early and mid-1980 which aggravated Medicaid’s financial distress.[11] Finally, Congress acted to discourage the overuse and abuse of Medicaid long-term care eligibility by passing the Boren-Long Amendment of 1980. For the first time, it prohibited the transfer of assets solely to qualify for Medicaid benefits.[12] But this new rule expressly excluded otherwise exempt assets, such as seniors’ largest resource, their homes. The strong incentive to take advantage of Medicaid nursing home benefits rather than paying out of pocket for non-institutional home or community-based care continued nearly as strong as ever. Medicaid costs kept rising as even upper-middle class people took advantage of the program.

Origins of Medicaid Planning

As soon as Congress began to restrict asset transfers for the purpose of qualifying for Medicaid, lawyers started finding ways to circumvent the new eligibility constraints. A whole sub-practice of law—Medicaid estate planning—developed to take advantage of this new opportunity. Qualifying affluent clients for Medicaid was and remains its main source of billable hours.

Artificial self-impoverishment, touted frequently in the national media and in local financial planning ads, became a clever solution to the long-term care financing problem for more and more people. The first known article on Medicaid planning was published in 1981 immediately after Boren-Long imposed the first limit on asset transfers.[13] It stated: “Careful planning even under adverse state law will still be able to achieve the goal of excluding an applicant’s resources for purposes of determining Medicaid eligibility.”[14]

The article also describes ways clients might reduce exposure to health costs through (1) creation of various trust devices, (2) conveyance of remainder interests in property, (3) conversion of property into assets exempted from eligibility tests for Medicaid, and (4) outright transfers of property. If a client can be rendered eligible for Medicaid, medical expenses will be paid in full and estate assets will be conserved. Moreover, while the Department of Public Welfare may seek recovery for payments made on behalf of elderly recipients from their estates, careful planning can lawfully defeat the Department’s ability to obtain indemnification.[15]

Scores of similar law journal articles soon followed.[16]

In 1987, 23 lawyers founded the National Academy of Elder Law Attorneys (NAELA) to represent their professional interests. Today, the NAELA has grown to a membership of 4,500 with an annual budget of $2 million.[17] It functions as the Medicaid planners’ trade association, frequently advocating for looser Medicaid eligibility rules and more public spending on long-term care.

A 2003 survey of NAELA lawyers in 30 states found that 40 percent of Medicaid planning clients transferred more than $75,000 of wealth and 63 percent involved estates of more than $100,000.[18] Most clients transferred more than $50,000 in order to qualify for Medicaid benefits.[19] The rule of thumb for Medicaid planners’ compensation is that fees to qualify someone for Medicaid long-term care benefits roughly average one month’s cost of nursing home care as a private payer. According to one source, such fees “can range from $2,500 for individuals with relatively simple estates to $10,000 for individuals with significant assets.”[20]

The Federal Government Tried to Restrain Medicaid Eligibility Bracket Creep

The federal government did not sit idly by and allow Medicaid long-term care benefits to spread to the upper middle class without a fight. As usual, however, public policy makers had one foot on the accelerator, generously expanding Medicaid benefits to more and more groups, even as they pressed down on the brake with the other. Four presidents and twelve Congresses struggled to discourage the growing practice of Medicaid estate planning from the early 1980s on even as program expansions continued.

Stress on Medicaid budgets worsened as the nation suffered another and longer economic recession in 1981 and 1982. With budget ends harder and harder to meet, Congress responded with the Tax Equity and Fiscal Responsibility Act of 1982. TEFRA ’82 authorized states voluntarily to place restrictions on asset transfers for the purpose of qualifying for Medicaid, to place liens on real property and to recover benefits correctly paid from recipients' estates. Because its provisions were not mandatory and the economy soon recovered relieving the pressure on state and federal budgets, TEFRA ’82 did little to lessen the underlying problem, excessive utilization of Medicaid long-term care benefits.

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA ’85) tried to control Medicaid qualifying trusts with only marginal success.

The Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) made transfer of assets restrictions mandatory and lengthened the look-back period for asset transfers from two years to 30 months. None of these measures had much effect on controlling the explosion of Medicaid long-term care eligibility. Endlessly creative Medicaid planners found new legal gambits to circumvent every loophole closed.

Nursing Home Occupancy Balloons While Quality Plummets

With the supply and price of nursing-home beds capped by government fiat and with Medicaid eligibility extremely generous, nursing-home occupancy skyrocketed to an average of 95 percent nationally in the mid-1980s. Given high demand and severely limited supply, nursing-home operators could fill their beds easily with low-paying Medicaid patients regardless of the care quality they offered. To achieve adequate operating margins, however, nursing homes had to attract a sufficient supply of higher-paying private patients or cut costs drastically. Yet, if they tried to attract more lucrative private payers with preferred treatment or accommodations, the nursing homes were deemed guilty of discrimination against Medicaid patients. If they tried to cut costs instead, they came under fire for technical violations or quality problems.

In response, Congress and state governments pressured the industry to provide higher quality care without discriminating against low-paying Medicaid recipients. The Omnibus Budget Reconciliation Act of 1987 (OBRA ’87) mandated extra staff, training, and quality improvements but without appropriating extra funds to pay for them. Given the program's fiscal duress, Medicaid could not offer higher reimbursement rates to achieve the legislation’s goals. That put nursing homes in a severe bind.

What happened to long-term care in the 1990s?

Caught between the rock of inadequate reimbursement and the hard place of quality mandates, the nursing-home industry put up a strong fight. Armed with another provision from the Boren Amendment,[21] a federal law that required Medicaid to provide reimbursement “reasonable and adequate” for “efficiently and economically operated facilities,” many state nursing-home associations took the battle to court and they usually won.

By this time, however, state and federal Medicaid expenditures were increasing so quickly and taxpayers had become so reluctant to pay for growing public spending that large increases in Medicaid nursing-home reimbursements were out of the question, regardless of which side won the lawsuits. The issue became moot when Congress repealed the Boren Amendment in the Balanced Budget Act of 1997. Since then there has been no legal floor on how low Medicaid nursing home reimbursement rates can fall. Consequently, quality of Medicaid-financed nursing home care remains a large and growing concern.

But note again that instead of addressing the cause of nursing home quality problems, i.e. inadequate reimbursements, politicians attacked the symptoms by simply demanding better quality without paying for the extra hiring, training and improvements it would require.

