LTC Bullet: Amada Keynote

Friday, November 12, 2021

Seattle—

LTC Comment: Amada is a model for home care delivery and financing from which Medicaid should learn. Details follow the ***news.***

*** WA CARES FUND problems dominate the news as these three recent LTC Clippings indicate:

11/1/2021, “Leaders are saying — and writing — the magic word in regard to a misguided long-term-care law: ‘repeal’,” by Elizabeth Hovde, Washington Policy Center
Quote: “Momentum is building to repeal the Legislature’s unpopular long-term-care law and accompanying payroll tax that starts in January. A Nov. 1 press release announces that Reps. Joe Schmick, R-Colfax, and Peter Abbarno, R-Centralia, have drafted legislation to repeal the law, a Washington Policy Center recommendation, calling the long-term-care program it creates ‘unfair,’ ‘inadequate’ and ‘insolvent,’ and rightly pointing out that the payroll tax is ‘regressive.’ The draft legislation has the support of House Republicans.”
LTC Comment: Given that Washington voters have twice rejected the WA Cares Fund, this legislation to repeal it has a good chance to succeed.

11/1/2021, “Initiative could change Washington's controversial long-term care fund,” by Drew Mikkelsen, King 5
Quote: “Backers of an initiative to change the state’s new long-term care fund, called the WA Cares Fund, said they are not having trouble getting signatures. ‘Just say we're trying to make the long-term care tax optional. That's all you have to say is that one sentence and they go, ‘Where do I sign?'‘ said Cary Condotta, co-founder of Reform Washington, the organization behind I-1436. … If enough signatures are turned in by the end of the year for the initiative to reach the Legislature, lawmakers would have three options: make the program optional, send the issue to the voters next November, or offer an alternative to the initiative to voters.”
LTC Comment: Freedom to choose? Naw, can’t have that, say Washington State legislators. 

11/9/2021, “Class action lawsuit filed against new WA long-term care tax,” by Rachel La Corte, Associated Press
Quote: “Opponents of a mandatory payroll tax to fund Washington state’s new long-term care program filed a class action lawsuit Tuesday in federal court seeking to stop the January start of the payroll premium for most employees in the state. … Among the arguments made by the suit is that the WA Cares Fund violates a federal law that forbids the state from passing any law that requires employees to participate in a plan that provides sickness or medical benefits. It also says that the disparate treatment of people paying the tax but not receiving benefits if they are not a Washington resident violates the Equal Protection and the Privileges and Immunities clauses of the U.S. Constitution.”
LTC Comment: Latest on the WA boondoggle. ***

*** LTC CLIPPINGS are a benefit received my premium members ($250 per year) of the Center for Long-Term Care Reform. Center president Stephen Moses scans the academic and popular media for critical studies, articles and data LTC professionals need to know. He sends an average of two brief email messages per day (like the ones above) to subscribers. Regular Center members ($150 per year) receive a weekly LTC E-Alert compendium of the previous week’s LTC Clippings. Both options provide members a way to stay on top of critical news and information so they are not blindsided by clients who have important knowledge before they do. Join the Center here. *** 

 

LTC BULLET: AMADA KEYNOTE

LTC Comment: Amada Senior Care provides home care through franchisees. CEO Tafa Jefferson reports that over half the company’s clients own private long-term care insurance. Amada seeks out LTCI owners to become clients and then assists them to obtain all the benefits they’re entitled to under their policies. When more funding is needed, Amada helps customers explore home equity conversion and/or life settlements. If only Medicaid thought more creatively about diverting consumers away from dependency on public assistance.

Center for Long-Term Care Reform president Stephen Moses delivered the keynote address to Amada’s annual franchisees’ conference in Dana Point, California on October 27. After celebrating the company’s creative approach to private home care financing, he delivered the following remarks.

Amada Keynote Address
by
Stephen A. Moses

Most high-cost long-term custodial care is funded by Medicaid and is still delivered primarily in nursing homes. Quality is problematical because Medicaid often pays less than the cost of providing the care. When you’re losing money on every patient, you can’t make up for it in volume. But it seems like that’s exactly what many politicians want to attempt.

