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Join the Center for Long-Term Care Reform. Help us fight for rational LTC policy reform. Receive our daily email publications. Get a user name and password to our Members-Only Zone. Only $150 per year. Mail your check to Center for Long-Term Care Reform, Inc., 2212 Queen Anne Avenue North, #110, Seattle, Washington, 98109. Contact Damon at 206-283-7036 or damon@centerltc.com if you have questions. Join the team!

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Updated, Friday, April 16, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: MILKEN GROUPTHINK FUMBLES LTC FINANCING

LTC Comment: You might expect innovative ideas from the Milken Institute, but when it comes to long-term care financing, all you get is ideological retreads. We explain after the ***news.***

*** TRUST ACT NEWS: We have big news about the state insurance program to fund long-term care that the Milken Institute and a bevy of study groups in recent years have hung their hopeful hats on. Stephen D. Forman of Long Term Care Associates reported yesterday that: “the Washington State House concurred with the amendments passed by the Senate, approving SHB 1323 by a final vote of 58 – 39. Now that it moves to Governor Inslee’s desk for signature, we can safely call it a “done deal”—including the new opt-out deadline of November 1^st, 2021. That’s a big deal because it means Washingtonians have one last chance to escape the Evergreen State’s oncoming long-term care straightjacket by purchasing real LTC insurance protection in the private market. Let the fire sale begin! ***

*** ILTCI CONFERENCE NEWS: The 2021 Intercompany Long-Term Care Insurance Conference kicked off on Tuesday, April 13. Its unique virtual format this year worked well, enabling 1500 participants to track information-rich presentations on a wide range of topics, but not without some electronic glitches. The keynote speaker, who signed in from Australia at 2am the following day, couldn’t complete his talk. I monitored four hours of break-out sessions on which I’ll report in a LTC Bullet after the conference concludes. I’ve also asked some LTCI experts to report on sessions they attend. We’ll bring you their feedback as well. Kudos to organizers Barry Fisher of Ice Floe Consulting and Vince Bodnar of Oliver Wyman and the teams they recruited to design and implement the program. Four more days of the conference remain:

Tuesday, April 20th, 12pm – 4pm ET
Thursday, April 22nd, 12pm – 4pm ET

Tuesday, April 27th, 12pm – 4pm ET
Thursday, April 29th, 12pm – 4pm ET

If you haven’t already, register and attend this extraordinary, free resource here: https://iltciconf.org/sessions-at-a-glance/. Show your appreciation for the program’s sponsors by visiting their online exhibits and considering their products and services. ***

LTC BULLET: MILKEN GROUPTHINK FUMBLES LTC FINANCING

LTC Comment: The Milken Institute, chaired by former junk-bond king, now philanthropist Michael Milken, modestly bills itself as a “catalyst for practical, scalable solutions to global challenges.” Toward that end they “conduct research and analysis and convene top experts, innovators, and influencers from different backgrounds and competing viewpoints.” Lately, the Milken Institute tackled the problem of providing and financing long-term care for the broad American middle class. Last week it published “New Approaches to Long-Term Care Access for Middle-Income Households,” a timely look at a critical topic that begs for fresh analysis and ideas.

Did the Milken Institute deliver? Yes and no. The report does a yeoman’s job of describing the problem. It offers creative ideas to address service delivery problems, proposing for example a “Medicare Advantage Demonstration Project” and that the country should “Scale Up Integrated Care Programs.” But when it comes to how to pay for long-term care, the report founders as its many predecessors have done. It makes no attempt to understand why long-term care financing is so inadequate in the United States. It parrots the prevailing academic shibboleths, ignores critical facts, and proposes nothing new or promising. We get no original analysis or ideas. We’re asked to hang our hopes on a fatally flawed exercise in political futility, the LTC Trust Act in Washington State.

What went wrong? Following are quotes from the Milken Institute’s “New Approaches to Long-Term Care Access for Middle-Income Households” followed by our comments.

Milken: “In November and December 2020, the Milken Institute … brought together a highly engaged group of experts from government and academia, as well as health care, insurance, long-term care delivery, senior housing, technology, and finance. Long-term care is a complicated issue, and many experts, organizations, and government entities have been working for decades to develop better ways to address this need.” (p. 2)

LTC Comment: There is a reason why groups of all sorts have studied long-term care ad nauseam for decades unsuccessfully. Brought together to summon and balance many different perspectives, such groups can never agree on anything beyond marginal variations from conventional wisdom. The conventional wisdom is that government must do something. The right approach is instead to ask and explain why the problems exist before proposing to add more government funding and regulation, which may, arguably, have caused or contributed to the problems in the first place. Read our Medicaid and Long-Term Care for that analysis.

Milken: “The access, delivery, and financial challenges are too vast for either the private or the public sectors to shoulder alone.” (p. 2)

LTC Comment: Agreed. But we already have a public/private approach to LTC financing. It is supposed to work like this: People pay their own way until they can’t and Medicaid picks up the difference. That doesn’t work, you say? Well, the right answer is to fix it, not to impose a compulsory new government program burdened with another insolvent “trust fund,”

Milken: “But middle-income households cannot qualify for Medicaid without spending down their assets to meet the strict income limits.” (p. 4)

LTC Comment: This is the false premise that dooms Milken to invalid conclusions. Most large assets, including nearly all home equity, seniors’ biggest resource, are exempt for determining Medicaid LTC eligibility. Non-exempt assets are easily converted to exempt status. Excess income must be applied to the cost of care, but that’s a relatively small co-insurance to pay in exchange for receiving expensive long-term care at Medicaid’s discounted rates. Estate recovery is easily evaded and MACPAC recently proposed to hobble that program further. Medicaid is a time-delay trap that anesthetizes the public to LTC risk and cost until a care crisis occurs and then ameliorates the otherwise catastrophic financial consequences. That is the real reason long-term care is in the mess it’s in. Again, see Medicaid and Long-Term Care.

Milken: “In 2010 the Affordable Care Act (ACA) established the Community Living Assistance Services and Supports (CLASS) Act, which would have provided a federally administered and voluntary long-term care insurance (LTCI) program. Ultimately, however, lawmakers deemed the program financially untenable and repealed it in 2013.” (p. 5)

LTC Comment: Why did CLASS fail? Advocates say because it was voluntary. So what they want is a program that is mandatory, that removes the freedom of the marketplace and substitutes the compulsion of government. That’s a Faustian bargain, the wages of which will come due when profligate public spending ends in spiking consumer inflation.

Milken: “Beginning in 2022, Washington will fund its mandatory program through a payroll tax of 58 cents for every $100 of income for all W-2 workers in the state; self-employed workers can participate if they choose.” (p. 5)

LTC Comment: So all rally around Washington State’s new program, but look what that leads to …

Milken: “And in November 2020, voters rejected a referendum to expand the types of investments available to the program’s trust fund to include private equities. As a result, the trust fund investments remain limited to corporate bonds and certificates of deposit. These restrictions will cause the current level of payroll tax to be inadequate for funding the program in the long term, according to a study by Milliman.” (p. 6)

LTC Comment: So, we not only have to force people to participate in government-mandated LTC insurance, we have to risk their “trust fund” by investing it in private equities that are vulnerable to collapse in value. Such a government gamble is likely to leave the Washington State program no better off than the Social Security and Medicare “trust funds” which contain nothing but federal IOUs.

Milken: “A recent AP poll shows that 67 percent of respondents had done little to no planning for LTC, and 57 percent mistakenly believe that Medicare will cover their LTC costs. According to Vanguard, in 2019, the average 401(k) account balance for those 65 and older was $216,720, and the median was $64,548.20. These amounts are wholly inadequate when one considers that costs rise proportionally to the complexity and duration of care, quickly exhausting the personal savings of individuals with severe and extended care needs.” (p. 6)

LTC Comment: Wouldn’t you think Milken, et al., would wonder why most people don’t plan for long-term care, when the risk and cost is so high, the media badgers them incessantly that they’ll lose their life savings if they don’t plan, and they’re “quickly exhausting” their personal savings when “severe and extended care needs” occur. The answer is that people would plan if they were suffering those catastrophic consequences, but they’re not. There is no evidence of widespread catastrophic LTC spend down. That’s why the Milken report cites none.

Milken: “Over the past 15 years, the number of LTC insurers in the market dwindled from over 100 in 2004 to about a dozen in 2018. This is attributed in part to inaccurate actuarial assumptions on older policies and the high levels of losses that insurers sustained. (p. 6)

LTC Comment: LTC insurance carriers didn’t get all their actuarial assumptions correct, but that was not all their fault. The Federal Reserve forced interest rates arbitrarily and artificially to near zero making it impossible for carriers to get the return on reserves they reasonably expected. Medicaid made access to expensive long-term care available to middle class and affluent people after the insurable event occurred obviating demand for the product. Bottom line, government interference in the LTC insurance marketplace is the bigger cause of its dysfunction.

Milken: “Most important, Lab participants noted, there are no current complementary public and private LTCI solutions.” (p. 11)

LTC Comment: That is not true. As mentioned above, there is a public/private solution in place. This is it: Medicaid for the indigent, home equity spend-down for the middle class, and private insurance for the upper middle class and affluent. The problem is that by exempting home equity from LTC risk and cost, and by allowing generous eligibility with many elastic loopholes, Medicaid has short-circuited a system that could work very well. I explain that system in “LTC Bullet: The Key to LTC” and I provide a full explanation of why and how most analysts evade the reality of Medicaid’s perverse incentives that discourage responsible long-term care planning in Medicaid and Long-Term Care.

Milken: “As we stand in early 2021, however, COVID-19 has decimated state budgets, making it more difficult to secure funding or the political will to raise the taxes necessary to build state-level public long-term care programs.” (p. 11)

LTC Comment: All the more reason to look for private sector solutions that build on the Medicaid LTC program for the needy that is already there. The government has no money other than what it borrows or prints. Tax revenues cover less than half of federal spending, according to the US Debt Clock. When the cost for that profligacy comes due in the form of inflation, the idea government can fund big new programs for long-term care on the backs of taxed out consumers will be even more far-fetched than it is already.

Milken: “Because the Lab focused on middle-income access to affordable LTC, the discussion does not extend to Medicaid coverage of LTC.” (p. 13)

LTC Comment: It is beyond bizarre that people who call themselves experts are unaware that Medicaid is the primary payer for expensive long-term care not just for the poor but for the middle class as well. That fact is well-established in the academic literature.

Milken: “As noted, participants agreed that a private funding source would be most expedient and politically feasible to conduct the demonstration. Many argued that the regulatory approval needed for a CMS-sponsored project would present too many constraints.” (p. 17)

LTC Comment: That is a tacit acknowledgement that government won’t help; in the end, we’ll have to rely primarily on the private sector. Better to do that sooner than later in order to save what can be saved of the Medicaid safety net for people in true need.

Milken: “Lab participants were in remarkable agreement that the public and private sectors should work together to design complementary insurance programs and products to provide coverage that would offer financial protection and reduce reliance on Medicaid.”

LTC Comment: The “solution” Milken proposes—front end compulsory public program, private wrap-around coverage, and Medicaid for the back end—won’t save Medicaid anything unless financial eligibility for Medicaid is changed to eliminate its easy access. People will use the government program, skip voluntary private LTCI, and go on Medicaid as they do now. Fix that so that Medicaid truly requires either spend down up front or pay back from estates, and you won’t need new government and private insurance programs. With the right incentives, the system will right itself.

Milken: “In addition, stakeholders reiterated that expanding Medicare to include LTC benefits could be a viable and efficient path forward.” (p. 25)

LTC Comment: That would be like adding deck chairs to the Titanic after the incident with the iceberg.

Milken: “The Lab recommends that policymakers first select their funding mechanisms and set funding levels, and then build out a benefit package to fit that budget.” (p. 27)

LTC Comment: Well that makes sense but it is certainly not what Washington State did. Its politicians came up with a rather meager benefit and they’re now struggling to find a way to fund it. Like the CLASS Act in that respect, it will likely fall of its own weight.

Milken: “In terms of financial solvency, policymakers must first determine if the program is prefunded or pay as-you-go. They will have to create a trust fund and ringfence those dollars. … As noted, Washington voters turned down a referendum in late 2020 that would have expanded investment options for the state’s LTC trust fund. Projections now show a major shortfall in the state’s future fund balances that state lawmakers will have to address in the coming years by increasing the payroll tax, reducing benefit levels, or putting the issue to voters again.” (p. 29)

LTC Comment: How do you “ringfence” a “trust fund” that must be filled with risky investments to have any chance for long-term solvency?

Milken: “One innovative approach to lowering premium levels and boosting uptake could be through the utilization of reinsurance. … Notably, many reinsurers left the LTC insurance market because of significant past losses.” (p. 31)

LTC Comment: The only “reinsurer” they’ll ever find for a program like this is the federal government’s power to tax, borrow, print and spend money citizens will repay through inflation in the end. To find the reinsurer of last resort, look in a mirror.

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Updated, Monday, April 12, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-012: LTC NEWS AND COMMENT

LTC Comment: Do you spend hours searching the internet for useful articles, key data, and relevant reports to keep you on the forefront of professional knowledge? Do you lose business because you’re blindsided by clients or competitors who learn critical information before you do? Here’s an antidote:

LTC Clippings: The Center for Long-Term Care Reform notifies subscribers to our LTC Clippings service daily of information you need to know. Each message contains only the critical facts about new publications: a title, representative quote, a link to the original, and our analysis in a sentence or two. To inquire or subscribe, contact Steve at 425-891-3640 or smoses@centerltc.com. Read testimonials by satisfied subscribers here. To subscribe online, please click here.

LTC E-Alerts: Once a week, we compile our daily LTC Clippings into a summary, email it to Center for Long-Term Care Reform members, and archive it in The Zone, our password-protected members-only website. Center members also receive our weekly LTC Bullet op-ed. To join the Center and receive all these benefits and more, contact Steve at 425-891-3640 or smoses@centerltc.com.

We no longer post our LTC E-Alerts on the Center’s public access website, but here’s what today’s LTC E-Alert contained: links, quotes and comments on the following articles, reports, or data:

Biden Begins An Important, Much-Delayed, National Debate About Long-Term Care Reform
42% of older adults have unmet need for assistive bathing, toileting devices
Untracked COVID: Nursing home workers have died at twice the rate of hospital workers
CNAs virtually march on Washington, calling for higher wages, more recognition
COVID-19 Helped Long-Term Care Insurers in 2020: Fitch
Genworth Ends China Oceanwide Merger Agreement
Comment: Protect state’s new long-term care trust program
Diane Archer on the Medicare Advantage Racket
Study: Alzheimer's disease treatments could reduce the financial burden to U.S. state budgets
Senior housing wealth exceeds record $8.05 trillion
Washington long-term care insurance program, a ‘compliance nightmare,’ may face ERISA preemption

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"LTC E-Alerts" are a feature offered by the Center for Long-Term Care Reform, Inc. to members at the $150 per year level or higher. We'll track and report to you news and analysis regarding long-term care financing, service delivery, and research. We hope The LTC E-Alerts will help you attain and maintain a high level of knowledge and competency in this complex field. The Center for Long-Term Care Reform, Inc. is a private institute dedicated to ensuring quality LTC for all Americans (www.centerltc.com).

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Updated, Monday, April 5, 2021, 9:22 AM (Pacific)

Seattle—

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LTC E-ALERT #21-011: LTC NEWS AND COMMENT

A Revolution Is Underway in Alzheimer's, and It's Not All Good
Alzheimer’s origin story is about metabolism and lifestyle, scientists contend
Biden Proposes The Biggest Medicaid Home-Based Long-Term Care Expansion In History, But….
Home care providers laud Biden plan to invest $400B in HCBS
Nursing home residents have a little more time to spend stimulus checks before losing Medicaid
Dementia toolkit for clinicians underscores urgency of early diagnosis
Too Much Restaurant Fare Could Shorten Your Life
Shipping containers show promise as affordable senior living solution
‘We pretend to work and they pretend to pay’
MassMutual Sees Crisis Hitting Younger Adults Harder
The Nursing Home Vulnerabilities That Led to Disaster

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Updated, Friday, April 2, 2021, 10:24 AM (Pacific)

Seattle—

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LTC BULLET: MACPAC CAPTURED

LTC Comment: Signs in MACPAC’s estate recovery report point to its capture by the Medicaid planning bar. Evidence after the ***news.***

*** ILTCI’s VIRTUAL CONFERENCE will convene every Tuesday and Thursday from 12-4pm EDT starting April 13th. Conference Chairperson Barry Fisher and Co-Chair Vince Bodnar report participants should register individually for each session they want to attend or view the recording. All sessions are now open for registration! Click Here to register for the Opening Session and Keynote. Click the following links to register for individual sessions in each track.
Actuarial & Finance
Advisors & Agents
Aging in Place Solutions (new this year!)
Claims & Underwriting
Legal, Compliance & Regulatory
Management & Operations
Marketing & Distribution
You can also click here to see all of the sessions at a glance and register from a single page. Registration and participation are free of charge! ***

*** CENTER SEEKS reporters. As we’ve done every year since the first Intercompany Long-Term Care Insurance Conference (2001 in Miami), the Center for Long-Term Care Reform intends to cover this one. But Center president Steve Moses is unavailable to monitor two days of the conference, April 15 and 20. So we’re inviting anyone who attends those two days to forward their notes on the sessions they attend to smoses@centerltc.com. Steve will integrate the material into as comprehensive a report on the 2021 virtual meeting as possible. But don’t limit yourselves to those two days; we welcome your coverage of all sessions on every day. Thanks for your interest and assistance. ***

*** MOVIE NEWS: Ross Schriftman’ “My Million Dollar Mom” film has been accepted into its sixth festival, the first in the Midwest: the Julien Dubuque Festival in Iowa. Ross also reports: “We received an excellence award from the Best Shorts Competition.” Congratulations to longtime Center member and supporter Ross Schriftman for bringing the importance of long-term care planning to the public’s attention in this creative and impactful way. ***

*** YESTERDAY, the Center for Long-Term Care Reform celebrated its 23^rd anniversary. No foolin.’ Check out our Membership Levels and Benefits and sign up today to help us carry on another year with the kind of trenchant analysis and public policy influence that follows. ***

LTC BULLET: MACPAC CAPTURED

LTC Comment: Medicaid is a means tested public assistance program. It is the primary funder of expensive long-term care (LTC) in the United States. Unlike other welfare programs, however, Medicaid does not have stringent income and asset eligibility limits for its long-term care benefit. Instead, so that people are not wiped out financially when stricken by chronic illness that requires formal long-term care, Medicaid lets them apply excess income toward their care, keep a substantial amount of assets including home equity, and receive care at Medicaid’s substantially discounted rate. The only quid pro quo is that recipients must agree to repay the cost of their care to Medicaid after they pass away, from their estates, unless that would create a financial hardship for a surviving dependent. This is a generous benefit, in essence a government-sponsored loan that allows people and their families to avoid the worst financial consequences of an uninsured extended care need.

But the Medicaid and CHIP Payment and Access Commission (MACPAC) wants to curtail Medicaid estate recoveries. MACPAC recently asked Congress to (1) make estate recoveries voluntary, (2) reduce recoveries from Medicaid’s rapidly expanding Managed Long-Term Services and Supports (MLTSS) programs, and (3) mandate “hardship” waivers for heirs when no financial hardship exists. Without estate recoveries, Medicaid’s generous long-term care benefit is a giant giveaway to people with money who could have paid some or all of the cost of their own care, diverting them from taking timely personal responsibility for LTC risk and cost.

Why would MACPAC seek to make estate recoveries less effective, reduce vital nontax revenue to Medicaid from estates, and reward the heirs of people who failed to save, invest or insure for long-term care with taxpayer-financed loan forgiveness? The answer is that the Commission was unduly influenced by the Medicaid estate planning bar, the lawyers who make their livings counseling affluent clients on how to circumvent Medicaid’s financial eligibility rules and evade estate recoveries. This conclusion is unavoidable upon close review, which follows, of MACPAC’s latest report to Congress.

Chapter 3 of MACPAC’s March 2021 Report to Congress on Medicaid and CHIP is titled “Medicaid Estate Recovery: Improving Policy and Promoting Equity.” It contains MACPAC’s recommendations to Congress regarding Medicaid estate recoveries. What follows are quotations from that chapter followed by our analysis in corresponding “LTC Comments.”

MACPAC: “We conducted nine interviews with AARP, the Centers for Medicare & Medicaid Services (CMS), estate recovery contractor HMS, retired elder law attorney Jason Frank, Justice in Aging, the National Academy of Elder Law Attorneys, the National Association of Medicaid Directors, and state officials from Oregon and Tennessee.” (p. 96)

LTC Comment: This list of interviewees is overweight with senior advocates (AARP, Justice in Aging) and Medicaid planning lawyers (National Academy of Elder Law Attorneys and Jason Frank), underweight in representation from nonpolitical experts on Medicaid estate recovery, and totally missing the front line Medicaid eligibility workers who have the most direct knowledge of how lawyers dodge Medicaid financial eligibility rules and evade estate recovery for their affluent clients.

MACPAC: “[C]ritics have noted that many people with sizeable wealth are able to legally shield assets from Medicaid estate recovery so these can be used for their benefit or passed on to heirs. This leaves the burden of estate recovery to fall primarily on those of modest means; this may also disproportionately affect people of color given disparities in household wealth.” (p. 73)

LTC Comment: Is that the fault of estate recoveries or of the “people with sizeable wealth” and their enablers who dodge estate recovery? This is a theme the Commission returns to over and over again as indicated by the following series of quotes. They have their argument backwards. Their legitimate complaint is with Medicaid planning abuse, not estate recovery. Estate recovery, by definition, reduces “disparities in household wealth” by returning protected wealth to Medicaid for the benefit of the disadvantaged of any color.

MACPAC: “The program mainly recovers from estates of modest size, suggesting that individuals with greater means find ways to circumvent estate recovery and raising concerns about equity.” (p. 73)

“As we heard in our interviews with stakeholders, individuals with greater awareness of estate recovery and resources may protect their assets from estate recovery while preserving Medicaid eligibility, allowing resources to be passed on to their heirs.” (p. 84)

“Because wealthier beneficiaries have found ways to protect assets so they can be passed on to their heirs, current Medicaid estate recovery policy places an unfair burden on beneficiaries with limited means, whose heirs would likely receive substantial protection from poverty or housing insecurity if they were able to retain an estate of even modest size.” (p. 92)

“Given that estate recovery likely only occurs for those without the resources and awareness to avoid it through estate planning, making it optional will help address equity concerns we heard in our interviews.” (p. 94)

“The Commission recognizes the growing financial pressures on the LTSS system, and that one way of addressing that pressure could be to explore mechanisms for people with substantial means to fund their own LTSS (e.g., private insurance) instead of seeking Medicaid. As noted above, during the Commission’s various discussions on estate recovery policy, a concern was raised about potential abuses of Medicaid planning activities that allow individuals to shield assets to gain Medicaid eligibility. Given that this is a wholly separate issue from estate recovery, the Commission agreed to defer further discussion of that issue for now and explore later whether there is a need for policy improvements related to eligibility.” (p. 96)

LTC Comment: The Commission has the cart before the horse. Medicaid planning abuse is not a “wholly separate issue from estate recovery.” It is the essence of estate recovery. Medicaid programs cannot recover what is not in an estate because it was divested prior to or during Medicaid eligibility. Most of the complaints the Commission raises about estate recovery—including low recovery amounts, recovery from small estates, and the inequity of the wealthy dodging the system while the less savvy pay up—would be eliminated by ending Medicaid planning abuse. The logical progression is to address the abuses of Medicaid planning before considering estate recovery. Instead the Commission seeks to hamstring estate recovery which is the only thing preventing Medicaid planners and their prosperous clients from getting off scot-free from long-term care responsibility at the expense of taxpayers and to the detriment of the actually needy people Medicaid is supposed to serve.

MACPAC: “Individuals who engage in Medicaid planning may be able to legally protect some of their assets, thus keeping assets that would otherwise deem them ineligible for Medicaid LTSS. One technique allowed in some states to reduce the length of the penalty period is known as the reverse half-a-loaf mechanism (GAO 2014).” (p. 80)

LTC Comment: Medicaid planning includes a wide range of techniques from very simple and common (the purchase of exempt assets to reduce countable wealth) to relatively sophisticated, somewhat less common methods (Medicaid compliant annuities and Medicaid Asset Protection Trusts) to mind-numbingly complicated, relatively rare strategies like the “reverse half-a-loaf” gimmick. Yet when the Commission gives an example of Medicaid planning, they offer the relatively obscure reverse half-a-loaf. That’s a very lawyerly way to divert attention and criticism from the much more common practices used to dodge Medicaid eligibility rules. For example, Medicaid planners give their clients long lists of things they can buy such as a more expensive home or car, household goods and personal belongings that convert wealth from countable to non-countable. This practice is almost universal, so a much more honest example of Medicaid planning than “reverse half-a-loaf.”