Back to the Battle Against Medicaid Planning

Responding to state and federal budget problems incidental to the July 1990 to March 1991 recession and its slow recovery, Congress picked up the gauntlet of Medicaid planning again in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). This legislation made the mandatory transfer of assets restrictions longer and stronger, extending the look-back period from thirty months to three full years for most transfers and five years for transfers to trusts. It also replaced the 30-month limit on the eligibility penalty for asset transfers with no time limit whatsoever and made recoveries from the estates of deceased recipients mandatory.

This OBRA ’93 package implemented many of the recommendations in a 1988 report by the Department of Health and Human Resources Office of Inspector General titled Medicaid Estate Recoveries: National Program Inspection. That report and OBRA ’93 encouraged families to retain exempt assets while relying on Medicaid for long-term care, strongly discouraged asset transfers with serious penalties, and allowed liens to hold real property in recipients’ possession until the cost of their care could be recovered from their estates. It was a government-sponsored home equity conversion program to fund long-term care, relieve the financial pressure on Medicaid, and incentivize families to plan and insure for long-term care in order to avoid Medicaid dependency and resulting estate recovery.

Unfortunately, states didn’t implement the law’s provisions aggressively; the federal government did not require them to do so; the media didn’t report the new liability of relying on Medicaid, the liens and estate recoveries; and so the public remained unaware and continued to drift onto Medicaid dependency by default. Once again, as the recession which led to OBRA ’93 abated, tax receipts increased and welfare rolls declined. Pressure was off to control Medicaid spending.

The Throw Granny and Her Layer in Jail Laws

When the OBRA ‘93 measures failed to constrain the growth of Medicaid planning and its explosive incidental costs, President Clinton joined the newly Republican-dominated Congress to try a radical solution in the Health Insurance Portability and Accountability Act of 1996 (HIPAA ’96). They criminalized asset transfers to qualify for Medicaid, assessing a $10,000 fine and a jail sentence on offenders. When senior advocacy groups exploded in opposition to this "throw granny in jail law," Congress repealed it one year later.

Undaunted, President Clinton joined Congress again in the Balanced Budget Act of 1997 (BBA ’97) to pass the "throw granny's lawyer in jail" law, which made it a crime to advise a client, in exchange for a fee, to transfer assets in order to qualify for Medicaid. This rule came to naught also. It was deemed unconstitutional, and therefore unenforceable, to hold an attorney legally culpable for recommending a practice to a client that was legal again after the criminalization of asset transfers was repealed.

After 17 years of trying to control Medicaid planning, the federal government gave up until 2006. The Medicaid planning bar prevailed. And Medicaid continued to sink into red ink making adequate reimbursement for nursing homes and home health benefits harder than ever to provide.

Promoting LTC Insurance

Worth noting is that at the same time these efforts to discourage Medicaid planning were underway, state and federal governments were encouraging citizens to buy private long-term care insurance. If people had private insurance to cover their long-term care costs, so the reasoning went, they would relieve the burden on Medicaid and help the long-term care providers, who desperately needed more private payers at rates half again as high as Medicaid's.

An experiment with "Long-Term Care Partnerships" allowed people to reduce their Medicaid spend-down liability dollar for dollar by purchasing and using private insurance. Several states adopted the early partnership program, but it languished when Congress refused to exempt any new partnership programs from the estate recovery mandate imposed by OBRA '93.[22]

HIPAA '96, besides briefly criminalizing abusive asset transfers, also granted a half-hearted tax deduction for private long-term care insurance. Because the deduction only applied to limited premium costs after total health care costs exceeded 7.5 percent of adjusted gross income, this measure helped few people afford the coverage and fizzled as an incentive to buy.

The main problem with marketing long-term care insurance, however, was the simple reality that Medicaid benefits were easy to obtain even after the insurable had occurred, without preplanning and without paying any premiums. That obstacle remains firmly in place.

Home- and Community-Based Services: A Panacea for Public Financing?

In the meantime, a wave of academic speculation beginning in the late 1970s suggested that paying for home- and community-based services (HCBS) instead of nursing-home care could save Medicaid a lot of money. Congress authorized HCBS waivers in the Omnibus Budget Reconciliation Act of 1981 (OBRA ’81), enabling states to spend Medicaid money on services other than nursing home care for the first time.

For the next four decades, Medicaid experimented with HCBS waivers as a cost-saving measure. Before long, however, hard empirical research compelled the conclusion that (desirable as they are) home- and community-based services do not save money overall.[23] Community-based care usually only delays institutional care. Between them, expanded home care plus eventual nursing home care end up costing more in the long run than nursing home care alone. There are many reasons for this. One is the economy of scale that comes from taking care of a larger number of people in an institutional setting. Another reason is that people who are enabled to remain at home and maintain their independence and control, tend to be happier. They live longer and die slower, ending up in a nursing home sooner or later anyway.

Not a single state has reduced the overall cost of nursing home and home health care by diverting more people to home care. The combined costs continue to rise everywhere, year after year. This is not to say we shouldn't find a way to fund home and community-based care. It only means that to think funding home care instead of nursing home care will save money is unreasonable. Medicaid expenditures for long-term personal and home care increased disproportionately even as nursing-home expenditures abated somewhat.

Reported HCBS spending increased 10 percent in FY 2016, greater than the five percent average annual growth from FY 2011 through 2015. Reported institutional service spending decreased two percent in FY 2016 following an average annual increase of 0.3 percent over the previous five years.[24]


The Supreme Court added to the pressure on Medicaid to offer home and community-based care in 1999. In Olmstead v. L.C., 119 S. Ct. 2176, the Court interpreted Title II of the Americans with Disabilities Act (ADA) to require states to serve people with disabilities in community settings rather than in institutions (such as nursing homes) when appropriate and reasonable. The Department of Health and Human Services took up the mantle of HCBS in 2001, spending millions to encourage state Medicaid waivers of the Social Security Act to promote more home and community-based care.

Despite these intensive measures to shift Medicaid away from its "institutional bias," roughly two-thirds of the program's long-term care expenditures continued to go for nursing home care by the year 2000. By 2016, overall Medicaid nursing home expenditures were down to 43 percent, while 57 percent went to HCBS. But HCBS programs primarily supporting older adults and people with physical disabilities have not kept pace. They are only 45 percent with over half, 55 percent, still going toward nursing home care.[25]

States remain afraid to shift too much of their long-term care spending toward popular home and community-based services because of the danger they will attract too many additional applicants, recipients and costs. As one analysis concluded: "Financially strapped states need massive sources of new revenues to comply with the Supreme Court's Olmstead ruling to house the elderly and disabled, if possible, in the community."[26]

It remains true, ironically, that because of the public's aversion to Medicaid nursing homes, institutional bias is Medicaid's strongest cost containment tool, one of its gravest deficiencies, and the biggest single obstacle to the expansion of privately-financed home- and community-based long-term care services.