Most people prefer to “age in place.” I expect one of your biggest challenges is to find people to provide home care. Paid caregivers are in short supply. The pandemic made the shortage critical. But, what’s the problem?

It’s a steady job; lots of overtime; you’re doing God’s work. On the other hand, caregivers work long hours, move heavy objects and clean up smelly messes--for fast-food wages. Who wants to stay home and watch Netflix when you could be changing bedpans and turning patients?

You’re in this whirlwind business of coordinating and providing long-term care in the home. So I expect you often feel more like contestants in the Squid Game.

My Background

I attend a lot of big long-term care conferences. The keynoters are usually mountain climbers, motorcycle CEOs, or they come from some other exotic background. I congratulate you on picking someone with many years of work experience in long-term care.

I’ve been working in this field for about forty years. Let me tell you a little bit about that journey to establish my bona fides and give you a little background on the history of long-term care insurance and how its prospects have been affected by government policies.

I first got involved in 1982 as a U.S. government employee working in the Seattle regional office of the Health Care Financing Administration, the now defunct predecessor of the Centers for Medicare and Medicaid Services.

I did research about Medicaid and long-term care in the states of Oregon and Idaho. I concluded Medicaid was doing more harm than good and that it was stifling the market for a then new and promising product called long-term care insurance.

My HCFA bosses didn’t like that conclusion. They thought regional office staff shouldn’t be doing policy studies, so they threatened me with negative personnel actions if I kept distributing my report.

But it was too late. The HHS Inspector General and the Government Accountability Office liked what I’d written and both agencies went on to conduct similar studies on a national level.

In fact, the Inspector General hired me out of HCFA to conduct its national study based on my findings in Region 10. Recommendations from the IG’s resulting 1988 report became federal law in the Omnibus Budget Reconciliation Act of 1993.

Those changes included longer and stronger transfer of assets restrictions for Medicaid eligibility and mandatory estate recovery. The idea was to aim Medicaid toward the truly needy so others would have a stronger incentive to plan ahead and insure for long-term care.

In the meantime, a small long-term care insurance brokerage in Seattle called LTC, Inc. had just received a big contract from American Express to take its local marketing strategy national. They hired me as their Director of Research in 1989.

I published a lot of articles, conducted several state and national studies many of which are linked on your electronic handout, and gave numerous speeches, but in 1995 General Electric bought American Express’s long-term care business. A couple years later GE also bought LTC, Inc.

Suddenly I was working for a giant international company which put the same kinds of restraints on me that I left government to escape. To do the kind of disruptive research and advocacy I’d become known for, I could not be under the thumb of corporate overlords worried I might say something to the media that could embarrass them.

So, I told GE: “You need me doing what I do, but I can’t do it working for you. So give me the money to start an independent think tank and I’ll pursue research and advocacy that will help you market your product. After all, you can’t sell long-term care insurance on one side of the street when the government is giving it away on the other.”

So I founded the Center for Long-Term Care Financing as a 501c3 charitable non-profit in 1998, but I quickly learned I couldn’t afford to be a non-profit. It was too expensive to keep all those records and too bothersome to maintain a Board of Directors that always wanted to tell me what to do. So the Center became a for-profit, more accurately a no-profit, in 2005.

In that same year, we had another opportunity to impact federal law. The American Health Care Association, the big nursing home lobby, hired me to work half time in DC promoting policies that would return Medicaid to the needy and incentivize others to save, invest and insure so they could pay privately for long-term care. Seattle to DC was a long commute, but that’s what I did for six months, two weeks on and two weeks off.

We succeeded. The Deficit Reduction Act of 2005, actually passed in 2006 when Vice President Cheney flew in from overseas to break a tie in the Senate. It put the first cap ever on Medicaid’s home equity exemption and unleashed the long-term care partnership program that California Congressman Henry Waxman had hamstrung years before.