MACPAC: “Finally, Medicaid estate recovery policies are unique among federal programs. For example, many people who use LTSS are dually eligible for Medicare and Medicaid, yet as one advocate noted, the federal government does not pursue Medicare costs, which can also be quite high … .” (p. 84)

LTC Comment: MACPAC is confused about the nature of Medicaid and Medicare. Medicaid is public charity for which people become eligible based on their inability to afford health and long-term care. Medicare is social insurance which entitles people to benefits by virtue of their having contributed substantial payroll taxes over many years. Medicaid is welfare, unearned; Medicare is like private insurance which requires “premiums” and is thus “earned.” Medicaid has “recipients;” Medicare has “beneficiaries,” but MACPAC uses the incorrect term “Medicaid beneficiary” a dozen times in this chapter. MACPAC displays its confusion about these programs by referring everywhere in the report to Medicaid recipients as if they were beneficiaries, giving the former a status they have not earned. Obviously, Medicare beneficiaries who paid for the benefits they received are not required to repay the cost of their care from their as Medicaid recipients must, who received benefits and retained wealth without having to contribute toward the cost of their care.

MACPAC: “If an individual’s home equity is above the state’s limit, they will be deemed ineligible to receive Medicaid LTSS; for 2021, the federal minimum home equity limit is $603,000 and the maximum limit is $906,000 (CMS 2021). In 2018, 40 states used the federal minimum limit, nine states used the maximum limit, one state, Wisconsin, set a limit in between, and one state, California, had no limit (KFF 2019).”

LTC Comment: Prior to the Deficit Reduction Act of 2005, Medicaid had no limit whatsoever on home equity. Unfortunately, the limits cited here, reflecting inflation since the DRA ’05 was passed, are meaningless. Recent research concluded “we estimate that nearly the entire elderly population would meet the home equity threshold of 552,000 [as of 2015].” (Robert Hest, Giovaan Alarcon & Lynn A. Blewett (2020): Modeling Financial Eligibility for Medicaid Long-term Services and Supports, Journal of Aging & Social Policy, DOI: 10.1080/08959420.2020.1740638, p. 7) Without estate recoveries, this enormous real property wealth is eliminated as a source of funding for long-term care, funding for which the country is desperately in need. MACPAC realized this fact as the next quote indicates but ignored it anyway.

MACPAC: “During the Commission’s deliberations, a concern was raised that allowing states to discontinue estate recovery would essentially exempt all home equity below the minimum home equity asset standard (currently set at $603,000) used for eligibility determination. Ultimately the Commission decided that issues and concerns related to eligibility determination should be taken up separately from estate recovery.” (p. 93)

LTC Comment: According to Kiplinger, “homeowners age 62 and older have a record $6.5 trillion of ‘tappable’ equity.” Imagine the potential for that wealth to relieve the stress on America’s long-term care financing system. Yet MACPAC neither proposes mandating reverse mortgages to capture that potential on the front end nor defends estate recovery to put it to use on the back end.

MACPAC: “For heirs of these modest estates, estate recovery may remove a source of income or a residence which, if retained, would protect the heirs from poverty or housing insecurity. As multiple interviewees commented, this contributes to generational poverty and wealth inequality. The policy may also place an unequal burden on people of color, compounding existing wealth inequalities among racial and ethnic groups.” (p. 84)

LTC Comment: This makes no sense. How could requiring people to repay the cost of their care—from wealth Medicaid enabled them to protect while receiving assistance—contribute to “existing wealth inequalities among racial and ethnic groups?” It does exactly the opposite. It reduces the discrepancy in wealth between those who have (including clients of Medicaid planners) and those who have not (underprivileged racial and ethnic groups). Furthermore, it is not in the interest of the state to impose such unreasonable burdens on heirs as to drive them onto public assistance. Hardship waivers are liberally granted in such cases although relatively few are requested.

MACPAC: “Estate recovery recoups relatively little—only about 0.55 percent of total fee-for-service LTSS spending.” (p. 72)

LTC Comment: Every dollar Medicaid does recover from estates goes back into the system to help others in their time of need. MACPAC should focus on preventing leakage of sheltered wealth from estates prior to recovery. Instead the Commission seeks to cripple estate recovery itself. Besides, Medicaid estate recovery barely scratches the surface of the potential nontax revenue that could redound to the program, as MACPAC acknowledges in the next quote.

MACPAC: “Research suggests that states do not recover all they could—one study estimated states could have collected 5.5 times more from 2002 to 2011 if all their efforts matched those states that were most effective at estate recovery (Warshawsky and Marchand 2017).”

LTC Comment: It should be noted, however, that even more important than the actual dollar totals that could be collected is the potential cost avoidance from estate recoveries. Properly publicized and enforced so that the public knows that long-term care is a risk they must pay for later if they don’t plan and prepare now, responsible people will be far more likely than they are today to think about ways to plan, save, invest or insure for the risk. The public policy goal should be to divert people from dependency on Medicaid not to seduce them onto the program as elastic eligibility policies manipulated by Medicaid planners do now.

MACPAC: “Due to restrictions on Medicaid eligibility for LTSS, older adults covered by Medicaid have few assets. Three-quarters of Medicaid decedents had net wealth of less than $48,500.” (p. 72)

LTC Comment: MACPAC can’t have it both ways. Either wealthy people dodge Medicaid financial eligibility rules as the Commission frequently acknowledges or “restrictions on Medicaid eligibility” cause estates to be small. Both aren’t true. Estates are small not because stringent eligibility requirements force a lot of people to spend down into impoverishment. Such requirements don’t exist. Rather, most people on Medicaid had little to “spend down” in the first place. They are the people Medicaid is intended to serve. But Medicaid planners reduce their clients’ net worth by means of Medicaid compliant annuities, Medicaid Asset Protection Trusts, exempt asset transfers, and many other techniques of artificial self-impoverishment. It is those artificially poor Medicaid recipients who are being asked to pay their fair share.

MACPAC: “Fear of estate recovery may deter some individuals from seeking Medicaid LTSS, however, awareness and understanding of these policies by potential Medicaid beneficiaries is low.” (p. 72)

LTC Comment: This is another self-contradictory statement. How can “fear of estate recovery” deter seeking Medicaid if “awareness and understanding of these policies” is low? The solution to this quandary is to publicize the Medicaid estate recovery requirement more widely and often so everyone knows that relying on public assistance while retaining wealth requires a payback from the estate. With that knowledge, more people would take long-term care risk and cost seriously; save, invest or insure to offset or spread that risk; and end up in a better position to pay privately for better care than Medicaid can afford to provide. Especially, knowing that home equity is at risk for estate recovery would encourage more people to tap their home equity through reverse mortgages unleashing a massive new LTC funding source that is so desperately needed to relieve the fiscal pressure on Medicaid.

MACPAC: “In general, this study found that, with some exceptions, the assets of older adults enrolled in Medicaid are quite modest, with a substantial proportion of individuals having little to no wealth (Table 3A-1). At age 65 and older, the average net wealth among Medicaid decedents was $44,393. … the highest quartile held an average of $173,436 in net wealth.” (p. 81)

LTC Comment: Some exceptions? Well I guess so! A quarter of the sample had almost $175,000 in net wealth or more. It’s not clear at all why public policy should discourage recovery from such large estates, but that would be the effect of MACPAC’s recommendations The Congressional Budget Office (CBO) confirmed that all three of MACPAC’s proposals would increase federal expenditures and reduce resources available to Medicaid.

MACPAC: “CBO estimates that this recommendation [to make estate recovery voluntary] would reduce estate recovery collections from state Medicaid programs, which would increase federal spending on Medicaid. Federal spending would increase by $50–250 million per year between 2022 and 2030, less than $1 billion between 2021 and 2025, and $1–5 billion between 2021 and 2030.” (pps. 93-94)

“CBO estimates that this recommendation [to restrict MLTSS recoveries] would reduce estate recovery collections from state Medicaid programs, which would increase federal spending on Medicaid. CBO was unable to provide a specific estimate for us … .” (p. 94)

“CBO estimates that this recommendation [to base hardship waivers on estate values instead of financial hardship] would reduce estate recovery collections from state Medicaid programs and increase administrative costs, which would increase federal spending on Medicaid CBO was unable to provide a specific estimate for us … .” (pps. 95-96)

LTC Comment: No one besides MACPAC is looking for ways to reduce revenue to Medicaid for long-term care. The program is desperately short of funding and notoriously scrimpy in its reimbursement levels for long-term care providers. Low Medicaid funding is often associated in the literature with too few caregiving staff and serious access and quality problems. Medicaid needs more revenue, not less. What exactly does MACPAC recommend?

MACPAC: “Recommendations
3.1Congress should amend Section 1917(b)(1) of Title XIX of the Social Security Act to make Medicaid estate recovery optional for the populations and services for which it is required under current law.” (p. 72)

LTC Comment: Mandatory estate recoveries are critical to the Medicaid long-term care program’s success as explained in the “LTC Comments” above. The policy should affect everyone equally throughout the country in order to discourage excessive reliance on Medicaid for long-term care and to encourage personal responsibility and early long-term care planning. It was a great victory in the Omnibus Reconciliation Act of 1993 (OBRA ’93) to make estate recoveries mandatory in every state based on analysis and recommendations in a 1988 report of the Department of Health and Human Services’ Inspector General: Medicaid Estate Recoveries: National Program Inspection -- Office of Inspector General (1988). See also the related Transfer of Assets in the Medicaid Program: A Case Study in Washington State -- Office of Inspector General (1989). It would be a tragedy to reverse that progress in the way MACPAC recommends.

MACPAC: “3.2 Congress should amend Section 1917 of Title XIX of the Social Security Act to allow states providing long-term services and supports under managed care arrangements to pursue estate recovery based on the cost of care when the cost of services used by a beneficiary was less than the capitation payment made to a managed care plan.” (p. 72)

LTC Comment: Addressing capitation payments as in this recommendation is simplistic. Managed care organizations apply complicated formulas to determine what they charge for their fees and what they pay for all the medical bills, and then they must negotiate with the state. These are very large contracts based on actuarially determined risks and benefits. Insurance is inherently inequitable, because some people pay premiums and get no benefits, while other people pay the same premiums, but become sick, injured, careless or unlucky, and receive large benefits. That is how insurance spreads risk. Managed care organizations already rate the monthly capitation fee by the level of service of individuals. That protects beneficiaries who use relatively few services, but it also covers some potential risks in the same way as private insurance would. Requiring managed care companies to tally up their charges for all services they have paid adds another level of service and causes complications such as attending court hearings and responding to complaints of family members after death about what was paid to providers. This added duty would increase fees to the states. Determining the claim amount is a pre-death matter. Whether fee-for-service or capitation payments are used, the recovery should be for what Medicaid paid on the deceased recipients' behalf. If there are inequities in the system, then those should be resolved before death, because collecting only fee for service in a capitation system would add extra administrative burdens for the managed care organizations to prove up the claims to the heirs and to the courts.

MACPAC: “3.3 Congress should amend Section 1917 of Title XIX of the Social Security Act to direct the Secretary of the U.S. Department of Health and Human Services to set minimum standards for hardship waivers under the Medicaid estate recovery program. States should not be allowed to pursue recovery for: (1) any asset that is the sole income-producing asset of survivors; (2) homes of modest value; or (3) any estate valued under a certain threshold. The Secretary should continue to allow states to use additional hardship waiver standards.” (p. 72)

LTC Comment: Hardship waivers should relate to the financial condition of the qualified heir or dependent. They should have nothing to do with the value of the house, the estate, or an income-producing asset. What matters is whether the person requesting the hardship is actually facing financial hardship. Hardship waivers are rarely requested (1%) and should be routinely granted to avoid generational poverty. Nearly two-thirds of potential Medicaid estate recovery is not collectible at all. There is no effect on race or generational poverty if there is no recovery. Hardship waiver policies across the states are inconsistent as are other estate recovery policies. Seeking uniformity is not a reason to create more loopholes in the process. Hardship waivers should be based on dependents’ income, assets, and whether collection of the debt would deprive the person seeking the waiver of necessities like food, shelter, clothing, or medical care.

Closing LTC Comment: Medicaid estate recoveries help to sustain the Medicaid long-term care program and to discourage excessive dependency on it. MACPAC’s recommendations would line the pockets of Medicaid estate planning lawyers and indemnify their affluent client heirs for the long-term care costs their parents’ avoided at public expense. Is it any wonder that advice from “elder law attorneys” is cited repeatedly throughout this report but we hear nothing from Medicaid eligibility workers or estate recovery staff who know firsthand how desperately inequitable the system MACPAC proposes would be? Medicaid planners have the most to gain from curtailing estate recoveries. By not acknowledging, much less disavowing, this obvious conflict of interest, MACPAC destroyed the objectivity and credibility of its recommendations.

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Updated, Monday, March 29, 2021, 9:20 AM (Pacific)

Seattle—

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LTC E-ALERT #21-010: LTC NEWS AND COMMENT

Reverse Mortgages: 10 Things You Must Know
Genworth Names Chairman With Private Equity Deal Experience
Lawmakers might close a window on workers who would rather choose their long-term care plan than be taxed for a publicly financed one
Middle-Age Loneliness Linked to Alzheimer's Disease
Cutting Medicaid and SNAP Red Tape During the Pandemic
How to Walk the Medicare Advantage Communications Tightrope
Is Eating Processed Meat a Risk Factor for Dementia?
The Nation’s Fiscal Health: After Pandemic Recovery, Focus Needed on Achieving Long-Term Fiscal Sustainability
Implementation of a $15 federal minimum wage may help reduce turnover in long-term care: expert

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Updated, Monday, March 22, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-009: LTC NEWS AND COMMENT

Senator calls for mandatory Medicaid coverage of HCBS as nursing homes remain under fire on Capitol Hill
New Video Library
Long-Term Care Insurers Reveal Early COVID-19 Effects
2021 Poverty Projections: Assessing Four American Rescue Plan Policies
Study: Heart problems in young adulthood increase cognitive decline later
The Boom in Out-of-State Telehealth Threatens In-State Providers
Amazon Care reportedly to launch telehealth offering in all 50 states
Report: Adult family care homes deserve ‘closer look’ as viable alternative to nursing homes
MedPAC to Congress: Reduce payments to home health in 2022, expand telehealth beyond public health emergency
Nearly all seniors are now prescribed drugs tied to falls: Study
Advocates Release Nursing Home Industry Reform Proposals
Home Equity Continues To Soar
House expected to vote to delay start of Medicare sequester
Maggots, Rape and Yet Five Stars: How U.S. Ratings of Nursing Homes Mislead the Public
Washington State's New Long-Term Care Statute Is a Mess – Can ERISA Preemption Provide the Cleanup?
Citing Vaccine Rollout, CMS Relaxes Nursing Home Visitation Rules
How Can The US Fix Long-Term Care In A Post Covid-19 World?
Dementia Patients Often Have Dangerous Mix of Drugs at Home
Pandemic-Driven Home Health Shifts Trigger Therapy Layoffs, Nursing Home Strategy Changes
‘Absolutely astonishing’: 90% drop in COVID cases shocks Parkinson, industry leaders
Can we keep Medicare from being insolvent by 2024?

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Updated, Friday, March 19, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: THE KEY TO LTC

LTC Comment: Solving the long-term care financing crisis isn’t so hard if you avoid ideology and take human nature into account. We explain after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, who provides many unique services to advisors as National Brokerage Director for USA-BGA in the individual, worksite and affinity LTCi markets. Advisors like his unique, simple and effective LTCi presentation and his revolutionary “Range of Exposure” tool which, among other things, projects a client’s (joint for a couple) mean age of LTC, likely annual cost and length of need based on age, gender, marital status, success goal (% chance of not outliving their assets), etc. Claude is the lead author of Milliman’s annual Broker World LTCi Survey & a past Chair of the Center for Long-Term Care Financing. Contact him at 913-707-8863 or claude.thau@gmail.com to discuss how he might help you. ***

*** DEBT BOMB, tick, tick, tick: Have you checked the US Debt Clock lately? The Treasury is hemorrhaging debt and the Federal Reserve is monetizing it apace. Federal spending this year is $8.0 trillion, but tax revenue is less than $3.5 trillion. How can that be? The Fed is printing the money, creating it out of thin air, to fund the difference between tax inflow and spending outgo. Bottom line, we’re pulling capital out of the productive economy to shower it on everyone and everything not producing anything. The result is more money and less to buy with it. As Elon Musk said: “If you don’t make stuff, there is no stuff.” Is this the elusive free lunch of Modern Monetary Theory? Hardly. The bill will come due in the form of inflation, the most pernicious tax that hurts the poor most of all. So much for the sanctimonious, hypocritical effusions of politicians and analysts who just want to “help people” by spending money the economy has not earned. ***

LTC BULLET: THE KEY TO LTC

LTC Comment: Long-term care services and financing in the USA are in a world of hurt. More and more people need care; families are stretched thin to provide free care; government programs are inadequate (Medicare) or pay too little (Medicaid) to ensure quality care in the most appropriate venue; private financing from personal spending, home equity or private insurance is extremely limited. The situation gets worse every year. Most analysts prescribe more government spending and regulation, but there is no evidence that vast increases in public spending and control have helped rather than worsened long-term care access and quality so far.

In fact, little has changed for the better since I first analyzed long-term care in the early 1980s. Then as now most people ignored long-term care risk and cost until they suddenly needed expensive care at which time the option of qualifying for Medicaid opened up for them. Generous income and asset eligibility rules eased the way onto public assistance creating a moral hazard for the aging infirm and a conflict of interest for their heirs. Pay privately and be wiped out financially or let Medicaid foot the bill and accept the downsides of limited choice, poor quality and mostly nursing home care. This was the Hobson’s choice, take it or leave it, most families faced. Of course, most families took the path of least resistance. They accepted public assistance, placed their elders in Medicaid nursing homes, and thus perpetuated the system that persists to this day.

As I began to study this problem in 1982, two paths to a solution opened up before me. We could change Medicaid LTC eligibility rules so they truly require impoverishment. That would remove the moral hazard and the perverse incentive to rely on public assistance, but it would be harsh and politically infeasible. The other way would be to keep Medicaid LTC eligibility generous, even make it more so, but require that assets preserved during a recipient’s lifetime while his or her care was covered by Medicaid should be recovered later, from the recipient’s estate, after no exempt relative still depended on them. The key to this “kinder gentler” solution was estate recovery. That would remove the incentive to ignore LTC risk and cost until confronted with the need and it would give seniors their dignity back. It isn’t welfare if you repay Medicaid.

I developed these ideas and documented them in a report for the HCFA titled “The Medicaid Estate Recoveries Study.” It is still available online here. Although HCFA did not publish this study, the USDHHS Office of Inspector General and the then General Accounting Office (now Government Accountability Office) both picked up on it and conducted their own national studies developing the theme. The Inspector General hired me out of HCFA so that I could conduct the IG study and write its report: “Medicaid Estate Recoveries: National Program Inspection.” It remains available on the IG’s website here.

Following are the Inspector General’s recommendations. They were designed to keep Medicaid long-term care eligibility readily available for people, even those with substantial wealth, who had insufficient cash flow to afford needed care and would be devastated financially if they had to pay up front. The quid pro quo for this public munificence was that costs expended by Medicaid would be recovered from each recipient’s estate. The goal of these recommendations was to awaken the public to the need to plan for long-term care, reward personal responsibility and early planning, prepare them to pay privately when and if expensive care became necessary, encourage the use of home equity conversion and private insurance, create a new nontax revenue source for Medicaid, and hence over time return Medicaid mostly to people in true need and make it a better, more well-financed program for all.

Now, please read the IG’s recommendations from “Medicaid Estate Recoveries: National Program Inspection.” The recommendations that later became federal law are bolded. I’ll return at the end with an “LTC Comment” to explain what happened: which recommendations became law and when, why the goal of saving Medicaid LTC by encouraging personal responsibility has failed so far, and what would need to be done to fix the long-term care services and financing crisis now.

The following is a verbatim quote from “Medicaid Estate Recoveries: National Program Inspection,” pages 50-53.

RECOMMENDATION #l--ELIGIBILITY AND TREATMENT OF RESOURCES

FINDING: Some HCFA, SSI, and state Medicaid policies promote retention of assets during Medicaid eligibility while others encourage precipitous liquidation of property with concomitant losses in value. Assets retained by recipients, in the absence of estate recovery programs, pass unencumbered to heirs at the expense of the taxpayers. Assets liquidated, sheltered or concealed to obtain eligibility are lost as a long-term care funding resource also. Incapacitated elderly people are sometimes financially abused by people who want to take their property, while at the same time, qualifying them for Medicaid nursing home benefits.

RECOMMENDATION: Change Medicaid rules to permit families to retain and manage property while their elders receive long-term care. Specifically: eliminate SSI "intent to return" rules as they apply to Medicaid long-term care recipients. Reinstate and broaden the "bona fide effort to sell" exemption. Allow Medicaid recipients to retain more income-producing property such as "contracts of deeds" or rental homes. Require agreement to liens and estate recoveries as a condition of Medicaid eligibility for people with property. Encourage State Medicaid programs to protect recipients and their property from financial exploitation through conservatorships, legal representation, and property management when necessary.

IMPACT: This policy would ease the financial impact of catastrophic long-term care costs on the elderly and their families, giving them time to cope with the problem. Total Medicaid costs would decline as estate recoveries increase.

RECOMMENDATION #2--TRANSFER OF ASSETS

FINDING: Despite almost universal State implementation of the TEFRA authority to restrict transfers of assets for the purpose of obtaining Medicaid eligibility, people are still able to give away property to qualify for assistance. This may be done by using the legal "loopholes" recommended in law journal articles or by deceit and concealment.

RECOMMENDATION: Strengthen the transfer of assets rules so that people cannot give away property to qualify for Medicaid. Specifically: improve State verification of property and transfers. Clarify that the "transfer of assets" restrictions apply to all property including that which is, or would be, exempt from eligibility determination. Expressly prohibit the transfer of property to spouses and other dependents which is permitted under current law. Extend the current 2-year "look-back" period to 5 or more years. Have HCFA publish regulations on transfer of assets.

IMPACT: More property will be retained by recipients to reimburse Medicaid for their cost of care after they and their dependents are no longer in need.

RECOMMENDATION #3—LIENS

FINDING: State Medicaid programs need a way to track property owned by recipients and ensure that it is not transferred or otherwise disposed before recovery of Medicaid benefits can be accomplished. Liens achieve these objectives most efficiently. While permitting liens, TEFRA placed so many qualifications on their use that only two states have employed liens to secure property for recovery of benefits correctly paid.

RECOMMENDATION: Require a legal instrument as a condition of Medicaid eligibility to secure property owned by applicants and recipients for later recovery. Specifically: Make liens, or some other form of encumbrance, a condition of eligibility so that the recipient’s interest in any property solely or jointly owned will inure, up to the cost of care paid by Medicaid, to the Medicaid program when neither the recipient nor dependents need the property further. Promote home equity conversion by using liens, "voluntary mortgages,” open-ended mortgages " and accounts receivable to let people extract their equities gradually while they receive assistance.

IMPACT: Mandatory liens would secure the State and Federal Government’s investment and permit Medicaid recipients to retain needed property while receiving highly expensive, but essential care.

RECOMMENDATION #4--ESTATE RECOVERIES

FINDING: Less than half of the States pursue Medicaid estate recoveries for benefits correctly paid. Of those which do, a few are very effective, but most are not. The HCFA and State Medicaid managements place little emphasis on retention of recipient property or estate recoveries. The TEFRA authority for estate recoveries, as for transfer of assets restrictions and liens, is only voluntary. Many State staff believe that TEFRA limitations hobble estate recoveries without safeguarding legitimate recipient interests.

RECOMMENDATION: Increase estate recoveries as a nontax revenue source for the Medicaid program while steadfastly protecting the property rights of recipients and their dependents. Specifically: Make estate recovery programs mandatory like other forms of third party liability. Provide technical assistance on estate recoveries, so that States can implement quickly and easily to generate an immediate cash flow for the Medicaid program. Promote awareness of the importance of real property ownership and estate recoveries for Medicaid funding. Allow estate recovery of benefits received before age 65. Permit estate recovery in cases of joint tenancy with right of survivorship. Require spousal and dependent recoveries upon death or seniority (of a minor child.)

IMPACT: Based on Oregon' s experience--even under current restrictive laws, regulations and policies--estate recoveries can recoup 5.2 percent of Medicaid nursing home costs, 5.0 percent of Medicaid payments to people over age 65, and 1. 7 percent of total Medicaid vendor payments. With enhanced legal authorities and greater programmatic emphasis, the contribution of estate recoveries to Medicaid’s program resources could be truly staggering.