The Interface Between HCBS and Medicaid Planning

For every person in a nursing home in America today, there are two or three of equal or greater disability, half of whom are bedbound, incontinent or both, who remain at home.[27] They are able to stay home because their families, mostly wives, daughters and daughters-in-law, struggle heroically to keep them out of a nursing home. When government starts providing long-term care that they want (home care) instead of long-term care that they don't want (nursing home care), people come out of the woodwork to take advantage of it. That drives up Medicaid long-term care expenditures.

Furthermore, if all it gets you is into a nursing home, one might be reluctant to seek the advice of an attorney to self-impoverish in order to qualify for Medicaid. But when Medicaid planning will get you access to home care services, adult day care, respite care, and even assisted living, you will be much more likely to seek out an elderlaw attorney. Medicaid financed home and community-based care encourages the practice of Medicaid estate planning.

Furthermore, Medicaid financed home and community-based care is deadly to the marketability of private long-term care financing alternatives, such as reverse mortgages or long-term care insurance. The big benefit of being able to pay privately for long-term care is the ability to command red-carpet access to top-quality long-term care at the most appropriate level and in the private marketplace. To the extent the government conveys to the American public that consumers can achieve the same benefits financed by Medicaid, Medicaid will continue to explode in cost. Reverse mortgages to fund long-term care in the short-term and LTC insurance to fund long-term care in the long run will remain stunted.

Long-Term Care in the New Millennium: Late 1990s to the Present

Reimbursement Revolution

When Medicare changed to a prospective payment system (PPS) for hospital care in 1983, patients moved out of acute care "quicker and sicker." Combined with liberalization of Medicare coverage criteria in the Medicare Catastrophic Coverage Act of 1988, this was a financial bonanza for nursing facilities and home care agencies because it augmented their census of higher-paying Medicare patients.[28]

By 1997, one-quarter of Medicare acute care discharges used postacute services within one day of leaving the hospital. . . . Skilled nursing facilities were used for more than half this time (53%), home health agencies for about one-third of the time (32%), and rehabilitation facilities about one-tenth of the time (11%), with psychiatric facilities and long-term hospitals accounting for the remainder.[29]

The long-term care industry mobilized to make the most of this opportunity. Providers grew, consolidated, and expanded into many auxiliary services to take advantage of the new, generous funding source. Wall Street caught the fever and sent long-term care stock prices way up. Private capital flowed into long-term care projects. Big money chased high hopes based on promising aging demographics in a way similar to the contemporaneous levitation of internet equities based on expectations of a "new economy." Nursing home chains prospered. The home health care industry exploded. Luxurious assisted living facilities popped up everywhere. High hopes veiled ominous possibilities.

This rosy scenario prevailed until the late 1990s. Then, having started the party by pouring vast amounts of new money into long-term care, the government removed the financial punch bowl. It replaced the generous cost plus reimbursement method, which had prevailed since the beginning of Medicaid and Medicare in 1965, with more parsimonious prospective payment systems (PPS).

The Balanced Budget Act of 1997 brought skilled nursing facilities into the prospective payment system and home health agencies were added soon thereafter. As a direct consequence, by 2000 "more than 10 percent of [skilled nursing] facilities nationwide filed Chapter 11 bankruptcy, including many of the largest chains (e.g., Vencor, Genesis Health Ventures, Mariner Post-Acute Network, Integrated Health Services, Sun Healthcare Group)."[30]

Utilization and cost of Medicare's home health benefit dropped by half the year after prospective payment was implemented.[31] Hundreds of home health agencies went bankrupt as a consequence. Providers received some reimbursement relief in the Balanced Budget Refinement Act of 1999 (BBRA '99) and the Benefits Improvement and Patient Protection Act of 2000 (BIPA '00), but the profession never has recovered its former prosperity.

How Medicaid Depends on Medicare

To this day, nursing homes rely heavily on relatively higher reimbursements from Medicare to offset Medicaid's meager rates. Yet fiscal pressure on both programs constantly threatens long-term care providers' solvency. The Medicare Payment Advisory Commission (MedPAC)[32] "continues to focus solely on data detailing the [long-term care] sector’s Medicare-only profits – without also looking at Medicaid losses," complained Mary Ousley, past chairman of the American Health Care Association (AHCA) to the House Ways and Means Committee.[33]

On December 8, 2005, MedPAC staff recommended that Congress deny an inflation increase in Medicare reimbursement rates for skilled nursing facilities for Fiscal Year 2007 and on January 10, 2006, the Medicare Payment Advisory Commission (MedPAC) so voted.[34] As of 2019, MedPAC continues to do so even as Congress continues to ignore the recommendation.

The nation’s more than 15,000 skilled nursing facilities should not receive a scheduled 2.6% Medicare market basket update in fiscal 2020, MedPAC wrote in its twice-annual report to Congress, citing a variety of positive benchmarks for the industry.[35]

Medicaid reimbursement for nursing homes is demonstrably deficient, falling in the early 2000s $12.58 per patient day below allowable costs, as studies by the accounting firm BDO Seidman for AHCA repeatedly established.[36] If that were all, it would be bad enough. But low reimbursements drag down quality and quality problems invite lawsuits.

Tort Liability

A wit remarked once that “Medicaid demands Ritz Carlton care at Motel 6 rates while imposing a regulatory jihad.” But laws and regulations cannot command quality care without paying for it. OBRA’ 87’s failure proved that. Tort liability has become a huge problem for long-term care facilities. A study by the actuarial firm Aon for the American Health Care Association found that claim frequency doubled and severity tripled between 1996 and 2005 and "the annual patient care liability cost for each occupied bed in a long term care facility has grown from $430 in 1993 to $2,310 in 2004."[37] Malpractice insurance costs have surged.[38] In Florida, the state worst hit, "the high liability costs were so dramatic that they entirely offset the average $28 per day increase in Medicaid reimbursement for nursing homes implemented over a five-year period, from $86 in 1995 to $114 in 2000."[39] All of these pressures continue to weigh heavily on the ability of long-term care providers to remain financially solvent while providing care of acceptable quality.

The sixteenth published edition of the Aon General and Professional Liability Benchmark for Long Term Care Providers estimates ultimate loss rates, or the cost of liability for skilled nursing providers on a per-bed basis. The projected national 2019 loss rate is estimated to be $2,410. This means that a skilled nursing facility with 100 occupied beds can expect approximately $241,000 in liability expenses in 2019.[40]

What Have the 2000s Wrought For Long-Term Care?