These were important steps in the right direction, but they didn’t solve the problem. Most Americans still ignored the risk and cost of long-term care until they needed it and then slipped quickly and easily onto Medicaid. So we turned our efforts to waking the public up.

In December 2007, I teamed up with some industry sponsors, bought a silver FJ cruiser and a 16-foot Airstream trailer, plastered it with corporate decals and headed out on a 16-month “National Long-Term Care Consciousness Tour.” I did a lot of radio, TV and print interviews, trained insurance agents, gave speeches to community groups and, really, addressed anyone who would listen about the importance of long-term care planning.

When the Silver Bullet of Long-Term Care and I visited Met-Life’s Connecticut headquarters, they greeted me with this video. Would you play it please Rick? [Play video.]

I guess you could call me the Nomadlander of long-term care.

Then in March of 2009, my wife of 45 years, was stricken with a glioblastoma. That’s an aggressive form of primary brain cancer, the same disease that took Ted Kennedy and John McCain. Suddenly, I went from speaking about long-term care in the abstract to delivering it in the most concrete ways for the next 20 months.

That experience, along with guiding my own and my late wife’s parents through the shoals of aging and long-term care, sensitized me intimately to what we’re all dealing with in this issue.

In the past 16 years we’ve made little further progress toward getting people to take the risk and cost of long-term care seriously and early enough to prepare for it. The number of carriers offering the product has declined from over 100 to about a dozen.

In fact politicians and policy analysts have drifted toward a very different model. They want to fund long-term care with compulsory social insurance funded with payroll deductions that go into a “trust fund” like Social Security and Medicare. I’m afraid that would be like trying to extinguish a fire by dousing it with gasoline.

So here’s the big picture: long-term care is a huge risk and cost yet most people don’t worry about it until they need it. Then, because they have not prepared financially, they drift toward public programs that mostly provide institutional care and pay too little to ensure quality.

America and Americans are prosperous, especially now that the Federal Reserve has printed so much new money. Yet very little of that money finds its way into funding the kind of home-based long-term care people prefer.

Puzzling Questions

Does all this seem a little incongruous to you? It does to me. It raises several questions in my mind:

(1)      All the studies show that the vast majority of Americans prefer to age in place, at home not in nursing homes or assisted living facilities. And yet, our long-term care system remains institutionally biased. Why?

(2)      When they’re spending their own money, consumers gravitate toward home and community-based care. So …

Why do so many people rely today on underfunded public programs and so few pay privately?

Why has private-pay declined to 7.1% of nursing home revenue (5.9% in urban areas)?

Why are assisted living facilities accepting more Medicaid residents despite that program’s extremely low reimbursement rates?

Why are out-of-pocket expenditures only 11% of home health costs?

(3)      If the risk and cost of catastrophic long-term care spend down is wiping out life savings all across the country, as the academic journals and popular media are constantly telling us, why is the public still asleep about that risk and cost? Why is private long-term care insurance so hard to market?

(4)      We know Medicaid is a means-tested public welfare program with apparently stringent income and asset eligibility limits. So, how is it that once people need expensive long-term care, they quickly become eligible for Medicaid?

(5)      America is awash in wealth. According to Federal Reserve data, the median net worth for Americans in their late 60s and early 70s is $266,400. Seniors hold over $9 trillion in home equity alone. Why are huge potential sources of private LTC financing, such as home equity and private insurance, only minor contributors to long-term care providers’ revenue? (Present company excepted with regard to the insurance.)

Those are the thorny questions I propose to answer for you this morning.

But, I have my work cut out for me: First I want to persuade you that a lot of what you know about long-term care policy is wrong. Then I need to convince you that what I’m going to explain is actually correct.

Mark Twain said it best: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

My Story

The best way I know to explain these things is to tell you the story of how I learned them.

In the early 1980s, I was the Medicaid state representative for Oregon in the Health Care Financing Administration.

My job was to ensure that Oregon’s Medicaid program complied with federal rules and regulations. I led an annual program assessment to ensure that was the case.

