 LTC Bullet: LTC Musings Friday, August 8, 2025 Seattle— LTC Comment: Three weeks of wandering around East Africa with hardly a thought about long-term care left me reflecting on four decades of struggling with that intractable public policy challenge. Some thoughts after the ***news.*** *** LTC CLIPPINGS: Did you catch these stories this week? Our LTC Clippings subscribers received them in real time including Steve Moses’s always trenchant, often ironic, sometimes humorous, usually concise “LTC Comments.” To subscribe or for a free trial, contact Damon at 206-283-7036 or damon@centerltc.com. Examples below: 8/2/2025, “Study: Medicare spends billions on medically unnecessary procedures,” by Donna Shryer, McKnights LTC News Quote: “A new study reveals that Medicare beneficiaries are receiving billions of dollars worth of medical care that offer little to no clinical benefit and may lead to harm. Researchers found that Medicare spent $4.4 billion annually between 2018 and 2020 on 47 different low-value medical services, with seniors paying an additional $800 million out of their own pockets.” LTC Comment: When government is the payer, the provider is the customer, and the patient is caught in between, this is what you get. ---------------------- 8/2/2025, “German nursing homes see cost for care explode,” by Volker Witting, DW Quote: “The cost of a stay in a nursing home has risen to an average of €3,248 ($3,760) per month, according to the German Association of Nursing Homes (vdek), an association that represents the interests of several statutory health insurance providers.” LTC Comment: We warned over
20 years ago that Germany’s LTC “insurance” plan would not be the end all
and be all it was being made out to be:
LTCI in Germany and
Don't Look to Germany for a Long-Term Care Model. Now reality is
setting as it is about to do for our Social Security and Medicare
entitlements. At least we dodged the LTC entitlement trap … well, except
in Washington State. *** LTC BULLET: LTC MUSINGS LTC Comment: I used to think long-term care was pretty simple and straight forward … both the problem and the solution. People become old, injured, or demented and they need help with activities of daily living. That help can be very expensive. But, like death, age and disability are things people don’t like to think about, so they tend not to plan for them. Consequently, many people end in need of LTC but unable to pay for it. So, government wanted to help. Medicaid came along 60 years ago this month and started paying for nursing homes, the main care venue available at the time. Two big things happened quickly:
Policymakers and politicians adapted by making Medicaid LTC harder to get with asset transfer restrictions and other eligibility controls. But lawyers specializing in “elder law” found ways around Medicaid’s eligibility restrictions, making their affluent clients as quickly and easily eligible as the poor, often more so, by streamlining and systemizing the application process. When I started working on the LTC issue in 1982, this was the situation. Most people ignored LTC until they needed it. The poor qualified for Medicaid care. The middle class and affluent did as well, often with help from specialized “Medicaid planners.” I figured that as long as the public could ignore LTC risk and cost, wait to see if they ever need extended care, and get the government to pay if they do, why would they plan, save, invest or insure for LTC? Specifically, I noticed there was a budding new product, called private LTC insurance, trying to get a foothold in the market. How I wondered would it have a chance competing with Medicaid? To buy insurance for a risk, people have to believe a risk exists and plan ahead. But everything about government’s handling of LTC sent the message: “don’t worry, if you ever need LTC, Medicaid will pay.” As I studied the issue I concluded “you can’t have it both ways.” You can’t provide free LTC after the insurable event occurs through Medicaid and still expect people to buy private insurance for LTC risk with high premiums 30 years in advance. So I did a study and wrote a report in 1985 for the Health Care Financing Administration (CMS’s predecessor) advocating that if Medicaid is to pay for LTC when needed it should also secure exempt property so it isn’t transferred to qualify and require recovery from recipients’ estates when the wealth is no longer needed by qualified relatives. That way, people would have skin in the game. They would figure “if I ever need LTC, Medicaid will pay, but Medicaid is welfare with a poor reputation for access and quality, and if I rely on it I’ll have to pay it back out of my estate anyway, so maybe I should consider this new LTC insurance product. You can still read that 40-year-old report here. HCFA suppressed that report, believing Regional Office staff should not be writing and publicizing national policy studies. But the USDHHS Inspector General and the Government Accountability Office picked it up and did similar studies under their imprimaturs. The IG hired me out of HCFA to do its study and write its report, published in 1988 and available here. The LTC social contract described in that study became law in the Omnibus Budget Reconciliation Act of 1993. Most of the study’s recommendations, such as longer and stronger transfer of assets restrictions and mandatory estate recoveries, became statutory requirements for state Medicaid programs to impose. Had the new rules been implemented and enforced, planning for LTC by saving, investing or insuring would have become routine as a sensible way to avoid dependency on Medicaid with its welfare stigma and poor quality, combined with the requirement to pay it back from the estate. Instead of