RECOMMENDATION #5--FUTURE STUDIES

FINDING: We have a great deal of circumstantial evidence about public assistance resource avoidance and estate planning to qualify for Medicaid. No hard data are available, however, on the extent of these practices. We also are unaware of how much Federal money is spent by the Legal Services Corporation and other national programs to promote Medicaid eligibility for people with property. We cannot account, without further review, for large discrepancies in amounts of estate recoveries reported to us versus "probate recoveries" reported to HCFA (for purposes of reimbursing the Federal share of recoveries. Finally, a priori, it would seem that the ability to receive Medicaid while preserving assets is a strong disincentive to the purchase of private long-term care insurance. Is this true, and if so, would programmatic changes such as those recommended here remove the disincentive and promote nonpublic assistance options to funding long-term care?

RECOMMENDATION: At a minimum, the following actions should be taken:

Conduct a comprehensive study of the transfer of assets problem to estimate how much equity is being diverted from long-term care costs at the expense of the Medicaid program. To what extent is the Federal Government funding this diversion by training attorneys and counseling prospective Medicaid recipients?
Conduct a thorough audit of Medicaid estate recovery programs to determine if the Federal Government is receiving its full share of the proceeds.
Perform a review to determine whether the availability of Medicaid without encumbering assets has a chilling effect on the marketability of private sector risk-sharing products such as long-term care insurance.

IMPACT: Results of these studies could point the way to a more equitable and efficient utilization of economic resources for the satisfaction of catastrophic long-term care needs.

LTC Comment: The USDHHS Inspector General’s report “Medicaid Estate Recoveries: National Program Inspection” proposed a straight forward solution for long-term care financing. Let Medicaid pay for long-term care when people lack sufficient income to pay privately, but counterbalance that considerable benefit with a guarantee secured by a lien that families do not divest their wealth before or while receiving publicly financed care and a requirement that benefits received be paid back out of estates whenever recovery does not create a financial hardship on heirs. The goals of this proposal were to eliminate the tragedy of catastrophic LTC spenddown, create an incentive for people to plan early for long-term care by saving, investing, or insuring privately, to generate a large new nontax revenue source for Medicaid, and to reduce dependency on Medicaid by the middle class so that it could become a better program for a smaller number of genuinely needy recipients.

So what happened? We got part way there statutorily. As the highlights in the proceeding quotation indicate, Medicaid estate recoveries became mandatory. That occurred in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). Several federal laws strengthened the transfer of assets restrictions, gradually extending the look back period from two years to five years in the Deficit Reduction Act of 2005 (DRA ’05). DRA ’05 also put the first cap ever on Medicaid’s home equity exemption potentially encouraging home equity conversion to fund LTC in lieu of Medicaid although the cap was too high at $500,000 increasing with inflation to achieve that objective. Transfer of assets restrictions were extended to include transfers of an exempt home which transfers were previously permitted without affecting eligibility. The HCFA finally published regulations on asset transfers after a long delay. Other federal statutes allowed estate recovery of benefits received before age 65 and permitted estate recovery in cases of joint tenancy with right of survivorship.

All these measures were steps in the right direction. But other key recommendations by the Inspector General were left unfulfilled. Liens to hold property during Medicaid eligibility were never required so wealth continued to disappear while recipients received Medicaid LTC coverage. None of the recommended studies to elucidate the reality and potential of eligibility controls, liens and estate recoveries were ever conducted. Most importantly the federal government did not enforce the new restrictions aggressively; most states did not implement them fully and some ignored the federal mandates entirely; the media did not publicize the estate recovery liability; so the public blithely continued to ignore LTC risk and cost until they needed expensive care and Medicaid eligibility opened up as a slick way to avoid personal financial loss.

So what’s the lesson to be learned? Clearly we need to revisit the analysis and recommendations in the IG report, implement them fully, enforce them aggressively, publicize them widely, and get long-term care financing back on an even keel, dominantly financed privately by home equity conversion and, ultimately, by a revitalized private long-term care insurance market. What we do not need is more government money flowing into a system that defies human nature by disincentivizing personal responsibility and rewarding the failure to plan for long-term care. Yet that is exactly what MACPAC (the Medicaid and CHIP Payment and Access Commission) proposes to do as we explained recently in “LTC Bullet: MACPAC Misfires.”

Here’s the latest. On March 15, 2021, MACPAC published its annual “Report to Congress on Medicaid and CHIP.” According to that report:

Chapter 3 makes recommendations to ease the burden of Medicaid estate recovery, which often falls on those with modest means, and may disproportionally affect people of color and perpetuate intergenerational poverty. Federal law requires state Medicaid programs to seek recovery from the estates of certain deceased beneficiaries for payments for long-term services and supports (LTSS) and other services. The Commission recommends returning to prior law, making estate recovery optional, rather than mandatory. It also recommends allowing states that cover LTSS under managed care to pursue recovery based on the cost of services where it is less than the capitation payment paid to a managed care plan; and directs the Secretary of the U.S. Department of Health and Human Services (HHS) to establish minimum hardship waiver standards, including a minimum estate value threshold for estate recovery.

If Congress were to follow these recommendations, the country’s long-term care financing system would be further hampered in its ability to supply quality care for all Americans. It is clear from MACPAC’s report that the commission’s “research” on the subject of Medicaid estate recoveries included extensive consultation with elder law attorneys who make their livings putting affluent people on Medicaid and helping them evade estate recovery. Of course Medicaid planners oppose eligibility controls and estate recovery. The few mentions in the report of “state officials” reflect mostly favorable attitudes toward controlling eligibility and requiring estate recoveries, but it is clear MACPAC did not engage closely with front line Medicaid eligibility workers. Those workers in my experience, having interviewed hundreds of them over decades, passionately favor targeting Medicaid to people in need and recovering from estates of people who shelter wealth. Almost to a person they expressed anger and frustration that it’s so hard to qualify the poor for care, but lawyers fill out applications thick with documentation for their wealthy clients who then qualify easily for Medicaid.

The system MACPAC seeks to sustain and empower by curtailing Medicaid estate recovery is corrupt. It rewards irresponsibility. It discourages early LTC planning. It tips LTC toward public financing and away from private sources such as home equity conversion, private LTC insurance and estate recovery. Human nature being what it is people will always adapt to the rules government imposes in order to maximize their interests. That’s not a bad thing unless government rules incentivize bad behavior as they do now and as MACPAC would further encourage. Instead we should strengthen estate recovery rules so people benefit by planning early for long-term care, saving, investing or insuring, using home equity to get the best care in the most appropriate venue, staying off Medicaid and out of nursing homes.

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Updated, Monday, March 8, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-008: LTC NEWS AND COMMENT

The Cost of Retirement Has Tripled! But a New Way of Planning Can Help
Falling through cracks’: Vaccine bypasses some older adults
LTCG Launches Self-service Portal for LTC Providers
A COVID Storm Hits Senior Living
Germany’s Exploitative Care Model Is Finally Being Put on Trial
Demystifying Cash Buyouts of Long-Term Care Insurance Policies
Alarming’ nurse turnover rates linked to quality, payment woes in major new nursing home study
Lower Spending Drives Senior Satisfaction with Medigap Policies
Alzheimer's May Strike Women and Men in Different Ways
Reforming Medicaid LTSS would increase HCBS access, create better jobs: report

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Updated, Friday, March 5, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: MACPAC MISFIRES

LTC Comment: MACPAC proposals would cripple Medicaid long-term care and aggravate inequality. Details after the ***news.***

*** WHY LTCI FAILS: Don’t miss Steve Moses’s article of that title in the March issue of Broker World magazine. Read it here. Then subscribe to the insurance trade journal to receive future issues. While you’re there, catch Margie Barrie and Leni Webber’s “COVID-19 and Long Term Care Planning,” expanding on a topic we addressed in “LTC Bullet: Long-Term Care and the Pandemic.” ***

*** MACPAC MEETS: Yesterday, the Medicaid and CHIP Payment and Access Commission met online. What to do about Medicaid estate recoveries was not on the agenda. But the Commission’s Executive Director assures me that “We have read your comments [I sent her a draft of today’s LTC Bullet] and will share them with members of the Commission. … The full report, with a detailed explanation of MACPAC's analysis and recommendations, will be out on March 15.” We’ll watch for that report and update you on whether or not it corrects the deficiencies identified below. ***

LTC BULLET: MACPAC MISFIRES

The issue in a nutshell:

Generous and elastic Medicaid income and asset eligibility limits enable middle class Americans to receive expensive long-term care when they need it while preserving most of their wealth. See “Welfare for the Well-to-do” (Wall Street Journal) and “Pretending to Be Poor” (New York Times).
The quid pro quo for this munificent public benefit is that recipients must agree to pay back the cost of their care after their deaths from their estates when their sheltered wealth is no longer needed by an exempt dependent relative and would not create a hardship for heirs.
MACPAC proposes to weaken Medicaid estate recoveries by (1) making them voluntary, (2) diluting recovery potential below what Medicaid actually pays, and (3) redefining hardship waivers so they do not require financial hardship.
If implemented, these measures would harm the poor by reducing Medicaid program resources, give heirs a tax-payer financed windfall for placing their parents on the public welfare program, further desensitize the public to long-term care risk and cost, cause even more people to end up on public assistance and increase Medicaid expenditures significantly.
Medicaid estate recoveries should be encouraged instead: (1) close Medicaid eligibility loopholes that allow affluent people to divest wealth making it unavailable for estate recovery, (2) require automatic liens to secure sheltered property so it remains available for later recovery, and (3) eliminate counterproductive rules that discourage efficient, cost-effective estate recovery, as recommended for example in Maximizing NonTax Revenue from MaineCare Estate Recoveries, 2013.

LTC Comment: The Medicaid and CHIP Payment and Access Commission (MACPAC) proposes to undercut a critical part of the long-term care financing system. To comprehend what MACPAC recommends and why it would be so detrimental if Congress accepted their advice, we must first review how the United States finances long-term care.

The vast majority of long-term care in the U.S. is provided for free by spouses, families and friends at tremendous financial and emotional stress. When free care is unavailable or exhausted and expensive formal care becomes necessary, Medicaid is the primary payer. Although it is a means-tested public assistance program, Medicaid has come to be the primary source of long-term care financing for the middle class as well as the poor. That is true because, although Medicaid’s financial eligibility rules sound very restrictive, the way the program works in practice is much more elastic and generous.

Medicaid LTSS Financial Eligibility

Most writers claim Medicaid benefits only go to “low-income” people, but medical and long-term care expenses are subtracted from income before eligibility is determined. So, very-high- income people do qualify for benefits if their health care expenses are commensurately elevated, as they usually are for people who need long-term care. The rule of thumb is that Medicaid’s eligibility cut-off for monthly income is roughly the same as the cost of a month in a nursing home, about $7,500 on average nationally for a semi-private room. That’s $90,000 per year, hardly low income.

The seemingly draconian limit on countable assets, $2,000 in most states, is also much less onerous than it appears. That’s because non-countable assets are practically unlimited and countable assets are easily converted to non-countable or exempt assets. Home equity, for example, is completely exempt up to $603,000 in most states and up to $906,000 in nine states. Recent research concluded that Medicaid’s home equity “limits” exclude almost no one. Other non-countable assets, allowed in unlimited amounts, include one automobile, Individual Retirement Accounts (IRAs) that are in payout status as they must be at age 72, one business including the capital and cash flow, term life insurance, household goods and personal belongings including family heirlooms, prepaid burial plans, and others. Lawyers who help affluent clients qualify for Medicaid long-term care benefits by means of sophisticated annuities, trusts, and other asset sheltering techniques, also routinely provide long lists of non-countable assets people can buy to “spend down” artificially to Medicaid’s countable asset limit.

Is Such Easy Access to Medicaid’s Extended Care Benefits Intentional?

Does this sound like a crazy system that could never have been intentionally imposed on unsuspecting taxpayers? If you think that, you are wrong. Medicaid long-term care benefits were originally much more generous than now. From the program’s beginning in 1965 until 1980, federal law expressly permitted asset transfers to qualify for benefits. Even millionaires could give away all their wealth to anyone else and qualify immediately. Unsurprisingly, Medicaid long-term care expenditures exploded from the first day. So a long series of Congresses and Presidents passed laws and imposed regulations that discouraged artificial self-impoverishment to qualify. (See “Appendix I: Supplemental Bibliography” (pps. 34-63) in How to Fix Long-Term Care Financing for the whole history of this process.)

Still, Medicaid long-term care costs continued to escalate throughout the 1980s. Something had to be done to control costs. But it was neither desirable nor politically feasible to stanch Medicaid’s financial hemorrhaging by forcing people into impoverishment before they could get help from the government. So the powers-that-be hit upon an ingenious solution. Let people keep their wealth while they get help with long-term care from Medicaid, but make sure they pay it back after they die out of their estates. That way Medicaid would no longer discourage people from planning early for long-term care. The new system was on the principle “pay now or pay later.” Medicaid would no longer reward heirs for waiting until their parents needed long-term care and then relying on taxpayers to indemnify their inheritances.

This scheme became law in the Omnibus Budget Reconciliation Act of 1993. It was reinforced by the Deficit Reduction Act of 2005. OBRA ’93 made transfer of assets restrictions longer and stronger to encourage people to hold onto their wealth while they received Medicaid benefits. But it made estate recovery mandatory so every state in the country would be required to track exempt wealth and recover it later to reimburse Medicaid. The DRA ’05 closed more of the eligibility loopholes that caused wealth to leak out of estates before it could be recovered later, but the DRA also put the first limit ever on home equity to convey that Medicaid’s generosity is not unlimited.

The Critical Role of Estate Recoveries

So, easy access to Medicaid LTC benefits for the middle class and affluent was not unintentional. It was just supposed to be mitigated by means of mandatory estate recovery. To avoid Medicaid dependency followed by repayment of benefits received from one’s estate, sensible people would plan early and save, invest or insure for long-term care. But to this day, very few people worry about long-term care until they need it. They end up on Medicaid as the path of least resistance, qualify under the program’s generous financial eligibility criteria, and often evade estate recovery with the help of Medicaid planning specialists. What happened?

Transfer of assets restrictions, while occasionally tightened were never made tight enough. Liens to hold property until later recovery remained voluntary and were fraught with loopholes. Likewise estate recovery rules were too easy to circumvent. But most importantly, the federal government did not enforce transfer of assets, lien and estate recovery rules effectively; the states did not implement the requirements consistently; the media didn’t publicize the risk of estate recovery liability; so the public continued to ignore long-term care risks and costs, failed to save, invest or insure, and ended up more dependent than ever on public assistance. That’s the mess in which America’s long-term care financing system remains today. So what should and should not be done?

MACPAC Would Weaken, not Strengthen Estate Recoveries

Let’s circle back to MACPAC now. What has the Commission recommended that Congress change about Medicaid’s long-term care program? These are the proposals approved at the Commission’s January 2021 meeting followed by our analysis.

MACPAC Recommendation #1: “Congress should amend Section 1917(b)(1) of Title XIX of the Social Security Act to make Medicaid estate recovery optional for the populations and services for which it is required under current law.”

LTC Comment: Making estate recovery optional for state Medicaid programs would cripple its ability to recover and reuse nontax revenue for the benefit of genuinely needy recipients, thus further aggravating the program’s financial and racial inequality. Estate recovery saves Medicaid money, preserves scarce resources for those who need them most, encourages early and responsible planning, and discourages abuse of Medicaid by people who should, could and would have paid for their own long-term care absent perverse policy incentives to ignore that risk and cost. Estate recovery should be encouraged and strengthened, not hobbled. Eliminate statutory and regulatory obstacles that prevent efficient enforcement. Stop the well-to-do from evading recovery with the help of legal enablers.

MACPAC Recommendation #2: “Congress should amend Section 1917 of Title XIX of the Social Security Act to allow states providing long-term services and supports under managed care arrangements to pursue estate recovery based on the cost of care when the cost of services used by a beneficiary were less than the capitation payment made to a managed care plan.”

LTC Comment: Medicaid estate recovery ensures that assets sheltered during recipients’ lives are used after their deaths to repay funds advanced by Medicaid for their care. Whether Medicaid pays a monthly fee to Medicare, private health insurance premiums, managed care rates, or fees for service, the principle is the same. Medicaid advanced funds to relieve the recipient of an onerous expense and the recipient’s estate should reimburse the full amount advanced to the extent the estate is sufficient to do so. Medicaid exists to help people in need fund long-term care, not to protect estates or indemnify heirs. Families who wish to preserve estates should consider reverse mortgages or private long-term care insurance to fund long-term care instead of relying on Medicaid and then evading or minimizing estate recovery.

MACPAC Recommendation #3: “Congress should amend Section 1917 of Title XIX of the Social Security Act to direct the Secretary of the U.S. Department of Health and Human Services to set minimum standards for hardship waivers under the Medicaid estate recovery program. States should not be allowed to pursue recovery for: (1) any asset that is the sole income-producing asset of survivors; (2) homes of modest value; or (3) any estate valued under a certain threshold. The Secretary should continue to allow states to use additional hardship waiver standards.”

LTC Comment: Clumsy restrictions like these only hamstring Medicaid estate recovery efforts more than they already are without serving any legitimate purpose. Medicaid estate recovery units do not pursue recoveries unless they are cost effective and humane. To do so would be political suicide. Hardship waivers must be based on whether there is an eligible person who faces a hardship. The MACPAC proposals ignore that precept. Regardless of the value of the house or the small amount left in the estate, the Medicaid program should be reimbursed for the costs of care paid on behalf of the deceased Medicaid recipient unless a qualified heir is actually facing hardship. Heirs should not receive taxpayer financed benefits just because their parents lived in modest houses or had nominal bank accounts at death. Research, referenced below, indicates that Medicaid estate recovery can return 15 times or more the cost of recovery to state and federal revenues. They can only do that by prioritizing their efforts and following good business practices that do not bring political disapproval onto the program.

MACPAC Proposals Are Shortsighted and Counterproductive

Clearly, MACPAC looked at estate recoveries through a microscope instead of taking a wider, telescopic view of their importance for responsible public policy. It is very clear from their staff reports going back to 2015 that the Commission was never provided the rationale behind and the history of estate recoveries. There is no reference, for example, to the US Department of Health and Human Services Inspector General Report from 1988 that analyzed the potential for estate recoveries, recommended strong transfer of assets restrictions, mandatory liens and estate recoveries, and explained how these measures could mitigate exploding Medicaid long-term care costs and incentivize Americans to plan early and responsibly for long-term care.

Here’s an excerpt from that report, Medicaid Estate Recoveries: National Program Inspection, Office of Inspector General, 1988:

A large nontax revenue source generated by Medicaid estate recoveries could be recycled to help the truly destitute. It is possible, however, that enhanced estate recoveries would have more far-reaching effects on long-term care funding. Faced with the certainty--which is almost nonexistent today--that accepting care from Medicaid means paying back the cost out of one’s estate, people might seek other alternatives. Such alternatives include Social Health Maintenance Organizations (SHMO' s), continuing care communities, targeted savings accounts and private long-term care insurance. To pay for these nonpublic assistance options, the elderly would have to turn more to private home equity conversion or to assistance from their adult children. 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 nonneedy 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. 47-48, emphasis added)

For the full picture, see the Medicaid Estate Recoveries report’s recommendations at pages 50 to 53. They propose to strengthen rules that discourage asset divestiture, encourage families to keep and use their property while receiving Medicaid long-term care benefits, but also ensure that protected wealth goes to repay Medicaid for benefits received rather than passing as a taxpayer financed indemnity to heirs. Several of these recommendations became law in OBRA ’93, DRA ’05 and other legislation over the years, but they have never been adequately implemented or enforced. They should be expanded, reinforced and carried out, not diluted as MACPAC proposes. In a subsequent LTC Bullet, we will republish the Inspector General’s recommendations and explain why they should be fully implemented now more than ever. (Full disclosure: I led the IG’s 1988 estate recovery study and wrote the agency’s report.)

This is the honorable principle behind Medicaid estate recoveries:

We have very limited dollars available for public assistance. We must take care of the truly poor and disadvantaged first. The middle class and well-to-do should pay privately for long-term care to the extent they are able without suffering financial devastation. Prosperous people who rely on Medicaid for long-term care should reimburse the taxpayers from their estates before giving away their wealth to heirs. Seniors and their heirs who wish to avoid such recovery from the estate should plan ahead, use their own financial resources first (including home equity by means of reverse mortgages) to pay for home and community-based services and/or purchase quality private long-term care insurance to finance their care.

We can return dignity to the Medicaid long-term care program. It isn’t welfare if you pay it back. That’s what Medicaid estate recoveries enable recipients and their families to do, while at the same time, preserving more resources for the needy and underprivileged.

A wag once defined “commission” as a group of people who’ve done nothing individually who come together to conclude that nothing can be done. If MACPAC isn’t to be a case in point, they should review this new, actually old and heretofore ignored, evidence about Medicaid estate recoveries before making such counterproductive recommendations to Congress. Save Medicaid long-term care from the unintended consequences of misplaced good intentions.

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Updated, Monday, March 1, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-007: LTC NEWS AND COMMENT

The Top Eight Mistakes People Make With Medicaid
Universal coverage of long-term care for older Americans may stabilize provider revenues: A report calls for establishing universal coverage for all Americans' long-term care needs through Medicare
COVID Cases, Deaths Plummet in Nursing Homes After Vaccine Rollout
Unconscionable’: Senior living eliminated from COVID relief package
Is The Shift Of Medicaid Long-Term Care From Nursing Facilities To Home About To Accelerate?
Majority Of Working Americans Are Optimistic About Their Financial Future, Even While Lacking Savings
U.S. unpaid caregivers struggling the most with emotional health problems: report
Alzheimer's May Start Sooner for People With Anxiety, Depression History
At-home hospital-level care is growing fast, home care execs say
Why Some 'Super Ager' Folks Keep Their Minds Dementia-Free
Nursing care prices increase 3.3% in January, but spending down 7.8%,
As Nursing Homes Lose Patients to Home Health During COVID, Past Shifts Show Path Forward
How older adults may be doubling their risk of dementia

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Updated, Monday, February 22, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-006: LTC NEWS AND COMMENT

MA Members Could See High Out-of-Pocket Costs For COVID-19
One of Ten in U.S. May Have to Switch Occupations Post Pandemic
Nursing Home Workers Had One of the Deadliest Jobs of 2020
Advantages, Disadvantages and Considerations for LTC Policy Buyouts
US life expectancy dropped a full year in first half of 2020, according to CDC
Accessory dwelling units may help cities deal with housing shortages for ballooning senior population
Black Caregivers Value Long-Term Care Insurance: Nationwide
Improving the Long-Term Care Insurance Customer Experience
‘The situation is dire’: Provider group seeks $5 billion in COVID relief for senior living

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Updated, Friday, February 19, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: RETHINK LTC FINANCING

LTC Comment: We review a study that, correctly interpreted, would bust the LTC financing debate wide open, after the ***news.***

*** THE 2021 INTERCOMPANY LONG-TERM CARE INSURANCE CONFERENCE will convene virtually and for FREE April 13th – 29^th. Expect 40+ sessions from the usual tracks, but apparently minus Public Policy & Alternative Solutions (my favorite), and adding an Aging in Place Solutions track. ILTCI’s 2021 Virtual Conference will be presented 4 hours per day on Tuesdays and Thursdays over three weeks beginning April 13th. Choose from 2 sessions per time slot! CLICK HERE to view the schedule when it becomes available. Barry Fisher, Conference Chairperson and Vince Bodnar, Conference Co-Chairperson say: “Registration is expected to open later this month. Join us and get the inside scoop on current trends in the long-term care insurance industry and what the future holds. We look forward to seeing you on April 13th. ***

LTC BULLET: RETHINK LTC FINANCING

LTC Comment: The long-term care financing conversation has settled into a comfortable narrative that goes something like this. The need for long-term care is growing and overwhelming both private and public funding sources. Medicaid requires impoverishment. Private LTC insurance failed. So we need a new compulsory tax-based government program to pay for long-term care. But what if private insurance failed largely because Medicaid does not require impoverishment? What if public LTC funding caused, and more of it would only worsen, the crisis? Let’s consider some new evidence.

Very little scholarly work tackles the critical, but complicated topic of Medicaid long-term care eligibility in any meaningful way. You’ll see the statement “Medicaid requires impoverishment” or variations of it in most peer-reviewed articles on long-term care. But analysis that approaches the highly nuanced truth of that subject is rare indeed. For example, you will virtually never find anything in the scholarly literature about people with substantial wealth qualifying for Medicaid LTC benefits by taking advantage of simple and/or sophisticated self-qualification methods. Scholars evade that subject despite the fact that such methods are widely available in popular books and articles and from online advertising, law journal articles and thousands of Medicaid planning specialists throughout the country.

