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The Center for LTC Reform, Inc. is a private institute dedicated to ensuring quality long-term care for all Americans by promoting public policy that targets scarce public resources to the neediest, while encouraging people who are young, healthy and affluent enough, to take responsibility for themselves.

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Updated: Thursday, July 2, 2009, 10:40 AM (Pacific)

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TRUST, BUT VERIFY

LTC Comment: Trusts have a long and sordid history as prime vehicles for Medicaid estate planning abuse.

Congress tried to shut the door on "Medicaid Qualifying Trusts" (MQTs) in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA '85). Section 9506 of COBRA provided that maximum distributions allowable from trusts are to be counted toward Medicaid eligibility limits whether or not the distributions are actually made. Existing MQTs weren't grandfathered in so a lot of affluent clients who'd used them to qualify for Medicaid nursing home benefits were thrown off the program summarily. Medicaid planners who'd put their clients in MQTs before the technique was outlawed were irresponsible at best. The same thing can happen again anytime with trusts or any other egregious Medicaid planning gimmick.

Nevertheless, over the years elder lawyers dreamed up many new kinds of trusts to get around the Medicaid rules and qualify their affluent clients for welfare-financed long-term care. Irrevocable income only trusts ultimately became a legal tool of choice for artificially impoverishing clients, securing estates for heirs, and pulling down big fees.

I recall when I was the Health Care Financing Administration's Region Ten Medicaid state representative for Oregon in the mid-1980s that the state dealt very creatively with abusive trusts and other legal methods of expropriating elders' assets to qualify them for the program. I wrote about it in the DHHS Inspector General's 1988 "Medicaid Estate Recoveries" report: ". . . Oregon, pursuant to State statute, has conservators appointed to protect the property rights of recipients, files suits to reverse illegal transfers, relitigates abusive divorce decrees, partitions undivided property and invades trusts." ("Medicaid Estate Recoveries," p. 22, emphasis added.)

In that same study, I found that many states were lax about enforcing rules against Medicaid planning abuse. A Pennsylvania eligibility worker told me: "There is a general feeling that if someone has to be hurt, let it be the State, especially when there are prospective heirs involved. There is no law in the state which makes repayment of assets to the state a high priority." (Ibid., p. 22) A New Jersey worker said: "Attorneys are getting very innovative with trusts. They are constantly looking for language that will make trusts okay within Medicaid eligibility criteria." (Ibid., p. 14)

Over the years, reading dozens of court cases bearing on trusts as Medicaid planning tools, I was amazed how often judges seemed to ignore, or at least liberally interpret, the law in order to allow all kinds of generous trust language. It was as though courts figured "Who cares, it's only government money. Why make people pay for their own long-term care when Medicaid's there to do it for them?"

But all that seems to be changing now. There's nothing like a hanging in the morning to get a prisoner's attention. And there's nothing like the brink of budgetary bankruptcy to get the attention of state judges. Judges in North Carolina just took a pay cut due to that state's budget problems. Perhaps this kind of new sensitivity to the scarcity of public funds has something to do with a recent spate of cases undermining the use of trusts for Medicaid planning.

Our thanks to the July 2009 issue of ElderLawAnswers Monthly for these examples:

"An Illinois appeals court finds that a trust that prevented the trustee from making distributions if it would interfere with public assistance is an available asset for Medicaid eligibility purposes. Vincent v. Dept. of Human Services (Ill. Ct. App., 3rd Dist., No. 3-08-0096, June 18, 2009)."

"The Massachusetts appeals court finds that although an irrevocable, income-only trust expressly prohibits distributions of principal, other provisions in the trust could conceivably permit the trustees to invade trust assets, and thus the trust is countable for Medicaid purposes. Doherty v. Director of the Office of Medicaid (Mass. App. Ct., Essex, No. 08-P-939, June 18, 2009)."

"Upholding a district court ruling, the Second Circuit Court of Appeals rules that SSDI payments placed in a Medicaid recipient's special needs trust (SNT) count as income for purposes of calculating his contribution to the cost of his nursing home care. Wong v. Doar (2d. Cir., No. 08-4992-cv, June 22, 2009)."

Score these three for the good guys.

Trust, sure, but verify that trusts are not used to divert scarce welfare resources to affluent clients, heirs and their attorneys.

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Updated: Wednesday, July 1, 2009, 9:58 AM (Pacific)

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LTC BULLET: HOW ESTATE RECOVERY PROTECTS THE POOR AND THE AFFLUENT

LTC Comment: Should Medicaid be free "inheritance insurance" for baby boomers or a LTC safety net for the needy? Considerations and consequences after the ***news.***

*** NEW AALTCI GUIDE. A new consumer guide to long-term care insurance protection has been published by the American Association for Long-Term Care Insurance. The eight-page booklet available to insurance and financial professionals specifically addresses the issues and options facing women. Check it out here. ***

*** PRAISING WITH FAINT DAMNATION. Turning the old saw "damning with faint praise" upside down, neither a GAO report nor a Senate Aging hearing could find many serious problems with reverse mortgages. As usual, the feds search diligently for any problem with private sector products, no matter how insignificant, while ignoring the huge unfunded liabilities facing Social Security, Medicare and Medicaid. ***

*** NURSING HOME STATISTICAL YEARBOOK for 2008 by Mick Cowles is now available. Find a description, order form, and past issues here. ***

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LTC BULLET: HOW ESTATE RECOVERY PROTECTS THE POOR AND THE AFFLUENT

LTC Comment: Pennsylvania Governor Rendell, Chairman of the National Governors Association (www.nga.org), said recently: "Ending vital programs for sick children and adults with disabilities would simply increase unfunded costs to hospitals and nursing homes, many of which are already near the brink of financial collapse."

So true. And yet that's exactly what governors and state legislatures are doing all across the country to cope with huge Medicaid-driven budget shortfalls.

But here's what I don't get. While they whack programs for the poor, they protect a program that benefits the prosperous exclusively. Why would Democrats, in control of most states, Congress and the Presidency, squeeze the poor to benefit the affluent, who are disproportionately Republicans?

How can that be? Give us an example, please.

All right.

For now, never mind the Medicaid long-term care eligibility rules that allow anyone with income below the monthly cost of a nursing home to qualify for the ostensibly "means-tested" program.

Never mind the loose and elastic asset eligibility rules that allow Medicaid LTC applicants to preserve unlimited exempt resources, including a home (up to $750K), a business, a car, prepaid burial plans, term life insurance, etc.

Never mind the wide-open "loopholes" Medicaid planners use to promise "nursing home care virtually free for life." Many examples here.

Let's just focus on one big hole in the Medicaid system that traps hundreds of thousands of Americans in nursing homes on public welfare and crowds out responsible LTC planning.

Until the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA '82), there was no explicit authority under federal law permitting state Medicaid programs to recover the cost of care they provide, from the estates of deceased recipients.

People with hundreds of thousands of dollars worth of exempt assets could get the government to pay for their long-term care and count on their estates passing unencumbered to their often-already-affluent heirs.

As I wrote in a 1988 study for the Office of Inspector General of the U.S. Department of Health and Human Services: "It is their children, after all, who stand to inherit whatever property remains after the costs of long-term care are paid and who currently reap the windfall of Medicaid subsidies. We must emphasize that the issue is enrichment of non-needy adult heirs, not denial of care to the elderly. For those who opt to rely on Medicaid, or have no other choice, eligibility conditional upon a promise (secured by an automatic lien) to repay benefits from their estates would assure all elderly people of (1) access to care , (2) retention of home property as long as it is needed by spouse and dependents, and (3) the dignity of paying their own way in the end." (pps. 47-8)

Congress and President Clinton saw the wisdom of this argument. They made Medicaid estate recovery mandatory in the Omnibus Budget Reconciliation Act of 1993 (OBRA '93).

Unfortunately, some states (including Texas, Michigan and Georgia) ignored the estate recovery requirement; most states enforced it only minimally; and only a few states (Oregon for example) maximized estate recovery potential. While all states now have some semblance of an estate recovery program, it remains only a shadow of the revenue source it could be.

So, Medicaid--ostensibly a welfare program--often remains free inheritance insurance for baby boomer heirs and the main reason most people don't plan responsibly for long-term care or buy private LTC insurance. (Brown and Finkelstein found Medicaid alone crowds out 2/3 to 90 percent of the potential market for private long-term care insurance. See www.nber.org.)

How can this be? Why is such abuse of the welfare program allowed? Don't governors, state legislatures and public officials care about the poor? Are they trying to buy the political support of middle-class and affluent constituents by plying them with scarce welfare resources more rightfully targeted to people in need?

Let me give you an example of why this huge potential non-tax revenue source for state Medicaid programs remains mostly untapped even as programs for the poor are slashed to make budget ends meet.

In his June 11, 2009 "Elder Law Alert", Pennsylvania Medicaid planner Jeffrey A. Marshall says "Estate recovery is a Medicaid 'death tax' imposed only on the elderly. The program has been referred to as 'picking the bones of the poor,' and 'sucking the last ounce of blood from the corpse.'" Lovely metaphors from someone who makes his living diverting funds desperately needed by the poor to affluent heirs while lining his own pockets with big Medicaid-planning fees.

Now do you see why Medicaid goes on decade after decade unable to pay adequately to ensure quality nursing home care, much less home and community-based services?

Do you wonder how attorneys like Marshall get away with shunting affluent clients off to welfare homes? Don't the adult children reaping this "windfall," as the OIG report described it, feel shame?

No, and here's why. The elder law attorneys assure families they have nothing to worry about from Medicaid's poor reputation for access and quality. "We know the best nursing homes and we'll get your Mom or Dad in," they say. "Once in, state and federal law forbid the homes from kicking your parents out just because their source of payment changes to Medicaid." True even though the payment to the nursing home drops 30 percent on average to below the cost of providing the care.

How do the Medicaid planners perform this miracle? It's called "key money." They used it to open doors for their well-to-do clients that are closed to poor people on Medicaid. When the attorney artificially impoverishes the frail and infirm elders to pass an early inheritance to the heirs, he or she holds back $50,000 or $60,000 so the seniors can pay privately for awhile. Because nursing homes are desperate to attract private payers who pay half again as much as Medicaid, people who are able to pay privately for awhile can buy their way into the best facilities. This is why one hears so often that care is identical for Medicaid and non-Medicaid nursing home residents. That's true for middle class and affluent Medicaid recipients who can buy their way into the nicest facilities.

But it leaves only the dregs of long-term care available to the poor for whom Medicaid was supposed to be a "safety net." They often end up in the kinds of places 20/20 visits with its hidden mini-cams. The kind of place with mostly Medicaid residents, too few staff, and not enough cash flow for quality care where patients lie in their own waste and develop bedsores down to the bone.

How do the elder lawyers respond to this outcome? They sue the nursing homes for providing deficient care, win big settlements for victims' adult children (who shunted their parents into welfare homes in the first place), and they pocket, yet again, huge fees for themselves.

Do you think long-term care public policy is just esoteric arguments between academics, politicians, and policy-makers? It's not. Policy has consequences. We have an underfunded, welfare-financed, nursing-home-based LTC system in the wealthiest country in the world where no one wants to go to a nursing home but the public's asleep about LTC risk and cost. Easy Medicaid LTC eligibility and the lack of strong lien and estate recovery programs have caused the mess were in.

On the other hand, targeting Medicaid's scarce resources to people truly in need and enforcing strong lien and estate recovery programs ensures better care for the poor and creates a strong incentive for everyone else to plan early and save, invest or insure for long-term care. And the more people plan responsibly to pay privately for long-term care, the fewer people will be dependent on Medicaid in the future, enabling that program to do a better job for a smaller caseload.

That's how Medicaid estate recovery protects the poor AND the affluent.

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Updated: Tuesday, June 30, 2009, 10:54 AM (Pacific)

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LTC Comment: I receive many communications from people passionate about the CLASS Act--passionately for and passionately against.

So it's good to have something objective to go on finally. The Congressional Budget Office (www.cbo.gov) has "scored," i.e. priced, the CLASS Act. Find a brief review below.

Some key points:

"[S]pending in the long-term care program would increase after 10 years and . . . it likely would not remain a very profitable enterprise for the government."

"[T] he program could become insolvent; in that case, the secretary of Health and Human Services would be authorized to close its enrollment."

And that's just what the proponents have to say about it!

Here's CBO's take:

"[P]remiums would have to rise significantly higher than . . . assumed for the program to remain financially sound."

As to points made in the CQ Politics blurb below, here's our take:

CQ: "[S]o many seniors needing [long-term] care impoverish themselves in order to qualify for Medicaid . . .."

LTC Comment: Nonsense. The vast majority of all expensive long-term care is paid by Medicaid, Medicare, VA, Social Security income spend-through of people already on Medicaid, or by other forms of income, not assets. There is zero evidence of widespread catastrophic asset spend down for long-term care. If that were happening, people would flock to private LTC insurance practically without regard to premium levels. Dozens of Medicaid "spend-down studies" proved two decades ago that all but 15 to 20 percent of people admitted to nursing homes are already Medicaid-eligible. And anyone who looks at the data from CMS can see the proof that non-Social-Security out-of-pocket expenditures for LTC are minimal. For example, read this.

CQ: "While the long-term care program would be a government-run insurance plan, it is intended to complement private long-term care insurance, not compete with the products . . .."

LTC Comment: Yeah, right. We know from Brown and Finkelstein (www.nber.org) that Medicaid already crowds out 2/3 to 90 percent of the potential market for private long-term care insurance. So, adding another underfunded government entitlement to the mix, that suggests it will somehow make half the cost of LTC disappear, is bound to crack through the public's denial of LTC risk and cost and persuade them to purchase more private insurance. Youbetcha.

CQ: "Private long-term care insurance has not proved popular: . . . more than 200 million adult Americans lack any kind of coverage against the possibility they will need the care."

LTC Comment: It's hard to know whether to attribute such a statement to ignorance or disingenuousness. Two hundred million are uninsured? Hello. Medicaid and Medicare "insure" most of those Americans, albeit with tragic consequences, including serious problems of access, quality, reimbursement, discrimination and institutional bias. The real reason LTC insurance hasn't been popular is that consumers don't think they need it. They don't think they need it because government has paid for most LTC since 1965.

What a shame that no one stops to ask "how did we get into this mess?" before proposing more government financing to fix it. Once you understand that it's government intervention in the health and LTC markets that caused the problems we face, this becomes clear: Trying to fix the system by adding more public financing is like trying to put out a fire by dousing it with gasoline.

What comes next? This whole government entitlement house of cards will collapse soon. Then, those of us who understand how and why it happened can rebuild on a solid moral, intellectual and political foundation.

In the meantime, a lot of people--especially the poor for whom Medicaid was supposed to be a safety net--will be hurt. That's the tragic unintended consequence of anesthetizing the public to LTC risk with insolvent public programs.

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Long-Term Care Program Would Provide Revenue - At First http://smtp01.kaiserhealthnews.org/t/856/423516/342/0/ [Jun 29, 2009]

A long-term care program could produce some needed dollars, at least in the short range, CQ Politics reports: "A new insurance program for long-term care that Democrats have included in a Senate health overhaul bill would produce about $58 billion in revenue for the government over the next 10 years, according to the Congressional Budget Office, helping to offset the cost of the legislation. Democrats acknowledge that spending in the long-term care program would increase after 10 years and that it likely would not remain a very profitable enterprise for the government. It is even possible, they say, that the program could become insolvent; in that case, the secretary of Health and Human Services would be authorized to close its enrollment. "The CBO says that premiums would have to rise significantly higher than Democrats have assumed for the program to remain financially sound."