During one of those assessments, I came across a program that puzzled me. Oregon’s estate recovery unit was collecting enough from deceased recipients’ estates to offset 1.7 percent of total Medicaid vendor payments and five percent of the cost of the state’s Medicaid nursing home expenditures. $3.8 million was still a lot of money in 1981.

Remember, back then, Medicaid was all nursing home care. I actually helped Oregon’s Senior Services Division implement the first Medicaid home and community-services waiver program in the country. That’s where the decades-long campaign of rebalancing Medicaid long-term care from nursing homes to home care began.

Now, here’s the quandary that jumped out at me. If Medicaid is welfare and you have to be poor to get it, how did so many people spend so much time in Oregon’s nursing homes on Medicaid, but the state still collected all that money from their estates?

This contradicted everything I thought I knew about Medicaid. Back then, as now, the conventional wisdom about long-term care and Medicaid went something like this.

“The risk and cost of long-term care is huge. People are spending down into impoverishment all across the country if they need extended care. When they run out of money, they turn to the Medicaid safety net. But Medicaid pays mostly for nursing home care, which people don’t want. They want home care, but too few can afford it. Private long-term care insurance could have helped finance home care, but it failed because it’s too expensive and complicated. The public remains largely ignorant or in denial about who pays for long-term care. So government keeps picking up more and more of the tab. Therefore, most conclude, government should pick up the whole tab.”

Does that about sum it up?

This peculiar state of affairs sent me to the library to study Medicaid eligibility rules and the long-term care financing market. What I found blew me away.

Medicaid does appear to have stringent income and asset limits, but that’s an illusion. The apparent income limit of $730 per month is obviated by the fact that Medicaid subtracts applicants’ personal health and long-term care expenses from their income before comparing the result to that low income limit.

The rule of thumb nationally is that anyone (well, anyone 65 or older with a qualifying medical need) with an income of less than the monthly cost of a nursing home qualifies for Medicaid. That can easily be $7,000 per month or $84,000 per year. Definitely not “low income.”

The truth about Medicaid long-term care income eligibility is that people do not need to be low income to qualify. They only need to have a cash-flow problem due to high personal health and long-term care expenditures. That is a condition most older people find themselves in once they need expensive long-term care.

Medicaid’s eligibility rules governing assets are similarly misleading. The academic and popular literature focus on the seemingly draconian resource limit of $2,000 and conclude people must be spending down huge amounts of wealth to qualify. But that $2,000 limit only applies to “countable” assets like cash, bank deposits, stocks and bonds, in fact anything easily convertible to cash.

But older Americans hold most of their wealth in assets that Medicaid considers “non-countable,” including home equity. Medicaid exempts between $603,000 and $906,000 of home equity depending on the state. According to recent research, that exemption prevents virtually all elderly Americans from having to use their home equity to fund their long-term care.

Besides the home equity exemption, which at least has an upper limit, Medicaid also exempts the following with no dollar limit: one automobile, prepaid burial plans, personal belongings including heirlooms, term life insurance, one business including the capital and cash flow, and Individual Retirement Accounts if they’re in payout status as most are for older people because of the Required Minimum Distribution rules.

The quickest and easiest way to become eligible for Medicaid long-term care benefits without spending down for care is to convert countable assets into exempt resources by purchasing the latter with the former. The lawyers who help affluent clients qualify for Medicaid benefits maintain long lists of exempt assets which they encourage the clients to purchase.

Medicaid planning attorneys also have a well-stocked armory of special legal trusts, annuities and so-called “half-a-loaf” strategies they use to qualify even wealthier clients for Medicaid.

I expect you’ve heard about this kind of “Medicaid planning” and scratched your heads. Who in their right mind with the wealth to purchase quality long-term care in the best and most appropriate venue would choose instead to “game” Medicaid and end up in the kind of underfunded welfare-financed facility you read about in the newspapers. That’s an objection I hear often.