Following the recession from March to November, 2001, the escalating cost of Medicaid returned as an important budget issue for states and the federal government. Policy makers turned again to the question of how to restrain the overuse of Medicaid’s most expensive benefit, long-term care.

On February 8, 2006, President Bush signed the Deficit Reduction Act of 2005 (DRA '05.) It passed by a single vote, supplied by Vice President Cheney who had to be transported back from the Middle East to cast the deciding vote in the Senate. As soon as the law was signed, senior advocacy organizations and Medicaid planning attorneys filed lawsuits against it, but all of this litigation was thrown out of court.

The DRA '05 took some giant steps in the direction of controlling Medicaid eligibility. For the first time ever, it put a limit on the amount of equity that can be exempted in a home and contiguous property. The limit was placed between $500,000 and $750,000 at the option of each state legislature. Pegged to inflation, the limits have increased to $585,000 and $878,000, respectively, as of 2019. Capping the home equity exemption was a step in the right direction, but the half-million dollar limit actually imposed was not enough to solve the problem. At the current levels inflated over time, people can shelter assets many times the average $79,200 home equity of elderly persons and still qualify for Medicaid.[41]

When state governments were under severe budgetary constraint, the National Governors Association advocated in writing for a limit on the Medicaid home equity exemption of only $50,000. That might have been an effective deterrent to Medicaid long-term care overuse. Unfortunately, the estate recovery requirement from OBRA '93, which was supposed to ensure that exempt assets are eventually used to reimburse Medicaid for the home owners care, is itself easy to avoid. So without lower limits on the home equity exemption or stronger estate recovery enforcement, Medicaid will continue to be the dominant source of long-term care financing for aging Americans.

The Deficit Reduction Act of 2005 also extended the look-back period for asset transfers from three years to five years for all transfers. That sounds impressive until you realize that the look-back period on asset transfers in Germany’s socialized health care system, is ten years. Transfer assets for less than fair market value within ten years of applying for public assistance to help with your long-term care costs in Germany, and you run the risk of their pursuing recovery from the people, probably your relatives, to whom you gave the money.

One of the most important changes the DRA '05 made was to eliminate the single most prevalent Medicaid estate planning gimmick at the time, the so-called "half-a-loaf" strategy. Instead of giving away $100,000 and incurring a 20 month transfer of assets penalty, people would give away $50,000, incur half the penalty, i.e., 10 months, hide the rest of the money and become eligible after the penalty ran its course, without ever spending any of their own money for long-term care. The Deficit Reduction Act ended this practice by starting the eligibility penalty at the date someone would have otherwise become eligible for Medicaid if the rule hadn't changed. Previously, the penalty began at the date of the transfer, a practice which enabled the half-a-loaf strategy. Now, the penalty begins (usually) at the date of Medicaid application.

Another Bust and Boom Story

America’s post-Internet-boom, early-2000s recession led to passage of the DRA ’05 with its new constraints on Medicaid LTC financial eligibility. As so often happened in the past, however, by the time the new legislation passed, the economy had improved considerably, welfare rolls went down, tax receipts improved and public officials at the state and federal levels lost their enthusiasm for enforcing the new restrictions. In California, for example, Medi-Cal (California’s name for Medicaid) didn’t implement, much less enforce, the mandatory changes required by the DRA ’05, such as the longer look-back period for asset transfers and the cap on home equity. Nor did the federal government enforce the law, allowing California to flout it with impunity and other states to get by with only half-hearted enforcement.[42]

Medicaid planners found new ways to circumvent the DRA’s stronger spend-down rules, replacing for example the newly proscribed “half-a-loaf” strategy with a clever “reverse half-a-loaf” gimmick whereby their affluent clients could use promissory notes or annuities to “cure” an asset transfer penalty and achieve the same objective to preserve half the assets. Medicaid-compliant annuities re-emerged in popularity allowing “millionaires” to qualify easily for LTC benefits according to MaineCare[43] eligibility workers.[44]

Thus, by 2007, easy access to Medicaid LTC benefits was returning to its historical norm. Then the economic cycle clobbered America again. In 2008, the “Great Recession” began. Once more, state and federal tax revenues plummeted, welfare rolls skyrocketed, and huge state and federal budget shortfalls developed. In other words, the stage was set for another round of legislative and administrative initiatives to reduce Medicaid expenditures, tighten eligibility rules, curb Medicaid planning abuses, and protect the LTC safety net for people most in need. But this time, it didn’t happen. Why?

The Broken Rhythm of Reform

Historically, progress toward making Medicaid a better long-term care safety for the poor tended to occur after major economic downturns when state and federal governments face serious budgetary constraints. After most recessions since 1965, Congresses and presidents of widely divergent ideological persuasions backed legislation closing Medicaid long-term care eligibility loopholes and encouraging early and responsible long-term care planning. But as each recession was followed by a rapid economic recovery and fiscal pressure abated, Medicaid long-term care benefits always reverted to virtually universal availability for all economic classes.

This pattern has changed since the start of the new millennium. After the recession from March 2001 to November 2001 following the internet bubble’s implosion, economic recovery came more slowly than before. Likewise, it took much longer for legislation discouraging the excessive use of Medicaid long-term care benefits to be passed. The Deficit Reduction Act of 2005 was not signed into law until February of 2006, nearly five years after the start of the previous recession. Ultimately, economic recovery did come and, true to form, enforcement of DRA ‘05 declined.

The resulting boom ended when the housing bubble burst, causing the Great Recession of December 2007 to June 2009. Again, economic recovery came very slowly and meagerly.[45] By 2016, seven years after the end of the last recession, we had seen neither a full economic recovery nor action to spend Medicaid’s scarce resources more wisely by aiming them toward people most in need. In fact, public policy analysts and advocates are moving in the opposite direction, towards proposing yet another government program funded by taxpayers to expand public financing of long-term care for all.

What might explain slower recoveries in recent years and less attention to the cost of Medicaid long-term care benefits? The Federal Reserve forced interest rates to almost zero during and since the Great Recession. The consequences of this policy have ramified through the economy in many ways. One way is that government has been able to finance deficit spending and the rapidly increasing national debt at considerably lower carrying costs than before when interest rates were much higher.