So, because its Abstract promised to show that many more people could qualify for Medicaid LTC benefits besides the poor, I couldn’t wait to read this article:

Robert Hest, Giovaan Alarcon & Lynn A. Blewett (2020): Modeling Financial Eligibility for Medicaid Long-term Services and Supports, Journal of Aging & Social Policy, DOI: 10.1080/08959420.2020.1740638. To link to this paywalled article, click here. (I want to thank LaRhae Knatterud of the Minnesota Department of Human Services and lead author Robert Hest for their time explaining this article’s background, methods and findings to me on a Zoom call and for listening and responding to my positive and critical feedback.)

The article’s “Abstract” states that the authors modeled “the impact of changing income, home equity, and asset limitations on Medicaid eligibility across states” and “found that one in five elderly adults (10 million individuals) meet all three tests and would be financially eligible for Medicaid LTSS.”

Wow! They concluded that 22 percent of all elderly Americans, more than double the official poverty rate of 9.2 percent (KFH, 2018), would qualify for Medicaid LTC benefits. That sure doesn’t support the conventional academic wisdom that Medicaid requires impoverishment. So I hastened eagerly to delve into the study’s details.

What I found pleased and disappointed me. The work is ground-breaking, the results surprising, and their true meaning far more important than the authors themselves realize. Instead, they ignored key evidence in order to conform their findings to the current “LTC Narrative”--that more social insurance is the only hope for long-term care and that targeting financial eligibility for Medicaid to the neediest would be ineffective and unadvisable. To support that assessment, here are some quotes from the article followed by my analysis:

JASP Article: “Medicaid plays a significant role in financing long-term services and supports (LTSS) for low-income elderly (65+) in the United States.”

LTC Comment: True, but Medicaid also “plays a significant role in financing” long-term care for higher income people, because medical and LTC expenses are usually deducted from income before income eligibility is determined. The constant reference in the media and scholarly literature to Medicaid helping only low-income people diverts attention from the fact that people with substantial incomes also qualify routinely.

JASP Article: “Given the high cost of LTSS, individuals often exhaust their personal resources in paying for services and must rely on Medicaid to finance ongoing care.” (p. 1)

LTC Comment: Neither this article, nor any peer-reviewed journal article I can recall, provides evidence for that statement. It is certainly true of low income/low asset people who are quickly wiped out financially by Medicaid eligibility rules. It is definitely not true of higher income/higher asset people with financial savvy and access to legal advice. See for example the 29-page “Bibliography of Books, Elder Law Treatises and Law Journal Articles on Medicaid Planning Listed Chronologically” in How to Fix Long-Term Care Financing (Moses, 2017). That source contains hundreds of techniques elder law attorneys use to qualify their affluent clients for Medicaid LTC benefits. With so much legal smoke, is it reasonable to ignore the fire, i.e. widespread use of Medicaid by prosperous people the program was never intended to serve? Yet the JASP article does not mention the possibility that people with incomes and assets much higher than the amounts they modeled could have achieved eligibility by means of self-impoverishment methods widely recommended in the popular and legal media.

JASP Article: “To qualify for Medicaid payment of LTSS, most individuals must spend nearly all of their income on their care.” (p. 4)

LTC Comment: It is true income must be spent down on care-related expenses, but that gives the lie to the common notion that only low-income people qualify for Medicaid. People who need long-term care have very high medical and LTC expenses. So, because those expenses are deducted before their income eligibility is determined, they can have very high incomes indeed and still qualify for benefits. Furthermore, while it is true that income must be spent for care, it assuredly is not true that assets must be spent on care, although that claim is made in the literature. In fact, there is no limit on how many assets an individual or couple may retain while on Medicaid as long as the wealth is held in exempt form, such as a home, IRAs making periodic payments, an automobile, prepaid burial benefits, household goods, family heirlooms, etc. Countable assets are easily converted to exempt assets as the extensive Medicaid planning literature cited above frequently observes.

JASP Article: “Under the Deficit Reduction Act of 2005, the applicant’s homestead is an excluded asset if the individual lives in the residence, is expected to return to the residence, or a community spouse or dependent relative lives in the residence (ElderLaw Answers, 2018a). … In some states, the home is not considered when determining Medicaid eligibility if the nursing home resident plans to return to the home; in other states, the resident must prove that they are likely to return home (U.S. Department of Health and Human Services, 2005).” (p. 5)

LTC Comment: Actually, the terms “expected to return,” “plans to return,” and “likely to return” are unofficial and inaccurate. Rather, the federal Medicaid criterion for permitting the home equity exemption is a totally subjective “intent to return” expressed by the recipient or a representative with no verification whatsoever required.

JASP Article: “Our data come from the 2014 Health and Retirement Study (HRS), a longitudinal household survey of Americans age 50 or older ….” (p. 6)

“We also want to note that our primary data source, the Health and Retirement Study, though now said to be representative of the institutionalized population, was not originally designed to be representative of that population and some concerns remain about the sample’s representativeness of the nursing home population, especially when used longitudinally (RAND Center for the Study of Aging, 2019; Sonnega et al., 2014).” (p. 12)

LTC Comment: The JASP article relies on HRS data to determine the wealth (income and assets) of people to whom the authors then apply Medicaid LTC financial eligibility standards. But what if the HRS data, commonly assumed to be a gold-standard source, are really highly dubious? That would mean HRS respondents might actually have much more income and assets than they report. Or it could mean that the income and assets they report are correct but that they arrived at the reported levels not by spending their wealth on long-term care but by taking advantage of Medicaid’s generous and elastic financial eligibility rules or by retaining the services of an elder law attorney specializing in Medicaid planning.

I found the HRS data highly questionable in “How to Fix Long-Term Care Financing” (pps. 16-17). For example: “One expert found significant data quality issues in the surveys due to “measurement errors in the data, particularly those arising from item nonresponse and from inaccurate respondent reports of the ownership and level of assets.” (Venti, p. 3) “Furthermore,” as I explained in the report, “there are many reasons why survey respondents and their representatives might fail to report income and assets to surveyors or even purposefully misrepresent the facts. People who have reconfigured their wealth to qualify for public welfare benefits may be ashamed of having done so or simply unaware that their heirs did this on their behalf. Seniors reporting on themselves may be cognitively impaired or intimidated by self-interested family members. Heirs who benefit from preserving parents’ estates may prefer to conceal the facts. Lawyers who do Medicaid planning are protected from disclosure by attorney/client privilege, while long-term care providers and Medicaid eligibility staff, who often know which wealthy locals are taking advantage of Medicaid, cannot disclose the information because of legally enforced confidentiality. Getting to the truth in such matters is extremely difficult.” (p. 16)

JASP Article: “We find that applying the most restrictive income allowances across the states would result in an estimated 6.8 million individuals potentially losing financial eligibility for Medicaid LTSS.” (p. 7)

LTC Comment: So, don’t tighten income allowances. It is well accepted that loss of income is the “deductible” people must pay to get Medicaid to cover their LTC expenses. The real potential savings are on the asset side of the ledger. But federal law does not permit states to do what would need to be done to divert many more people away from Medicaid dependency. That is, change the home equity exemption so that home equity goes to fund better LTSS in homes instead of passing as a windfall to heirs at government expense. Loss of the home equity exemption would make people think and plan earlier for LTC resulting in fewer ending up on Medicaid. Eliminating some of the most common Medicaid planning strategies would also help to divert the middle class away from Medicaid without negatively affecting, in fact actually helping, the needy for whom more program resources would remain available.

Having interviewed hundreds of Medicaid LTC eligibility workers over the years, I found little relationship between the ostensibly draconian income and asset eligibility rules and the way the system works in practice. Workers told me they’re frustrated that people of few means quickly get wiped out financially whereas people with substantial wealth qualify immediately and easily because lawyers fill out their applications, know all the loopholes, provide all the documentation, and follow up until eligibility is granted.

JASP Article: “The population of elderly adults studied has an average age of 74.6 and is 56.3 percent female. Among the population, the median household income is 40,912, USD the median value of household net assets is 79,400 USD (excluding housing assets), and the median net primary residence value is 100,000. USD.” (p. 7)

LTC Comment: These are very high medians, which indicates that half of the studied population has even higher incomes and assets. Remember, this study found that 22 percent of the studied population not the median households would be “financially eligible for Medicaid LTSS” (p. 7). In How to Fix Long-Term Care Financing (pps. 8-9), I found that while half of all Medicare beneficiaries had annual incomes below $26,200 in 2016, 45 percent had annual incomes between $26,200 and $103,450, all of whom could qualify for Medicaid LTC benefits based on income if their deductible medical and LTC expenses were high enough. Furthermore, I found that while half of all Medicare beneficiaries had savings of $74,450 or less in 2016, 45 percent of them had savings between $74,450 and $1.4 million, all easily converted to Medicaid LTC asset eligibility with the simplest kinds of Medicaid planning measures. In other words, up to the 95^th percentile of Medicare beneficiaries could qualify for Medicaid LTC eligibility and, in the real world, they often do. This analysis applies equally well to the current study’s findings.

JASP Article: “If the most common state thresholds were applied across all states, we estimate that nearly the entire elderly population would meet the home equity threshold of 552,000. USD Just more than half (54 percent) would meet the home equity and income test, and only 22 percent, or 10 million adults age 65 and older, would meet all three tests – home equity, income, and assets – and be financially eligible for Medicaid LTSS.” (p. 7)

LTC Comment: Now, that statement is far more dramatic than it appears to be on the surface. Let’s deconstruct it. Nearly the entire elderly population would meet the home equity threshold of $552,000, but that was the exempt home equity amount as of 2015. The comparable amount for 2021 is $603,000. In nine states, the home equity exemption was $828,000 in 2015, but it is $906,000 today, because the exempt amount increases every year with inflation. What is the point of having a limit on home equity that does not exclude anyone? What is the public policy reasoning for preventing so much private wealth from funding quality long-term care for prosperous people? Over half the study population (54 percent) meet the home equity and income test? More than one-fifth meet all three (home equity, income and asset) tests? These figures apply to the whole population not just to the median? So much for the fallacy that Medicaid requires impoverishment.

JASP Article: “We found that the population that would be made financially ineligible for Medicaid LTSS by restricting income allowances and thresholds likely has a greater need for services, is less likely to have a spouse who could potentially provide informal care, has fewer financial resources to pay for formal care, and is less likely to be currently using formal LTSS compared to the population ineligible for Medicaid LTSS under the most common income allowances and thresholds. This indicates that Medicaid LTSS eligibility is already narrowly targeted under the most common allowances and thresholds.” (p. 11)

LTC Comment: That statement aligns with the fact that current Medicaid financial eligibility rules are devastating for low income, low asset people. They’re wiped out financially as soon as they begin to need expensive long-term care. But the study’s conclusion that “Medicaid LTSS eligibility is already narrowly targeted” is untrue. Higher income people qualify because their health and LTC expenses are deducted before their income eligibility is determined. Higher asset people qualify because they can easily convert assets into exempt form. Much higher asset people qualify by retaining the services of Medicaid planning attorneys, services and techniques this research and most other research of its kind completely ignore..

JASP Article: “On the surface, this [$552,000 home equity exemption] may seem a generous threshold; however, most states have estate recovery laws that allow a state to seek retroactive payments for LTSS from an enrollee’s estate upon their death (ElderLaw Answers, 2017).” (p. 11)

LTC Comment: Estate recovery was made “mandatory” in the Omnibus Budget Reconciliation Act of 1993, but unfortunately the federal government did not enforce the requirement, states did not administer it fully or consistently, the media did not publicize it, and consequently consumer behavior did not adapt to plan for long-term care in order to avoid estate recovery. By citing “ElderLaw Answers,” the study’s authors display a closed-minded bias. ElderLaw Answers is published by Medicaid planning lawyers whose principal source of revenue is affluent clients they convert to Medicaid eligibility by circumventing the same income and asset limits the study’s authors claim are so restrictive. Did the study’s authors not consider this blaring conflict of interest?

JASP Article: “We believe Minnesota’s eligibility model represents the key components of financial eligibility used by all states and provides a reasonable approximation of the impact of changes to these components on eligibility levels.” (p. 12)

LTC Comment: The study’s authors acknowledge that one of the limitations of their work is the assumption that “Minnesota’s eligibility model represents the key components of financial eligibility used by all states.” Given the constraints of such research, it’s reasonable to accept that limitation. But then, why not ask what methods of artificial self-impoverishment (Medicaid planning) are effective in Minnesota as well? A simple internet search for “Medicaid planning in Minnesota” reveals scores of Medicaid planners available throughout the state to use hundreds of simple and more sophisticated methods to get around Minnesota’s ostensibly strict but actually generous and elastic Medicaid financial eligibility rules.

A few examples: the Medicaid Asset Protection Trust; the “Family Pot Trust;” “Advanced Medicaid Planning Techniques: Trusts, Private Annuities, Spousal Transfers, Caregiver Agreements;” “Elder Law & Medicaid Services: We help clients qualify for government medical benefits legally and ensure their estates are preserved for their families, instead of their nest egg being wiped out by high nursing home expenses.”; “Life Estates.” I found these sources in a few minutes perusing the internet. What value can “modeling” Medicaid financial eligibility rules possibly have when it ignores how Medicaid eligibility qualification is actually done?

JASP Article: “Our study highlights the already strict eligibility levels that limit access to Medicaid LTSS.”

LTC Comment: This study does nothing of the sort. It completely ignores the well-documented evidence of widespread Medicaid planning which allows people far above Medicaid’s apparent financial eligibility limits to qualify. Modeling financial eligibility rules that are actually circumvented routinely in real life is more misleading than informative.

JASP Article: “The Medicaid program for LTSS among the 65+ population is already well targeted and restricting eligibility would likely exclude individuals in need of services. Few states have opted to further restrict access to needed services and are instead opting to find more ways to keep people living independently in the community.” (p. 12)

LTC Comment: As we’ve shown, Medicaid is definitely not “already well targeted.” Few states have opted to target services to the needy because federal law prevents them from changing eligibility rules to exclude the affluent and achieve that objective.

JASP Article: “We caution policymakers who feel pressure to constrain eligibility for Medicaid LTSS as a cost-savings measure against taking this action.” (p. 13)

LTC Comment: This is a wrong conclusion unjustified by findings that ignore the ease of converting countable into non-countable assets and disregard the potential for home equity conversion to fund long-term care privately. In fact, changes in federal law recommended in How to Fix Long-Term Care Financing would allow states to target scarce Medicaid resources to the needy thus impelling those with means to plan early for long-term care and avoid government dependency later on.

Closing LTC Comment: The JASP article dramatically shows that over twice the proportion of elderly poor in America would qualify for Medicaid LTC benefits based on income and assets. It proves this without considering the possibility that many more people, with much higher income and assets, qualify using widely known and applied techniques of Medicaid planning. Only by ignoring the vast legal and popular literature on how to qualify for Medicaid LTC benefits without spending down can the authors cling to the conventional “LTC Narrative” that “a broader finance solution that spreads out the cost risk via a social insurance program” (p. 13) is necessary. I implore these authors and their scholarly colleagues to ask Medicaid LTC eligibility workers how Medicaid eligibility really works and to read the legal literature on qualifying for Medicaid that I painstakingly documented in How to Fix Long-Term Care Financing, pps. 34-63. Then, try modeling reality instead of the Medicaid spend-down myth. If I can help in any way, I would be happy to do so.

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Updated, Monday, February 15, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-005: LTC NEWS AND COMMENT

COVID-19 mortality tied to racial disparities in nursing homes, industry expert says
Analysis Sees $94 Billion in Industry Losses Over Two Years
Covid Has Black Americans Thinking More About Financial Planning
Lincoln to Add Variable Universal Life-Long Term Care Hybrid
Dementia doubles COVID risk — even after accounting for LTC residence, study finds
MA Enrollment in Plans With Extra Benefits for Chronically Ill Tripled in 2021
Legal experts warn of incoming lawsuits for long-term care
COVID-19, in some respects, made senior living more appealing: survey
Why the Medicaid block grant is the right strategy for Tennessee | Opinion
Coronavirus cases drop at US homes for elderly and infirm

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Updated, Monday, February 8, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-004: LTC NEWS AND COMMENT

Long-term care in the age of Covid, and beyond
Using Estate Planning to Prepare for Medicaid
Baby boomers face financial distress and age discrimination
Long-Term Care Insurance: First, You Should Find an Agent
Want to age at home instead of a nursing home? Consider this first
We need comprehensive long-term care reform, and we need it now
More than a fourth of Americans 40 and younger don’t think they need to be saving for retirement: survey
Six-year study links hearing loss to dementia risk
Here's a New COVID-19 Nightmare, for You
Veterans Community Care Program: Immediate Actions Needed to Ensure Health Providers Associated with Poor Quality Care Are Excluded
NAIFA-ND Activates Grassroots to Counter LTC Proposal
Boren-like solution needed nationwide to address Medicaid shortfalls, expert says

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Updated, Friday, February 5, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: SOCIAL INSURANCE IS AND OXYMORON

LTC Comment: Insurance is individualistic, so “social insurance” is a contradiction in terms. Meaning and consequences follow the ***news.***

*** LTCI SURVEY NEWS: Oliver Wyman and Ice Floe Consulting have presented the Executive Summary of the “Who is Selling What? To Whom, How & Why?” agent and advisor survey they conducted last fall. The study team gathered a great deal of actionable intelligence from agents and advisors actively engaged in the long-term care insurance planning process. Click here for the executive summary of results. You can request their full report starting next week at this Oliver Wyman webpage. Ron Hagelman and Barrie Fisher published an excellent review of the survey results titled “Actionable Intelligence in Long Term Care Planning” in the February issue of Broker World just out, here. ***

*** WA AND ND SLIDE OFF THE RAILS: Evidently the people in Washington State who are trying to design compulsory social insurance for long-term care can’t decide whether or not people who own private insurance already or buy it now should have to pay for the new state-mandated plan too. Wouldn’t that be double jeopardy? In the meantime, North Dakota wasn’t messing around with any such nuance; they had a bill to stop the sale of private LTC insurance for three years altogether. Apparently they’ve relented on that nuclear option and will only “study” the subject going forward. We thank Stephen D. Forman of Long-Term Care Associates for keeping us apprised of the politicians’ latest shenanigans. ***

LTC BULLET: SOCIAL INSURANCE IS AND OXYMORON

LTC Comment: The LTC policy world is smitten by a dream that they can solve the LTC financing crisis by means of social insurance. (Are you listening Marc Cohen, Judy Feder, et al.?) Washington State’s plan to compel workers to fund a government designed and managed LTC “insurance” plan is the basic model. But other states are building similar programs and many more have a social insurance long-term care program on their wish list. What’s wrong with that? Today’s LTC Bullet explains.

The following article, originally published in 2002, begins by defining insurance and explaining its fundamental principles. The article proceeds to describe the many ways the honorable concept of private insurance has been corrupted by government interference and regulation in the name of “social insurance.” It closes with a comparison of the moral consequences of real private insurance compared to so-called social insurance.

In a nutshell, real private insurance is individualistic, voluntary, fair, rational, objective, and based on the trader principle. It serves life. Social insurance is collectivistic, subjective, non-rational, inequitable, and violates the trader principle. So it undermines life. Now read on to see how I justify those conclusions by comparing and contrasting true insurance with the oxymoron “social insurance.”

Stephen A. Moses, "The Inherent Individualism of Insurance," Navigator, Vol. 5, Nos. 10-11, November-December 2002, pps. 10-12, 14-16, published in January 2003.

“The Inherent Individualism of Insurance”

By Stephen A. Moses

As human beings, we fear chaos and confusion and fight against them. We appreciate order. We celebrate reason, logic, and science because they help us bring order and manageability to our experience of reality. But no matter how rational and focused we are, we remain vulnerable to unexpected events that can throw our lives into turmoil. A slippery sidewalk, an unanticipated illness, a drunken driver, a freak storm, or (who knows?) an errant meteor. Besides, "the best laid plans of mice and men oft go astray." We need a tool to help us mitigate the consequences of uncertainty in day-to-day life, just as reason and logic help us to bring order and predictability to cognition. Fortunately, we have such a tool: it's called insurance. Insurance cannot repair the damaged or heal the sick, but it can alleviate the economic consequences of unpredictable negative events like accidents, natural calamities, and illness or death.

What is insurance and why do we need it?

"Insurance" is a financial tool with which we can replace the small risk of a catastrophic financial loss with the certainty of an affordable payment. Insurance companies help people achieve this objective by spreading and pricing risk. For example, let's say there is one chance in a million that I will be hit by a truck, resulting in a $1 million loss. That event—unlikely as it might be—would devastate me financially as an individual. I would gladly pay $2 to make the monetary part of this risk disappear. So would millions of other people. Therefore, an insurance company can profitably sell such protection, called an insurance "policy," to me and to 999,999 others for a reasonable fee, called a "premium."

The insurer promises to "indemnify" me and all other policyholders (or "insureds") if and when the insured event occurs by paying us a specified "claim" amount that restores us to our financial position before the loss occurred. If the company sells one million such policies for $2 each and incurs the anticipated single "loss" of $1 million, it makes a hefty 100 percent profit and performs a valuable public service in the process. The insureds can relax and enjoy life in the knowledge that if the worst happens, at least they are protected financially. That is called "spreading risk." But what if five of the insurance company's beneficiaries are hit by trucks instead of just one? Then the company would have collected only $2 million in premiums, but would owe $5 million in claims, a $3 million loss. To know what to charge for insurance protection, companies must "assess the risk." They must measure, record, and analyze extensive "actuarial" data on the incidence and frequency of the insurable event. In other words, they must answer the question: What is the probability that the insurable event will occur to individuals among the insured group and what will be the cost if it does? That is called "pricing the risk."

Of course, they cannot say with certainty whether you or I may be the victim, but they can say with a high degree of confidence what level of risk we face as a group of individuals. Thus, insurance makes it possible for us to "transfer risk" from ourselves as individuals to a third party, the insurance company, in a voluntary commercial relationship that benefits both parties. The insureds gain peace of mind. The insurer gains profitability.

So far so good. But what if I want to buy insurance because I know I am very likely to need it? This is called "adverse selection," and insurance companies must discourage it. Or else, what would happen if I bring more risk into the risk pool than you do? Would it be fair to charge me the same premium as you have to pay? In fact, would you even purchase an insurance product that guaranteed to give a higher return on average to other, higher-risk insureds than to yourself? Probably not.

For example, say that I am a heavy smoker and I am therefore more vulnerable than a non-smoker to emphysema and lung cancer. If I'm already sick, selling me health insurance would be like providing fire insurance to someone whose house is already in flames—blatant adverse selection. But even if I'm not yet ill, if I were to pay the same premium for health insurance as a non-smoker, I would be getting more protection for my money, dollar for dollar. That's because, as a smoker, I would be much more likely than the non-smoker to file an insurance claim for medical treatments related to my unhealthful behavior. Put another way, the non-smoker would be subsidizing my health insurance premium by paying a higher premium himself than the level of risk he brings to the risk pool warrants.

Thus, insurance companies must not only assess but also "classify" risks. They do this through "underwriting." That is, they ask questions, examine evidence, or do tests to determine the level of risk that each individual or class of individuals brings into the "risk pool," so they will know how much premium to charge each insured or group of insureds. Thus, your insurance company may examine your driving history or review your medical records before underwriting you for auto or life insurance, for example. If insurance companies failed to classify risks in this way, the whole system would fall apart very quickly.

In the example of the smoker and the non-smoker, the non-smoker—unless he's an inveterate altruist—would get smart sooner or later, drop any health insurance that punished him financially but rewarded smokers, and look for a policy that treats everyone fairly. This would have a devastating effect on the "reserve fund" that insurers must maintain and invest. Insurers need reserves to pay claims when they occur, to cover administrative costs, and, of course, to return an acceptable profit to their investors or shareholders. When non-smokers, i.e., "good risks," drop their policies and stop paying premiums while smokers, i.e., "bad risks," keep their underpriced policies, something has to give. Either the insurer must raise premiums for the remaining smokers covered by the policy to ensure sufficient reserves to pay the higher anticipated claims or the reserve fund will become "insolvent," i.e., insufficiently capitalized to pay expected claims. Either way, nobody wins.

Another beneficial effect when insurers classify and price risk accurately is to encourage positive behaviors and discourage negative behaviors. The price of insurance should alert us to the long-term cost of our decisions. When insurance is very expensive, it sends the message that our conduct or condition may be excessively risky. For example, people who have poor driving records usually pay higher auto insurance premiums, sooner or later. Their careless or drunken driving may have little or no cost for a long time. Once a traffic ticket is issued, however, it becomes part of the public record. An auto insurance company can review the public record and raise the violator's insurance rates to reflect the added risk he brings to the risk pool. On the margin, this added cost associated with carelessness or illegality tends to discourage irresponsible behavior and reward responsible behavior. Conversely, over time, if one's driving record improves, one's insurance premiums will decline once again to reflect better performance, thus rewarding improved behavior. Insurance achieves this positive social effect justly and without coercion by objectively pricing the risky behavior of individuals.