CQ Politics notes: "But Democrats say the program strikes at a problem that has long embarrassed lawmakers: Medicare generally does not cover long-term care, and so many seniors needing the care impoverish themselves in order to qualify for Medicaid, the health entitlement for the poor, which does cover the service. ... While the long-term care program would be a government-run insurance plan, it is intended to complement private long-term care insurance, not compete with the products, Democratic aides say. Benefits under the program are intended to only cover about half the average cost of long-term care, according to a summary distributed by HELP staff. Private long-term care insurance has not proved popular: according to the HELP committee, more than 200 million adult Americans lack any kind of coverage against the possibility they will need the care" (Wayne, 6/26).

Source: Kaiser Daily Health Policy Report - Monday, June 29, 2009

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Updated: Monday, June 29, 2009, 10:03 AM (Pacific)

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GENERATIONAL WARFARE FOR REAL

LTC Comment: Juxtapose the two big facts in the following report and what do you get?

Developed countries will have huge excesses of old people to support in the decades ahead.

But equally daunting . . .

Undeveloped, poor countries will have excesses of young people who will demand more of what old people in rich countries now consider themselves "entitled" to receive.

It's a volatile international demographic concoction almost inevitable to boil over in strife.

For more on this fascinating topic, refer to the fine work of Richard Jackson, the Global Aging Initiative and others for the Center for Strategic and International Studies.

Do your part to avert generational warfare. Don't count on government entitlements that can't survive the Age Wave.

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Source of the following is NCPA: Daily Policy Digest 06-26-2009

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WORLD'S 65 AND OLDER POPULATION TO TRIPLE BY 2050

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As the fastest-growing age group, seniors now comprise just under eight percent of the world's 6.8 billion people. But demographers warn the biggest shift is yet to come. They cite a coming wave of retirements from baby boomers and China's Red Guard generation that will shrink pensions and add to rising health care costs.

According to the U.S. Census Bureau, about 1.53 billion, or 16 percent, of the world's estimated 9.3 billion people in 2050 will be 65 and older:

o In the United States residents who are 65 and older currently make up 13 percent of the population, but that will double to 88.5 million by 2050.

o In two years, the oldest of the baby boomers will start turning 65, and the baby boomer bulge will continue padding the senior population year after year, growing to 1-in-5 U.S. residents by 2030.

o China's current ratio of 16 elderly people per 100 workers is set to double by 2025, then double again to 61 by 2050, due partly to family planning policies that limit most families to a single child.

o Without a universal pension system to cover all elderly, millions of older Chinese could fall into poverty, creating social and political unrest and shock waves that could ripple through the global economy given the country's economic heft.

Moreover:

o Only 5 percent of Africa's population is projected to be 65 and older in 2050, while Europe will continue to be the grayest region, with 29 percent of its population projected to be 65 and older by 2050.

o In Latin America, known for its high fertility, youths ages 19 and younger outpace the 65-and-older group by more than 5 to 1.

o But by 2050, led by a drop-off in births in countries such as Brazil and Mexico, senior citizens will jump to 18 percent of the population compared to 25 percent for youths.

Source: Hope Yen, "World's 65 and older population to triple by 2050," ksl.com (Utah), June 23, 2009; based upon: U.S. Census Bureau, "International Data Base," U.S. Census Bureau, June 2009.

For text:

http://www.ksl.com/index.php?nid=130&sid=6911425

For Census Bureau text:

http://www.census.gov/ipc/www/idb/index.php

For more on Social Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=28

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Updated: Friday, June 26, 2009, 10:12 AM (Pacific)

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BULLET POINTS YOU CAN USE WITH REPORTERS

Early this morning, I received a request from the president of Rhode Island's Ocean State Policy Research Institute (www.oceanstatepolicy.org).

He said a well-known national magazine is willing to do a story on the state's unique "global Medicaid waiver."

"If you have some bullet points you want emphasized," he said, "please pass them along."

I replied "Following are some bullets, but feel free to refer the reporter to me for details if you think that will help. I'd also recommend my monograph for the Cato Institute titled "Aging America's Achilles' Heel: Medicaid Long-Term Care."

I make you the same offer, faithful Center members and LTC Blog readers. Most of what follows applies in every state, not only Rhode Island.

So feel free to pique your local reporters' interest with these points. Then send them to me for the details and proof.

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BULLETS ON MEDICAID AND LTC FINANCING

o Despite conventional wisdom that Medicaid long-term care benefits require total impoverishment, the truth is . . .

o Anyone with income below the cost of a nursing home ($6000 per month on average nationally, more in RI) is eligible for Medicaid LTC based on income and the rules are even more generous in most states.

o There is no limit on assets held in exempt form such as home equity, one business, one auto, prepaid burial plans and term life insurance.

o Medicaid planning lawyers specialize in artificially impoverishing affluent clients to qualify them for Medicaid LTC benefits and simultaneously getting them into the best nursing homes by taking beds more properly reserved for the truly needy.

o Medicaid crowds out 2/3 to 90 percent of the potential market for private long-term care insurance (Brown and Finkelstein, www.nber.org).

o Medicaid's huge home equity exemption--$500,000 to $750,000, depending on the state, and 15 times as big as in the UK, a socialized health system--precludes the use of seniors' biggest asset (home equity) to fund their own LTC thus placing this huge liability on Medicaid, ostensibly a welfare program.

o Because of easy, highly elastic Medicaid eligibility rules and the lack of strong estate recovery, we have a welfare-financed, nursing home based long-term care system in the wealthiest country in the world where no one wants to go to a nursing home but the public remains mostly unaware of the risk and cost of LTC.

o This dysfunctional system persists because federal law and regulations do not allow states to target Medicaid to people in need so they could use the savings to incentivize responsible LTC planning including private insurance and the use of home equity conversion to fund LTC.

o The RI global Medicaid waiver is a unique and marvelous opportunity to fix LTC financing in a state by controlling LTC eligibility, expanding home and community-based care, and maximizing (1) tax revenue from private insurers and reverse mortgage lenders and (2) non-tax revenue from estate recoveries.

o If RI can do it, so can the whole country, so we have the opportunity here to create a model for reform that can do for Medicaid and long-term care financing what welfare reform did for public assistance.

o We have the evidence and logic to back all of this up and we plan to bring both to bear on LTC financing in Rhode Island with a special study currently in the planning stage.

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Updated: Thursday, June 25, 2009, 11:00 AM (Pacific)

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CALCULATE THEIR NEED FOR LTC INSURANCE TO SELL MORE

LTC Comment: Long-term care insurance. Who needs it? And how much?

Answers: Everyone and all they can afford.

The main reason is that the public programs that fund LTC today and have since 1965 can't much longer. Individuals and families will be much more responsible for the cost of long-term care in the future.

So how can we help consumers understand and measure that responsibility more clearly?

I found some clues in the June issue of MetLife's QuickFacts e-letter. Check it out here.

Here's what you'll find there and below. First an online life expectancy calculator. I tried it and got the answer "96 years." Good grief. Maybe I better increase my own LTCI coverage!

Next, you'll see a report that retirement confidence is at its lowest ebb ever. So, we're not only living much longer but we're less confident we can afford it.

Third, Alzheimer's care for loved ones consumes 8.5 billion hours of unpaid care annually, valued at $94 billion dollars. So, we're living longer, can't afford to retire and have to spend untold hours giving or receiving free care.

Last, even if we can afford medical care in old age, there won't be enough specialized professionals to look after us. (Hint: there's always someone available to provide a service if YOU can pay for it, but not necessarily if you expect the government to pay.)

Seems to me, this is pretty powerful stuff and all in a single issue of an e-letter. Why not encourage your prospects and clients to compute their likely life expectancy and consider the likely consequences of going without LTC insurance?

The smart ones will not only buy LTCI for themselves, they'll get everyone in the family to buy who might otherwise need free care from them someday!

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Web Watch: Calculating Your Life Expectancy. The Living to 100 Life Expectancy calculator was created by Dr. Thomas Perls who founded and directs the New England Centenarian Study, the world's largest study of individuals age 100+ and their families. More information about the study and its findings can be found at www.bumc.bu.edu/centenarian. The Living to 100 calculator at http://www.livingto100.com/ provides a series of questions for you to answer in order to estimate your life expectancy. After completing the questions, you will receive personalized feedback, a to-do list for you and your doctor, and tips for things you can do to add to your life expectancy.

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Retirement Confidence at a Low Point. The 2009 Retirement Confidence Survey (RCS) shows the lowest level of confidence among both workers and retirees since the survey was initiated in 1993 and a steady decline in confidence over the past three years. Only 13% of workers felt very confident about having enough money for a comfortable retirement in 2009 as compared with 27% in 2007 and 18% in 2008. While 41% of retirees reported being very confident about having a secure retirement in 2007, the percentage dropped to 29% in 2008 and 20% in 2009. Ruth Helman, Mathew Greenwald & Associates, Craig Copeland and Jack VanDerhei "The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer" Issue Brief No. 328 Employee Benefits Research Institute April 2009 Click for link to publication http://www.ebri.org/pdf/briefspdf/EBRI_IB_4-2009_RCS1.pdf

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Family Caregivers: Assisting Loved Ones with Alzheimer's Disease. Close to 10 million Americans provide unpaid care to individuals with Alzheimer's disease or a similar disorder. These caregivers include family members, friends, and neighbors. In 2008, it is estimated that they provided 8.5 billion hours of unpaid care, valued at $94 billion dollars. 2009 Alzheimer's Disease: Facts and Figures Alzheimer's Association Click for link to publication http://www.alz.org/national/documents/report_alzfactsfigures2009.pdf

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Shortage of Specialized Professionals. While adults age 65 and over currently make up only 12% of the U.S. population, they account for about 26% of all physician office visits, 35% of all hospitalizations, 34% of all prescriptions, and 90% of all nursing home use. Despite high health care utilization by older individuals, there is a shortage of professionals specializing in their care. Fewer than 1% of all nurses and pharmacists are certified in geriatrics. Retooling for an Aging America: Building the Health Care Workforce, Executive Summary Committee on the Future Health Care Workforce for Older Americans Institute of Medicine Copyright(c) National Academy of Sciences 2008 Click for link to access executive summary http://www.nap.edu/catalog.php?record_id=12089

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Updated: Wednesday, June 24, 2009, 10:53 AM (Pacific)

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LTC BULLET: WHEN RHETORIC MET REALITY

LTC Comment: High hopes, wishful thinking, even eloquent oratory do not reform a health insurance system in the face of evidence, logic, and hard fiscal reality. More after the ***news.***

*** YOU HEARD IT HERE FIRST. Whatever shadow of "health reform" emerges from the current political frenzy will not include long-term care. Now other experts are saying what we've said all along. In "LTC on the back burner under Obama health plan," by Darla Mercado on June 21, 2009, here, find this: "We won't see anything to move in the direction of more funding for long term care," said Dallas L. Salisbury, president and chief executive of the Employee Benefit Research Institute in Washington [www.ebri.org]. "With the government's fiscal situation and the unsustainability that the president has stated is present for Medicare and Medicaid, if anything, there will be a reduction [in spending]." He's right. What will emerge in the end is stricter eligibility for Medicaid LTC, a smaller home equity exemption, and tax incentives to encourage the use of reverse mortgages and private insurance to fund long-term care. But don't hold your breath. That outcome is still a few years away. ***

*** STATE X PROJECT moves forward. I'm scheduled to visit Providence, Rhode Island on July 6-10 to conduct the initial field work for what we hope will become a full-fledged review of Medicaid and long-term care financing in the Ocean State. Why RI? Simple. The state has a unique "global Medicaid waiver" that enables it to experiment creatively with new ways to encourage better access to higher quality long-term care without running afoul of federal regulations. The trade off for that freedom is controversial: Rhode Island had to agree to accept a limit on federal Medicaid matching funds. So, proving that RI can do better LTC for needy people at less cost is critical. We think that goal's eminently achievable and we look forward to a week of conversations about how to do it with all the key LTC stakeholders in the state. The Center for Long-Term Care Reform (www.centerltc.com) is working closely with the Ocean State Policy Research Institute (www.oceanstatepolicy.org) on this project. ***

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LTC BULLET: WHEN RHETORIC MET REALITY

LTC Comment: From Don Quixote's quest to Bill and Ted's Excellent Adventure, from HillaryCare to the latest health reform windmill jousting, one lesson of history has to be learned and relearned over and over again.

If you want something, even if you want it really, really badly, you'd best be realistic. That includes figuring out how to pay for it before you begin to build.

Setting out to reform 18 percent of the United States' economy without considering how to finance it wasn't smart. What if NASA had constructed the moon ship without taking gravity into consideration?

Now people are all worked up. Hopes are high. There's even talk of adding everyone and everything, including long-term care, to Medicare. Hey, the Titanic got us this far, why not bring on a few more passengers? . . . What iceberg?

Even if you only see the tip of the ice that's visible now, it's clear the good ship health reform in its most ambitious form is headed to the bottom. Sorry to mix metaphors, but do consider the "Bombshells" that Grace-Marie Turner of the Galen Institute describes in her piece below.

For now, here's the essence of the problem. Without removing the perverse incentives in current health policy that discourage inexpensive catastrophic health coverage and reward profligate benefits for the lucky few, extending health insurance to the uninsured is going to cost much more. But, hello, we have no more money.

Not only do we have no more money, we've already spent or committed tons of revenue, at least ten trillion dollars, that we don't have. On top of that we've promised Social Security and Medicare benefits totaling $105 trillion more than those programs can expect to collect. Oh, and by the way, remember long-term care? Whatever that'll cost has to be included too. And Medicaid doesn't even have a raided trust fund. There's no pretence whatsoever that it's solvent.

So let's say grand ideas of expensive health reform don't happen or happen but make the problem worse. One or the other of those outcomes is inevitable. What comes next?

Sooner or later, we have to repay the debt we've created. There are only three ways for government to do that. Tax, borrow, or print more money.

Tax more and you impede the private sector's ability to generate profits to tax in the first place. That's a fiscal whirlpool.

Borrow more and, even if you can still find lenders, interest rates increase and carrying costs start to consume everything you borrow. That's a financial sink hole.

Print more money and you pay for it with the most pernicious tax of all, inflation. That'll drown an economy. Ask Argentina.

So here we are. About to walk the plank. Or shall we pause at the brink, think it over, and begin again?

When you confront a seemingly insoluble problem, the best next step is to re-examine your premises. Is the problem really too little government financing of health care? Or could it possibly be that government intervention in the health care marketplace, however well-intentioned, actually created the mess we're in? Are entitlements the solution or the problem? Hmmm.

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In her "Health Policy Matters" e-letter on June 19, Grace-Marie Turner of the Galen Institute (www.galen.org) wrote the following. (Reprinted with permission. If you use or reprint this material, they ask that you credit the Galen Institute.)

The bombshells started dropping on the health reform front this week:

* Soaring costs: The Congressional Budget Office told the Senate health committee its bill would cost $1 trillion over the next 10 years and would only provide health insurance for a net 16 million more people. It said 15 million would lose their coverage at work and eight million would lose coverage from other sources, leaving 36 million uninsured. Since the goal is to have virtually everyone covered with no deficit spending, this was a double whammy, especially since there is even more spending in the bill that the CBO hasn't yet scored.