But there are reasons why this happens. By the time elderly people need long-term care, they are often too infirm physically or cognitively to make their own decisions. Their adult children, that is to say their heirs, who have a financial conflict of interest, are in control. What is not spent on Mom and Dad’s long-term care will go to the heirs.

Nevertheless, most adult children do have their parents’ best interests top of mind. But the lawyers who advise them say not to worry about Medicaid’s poor reputation. They’ll get Mom and Dad into the best facilities that only have a few Medicaid beds.

How do they do that? They hold back some “key money” to ensure the client can pay privately for a few months. Nursing homes receive about half again as much from private payers as from Medicaid recipients, so they roll out the red carpet for people who can pay cash. After a few months, the family’s lawyer flips the legal switch and, voila, Medicaid takes over paying.

The sad truth about Medicaid planning is that poor people, for whom Medicaid is supposed to be a safety net, get wiped out financially very quickly because they don’t know the tricks of qualifying for Medicaid and don’t have access to special legal advice. So they end up in the least desirable nursing homes that rely mostly on Medicaid’s penurious reimbursement rates.

Answer the Questions

Let’s answer the questions we posed earlier:

1.  Why do most people prefer home care but end up in nursing homes? Medicaid started paying for nursing home care, including room, board, medical care and laundry facilities, in 1965. Ostensibly stringent financial eligibility rules are actually very generous and elastic. Stories of catastrophic long-term care spend down are just anecdotal. There is no empirical evidence to prove that problem is widespread. So analysts cite none. No wonder people don’t worry about long-term care until they need it.

2.  Why has private pay nearly disappeared from nursing home revenue? Why are assisted living facilities tempted to accept Medicaid? Why is so little home health care funded privately? Because government co-opted long-term care financing with well-intentioned but perversely counterproductive policies.

3.  Why is the public still asleep about long-term care risk and cost? Why is long-term care insurance so hard to sell? Because consumers have been able to ignore the risk, avoid the premiums, wait to see if they ever need extended care, and if they do, get the government to pay. As undesirable as the care government pays for may be, at the point of facing catastrophic costs, it’s not hard for the elderly, and their heirs to justify qualifying for Medicaid. Any port in a storm.

4.  How do so many financially comfortable people become eligible for Medicaid so quickly and without spending down significantly? Medicaid’s financial eligibility rules devastate the poor who lose everything quickly but welcome the middle class and affluent who have legal and financial advisers to guide them.

5.  Why does the richest country in the world not tap the two biggest potential sources of private long-term care financing? Medicaid exempts nearly all home equity. Without their biggest asset at risk for long-term care, few people buy insurance to protect it.

What Can We Do?

What can we do to fix this ailing long-term care market?

What are policy analysts and the politicians who listen to them doing about this? Not much. They never ask “how did we get into this mess?” so they never discover that government funding and regulation are the primary causes. They just recount all of the dysfunctions afflicting long-term care and insist we need a bigger, better, compulsory, payroll-funded social insurance program. If their models, to wit Social Security and Medicare, were not under water by trillions of dollars in unfunded liabilities already, maybe they’d have a case to make. As it is, programs like the Washington Cares Fund and the federal WISH Act proposal only make you want to say “Oh no, here we go again.” I’ve analyzed those programs in articles cited in your handout. Ironically, the WA Cares Fund ignited a long-term care insurance fire sale by offering an exemption from its otherwise mandatory payroll tax for people who can show proof they have private long-term care insurance by November 1. The resulting demand for the product overwhelmed the insurance industry’s ability to meet it. The market shut down before the hundreds of thousands of people who wanted the exemption could qualify for it by purchasing a private policy. I have a column coming out in Broker World next week titled “LTCIrony.” [Publication of this article was delayed until Broker World’s December issue.]