Even when our behavior is not dangerous to others or otherwise irresponsible, however, accurately priced insurance premiums still give us valuable personal information and promote fairness and equity. For example, why should a sedate philosophy professor pay the same life insurance premium as a skydiver or motorcycle daredevil? There is nothing wrong with the adventurous life, but insurance helps make sure that those who choose it take their fair share of the fiscal, as well as the physical, risk. Properly conceived, therefore, private insurance is in many ways a marvelous early warning system for us both as individuals and as a society.

Notice, finally, that insurance is different from saving, though the two are intimately related as ways of preparing for future needs. When we save, we are putting money aside for future use, normally in an account or investment that earns a return; we retain the money rather than paying it to someone else, and we get back only what we put in (plus interest or dividends). We can use savings to deal with various risks, but saving per se does not spread risks among people and thus does not require the kind of risk classification that insurance does.

Insurance and savings can of course be bundled together as products. An example is whole life as opposed to term life insurance. When you buy a whole life policy, you are not buying pure insurance; you are investing a portion of your premium with an insurance company. Most people can invest their money much more profitably through independent investment vehicles. In the same way, most managed-care health plans cover both unpredictable catastrophic illness or injury and routine, predictable medical expenses like annual checkups. In effect, managed care is a combination of a lay-away plan for routine care and insurance for catastrophic care. Bundling those functions together is generally not a good idea—though in this case government policies have pushed most people in that direction.

Why and how is insurance corrupted?

Well, if insurance is that wonderful, why do so many people have such a bad opinion of it? What's the "rap" against private insurance? Maybe the following comments will sound familiar:

"Private insurance is heartless. It blames the victim. It punishes people for conditions that are no fault of their own." For example:

Health insurance callously excludes anyone with a serious pre-existing medical condition.
Home owners insurance may be prohibitively expensive for otherwise fine citizens who just happen to live in crime-infested neighborhoods.
AIDS patients can't get life insurance, and Alzheimer's patients can't get long-term care insurance, even though these are the people who need the protection most.

Are these legitimate criticisms? No, of course not. Insurance is a business, not a charity or a welfare program. Private charity or government welfare programs may be legitimate ways to help the uninsurable, but that's a different issue. To achieve the benefits I described earlier, insurance must remain a business enterprise, motivated by self-interest, regulated by competition, and priced by objective evaluation of risks and returns. When politicians, bureaucrats, or "advocates" of one kind or another try to achieve welfare goals through private insurance—when they try to "improve" on private insurance with mandates, controls, or regulations—all sorts of unforeseen and unintended consequences follow.

Here is how it starts. In the interest of protecting consumers, someone insists that insurance should be required to cover a benefit that was previously not covered or covered only as an optional benefit for an added premium. Or, in the interest of assisting the uninsurable, someone demands that everyone should be able to buy insurance and that premiums should not exceed "reasonable" levels. Or, in the interest of helping people who are vulnerable to certain illnesses, someone wants to prohibit the collection and review of medical or genetic information by insurance companies.

Demands for politically induced insurance "reforms" like these start small and quietly. They build over time with growing support from the often small minority of individuals who stand to benefit most from the changes. Gradually, interest groups mobilize to represent the benefit seekers and to promote their claims. A relatively small number of people and organizations have a relatively intense interest in promoting laws that benefit them.

Opposition remains quiescent for two main reasons. "There but for the grace of God go I," think some. "Maybe this new law will actually help me someday." Others think, "I should not begrudge the less fortunate their getting something from private insurance companies. After all, those companies have deep pockets and, even if they pass the cost on to me, how much more will helping the needy cost me anyway?" Most people do not understand the trade-offs between a free and a controlled insurance market. Others don't care. Thus, whether motivated by self-sacrifice or the hope of unearned gain, by ignorance or apathy, most people go along to get along, supporting government intervention in the insurance industry.

All of these interventions attempt to reduce the cost of insurance protection for high-risk individuals by increasing the cost to low-risk individuals. Therefore, their purpose and effect is not to reduce risk but to spread wealth. Like other egalitarian measures, they unjustly grant unearned benefits to some while imposing undeserved penalties on others. And, accordingly, the results are destructive. There is an old saying that "you get more of what you subsidize and less of what you tax." By subsidizing high-risk behaviors and conditions while taxing low-risk behaviors and conditions, these measures have exactly the opposite effect of the benign results we attributed earlier to private insurance. They reward irresponsible behavior and punish responsible behavior, creating a downward spiral of perverse incentives.

Regulation, Welfarization, and Social Insurance

Government efforts to improve on private insurance fall into two major categories. First is the regulation of private insurance through "prior approval," restrictions on risk classification, and mandated coverage (that is, the company must offer certain types of insurance in the state if it offers any). In the second category are the "social insurance" programs that government itself provides.

The first tactics used by state regulators were prior approval of insurance rates, policy forms, or both. Historically, insurance regulation has been a state-level function with relatively little federal involvement. Insurance companies that wish to market a policy nationally must file for approval in all 50 states. Each state has different requirements, some stricter than others; the most rigid states require the use of state-mandated rates or forms. Frequently, the regulation of insurance becomes the politicization of insurance and then the welfarization of insurance. According to testimony given before Congress by Robert E. Litan, co-director of the American Enterprise Institute-Brookings Joint Center on Regulatory Studies:

Regulated rates are often distorted by political pressures in order to subsidize certain classes of drivers. The AEI-Brookings study found evidence that not only does regulation often suppress average rates, but distorts rates between different classes of drivers—keeping rates for high-risk drivers artificially low, while raising rates for lower-risk drivers. This cross-subsidization is accomplished directly through limits on rates in certain classifications…. The Massachusetts case study, for example, found that some high-risk drivers receive subsidies as high as 60 percent, requiring some lower-risk drivers to pay 11 percent more in premiums than they would pay in a competitive environment ("State Regulation of Auto Insurance," Testimony before the Subcommittee on Oversight and Investigations of the House Committee on Financial Services, August 2001).

The obvious solution to bring the market back into equilibrium is to eliminate the rate caps. That is hard to do, however, because advocates for the "disadvantaged" who live in high-risk urban areas insist that the caps favor consumers and that dropping the caps would benefit only the insurance industry by allowing it to charge higher premiums. All too often, the media accept and promulgate this argument. Thus, for reasons discussed above—vested interests for some, forced altruism for others, and ignorance or apathy for most—such insurance "reforms" tend to remain in place and other similar measures constantly gain support and adoption. I call this process the "welfarization" of insurance, that is, the transformation of private insurance by government intervention from a market-based product into a tool to improve the condition of some people in relation to and at the expense of others.

Another form of welfarization is to impose restrictions on risk classification. As explained earlier, insurers must classify kinds and levels of risk carefully to avoid "adverse selection" and to price policies accurately in accordance with the levels of risk that various policyholders bring into the risk pool. In the absence of risk classification, smokers and non-smokers, good and bad drivers, daredevils and college professors would pay identical premiums.

An example of insurance "reform" that eliminates or severely restricts risk classification is "community rating," which requires that insurance premiums reflect the average risk in a geographic region. Under community rating, the level of insurance premium for everyone is determined by adding up the cost of paying benefits for everyone—rich and poor, sick and well, responsible and irresponsible—and dividing by the total number of individuals in the covered population. To many people, this sounds like a fair and effective way to address the endemic problems of unaffordability and the uninsured, especially in the case of health insurance.

But look at what happens. Low-risk insureds soon realize that they have to pay more for insurance than was the case before community rating, and they tend to drop such over-priced coverage. High-risk insureds, on the other hand, have every reason to keep their under-priced coverage. In fact, high-risk people who were previously uninsured tend to purchase this highly attractive new insurance. Gradually, the risk pool becomes heavily weighted with people who are highly likely to file claims. Insurance companies begin to lose money and must either raise premiums to remain solvent or stop offering the coverage altogether. If the insurer raises premiums, the coverage becomes less attractive to low-risk insureds, further exacerbating the problem. Sooner or later, the only viable option for insurance carriers is to drop the policy and leave the state. The money they can collect from premiums will not cover the anticipated expenditures for claims, much less return administrative costs and an acceptable profit.

Viewed logically and analytically, this outcome seems obvious. But that has not stopped real-world regulators from imposing community rating and unleashing the inevitable consequences. For example, New York legislators mandated community rating for health insurance in 1993. The National Center for Policy Analysis summarized the effects:

Consider the impact on policies sold by Mutual of Omaha, one of the largest sellers of individual health insurance policies in the state:

Before community rating was instituted in New York, a 25-year-old male on Long Island paid $81.64 a month for health insurance, and a 55-year-old paid $179.60.

After community rating, both paid $135.95, a 67 percent increase for the 25-year-old and a 25 percent decrease for the 55-year-old.

Because young, healthy people began canceling policies, by 1994 both paid $183.79—more than the 55-year-old was paying before community rating was implemented—and by 1997 that community-rated premium had risen to $217.59 a month.

As a result of the departure of thousands, the uninsured population in New York City grew from 20.9 percent in 1990 to 24.8 percent in 1995, according to one report, while the national rate grew from 16.6 percent to 17.4 percent over that same period. ("Explaining the Growing Number of Uninsured," National Center for Policy Analysis)

In Kentucky, the same tactic prompted 45 of 47 insurance companies to withdraw from the state's individual health insurance market. Market failure caused by government intervention then became one more reason in the minds of politicians to impose even more government intervention—a chain reaction that leads deeper and deeper into political manipulation and further dysfunction.

In addition to manipulating private insurance, government has created its own insurance programs—with equally unsatisfactory results. "Social insurance" is the idea that we should all pay the same premium, usually in the form of a payroll deduction, and that we should all be entitled to the same benefits regardless of the level of risk we bring to the global risk pool. America's Social Security and Medicare programs are social insurance systems. Both of these programs are enormously popular. Many people consider them to be unqualifiedly successful. Similar and more extensive social insurance programs in Europe have even greater popular support despite the enormous tax burden they impose on wage-earning participants.

Nevertheless, these programs are highly destructive. For one thing, social insurance is a pay-as-you-go system, and thus a Ponzi scheme. The government does not invest the payroll taxes it collects from workers in order to support their future benefits. Rather, it pays out their taxes to current retirees; when those who are currently working and paying taxes retire, they will have to depend on taxes from the next generation of workers. This system seemed to work early on when a large number of people were paying into the system while only a small number of people were drawing benefits out. But, in the future, as Europe, the United States, and the rest of the world confront a new demographic of aging, analysts say a shrinking pool of workers will be unable to support full social insurance benefits for a retiring baby-boom generation of gigantic size and unreasonably large expectations. If warnings from the General Accounting Office, the Congressional Budget Office, and dozens of independent experts are accurate, Social Security and Medicare will leave both their participants and the government worse off in the long run.

Insurance performs the critical economic functions of spreading risk and of pricing risk. If we do not price risk fairly and objectively, we end up with a system that rewards high-risk (including irresponsible) behavior and punishes low-risk (including responsible) behavior. One of the main differences between social insurance and private insurance is that, although both spread risk, only private insurance prices risk in a meaningful way. Private insurers have a legal and fiduciary responsibility to their insureds. They must price insurance coverage at a level sufficient to accumulate reserves that will be adequate to pay carefully anticipated claims rates. Private policyholders possess legal contracts, enforceable in a court of law, that assure them recourse in case of dispute, malfeasance, or insolvency by the insurance company.

Social insurance, on the other hand, offers none of these protections. Social Security and Medicare, for example, are notorious for growing exponentially beyond their original cost projections. Socially insured people have no legal recourse or protection against increases in premiums (payroll taxes), decreases in benefits (program cutbacks), or the imposition of means tests (welfarization).

In America's mixed economy, social insurance is usually considered a safety net and not a first line of financial defense. When savings, investments, pensions, and private insurance prove inadequate, we look to social insurance to pick up the slack. Unfortunately, however, the very existence of compulsory social insurance debilitates the effectiveness of these private financing vehicles. People save or purchase insurance if they perceive they are vulnerable to a large financial loss. Social insurance distorts that perception. By creating an illusion of low risk, it reduces the demand for private insurance protection.

For example, when President Lyndon Johnson signed the act that created Medicare in 1965, he stated confidently that "no longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations." By building up false hopes like these, Medicare effectively scuttled any hope for a private health insurance market to cover seniors. Today, the elderly spend a larger proportion of their income for health care than they did before Medicare began; Medicare has little hope of continuing to provide full benefits without major premium increases as the baby-boom generation retires; and a private insurance system to take Medicare's place has no realistic chance to develop.

The same problem occurs in other categories of insurance. Most people buy private car, fire, and life insurance. If they did not have these kinds of coverage and the insurable event occurred, they would usually experience a major loss with little direct assistance from the government. On the other hand, very few people purchase hurricane, flood, or earthquake insurance. When a major natural disaster occurs, local and national politicians jump at the opportunity of promising financial assistance of all kinds to the victims. Nothing lets a politician appear compassionate and generous without fear of criticism like a major disaster. Why buy flood insurance if the government indemnifies you with grants and loans every time the Mississippi escapes its banks? In the same way, the marketability of private long-term care insurance is also undercut by the easy availability of nursing-home care financed by Medicaid. One can only wonder at the possible effect on private life insurance sales of the government's liberal indemnification of families victimized by the World Trade Center attacks.

Thus, government impedes the effectiveness of private insurance in two main ways: first, by trying to improve on private insurance with arbitrary controls; secondly, by allegedly mitigating the risks against which private insurance should protect us through mandatory social insurance, public welfare, and emergency grants and loans.

Insurance and Morality

We have seen that insurance performs a vital economic function. To the extent that government regulates or subsidizes insurance, it also becomes a political issue. But insurance has a moral dimension as well. Insuring against risk is one of the most important ways in which individuals take full responsibility for their lives, in accordance with the ethics of Objectivism. And the private marketplace for insurance illustrates how trade allows individuals to cooperate for mutual benefit.

* Insurance is individualistic. Individuals buy insurance by voluntary choice to protect their own self-interest (including the interests of their loved ones and dependents) in accordance with their own assessment of their individual needs and circumstances.

* Insurance is rational and objective. It helps us prepare for the unexpected based on facts and analysis, so we don't have to depend on wishful thinking or blind hope. Premiums and benefits are based on objective risks as determined by hard actuarial data.

* Insurance depends on the trader principle. You won't buy it and the insurance carrier will not sell it unless you each perceive that the transaction will leave you both better off than you were before. When this simple principle is allowed to operate in a free market, the result is a profusion of different policies—covering a wide range of risks, benefit levels, terms and conditions, and durations—that an individual can tailor to his unique situation, with prices controlled by competition.

* Insurance is fair. You know you get what you pay for because your premium is based on underwriting, which measures and prices the level of risk you bring to the risk pool. Nobody forces you to buy insurance, but if you don't have it, you are responsible for the punishing financial consequences if and when the insurable event occurs.

* Insurance serves life. It helps us to manage uncertainty and therefore preserves, sustains, and promotes life.

By contrast, social insurance violates those same ethical principles.

* Social insurance is collectivistic. It treats individuals as means to an end by sacrificing their interests for the sake of others.

* Social insurance is subjective. "Premiums" and benefits are based on political considerations and are established by the authorities.

* Social insurance is non-rational. You pay what it charges and get what it gives you without regard to any reasoned calculation of what you want, what you need, or what you can afford.

* Social insurance is inequitable. By treating everyone the same, it punishes some people (the most responsible and least risky) to reward others (the least responsible and most risky).

* Social insurance violates the trader principle. It is compulsory and monopolistic. It prevents people from choosing to opt out; it offers a single policy with few options, if any; and it is not subject to competition.

* Lastly, social insurance undermines life. It creates a false sense of security that anesthetizes people to risks that they must recognize and confront to live safely.

For all these reasons, it should be clear that "social insurance" is not a type of insurance but its antithesis. It is not a means of dealing with the chaos and confusion of life; it is a source of chaos and confusion. Because social insurance rests on the politics of demagogy, it renders future freedoms and obligations unknowable, and so vitiates our ability to plan. Because social insurance operates through taxes, it robs us of our money—the principal tool we need to give substance to our plans.

The question, then, is not whether social insurance should become private. That is like asking whether drunk drivers should become sober drivers. Of course they should. And social insurance thus needs to be fought through a well-grounded moral crusade, carried to the voting public through lectures, articles, and other means. But until politicians show an inclination to give up their demagogic joy rides, the uncertainties generated by social insurance will remain a personal threat, compounding the uncertainties that are inherent in life. Although we cannot entirely escape the cost of government intervention, we can gain a measure of independence by refusing to rely on government's offer to help. We can and should use genuine insurance—private insurance—to build a wall of private protection between ourselves and life's uncertainty that depends as little as possible on government promises and programs.

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Updated, Monday, February 1, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-003: LTC NEWS AND COMMENT

COVID-19 and Long-Term Care: LTCI Insider
Trust Fall II: Surfin' USA
An afternoon nap could improve your cognitive abilities, study says
New York AG: Nursing Home COVID Deaths Undercounted by 50%
Group Sees Long-Term Care Insurance Claims Rising
American Academy of Actuaries Examines COVID-19's Potential Impacts on Long-Term Care Insurance
Eating Nuts In Your Forties Could Cut Dementia Risk In Later Life, Study Finds
Promoting the sixth insurance program
Dementia, Alzheimer’s not an inevitable part of aging: Study
Some senior living operators add vaccine access to marketing toolkits to help rebuild occupancy
Hourly rates for assisted living CNAs increased by nearly 6% last year

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Updated, Monday, January 25, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-002: LTC NEWS AND COMMENT

Nursing home sector continues to lose jobs, while healthcare overall rebounds: report
Pandemic forcing nursing homes across the country to close
Washington state lawmakers look to the market to cover long-term care costs
Low Interest Rates Push LTCI Prices Up
The Social Security retirement age could change. What that could mean for benefits
Nearly half of Alzheimer’s cases are mild, supporting a focus on early intervention
Six Months Later, Most Wuhan COVID Survivors Still Have Health Issues
Poor Performance of Long-Term Care Product Persists
Joe Biden’s New Health Care Agenda (and CMS’s Big Role In It)
IRS Reversal: Expenses Paid With PPP Loan Funds Are Now Tax-Deductible
CDC study confirms: Coronavirus most often spread by asymptomatic carriers

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Updated, Friday, January 22, 2021, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: SPOUSAL IMPOVERISHMENT, THEN AND NOW

LTC Comment: The myth that access to Medicaid LTC benefits requires impoverishment is pervasive. A dose of reality concerning spousal impoverishment specifically follows the ***news.***

*** NEW 2021 MEDICAID SPOUSAL IMPOVERISHMENT NUMBERS. We’ve just updated MEDICAID AND MEDICARE KEY NUMBERS UPDATED ANNUALLY in The Zone, the Center’s members-only website. If you need your user name and password to access The Zone or if you’d like to join the Center to gain sustained access, contact Steve Moses at smoses@centerltc.com. The 2021 spousal impoverishment numbers are included in the following LTC Bullet. ***

*** CLTCR Premium Membership -- Center for Long-Term Care Reform premium members receive our full suite of individual membership benefits including: our LTC Bullets and E-Alerts; access to our Members-Only Zone website and Almanac of Long-Term Care; subscription to our Clipping Service; and email/phone access to Steve Moses for 24-hour turnaround queries. Our Premium Membership is designed to give you a competitive advantage in your long-term care profession. Your increased knowledge of the critical issues and challenges we face in the field of long-term care service delivery and financing equals improved professional success for you and better LTC services for your clients and for those who have no choice but to rely on scarce public resources. Premium Membership is $250 per year, paid up front or monthly by automatically recurring credit card payments. Contact Steve at smoses@centerltc.com to start your Premium Membership immediately or go directly to our secure online subscription page and sign up for as little as $21 per month. ***

*** QUINTESSENTIAL QUERY: After a program I gave for LTCI producers recently, an attendee asked:

I never have been able to understand why the state and federal government do not enforce existing rules about qualifying for Medicaid or create new ones that will limit their liability. It is a welfare program designed to help those who need it and not a program for the people who can afford to pay for their own care. We have known for years that the Baby Boomers are a ticking time bomb, yet the government ignores it. Can you explain why they are not interested in making Medicaid a program that can be accessed by the ones who really need it?

I replied:

In a nutshell, the problem is decades of drift toward collectivism and dependency on government as everyone’s provider/protector implemented through compulsory social insurance. We’re now paying the price for replacing personal responsibility with government promises. I expect the full bill to come due by 2031 when boomers start turning 85, Social Security and Medicare “trust funds” are depleted and the Fed’s and Treasury’s Faustian bargain with Modern Monetary Theory plays out. Then we’ll learn if there is anything left of the individualistic values and principles that made America great in the first place.

For the full explanation, I recommend my two latest studies, a monograph published in January 2020 titled Medicaid and Long-Term Care and How to Fix Long-Term Care Financing from 2017, published with the Foundation for Government Accountability. ***

LTC BULLET: SPOUSAL IMPOVERISHMENT, THEN AND NOW

LTC Comment: Before the Medicare Catastrophic Coverage Act of 1988, which was signed into law by President Ronald Reagan July 1, 1988, access to Medicaid’s generous long-term care benefits did require spousal impoverishment under certain circumstances. While the “catastrophic” law was still under consideration in Congress, I described the problem and how the proposed legislation would address it in the U.S. Department of Health and Human Services Office of Inspector General’s June 1988 report titled “Medicaid Estate Recoveries: National Program Inspection”:

Under current law, spouses of institutionalized Medicaid recipients are sometimes forced into impoverishment by Medicaid eligibility rules. This usually occurs because the husband is institutionalized first. If, as is often the case, most of the family's income such as Social Security and/or a pension is in the husband's name, Medicaid rules provide that all but a small amount must be applied toward his cost of care. The wife who is left in the home, i.e., the community spouse, retains only a pittance. On the other hand, if the wife is institutionalized first, and the income is still in the husband's name, he keeps the money, because the community spouse has no legal obligation to contribute toward the cost of the institutionalized spouse's care.

The catastrophic bill addresses this problem by increasing the amount of income and resources that the community spouse may retain without affecting the Medicaid eligibility of the institutionalized spouse. Because more people would qualify for assistance and less family income would apply toward the cost of institutional care, the fiscal impact of this solution would be to increase Medicaid expenditures. We found that 3-year cost estimates on similar provisions in different bills varied from $410 million (Congressional Budget Office) to $1,275 million (HCFA actuaries) depending on implementation assumptions. All estimates ascend steeply into future years. (pps. iii-iv, emphasis added.)

Boy did we get that right! Medicaid’s long-term care expenditures have skyrocketed ever since, from $18.5 billion for nursing home and home health care in 1990 to $87.1 billion in 2019, nearly quintupling in the ensuing 29 years.

What MCCA ’88 Did

MCCA ’88 dealt with the spousal impoverishment problem in several ways. It guaranteed the community spouse a “Maximum Monthly Maintenance Needs Allowance” or MMMNA of up to $1,500 per month. The law granted a “Community Spouse Resource Allowance” or CSRA of $60,000.

What these provisions meant is that the wife or husband of an institutionalized Medicaid recipient could retain up to $1,500 per month of the Medicaid spouse’s income instead of that income having to be used to offset Medicaid’s cost of his or her care in the nursing home. Likewise, the community spouse could retain half of the couple’s joint assets not to exceed $60,000, thus exempting those funds from private LTC liability and increasing Medicaid’s expenditures.

MCCA ’88 provided for these spousal impoverishment protections to increase with inflation annually. As of 2021, the original numbers have more than doubled. The MMMNA is now $3,259.50 per month and the CSRA is $130,380. A little over $3,200 per month is not easy living, but it is also most assuredly not “spousal impoverishment.” The official poverty level for single individuals as of 2021 is $12,760 per year or $1,063 per month, a little less than one-third of the MMMNA. Medicaid’s LTC role is to provide a safety net for the poor, not to protect a middle-class life style for people who fail to plan, save, invest or insure for long-term care. So the term “spousal impoverishment” should be stricken from the LTC financing lexicon.

Updated Medicaid Spousal Impoverishment Numbers

In case you’re interested, we’ve updated and published the Medicaid spousal impoverishment numbers every year since 1991, when the MMMNA was $1,662 and the CSRA was $66,480. Those data are available to Center members in The Zone here. You’ll need your user name and password for access to The Zone. Get a reminder from smoses@centerltc.com if you’re already a Member or contact him to join and get access to this valuable resource. Our source is the Centers for Medicare and Medicaid Services (CMS) “2021 SSI and Spousal Impoverishment Standards” here.