* Delay: The Senate Finance Committee was forced to delay its work on developing its bill when the CBO offered a preliminary cost estimate of $1.6 trillion over 10 years. Somehow in the hall of budget mirrors in the U.S. Congress, the most they are willing to spend of future generations' money is $1 trillion.

* No agreement: President Obama traveled to Chicago to speak at the annual meeting of the American Medical Association, hoping to sway them to support his health reform plan. He again faced protest signs outside the hall. Inside, there were boos when he said he wouldn't go along with their proposal to cap malpractice awards.

* AMA rebuffs: Worse, when a resolution came to the floor of the AMA which would have endorsed Mr. Obama's idea of a new government health plan, the language he had hoped for was stripped out, and it became a mere restatement of the AMA's long-standing goals supporting "pluralism, freedom of choice, freedom of practice, and universal access for patients."

* More cost-shifting: The CBO also says that congressional plans to rein in federal spending through public plans could end up shifting more of the costs to private insurers, employers, and people with private medical coverage. While there are many efficient providers currently practicing, experts don't yet know how to spread that efficiency throughout the system, and policy makers won't be able to do so "through fiat or good intentions," the CBO said.

"I think there's definitely risk that a portion of the reduction in hospital payments from Medicare will wind up as increased payments by private insurers," said Paul B. Ginsburg, president of the Center for Studying Health System Change. Hospitals may have the motive and means to "transfer those charges to somebody else," and "we'll see costs increasing on the private side and not necessarily falling everywhere," said Harold S. Luft, director of the Palo Alto Medical Foundation Research Institute.

* Don't take it to the bank: The CBO also says that it can't give credit for most of the $2 trillion in savings that were announced with great fanfare in May. You will recall the brouhaha between the White House and six industry groups over whether they had or had not pledged to reduce health spending by 1.5% a year over 10 years through disease management, information technology, coordinated care, etc.

"What was originally offered up as a down payment on healthcare reform simply can't be accurately estimated by the CBO and will result in far less savings than the originally promised $2 trillion," said Republican senator Mike Enzi of Wyoming, the ranking member of the Senate health committee. "The administration will need to come up with far greater savings proposals -- savings that Congress can take to the bank -- to achieve the massive healthcare bill Democrats are proposing."

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Updated: Tuesday, June 23, 2009, 10:26 AM (Pacific)

Seattle--

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METLIFE AND NCOA ON HEC

LTC Comment: Kudos to the MetLife Mature Market Institute (www.maturemarketinstitute.com) and the National Council on Aging (www.ncoa.org) for their new, jointly published report on reverse mortgages.

Read a summary below. See the full report here.

Reverse mortgages are rarely used to fund long-term care. We've established that fact repeatedly by interviewing lenders in our state-level studies of long-term care over the years. Examples here.

There is a simple reason why reverse mortgages don't help many aging homeowners obtain quality long-term care. Until the Deficit Reduction Act of 2005 capped Medicaid's home equity exemption at $500,000 to $750,000, Medicaid LTC recipients could retain one home and all contiguous property with no limit on the value. Even now the most common $500,000 limit is roughly four times the median value of the average elderly family's home. But get this: our half a million dollar limit is nearly 15 times the size of the home equity exemption in the United Kingdom's long-term care system ($35,000). We're more generous with our welfare-financed long-term care than a socialized health care system in Europe.

No wonder middle class and even affluent Americans end up in Medicaid-financed nursing homes instead of using their home's value to enable them to stay at home, as an earlier NCOA study recommended. It's a no-brainer seemingly: Capture Medicaid's generous health and LTC benefits, save your home's value as your legacy, and preserve your adult children's inheritance. This bill of goods is sold daily by thousands of Medicaid planners all across the country. It's not the only reason, but it is one of the big reasons that most people fail to plan for long-term care and end up by default on a slippery slope into deficient institutional care funded by a bankrupt welfare program.

That said, it's a great thing that MetLife and NCOA continue to encourage the wise use of home equity conversion to help aging Americans live better lives in retirement, including long-term care. I only have one quibble. The report says little about using a reverse mortgage to purchase private long-term care insurance and what it does say is negative: "Policymakers, advocates, and insurance companies have raised serious concerns about using home equity to purchase long-term care insurance." (p. 18) Oh yeah? What concerns? No comment in the report. I've seen those objections in other publications. Most are specious based on a misunderstanding of and a prejudice against long-term care insurance specifically and private LTC financing alternatives in general. The rest are obvious based on common sense. Most seriously, opponents of the use of reverse mortgages to finance LTC insurance premiums never take into account the problems with Medicaid dependency which are the most likely outcome of going without private LTC insurance. Thus, our only hope to salvage a public LTC safety net for people in need (LTCI) is subverted in the interest of protecting a dubious welfare benefit for people who otherwise should, could and would save, invest or insure for long-term care.

Count on this: when Medicaid stops giving baby boomers free inheritance insurance by exempting their parents' expensive homes, reverse mortgages will explode as a funding source for long-term care directly and for long-term care insurance premiums as well. When will this happen? Possibly as a consequence of the current recession's fiscal pressure on the federal and state Medicaid programs. Likely within three to five years. Certainly within ten years. Smart people will get in front of this Age Wave and use home equity if they need it to leverage their LTC protection by means of private insurance whenever appropriate.

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AS BOOMER RETIREMENT LOOMS, THE NEED TO LEVERAGE HOME EQUITY GROWS

Report from MetLife Mature Market Institute® and National Council on Aging Recommends More Education for Using Home Equity and Reverse Mortgages in Retirement

Westport, CT- June 22, 2009 - As today's economic environment puts pressure on older homeowners to find new sources of retirement income and stretch their savings, growing numbers are starting to tap their housing wealth, using home-equity loans or reverse mortgages. However, with little guidance, they are often unsure about how to include this asset as an integral part of their financial strategy, rather than as a last resort. Tapping Home Equity in Retirement: The MetLife Study on the Changing Role of Home Equity and Reverse Mortgages, issued today by the MetLife Mature Market Institute (MMI) and the National Council on Aging (NCOA), calls for a more comprehensive approach to ensure that this asset is used appropriately and effectively to deal with the growing uncertainties of retirement.

"There is no doubt that Americans should be more strategic about using home equity," said Sandra Timmermann, Ed.D, director of the MetLife Mature Market Institute. "Retirees need a new framework for thinking about how home equity can help assure their financial security and enable them to age in place without fear of running out of money."

The study finds that 35% of older Americans see their homes not just as secure places to live, but also as collateral for a loan. About 14% are taking cash out of their house through a home equity loan or reverse mortgage. This is a growing reality for affluent households who seek to enhance their lifestyle, as well as middle-income families for whom it may be their only choice. Study findings indicate that older homeowners are using home equity to increase income security, enhance financial resilience to deal with unexpected expenses, and to improve debt management, among other things.

"Tapping home equity in a timely and appropriate way can keep small budget shortfalls from becoming overwhelming problems," said Barbara R. Stucki, Ph.D., director of the Reverse Mortgage Initiative for NCOA.

The study highlights different options for using home equity that are not part of the current national conversation. These include:

· The use of reverse mortgages to delay the age at which one might begin to collect Social Security, thus increasing the amount of one's ultimate monthly Social Security income.

· Reverse mortgages as a stopgap measure to consolidate credit card debt, to cover investment losses or to defer mortgage payments.

· Periodic distributions that would tap home equity to help people meet expenses if they outlive their savings/retirement income.

· Programs that combine public benefits with modest amounts drawn from home equity to help seniors stay at home.

· Home equity lines of credit for emergency spending, such as home maintenance, without which many homes decay and lose value.

· Reverse mortgages with a line of credit option for borrowers to pay out-of-pocket health and home care expenses. Borrowers only pay the amount they use from the loan.

"Our research on Baby Boomers indicates that they are more open than previous generations to tapping home equity and considering reverse mortgages to help fund their retirement," said Timmermann. "With the right guidance and policy protection, reverse mortgages can be an important financial option for Boomers who do not have adequate savings."

The report emphasizes that consumer education must be part of any new efforts aimed at increasing the use of reverse mortgages. It reinforces the value of consumer counseling mandated by the U.S. Department of Housing and Urban Development for the popular Home Equity Conversion Mortgage (HECM) reverse mortgage program.

"The financial services industry, policymakers, and consumer advocates cannot be complacent about the potential benefits and risks of using home equity to address the challenges facing older Americans," said Stucki. "We need to work together to educate consumers, create cost-effective financial products, and promote public policies that strengthen consumer protections for older homeowners."

As a complement to the study, the Mature Market Institute is also introducing The Essentials: Reverse Mortgages, a free guide to help consumers better understand the product. It explains the terminology associated with these loans, presents some issues to consider, and provides answers to frequently asked questions about borrowing limits, qualifications and consumer protection, among other things.

National Council on Aging

The National Council on Aging (NCOA) is a nonprofit service and advocacy organization headquartered in Washington, DC. NCOA is a national voice for older Americans- especially those who are vulnerable and disadvantaged- and the community organizations that serve them. It brings together nonprofit organizations, businesses and government to develop creative solutions that improve the lives of all older adults. NCOA works with thousands of organizations across the country to help older adults find jobs and benefits to improve their health, live independently and remain active in their communities. www.ncoa.org

The MetLife Mature Market Institute®

Established in 1997, the MetLife Mature Market Institute (MMI) is MetLife's research organization and a recognized thought leader on the multi-dimensional and multi-generational issues of aging and longevity. MMI's groundbreaking research, gerontology expertise, national partnerships, and educational materials work to expand the knowledge and choices for those in, approaching, or caring for those in the mature market.

MMI supports MetLife's long-standing commitment to identifying emerging issues and innovative solutions for the challenges of life. MetLife, a subsidiary of MetLife, Inc. (NYSE: MET), is a leading provider of insurance, employee benefits and financial services with operations throughout the United States and the Latin American, Europe and Asia Pacific regions.

The full study, Tapping Home Equity in Retirement: The MetLife Study on the Changing Role of Home Equity and Reverse Mortgages, and The Essentials: Reverse Mortgages, are available at www.maturemarketinstitute.com under "What's New." For more information about the MetLife Mature Market Institute, visit: www.maturemarketinstitute.com.

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Updated: Monday, June 22, 2009, 10:11 AM (Pacific)

Seattle--

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THE LTC CANARY

LTC Comment: Miners once used canaries to test mineshafts for toxic gasses. PETA notwithstanding, it was better the little bird expired than the workers themselves.

The Medicaid program, which is the dominant payor for long-term care in the United States, is sort of an "LTC Canary." It is screeching a warning right now:

"Don't count on the government to pay for your long-term care!"

It's the same message we delivered all last year on the "National Long-Term Care Consciousness Tour."

Don't plan for LTC through the rear-view mirror. All you'll see is that Mom and Dad or Grandpa and Grandma got nursing home care financed by Medicaid.

Rather, look carefully through the windshield and what you'll see is a brick wall of fiscal reality coming at you 100 miles per hour.

Bottom line, the long-standing system of LTC financing in the United States (Medicaid financed nursing home care) is collapsing.

If you think that, having caused the mess we're in, government will come to the rescue with new and better programs, good luck. You may already be ineligible for LTC insurance due to early-onset dementia.

If you're sane and realistic, you'll take responsibility, plan now, and save, invest or insure for long-term care.

Following are excerpts from a front-page, above-the-fold article in today's New York Times. It explains the fiscal mess states are in and ties it in large measure to the cost of Medicaid.

If you need to convince a prospect or client how dangerous it is to "go bare" for LTC, this article and others like it, would be good places to start.

If you'd like to make a difference by helping states control Medicaid costs and creating a bigger demand for LTC insurance while enhancing your visibility and credibility in the community and marketplace, check out our "2009 Save Medicaid Campaign" here.

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Excerpts from Abby Goodnough, "States Turning to Last Resorts in Budget Crisis," New York Times, June 22, 2009, http://www.nytimes.com/2009/06/22/us/22states.html?hp=&pagewanted=print

"In Hawaii, state employees are bracing for furloughs of three days a month over the next two years, the equivalent of a 14 percent pay cut. In Idaho, lawmakers reduced aid to public schools for the first time in recent memory, forcing pay cuts for teachers.

"And in California, where a $24 billion deficit for the coming fiscal year is the nation’s worst, Gov. Arnold Schwarzenegger has proposed releasing thousands of prisoners early and closing more than 200 state parks.

"Meanwhile, Maine is adding taxes on candy and ski tickets, Wisconsin on oil companies, and Kentucky on alcohol and cellphone ring tones.

"With state revenues in a free fall and the economy choked by the worst recession in 60 years, governors and legislatures are approving program cuts, layoffs and, to a smaller degree, tax increases that were previously unthinkable.

"All but four states must have new budgets in place less than two weeks from now — by July 1, the start of their fiscal year. But most are already predicting shortfalls as tax collections shrink, unemployment rises and the stock market remains in turmoil.

"'These are some of the worst numbers we have ever seen,' said Scott D. Pattison, executive director of the National Association of State Budget Officers, adding that the federal stimulus money that began flowing this spring was the only thing preventing widespread paralysis, particularly in the areas of education and health care. 'If we didn’t have those funds, I think we’d have an incredible number of states just really unsure of how they were going to get a new budget out.'"

[NB: Federal stimulus funds for Medicaid required that states NOT reduce hemorrhaging Medicaid LTC eligibility, so when stimulus funds run out, states will be in much worse condition than if they'd addressed the cause of the financial problem (easy LTC eligibility) in the first place.]

"Even with the stimulus funds, political leaders in at least 19 states are still struggling to negotiate budgets, which has incited more than the usual drama and spite."

"In all, states will face a $121 billion budget gap in the coming fiscal year, according to a recent report by the National Conference of State Legislatures, compared with $102.4 billion for this fiscal year."

"'They have done a fair amount of cutting and will probably do some more,' said Ray Scheppach, executive director of the governors association. 'But as they look out over the next two or three years, they are also aware that when this federal money stops coming, there is going to be a cliff out there.'"

"In an example of the countless small but painful cuts taking place, Illinois announced last week that it would temporarily stop paying about $15 million a year for about 10,000 funerals for the poor. Oklahoma is cutting back hours at museums and historical sites, Washington is laying off thousands of teachers, and New Hampshire wants to sell 27 state parks.

"Nor will the pain end this year, Ms. Urahn said, even if the recession ends, as some economists have predicted. Unemployment could keep climbing through 2010, she said, continuing to hurt tax collections and increasing the demand for Medicaid, one of states’ most burdensome expenses.

"'Stress on the Medicaid system tends to come later in a recession, and we have yet to see the depth of that,' Ms. Urahn said. 'So you will see, for the next couple years at least, states really struggling with this.'"

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Updated: Thursday, June 18, 2009, 10:41 AM (Pacific)

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The CRASS Act

LTC Comment: What would you call a proposal that (1) taxes everyone like Medicare in order to (2) create a trust fund like Medicare's that (3) politicians can spend and replace with IOUs like Medicare's $89 trillion unfunded liability and (4) pays inadequately for benefits like Medicare under (5) severely limited circumstances like Medicare?

Check WORD's thesaurus (Shift-F7) for "crass" and you'll find these synonyms: insensitive, stupid, obtuse, inane, ridiculous, blundering. Seems to fit. So, how about "The CRASS Act?"