How Washington Learned to Love Debt and Deficits

By enabling politicians to spend more without facing the normal fiscal consequences, this new economic policy has attracted greater financial resources, including borrowed funds, into public financing of all kinds and simultaneously diverted private wealth into low-interest-rate-induced malinvestment. Consequently, political concern about burgeoning budgets and debt has abated and no significant effort to preserve Medicaid funds by targeting them to the poor has occurred.

The danger is that just as excessive public spending and private malinvestment in the early 2000s led to the housing bubble and its consequent mid-decade recession, so the current much larger credit bubble driven by excessive government borrowing and spending could lead to an even greater economic collapse. With the current national debt nearing $23 trillion and total unfunded entitlement liabilities around $125 trillion, a return to economically realistic market-based interest rates would render the federal government immediately insolvent.[46]

Further exacerbating the problem of long-term care financing is the fact that the long-anticipated age wave is finally cresting and will soon crash on the U.S. economy. Baby boomers began retiring and taking Social Security benefits at age 62 in 2008. By age 66 in 2012, they had turned the Social Security and Medicare programs cash-flow negative. Boomers began taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts in 2016, depleting the supply of private investment capital. They will reach the critical age (85 years plus) of rising long-term care needs in 2031, around the time Social Security and Medicare are expected to deplete their trust funds, forcing them to reduce benefits.

Of course, Medicaid is the main funder of long-term care, but according to a former Center for Medicare and Medicaid Services Chief Actuary in a statement of consummate denial, “. . . Medicaid outlays and revenues are automatically in financial balance, there is no need to maintain a contingency reserve, and, unlike Medicare, the ‘financial status’ of the program is not in question from an actuarial perspective.”[47] In a sentence, conditions are coalescing for a potential economic cataclysm in or before the second-third of this century and public officials are almost entirely ignoring the risk.

As fiscal and monetary pressure on government spending abated, other factors also combined to discourage controls on Medicaid long-term care benefit expansion.

Maintenance of Effort

The American Recovery and Reinvestment Act of 2009 (ARRA ’09) was signed into law by President Obama on February 17, 2009. This “stimulus” law ultimately pumped $831 billion into the economy according to the Congressional Budget Office. State Medicaid programs were among the biggest beneficiaries of the ARRA ‘09’s largesse receiving approximately $100 billion in extra funds from an increase in federal Medicaid matching funds. But this windfall had a string attached. To qualify for the additional revenue, states had to agree not to tighten their Medicaid eligibility rules. This “maintenance of effort” (MOE) requirement prevented states from reducing Medicaid expenditures during the economic downturn by means of targeting scarce resources to the neediest applicants.

The ARRA ‘09’s MOE restriction expired at the end of June 2011, at which time state revenues plunged as federal matching fund rates reverted to pre-stimulus levels. A state that had been getting three dollars in federal matching funds for every dollar it put up now was getting only two federal dollars for every state dollar. Simultaneously, due to the reduced economic activity incidental to the ongoing economic downturn, other state revenues from sales and income taxes declined as well. But Medicaid costs continued to increase rapidly as they always do when the economy falters. This would have been the perfect time to control the Medicaid eligibility hemorrhage by targeting the program’s scarce benefits to citizens who needed them most.

By this time, however, a new MOE rule applied which prohibited any reduction in Medicaid financial eligibility. The Patient Protection and Affordable Care Act of 2010 (PPACA ‘10, also known as health reform or “ObamaCare”) required maintenance of effort upon penalty of the loss of all federal Medicaid funds. Under PPACA ‘10, however, the states received no bonus in federal matching funds for complying with MOE. Thus, with flat or falling state government revenues, state Medicaid programs all across the country were locked into retaining the generous Medicaid long-term care financial eligibility they had implemented during better economic times. If they acted to reduce Medicaid LTC eligibility even within limits allowed by federal law before imposition of the MOE requirement, they could lose all federal Medicaid funds.

Then in June 2012 the United States Supreme Court ruled that, although ObamaCare is constitutional, states can nevertheless opt out of its Medicaid expansion provision without losing federal matching funds for the rest of their Medicaid programs. Arguably, states that choose not to expand Medicaid under PPACA should therefore not be constrained by the law’s MOE provision for the same reason. Some legal and policy experts, as well as the state of Maine, made that case, but were unsuccessful based on interpretations from the Centers for Medicare and Medicaid Services (CMS, the federal agency that oversees Medicaid) and the Congressional Research Service.

Thus, faced with widespread budget shortfalls and doubtful new revenues sufficient to close the gaps, states had only two ways to constrain costs: cut benefits or cut reimbursements. With eligibility cuts out of bounds due to MOE, the states’ only options, besides shifting funds from education or some other budget category, were to eliminate desperately needed services or to reduce provider reimbursements. Cutting services hurts the needy most. Provider reimbursements were already minimal and further cuts could lead to facility closures and other long-term care provider shortages. By the beginning of the second decade of the new millennium, the maintenance of effort requirement was a major obstacle to Medicaid long-term care reform, which remained stymied so long as MOE remained in effect.


The Patient Protection and Affordable Care Act of 2010 (PPACA ’10) or “health reform” was signed into law by President Obama on March 23, 2010. By far its most important impact on long-term care financing was its provision regarding maintenance of effort as already explained. But ObamaCare attempted to address LTC financing in two other potentially important ways. One was the “CLASS Act,” an acronym standing for Community Living Assistance Services and Supports. While not formally repealed, CLASS died for all practical purposes when it became clear the pseudo-LTC-insurance program was financially infeasible to implement. I explained the problems and deficiencies of CLASS in a 2011 speech to the Society of Actuaries "Living to 100" Symposium. The aborted program does not warrant further consideration.

The other way ObamaCare addressed long-term care was with several special programs and pilots designed to encourage more public financing of home and community-based services (HCBS). These are described in an October 2011 report by the Kaiser Family Foundation titled “State Options That Expand Access to Medicaid Home and Community-Based Services.” They need not concern us here, because, as explained earlier, publicly financed home- and community-based services on a wide scale are not financially sustainable, impede a private market for home-based care, and discourage responsible long-term care planning. Striving to make Medicaid long-term care services more attractive without limiting eligibility to those truly in need drives up the program’s cost while reducing the potential private resources that might improve the long-term care service delivery system.

Value-Based Care and Reimbursement

Huge changes in how the government pays for post-acute and long-term care are under way today, building steam, and about to revolutionize long-term care service delivery. The system's transformation to "managed care," whereby state Medicaid programs turn over responsibility for providing and paying for LTC to the highest bidders, has long been sweeping the country. The Obama Administration, including the Centers for Medicare and Medicaid Services, pushed headlong into managed long-term care. The Trump Administration has followed suit.