A Better Way

Now back to that old OIG report from 1988. Did it oppose the MCCA ‘88’s provisions to eliminate spousal impoverishment? No! But it did offer an alternative approach designed to achieve the same result more cost-effectively:

Certain findings from the OIG’s Medicaid Estate Recoveries report have a direct bearing on the spousal impoverishment issue. In fact, we believe this problem can be resolved at considerably less public expense than is contemplated in the current legislation. We found, for example, that many "impoverished spouses" own their homes free and clear. Their problem is cash flow, not poverty per se. We found that two-thirds of the elderly poor are unable to qualify for any Medicaid services, although many individuals with large assets are eligible for the program's most valuable benefit (institutional care). We documented that recovery of Medicaid payments from the estates of property-holding recipients is very unusual. This is true because assets are (1) transferred, sheltered, expended or concealed by recipients and their families and/or (2) public officials have taken no action to recover. In light of these facts we recommended that propertied recipients be permitted to retain their income and assets while receiving Medicaid long-term care benefits, but only in exchange for a promise, secured by a legal encumbrance, to repay the cost of their care when they no longer need their property. This repayment would be made from their estates or the estates of their last surviving dependent relatives after the property is no longer needed for a livelihood. Such a plan would resolve the spousal impoverishment problem, eliminate the most catastrophic financial impact of long-term illness and add a major nontax revenue source for Medicaid. More importantly, the risk of losing their financial legacy would influence the elderly and their heirs to seek private long-term care insurance protection and thus further relieve fiscal pressure on public programs. (p. iv)

Congress later adopted some of our 1988 report’s recommendations in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93). It made estate recoveries mandatory, for example, but it left Medicaid’s many income and asset exemptions unprotected by the “legal encumbrance” to secure that wealth for later recovery as we had recommended. Nor did the federal government strongly enforce the newly required estate recoveries. Worse, OBRA ’93 left the home equity exemption unlimited. That only changed with the Deficit Reduction Act of 2005 (DRA ’05), which capped home equity at $500,000 to $750,000 ($603,000 to $906,000, as of 2021) at state legislatures’ discretion.

The end result is that Medicaid LTC expenditures continue to grow rapidly, the public remains desensitized to LTC risks and costs, private financing of LTC through home equity conversion and private insurance is stymied, and LTC access and quality continue to be serious problems.

If all this seems just a little too “inside baseball” to you, then you have a good idea why the complicated subject of long-term care financing policy remains a mystery to most analysts and policy makers. If you really want to understand what it means, and what has to be done to resolve the problems once and for all, you could do worse than to spend an hour reading the OIG’s report from 33 years ago. Here it is again: “Medicaid Estate Recoveries: National Program Inspection.”

I’d also like to point readers to an earlier study I conducted and wrote that led directly to the Inspector General’s report. The Medicaid Estate Recoveries Study--Volume I: Estate Recoveries in the Medicaid Program -- Health Care Financing Administration (1985). Read it and see if you don’t think we nailed the problem and the solution 36 years ago!

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Updated, Monday, January 11, 2021, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #21-001: LTC NEWS AND COMMENT

Trump Officials Approve Tennessee's Controversial Request To Revamp Medicaid Funding
New Analysis Finds Significant Financial Benefits Locked in Long-Term Care Insurance Policies Sold Fifteen to Twenty-Five Years Ago
One-week US Covid-19 case and death totals are higher than ever
Genworth May Cut Remaining LTCI Sales and Marketing Operations
December Proved To Be Deadliest Month For Residents In Long-Term Care
2021 Economic Outlook Fraught With Uncertainty
Older Adults and COVID-19: Implications for Aging Policy and Practice
MA Beneficiaries See Nearly 20% Fewer Home Health Days Than Traditional Medicare Peers
Genworth to Shift to China Oceanwide Deal Backup Plan
‘Because of You Guys, I’m Stuck in My Room’
The COVID-19 Pandemic Has Upended The LTCi Market
What's Most Hurting the Financial Security of Older Americans?
We need long-term solutions for older Americans’ long-term care
Elder Law Guys: The twelve COVID elder law days of Christmas
Trust Fall
Crushing Despair, Glimmers of Hope: The Top Skilled Nursing Stories of 2020
Senate Passes $2.3T Package of Relief, Funding and Tax Breaks

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Updated, Friday, January 8, 2021, 10:40 AM (Pacific)

Seattle—

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LTC Bullet: Long-Term Care and the Pandemic

LTC Comment: What has the Covid-19 pandemic wrought for long-term care? Answers after the ***news.***

*** ILTCI CONFERENCE GOES VIRTUAL: “After surveying our attendees and careful consideration, we will change the 2021 ILTCI Conference from an in-person meeting to a virtual format.” So announced Barry Fisher, Conference Chairperson and Vince Bodnar, Conference Co-Chairperson recently. They’ve polled past participants for their preferences regarding how to structure and present the leading LTC insurance industry conference in a virtual format. Whatever they come up with will be far better than nothing (last year) but could never match past in-person versions. Nevertheless, we’ll take whatever we can get! Read the Center for Long-Term Care Reform’s History of LTC Insurance Conferences (2019) for a detailed look back at all the Intercompany Long-Term Care Insurance Conferences from the first one, 2001 in Miami to the latest, 2019 in Chicago. ***

*** “Trust Fall: The Untold Story of Washington's LTC Trust Act” is an excellent essay by LTC Associates’ Senior Vice President, Stephen D. Forman. In it Forman describes, explains and debunks the CLASS-like public policy misfire currently being operationalized in the Evergreen State. This evergreen new deal for long-term care “vigorously remakes Washington’s insurance market—without voice from the insurance industry—to the financial injury of residents.” We hope to bring you a “guest bullet” by Mr. Forman summarizing the key points in his essay. In the meantime, don’t wait. Read this provocative essay now while there’s still time to talk sense to Washington State policy makers. As with CLASS, it may be possible to derail this taxpayer shakedown before its major damage is done. Washington voters have already expressed their opposition to the plan twice by rejecting it at the ballot box in 2019 and refusing to fund it with risky investments in 2020. ***

*** IF YOU FIND VALUE IN TODAY’S LTC BULLET, please consider joining the Center for Long-Term Care Reform so you can enjoy the many benefits of membership and stay tuned daily with our LTC Clippings, weekly with LTC E-Alerts and bi-weekly with LTC Bullets. Get in front of your prospects and clients by knowing what’s happening in long-term care news and analysis—and what to say about it—before they blindside you with stories you haven’t heard. ***

LTC BULLET: LONG-TERM CARE AND THE PANDEMIC

LTC Comment: Invited by two leading national distributors of long-term care insurance to help kick off their 2021 sales year, Center for Long-Term Care Reform president Steve Moses delivered the following presentation on Wednesday and Friday of this week. He thanks GoldenCareUSA and Long-Term Care Resources (LTCR) for this opportunity to reflect on the impact Covid-19 is having on long-term care services and financing, including the future prospects for LTC insurance sales. Read on for Steve’s insights in the following presentation notes.

Long-Term Care and the Pandemic
Presented to GoldenCareUSA and Long-Term Care Resources agents and staff
Wednesday and Friday, respectively, January 6 and 8, 2021
By Stephen A. Moses, President
Center for Long-Term Care Reform

Covid Impact: Earthquake, life as we’ve known it changed radically, huge opportunities, giant risks, long-term care and LTC financing are more interesting, challenging, and fun than ever before in my 38 years following the field. The opportunity to do well by doing good selling LTCI has never been greater. You producers, distributors and the carriers you represent to consumers are critical to our country’s surviving this crisis and prospering in the future.

3 Themes: I’ll discuss three major themes or contexts of the Covid-19 pandemic:

Health and long-term care
The Economy
Politics

LTC Clippings since last month, December 2020, are the source for most of what follows. LTC Clippings is a publication we produce and distribute to subscribers.

We send an average of two clippings per day by email to subscribers. Each clipping gives the title, a link to the source, a representative quote and a couple sentences of my analysis to put the information in context.

The purpose of LTC Clippings is to inform agents of news, data, reports, articles, etc. that they need to know before they’re blind-sided by prospects or clients who’ve read something the agents haven’t seen yet.

I’ll make today’s presentation and all the links to original stories it covers available in our next LTC Bullet to be published on Friday. The same day it will be posted on The Moses LTC Blog at www.centerltc.com. You can find it there.

My point: if you received the LTC Clippings you would know all of what I’ll say today already.

If you’re blown away and you want to subscribe, check out our “Membership Levels and Benefits” link and our “Join and Contribute Online” link. Both links will be live in the LTC Bullet on the blog.

Health and LTC Context

Acknowledge sources: Experts like Claude Thau, Sally Leimbach and Margie Barrie.

Watch for two forthcoming white papers by Margie Barrie: “The Impact of Covid-19 on Long-Term Care” and “The Medicare White Paper”

Long-term care is in the news—that’s a big change for better and worse
On the bad side, people are dying in LTC facilities:

Even though just 1 percent of the U.S. population resides in a long-term-care facility, LTC deaths represent nearly four in 10 COVID-19 deaths. (Source – Christine Benz, Morningstar, December 8, 2020.)

I covered the causes, consequences and solutions in my June 1, 2020 op-ed in the WSJ: Nursing Homes, Coronavirus and Medicaid

On January 1, 2021, the New York Times published heart wrenching stories about people who have been trapped in nursing homes watching friends and fellow residents sicken and die around them

1/1/2021, “‘Because of You Guys, I’m Stuck in My Room’,” by Kristin Lin, New York Times

LTC providers have been devastated:

“The dual factors of sharply declining occupancy [down from 85% in Feb to 74% in Sept.] coupled with the high cost of personal protective equipment, COVID-19 testing, and hazard pay for workers is placing the skilled nursing sector under unsustainable financial strain.”
12/4/2020, “ NIC Points to Unprecedented Challenges for Skilled Nursing as Occupancy Remains Low ,” by Patrick Connole, Provider

“Two-thirds of nursing homes say they won’t make it another year given the current operating pace due to increased COVID costs. … Staffing has been the top cost in response to COVID with nine out of 10 nursing homes hiring additional staff and/or paying staff overtime.”
12/16/2020 , “ State of Nursing Home Industry: Facing Financial Crisis and Staffing Challenges” by Beth Martino, AHCA/NCAL

“The COVID-19 pandemic [will contribute] to substantial eldercare cost hikes, especially for assisted living and in-home care. … Over the course of a single year, assisted living community rates increased by 6.15% to an annual national median cost of $51,600.” (And pre-Covid)
12/3/2020, “ COVID-19 linked to ‘substantial cost increases’ in assisted living: survey ,” by Kimberly Bonvissuto, McKnight’s Senior Living

“The United States spent a collective $172.2 billion on care at nursing homes and continuing care retirement communities (CCRCs) in 2019…; that’s a gain of 3.3% [from] 2018. But that increase pales in comparison to the 7.7% jump in spending on home health services during that time, from $105.4 billion in 2018 to $113.5 billion in 2019.” Again, all pre-Covid so expect much more coming.
12/16/2020, “ Spending Growth on Nursing Home Care Falls Far Behind Home Health, Hospitals ,” by Alex Spanko, Skilled Nursing News

Shortage of health care workers: “Notwithstanding sign-on bonuses, competitive salaries and benefits packages, recruiting [caregivers] is a challenge, [one home health provider] said. ‘Before the pandemic, I used to get 10 applicants a week for our open positions. Now I’m getting one or two.’”
12/14/2020, “Help wanted: More home healthcare workers due to COVID-19 ,” by Joe Jancsurak, McKnight’s Senior Living

People aren’t exactly lining up for minimum-wage jobs in Covid’s bullseye with higher unemployment benefits readily available. Go figure.

Covid had a crazy impact on health care costs beyond long-term care:

Hospital costs down 36% due to elimination of noncritical services such as elective surgeries

Dental care down 65%. When was the last time you saw a dentist?

Flu cases lower than normal so far this year; measures taken to avoid COVID-19 are likely the reason
12/11/2020, “Flu cases lower than normal so far this year, COVID-19 likely the reason ,” by Brian P. Dunleavy, UPI
12/16/2020, “COVID-19 Shocks The US Health Sector: A Review Of Early Economic Impacts,” by George Miller, Corwin Rhyan, Ani Turner, and Katherine Hempstead, Health Affairs

How is the public reacting to all this? People want to stay home and they want to keep their parents at home:

“The number of COVID-19 cases and deaths for home- and community-based services programs pales in comparison with those for nursing homes … After [researchers] compared positive COVID-19 cases and deaths in three Medicaid [home care] programs to results for nursing home and assisted living residents for March through July, they found that only 3% of older [home care] adults were infected, and only 1% died from COVID-19. Meanwhile, nursing home and assisted living residents showed a 37% positivity rate and an 11% death rate.”
12/10/2020, “Study shows far fewer COVID-19 cases at home than in nursing homes, assisted living,” by Joe Jancsurak , McKnight’s Senior Living

“61% of Americans now report that they would rather die than live in a nursing home. … Americans prefer to stay in their home for long-term care (71%), and most would like to have the option of relying on a family member if they needed long-term care (68%) but would not expect them to [provide such care] if they were unable to pay them (69%).’”
12/9/2020, “More than 6 in 10 Americans now say they would rather die than live in nursing home: survey ,” by Amy Novotney, McKnight’s Senior Living

“The vast majority of Americans (87%) believe it’s more important than ever for people to stay at home for long-term care, as well as have a plan for long-term care (85%) and have long-term care insurance (81%) as COVID-19 has raised concerns about the safety of nursing homes.”
12/16/2020, “Americans Worry More Now About Their Long-Term Care Plans and Prioritize Staying At Home ,” by Nationwide Retirement Institute, Advisor Magazine

There will be more cost and more cost increase awareness

Nursing home, assisted living and home care costs will rise further, especially for home care

LTCI prices are rising, especially for hybrids

According to Margie Barrie: “Virtually all carriers have increased their premium rates and most have limited the application age to 70.”

The impact on traditional LTCI products has been more limited, but stricter underwriting requirements keep coming: Applications may be postponed if someone has been outside the country within the past month; or in contact with somebody who tested positive; or if quarantined, even with no diagnosis or symptoms.

Simultaneously Medicare is pushing more costs onto consumers. To ensure that Medicare remains financially viable, a number of major changes have been introduced over the last several years:

So called “Value Based Care” means fewer services being provided to beneficiaries.

People are being sent home sooner from the hospital and nursing home.

Medicare has changed the payment process. Hospitals will now control the distribution of payments for all parts of the long term care continuum.

For details, read Margie’s forthcoming “The Medicare White Paper.”

Sensitivity to risk is very high: the unpredictability of life and health is on everyone’s mind, observes Sally Leimbach

“A majority of today’s workers and retirees range from feeling cautious to pessimistic about the economic outlook for 2021, with nearly 75% concerned about how the global pandemic may impact their retirement savings ….”
1/5/2021, “2021 Economic Outlook Fraught With Uncertainty,” by Principal Financial Group, Advisor Today

People are more aware of their own and their parents’ vulnerability

Will we have more pandemics, different ones, worse ones? Will Covid-19 have long-term negative effects on brain health?

“Although almost every household with an income of $100,000 or more reports saving for retirement, only half of them (49%) say they believe they will ever be able to retire.”

12/8/2020, “ Half of Americans with incomes over $100,000 think they’ll never be able to retire ,” by Amy Novotney, McKnight’s Senior Living

“According to an analysis of applicants for traditional long-term care insurance in 2019, decline rates ranged from 19.4 percent for individuals applying between ages 40 to 49 to 53.6 percent after age 75. ‘Couples comprise the majority of traditional long-term care insurance applicants,’ explains Claude Thau, National Brokerage Director at USA-BGA … ‘The likelihood that at least one spouse will be declined ranges from 35.0 percent for spouses between ages 40 and 49 to 78.5 percent for couples age 75 or older.’” That’s pre-Covid too so likely getting worse.
12/10/2020, “Long-Term Care Insurance Decline Rates Reported,” by Jesse Slome, American Association for Long-Term Care Insurance

Insurability is declining as urgency for consumers is increasing: Insurance companies are wary to take on applicants who have had the virus or been exposed to it. Intelligent people who realize this are more inclined to purchase LTCI while they still can prove that Covid-19 has not yet compromised their health history.

New and different products are available and catching hold

Hybrids provide a wide range of benefits

Traditional products still offer the biggest leverage against LTC risk

But carriers face increasing costs and consumers confront higher premiums and/or reduced benefits due to the government’s artificially low interest rates.
12/18/2020, “ COVID-19 Drove Up Group Term Life Death Claims: SOA Survey,” by Allison Bell, ThinkAdvisor

In the meantime, Suze Orman says people “must have LTCI”

Virtual marketing and sales via face-to-face electronic connections make LTCI easier and less expensive to sell, eliminating drive time for example

People will be back at work after the vaccine, so their future financial outlook will become more stable.

Bottom line: there’s never been a better time to sell (or to buy) LTCI

Now let’s examine the situation from the standpoint of the …

Economic Context
Characterized by irresponsible fiscal and monetary policy

Consider the national debt. According to the “Debt clock” for 2008 (Obama’s first term) $9.6 trillion; 2016 (Trump elected) $19.2 trillion; 2021, (now) $27.8 trillion; 2025 (end of Biden term) $48.9 trillion projected. See a trend?
These current and projected numbers are going up so fast, they may increase by hundreds of billions of dollars between the time I posted them yesterday and when you click the links
So-called “stimulus” to confront the economic downturn caused by the pandemic has resulted in these huge deficits and rampant money printing by the Federal Reserve to monetize the skyrocketing debt.

All this new money had to go somewhere. It didn’t inflate consumer prices so much because of low demand suppressed by high unemployment.

So instead, we’ve seen rapid inflation in equities (stocks and bonds) and real estate.

Ironically, in this economic crisis stock markets are at all-time highs.

Home prices rose 8.4% in the year that ended in October, up from a 7% annual rate the prior month to a 14-year high: U.S. Home-Price Growth Accelerated in October

People working from home with shorter or no commutes are looking for larger homes in suburbia offering more space, better home offices and a place to provide home care if needed for themselves or their parents.

The result is that we have more upper-middle-class people, exactly the demographic cohort most likely to consider and buy LTCI

They have more wealth to protect and more money for premiums.

People going back to work after the vaccines kick in means a bigger worksite market.

On the negative side, inequality is exacerbated: elderly poor get poorer even as the rich get richer.

There will be more elderly debt: “Adults age 70 and older have increased their debt since the Great Recession — largely due to mortgage payments — and this hampers their ability to overcome ‘negative events’ as they age …” Substitute “a long-term care crisis” for “negative events” and you can see what this means.

The elderly poor get poorer even as the rich get richer due to irresponsible monetary policies that inflate stock and real estate values. What this means in terms of long-term care is that more people will depend on Medicaid when Medicaid is least able to support them. The good news is that the well-to-do will have more wealth to protect and more money to pay premiums for LTC insurance. So the current mess in LTC services and financing will worsen. Medicaid will continue to deteriorate and private LTCI will become more desirable and salable than ever before.

12/29/2020, “What's Hurting the Financial Security of Older Americans?,” by Ginger Szala, ThinkAdvisor

Bottom line: there’s never been a better time to sell LTCI

Now let’s look at the political context. As I prepared this presentation before the Georgia Senate run-off elections, it was impossible to predict what the future might hold politically. Would the Democrats win control of the Senate taking the trifecta of President, House and Senate? That would free them to pursue their left wing’s most radical progressive wish list. Or would the Republicans hold control of the Senate and remain a bulwark of opposition to the goals of Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez.

It was a cliff-hanger, but now we know …

The Democrats have taken both Georgia Senate races and so will control both houses of Congress as well as the Presidency. Vice President Kamala Harris will cast the deciding vote in case of a 50/50 tie on key issues. We’ll likely see more progressive measures pass, more spending approved, more money printing to cover it, and higher national debt than otherwise. Only time will tell what the long-term results of such policies will be.

Political Context
Biden Administration

As we’ve seen from the economic context, there isn’t much concern for financial responsibility any more in either party. We have to ask …

Will Modern Monetary Theory, the idea that the government can print and spend unlimited amounts of money without consequences, will MMT prevail allowing progressives to pursue their whole bucket list of goals including “free” long-term care provided by Medicare? That would finally wipe out private LTC insurance.

Actually, the Biden Administration’s LTC wish list is much less ambitious.

According to the “Biden-Harris Plan to Make Nursing Homes and Long-term Care Facilities Safe” the Biden Administration’s whole focus is on regulation and enforcement. For example, they want to …

Promote safety and care
Ensure appropriate oversight of facilities to protect patient safety and wellbeing
Provide oversight for how taxpayer and resident funds are spent and provide avenues for bringing complaints
Increase access to home and community-based services for the number of older Americans and people with disabilities able to receive home and community-based services (HCBS).
All nice sounding ideas, but what they mean is more inspections, more fines and financial penalties, not more money and support. In a phrase “The beatings will continue until morale improves.”

The Biden Plan For Older Americans addresses long-term care by promising to …

Protect Medicare as we know it.

“The Congressional Budget Office (CBO) now projects that the trust fund will be exhausted in 2024 , a little more than three years from now, which is the nearest the fund has come to exhaustion in the 55 years of its existence.

12/15/2020, “The Coming Crisis For The Medicare Trust Fund ,” by David Muhlestein, Health Affairs

The Biden Plan will protect Medicaid funding and make sure the program gives those on Medicaid who need long-term care the flexibility to choose home- and community-based care.

Heavier than ever reliance on Medicaid, a bankrupt welfare program, is a mistake. Making Medicaid LTC more attractive by offering more home care does not save money and further reduces consumers’ perception of LTC risk.

Consider Medicaid’s well-known deficiencies …

Access and quality problems, notoriously low reimbursement rates, discrimination, institutional bias, loss of independence and control, but add to these some new defects …

Managed long-term care through Medicaid is increasing, adding another layer of compensation and control between the patient and provider.
“Over half of states contract with managed care organizations to provide [LTC] services. [GAO] examined 6 states, each of which reported finding significant problems with the quality of care provided through these contracts. In some cases, the problems led to patient injury or neglect.” 12/16/2020, “Medicaid Long-Term Services and Supports: Access and Quality Problems in Managed Care Demand Improved Oversight

On top of that: “The true Medicaid improper-payment rate now exceeds 25 percent, meaning that more than one in every four dollars spent in the Medicaid program — or more than $100 billion in federal spending each year — is in violation of program rules. It turns out that millions of Medicaid enrollees are ineligible for the program — in most cases because they earn too much income, but in others because they are not lawful residents.”
12/9/2020, “ Improper Medicaid Payments Have Soared since Obamacare ,” by Brian Blase and Hayden Dublois, National Review

The Biden Plan promises a $5,000 tax credit for informal caregivers, but that’s

Not above the line LTCI tax deductibility

Not cafeteria plan eligibility for LTCI

Biden will increase the generosity of tax benefits for older Americans who choose to buy long-term care insurance and pay for it using their savings for retirement.

Let people use retirement funds for LTCI premiums. (Good)

Biden made an unpromising first political appointment: California’s Attorney General, Xavier Becerra, is going to run DHHS

He was a big supporter of the CLASS Act and all of ObamaCare

12/8/2020, “Biden nominates defender of long-term care causes and a virus expert to health team,” by Alicia Lasek, McKnight’s LTC News

Biden wants to lower the Medicare age to 60

What happened to “Medicare for All?” “Medicare at 60” is “Medicare For…Gotten.”
Hospitals fear adding millions of people to Medicare will cost them billions of dollars in revenue.”
11/11/2020, “Biden Plan to Lower Medicare Eligibility Age to 60 Faces Hostility From Hospitals,” by Phil Galewitz, Kaiser Health News
Medicare at 60 is just one more way for government to say “don’t worry” just before bottom falls out of the trust fund.

I’m going to close by explaining biggest risk to private long-term care insurance:
LTC intelligentsia has formed a consensus around compulsory social insurance

Their analysis goes like this:

Long-term care is in crisis;
Especially now in the pandemic;
The middle class is unprotected;
LTCI failed;
Big government programs aren’t coming;
Medicaid requires impoverishment;
So our best hope is what Washington State is doing:
Compulsory social insurance funded by mandatory taxes on workers and with a back-end focus;
But “Keystone Kops” and “Trust Fall.”

I’ll explain why this analysis and recommendation is wrong and doomed to fail disastrously in “Why LTCI Fails,” my article in the February Broker World. Watch for it.

Bottom line: Given what’s happening in health and long-term care, in the U.S. economy, and politically, there’s never been a better time to sell LTCI.