With no disrespect to proponents of the CLASS Act currently under consideration in Congress, it proposes to do all the same things! Maybe some thoughtful reflection would be advisable. Surely the CLASS Activists are as well-intentioned as their bill is ill-advised.

Center member, former political candidate, parental caregiver and strong LTC advocate Ross Schriftman of Pennsylvania put it like this:

"I just finished my analysis of the new version of the CLASS Act for long term care in the Kennedy Bill.  The most important thing is that the benefit is grossly inadequate (as little as $50 per day) and that amount is also supposed to cover other services such as home modification, training, family care givers, medical alerts, etc.

"The second problem that we should be pointing out strongly is that no one is covered until they have paid for 5 years.  Imagine a private insurance policy that didn't cover you until you paid premiums for 5 years.

"Another concern is that the funds could be diverted by a 3/5 majority vote of the U.S. Senate.

"Finally, this should be attacked for what it is; another government fund like Social Security and Medicare that will end up providing less than people need and be in financial trouble.  We should instead shore up the promises in the current entitlement programs that are being broken right now.  Not create a third one."

For a copy of Ross Schriftman's analysis of the CLASS Act, contact him here: rfs270@aol.com .

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Updated: Wednesday, June 17, 2009, 10:48 AM (Pacific)

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MORE BAD LTC ADVICE FROM NYT AND AMMUNITION TO FIGHT IT

LTC Comment: Last week we brought you an LTC E-Alert about advice published in the New York Times' "New Old Age" column. Writer Jane Gross suggested boomers will demand high-cost, luxurious nursing homes. Don't worry about the cost, she advised. Medicaid pays for most long-term care and you can always hire an attorney to get on the program without spending down. We brought that idiocy up short in "LTC E-Alert #9-067: Nursing Homes for the Rest of You," Thursday, June 11, 2009. Read it here if you're a Center member and have your user name and password handy. Otherwise, join and/or get your UN/PW from Damon at 206-283-7036 or damon@centerltc.com.

Yesterday, the NYT's "New Old Age" column trumped last week's foolishness. This time the columnist is Sarah Arnquist, the piece is titled "Congress Airs Concerns on Long-Term Care Insurance," and you can read it below or here.

Having propped up nursing homes and Medicaid to pay for them last week, this week the newspaper attacks long-term care insurance, the only hope we have to save Medicaid and fund alternatives to institutional care.

The fodder? A recent Senate hearing on LTCI regulation and Senator Kohl's new bill to press for heavier regulation of the product. It's the usual litany of criticism:

-- Consumers need more protection because states and feds are pushing LTCI.

-- How do we know policies will pay and serve needs decades from now?

-- Affordability

-- Premiums may increase

-- Why not just buy mutual funds instead?

-- Look out for the fine print!

Most who read these LTC E-Alerts know how to answer those specious objections, so let me attack the issue from a different angle. If you don't buy long-term care insurance, are you exempt from those same objections? Distinctly not!

-- What about consumer protection for people who end up in nursing homes on Medicaid because they lack LTCI? Medicaid pays less than the cost of care and is the principal cause of poor LTC access and quality in the United States. How about some consumer protection warning the public about the truth: the only way to ensure access to quality long-term care at the most appropriate level is to be able to pay privately and avoid dependency on publicly financed programs.

-- Do you think Medicaid will serve and pay for future long-term care needs? Forget about it. Medicaid can't pay adequately now even for nursing home care and its crowd-out effect is the main reason we lack a strong, privately-financed home and community-based services infrastructure. LTC insurance, on the other hand, pays mostly for home care and assisted living (2/3) and generously for nursing home care when medically necessary (1/3).

-- How about affordability? LTC insurance allows people to purchase red-carpet access to top-quality care in the most appropriate and desirable settings . . . for nickel-dollars now, instead of dollar-dollars later. It's a "no-brainer" in the absence of brainless advice from the NYT. Do you think going bare for LTC is more affordable? Get a clue. Medicaid was there for the uninsured in the past; it won't be . . . it can't be . . . in the future, for reasons we've explained here repeatedly. Always consider affordability in the context of the coming collapse of the social safety net.

-- Worried LTCI premiums may increase? Hello! What do think is going to happen to the "premiums," i.e. payroll taxes, you pay for Social Security and Medicare. Those two programs are unfunded to the tune of $105 trillion dollars. They will be welfarized. You won't get those benefits unless you're broke. And Medicaid? Forget about exempting unlimited assets in a home, business, prepaid burial plans, an auto and term life insurance while welfare pays for your long-term care. Those exemptions, and many other "loopholes" that have let the affluent skim off the best of Medicaid and left the dregs for the poor, will disappear.

-- So we should self-insure with mutual funds instead of using LTC insurance? Right. That's probably how we accumulated whatever wealth we have now. We carried no fire insurance, health insurance, auto insurance, or any other insurance. We invested the savings and now we're set. Of course not. The only kinds of insurance people don't buy are the kinds that, if the insured event occurs, the government steps in to cover the loss. Examples are crop insurance, earthquake insurance, and LONG-TERM CARE INSURANCE.

-- Finally, beware the fine print? Have you ever looked at the print, fine or otherwise, in a Medicaid application? They're usually twenty pages or more of intrusive queries into every aspect of your life and property. Have you visited a Medicaid eligibility office? They're usually seedy places where truly needy people ask for desperately needed help from underfinanced welfare programs. Imagine yourself, your spouse, or your adult children reduced to begging, lying or seeking "loopholes" in the law to qualify for welfare-financed LTC.

What puzzles me even more than the short-sighted, ideologically biased reporting by the media and closed-minded scrutiny by Congress, is the lack of a strong, coordinated response from the powers-that-be in the long-term care insurance industry. Where are AHIP, NAHU, NAIFA, the major carriers? Are they cowed by the criticism? Do they doubt their product? Are they afraid to challenge the affordability and efficacy of their biggest competitor--government financed LTC, especially Medicaid for the middle class and affluent?

Actually, I understand why the industry doesn't defend itself effectively. How can you criticize Medicaid without inviting attacks for self-dealing? But here's the answer. Focus on the role of long-term care insurance in saving Medicaid as a true safety net for the poor. That is the position of the Center for Long-Term Care Reform. We're not about promoting LTCI or reverse mortgages. We're all about saving Medicaid for those in need by diverting everyone who is young, healthy and affluent enough into early planning for private financing alternatives.

If this makes sense to you, we could sure use your help to mobilize and take the fight to politicians, public officials, and decision makers all across America.

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The New Old Age

June 16, 2009, 12:28 pm

Congress Airs Concerns on Long-Term Care Insurance

By Sarah Arnquist

As many as 7 million Americans have long-term care insurance policies, and many states confronting burgeoning deficits are urging consumers to buy this type of insurance as a way to protect Medicaid budgets. But at a recent Senate hearing, lawmakers and watchdog groups cautioned that greater consumer protections are needed.

"There are no guarantees that the policies purchased today will serve your needs 20 to 30 years down the road," Diane Rowland, executive vice president of the Kaiser Family Foundation, told the Senate Special Committee on Aging earlier this month.

Consumers must balance premium affordability with the types of services they may want, the daily benefit amount, the length of coverage and other options, such as inflation protection. But personal needs and the marketplace can change in the decades between purchasing and using a policy, Ms. Rowland said.

Moreover, some purchasers find they can no longer afford the premiums, even after years of payments. And it is even more expensive to acquire coverage late in life. A long-term care policy costs almost twice as much when purchased at age 70 than it would have at age 60, according to a Kaiser policy brief (PDF).

Given this uncertainty and the increasing number of state Medicaid and private long-term care insurance partnerships, greater consumer protections are needed nationally, said Senator Herb Kohl, Democrat of Wisconsin and chairman of the aging committee.

Medicaid foots the bill for more than 40 percent of nursing home costs and 25 percent of home health costs in the U.S., but only low-income individuals with minimal financial assets qualify.

In 2005, Congress passed the Deficit Reduction Act, which lifted a moratorium on partnerships between states and private long-term care insurance companies. At least 30 states now have or soon will have programs to encourage middle-income Americans to buy long-term care insurance.

Under these programs (PDF), Medicaid kicks in to pay for long-term care after an individual exhausts his or her private insurance benefit. Consumers participating in these plans would not have to meet the same strict asset test to qualify for Medicaid as most people do.

Private insurance companies often help finance government campaigns to raise awareness about long-term care insurance and the partnership program.

Mr. Kohl has introduced the Confidence in Long-Term Care Insurance Act of 2009, which would set minimum consumer protections nationally for private policies partnering with Medicaid. The bill also would create an internet directory to help consumers evaluate long-term care insurance policies.

"We need to ensure that premiums increases are kept at a minimum, insurance agents receive adequate training, and complaints and appeals are addressed in a timely manner," Mr. Kohl said.

Attendees at the hearing also suggested that consumers not purchase long-term care insurance without considering alternative savings and investment options, such as mutual funds. Also, consumers should be sure to read and understand all the fine print, such as when and by how much premiums can increase and how inflation protection works.

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Updated: Tuesday, June 16, 2009, 11:07 AM (Pacific)

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LTC BULLET: LTCI TURMOIL

LTC Comment: What's really happening to long-term care this year in DC and state capitals? Some thoughts after the ***news.***

*** RHODE ISLAND READY. Help us find reverse mortgage lenders and LTCI producers, brokers and carriers to interview. We're scheduling field work for the Center's "State X Project" now revealed as a review of Medicaid and LTC financing in the "Ocean State." If you work in the long-term care insurance or home equity conversion fields in Rhode Island and you'd like to attend a two-hour briefing/interview by Steve Moses on LTC financing policy during the week of June 6-10, 2009, contact Damon at damon@centerltc.com to be added to the invitation list. If you can provide a conference room to accommodate 20 or more attendees, please let us know. ***

*** SEE WHAT I MEAN? Harboring any doubts about our analysis of the LTC financing scene? Do you think Medicaid and Medicare will keep crowding out LTC insurance? Check this out: "Obama opens the door for drastic new Medicare, Medicaid cuts for nursing homes. Frayed nerves were showing in the provider community Monday after President Obama announced his intentions Saturday to cut $313 billion more from Medicare and Medicaid over the next 10 years. The proposed new cuts are in addition to the $635 billion in Medicare and Medicaid spending reductions already included in the president's FY 2010 budget, and include billions in potential payment reductions." Source: McKnights.com Daily Update, 6/16/9 ***

*** HEALTH REFORM IN A NUTSHELL. Want a quick overview of what health reform is all about and what has to happen to get it right? Check out this 47-minute talk by Congressman Paul Ryan of Wisconsin as introduced and supplemented by Bob Moffit of the Heritage Foundation. For his clarity, credibility and passion, no one beats Ryan on health reform. ***

LTC BULLET: LTCI TURMOIL

LTC Comment: Will health reform turn the LTCI market upside down? Will the Kennedy bill create a new treasure chest of "trust" funds for politicians to rob? Can the Kohl bill kill LTC insurance with a death of a thousand regulatory cuts?

I don't think so. If you look at the bigger picture, you'll find a sea change coming in long-term care financing. We addressed it first in "LTC Bullet: Will Health Reform Include LTC?," Thursday, March 5, 2009.

This month's Broker World has my latest thinking (as of March when I wrote the piece) on the subject. Read it below or here with a picture. Reprinted from BROKER WORLD June 2009 www.brokerworldmag.com. Used with permission from Insurance Publications. Subscriptions $6/yr. 1-800-762-3387.

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"LTCI Turmoil"

by

Stephen A. Moses

On the face of it, not much is happening this year on LTCI public policy. Health reform consumes the political system's attention, but long term care is barely on politicians' radar screens. This year, no one in Congress even bothered to introduce the perennially-doomed "above-the-line tax deductibility" proposal. Education campaigns like "Own Your Future" sputter along. Section 125 remains little more than a gleam in the eyes of carriers' government affairs staff. LTC partnerships leave people wondering, "Who would want to coordinate benefits between a quality insurance product and a bankrupt welfare program?" LTCI market penetration is dismally low and flat or down.

The recent $787 billion economic stimulus package contains $127 billion for health care, $87 billion of which is aid to the states for Medicaid.

• First, according to research published by Amy Finkelstein of MIT and Jeff Brown at the University of Illinois, Medicaid crowds out 66.6 to 90 percent of the potential market for long term care insurance. (Read their evidence for yourself at www.nber.org, the National Bureau of Economic Research's website.)

• Second, the $87 billion stimulus Congress gave to state Medicaid programs comes with the stipulation that they not cut eligibility for long term care benefits.

In other words, this new windfall of borrowed money from the feds is guaranteed to prop up Medicaid's profligate nursing home and home care spending, which is precisely what's preventing long term care insurance from gaining marketplace traction.

How can that be? Medicaid is welfare. It requires total impoverishment. Surely any new money for Medicaid only helps the most destitute.

Medicaid is supposedly for low-income people, but if you're 65 or older and you need LTC, you're eligible if your income is less than the cost of a nursing home. That's more than $6,000 per month, on average. Low income? Not by any standard.

But doesn't anything over $2,000 in assets disqualify you? Yes, if you hold it in cash or negotiable securities. No, if you hold it in exempt assets.

• A home and all contiguous property up to an equity value of $500,000. Make that $750,000 in "generous" states such as New York, California and Idaho.

• A business, including capital and cash flow of unlimited value. Got extra assets? Want Medicaid to pay for your LTC? Buy a rental house.

• One auto of unlimited value, as long as it benefits the Medicaid recipient. Use Grandma's money to buy a sports car and take her for a ride. That counts. Because the car's exempt, it isn't a penalizable transfer of assets if Grandma gives it away. So buy one, give it away, buy another and so on, until you get down to the $2,000 limit. That's the "two Mercedes" rule.

• Unlimited prepaid burial plans for the Medicaid recipient and family members. Own your own pyramid and qualify quicker for Medicaid LTC.

• Unlimited term life insurance. Why would a 90-year-old buy a $1 million term life policy? Instantaneous self-impoverishment, eligibility for Medicaid, and the benefit passes directly to heirs dodging probate and evading Medicaid's mandatory estate recovery.

Still having trouble getting down to that $2,000 limit? Medicaid planners (lawyers who specialize in artificially impoverishing affluent clients to qualify them for Medicaid) advise "take a world cruise" or throw "a party of Ziegfield Follies proportion." Medicaid doesn't care how you spend the money as long as you don't give it away for less than fair market value.

And finally, if you still have too much wealth to qualify for Medicaid, those same lawyers can show you how to get rid of it with annuities, life care contracts, reverse half-a-loaf strategies and dozens of other sophisticated techniques they've dreamed up to justify their $200 to $500 billable hours.

I encourage LTCI carriers, brokers and producers to understand how Medicaid crowds out their market and poisons long term care services for everyone.

The good news is that this problem is easy to fix and, with your help, we have a real chance to fix it this year. The trick is to preserve Medicaid as a safety net for the poor and use the savings to fund tax incentives for LTC insurance and a much bigger education campaign.

That's the goal of the Center for Long-Term Care Reform's "2009 Save Medicaid LTC Campaign" and our "2009 Western Tour."

1. Help state Medicaid programs make full use of federal laws to target their scarce LTC resources to people truly in need.