Most long-term care will still be provided by nursing homes and home care companies, but now a new middle-man, the managed care company, will come between the payer (Medicaid) and the provider, which already stands between the patient and access to quality care. Long-term care providers complain vehemently that their already meager Medicaid reimbursements, often less than the cost of the care, will be further attenuated with potentially dire consequences for care access and quality.

The government's latest move toward centralized control of the long-term care market is even more significant. The federal bureaucracy is replacing traditional fee-for-service reimbursement with new, experimental financing schemes based on value-based payments. The Centers for Medicare and Medicaid Services (CMS) is changing the focus of long-term care financing in both of the programs for which it is responsible from paying for services (volume) to paying for value (as measured by new, vague and complicated "quality" metrics). "Prospective payment," "bundling," “value-based” reimbursement and, most recently PDPM, or the Patient Directed Payment Model, are on every health care bureaucrat's lips.

The idea behind the value-based revolution is to reward long-term care providers for quality instead of quantity, for performance and results, instead of for the number of services they provide. It sounds like a great idea. Who doesn’t want higher quality, better outcomes, at the same or lower cost? The problem comes from having politicians and bureaucrats define quality and outcomes, instead of doctors and patients deciding and choosing. Such an approach is highly susceptible to improper influence, abuse and rationing.[48] The new system will put care managers and providers at far greater financial risk. Experts worry the end result will be a two-tiered system with poor providers getting worse and becoming more dependent than ever on low Medicaid reimbursements.

Attacking Symptoms Again While Ignoring Causes

In a free market, devoid of government interference, people would purchase health care services the same way they buy other products and services. Using their own funds, or an insurance company’s in catastrophic circumstances, patients would choose their doctors, caregivers, and long-term care providers based on price and reputation. If they were not happy with the care they received, they would change providers. Over time the market would sort out the providers, with the best ones surviving and prospering while the poor ones would decline or disappear. No need for central planners to decide what is good care and reward or punish providers. That just adds an expensive and unnecessary layer of bureaucracy.

The right questions to ask about value-based payments are these: why does government pay for most long-term care in the first place? Why does it have to revolutionize its reimbursement methods to ensure quality? Why can't people simply choose the long-term care services and providers they prefer without the long arm of the law needing to intervene? The answer to all these questions is the same. This latest push by government to manage the long-term care service delivery and financing system is designed to fix problems that were caused by earlier government interventions, as we’ve explained in the foregoing history of Medicaid and long-term care financing.

As always before, these new value-based interventions address symptoms—high costs, low quality and public-policy-induced market dysfunction—instead of the real causes, perverse incentives created by earlier government intercessions that turn patients and long-term care recipients into financial pawns instead of customers. The risk is that further interference in an already fragile long-term care market will turn everything topsy-turvy just as the age wave begins to crest and the entitlement programs’ unfunded liabilities begin to come due.

So What Is the Bottom Line on the Post-Medicaid History of Long-Term Care?

In a nutshell, just as heavy demand was building for a privately financed senior services market in the 1960s, Medicaid co-opted the trend by providing easy access to subsidized nursing-home care.

Confronted with a choice between paying out-of-pocket for a lower level of care or receiving a higher level of care at much less expense, seniors and their families made the predictable economic choice. They closed Medicaid-funded nursing home care. Naturally, the potential market for long-term care insurance and privately-financed home- and community-based services languished.

Medicaid nursing-home caseloads and expenditures increased rapidly and drastically. In response, Medicaid capped bed supply and reimbursement rates, which led inevitably to excessively high occupancy, private-pay rate inflation, discrimination against low-paying Medicaid patients, and serious quality of care issues.

Over time, Medicaid nursing-home care acquired a national reputation for impeded access, dubious quality, inadequate reimbursement, widespread discrimination, pervasive institutional bias, and excessive cost.

Medicaid remains, nonetheless, the only way middle-class people can pay for long-term care without selling their homes nor, if they are clever, liquidating their savings. That is why so many otherwise independent and responsible Americans fail to buy private insurance while they are young and healthy enough to qualify for it and afford it. It is why they end up looking to Medicaid planning as the only way to save their estates or their inheritances. It is the reason why a huge proportion of America's proud World War II generation has died on welfare in nursing homes.

Today, these historical trends have almost run their course. We are on the verge of a promising, but perilous, new world of long-term care. We are floundering forward, compelled by necessity to change the system somehow.

Both the private marketplace and public policy are pushing long-term care in a more consumer-friendly direction. Nursing-home occupancy has declined. The trend toward privately-financed assisted living is growing. New buzz words dominate our professional jargon. Policy makers look to concepts like capitation, managed care, dual eligibles, and integration of acute and long-term care for new hope.

Is our dream of a seamless long-term care delivery and financing system just around the next bend in public policy? Or are we at risk of making the same mistakes as in the past, but on a wider scale and with more disastrous consequences? To answer these questions, we need to find a fresh perspective on the past, present, and future of long-term care financing.

Applying Themes

We identified three predominant themes in the post-Medicaid history of long-term care: (1) generous government financing aimed at (2) ameliorating symptoms instead of removing causes while (3) acting in response to budget crises incidental to national economic recessions. We showed how Medicaid provided a huge funding source directed to nursing home care, tried to control symptoms like excessive supply, utilization, and eligibility when costs exploded, but ignored the cause, perverse incentives created by the virtually unlimited funding. Medicaid became the principal payer of long-term care in the United States for poor and rich alike and that led directly to the dysfunctional system we struggle with today.

If Medicaid is not the catastrophic poverty-maker its long-term care critics make it out to be, what is it? Simply put, it has become an entitlement for middle-class and affluent families. By making nursing home care virtually free in the mid-1960s, Medicaid locked an institutional bias into the long-term care system, crowded out a privately financed market for home care, and trapped the World War II generation in sterile, welfare-financed nursing facilities.[49]

By reimbursing nursing homes less than the cost of providing the care, Medicaid guaranteed that America’s long-term care service delivery system would suffer from serious access and quality problems.[50]

By underfunding most long-term care providers – leading to doubtful quality – Medicaid incentivized plaintiffs’ lawyers to launch giant tort liability lawsuits, extract massive financial penalties, and further undercut providers’ ability to offer quality care.