incentivizing adult children to save their inheritances by putting their ailing parents on Medicaid, the new system would encourage them to help their elders pay privately for LTC and stay off Medicaid with its various downsides. It would also encourage the younger generation to prepare for their own future LTC need. But as it turned out, states did not implement the new rules effectively; the federal government did not enforce the rules; the media didn’t publicize them and consumer behavior did not change. As a consequence, we find ourselves decades later with Medicaid LTC costs continuing to soar, with access and quality deficient, with private LTC insurance languishing, and with little hope for improvement. What’s worse, there have been recent calls to cut back or eliminate mandatory estate recovery, limiting or removing one of the only provisions in the rules to encourage early LTC planning. Whereas Medicaid LTC eligibility was always easy to obtain, especially with legal assistance, it has become easier than ever due to the widespread practice of artificially spending down countable wealth by using it to purchase exempt resources. See “Medicaid’s $100+ Billion Leak” for details on that practice. America’s faltering LTC system sinks deeper and deeper into dysfunction. Nursing home bankruptcies are up. Assisted living facilities follow nursing homes down Medicaid’s primrose path. Realignment from institutional to home and community-based care, expected to save money, actually drives up total costs because those in home care need nursing homes eventually too. Crazy, contradictory public policies encourage asset accumulation on the one hand (Americans hold $97 trillion in home equity, retirement savings and life insurance) but discourage asset expenditure for LTC by Medicaid eligibility policy that allows high income and high asset people to qualify easily while preserving wealth in exempt form. The common assumption that Medicaid LTC eligibility requires impoverishment is myth at best (misunderstanding), hoax at worst (intentional). The common statement in popular and academic media that millions of Americans are spending their life’s savings on LTC is unsupported by facts. Only 6.5% of LTC expenditures could come from savings. LTC is not the high financial risk (70%?) it is often reported to be. 55% who reach 65 will have no paid LTC costs. 31% will need 2 years or less and 9 in 10 have resources (income and wealth) to cover two years of assisted living. For the remaining 14% who need 2 years or more, especially the 4% who need 5 years or more, Medicaid pays much of the cost. Little wonder people worry so little about LTC until they need it. Estimates of out-of-pocket LTC expenditures are dubious because they are based on micro-simulations that assume people are paying going rates for care. There is no evidence that people actually spend down savings for care as opposed to reconfiguring wealth to qualify by other means, such as asset transfers, irrevocable trusts, Medicaid-friendly annuities or purchase of exempt assets. Medicaid pays LTC providers notoriously low reimbursement rates which accounts for the access and quality problems and the caregiver shortages. Medicaid requires recipients to contribute most of their income to offset the cost of their care to Medicaid. This in effect converts what would have been private pay revenue at market rates into Medicaid-level reimbursement that is a cause of many problems. America’s dismally inadequate LTC system will not improve until Medicaid pays market rates. Medicaid can’t pay market rates until it covers fewer middle class and affluent people. Medicaid treats the affluent well but crushes the poor. Key money allows affluent people who have used Medicaid financial eligibility loopholes to quality to access the best care to the exclusion of the aged, poor and vulnerable Medicaid supposedly helps first. So, in conclusion, America’s Medicaid-based LTC system is much more complicated than it seemed when I first assessed the situation in 1982. We made progress in 1993 with stronger asset transfer limits and mandatory estate recovery. In the Deficit Reduction Act of 2005 we finally got the first ever cap on home equity. But since then, no progress, and some back sliding. I remain optimistic that the country will come to its senses. Winston Churchill famously said “You can always count on Americans to do the right thing - after they’ve tried everything else.” But I’m convinced now that we will have to hit a financial wall before the right corrective actions are taken. When the country has borrowed so much and the rest of the world loses confidence in our ability to service our debt, a reckoning will occur. I expect that to happen in the 2030s when a triple threat occurs. Boomers start turning 85 in 2031, Social Security and Medicare cut back by mid-decade, and their reductions in support for Medicaid LTC will spell the end of that program’s availability to middle-class and affluent people. At that point, by default if not by intentional policy, Medicaid will shrink to a safety net for the poor, be forced to pay market rates for care to attract enough caregivers, and become a much better program for those in need when it no longer covers those who should, could and would pay their own way going forward. To make sense of what ails LTC, read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution” and watch this “virtual LTC event” featuring age wave visionary Ken Dychtwald and leading LTC researchers. To find ample private funds for LTC, check out “Medicaid’s $100+ Billion Leak.” For what not to do, see “Medi-Cal-amity: California’s Reckless Expansion of Medicaid Long-Term Care to the Affluent.” Much more on long-term care here. |