2. Advocate for new federal rules that prevent affluent people from gaming the system and to encourage everyone who's young, healthy and affluent enough to save, invest or insure for LTC.

3. Help LTCI carriers, brokers and producers use these insights to protect more individuals, families and companies from the risk and cost of long term care in the future.

Long term care financing is entering a period of tumultuous change. Medicaid can't and won't continue to pay for most LTC and crowd out most LTCI.

STEPHEN A. MOSES is president of the Center for Long-Term Care Reform, Inc., which is a private think tank and public policy organization. Its mission is to ensure quality long term care for all Americans. Moses is widely recognized as an expert and innovator in the field of long term care. Previous to founding the center, Moses was president of the Center for Long-Term Care Financing (1998-2005); director of research for LTC, Inc. (1989-98); a senior analyst for the Inspector General of the U.S. Department of Health and Human Services (1987-89); and a Medicaid state representative for the Health Care Financing Administration (1978-87).

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Updated: Monday, June 15, 2009, 9:51 AM (Pacific)

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MOSES NAMED OSPRI HEALTH POLICY FELLOW

LTC Comment: Remember the Center's "State X Project?" We described it in "LTC Bullet: Unique LTC Reform Opportunity," Monday, May 18, 2009. We asked for contributions of $5,000 to fund a quick turn-a-round study to evaluate the opportunity for LTC reform in the unnamed state. You responded with double what we requested, so I'll be visiting Providence, Rhode Island July 6-10, 2009 to get the LTC lay of the land there. Much more on our RI plans as they develop.

So, yes, "State X" is Rhode Island and the "think tank" we'll be working with is the Ocean State Policy Research Institute (OSPRI) directed by president William Felkner. Check them out here. Following is their press release today titled "OSPRI Names Moses Fellow on Healthcare Policy."

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OSPRI NAMES MOSES FELLOW ON HEALTHCARE POLICY

The Ocean State Policy Research Institute is pleased to announce Steve Moses as their Fellow on Health Care Policy.

"With the passage of the Global Medicaid Waiver, Rhode Island was released from many of the federal guidelines dictating how we provide tax funded healthcare and the state must now design a system that will be sustainable and productive for our citizens," said William Felkner, president of the Ocean State Policy Research Institute. "The benefits of having an expert of Mr. Moses' caliber to provide research for stakeholders as we navigate this change will be immeasurable."

Mr. Moses has directed numerous national and state-level studies for the federal government, state governments, and private think tanks on Medicaid nursing home eligibility, asset transfers, estate recoveries and long-term care financing.

Moses influenced the content and passage of the Deficit Reduction Act of 2005, which discouraged Medicaid planning abuses and unleashed the LTC Partnership programs. He is credited with having "forged the framework" for the Omnibus Budget Reconciliation Act of 1993, which closed many Medicaid eligibility loopholes. He helps state Medicaid programs curtail Medicaid estate planning and encourage private insurance and home equity conversion as alternatives to public welfare financing of long-term care for the middle class and affluent.

"I've dreamed for many years of an opportunity like the one presented now in Rhode Island by this global Medicaid waiver," said Moses. "This state can show what can happen when a state Medicaid program eliminates perverse public policy incentives that have trapped millions in nursing homes on welfare, created the long-term care system's institutional bias, diminished access and quality of care, and created a cottage industry of 'advisors' who overload Medicaid by artificially impoverishing vulnerable elderly clients."

"Rhode Island has taken the bold step of acquiring the waiver because, financially, we simply do not have a choice. Many say our economy is in crisis," said Felkner. "Within this crisis is an opportunity and we are honored that Mr. Moses sees this opportunity and has chosen to work with us to provide research on our health care options."

Mr. Moses has testified before Congress and most of America's state legislatures. His recommendations are quoted often in the national media including the "CBS Evening News," PBS's "Frontline" and "The Financial Advisors," CNN, National Public Radio, The New York Times, The Wall Street Journal, Newsweek, USA Today, Forbes, The New Republic, Smart Money, National Journal, and Jane Bryant Quinn's syndicated column.

His articles have appeared frequently in distinguished publications like The Gerontologist, The Journal of Accountancy, The Journal of Financial Planning, Contemporary Long-Term Care, Best's Review, National Underwriter, Assisted Living Today and Nursing Homes magazine. He is the author of chapters in several books including "Health and Long-Term Care Insurance" in Clark Boardman Callaghan's legal treatise Advising the Elderly Client, the chapter on long-term care financing in "Age Wave" author Ken Dychtwald's Toward Healthy Aging anthology, and a critique of the long-term care partnerships in a volume which reviews that program. He is also the author of Aging America's Achilles' Heel: Medicaid Long-Term Care which was published by the Cato Institute.

Senior Market Advisor magazine put Steve Moses in its top-ten LTC insurance "Power List" and his picture on its cover. McKnight's Long-Term Care NEWS said Moses is "one of the 100 most influential people in long-term care." Nursing Homes magazine reported "there is probably no more articulate spokesperson for privately financed long term care than Stephen Moses."

"Under a federal waiver similar to the one Rhode Island received for Medicaid, Wisconsin Governor Tommy Thompson removed perverse incentives in the old AFDC welfare program that trapped generations of young women in poverty," Moses said explaining the national implications of RI's Medicaid Waiver. "President Clinton and Congress 'changed welfare as we know it' in 1996 using Thompson's Wisconsin model. Welfare rolls declined by two-thirds saving millions from impoverishment and misery."

"Rhode Island has a similar opportunity," Moses continued. "I am delighted to work with the Ocean State Policy Research Institute so we may provide whatever assistance we can to help Rhode Island change Medicaid as we know it."

Moses received his Bachelor of Arts in Political Science, Highest Honors, Phi Beta Kappa, at the University of California, Davis (1967) and his Master of Arts in Political Science, High Honors, at the University of Maryland, College Park (1971). He and his wife of 43 years were Peace Corp Volunteers in Venezuela from 1968 to 1970.

About OSPRI:

Created in 2007, our work is focused on crafting sound public policy based on the principles of free enterprise, limited government, and traditional American values. We offer timely research and analysis on important issues to be shared with elected officials, the media, business leaders, community organizations and individual citizens. In recent months, we have been responsible for such successful projects as the Transparency Train - A public financial and legislative information repository, as well as regular updates published and available on our website and companion blog.

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Updated: Thursday, June 11, 2009, 10:14 AM (Pacific)

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NURSING HOMES FOR THE REST OF YOU

LTC Comment: Jane Gross writes a column titled "The New Old Age" for the New York Times. She often tries to humanize and personalize the difficult public policy and personal issues surrounding long-term care for the frail or infirm elderly. Check out the following example. Please read the column first, then return for our analysis:

Jane Gross, "The New Old Age: Nursing Homes for the Rest of Us," New York Times, February 25, 2009, http://newoldage.blogs.nytimes.com/2009/02/25/nursing-homes-for-the-rest-of-us/?emc=eta1.

LTC Comment: Jane Gross laments the poor quality of nursing home care in the United States. How could we have institutionalized our wonderful World War II generation in these awful places? Surely baby boomers won't put up with conditions like "double rooms, showers down the hall, linoleum floors and coffee that arrived at the breakfast table lukewarm from a central kitchen . . . wheelchairs hubcap-to-hubcap in the lounge."

Boomers will (make that WE will) demand better. Why not this? "Private rooms. Internet access. A fitness center. Massage rooms. Kitchens in each dining area, so the coffee is hot and the toast crispy. Electronic medical records to eliminate the need for nursing stations. Windows that face the river, positioned so someone in a wheelchair can enjoy the view. And showers in each room to eliminate the indignity of being wrapped in a sheet and wheeled down the public hallway."

All right! Sounds good to me. And Ms. Gross agrees: "I look at it and say to myself, 'If I needed nursing care, would I live here?' And my answer is definitely yes."

But after she fantasized about good nursing home care in this column, she came back down to Earth with an "update" on LTC financing four days later. There, she says:

"Many of you noted that a place like this must be out of the economic reach of all but the very wealthy (and no, that does not include newspaper writers!). Let me clarify something that has come up in this blog numerous times, something I have failed to communicate with clarity or precision.

"Yes, nursing homes like this one are exorbitantly expensive for self-pay residents - upwards of $15,000 a month for a private room. (Yes, $15,000. Yes, per month.) But 80 percent of the people here, and at nursing homes both upscale and downscale across America, have no money because they didn't have any to begin with, they've already spent it all on their own care, or they have used legal (yes, legal, however unfair or even immoral) means to transfer their money to their heirs.

"All of these residents without funds are subsidized by the government via Medicaid. In other words, they reside here and at all other nursing homes for free, with Medicaid covering a smaller and smaller portion of their actual care and the nursing homes themselves making up the shortfall. Nonprofit homes are more likely than for-profits to provide identical services to those who are paying their own bills and those who aren't. When my mother was a resident of the Hebrew Home, she paid $14,000 a month of her own money for her care for over a year. The last few months of her life she was on Medicaid, having exhausted her funds. Her excellent care was identical before and after.

"One additional fact of some importance: It is illegal for nursing homes to evict self-pay residents when they run out of money. What this lengthy explanation translates to is this: Assisted living facilities, continuing care retirement communities and hourly or live-in home care are generally available only to the wealthy, since - except under special waivers, in certain states - there is no government reimbursement. Nursing homes, and only nursing homes, serve rich and poor alike, because Medicaid takes care of anyone in such a facility."

LTC Comment: With "experts" like this providing advice like that in America's "newspaper of record," it's easy to feel hopeless about the future of long-term care financing in the United States.

Ms. Gross has no clue why our LTC service delivery and financing system is so messed up. So let's enlighten her:

Medicaid made nursing home care free in 1965. That effectively crowded out a market for privately financed home and community-based care and a private long-term care insurance market to pay for all levels of LTC. The result 44 years later is a welfare-financed, nursing-home based LTC system in the wealthiest country in the world where no one wants to go to a nursing home but the public remains in denial about the risk and cost of LTC.

The baby boomers won't put up with such a system, Ms. Gross? Au contraire. They'll (we'll) have no choice. And what our generation faces will be even worse than what our parents and grandparents put up with so stoically.

Why? Because the bottom's about to fall out of the frayed safety net (Medicaid for LTC, Social Security for income, and Medicare for acute care) that has heretofore protected people from the worst financial consequences of getting old and sick. I won't repeat the evidence for this impending outcome as we've covered it so often here before.

But let me make this one last point in closing. The only boomers who have access to the kind of long-term care Jane Gross praises will be those who are independently wealthy or who own private long-term care insurance. Medicaid won't be an option except for the truly destitute. Social Security and Medicare, which prop up Medicaid LTC now through income spend-through and generous LTC reimbursements, respectively, won't do so indefinitely. Those so-called social insurance programs will be welfarized and available only to the poor who meet stringent income and asset restrictions.

In the past, people could ignore the risk of long-term care, avoid the premiums for private insurance, and, if they ever needed expensive LTC, government picked up most of the cost. The rest of the cost was shifted to private-payers who pay half again as much for their own equally poor care in nursing homes. But there are few private-payers left to fleece and the government has no more money for LTC, so the end game is upon us.

Gee, it sure would have been good if someone had warned about this inevitable outcome 25 years ago.

Someone did? Pray tell, who? Check it out here and here. [These reports, both authored by Stephen Moses in 1988 (for the DHHS Inspector General) and 1985 (for HCFA), discuss "Medicaid Estate Recoveries" but read them through and you'll see the big problem regarding LTC financing diagnosed, prognosed, and treatment recommended.]

Now that you're free of Jane Gross's fantasies and in possession of the hard facts of reality, do the only thing you can do to prepare for the future:

Plan now and save, invest or insure privately for long-term care, income, and acute care security.

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Updated: Wednesday, June 10, 2009, 11:04 AM (Pacific)

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STIMULATING LTC DYSFUNCTION

LTC Comment: Life estates are one way Medicaid planners manipulate the welfare program to benefit affluent clients and line their own pockets.

Read about the strategy on a well-known Medicaid planner's blog here.

Note that the State of Virginia threw a monkey wrench into the life estate gimmick. Virginia Medicaid changed the eligibility rules last year so that life estate values counted against LTC asset eligibility limits.

So far, so good. That meant more Medicaid money for people in need and a greater incentive for others with home equity to plan responsibly to pay for their own LTC.

But then, along came the federal government with its seemingly unlimited supply of money. The famous "stimulus bill" granted state Medicaid programs an extra $87 billion in total. Each state that qualifies receives an extra 6.2 percent in federal Medicaid matching funds.

Now, here's the kicker. To qualify for this federal windfall, state Medicaid programs have to make sure their Medicaid eligibility criteria are no stricter than they were in July 2008.

Having tightened its eligibility rules to make the value of life estates a countable resource, Virginia had to rescind this sensible rule in order to qualify for the federal stimulus money. Fancy fiscal footwork responding to a federal financial honey trap.

But, who wins? Who loses?

• Affluent elders get easier access to Medicaid LTC.
• Heirs save their inheritances at Medicaid's expense.
• Medicaid planners rake in big fees.
• The feds subsidize dysfunctional Medicaid eligibility loopholes.
• Tax payers foot the bill.
• LTC insurance and home equity conversion for LTC lose potential customers.
• More chronically ill people get Medicaid's "low cost care of uncertain quality."

I once compared working for the federal government to "Bouncing Around in a Rubber Room." (Forbes, July 4, 1994) This crazy policy is another case in point.

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Updated: Tuesday, June 9, 2009, 11:45 AM (Pacific)

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LTC BULLET: KFF MISFIRES ON LTCI

LTC Comment: A new study of private long-term care insurance published by the Kaiser Family Foundation fails in the usual, predictable ways. Details follow.

LTC BULLET: KFF MISFIRES ON LTCI

LTC Comment: The Kaiser Family Foundation (KFF) examines government programs through a glass darkly. See no evil, hear no evil, speak no evil. But when KFF inspects the private sector, it uses an electron microscope. The richly endowed Foundation always finds a log in LTCI's eye, but never a speck in Medicaid's.

Their latest broadside . . . uh . . . I mean study . . . is a case in point.

Citation: Anne Tumlinson and Christine Aguiar of Avalere Health, LLC and Molly O'Malley Watts, of Kaiser Family Foundation, "Closing the Long-Term Care Funding Gap: The Challenge of Private Long-Term Care Insurance," The Kaiser Commission on Medicaid and the Uninsured, June 2009, http://www.kff.org/insurance/upload/Closing-the-Long-Term-Care-Funding-Gap-The-Challenge-of-Private-Long-Term-Care-Insurance-Report.pdf.

Read the "Overview" and "Key Findings" below after our review. Or check out the full report here.

The report's argument in a nutshell is this: Long-term care costs are wiping out families' savings all across America plunging frail and infirm seniors into total impoverishment and leaving them dependent on a financially overburdened Medicaid program. But private long-term care insurance isn't a solution because people don't buy it, it's too complicated, expensive, and, besides, who knows what long-term care will be like in the future and whether LTCi will pay.

But if this "Welfare Paradigm" is true, how do you explain consumer behavior? If long-term care costs are wiping out the savings of millions of Americans, why is the public in denial about LTC? Why isn't there a strong home and community-based services infrastructure fueled by the billions of dollars families are allegedly spending down for LTC? How come we have an institutional bias in the system when most people would rather avoid nursing homes? Shouldn't private long-term care insurance be a bargain at any price? It enables the insured to purchase red-carpet access to top-quality care at the most appropriate level for nickel-dollars now instead of dollar-dollars later. If the "Welfare Paradigm" is true, consumer behavior is totally irrational.