By making public financing of expensive long-term care available after the insurable event occurred, Medicaid discouraged early and responsible long-term care planning and crowded out the market for private long-term care insurance.[51]

By compelling impoverished citizens to spend down what little income and savings they possessed in order to qualify for long-term care benefits, Medicaid discouraged accumulation and growth of savings among the poor, reducing their incentives to improve their stations in life.[52]

By allowing affluent people to access subsidized long-term care benefits late in life, Medicaid encouraged accumulation and growth of savings among the rich who could pass their estates to their heirs whether they were stricken by high long-term care expenditures or not.[53]

Medicaid is the cause of most of the dysfunction in America’s long-term care service delivery and financing system. But blame should not fall on a mythical Medicaid program imagined by advocates of a new compulsory government program. Rather, blame must fall on the real Medicaid program that has operated by funding long-term care after people require expensive care while allowing them both time and the means to preserve most of their wealth.



[1] “History of Senior Living: 1960 - 1969,”

[2] Columbia Journal of Law and Social Problems, “Medicaid: The Patchwork Crazy Quilt,” Columbia Journal of Law and Social Problems, 5 Colum. J.L. & Soc. Probs. 62 1969,

[3] Sydney E. Bernard and Eugene Feingold, “The Impact of Medicaid,” Wisconsin Law Review, Wis. L. Rev. 726 1970, p. 743.

[4] Ibid., p. 745.

[5] Ibid., p. 747.

[6] “Prior to an amendment to the SSI program in 1980, applicants were expressly permitted to transfer resources that otherwise would have disqualified them from receiving any benefits. A number of decisions confirmed that states were not permitted to deny Medicaid eligibility to an applicant who had divested himself of resources for less than fair market value.” Timothy N. Carlucci, “The Asset Transfer Dilemma: Disposal of Resources and Qualification for Medicaid Assistance,” Drake Law Review, 36 Drake L. Rev. 369 1986-1987, p. 372,

[7] Milton I. Roemer first posited Roemer's law around 1960. In 1993, he reiterated this observation in National Health Systems of the World, Volume Two (Oxford University Press): "The optimal supply of hospital beds needed by each country, for planning purposes, has been a subject of study and debate everywhere. If there is an assured payment system, it seems that almost any additional hospital beds provided will tend to be used, up to a ceiling not yet determined." The Dartmouth Atlas of Health Care 1999, "The Quality of Medical Care in the United States: A Report on the Medicare Program," The Center for the Evaluative Clinical Sciences, Dartmouth Medical School, Hanover, New Hampshire, 1999, p. 309.

[8] Source: [LINK]. For analysis, see “LTC Bullet: So What If the Government Pays for Most LTC?, 2017 Data Update,” December 13, 2018.

[9] Skilled Nursing Data Report Key Occupancy & Revenue Trends Based on Data from January 2012 through March 2019, National Investment Center (NIC),

[10] Ibid.

[12] Shawn Patrick Regan, “Medicaid Estate Planning: Congress’ Ersatz Solution for Long-Term Health Care,” Catholic University Law Review, 44 Cath. U. L. Rev. 1217, 1227 (1995), p. 1228,

[13] William G. Talis, “Medicaid as an Estate Planning Tool,” Massachusetts Law Review, Spring 1981, pps. 89-90

[14] Ibid., p. 90

[15] Ibid.

[16] Find many examples of Medicaid planning articles in Stephen A. Moses, How to Fix Long-Term Care Financing, “Appendix A: Supplemental Bibliography,” Center for Long-Term Care Reform and Foundation for Government Accountability, 2017, pps. 34-63.

[17] Cited July 25, 2019 from the “History” of NAELA on the organization’s website:

[18] ElderLaw News, “Survey Finds Rich Are Not Engaging in Medicaid Planning,” ElderLaw News, September 2, 2003; http://www., cited June 19, 2019. Critiqued in S. Moses, “LTC Bullet: Medicaid Planners Confess,” October 2, 2003;

[19] Ibid.

[20] Milan Markovic, “Lawyers and the Secret Welfare State,” Fordham Law Review, 84 Fordham L. Rev. 1845 2015-2016, p. 1857, footnote 88;

[21] "As part of the Omnibus Reconciliation Act of 1980, the 'Boren amendment' required that Medicaid nursing home rates be 'reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable state and federal laws, regulations, and quality and safety standards' (Section 1902(a)(13) of the Social Security Act)." Joshua M. Wiener and David G. Stevenson, "Repeal of the 'Boren Amendment': Implications for Quality of Care in Nursing Homes," The Urban Institute, Series A, No. A-30, December 1998,, p. 1.

[22] The Long-Term Care Partnership program is described and critiqued in Stephen A. Moses, “The Long-Term Care Partnership Program: Why it Failed and How to Fix it,” in Nelda McCall, editor, Who Will Pay for Long Term Care?: Insights from the Partnership Programs, Health Administration Press, Chicago, Illinois, 2001, pps. 207-222,

[23] "Evaluations of community care programs...tend to show not only that expansion of community care has little effect on nursing home use, but that it raises, rather than lowers, total expenditures." Alice M. Rivlin and Joshua M. Wiener, Caring for the Disabled Elderly: Who Will Pay?, The Brookings Institution, Washington, D.C., 1988, p. 190.

[24] Steve Eiken, Kate Sredl, Brian Burwell and Angie Amos, “Medicaid Expenditures for Long-Term Services and Supports in FY 2016,” IBM Watson Health, May 2018,

[25] Ibid., p.2

[26] _______, "Massive New Spending Needed to Comply with Olmstead Ruling," Aging News Alert, January 14, 2002.

[27] William E. Oriol, The Complex Cube of Long-Term Care, American Health Planning Association, Washington, D.C., 1985. An old source, but undoubtedly still a correct statistic.

[28] Although many provisions of MCCA '88 were repealed the following year, home health care and nursing home services remained much easier to obtain than before and utilization and costs of those services increased rapidly.

[29] Gerben Dejong, et al., "The Organization and Financing of Health Services for People with Disabilities," The Milbank Quarterly, Vol. 80, No. 2, 2002, p. 282.

[30] R. Konetzka, et al., "Effects of Medicare Payment Changes on Nursing Home Staffing and Deficiencies," American College of Healthcare Executives, Vol. 39, No. 3, June 1, 2004, p. 463.

[31] Harriet L. Komisar, "Rolling Back Medicare Home Health," Health Care Financing Review, U.S. Department of Health and Human Services, Vol. 24, No. 2, Pg. 33.

[32] "The Medicare Payment Advisory Commission is a nonpartisan legislative branch agency that provides the U.S. Congress with analysis and policy advice on the Medicare program.” Source:, cited June 20, 2019.