What are LTC insurance carriers doing about these policy issues? Not much. The carriers have been very creative modifying their policies to deal with common objections. The newer “hybrid” policies, for example, counter the “what if I don’t need it” complaint, by returning a payment whether beneficiaries need long-term care or not. But there’s not much they can do about the “too expensive” objection. Fire insurance wouldn’t be cheap either if every fourth house burned down. With regard to the issues we’ve identified today as inhibiting the long-term care insurance market, the carriers and their industry groups have been mostly silent. Either they don’t get it or they’re too scared to offend the powers that be. I’ve made the case to them that they should support me and the Center for Long-Term Care Reform. We can say what needs to be said and advocate for the policies that are needed. And we’re not required to disclose our contributors, nor do we do so.

What are the long-term care providers and their trade associations doing about this? Again, not much. Their principle revenue sources are Medicaid and Medicare. Virtually all of their lobbying effort goes into asking for more money from those sources. It’s hard to think about the big picture and the need for major public policy changes when you’re struggling to keep the doors open for another month. I think the most promising source of support for better long-term care policies is companies like yours that would benefit tremendously from more private payers and less public funding.

What am I doing about this? I figure it’s really very simple actually. We want people to take the risk of long-term care seriously and buy insurance in case they ever require a long, expensive bout of care. So, the government should stop giving away what the insurance industry is trying to sell. Require people to use their home equity, through reverse mortgages or other methods, to fund their long-term care before they turn to public safety net programs.

Give the safety net programs back to the poor whom they were originally intended to serve. Do this and huge new revenue will flow into the service delivery system, most people will get the kind, quality, and type of care they prefer by paying privately; Medicaid will serve fewer, cost much less, and people still dependent on public assistance will also get better care because of the increased private revenue going to providers.

What’s Standing in Our Way?

I mentioned earlier that we made great progress changing federal law in 1993 and 2005, but we’ve made little or no progress in the last 16 years since. Why? What’s changed?

In the 1990s and early 2000s, politicians still cared about fiscal responsibility. Remember the “Contract With America” in 1994 and the worries about excessive spending and skyrocketing debt that ensued when the dot-com bubble burst?

Back then, we were able to get the powers that be to listen about ways to reduce government long-term care expenditures while simultaneously improving care for rich and poor alike. That’s our mission after all.

But nowadays no one seems to care about excessive government spending. The Federal Reserve just prints more money to cover whatever the U.S. government wants to spend.

It’s as though our public officials are guided by Modern Monetary Theory. It says that a country borrowing in its own currency can accumulate unlimited debt without creating a problem unless or until inflation flares.

Well, in case you haven’t noticed, inflation is finally flaring. So the Fed’s monetary policy of meeting every financial crisis—including the dot-com collapse, the 2008 housing bust, and the Covid recession—with more money printing, spending and debt may be slowly ending.

Ironically, while the politicians want us to believe that their big spending plans will be paid for by the wealthy, the truth is that inflation, the most pernicious tax of all, which hits low income people hardest, will be the price we pay for decades of careless monetary and fiscal policy.

The only silver lining in that cloud is that once inflation forces policy makers to refocus on responsible public policies that keep spending under control and incentivize personal responsibility, saving and private insurance, perhaps then our proposals regarding Medicaid and long-term care will have a better chance to succeed.

Want to Learn More?

Now, I think I know what’s on the tips of your tongues right now. Tell me Steve, how can we learn more about all this? If that is the case ….

I would refer you to two of my recent publications. Both are monographs. The first is titled “How to Fix Long-Term Care Financing.” It presents the material I’ve covered today, but it also includes a long annotated bibliography of books, elder law treatises and law journal articles on Medicaid planning. I think you’ll be amazed how vast and sophisticated that literature is.

The other monograph is titled “Medicaid and Long-Term Care.” It presents my argument and evidence in a more formal, scholarly way with abundant citations to the peer-reviewed academic literature on long-term care to make and substantiate my points.

Finally, you can find over 1300 of my articles, we call them “LTC Bullets” archived chronologically and by topic at the Center’s website, www.centerltc.com.

The Center is a membership organization, so please consider joining and working with us to achieve these goals. Amada is a member in good standing.                                                                        

I think I’ll stop there. Thank you for your attention. I will be around the rest of the day and this evening. If you have any questions, please find me and ask them.