Now consider another explanation of the long-term care system. Call it the "Entitlement Paradigm." It goes like this: In America today, people are living longer, dying slower, and are often in need of high-cost long-term care. But they can ignore this risk, avoid the premiums for private insurance, and, if they ever do need expensive extended care, somebody else pays. If that's true, then consumer behavior makes perfect sense. No wonder the public's in denial about LTC risks and costs. No wonder they end up in nursing homes mostly, because that's what Medicaid finances. No wonder home and community-based care options are severely limited because people have to pay for them privately. And no wonder LTC insurance remains stunted. You can't sell apples on one side of the street when they're giving them away on the other.

Here's the basic problem with the new KFF report. It assumes the "Welfare Paradigm" is true without any evidence and doesn't consider the "Entitlement Paradigm" at all despite overwhelming proof readily available in the literature. Let me give you a few examples.

The KFF report says "American families today are struggling to pay for long-term care, caught in the crosshairs of an economic meltdown dramatically reducing the personal resources that have fueled over 25 percent of the nation's long-term care spending until now." (p. i) Also: "Such an [LTC] event can devastate family members who, after exhausting their assets, may have very little choice of care setting other than a Medicaid nursing home." (p. 14)

So, out-of-pocket expenses (OOPs) account for 25 percent of LTC spending and devastate families? Doesn't sound like that much, does it? OOPs were over half of LTC costs 30 years ago. But the explosion in LTC funding from Medicaid and Medicare has replaced most of the private liability for long-term care.

Furthermore, of the 25 percent of LTC costs that are still out-of-pocket, half is just the spend-through of Social Security income by people already on Medicaid! If you add in the VA's contribution to LTC costs, other federal and state funding sources, and other private income, you account for 85 percent to 90 percent of total LTC expenses without touching a penny of anyone's assets. No wonder people aren't worrying about protecting assets from LTC costs. They've been anesthetized to the risk by the dominance of publicly financed care.

The new KFF report acknowledges none of this, nor do any other KFF reports discuss the facts of LTC government financing instead of the myths of Medicaid spend down. For details on the impact of public funding on the LTC service delivery and financing system, see "LTC Bullet: So What if the Government Pays for Most Long-Term Care, 2007 Data Update" here.

These are some more critical points the KFF routinely ignores:

o Medicaid alone (never mind Medicare, the VA, etc.) crowds out 2/3 to 90 percent of the potential market for private LTC insurance. (Brown and Finkelstein, www.nber.org)

o Three dozen "Medicaid spend-down" studies from the late 1980s and early 1990s revealed that most people (upwards of 80 percent) are already Medicaid eligible at the time of nursing home admission. No evidence of widespread, catastrophic LTC spend-down exists.

o Social Security (income spend-through) and Medicare (generous reimbursement levels), two federal programs with unfunded liabilities totaling $105 trillion, prop up Medicaid's ability to fund LTC (and crowd out LTCI). But they can't continue doing so much longer. When Social Security and Medicare cut back as they inevitably have to, it will devastate publicly financed LTC and ruin nursing homes, home health agencies, state Medicaid programs, and the poor who depend so heavily on Medicaid.

o Medicaid LTC eligibility is not strict as Diane Rowland, Executive V.P. of KFF, claims in her June 3, 2009 testimony on the new KFF report before Senate Aging. She says "Medicaid's strict eligibility rules require people who need long-term care to spend-down all of their assets . . .." (p.5, read Rowland's testimony here) If that were true, everyone who is medically and financially eligible would be buying LTC insurance. The truth is that Medicaid LTC exempts unlimited assets: a home and all contiguous property up to $500,000, one business including unlimited capital and cash flow, one auto of unlimited value, prepaid burial plans for the Medicaid recipient and family members (no limit), and unlimited term life insurance. On top of that, community spouses may retain up to nearly $110,000 in assets and Medicaid planners can make hundreds of thousands of dollars disappear with sophisticated legal techniques including trusts, annuities and life care contracts.

Once you grasp that KFF's understanding of the big picture is grossly distorted by evasion of facts like these and ideological bias (a preference for public over private funding), it's easy to see through the fallacies in this report's analysis of private long-term care insurance. So, I'll leave it to the reader to analyze the report's specific findings about LTCI. I see that part of the report as the meanderings of lost explorers with a bad map and no compass to guide them.

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Excerpts (footnotes omitted) from Anne Tumlinson and Christine Aguiar of Avalere Health, LLC and Molly O'Malley Watts, of Kaiser Family Foundation, "Closing the Long-Term Care Funding Gap: The Challenge of Private Long-Term Care Insurance," The Kaiser Commission on Medicaid and the Uninsured, June 2009, http://www.kff.org/insurance/upload/Closing-the-Long-Term-Care-Funding-Gap-The-Challenge-of-Private-Long-Term-Care-Insurance-Report.pdf.

"Overview

"American families today are struggling to pay for long-term care, caught in the crosshairs of an economic meltdown dramatically reducing the personal resources that have fueled over 25 percent of the nation's long-term care spending until now. These sources of out-of-pocket financing, which include home equity, personal savings, and income from adult children, have provided critical private funding for a long-term care system in which insurance has played a very small role, covering only about 10 percent of all seniors.

"The decline in personal financial resources comes at a time when states are facing negative growth in revenue collections and unprecedented budgetary shortfalls, forcing them to reduce spending growth in Medicaid, the nation's long-term care safety net and major financing engine. Medicaid pays for approximately 70 percent of nursing home patients, 12 percent of assisted living residents, and nearly all people with developmental disabilities. However, many states are cutting back on Medicaid and long-term care services to help balance their budgets. According to the Center on Budget and Policy Priorities, at least 21 states and the District of Columbia have cut or are considering cuts to medical, long-term care, or other services for the elderly and disabled. These reductions combined with a diminishing pool of private resources will serve to further worsen the long-standing funding gap between long-term care need and available financing.

"At the same time, federal policymakers are grappling with two policy imperatives that could diminish their ability to seek publicly funded solutions to the growing financing gap for long-term care. These imperatives include the desire to control growth in national spending on entitlement programs for the elderly and the need to finance healthcare coverage for the uninsured. Some policymakers may consider these policy goals to conflict with adding federal funds to the longterm care system through new programs or other public solutions.

"In grappling with multiple priorities and scarce public dollars, policymakers may be interested in exploring whether private long-term care insurance could play a larger role in financing America's long-term care needs. In doing so, they must carefully examine the private long-term care insurance market and consider whether this financial product could fill the long-term care financing gap and what policy changes would be necessary to achieve such a goal.

"This policy brief examines, in depth, the fundamentals of long-term care insurance, a product designed, purchased, and used much differently from health insurance. It describes the results of a study exploring how consumers buy policies, what they are buying, how much the insurance costs, how policies cover services, and how regulations work to protect consumers. This study relies on expert interviews, collection of 2008 premium data from three major carriers, and a literature review. The brief explores some of the key challenges policymakers face in enlarging the role of private long-term care insurance in financing long-term care." (p. i)

"Key Findings [charts and footnotes omitted]:

"Cost remains a key barrier to expanding the role of private insurance. People who shop for, but do not buy, long-term care insurance cite cost as the most important reason for their decision. Premium amounts vary by age of purchase. For individuals age 60 with no partner, the annual premiums for a typical policy averaged $2,329 across three products offered by three major carriers (Figure 1). For a couple the same age, premiums for the same policy design averaged $3,096 combined for the two people. If purchased at age 70, premiums would cost, on average across these products, $4,515 per year for an individual and $6,010 for a married couple. Policymakers seeking to increase the purchase of long-term care insurance will have to address its cost and the ability of consumers to pay premiums.

"Health risk can deny consumers coverage. Before purchasing insurance, many consumers must undergo a detailed health screening and evaluation to determine their insurability and risk rating. Industry experts estimate that 15 to 20 percent of those who apply do not get coverage. Policymakers interested in promoting the role of private long-term care insurance will need to seek ways to reduce coverage denial rates or provide private financing alternatives for individuals denied coverage.

"Buyers face complex product design issues. The complexity of today's long-term care insurance products reflects a market in which consumers traditionally have worked with individual agents to tailor products along multiple dimensions such as how much they will receive in daily benefits, how long the coverage will last, and how their benefits will be protected from inflation. Even policies with the same design elements can differ from one insurance carrier to another in even more subtle ways such as the definition of certain services. Any policy effort to expand the marketing and appeal of long-term care insurance to a broader group will require product simplification and consumer education.

"Time lag between purchase and use of benefits creates problems in service use. One of the major challenges of long-term care insurance is the time lag element, since it can be 20 to 30 years before the purchased insurance is used. Changing service definitions and the evolution of new forms of residential care as well as the advent of assistive technologies test the flexibility of long-term care insurance products. Policymakers must consider how to ensure the product flexibility that will provide today's purchaser with tomorrow's services and technology.

"Employer-based market offers promise but adequacy of coverage is a concern. At the same time that private long-term care insurance policies sold individually by agents have been declining, insurers have been selling a growing number of long-term care insurance policies through employers or other groups. Product options sold in this manner are often simpler than the individual market and underwriting is more limited. However, buyers in the group market tend to earn less than buyers in the individual market and therefore opt for less expensive policies in which benefits do not automatically grow with inflation. Policymakers interested in boosting the employerbased market must carefully consider how to balance growth among younger consumers with the need to ensure that inflation does not erode their coverage over time.

"Medicaid Partnership Program will shape products and the market. At least 30 states have approved state plan amendments to participate in a long-term care insurance partnership program with Medicaid that allows long-term care insurance policyholders to qualify for a Medicaid asset disregard. This disregard allows policyholders to retain a certain portion of their assets and qualify for Medicaid coverage. A policyholder who receives $150,000 in benefits from his or her long-term care insurance policy, for example, and meets all other program requirements can qualify for Medicaid using an asset test that is $150,000 higher than the ordinary Medicaid asset test (which is typically $2,000). One potential outcome of this program is that, going forward, nearly every policy sold in the 30 or more partnership states will likely qualify for the program and therefore include a Medicaid asset disregard. This makes Medicaid an integral component of many private long-term care insurance policies. Any policy effort to expand the role of private insurance should consider explicitly how the Medicaid partnership program can complement and work in tandem with other efforts to attract long-term care insurance purchasers.

"Long-term care insurance can serve as an important source of financing for policyholders in need of long-term care. Policyholders typically use their insurance benefits to pay for care at home or in an assisted living facility and report that they would likely use less paid care in the absence of their policies. At the same time, product cost, complexity, and changes in technology are among the many challenges policymakers face in creating a larger role for private insurance in financing America's long-term care system." (pps. ii-iii)

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Updated: Friday, June 5, 2009, 9:45 AM (Pacific)

Seattle--

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WANT HEALTH AND LONG-TERM CARE? EXPECT TO PAY FOR IT

LTC Comment: We have a simple, straightforward analysis of health and LTC policy here at the Center for Long-Term Care Reform. To wit:

Most people are inadequately protected for health and long-term care expenses because government financing of those services has replaced personal responsibility and planning with a pervasive entitlement mentality and a false confidence in public programs.

But government's financing of health and long-term care is insolvent already and totally unsustainable in the future. Families and individuals will be hugely more personally and privately responsible to pay for their own care going forward.

Therefore, people should start now to save, invest or insure for their own future health and long-term care needs. Financial advisors should strongly recommend private financing alternatives that can substitute for traditional government benefits which will decline in availability and quality.

OK, that's the theory. And once in awhile, news items seem to come together as though pre-planned to prove our analysis. This is one of those times. Check out the following reports from the perspective of the conceptual framework we've just described.

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The Changing Face of Medical Care after Age 65

For those reaching the age of 65 and enrolling in Medicare, the system may hold a number of surprises. Nationwide, there is a shortage of internists and they are increasingly becoming unwilling to accept Medicare. In a 2008 report from the Medicare Payment Advisory Commission, 29% of Medicare beneficiaries surveyed reported having problems finding a primary care physician or a specialist to provide care. This represents a 24% increase over the previous year's survey. Physicians site the poor reimbursement rate and the paperwork as reasons for not accepting Medicare. For people approaching Medicare eligibility, it is advisable to speak to their doctors ahead of time, since while they may not be taking new Medicare patients, they may be willing to continue treating their existing patients.

Julie Connelly

"More Doctors Are Opting Out of Medicare"

New York Times

April 2, 2009

Click for link to article

Source: May QuickFacts from MetLife Mature Market Institute, 5/12/2009

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LTC Comment: The next four items document the explosion of government benefit spending and the concurrent growth in private financial responsibility. The fifth item shows how government seeks to tie long-term care insurance, one of the potential solutions to these problems, in regulatory knots.

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Reports: Bleak state budgets through 2011 By Pamela M. Prah, Stateline.org Staff Writer Even if the national recession ends this year as many predict, state budgets will likely be in the red for the next two years, with budget gaps topping $230 billion as tax collections of sales, personal and corporate income lag, two new reports show. Read More

Source: Stateline.org Daily News Alert - June 4, 2009

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Benefit spending soars to new high By Dennis Cauchon, USA Today. Jun 4, 2009 As a result of the current recession, one of every six dollars of Americans' income is now coming in the form of benefits, such as Social Security, food stamps, unemployment insurance, Medicare and Medicaid. Government spending on benefits will top $2 trillion in 2009 - an average of $17,000 provided to each U.S. household, according to federal data. http://www.usatoday.com/news/washington/2009-06-03-benefits_N.htm

Out-of-pocket health costs up 34 percent UPI.com. Jun 3, 2009 2:41 PM U.S. adults with employer-provided health coverage paid an average $729 in out-of-pocket costs for health care in 2007, according to a study by researchers from the National Opinion Research Center and Watson Wyatt Worldwide for The Commonwealth Fund. Costs to employees jumped 34 percent from 2004 to 2007. http://www.upi.com/Health_News/2009/06/03/Out-of-pocket-health-costs-up-34-percent/UPI-35391244054495/

Study: Medical bills underlie 60 percent of U.S. bankruptcies Kaiser Health News. Jun 4, 2009 "Medical bills are involved in more than 60 percent of U.S. personal bankruptcies, an increase of 50 percent in just six years, U.S. researchers reported on Thursday," according to Reuters. "More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts." Most of them were "well-educated, owned homes and had middle-class occupations," the researchers from Harvard Law School, Harvard Medical School and Ohio University wrote in the American Journal of Medicine. http://www.kaiserhealthnews.org/Daily-Reports/2009/June/04/Medical-Bankruptcies.aspx

Kohl seeks regulation of long-term care insurance

By Alexis Leondis. Bloomberg.com. Jun 3, 2009

Long-term care insurance may not be a "cure-all" for the estimated 12 million Americans who will require such care by 2020, according to Senator Herb Kohl, chairman of the Senate Special Committee on Aging.

"Providers such as Genworth Financial Inc. are reporting losses and others such as Conseco Inc. are increasing premiums, which raises questions about the viability of the industry," Kohl said at a Washington hearing. "We need to boost consumer protections and ensure the solvency of these products in the long run, and even then long- term care insurance may not be right for everyone," said Herb Kohl, chairman of the Senate Special committee on Aging. "Long-term care insurance should not be considered as a cure- all."