[33] "AHCA to Ways and Means Health Subcommittee: MedPAC Recommendations on Nursing Home Funding Illogical, Hurts Seniors," March 6, 2003.

[34] AHCA President's Memo Number 57, December 9, 2005.

[35] Alex Spanko, “MedPAC Again Calls for $2B in SNF Cuts, But Also Urges Caution Amid PDPM Shift,” Skilled Nursing News, March 15, 2019.

[36] "The daily reimbursement shortfall increased by about 9% from 2001 to 2002 (about 39% in the 4 years from 1999 to 2002). Unreimbursed Medicaid allowable costs were estimated at $4.5 billion nationally in 2002. Since 1999, cost increases have exceeded rate increases by 2%." BDO Seidman, LLP, "A Report on Shortfalls in Medicaid Funding for Nursing Home Care," prepared for the American Health Care Association, April 2005, p. ii.

[37] "Aon Study Finds Liability Cost Increases of 182 Percent in the Long Term Care Sector Since 1996," AHCA News, May 5, 2005.

[38] "The cost of malpractice insurance for nursing homes has jumped an average 51%, according to a study funded by a long-term-care trade group to be released today. The situation is particularly severe in several states with large populations of seniors, including Texas, Arkansas and Florida." Andrea Petersen, "Nursing Homes Face Insurance Crunch: Wave of Consumer Lawsuits Pushes Cost of Malpractice Policies Higher; Some Doctors Stop Seeing Seniors, The Wall Street Journal, June 3, 2004, Page D1. For the full report, see Theresa W. Bourdon and Sharon C. Dubin, "Long Term Care General Liability and Professional Liability, 2004 Actuarial Analysis," Aon Risk Consultants, Inc., American Health Care Association, June 2004.

[39] Elizabeth Devore, "Nursing Homes: The Escalating Liability Crisis," National Conference of State Legislatures, Health Policy Tracking Service, February 2002, p. 1.

[40] “2018 Aon General and Professional Liability Benchmark for Long Term Care Providers,” AON, October 16, 2018,

[41] For the average home equity of elderly people, see the table citing U.S. Census Bureau, Survey of Income and Program Participation, 2014 Panel, Wave 2, in Teresa Ghilarducci, “Reverse Mortgages Are A Bust Partly Because Average Home Equity Is $80,000,” Forbes, January 17, 2019,

[42] Stephen A. Moses, “Medi-Cal Long-Term Care: Safety Net or Hammock?,” Center for Long-Term Care Reform and Pacific Research Institute, January 2011, p. 25.

[43] MaineCare is Maine’s name for Medicaid.

[44] Stephen A. Moses, “The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net,” Center for Long-Term Care Reform and the Maine Health Care Association, November 2012, p. 10.

[45] According to the Wall Street Journal, we are experiencing “the weakest pace of any expansion since at least 1949.” Eric Morath and Jeffrey Sparshott, “U.S. GDP Grew a Disappointing 1.2% in Second Quarter,” Wall Street Journal, July 29, 2016;

“Even seven years after the recession ended, the current stretch of economic gains has yielded less growth than much shorter business cycles.” Eric Morath, “Seven Years Later, Recovery Remains the Weakest of the Post-World War II Era,” Wall Street Journal, July 29, 2016;

[46] The “National Debt Clock” ( places U.S. national debt at $22.5 trillion and unfunded liabilities at $125.0 trillion, a little over $1 million per taxpayer (cited July 25, 2019).

[47] Christopher J. Truffer, Christian J. Wolfe, and Kathryn E. Rennie, “Report to Congress: 2016 Actuarial Report on the Financial Outlook for Medicaid,” Office of the Actuary, Centers for Medicare & Medicaid Services, United States Department of Health & Human Services, Sylvia Mathews Burwell, Secretary of Health and Human Services, 2016, p. 3, This identical quote was in the 2013 version of the “Actuarial Report” and was critiqued in S. Moses, “LTC Bullet: Does Medicaid Solvency Matter?,” Friday, October 31, 2014;

[48] “[W]atchdogs say the efforts to give providers more control over quality through value-based payment initiatives may actually create new avenues for fraud or corruption,” Kimberly Marselas, “Value-based care focus could erode regulatory safeguards, critics argue,” McKnight’s LTC News, June 20, 2019.

[49] One Medicaid planner promised and advertised nursing home care “virtually free for life.” Read about his program in Stephen Moses, “LTC Bullet: ‘Nursing Home Care Virtually Free For Life,’ May 7, 2002;

[50] “Unreimbursed allowable Medicaid costs for 2015 are projected to exceed $7.0 billion. Expressed as a shortfall in reimbursement per Medicaid patient day, the estimated average Medicaid shortfall for 2015 is projected to be $22.46, which is a 6.0 percent increase over the preceding year’s projected shortfall of $21.20.” ELJAY, LLC & Hansen Hunter & Company, PC, “A Report on Shortfalls in Medicaid Funding for Nursing Center Care,” American Health Care Association, Washington, D.C., April 2016, p. 1;

[51] “Private insurance could be made more attractive to consumers by . . . taking steps to remove or lessen what is sometimes termed Medicaid crowd-out--the dampening effect that the availability of Medicaid’s LTC benefits has on sales of private LTC insurance policies.” The United States Congress, Congressional Budget Office, “Financing Long-Term Care for the Elderly,” April 2004, p. xiii;

“Given the current structure of Medicaid, we estimate that even if (contrary to fact) comprehensive private insurance policies were available at actuarially fair prices, about two-thirds of the wealth distribution still would not want to buy this insurance. This suggests that fundamental Medicaid reform is necessary for the private insurance market to expand considerably.” (p. 1084) and “At actuarially fair prices, simple expected utility theory says that in our model all individuals would purchase insurance in the absence of Medicaid.” (p. 1095) Jeffrey R. Brown and Amy Finkelstein, “The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market,” American Economic Review, 98:3, 20081083–1102;  

[52] “We demonstrate theoretically that social insurance programs with means tests based on assets discourage saving by households with low expected lifetime income.” R. Glenn Hubbard, Jonathan Skinner, and Stephen P. Zeldes, “Precautionary Saving and Social Insurance,” The Journal of Political Economy, Vol. 103, No. 2, April 1995;

[53] “For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest. These government programs, however, also benefit the rich because they insure them against their worst nightmares about their very old age: either not being able to afford the medical care that they need, or being left destitute by huge medical bills.” Mariacristina De Nardi, Eric French, and John Bailey Jones, “Why Do the Elderly Save? The Role of Medical Expenses,” NBER Working Paper No. 15149, July 2009, p. 2;