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Updated, Monday, December 21, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-049: LTC NEWS AND COMMENT

COVID-19 Shocks The US Health Sector: A Review Of Early Economic Impacts
COVID-19 Drove Up Group Term Life Death Claims: SOA Survey
Spending Growth on Nursing Home Care Falls Far Behind Home Health, Hospitals
Medicaid Long-Term Services and Supports: Access and Quality Problems in Managed Care Demand Improved Oversight
Americans Worry More Now About Their Long-Term Care Plans and Prioritize Staying At Home
State of Nursing Home Industry: Facing Financial Crisis and Staffing Challenges
HC2 Gets Offer for Long-Term Care Insurance Business
The Coming Crisis For The Medicare Trust Fund
Making Care Work Pay: How A Living Wage For LTSS Workers Benefits All
Medicare Advantage Beneficiaries Log Almost 30% Fewer SNF Days Than Traditional Medicare
Help wanted: More home healthcare workers due to COVID-19
Flu cases lower than normal so far this year, COVID-19 likely the reason

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Updated, Friday, December 18, 2020, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2019 DATA UPDATE

LTC Comment: Heads up! We're about to explain why long-term care insurance sales have disappointed, why people don't "use their homes to stay at home" and why LTC providers who depend on public financing are at risk.

*** TODAY'S LTC BULLET is sponsored by Claude Thau, who provides many unique services to advisors as National Brokerage Director for USA-BGA and to other entities as a consultant, in the individual, worksite and affinity group markets. For example, his revolutionary “Range of Exposure” tool projects clients’ likelihood (joint for a couple) of spending $100,000; $250K; $500K or over $1,000,000 on long-term care, based on their personal characteristics and estimates how much of their cost in each range would be covered by various traditional or linked insurance designs. Claude is the lead author of Milliman’s annual Broker World LTCi Survey & a past Chair of the Center for Long-Term Care Financing. You can reach him at 913-707-8863 or claude.thau@gmail.com. ***

LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2019 DATA UPDATE

LTC Comment: Once a year around this time the Centers for Medicare and Medicaid Services (CMS) report health care expenditure data for the latest year of record. Recently, CMS posted 2019 statistics on its website at NHE Tables (ZIP). Click on that link to download the tables, unzip them, then click on the data tables of interest, Tables 14 and 15 for our purposes.

Health Affairs has published a summary and analysis of the new data titled “National Health Care Spending in 2019: Steady Growth for the Fourth Consecutive Year." Health Affairs subscribers can access the full text of that article here. Others can purchase it. The “Abstract” is available free. A good summary of the new long-term care data is here.

Following is our annual analysis of the latest nursing home and home health care data.*

Heads Up: This may be the most important LTC Bullet we publish all year. It is the eighteenth in a row we’ve done annually to analyze the federal government’s enormous, and we argue, often detrimental, impact on long-term care financing. If you'd like to see the earlier versions, go here and search for “So What if the Government Pays for Most LTC.” You’ll find our yearly analyses of the data going all the way back to "So What If the Government Pays for Most LTC, 2002 Data Update."

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"So What If the Government Pays for Most LTC, 2019 Data Update"
by
Stephen A. Moses

Ever wonder why LTC insurance sales and market penetration are so discouraging? Or why reverse mortgages are rarely used to pay for long-term care? Or why LTC service providers are always struggling to survive financially and still provide quality care? Read on.

Nursing Homes

America spent $172.7 billion on nursing facilities and continuing care retirement communities in 2019. The percentage of these costs paid by Medicaid and Medicare has gone up over the past 49 years (from 26.8% in 1970 to 51.5% in 2019, up 24.7 % of the total) while out-of-pocket costs have declined (from 49.2% in 1970 to 26.4% in 2019, down 22.8% of the total). Source: Table 15: Nursing Care Facilities and Continuing Care Retirement Communities Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2019.

So What? Consumers' liability for nursing home and CCRC costs has declined by nearly half, down 46.3% in the past almost five decades while the share paid by Medicaid and Medicare has nearly doubled, up 92.2%.

No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care! No wonder they don't use home equity for LTC when Medicaid exempts at least $595,000 and in some states up to $893,000 of home equity (as of 1/1/20). No wonder nursing homes are struggling financially--their dependency on parsimonious government reimbursements is increasing while their more profitable private payers are disappearing.

Unfortunately, these problems are even worse than the preceding data suggest. Over half of the so-called "out-of-pocket" costs reported by CMS are really just contributions toward their cost of care by people already covered by Medicaid! These are not out-of-pocket costs in terms of ASSET spend down, but rather only INCOME, most of which comes from Social Security benefits, another financially struggling government program. Thus, although Medicaid pays less than one-third of the cost of nursing home (and CCRC) care (29.4% of the dollars in 2019), it covers two-thirds (66.5%) of all nursing home patient days.

So What? Medicaid pays in full or subsidizes two-thirds of all nursing home patient days. Even if Medicaid pays nothing with the entire amount due contributed from the recipient's income, the nursing home receives Medicaid's dismally low reimbursement rate.

No wonder the public is not as worried about nursing home costs as they would be if they were more at risk for the cost of their care. No wonder nursing homes risk insolvency when so much of their revenue comes from Medicaid, often at reimbursement rates less than the cost of providing the care. “With states setting the Medicaid rates paid to nursing centers, there is a wide variation in the percentage of costs covered by the rates. In 2015, the coverage ranged from a low of 73.5 percent to a high of 100 percent. A similar range exists with the 2017 projected shortfall across the states.” (Latest available data) Source: A Report on Shortfalls in Medicaid Funding for Nursing Center Care.

Private Health Insurance

Don't be fooled by the 10.4% of nursing home costs that CMS reports as having been paid by "private health insurance" in 2019. That category does not include private long-term care insurance. (See category definitions here.) No one knows how much LTC insurance pays toward nursing home care, because many LTCI policies pay beneficiaries who then pay the providers. Thus, a large proportion of insurance payments for nursing home care gets reported as if it were "out-of-pocket" payments. This fact further inflates the out-of-pocket figure artificially.

Assisted Living

How does all this affect assisted living facilities? According to the Genworth Cost of Care Survey for 2020, ALFs cost an average of $51,600 per year, up 6.15% from 2019. Although assisted living facilities remain mostly private pay, “48% of ALFs are Medicaid certified” and only “a small minority of state Medicaid programs do not cover services in assisted living.” Over time assisted living facilities have followed nursing homes down the primrose path of accepting more and more revenue from Medicaid.

Many people who could afford assisted living by spending down their illiquid wealth, especially home equity, choose instead to take advantage of Medicaid nursing home benefits. Medicaid exempts one home and all contiguous property (up to $595,000 or $893,000 depending on the state), plus—in unlimited amounts—one business, one automobile, prepaid burials, term life insurance, personal belongings and Individual Retirement Accounts not to mention wealth protected by sophisticated asset sheltering and divestment techniques marketed by Medicaid planning attorneys. Income rarely interferes with Medicaid nursing home eligibility unless such income exceeds the cost of private nursing home care.

So What? For most people, Medicaid nursing home benefits are easy to obtain without spending down assets significantly and Medicaid's income contribution requirement is usually much less expensive than paying the full cost of assisted living.

No wonder ALFs are struggling to attract enough private payers to be profitable. No wonder people are not as eager to buy LTC insurance as they would be if they were more at risk for the cost of their care. This problem has been radically exacerbated in recent years because more and more state Medicaid programs are paying for assisted living as well as nursing home care, which makes Medicaid eligibility more desirable than ever.

Home Health Care

The situation with home health care financing is very similar to nursing home financing. According to CMS, America spent $113.5 billion on home health care in 2019. Medicare (38.7%) and Medicaid (32.0%) paid 70.7% of this total and private health insurance (not LTC insurance) paid 14.6%. Only 11.0% of home health care costs were paid out of pocket. The remainder came from several small public and private financing sources. Data source: Table 14: Home Health Care Services Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2019.

So What? Only one out of every nine dollars spent on home health care comes out of the pockets of patients and a large portion of that comes from the income (not assets) of people already on Medicaid.

No wonder the public does not feel the sense of urgency about this risk that they would if they were more at risk for the cost of their care.

Bottom line, people only buy insurance against real financial risk. As long as they can ignore the risk, avoid the premiums, and get government to pay for their long-term care when and if such care is needed, they will remain in denial about the need for LTC insurance. As long as Medicaid and Medicare are paying for a huge proportion of all nursing home and home health care costs while out-of-pocket expenditures remain only nominal, nursing homes and home health agencies will remain starved for financial oxygen.

The solution is simple. Target Medicaid financing of long-term care to the needy and use the savings to fund education and tax incentives to encourage the public to plan early to be able to pay privately for long-term care. For ideas and recommendations on how to implement this solution, see www.centerltc.com.

Note especially:

Medicaid and Long-Term Care (2020) at http://www.centerltc.com/pubs/Medicaid_and_Long-Term_Care.pdf

“How to Fix Long-Term Care Financing” (2017), at http://www.centerltc.com/pubs/How-To-Fix-Long-Term-Care-Financing.pdf

“CASSANDRA’S QUANDARY: The Future of Long-Term Care” (2016), at http://www.centerltc.com/pubs/FIA-Cassandra-Quandry.pdf.

“How to Fix Long-Term Care,” at http://www.centerltc.com/BriefingPapers/Overview.htm;

"Medi-Cal Long-Term Care: Safety Net or Hammock?" at http://www.centerltc.com/pubs/Medi-Cal_LTC--Safety_Net_or_Hammock.pdf;

"The LTC Graduate Seminar Transcript" here (requires password, contact smoses@centerltc.com);

"Aging America's Achilles' Heel: Medicaid Long-Term Care" at http://www.centerltc.com/AgingAmericasAchillesHeel.pdf; and

"The Realist's Guide to Medicaid and Long-Term Care" at http://www.centerltc.org/realistsguide.pdf.

In the Deficit Reduction Act of 2005, Congress took some significant steps toward addressing these problems. A cap was placed for the first time on Medicaid's home equity exemption and several of the more egregious Medicaid planning abuses were ended. But much more remains to be done. With the Age Wave starting to crest and threatening to crash over the next two decades, we can only hope it isn't too late already.

* Note that CMS changed the definition of National Health Expenditure Accounts (NHEA) categories in 2011, adding for example Continuing Care Retirement Communities (CCRCs) to Nursing Care Facilities. This change had the effect of reducing Medicaid's reported contribution to the cost of nursing home care from over 40% in 2008 to under one-third (32.8%) in 2009. CMS also created a new category called "Other Third Party Payers" (7.1%) which includes "worksite health care, other private revenues, Indian Health Service, workers' compensation, general assistance, maternal and child health, vocational rehabilitation, other federal programs, Substance Abuse and Mental Health Services Administration, other state and local programs, and school health." For definitions of all NHEA categories, see http://www.cms.gov/NationalHealthExpendData/downloads/quickref.pdf.

Stephen A. Moses is president of the Center for Long-Term Care Reform in Seattle, Washington. The Center's mission is to ensure quality long-term care for all Americans. Steve Moses writes, speaks and consults throughout the United States on long-term care policy. Learn more at www.centerltc.com or email smoses@centerltc.com.

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Updated, Monday, December 14, 2020, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #20-048: LTC NEWS AND COMMENT

GE Puts SEC Long-Term Care Insurance Probe Behind It
Long-Term Care Insurance Decline Rates Reported
Improper Medicaid Payments Have Soared since Obamacare
Study shows far fewer COVID-19 cases at home than in nursing homes, assisted living
‘We can no longer ignore this’: Affordable long-term care is urgent priority, panelists say
Measuring The New Costs Of Care: How the pandemic is exacerbating the already rising price-points of long-term-care
More than 6 in 10 Americans now say they would rather die than live in nursing home: survey
Long-Term Care Planning Firm Sees Life-LTC Hybrid Prices Rising
Half of Americans with incomes over $100,000 think they’ll never be able to retire
Biden nominates defender of long-term care causes and a virus expert to health team
BREAKING: HHS awards nursing homes $523M in COVID-19 performance payments
MedPAC: Nursing Homes on Solid Financial Ground Despite COVID, Medicare Boost ‘Poor Approach’
NIC Points to Unprecedented Challenges for Skilled Nursing as Occupancy Remains Low

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Updated, Monday, December 7, 2020, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #20-047: LTC NEWS AND COMMENT

COVID-19 linked to ‘substantial cost increases’ in assisted living: survey
Cost of Care: Trends & Insights
Town’s only nursing facility converting to ALF, as national study finds ‘dangerously low’ occupancy threatening many SNFs
SNF occupancy ticks up but is ‘dangerously’ low and threatens long-term survival
CDC advisers: Long-term care workers, residents should receive first COVID-19 vaccinations
Life’s Third Age: A Public Television Pledge Special
Genworth, China Oceanwide Push Deal Deadline Back
Financial ‘symptoms’ of dementia seen up to 6 years before diagnosis
Medicaid is hemorrhaging $100B on Americans ineligible for the program
Nearly 6 million Americans expect to lose homes in the next 2 months: survey
COVID-19 Has Claimed the Lives of 100,000 Long-Term Care Residents and Staff
Nursing home residents could start receiving COVID vaccines in about 2 weeks
CMS’s 2020 Final Medicaid Managed Care Rule: A Summary of Major Changes
COVID-19 Pandemic Shifts Caregiving Responsibilities

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Updated, Friday, December 4, 2020, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: IS MEDICAID THE LTC SOLUTION OR THE PROBLEM?

LTC Comment: Will more Medicaid funding and regulation help (short-term) and harm (long-term) America’s fragile long-term care system? Answers after the ***news.***

*** “LTC CLIPPINGS” is a special daily service that premium Center members ($250 per year or $21 per month) and above can opt to receive. Steve Moses scans the internet for news, articles, reports and data you need to know before your prospects start asking about them. He provides the date, title, author, a link, a representative quote and a brief, often humorous or satirical, but always thoughtful comment. Know what you need to know before you’re caught off guard. Subscribe to LTC Clippings. ***

*** RECENT LTC CLIPPINGS:

11/28/2020, “Medicaid is hemorrhaging $100B on Americans ineligible for the program,” by Brian Blase, New York Post

Quote: “The federal government’s improper Medicaid payments now exceed $100 billion a year. This means that more than one-in-four dollars flowing out of Medicaid — our nation’s third-largest government program — do not meet program rules. This staggering failure doesn’t just reduce health-care access for the truly eligible, it also harms taxpayers who fund it.”

LTC Comment: This is an excellent piece by my co-author of “Nursing Homes, Coronavirus and Medicaid,” published June 1, 2020, in the Wall Street Journal. The problem of improper payments is even worse since the Families First Coronavirus Response Act (FFCRA), signed March 18, 2020, imposed maintenance of effort rules prohibiting states from terminating eligibility even for the ineligible. See Medicaid Maintenance of Eligibility (MOE) Requirements: Issues to Watch When They End, Kaiser Family Foundation, September 22, 2020, for details. Kind of makes tracking improper payments moot if ineligibility itself isn’t “improper.” Ugh!

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11/25/2020, “COVID-19 Has Claimed the Lives of 100,000 Long-Term Care Residents and Staff,” by Priya Chidambaram, Rachel Garfield and Tricia Neuman, Kaiser Family Foundation

Quote: “This week marks a bleak milestone in the pandemic’s effect on residents and staff in long-term care facilities across the country. According to our latest analysis of state-reported data, COVID-19 has claimed the lives of more than 100,000 long-term care facility residents and staff as of the last week in November. This finding comes at a time when public health experts are predicting a surge in cases after holiday gatherings and increased time indoors due to winter weather, which will have ripple effects on hospitals and nursing homes, given the close relationship between community spread and cases in congregate care settings. As the nation braces for the fallout of the holiday, recent data on deaths in long-term care facilities highlight the ongoing disproportionate impact on this high-risk population.”

LTC Comment: Maybe the time has come for another “Long-Term Care Consciousness Tour.” Here’s what the first one was like: http://www.centerltc.com/LTC%20Tour/LTC_Tour_Index.htm. This is my favorite reminiscence of that 2008-9 Tour. The need for long-term care planning is even greater now than it was then.

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11/20/2020, “Nearly 6 million Americans expect to lose homes in the next 2 months: survey,” by Amy Novotney, McKnight’s Senior Living

Quote: “Approximately 5.8 million Americans — including many seniors — say they are somewhat or very likely to face eviction or foreclosure in the next two months, according to a Bloomberg analysis of survey data from the U.S. Census Bureau. The survey also found that about 28% of renters, or roughly 14.9 million Americans, have little to no confidence that they’ll be able to pay their December rent.”

LTC Comment: So what’s next? Let them suffer? Or another paroxysm of government borrowing and money printing to aid home buyers and renters? And, when that public debt bill comes due, what then? ***

LTC BULLET: IS MEDICAID THE LTC SOLUTION OR THE PROBLEM?

LTC Comment: As the Covid plague surged through long-term care facilities this spring, one thing was certain. The long-term care intelligentsia would recommend more government, specifically Medicaid, spending. Our favorite federal fetishist, Judith Feder of the McCourt School of Public Policy at Georgetown University, was no exception. In May 2020, she proposed …

Long-term care financing policy should be modified to either adjust federal matching funds by the age of each state’s population, or fully federalize the funding of LTC expenses of Medicaid beneficiaries who are also eligible for Medicare. (p. 350)

That didn’t happen, won’t, and shouldn’t. Federal funding and regulation of long-term care are what caused us to rely excessively on underfinanced institutional care settings for elderly people leaving them susceptible to the pandemic’s ravages. More of what caused the problem in the first place will hurt, not help.

In fact, what the federal government actually did exacerbated the problem of excessive federal dependency. In Feder’s words …

The Families First Coronavirus Response Act included a modest 6.2 percentage point bump in the Medicaid match tied to the public health emergency, conditional on states’ retention of current eligibility levels or “maintenance of effort” (Broaddus, 2020). (p. 352)

So, the Feds gave states a little more money but only if they maintained their current Medicaid efforts. What does this “maintenance of effort” mean? According to the Kaiser Family Foundation …

To receive the enhanced federal matching funds, states must meet certain MOE requirements that include ensuring continuous coverage for current enrollees. Specifically, states must provide continuous eligibility through the end of the month in which the PHE [public health emergency] ends for those enrolled as of March 18, 2020, or at any time thereafter during the PHE period, unless the person ceases to be a state resident or requests a voluntary coverage termination. Medicaid eligibility during this time must continue “regardless of any changes in circumstances or redeterminations at scheduled renewals that would otherwise result in termination.”¹ (Emphasis in the original)

In case that bureaucratese confounds you, what it means is that state Medicaid programs, if they want to receive the extra federal money, can’t tighten their loose LTC financial eligibility rules. They can’t even terminate Medicaid recipients who are proven to be totally ineligible. They must throw the federal financial floodgates wide open.

So how is this generous policy working out so far? Are people in nursing homes finally free from worry and sickness? Hardly. According to the Kaiser Family Foundation …

This week marks a bleak milestone in the pandemic’s effect on residents and staff in long-term care facilities across the country. According to our latest analysis of state-reported data, COVID-19 has claimed the lives of more than 100,000 long-term care facility residents and staff as of the last week in November.

The holidays and long winter months ahead presage much worse. Current public policy for long-term care services and financing is deadly. We should be asking: “How did we get into this mess?” not “How much more federal money and regulations can we pour on?”

For an answer to the first question, see Medicaid and Long-Term. That 2020 monograph explains step by step how Medicaid caused the very problems that people ask it to solve today. The study’s recommendations explain how to fix the problems Medicaid created.

For specific state-by-state analysis and recommendation, see our many state-specific reports at http://www.centerltc.com/reports.htm. As you see the increasingly frequent pleas of Governors and long-term care trade groups for federal relief, visit that site, find our report for whichever state, and forward its link to them. Policy makers can reduce Medicaid costs and simultaneously expand and improve care, but they must first understand why costs are so high now and care quality so diminished.

Answers to long-term care’s persistent problems—poor access and quality, institutional bias, inadequate funding, etc.—are readily available. The knee-jerk reaction to increase Medicaid actually cripples any hope to fix these problems in the future. Yet, it’s easy to understand why politicians and provider associations gravitate toward the easy money in the current crisis. Any port in a storm.

Unfortunately, higher spending for Medicaid in the short term is far more likely than thoughtful restraint given the incoming Biden administration’s ideological predispositions. With Yellen at Treasury, pile-it-on Powell at the Fed, the Modern Monetary Theory predominating, and fulsome support for unlimited federal spending guaranteed from academia and the media, greater damage to long-term care services and financing is probably inescapable.

It’s as though a family had their maxed-out credit card limit miraculously doubled all of a sudden. The good times would roll until they hit the higher limit too. What’s the upper limit for federal spending? I don’t know, but I’m afraid we’re going to find out.

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Updated, Monday, November 23, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-046: LTC NEWS AND COMMENT

How to Save Money on Assisted Living Costs
Higher Medicare Premiums For 2021 Announced, Topping Out At $504.90
CalPERS approves 90% price increase for long term care insurance plans
Vast majority of providers struggling to fill work shifts or hire new employees: industry survey shows
Where Are the Gray Panthers
COVID-19’s Deadly Lesson: Time To Revamp Long-Term Care
Vulnerable Senior Populations in the Pandemic
89 percent of families with loved ones in long-term care facilities consider home care: survey
Economists warn of lag time between vaccine and recovery
Parkinson: ‘Worst Fears Have Come True’ as Nursing Home COVID Cases Hit New Record, Operators ‘Powerless’ to Stop Trend Alone
81% of providers encouraging residents to stay put for Thanksgiving: survey
Big, big changes’ coming to nursing home regulation thanks to pandemic’s destruction, Grabowski says

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Updated, Friday, November 20, 2020, 9:00 AM (Pacific)

Seattle—

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LTC Comment: Today’s “Guest Bullet” by Bruce Stahl of RGA Reinsurance Company develops the idea of “Caregiver Insurance” after the ***news.***

* LTC IMPACT WEEK EXCELLS: Last week, on November 10, 11, 12, NAIFA’s Limited & Extended Care Planning Center Zoomed nine hours of briefings aimed at LTCI producers. Kudos to LECP Executive Director Carroll Golden for sponsoring this creative educational program and to Steve Cain of LTCI Partners for his omnipresent participation. Highlights included Matt Hamann of Transamerica speaking on “Why LTC Now?”; Denise Gott of ACSIA Partners on “LTC Worksite Enrollments in a Virtual World”; Marc Glickman of BuddyIns presentation on the “Technology Panel”; Shelley Giordano of Mutual of Omaha Mortgage on “No, Long Term Care Insurance Does Not Mean No Plan at All for Long Term Care Needs”; and Barry Fisher and Ron Hagelman, Jr., Principals of Ice Floe Consulting, LLC reporting on results of their survey with Oliver Wyman’s Vince Bodnar, “Who is Selling What? To Whom, How & Why?” This innovative program provided a great foundation on which to build. Room for improvement includes increasing the turnout which I never noticed reaching 200 attendees and considering the larger market in which LTC insurance is sold, including the public policy context, LTC providers, and the elephant in the room, Medicaid’s crowd out of LTC risk and planning. *

*** SUBSCRIBE to LTC Bullets, LTC E-Alerts, and LTC Clippings. Join the Center for Long-Term Care Reform here. Due to the pandemic, long-term care is in the news more than ever before. Calls for more funding to alleviate the strain on seniors’ housing and caregivers are everywhere in the media. But no one has any idea where to find the money to improve long-term care. Except the Center for Long-Term Care Reform. We advocate targeting scarce public resources to those most in need and using the savings to incentivize private financing alternatives such as home equity conversion and long-term care insurance. Check out our analysis and recommendations in Medicaid and Long-Term Care (2020) and How to Fix Long-Term Care Financing (2017). Then join the Center and encourage your employers to join as corporate members. Our “Membership Levels and Benefits” schedule explains all the options. Contact Steve Moses at 425-891-3640 or smoses@centerltc.com with questions or comments. ***

LTC BULLET: CAREGIVER INSURANCE

LTC Comment: Bruce Stahl and Winona Berdine, both vice presidents at RGA Reinsurance Company, published “A Middle-Market Senior Care Solution” in the August 2020 issue of the Society of Actuaries’ Long-Term Care News. Their idea is a product to mitigate LTCI’s “affordability gap.”

They propose a “living benefits solution” that “reaches the middle market, provides security to generations of family members, satisfies real customer financial needs and provides them with peace of mind, minimizes risk in the morbidity tail, reduces asset and interest rate risk, and reduces concerns about pandemic risk in facilities.” (LTC News)

A tall order, but intriguing, so we asked Bruce Stahl to tell us more. His reply follows. But first read “A Middle-Market Senior Care Solution” to get details on the proposed product.