The Wisconsin Democrat introduced legislation to provide a uniform way of handling claims, transferring policies between states and increasing premiums. "Long-term care insurance should reflect standards set by the National Association of Insurance Commissioners," he said.

http://www.bloomberg.com/apps/news?pid=20601213&sid=awqd14tyMyY8

Source: AHCA / NCAL Gazette, Thursday, June 4, 2009

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LTC Comment: And just in case you harbor any remaining doubts about the hopelessness of publicly financed benefits, here's USA Today's take on the subject.

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LEAP IN U.S. DEBT HITS TAXPAYERS WITH 12 PERCENT MORE RED INK

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA Today analysis shows.

Social Security:

o Social Security will grow by 1 million to 2 million beneficiaries a year from 2008 through 2032, up from 500,000 a year in the 1990s, its actuaries say.

o Average benefit: $12,089 in 2008.

Medicare:

o More than 1 million a year will enroll starting in 2011 when the first Baby Boomer turns 65.

o Average 2008 benefit: $11,018.

Retirement programs:

o Congress has not set aside money to pay military and civil servant pensions or health care for retirees.

o These unfunded obligations have increased an average of $300 billion a year since 2003 and now stand at $5.3 trillion.

The 12 percent rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security. That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003. The latest increase raises federal obligations to a record $546,668 per household in 2008. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

"We have a huge implicit mortgage on every household in America -- except, unlike a real mortgage, it's not backed up by a house," says David Walker, former U.S. comptroller general, the government's top auditor.

Source: Dennis Cauchon, "Leap in U.S. debt hits taxpayers with 12% more red ink," USA Today, May 29, 2009.

For text:

http://www.usatoday.com/news/washington/2009-05-28-debt_N.htm

For more on Taxes:

http://www.ncpa.org/sub/dpd/?Article_Category=20

Source: NCPA: Daily Policy Digest 05-29-2009

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Updated: Thursday, June 4, 2009, 11:20 AM (Pacific)

Seattle--

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ON THE HOOK FOR MOM AND DAD'S LTC?

LTC Comment: The market for LTC insurance has never taken off because government pays for most expensive long-term care. That's been irrefutably true since Medicaid and Medicare began in 1965. Don't take my word for it. Scholars Jeff Brown and Amy Finkelstein have published peer-reviewed research affirming that Medicaid crowds out 2/3 to 90 percent of the potential market for private LTCi (www.nber.org.)

But what if the government stopped paying for the LTC of middle class and affluent seniors? What if they build on DRA '05 and wipe out Medicaid's huge home equity exemptions and close the remaining eligibility loopholes? What if quality of care under Medicaid continues to disintegrate so that no one with money would accept such care even if it's free?

All these outcomes are likely given our country's hopelessly unfunded safety net. But . . . oh, oh . . . paying for our own long-term care someday may be the least of our worries. Now it looks like the government wants to put adult children at risk for their parents' long-term care expenses too!

Are you listening Generations X, Y, Z? We boomers are saddling you with $105 trillion of unfunded liabilities for Social Security and Medicare plus an undetermined, but exploding, debt for Medicaid and long-term care and now. . . lucky you . . . we want you to pay for our LTC too. Not just with your payroll and income taxes. Sure, we want those too. But now, you get to pay directly for our care as well.

What gives? Read the following report and judge for yourself.

Caveat #1: What sense does it make to require adult children to pay for their parents' long-term care when we have a system now that rewards them for ignoring this risk, waiting to see if the parent ever needs LTC, taking an early inheritance by impoverishing the parent artificially, and using Medicaid to finance their nursing home care? Fix that perverse incentive first and maybe the government won't need to enforce "relative responsibility" directly. People and their children would save, invest or insure for LTC as they should have, could have and would have all along.

Caveat #2: Only once in history has a state Medicaid program tried to require adult children to contribute toward their parents' cost of care under Medicaid. That was Idaho in the mid-1980s. It blew up in their face. I saw it up close and personal because I was the HCFA-Medicaid state representative for Idaho at the time. It was my job to make sure, if they were going to do it, that Idaho Medicaid implemented relative responsibility in accordance with federal law. For reasons too complicated to go into here, it can't be done. But that doesn't mean Congress couldn't change the rules and make it happen.

So, here's the latest on relative responsibility for long-term care costs.

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STATES MAY TAKE NEW LOOK AT REQUIRING ADULT CHILDREN TO PAY FOR AGING PARENTS

Did you know you could be responsible for your parents' unpaid bills? Thirty states currently have laws making adult children responsible for their parents if their parents can't afford to take care of themselves. While these laws are rarely enforced, there has been speculation that states may begin dusting them off as a way to save on Medicaid expenses, says SeniorJournal.com.

These laws, called filial responsibility laws, obligate adult children to provide necessities like food, clothing, housing, and medical attention for their indigent parents.

According to the National Center for Policy Analysis:

o Twenty-one states allow a civil court action to obtain financial support or cost recovery.

o Twelve states impose criminal penalties on children who do not support their parents.

o Three states allow both civil and criminal actions.

Generally, most states do not require children to provide care if they do not have the ability to pay. States vary on what factors they consider when determining whether an adult child has the ability to pay. Children may also not be required to support their parents if the parents abandoned them or did not support them.

The passage of the Deficit Reduction Act of 2005 made it more difficult to qualify for Medicaid, which means there may be more elderly individuals in nursing homes with no ability to pay for care. In response, nursing homes may use the filial responsibility laws as a way to get care paid for, says SeniorJournal.com.

Source: ElderLawAnswers.com, "States May Take New Look at Requiring Adult Children to Pay for Aging Parents; Boomers could get caught by laws already on books in thirty states," SeniorJournal.com, June 3, 2009.

For text:

http://www.seniorjournal.com/NEWS/Boomers/2009/20090603-StatesMayTake.htm

For more on State and Local Issues:

http://www.ncpa.org/sub/dpd/?Article_Category=40

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Updated: Wednesday, June 3, 2009, 10:00 AM (Pacific)

Seattle--

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LTC Comment: The DRA '05 helped preserve Medicaid LTC benefits for the needy and encourage responsible LTC planning for others. Is it doomed to repeal? Answers after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, a Master General Agent who serves LTCi producers nationwide. Claude is the lead author of the Towers Perrin Broker World Individual and Group LTCi Surveys. He helps you build whichever market suits you best (individuals, executive carve-out, work-site, affinity, financial institutions, referrals from other professionals, etc.). Claude has been active in the State Partnership movement and campaigns for independent review of LTCi claims. Test Claude by calling 800-999-3026, x2241 to ask questions or get references or email cthau@targetins.com. ***

*** STATE X UPDATE. Two weeks ago we announced a special project in a state to remain anonymous for now. I called it a "Unique LTC Reform Opportunity." Read the LTC Bullet about the project here. We appealed for special contributions totaling $5,000 to enable me to (1) spend a week in State X and (2) write a report listing ways to improve Medicaid and save money by promoting responsible LTC planning. Your response has been exceptional. We've almost reached our goal. So far, 11 Center members have pledged $4,450 and we've received $2,800. Another donor gave $5,000 directly to the state think tank we'll work with on the State X project. So, bottom line, we're already able to plan a bigger and better project than previously envisioned. But it would be great to close that remaining $550 gap to reach our original $5,000 goal. All donors are added to a special email list to receive updates on the State X project before they're announced publicly. So don't miss this chance to become a State X Project insider. Email your pledge to smoses@centerltc.com or damon@centerltc.com and follow up with a check to the Center for Long-Term Care Reform, 2212 Queen Anne Avenue North, #110, Seattle, Washington, 98109. Thanks for your support. ***

*** LTC GRADUATE SEMINAR. I gave one and two hour versions of our "LTC Graduate Seminar" 100 times to over 5,000 financial professionals on the LTC Consciousness Tour. These programs were big hits as you can see from the testimonials here. If you missed out, don't worry. You can take the full 8-hour LTC Graduate Program online in webinar form. Check it out here. Click on "View Webinar" to hear me describe the program. Hit "Online Version" for details in text form. If you're already a member of the Center for Long-Term Care Reform, you can access a full transcript of the two-hour version of the LTC Graduate Seminar in "The Zone" here. So, we've got you covered. To pursue any or all of these options, contact Damon at 206-283-7036 or damon@centerltc.com. ***

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LTC BULLET: ADIOS, DRA?

LTC Comment: Last week an insurance industry lobbyist emailed me this discouraging message:

"Congress is contemplating a massive Medicaid expansion starting with a rollback of the 5 year look back provision passed under DRA. It will revert to 3 years. Hold on to your hats and wallets."

Gee, what a great idea! Expand Medicaid and let prosperous people self-impoverish more easily to get the welfare program's most expensive benefit. That would be like beating your head against a wall and attributing the resultant headache to not knocking it hard enough.

I'm dubious that any Congress would make such a silly mistake. But then, when the other party controlled both House and Senate, it pushed through a Medicare expansion that added $11 trillion to that program's hopelessly unfunded liabilities. Go figure.

So, anything is possible. But not very long ago, the Congressional Budget Office (CBO) recommended doing just the opposite. CBO proposed saving $220 million between 2010 and 2019 by LENGTHENING the Medicaid transfer of assets look-back period from five to seven years.

[Source: Congress of the United States, Congressional Budget Office, "Budget Options, Volume I: Health Care," Publication Number 3185, Washington, D.C., December 2008, Chapter 10, page 185, http://www.cbo.gov/ftpdocs/99xx/doc9925/12-18-HealthOptions.pdf.]

In the same document, CBO proposed to: "Require Deposits to Individual Accounts for Purchasing Long-Term Care Insurance" because "Increasing the ability of individuals to purchase private long-term care insurance could help reduce the strain on federal and state budgets." [Source: Congress, ibid. p. 188.]

That measure would cost $214 million, almost exactly the same amount as expanding the Medicaid look-back period would save. Now there's a trade off that makes sense.

But public policy that makes sense may not be a priority in government right now. Consider these facts:

-- The transfer of assets look-back period for LTC assistance in Germany is TEN YEARS. Ours is only five years and Congress contemplates cutting it back to three.

-- The United Kingdom allows only a $35,000 home equity exemption for long-term care. Anything over that and you have to use the home's value to pay for care. We exempt a minimum of $500,000 and up to $750,000 in New York and California.

Ironically, we're more generous with our scarce public welfare resources for long-term care in the United States than they are in those two European, supposedly socialized, health care systems.

The USA must be rolling in Medicaid money. Thank goodness California and New York are flush with revenue. It's lucky federal taxpayers in the rest of the country don't mind paying half the cost of those states' generous Medicaid LTC programs. (Yeah, right.)

If it's starting to sound like we're drifting into la-la-land here, don't blame the messenger. Hold the politicians and bureaucrats to account who wrought this Rube Goldberg LTC service delivery and financing system.

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Updated: Tuesday, June 2, 2009, 10:24 AM (Pacific)

Seattle--

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CLEAR THINKING ABOUT LTC (AND EVERYTHING ELSE)

LTC Comment: I attribute whatever success I've had in research, analysis and writing to a love for and decades of studying philosophy, logic, reason and individualism. If only I'd been introduced to those challenging delights early in my education instead of stumbling onto them in a slow personal search for meaning!

So, when long-time friend, author, speaker and college-founder Marsha Enright sent me the following announcement, I knew I wanted to share it with Center members and LTC Blog readers. I know and admire several of the speakers scheduled for the week of "Great Connections" Marsha describes. And I can vouch unqualifiedly for her expertise and professionalism.

I don't think you could give a bright high school or college student a better gift than an introduction to "The College of the United States" as presented in this week of intensive study and learning. After all, they'll face the challenge of solving the LTC financing problem for our generation and we need them as well-prepared intellectually as possible.

Steve Moses

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Greetings!

I'm writing to ask if you would help me spread the word about the RIF Institute's summer program for high school and college students.

I created The College of the United States because I'm convinced that there's a need for a dramatically new institution of higher learning, and we are aiming to open next year. Its curriculum will incorporate the Great Books and other classics. Major works of classical liberalism, free-market economics, and modern science will also be emphasized. Students will learn philosophy, reasoning skills, economic literacy, and how to exercise their own independent rational judgment. They will study and debate the ideas of important thinkers such as Ludwig von Mises and Carl Menger and Ayn Rand-whom other institutions now often ignore or even disparage.

One of our major goals is to counter the irrationalist and collectivist trends that currently dominate higher education. The hallmark of The College is objective inquiry and reasoned debate, and the presentation of a complete spectrum of knowledge and ideas.

Although the College is not yet ready to open, something exciting is happening in just a few weeks...

It's a seminar for high school and college students in Chicago this July. It's called The Great Connections: Mastering the Intellectual Tools that Transform a College Education into Lifetime Success.

This week-long event will serve as a demonstration of, and introduction to, The College's distinctive approach. But it will benefit participants regardless of the institution they choose to attend.

This unique seminar will develop attendees' independence and knowledge of key ideas in the battle for liberty. They will be equipped to maintain their integrity despite the political correctness and collectivist pressures they may encounter on other campuses. They will learn first-hand about a variety of career paths and their rewards and challenges. And they will realize many other benefits that will stand them in good stead for the rest of their lives.

Do you know a bright student or family that might benefit from this innovative event? If so, please forward this message. A detailed description is here.

Would you help us spread the word about this important event? Feel free to mention it in your newsletter, website, or blog. I can supply announcement copy to meet your specifications; just write me at marshaenright@ameritech.net.

Support for our ambitious plan to launch The College itself is also welcome. Donors may contribute online here, or by sending a check to the "RIF Institute" at the address below.

Please let me know if you would like more information or have any questions-and if there is anything I can do to help you help us. My complete contact information is below. I'm sorry this email could not be more personal, but thank you for any help you can provide.

Sincerely,

Marsha Enright
President
www.rifinst.org

773-677-6418

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Updated: Monday, June 1, 2009, 10:32 AM (Pacific)

Seattle--

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MEDICARE ADDS INSULT TO MEDICAID'S INJURY

LTC Comment: Oh what a tangled web we weave when first we practice to . . . help the elderly through government programs.

The already messy relationship between Medicare and Medicaid is getting messier still. Medicare props up Medicaid's ability to fund LTC (and crowd out most private LTC insurance) by paying very generously for 18 percent of nursing home expenditures. But MedPAC (the Medicare Payment Advisory Commission) strongly recommends severe cuts in Medicare SNF reimbursement to Congress each year. If implemented, such cuts would devastate nursing homes and state Medicaid programs that would have to make up the difference. Now some want to shift MedPAC from Congress to the executive branch to enhance its power and hasten the cost shift from Medicare to Medicaid, the states and nursing homes. ("Rockefeller Looks to Empower MedPAC").

But that's not all I want to bring to your attention today. Check out the press release below from the Kaiser Family Foundation. Read the issue brief it describes here. Then consider the effect of what's about to happen. State Medicaid programs and higher income Medicare beneficiaries are going to be stuck with paying the brunt of extra Part B premiums from which most beneficiaries are exempt.

"So what?," you ask? This is just one more example of what we've predicted will happen. Instead of radically altering Medicare by spiking payroll taxes or slashing benefits, government will gradually shift federal costs to the states and to higher income beneficiaries. Former Comptroller General (GAO head) David Walker warns on his "Fiscal Wake-Up Tour" that we'd have to double payroll taxes and/or cut benefits by half to save Social Security and Medicare. As that's infeasible politically, we've been warning that instead the social safety net--including Social Security, Medicare and Medicaid--will be means-tested (welfarized) thus making traditional protections available to all or most people accessible only by the truly destitute.

