LTC Bullet: LTC Bankruptcy

Friday, March 4, 2022

Seattle—

LTC Comment: Is this Wall Street Journal anecdote of LTC bankruptcy commonplace, occasional, rare … or contrived? Considerations after the ***news.***

*** RECENTLY PUBLISHED ARTICLES by Steve Moses. We hope you’ll read these articles, join the Center for Long-Term Care Reform, and help us solve the long-term care financing problem. The Center’s “Membership Levels and Benefits” schedule is here. Join individually or urge your company or association to join as a corporate member so you can receive all the benefits of membership at no cost to you. Universal access to top quality care for all Americans (the Center’s mission) is achievable. Join us and make it happen! ***

“Trappings of LTC system leave operators trapped,” by Stephen A. Moses, McKnight’s Long-Term Care News, February 23, 2022.

“The Great Long-Term Care Compromise,” by Stephen A. Moses, Broker World, January 1, 2022

“The irony of long-term care advocacy,” by Stephen A. Moses, McKnight’s Long-Term Care News, December 17, 2021

“Long Term Care Irony,” by Stephen A. Moses, Broker World, December 1, 2021 (PDF version.)

“What works for long-term care and what doesn’t,” by Stephen A. Moses, McKnight’s LTC News, November 17, 2021.

“What’s better for senior living and care — the market or government?,” by Stephen A. Moses, McKnight’s Senior Living, October 25, 2021.

“Long-Term Care’s Problems Are Bad, Getting Worse, but Fixable,” by Stephen A. Moses, McKnight’s LTC News, October 1, 2021.

“Should Medicaid Protect $8 Trillion from Private Senior Living Costs?” for McKnight’s Senior Living, August 9, 2021

“The InLTCgentsia” for Broker World’s August 2021 issue. (PDF version.)

“Panel Gives States Pass in Collecting Assets for Medicaid Long-Term Care,” by Stephen A. Moses, Health Care News, July 2021

“Government Violates the Long Term Care Social Contract to Your Detriment, by Stephen A. Moses, Broker World, June 2021. (PDF version.)

“President Biden, tear down this wall,” by Stephen A. Moses, McKnight’s LTC News, June 23, 2021

“Using Medicaid to protect inheritances,” by Steve Moses and Brian Blase, The Hill, June 10, 2021.

“LTC financing: Be careful what you WISH for,” by Stephen A. Moses, McKnight’s Senior Living, June 7, 2021.

“The social contract for long-term care,” by Stephen Moses for McKnight’s Long-Term Care News, May 17, 2021. ***
 

LTC BULLET: LTC BANKRUPTCY

LTC Comment: Clare Ansberry describes a heartrending case of long-term care spending unto impoverishment in “Caring for Older Relatives Is So Expensive That Even AARP’s Expert Filed for Bankruptcy” (Wall Street Journal, 2/20/22). The anecdote perfectly fits a narrative repeated endlessly in the academic and popular media. To wit: all across America the high cost of long-term care is wiping out the savings of aging Americans and of their families who struggle to care for them. Therefore, they conclude in a classic non sequitur: we need to add long-term care to Medicare or create a new, compulsory, payroll-funded program to cover it.

Does catastrophic long-term care spend down happen? Of course. Consider the case this article describes. Amy Goyer worked for AARP as a “family and caregiving expert.” She provided long-term care for her parents. She gave care herself and spent her own money to supplement her parent’s incomes when paid care became necessary. She left her job and moved from DC to Arizona to be with her ailing parents when caregiving trips became too frequent. She maxed out $25,000 on credit cards, took out a home equity line of credit, borrowed from her boyfriend and ultimately declared bankruptcy. All this happened despite her parents having private long-term care insurance, a pension, Social Security, and VA benefits. It would be hard to imagine a more tragic case. In fact, it seems almost too bad to be true.

The Ansberry article summarizes a national crisis that the Goyer case characterizes  …

Family caregivers are the backbone of the nation’s long-term care system and provide an estimated $470 billion worth of free care—often at great personal cost. On average, caregivers spend 26% of their personal income on caregiving expenses, according to a 2021 AARP study, with most personal spending going to housing, including home modifications. A third of caregivers dip into their personal savings, like bank accounts, to cover costs, and 12% take out a loan or borrow from family or friends.

Could all of this be true and yet the predicate, that we need the government to take over long-term care and force everyone to pay for it like health care (Medicare) and retirement income (Social Security), be false? If so, how?

As tragic as the Goyer case is, we need to remember that she chose the course of action she took. At any point in her parents’ story, she could have qualified them for Medicaid. Their home equity was exempt and their huge health and long-term care expenses would have been deducted from their incomes before Medicaid’s low income eligibility threshold was applied. Qualifying them for Medicaid would of course have limited their choice of care setting and quality. Medicaid often means going to a nursing home, encountering long waiting lists for home care, and becoming dependent on Medicaid’s low reimbursements and poor quality reputation.

My point is not that Ms. Goyer should have taken this course instead of spending down into poverty as she did. I only mean to suggest that most people are not so self-sacrificial. Based on the fact that Medicaid pays for most expensive long-term care, it would seem that many do opt for that route instead. Nursing homes remain the dominant venue for long-term custodial care, but their private pay revenue has diminished to only 7.4 percent. Over 66 percent of their patients are covered by Medicaid and the welfare program’s extremely low reimbursement rates, often less than the cost of the care, account for half of nursing homes’ revenue. Home care is no different. Medicare, Medicaid and private insurance pick up about 80 percent of home care costs; out-of-pocket expenditures, only 10 percent.

Government, mostly Medicaid and Medicare pay for 70 percent of all long-term care. Private out of pocket costs for nursing home care have plummeted from 49 percent to only 23 percent since 1970. Half of that 23 percent is actually spend-through of Social Security (another fiscally vulnerable federal program) income that people already on Medicaid have to contribute toward their cost of care. Government has paid for most expensive long-term care for almost 60 years. That has anesthetized the public to long-term care risk and cost leaving most unprepared when catastrophic need arises.

Whatever its intentions, government set a long-term care trap for people. By making the high cost of long-term care go away for most, Medicaid anesthetized the public to long-term care risk, created institutional bias, hampered the home care market, and crowded out most private insurance. A few responsible people like Amy Goyer’s parents planned relatively well despite the perverse incentives in public policy. They even bought some, though obviously not enough, private long-term care insurance. She and they faced the sad choice of bankruptcy or welfare dependency.

The lamentable reality about long-term care in America today is that most people follow government’s lead if they need high cost long-term care. This results in an overwhelmed Medicaid program that pays too little to ensure quality care. The few like the family in this story who insist on paying their own way get wiped out financially. Forcing everyone into a new government funded and controlled program would only double down on the failures caused by the current government funded and controlled programs. For a full analysis and a better solution, read Medicaid and Long-Term Care.