LTC Bullet: Paragon’s Virtual Long-Term Care Event

Friday, January 19, 2024

Seattle—

LTC Comment: For a scintillating 75-minute virtual LTC event, go here and read on for a transcript of the program’s opening commentary, after the ***news.***

*** MEDIA COVERAGE of the Paragon Health Institute’s January 9, 2024 “virtual LTC event” and related issues is notable. Following are links to and LTC Clippings about this coverage.

1/9/2024, “Qualifying for Medicaid LTC Benefits Could Get Tougher,” by Allison Bell, ThinkAdvisor - LINK to LTC Clipping

1/12/2024, “Public policy must address flaws in long-term care financing, experts say,” Kathleen Steele Gaivin, McKnights Senior Living and McKnights Business Daily - LINK to LTC Clipping

January 2024, “Easy Medicaid Access Discourages Long-term Care Planning,” by Kevin Stone, Health Care News - LINK to LTC Clipping

1/15/2024, “Preserving long-term Medicaid for the poor,” by Gary D. Alexander, Washington Times - LINK to LTC Clipping

1/16/2024, “Medicaid should not be for the middle class | Opinion,” by Sally Pipes, PENNLIVE.com - LINK to LTC Clipping 

1/16/2024, “Medicaid should not be for middle class,” by Sally C. Pipes, TribLive
No
LTC Clipping

*** ILTCI ’24 seeks exhibitors and sponsors for this year’s conference in San Diego. See the current sponsor list here. Inquire about and/or request exhibit space here. Register here. Register now to capture the $100 Early Bird Discount which ends today, January 19. This year’s meeting convenes March 17 to 20 at San Diego’s newly renovated Town & Country Resort. This is the big one with the best LTCI content and networking you’ll find anywhere. I’ll host a special session: “Stephen Moses (Center for LTC Reform president) will present two new papers “Long-Term Care: The Problem” and “Long-Term Care: The Solution.” He will explain why LTC financing reform has languished since the Great Recession, but will flourish anew soon. Steve will also preview his forthcoming paper ‘Ending Structural Long-Term Care Racism.’ Don’t miss this review of the past and forecast of the future by the 2019 ILTCI Recognition Award recipient.” ***

*** ILTCI RECOGNITION AWARD: The ILTCI Conference is reviving this tradition. Marc Cohen was the ILTCI Recognition Award’s first recipient in 2018. Steve Moses received the honor in 2019. After the 2020 conference was cancelled due to Covid, the ILTCI Recognition Award was not announced or bestowed for the 2021 to 2023 conferences. But kudos to 2024 ILTCI Conference Chair Karen Smyth and the organization’s Board of Directors for restoring the tradition in 2024 with this announcement: “Now is your chance to nominate a person(s) or organization that has made a significant, long-term contribution towards the attainment of the ILTCI vision. Help us showcase the best of our industry and acknowledge their contributions. Nominees must have worked within the long term care insurance industry in some capacity for minimum of five years to qualify. Submissions will be accepted through February 1, 2024.” Find the nomination form here. Act soon as the deadline is only 12 days away! ***

*** STOP. Go back one item. Don’t skip over this chance to nominate an organization or person who has made a “significant, long-term contribution towards the attainment of the ILTCI vision.” The ILTCI vision is “to create an environment for aging in America that includes thoughtful, informed planning that takes into account the most effective and efficient use of resources in addressing the risks and costs of long term care for all levels of American society.” Nominate someone for the ILTCI Recognition Award here now. ***
 

LTC BULLET: PARAGON’S VIRTUAL LONG-TERM CARE EVENT

LTC Comment: On January 9, 2024, the Paragon Health Institute sponsored and hosted a 75-minute virtual LTC event. Check out a video recording of the proceedings here.

Paragon president Brian Blase opened and closed the program with summary remarks. Age wave visionary Ken Dychtwald moderated the discussion and explained how LTC fits into the broader cultural, demographic, and gerontological context. He asked the participants many provocative questions. Steve Moses briefly summarized findings from two Paragon reports—“Long-Term Care: The Problem” and “Long-Term Care: The Solution.” Two discussants reacted: Richard Johnson from the Urban Institute and Mark Warshawsky from the American Enterprise Institute. Over 100 people attended via Zoom. They asked an unusually large number of questions (34) for such a brief program, some of which were answered live and others are addressed in the Paragon reports.

Steve set the stage with a 12-minute presentation, the text of which follows below. Rich and Mark had six minutes each to respond. Their feedback and their answers to questions reflected substantial agreement, but also many insightful diverging views. Do click through to watch the whole program and see for yourselves. In the meantime, here’s how Steve set the stage:

Welcome and thank you for participating in today’s discussion.

Long-term care in America is broken, marked by nursing home bias, too little home care, dubious access and quality, inadequate funding, caregiver shortages, stressed out unpaid family caregivers, and growing complaints of structural racism.

Everyone bewails these problems, but few ask or explain their cause. Most jump to “solutions” that involve more government money and regulation. But, arguably, government money and regulation caused these problems. Certainly, Medicaid is at their root.

Medicaid reimburses providers 70% of market rates, too little to ensure access and quality. Resulting low salaries cause caregiver shortages and worsen the burden on families. Federal law underwrites Medicaid’s nursing home bias and impedes home care alternatives.

Medicaid’s impact is much greater than its 42% contribution to LTC spending implies. By requiring recipients to contribute their incomes, Medicaid shifts costs to the private sector. It relies heavily on recipients’ Social Security income, and on Medicare, which pays higher reimbursements, enabling Medicaid to pay often less than care costs.