That's the outcome today's aging Americans should be preparing to confront in retirement. As we said so often on the LTC Tour, don't look at the rear-view mirror when you plan for old age. There you'll see a relatively healthy, generous social safety net covering retirement income, acute care, and long-term care. Look through the windshield instead and you'll see a brick wall of fiscal reality approaching at 100 miles per hour. We'll continue to point out evidence of this impending collision to you. Use the evidence to lift the veil of denial and complacency from clients and prospects.

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Wednesday, May 27, 2009

Brief Examines Medicare Implications Of Social Security Cost-of-Living Freeze

Social Security recipients are not expected to receive a cost-of-living adjustment (COLA) for the first time in 2010, with no or low COLAs projected through 2012. The absence of a COLA not only has direct financial implications for more than 50 million Social Security recipients, but also will result in higher Medicare Part B premiums for roughly a quarter of all Medicare beneficiaries, with a particularly steep increase in premiums expected between 2010 and 2011.

A new Kaiser Family Foundation issue brief, based on the most recent projections of the Medicare and Social Security Trustees, explains the relationship between the Social Security COLA and the Medicare Part B premium, and the implications for those who are covered by both programs. With Medicare Part B spending expected to continue to increase in the coming years, beneficiary premium contributions are also expected to rise to cover 25 percent of total Part B spending as required by law.

Not all Medicare beneficiaries will be affected. About three in four Medicare beneficiaries are protected by a "hold-harmless" provision in the law that ensures that their Medicare premiums do not increase more than any increase in Social Security premiums. Thus, the higher premiums would fall on the remaining one quarter of beneficiaries - with monthly premiums expected to rise from $96.40 this year to $104.20 in 2010 and $120.20 in 2011.

Because most in this group are low-income beneficiaries eligible for both Medicare and Medicaid benefits, Medicaid would pay the cost of the monthly Part B premium, increasing Medicaid costs for states. Higher-income beneficiaries who are required to pay an income-related surcharge in addition to the monthly Part B premium would also pay the higher rate, as would any new enrollees who did not receive Social Security payments in the previous year and/or were not covered under Part B.

The brief, "The Social Security COLA and Medicare Part B Premium: Questions, Answers, and Issues," is available online at http://www.kff.org/medicare/7912.cfm .

For additional information, please contact:

Craig Palosky at (202) 347-5270 or cpalosky@kff.org

Tiffany Ford Fields at (202) 347-5270 or tfordfields@kff.org

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Updated: Thursday, May 28, 2009, 10:44 AM (Pacific)

Missoula, Montana--

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MEDICAID PLANNING LIVES

LTC Comment: So you thought the Deficit Reduction Act of 2005 (DRA '05) killed off Medicaid planning? Think again.

Don't get me wrong. DRA '05 made a big difference. We got rid of the biggest and easiest Medicaid planning technique--the "half-a-loaf" strategy. There's now a limit of $500,000 to $750,000 on hiding money in home equity (though we're still more than 10 times as generous as the UK's socialized system, which allows only a $42,000 home equity exemption). We now have a five year look-back for asset transfers (though we're still only half as strict as Germany's socialized system, which looks back 10 years.) So, yes, we've made a dent in the problem of Medicaid planning abuse.

But there remain Medicaid LTC eligibility loopholes big enough to drive an 18-wheeler through. Following are three websites that offer easy access to free long-term care after the insurable event has occurred. Check them out. But take your blood pressure medicine first! As long as professional scavengers like these can feed profitably on Medicaid's carcass, the poor will be denied a decent LTC safety net and clients who could have purchased quality long-term care (or insurance to pay for it) will end up trapped instead in welfare-financed nursing homes.

Special thanks to an anonymous friend in the state Medicaid system for tipping us to these websites thus:

Steve,

Here are a few Medicaid planning web sites that I've stumbled across in the course of performing my research duties that you might find amusing/disturbing:

http://stopspenddownnow.com/: I particularly like the picture of the woman hiding the piggy bank behind her back; it's a great visual for shielding assets.

[Representative Quote: "Medicaid benefits are for any person who qualifies. Whether you want to believe it or not, having Medicaid pay for the outrageous Nursing Home bill is NOT just for the poor. The government wants you to do nothing! But there are things you can do to protect your assets while obtaining public benefits to pay for the huge medical, hospital, rehab or nursing home bills due to unexpected catastrophic illness or accidents."]

www.coloradomedicaid.com: You might expect this to take you to the web site of the Colorado Medicaid agency, but you would be wrong. It takes you to the web site of a Medicaid planner.

[Representative Quote: "So many times clients come to our office under the mistaken impression that there is nothing that can be done to protect assets from nursing home costs. Fortunately much of the circulating consumer knowledge is false or misinterpreted. For example, it isn't always necessary to wait 5 years after gifting assets to become eligible for Medicaid. The answer actually depends upon the specific facts of your case. With the help of an experienced Elder Law and Medicaid Planning attorney many of the assets you have spent a lifetime accumulating can be protected from high nursing home expenses."]

http://www.medicaidsecrets.com/: The book referenced on this web site was written by a Colorado elder law attorney. There is some good material in here that you could add to your collection of Medicaid Planning quotes.

[Representative Quote: "I've seen it happen all too often with my clients who seek Medicaid advice. They try to qualify their elderly parent for Medicaid -- but not until after they've already wasted a lot of their parent's life savings paying the nursing home at the 'private pay' rate, or sold the family home because they thought they had no choice, believing that the government would force them to sell the house anyway. Of course, that's simply not true! There are ways to arrange your affairs in a way that will enable you to build a fortress of protection around your family's assets and have Medicaid pay for most, if not all, of your nursing home expenses."]

Enjoy! (or cringe)

Signed (name withheld to protect the innocent state staffer struggling to save Medicaid for people who need it)

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Updated: Wednesday, May 27, 2009, 9:40 AM (Pacific)

Seattle--

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HBO ON ALZHEIMER'S

LTC Comment: When Liz Taylor speaks, I listen. (She of Aging Deliberately, of course, not the movies.)

Liz Taylor is an expert and author on long-term caregiving. Her e-newsletter, Aging Deliberately, is free now. Subscribe here.

Following are some excerpts from her latest issue and a link to a website where you can watch the HBO series on Alzheimer's that she recommends so strongly.

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From Liz Taylor, "Feature: An exceptional HBO series on Alzheimer's," Aging Deliberately e-Newsletter, May 25, 2009.

". . . I think the media does a disservice by portraying most things aging as heart-breaking pathos and bathos. Whatever we see rarely gives us the whole picture, the warts along with the smiles. . . .

"So I have a bit of Good News/Bad News that might interest you.

"Good news: I recently watched an extraordinary television series about a tough topic -- Alzheimer's disease -- that is simply one of the best programs on aging I've ever seen.

"Bad news, it was on HBO, which a lot of people (including me) can't get. More bad news: the program began May 10 and is now over.

"Great news: you can still watch it/them (there are many different segments) in the comfort of your home or office via the Internet, thanks to the generosity of HBO and its sponsors (The National Institute on Aging and the Alzheimer's Association, among others). In a minute I'll tell you how.

"Bad news: the availability of this series ends June 7, so act quickly if you intend to see it. . . .

"Given my long experience in the aging field, I figured I already knew what the programs would say. So I started to watch the series on one of the first sunny, warm, beautiful weekends of the year, assuming I'd catch the gist quickly, then be out the door into the sunshine.

"Four hours later, I was still watching, engrossed in the stories of so many real people, fascinating research, and interesting ideas about our future. . .

"It takes intelligence and careful planning to prepare for our aging, whatever life brings us. We need real information, not hysteria. This HBO series on Alzheimer's starts us down a good path. Let's hope the rest of the media catches on.

"To see the series, go to www.HBO.com/Alzheimers."

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Updated: Tuesday, May 26, 2009, 10:40 AM (Pacific)

Seattle--

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LTC BULLET: LTC CLUELESS

LTC Comment: Consumers' denial of LTC risk and cost is nothing compared to the naiveté of professionals who should know better. Examples after the ***news.***

*** STATE X PROJECT UPDATE. Did you read our Bullet about this amazing opportunity to do LTC financing policy right? If you missed "LTC Bullet: Unique LTC Reform Opportunity," read it here now. Bottom line, we're trying to raise $5,000 so the Center can do a quick turnaround study in a state primed to be a LTC financing model for the rest of the country. So far, we've raised $3,950. Check out the project here and let us know what you can contribute. All donors will be recognized in a published report. Contact Damon at 206-283-7036 or damon@centerltc.com for details. ***

*** DON'T MISS STEVE MOSES'S "Letter to the editor: Out of whose pocket?," published in National Underwriter's LTC E-Wire, May 2009, Vol. 8, No. 8, read it here. ***

*** LTC GRADUATE SEMINAR feedback excellent. Planning a meeting or conference? Need a nationally-recognized speaker who educates and motivates audiences, especially LTCi producers? Following is a sampler of feedback from Steve Moses's last four LTC Tour presentations. Contact him at 425-891-3640 or smoses@centerltc.com to book an event. Message from Steve: "The Center for Long-Term Care Reform appreciates the generosity of individual and corporate members. But we also depend on paid speaking engagements to supplement the Center's budget and enable our research and advocacy. If this looks like the kind of feedback you'd like to have from a speaker for your event, bring me in."

"During the 7 years I have devoted to educating the public about the necessity for LTC planning and more specifically for LTCI, I have never heard it explained as clearly as Steve Moses did in the seminar I just attended." Cathie Deegan

"Steve shared great information that will help me better support the need to sell LTC programs." Rick Cohen, CFP

"Great presenter; very knowledgeable; people person." Kristy Stauffer

"Very knowledgeable. Good information, nice follow-up with website, very resourceful. Useful for our market. Thank you." Allen Pauley

"You are a breath of fresh air for those of us in Medicaid who feel like we are a small voice in the wilderness when trying to alert the public or even our own administration about the LTC crisis." Michelle Daniels, Colorado Medicaid agency. ***

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LTC BULLET: LTC CLUELESS

LTC Comment: LTCi producers tell me all the time that the public is in denial about long-term care risk and cost. "Denial is not a river in Egypt," they say.

But there is a good reason for consumers' cluelessness about LTC. Government has paid for most expensive long-term care since 1965. According to Brown and Finkelstein (www.nber.org), Medicaid alone crowds out 2/3 to 90 percent of the potential LTCi market. No wonder the public's asleep about LTC until it's too late to save, invest or insure. And by then, government financing is easy to obtain as we've explained so often here and elsewhere.

What surprises and annoys me most, however, is that professionals who ought to know better are also oblivious to the real challenge of financing long-term care. Take for example the following three stories in a recent LTC provider magazine's online publication. And don't blame the messenger. Long-Term Living E-News for May 22, 2009 was just reporting.

o Budget Update Warns of State Cuts Read More

o AARP Ramps Up Effort to Close Medicare Doughnut Hole Read More

o Poll Finds Americans Say Long-Term Care is Priority for Healthcare Reform Read More

Let's take these stories one at a time.

First, all states are struggling to meet their budgets. Medicaid is a big part of the problem; and long-term care is a big part of the Medicaid problem. Yet most states have done little to control Medicaid LTC costs. Eligibility rules remain so generous that most people who need LTC qualify. Even the affluent can become eligible by hiring lawyers to impoverish them artificially. Most states are ballooning their Medicaid LTC expenditures by expanding services people want (home care) and cutting services people would rather avoid (nursing homes). To top it all off, the federal government has subsidized this lunacy by giving states 6.2% extra federal matching funds ON THE CONDITION that they do NOTHING to control the eligibility hemorrhage.

Second, AARP wants to plug the Medicare Part D "doughnut hole." What a great idea! Thank goodness Medicare is rolling in money. Not! The new Part D pharmaceutical program added $11 trillion to Medicare's infinite-horizon unfunded liability which now totals $89 trillion. That's over five times our annual Gross Domestic Product! Looking for ways to add to Medicare's already hopeless financial obligations is simple madness. Yet, there are still those who would load long-term care onto Medicare also. The straw that breaks the camel's back? Not even. The camel's already crippled, hobbling and terminal.

Third, the American Association of Homes and Services for the Aging commissioned a poll that concluded 85% of the American public thinks LTC should be part of health care reform. Wow! No problem then. People want it. Wishing makes it so. This is delusional fantasy. Ask the question differently and see what sort of response you get. How about this: "How much more are you willing to pay in taxes so that people who can't or won't pay for their own long-term care can get it free at your expense?" The frank answer to that realistic question is usually not much more than "Zip!"

The United States is going through a turbulent readjustment from pre-Boomer-retirement-boom-times to post-Boomer-retirement-bust-times. Former Comptroller General David Walker has warned for years on his "Fiscal Wake-Up Tour" that Uncle Sugar will have to double your payroll taxes or cut your benefits by half just to prop up Social Security and Medicare. That's not counting Medicaid and long-term care, which lack even the phony trust funds of the other entitlement programs.

News flash: that ain't going to happen! So, what will happen?

Watch closely and this is what you'll see. Over the next few years, government will cut back dramatically on Medicaid LTC eligibility. No more hiding three quarters of a million dollars in home equity. No more wide open income and asset loopholes. Medicaid will shift from its long-standing status as a defacto entitlement to a real, hard-nosed welfare programs for people most in need.

But it won't stop there. Social Security and Medicare will be converted from social insurance programs available to all who pay their payroll taxes regardless of income and assets into welfare programs restricted to people who meet increasingly limited income and asset means tests. That process has already begun. Social Security taxes income above relatively low limits. Medicare Part B and Part D deductibles sky-rocket as income increases. Expect more of the same.

Bottom line? Middle class and affluent people will be much more personally responsible for their own long-term care expenses in the future. But not only that. They'll be crowded out of Social Security's and Medicare's previously generous benefits. It's not like the poor will reap a bonanza though. All economic segments will be hurt.

There's an old saying: "the best way to help the poor is not to become one of them." As the publicly financed social safety net frays and retrenches, private financing alternatives will finally emerge unfettered. Expect great growth in LTC insurance, reverse mortgages, health savings accounts, medically underwritten annuities, and other products that enable and empower personal responsibility and good planning.

In the meantime, with experts like those cited above swimming against the current of economic change, we have nothing to look forward to in the short term but hard times for all. So, here's today's take away:

If you are in the business of advising people on financial planning, you have a moral and fiduciary responsibility to convey the facts and protect your clients against these real risks. Cut through their veils of denial. It won't be easy, with so many "experts" pulling layer after layer of wool over the public's eyes.

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LINKS

Here are some links you can check out to find valuable information on long-term care providers, financiers and insurers.  This is just for starters.  We'll add many more as time goes on plus advice on what to look for on their sites.

www.ahca.org American Health Care Association

www.aahsa.org American Association of Homes and Services for the Aging

www.alfa.org Assisted Living Federation of America

www.nic.org National Investment Center

www.ahip.net America's Health Insurance Plans 

ltcconsultants.com           Phyllis Shelton's website 

www.aaltci.org American Association for Long-Term Care Insurance 

www.ltcsales.com LTCi Sales Strategies

www.ahia.net Association of Health Insurance Advisors