Republished with permission of McKnight's Assisted Living magazine.
Article as published in Assisted Living, Vol. 2, No. 2, April 2004, p.
"The Sirens' Call, The Primrose Path, and Assisted Living,"
Stephen A. Moses
Steve Moses is President of the Center for Long-Term Care Financing, a
501(c)3 charitable, nonprofit think tank and public policy organization (www.centerltc.org).
Reach him at firstname.lastname@example.org or 206-283-7036.
Be careful what you wish for . . . you may get it! That's good advice for the
assisted living industry, which is sorely tempted today by the sirens' call of
When Medicaid started paying for nursing home care in 1966, reimbursement was
generous and regulation was light. As costs rose, however, Medicaid officials
clamped down. First, they capped bed supply with certificates of need. Then,
they restricted reimbursement levels. With price and supply artificially
controlled, demand skyrocketed and nursing facilities filled to 95% of capacity
with mostly Medicaid residents. Providers quickly learned that when you're
losing money on every customer, you can't make up for it in volume!
Gradually, the nursing home industry became a virtual public utility. Care
quality suffered as Medicaid eligibility bracket creep undercut private-pay
census. The government responded with increasingly onerous regulations and
inspections. The plaintiff's bar piled on, extracting huge and ever-increasing
court settlements. Liability insurance premiums skyrocketed leading to a dearth
of affordable coverage. The end result is that we have today a welfare-financed,
nursing-home-based long-term care system in the wealthiest country in the world
where no one wants to be institutionalized.
In a nutshell, as an industry leader told me once, "Medicaid demands
Ritz Carlton care for Motel 6 rates while imposing a regulatory Jihad." The
assisted living industry should keep that in mind before accepting more Medicaid
There is a simple, cost-free solution to this dilemma. If Medicaid required
seniors to use the $1.8 trillion of home equity they own before qualifying for
public assistance, fewer people would end up on public assistance. The program
could then afford to pay market rates for a wider continuum of care, including
With reverse mortgages supplementing seniors' income, more of them could
afford assisted living without help from Medicaid. More people would buy private
long-term care insurance to protect their legacies. Medicaid could get back to
its basic business of providing a safety net for the genuinely needy.
And the assisted living industry could avoid learning first hand the bitter
lesson: "Who pays the piper, calls the tune."