This arrangement is unsustainable. The boomer generation starts turning 85 in 2031, when their LTC need is greatest, just as Medicare and Social Security face statutory cuts. With higher caseloads, less revenue from Social Security, and reduced Medicare payments, rising Medicaid expenditures will constrict budgets, further impairing providers’ ability to deliver good care.

What caused Medicaid’s dominance that created these problems? Policy makers sought to provide a safety net for the needy, but they created a financial fail safe for the elderly instead. A program reputed to help only low income people who have spent down their savings for care is actually available to higher income people who preserve most of their wealth.

As a rule of thumb, monthly income below the cost of a nursing home is not disqualifying; most large assets, such as home equity, are exempt; any remaining countable wealth is removable by purchasing exempt assets; and if eligibility is still out of reach, legal advisers extend it to affluent clients by means of trusts, annuities, and other financial strategies.

What has this system wrought? By giving publicly financed LTC to the middle class and affluent late in life and allowing them to preserve wealth, it encouraged consumers to ignore this risk early in life. It indemnified them against the worst consequences of failing to prepare. In other words, Medicaid created a “moral hazard” that discouraged early and responsible LTC planning.

Despite constant warnings that aging Americans are “Dying Broke,” few people plan for LTC. Private insurance languishes. The high “out-of-pocket” costs that CMS reports are deceptive. Most are payments from income, not assets, toward the cost of care for people already on Medicaid. If you back out all other LTC payment sources, what remains that could come from personal savings is only 6%.

Taking all this into account, we concluded that to end LTC’s problems would require ending Medicaid as a late-life, wealth-preserving funding source for all but the truly indigent. The solution is to convert Medicaid into the program most think it was originally intended to be and many claim it still is, a safety net for people actually impoverished by private LTC costs.

To achieve that objective, we propose to end all Medicaid rules that enable people with substantial incomes and assets to qualify. On the income side, that means eliminating the “medically needy” method of determining income eligibility and stopping the use of income diversion trusts in “income cap” states. All private income would remain in the private-pay system instead of coming to providers at harmfully low Medicaid rates as now.

On the asset side, we propose to eliminate the ways people qualify for Medicaid benefits while preserving wealth. Purchase of exempt assets to reduce countable resources is the biggest of these and the least understood. The home equity exemption, over $1 million in some states, should disappear entirely. The look-back period for asset transfer penalties should be 20 years instead of five. Legal schemes to remove wealth from LTC spend down should end.

Phase these changes in gradually. Exempt everyone too old or infirm to adapt and prepare. People 55 or older and younger people with chronic disability or early onset dementia would be unaffected. Tell others that Medicaid eligibility rules have changed; there is no way to fund LTC and preserve estates going forward without taking personal responsibility; so they should prepare now in case they need care later. Private firms can estimate individuals’ risk levels actuarially giving each a planning goal to achieve by a date (or age) certain. People who prepare for LTC risk at younger ages could have a lower goal set.

Is this plan draconian? No more so than the way Medicaid is described today as requiring “catastrophic” spend down into total “impoverishment.” Consider the plan’s benefits. Consumers would prepare for LTC instead of ignoring that risk until they need care. Fewer would rely on Medicaid, substantially reducing numbers of high cost “dual eligibles.” Reduced Medicaid budgets could pay providers market rates, which would improve quality and relieve caregiver shortages. Families would mobilize to help elders plan and protect inheritances by avoiding Medicaid instead of taking advantage of it. With most LTC funded privately, families could turn over the heaviest and most intimate personal care to paid caregivers. Nursing homes would provide sub-acute and rehab care but long-term custodial care would devolve naturally toward home care as market-based consumer preferences prevail.

The challenge to achieve these benefits may not be as great as we once thought. Research, by one of today’s interlocutors, Dr. Johnson, found that while 56% of people turning 65 will need LTC, 44% will not. The average $121,000 cost for those who do need care, 43% of which Medicaid pays today, could be financed by setting aside the “present discounted value” (PDV) of $70,000 at age 65. Starting earlier, less would be needed.

We also identified substantial wealth held by aging Americans that is untapped for LTC. It is locked up in home equity ($12 trillion), retirement savings ($35 trillion) and life insurance ($21 trillion). By mobilizing this wealth to fund LTC, reliance on Medicaid could be drastically reduced and access to quality care vastly increased. But that objective faces two obstacles.

First: that wealth already supports other worthy goals such as estate planning, retirement savings, and life insurance. Second: young families saving for retirement while making car and mortgage payments cannot assume the added burden of LTC planning. We resolve those two challenges by reprioritizing LTC among life’s risks and offering ways for people to meet their planning objective more easily.

LTC is the biggest financial risk aging people face, but Medicaid obscured that fact. Granting LTC top priority, public policy should allow people to meet their planning responsibility by earmarking wealth they are already accumulating for other purposes to be used first for LTC if needed. We propose seven “LTC Choices” to help them do that.

LTC Choice #1 recognizes private insurance would be more affordable covering only average risk. Choice #2 proposes a new tax-favored account for LTC. Numbers 3, 4 and 5 would enable people to earmark part of their home equity, retirement savings, and life insurance for LTC if and only if needed. LTC Choice #6 does the same for estates and #7 favors people who start younger with more easily attainable goals.

With average LTC risk and cost handled in the private market, the burden on Medicaid will decline substantially, but not disappear. Medicaid for catastrophic coverage will remain but only for the truly indigent whose savings have actually been consumed by private LTC expenditures.

Exploding Medicaid costs and the service delivery and financing dysfunctions they caused are undesirable and insupportable. What could be more reasonable than to solve them by converting Medicaid into the program most people think it already is?