LTC Bullet: LTC TANSTAAFL

Friday, April 7, 2023

Seattle—

LTC Comment: Free lunches are the most expensive after the ***news.***

*** CENTER’S 25^TH ANNIVERSARY: On April 1, 1998 attorney David Rosenfeld and I founded the Center for Long-Term Care Financing (now Reform). A quarter century later, the Center is still going strong. David moved on to play a major role as a Congressional staffer in passing our proposals as part of the Deficit Reduction Act of 2005. Damon joined as VP for Administration in 2002 and he’s kept us in business ever since. We thank our corporate and individual members for your many years of support, encouragement, collegiality and friendship. The most promising opportunities to improve LTC financing public policy are immediately ahead. Stay committed with us. ***

LTC BULLET: LTC TANSTAAFL

LTC Comment: TANSTAAFL: There Ain’t No Such Thing As A Free Lunch. That immortal verity pertains today more than ever. But equally true is its corollary that everyone wants a free lunch and many will fall for the promise of one when offered.

Government is the worst purveyor of free lunches that turn out to be very expensive indeed. Pay a little now and get a lot later. That’s the formula employed by Social Security, Medicare, Ponzi, and Bankman-Fried. The outcome is always the same. Sooner or later there aren’t enough new suckers to keep the game going.

Medicaid LTC’s free lunch isn’t as obvious. You don’t have to pay in to get the bonanza later. You only have to be broke. Medicaid even says that if you aren’t broke and you need expensive LTC, you have to become broke by paying for your own care first to qualify.

Not much of a free lunch if you put it that way. But here’s the twist. When the time comes that you need high-cost LTC, you don’t have to impoverish yourself. Reaching “low income” is easy. Medicaid subtracts your private health and LTC costs. Most big assets are exempt so uncounted.

Here’s how Medicaid LTC offers a free lunch. It turns the typical Ponzi entitlement scheme on its head. It says “ignore the risk of LTC and if you need it you’ll lose your life’s savings paying for it before you get any help from the government.” Then, when you need care, government pays anyway, ignoring the draconian warnings.

Medicaid LTC’s free lunch is the worst of both worlds. People ignore the impoverishment warnings with impunity. They don’t plan, save, invest or insure for LTC. The fact that government always paid in the end enabled their denial of the risk.

There are two ways to eliminate Medicaid LTC’s upside down free lunch. You can force everyone to pay a tax to fund a new entitlement for LTC. That’s WA Cares. It turns LTC into a conventional social insurance free lunch scheme.

A better approach is to establish a LTC planning responsibility, offer many ways to meet it, monitor compliance, but only enforce responsibility when it’s unmet voluntarily. Instead of threatening catastrophic spend down maybe someday without following through, incentivize responsible early planning as a way to avoid any government compulsion.

That’s the plan that I’m working on now, details of which are being formulated every day. So stay tuned.