“Caregiver Insurance”
by
Bruce Stahl

The attributes of the product define it better than the name. Our focus groups recommended calling it something with a personal flavor, like “Caregiver Insurance.” Originally, we at RGA were calling it a decreasing term product and a career protection product. Yet the attribute of having a pre-chosen terminus date and the fact that the benefits would be determined by another person’s expenses make the product valuable.

Here’s how it works: The parents are underwritten, but the working adult child is the policyholder. The policy covers the costs of a parent’s care while the child is working. This allows the child to save for their own retirement while still addressing the cost of care needs of parents. The term of coverage is designed to end when the policyholder retires and can care for parents themselves without interrupting their own career.

Typically, care is assumed to be in the parent’s home, given the expectation that the retiree will care for their parents at a time suitable to their plans and budget. The applicant would hypothetically purchase a policy to cover care expenses for the span of time they intend to remain in the workforce. The applicant could also choose a term that allows payment of benefits for additional time after retirement, such as for a prolonged vacation, before taking up caregiver duties. But the policy does not have a waiver of premium benefit, so the policyholder would want to plan on continuing premium payments even when not earning income.

Distributors of senior benefits products might find Caregiver Insurance an attractive product to promote to the insurers they represent. It could fit well as a supplemental worksite benefit if underwriting with electronic medical records could be sufficient. It could also work well for Medicare Supplemental or Advantage distributors, who can contact these adult children policyholders ten to twenty years before they themselves are ready for Med Supp.

Also, if distributors are concerned that their insurance partners might not be willing to take on investment risk at this time, the product has only a small pool of assets available to invest because the maximum benefit decreases as the policy ages, the risk is far lower.

Finally, if insurers want to avoid standalone LTCI’s reputation for premium rate increases, this product, even though it is not LTCI, does cover many long-term care needs without the concerns of increased longevity and lack of very old age mortality and morbidity experience.

Bruce Stahl, ASA MAAA is senior vice president, head of U.S. Individual Health for RGA Reinsurance Company. Reach him at bstahl@rgare.com.

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Updated, Monday, November 16, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-045: LTC NEWS AND COMMENT

Federal Medicaid Outlays During the COVID-19 Pandemic
Medicare Part B premiums are rising in 2021 by more than double the Social Security COLA bump
Baby boomer retirements have taken a big jump in the past year
Pandemic is forcing providers to be ‘catalysts of change’ for long-term care sector, association head explains
Biden Plan to Lower Medicare Eligibility Age to 60 Faces Hostility From Hospitals
28% Growth in Medicare Advantage Plans Led By Senior Housing and Care Providers
As Admissions Stall and Aid Dries Up, ‘Losses are Coming’ for Nursing Homes in ‘Bleak’ First Half of 2021
COVID-19 Tied to New Psych Diagnoses; Pessimism & Bipolar Disorder
70 percent of long-term care claims begin with home care
Nursing home COVID-19 cases rise four-fold in surge states
Medicare Part B Premium to Jump $3.90 a Month for 2021
Welcome to 2020 Impact Week: Long Term Care

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Updated, Monday, November 9, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-044: LTC NEWS AND COMMENT

How To Plan For Nursing Home And Long-Term Care Costs
Long-Term Care Insurance: A Comprehensive Guide to Costs, Coverage, and Whether It's Right for You
What COVID-19 Exposed In Long-Term Care
Are You a Good Candidate for Long Term Care Insurance?
Skilled nursing occupancy hits new low of 73.8%: NIC
Verma: COVID-19 Shows LTC ‘Relies Too Heavily on Nursing Homes’
Retirees, Make the Most of Your Home Equity
A Middle-Market Senior Care Solution
Does Hard Work Help Preserve the Brain?
Community spread triggers growing number of COVID-19 cases in nursing homes: AHCA
Integrity Expands in the Southwestern United States with the Addition of Western Asset Protection

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Updated, Friday, November 6, 2020, 9:00 AM (Pacific)

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LTC BULLET: LONG-TERM CARE INSURANCE IN CHINA

*** KUDOS to Bruce Stahl and Winona Berdine of Reinsurance Group of America (a corporate member of the Center for Long-Term Care Reform) for this creative idea highlighted in our recent LTC Clipping:

8/2020, “A Middle-Market Senior Care Solution,” by Bruce Stahl and Winona Berdine, Long-Term Care News
Quote: “Would you like to have an insurance product in your company’s lineup that provides all of the following? • Reaches the middle market, • provides security to generations of family members, • satisfies real customer financial needs and provides them with peace of mind, • minimizes risk in the morbidity tail, • reduces asset and interest rate risk, and • reduces concerns about pandemic risk in facilities.”
LTC Comment: Well, yeah! Click through to read this intriguing proposal.

We hope soon to publish a “Guest Bullet” by Bruce Stahl further developing and explaining this “caregiver insurance proposal. Your comments on the idea are welcome. ***

*** PREDICTING IS HARD, they say, especially about the future. Toward the end of the 2017 Intercompany Long-Term Care Conference in Jacksonville, Florida, which took place shortly after Donald Trump was inaugurated, attendees were invited to answer this question via electronic polling:

Q7. Do you think the next four years will bring an improved economic climate? Or will we see a continuation of low interest rates?
Answers:
1. Improved economic climate/higher interest rates = 76%
2. Stay pretty much the same = 13%
3. Get worse = 11%

In “LTC Bullet: LTC Policy Poll Results,” on April 14, 2017, I offered my own answer to that question and suggested to readers: “Tickle your calendar to review this prediction on election day, November 3, 2020. I’ll do the same.” Here’s my answer then followed by my comment now.

Then: “LTC Comment: I think these voters are vastly over-optimistic. I’d agree with the stay-the-same or get-worse minority. The current ‘economic recovery’ is long in the tooth; the ‘Trump trade’ is already petering out as health and tax reform languish; we may already be in a recession; the Federal Reserve’s tightening cycle has nearly run its course; after perhaps one more interest rate increase, the next step is down and most likely we’ll see more quantitative easing (QE4). That means more and more debt. The U.S. dollar is unsupported by real value and very vulnerable; foreign countries that give us real economic goods in exchange for paper (bonds that the U.S. cannot ever afford to redeem) could wise up any time, stop buying our debt, and start selling it; carrying costs on our $20 trillion debt [$27.2 trillion as of today (11/6/20)] will force a reversal of the Fed’s tightening soon, as the economy worsens. The credit bubble inflating for a decade will pop. Sadly for the Trump Administration, the wages for the economic sins of its predecessors will come due in its first term. (Tickle your calendar to review this prediction on election day, November 3, 2020. I’ll do the same.)”

Now: LTC Comment: QE4 actually turned into QE Infinity. Modern Monetary Theory, as explained and critiqued in “LTC Bullet: Modern Monetary Theory and Long-Term Care,” is sweeping the land. The Federal Reserve has forced real interest rates (nominal rates minus inflation) into negative territory. It appears Trump has been swept out of office and the incoming Biden administration will likely double down on the same inflationary policies. Thus “the wages for the economic sins” of Trump and his predecessors will come due in the term of his successors. We are in for a rough economic ride, exacerbated by the pandemic, but inevitable regardless, because of the irresponsible fiscal and monetary policy of both political parties. ***

*** NOWADAYS, we need clear-eyed analysis of the prospects for long-term care services and financing more than ever. Don’t ingest the “soma” of social insurance purveyed by most of the LTC intelligentsia. If you haven’t already, join the Center for Long-Term Care Reform here. Encourage your company to support the Center as a corporate member. Share our “Membership Levels and Benefits Schedule” with any and all. Join the fight for rational long-term care financing policy. Thanks for your consideration. ***

LTC BULLET: LONG-TERM CARE INSURANCE INBB CHINA

LTC Comment: With Genworth long hanging on the cusp of sale to a Chinese company, what could be a more timely topic than LTCI in China?

On October 20, 2020 the Society of Actuaries LTCI Section sponsored a webinar titled “Long-Term Care Insurance in China.” Moderator Vincent L. Bodnar, ASA, MAAA, a Partner and Long-Term Care Practice Leader, at Oliver Wyman introduced the program and the panel of three experts, two of whom called in from Beijing at midnight local time. (Vince visited China some years ago, conducted a briefing on the U.S. experience with LTCI, found avid interest there and has followed China’s LTCI experience ever since.)

A recording of the “LTCI in China” webinar should be available to buy on the SOA website soon. Attendees who purchased the original webcast will be able to access the recording for free. But here’s a synopsis of the program for those of you who missed the original and may want to consider obtaining the recording:

Panelists:

Guangyao Liu, FSA
Executive Actuary
China Life Reinsurance Company

Xiaochen Sun
Product Actuary
China Life Reinsurance Co Ltd

Song-Song S. Liao
President
Song-Song & Associates

Guangyao Liu opened the session with an introduction to China’s “LTC Pilot Program.” He began by summarizing the uniquely challenging demographics his country faces. China has more “baby boomers,” 359 million, born between 1962 and 1975, than the USA has people (328 million). A second wave of Chinese boomers, 374 million, born between 1981 and 1997, is not far behind. With 176 million elderly (over age 65) people, 12.6% of the population as of 2019, China is looking at 28% and 380 million by 2050. In the meantime, China’s birth rate has been decreasing since the 1990s, due in large part to the country’s one-child policy, exacerbating the elderly dependency ratio and resulting in 120 million “empty nest elderly.”

Anticipating the inevitable challenges of providing and paying for the care of this burgeoning elderly population, the Ministry of Human Resources and Social Security/National Healthcare Security Administration implemented a four-year pilot project in 2016 which is expected to be extended this year. The pilot covers 15 cities and 88.5 million people (out of a total of 1.4 billion). It covers 426,000 insureds at an equivalent cost of 1,300 U.S. dollars per person per year. Care provided is 70% home care and 30% facility care.

Problems of the pilot include limited coverage as only seven pilot cities cover rural residents; an imbalance of funding structure, which is highly dependent on China’s government healthcare fund; inadequate professional care services, which cannot meet demand; lack of uniform standards for care service, ADL assessment, etc.; and large variation of program administration across pilot cities ‐ hard to copy to other cities.

But substantial benefits accrue to commercial LTC insurance including a start to educate residents about the concept of long‐term care and raise potential demand; improve care facility development and care service quality; and participating commercial life and health insurers gain experience data and operating expertise.

Xiaochen Sun next discussed commercial LTCI in China, the first example of which, with a “sum assured” benefit, emerged in 2005. In 2010 a product appeared with a benefit structure like “universal life” and 2017 saw a reimbursement or sum-assured benefit directly to care providers. As of 2020, the Chinese commercial LTCI market has 20 players and 40 products.

The big takeaways from this section of the program, as summarized by Vince Bodnar are:

China has both standalone and hybrid products, like the US
There are two big players in the market today: Taikang Life and Pingan Life
Taikang offers a high-end product that gives the policyholder access to its LTC facilities. It looks a little like a CCRC approach.
Pingan sells a “trauma-led” product, which is cheap. They sell 10,000 of these policies a month.

Song-Song S. Liao concluded the survey of LTCI in China with an excellent summary of the challenges and opportunities the country faces. For example, there is no clear distinction in China between nursing homes and other levels of care. There is inconsistency in defining and monitoring activities of daily living and benefit triggers. Cultural differences often complicate the business. Admission to a long-term care facility, for example, could be considered a disgrace because of the traditional Chinese belief in the responsibility of the younger generation for the older generation. The potentially unrealistic goal is to have 90% age at home with only 3% depending on institutional care.

Further difficulties include insufficient infrastructure and a commercial insurance industry that is very small compared to China’s dominant social insurance structure. Chinese actuaries are exploring all the approaches tried in U.S. It is not a lack of product ideas limiting product development; it’s that the Chinese infrastructure does not support U.S. LTC products. It may be China requires a product more like what we call “critical illness” insurance. Or a product that only provides cash; not care services. Shanghai pushed out a product like the US model, but can’t sell it. The current infrastructure is the biggest obstacle to design a product for China, but “we all know the need is there.”

Song Song summarized the “Contextual Differences” thus:

• LTC business could mean handling government pilots, not commercial LTC

• Commercial LTC is supplemental to social insurance

• Differentiation between medical/acute care vs residential care vs nursing

homes/SNF settings is not distinct in China

• Regulation and standards may exist but not in full compliance

• Much narrower coverage, more restrictive benefit triggers, and more carve outs in China

• ADL 2/6 vs 3/6 or even 4/6

• E.g. restrict to 12 types of diseases, not including cancer, diabetes.

• Age limits and long elimination period

LTC Comment: Congratulations to the Society of Actuaries and Vince Bodnar for conducting this review of nascent LTC insurance in China. We’ll be hearing much more about this topic over time.

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Updated, Monday, November 2, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-043: LTC NEWS AND COMMENT

Medicare Advantage 2021 Spotlight: First Look,” by Medicare Advantage 2021 Spotlight: First Look
U.S. cities seen ill-prepared for boom in elderly population
LONG TERM CARE: Caught in the Middle: How Young Parents Can Plan for Long-term Care
BREAKING: First Alzheimer’s commercial blood test to detect amyloid beta hits the market
Older Americans 2020: Key Indicators of Well-Being
2021 Tax Deductibility Limits
Leisure Activity and Dementia Risk: When Does It Matter?
Report shows 51% growth for home-based services
How do you get the new Medicare Advantage benefits? It’s not easy
Social Security will be exhausted several years earlier than expected: report
Retirement: Average Boomer's savings would only last seven years, study finds

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Updated, Monday, October 26, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-042: LTC NEWS AND COMMENT

Community noise may affect dementia risk
New poll shows most older adults worried about potential healthcare and long-term care costs
Binge drinking may cause Alzheimer's disease—and it might strike younger and in a severe form
Nearly half of COVID-positives were asymptomatic, nursing home study finds
The Collapse of Long-Term Care Insurance
Long-Term Care Awareness Month Approaches Like an Avenging Angel
As most states see nursing home cases increase, providers fear third wave of COVID-19
Most Americans want health insurance companies and Medicare to pay for long-term care: poll
Report shows huge jumps in Medicare Advantage enrollment among minorities, dually eligible
30 percent of COVID deaths in long-term care have occurred in assisted living: study

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Updated, Friday, October 23, 2020, 9:00 AM (Pacific)

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LTC Comment: Finally, a solution for the long-term care financing crisis. Or not? Explanation after the ***news.***

LTC BULLET: MODERN MONETARY THEORY AND LONG-TERM CARE

LTC Comment: Policy wonks have anguished over how to finance long-term care for decades. Most have concluded (wrongly I think, see Medicaid and Long-Term Care) that the only answer is some form of compulsory, government-imposed LTC social insurance program. But, given the insolvency of all existing social insurance programs (Social Security, Medicare, Medicaid, etc.), voters have not been willing to approve even more of these unfundable liabilities. Result: stalemate, frustration, anger, despair, and, finally, hanging their meager hopes on another hapless experiment in government-designed and –imposed LTC insurance that is already foundering in Washington State. (See “LTC Bullet: The Keystone Kops of LTC Insurance.”)

What’s needed to save the policy pundits’ preferred social insurance model is an economic miracle. What if it were possible to find the unlimited government financing that social insurance would need to survive indefinitely? That’s what “Modern Monetary Theory” (MMT) promises to deliver.

For easy, entertaining access to the principles and arguments behind MMT read Stephanie Kelton’s best-selling book The Deficit Myth. Better yet, don’t invest so much of your precious professional time on that source. You can get more than enough to understand Modern Monetary Theory from a summary of the book here.

But let’s cut right to the chase today. Here’s the essence of MMT and the bottom line on what it means. (If what follows seems too bizarre to be credible, refer to the book summary just referenced. You’ll see I’ve neither mis-stated nor exaggerated MMT’s ideas and claims.)

According to MMT, currency issuers like the USA, can print as much money as they want. They do not have to work within conventional financial limits, with revenue matching outlays over time, as mere currency users, such as families, businesses, or countries borrowing in a currency not their own, must.

The power to spend with no set limits is especially true for the U.S. because the dollar is the world’s reserve currency.

TABS or STAB: Conventional economic theory assumes governments must Tax and Borrow to be able to Spend (TABS), but MMT says what really happens is that governments create money by Spending and then they Tax and Borrow (STAB) to control any resulting excessive inflation.

Currency issuers, according to MMT, don’t need to collect taxes, in order to be able to spend. Taxes are necessary but not to generate revenue. Rather the purpose of taxes is to compel citizens to work and provide goods and services the economy needs in order to earn the money to be able to pay the required taxes.

Deficits don’t matter per se. The Federal Reserve could print enough money to pay off the national debt and eliminate the interest cost of servicing the debt. No kidding. MMT actually claims this.

Therefore, to achieve any and all social goals, such as controlling climate change, free college, universal health care, or generous long-term care financing, etc., all it takes is for a currency issuer’s government to have the will to spend/create enough money.

The only limit on printing and spending money in one’s own currency is inflation. When too many dollars chase too few goods, prices increase, thus devaluing the currency and leaving people unable to afford goods and services they need.

So, if inflation starts to become a problem, MMT says the government should raise taxes to reduce the amount of money in circulation and thus stanch inflation before it gets out of control.

Crazy? Of course. But seductive? Very. If you trust government to solve problems, Modern Monetary Theory is your key to unlock not just the Treasury, but the entire productive capacity of the national economy.

But here’s the rub. The net effect of Modern Monetary Theory is redistribution by the Marxist principle “from each according to his ability to each according to his need.”

Government spending (money creation) pursues “progressive” goals, i.e. Need, such as financing free health care, free college, the Green New Deal, free LTC, etc. But when all that extra money printing/spending spikes inflation, who gets taxed to tamp it down? People with the money, i.e. Ability, are the only ones who can be taxed.

MMT is “Miracle Gro” for the idea that taxing productive people is the best way to provide for the needs of unproductive people. Unfortunately, this tried and true principle always applies: you get less of what you tax (ability) and more of what you subsidize (need).

In other words, need is unlimited. It always grows to consume whatever ability, always scarce, is able to produce. Subsidize the former by taxing the latter for 85 years and what you get is …

The whole mess we’re in today including the long-term care financing crisis.

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Updated, Monday, October 19, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-041: LTC NEWS AND COMMENT

Was COVID-19 Really the Killer?
Medicare Advantage Plans May Have More Search Buzz
Covid-19 Has Made Caregiving Harder, But Isn’t Making Americans More Likely To Plan For Their Old Age
Long-Term Care Insurance Benefits Cut Panel Drafts Principles
Having Dementia Doesn’t Mean You Can’t Vote
HCBS could be solution to ‘catastrophic costs’ of long-term care: report
Apathy Predicts Dementia in Cognitively Normal Older People
Extreme confusion most common Covid-19 symptom in frail older adults, new research discovers
Long-term care usage increased under ACA-funded Medicaid expansion
US sees 20% more deaths than expected this year, most due to Covid-19, research finds
HHS officially extends COVID-19 public health emergency again ahead of upcoming expiration date
The Times recommends: Vote to support trust fund for long-term care

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Updated, Monday, October 12, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-040: LTC NEWS AND COMMENT

What Does Retirement Look Like in a Pandemic?
SEC Adds to General Electric's Long-Term Care Insurance Headaches
9 Surprising Secrets About Long-Term Care and Medicaid
Measuring The Financial Impact of Cognitive Decline
Skilled nursing, assisted living facilities top OSHA’s COVID-19 violators list
The Nation's Fiscal Health: A Long-Term Plan Is Needed for Fiscal Sustainability
The Alzheimer's Stamp Now Available to Purchase
Walmart Jumps Into the Medicare Plan Distribution Market
The Problem With Buying Bundled Life and Long-Term Care Insurance
Northwestern Mutual Announces New Senior Leadership Appointments
Looming Medicare Cuts Threaten Physician Services in Nursing Homes, Even as COVID Continues

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Updated, Friday, October 9, 2020, 9:00 AM (Pacific)

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LTC BULLET: THE KEYSTONE KOPS OF LTC INSURANCE

LTC Comment: What happens when the Keystone Kops design a long-term care insurance plan? Details after the ***news.***

*** LONG-TERM CARE INSURANCE IN CHINA: Don’t miss this Society of Actuaries webcast on Oct. 20 as speakers discuss the history of long-term care insurance products in China, current government pilot programs and the opportunity for new products. Register here by October 18, 2020. What could be more timely as Genworth contemplates entering the Chinese market? ***

*** LTCI SURVEY: The deadline for responding to the survey has been extended to October 15^th. Take the Who is Selling What? To Whom, How & Why Survey today! Even if you don’t ordinarily discuss long-term care planning with your prospects and clients, your thoughts are vitally important. This is the largest national effort of its kind, spearheaded by Oliver Wyman Actuarial and Ice Floe Consulting, and supported by NAIFA, NAILBA, Broker World Magazine, the Center for Long-Term Care Reform, and life and long-term care insurance companies. Take the survey and you’ll be first in line to receive its findings. ***

LTC BULLET: THE KEYSTONE KOPS OF LTC INSURANCE

The "Keystone Kops" are fictional, humorously incompetent policemen featured in silent film slapstick comedies between 1912 and 1917. Play this video and you’ll have a pretty good idea what the Washington State Long-Term Services and Supports (LTSS) Trust Commission’s September 30, 2020 meeting was like. More on that below. It’s always a comedy when governments try to do long-term care insurance. Remember CalPERS? CLASS? Every public commission ever mandated to fix long-term care? This new adventure in state-based LTCI hubris is headed toward the same fate.

Washington State’s “Long-Term Services and Supports Trust Act (Trust Act),” enacted in 2019, created a long-term care insurance benefit for all eligible Washington employees that would cover some of the cost of their long-term services and supports. Specifically, a .58% mandatory payroll tax would fund benefits up to a lifetime total of $36,500 for people who paid premiums either (1) for 3 years within the past 6 years, or (2) for a total of 10 years, with at least 5 of those years paid without interruption. The state won’t collect the tax until January, 2022 and doesn’t pay benefits until 2025. Eligibility triggers at the need for help with three or more ADLs. Benefits are paid directly to service providers which may include sufficiently trained family members. There are more complications in the legislation, but this is enough to indicate what’s wrong.

The same Trust Act that created this program also created the Long-Term Services and Supports Trust Commission to figure out how to implement it. The Commission consists of legislators, administering agencies, and stakeholder representatives. It “makes recommendations regarding criteria for determining who is a qualified individual, minimum provider qualifications, service payment maximums, actions needed to maintain Trust solvency, and monitoring of agency expenses.” Now ask yourself, aren’t these basic questions that should have been analyzed before imposing a compulsory tax-supported program on citizens? Didn’t the Washington State Legislature put the cart in front of the horse?

What would happen to a private LTC insurance plan dreamed up by an insurance executive and offered to the public without first thinking through who qualifies, provider standards, payment maximums, solvency issues and expenses? Free markets are vicious. No caring person would wish the inevitable catastrophic consequences that would ensue on such a hapless entrepreneur. Yet politicians can wave a magic wand, create such a program, force it on their constituents, and then turn it over to be somehow fixed by a commission comprised of more clueless legislators, bureaucrats, and highly paid representatives of rent-seeking special interest groups … though with not a single representative from the one profession that could help … the private long-term care insurance business.

Now back to the LTSS Commission’s September 30, 2020 virtual meeting. I followed the three-hour session in jaw-dropped awe as one critical issue after another was raised, discussed, and tabled for future consideration. Premium rates? Gotta wait to set those because the law caps the maximum rate and who knows if premiums plus investment returns will cover costs. Qualified individuals? When does the clock start on the required period of employment; when does the look back period begin; how about people too near retirement who will be left out? People disabled before age 18? There ensued a long discussion on how to handle the under-18 who are excluded in the law but mandated to be considered for inclusion. No decisions. As one astute commenter exclaimed: “They don’t even know what they don’t know.”

I think the one thing Washington State has gotten right in this project was to hire Milliman to guide them through the actuarial thicket created by the state legislature’s carelessness. Anyone knowledgeable about insurance could not help but smile as Milliman’s Chris Giese patiently explained adverse selection to the committee. In paraphrase: “You need to set a rate that matches health risk. With no underwriting, the question of who can opt in or opt out creates challenges. Individuals will evaluate what’s best for them in their circumstances. Healthy individuals might opt out. When they opt out, you’re left with a pool of individuals using benefits who are at higher risk. If you adjust the premium rate up to compensate, then more healthy people won’t participate. You get more uncertainty and a spiral of higher and higher costs.” Wow! What an insight? Who could have imagined that adverse selection might be a problem before the program was carved in statutory stone?

Giese also explained the financial facts of life to the Commission. You see, the program must generate enough in premiums plus investment returns on reserves to cover costs. But Treasury yields are very low these days. Stocks have the potential to earn much more, but they’re riskier. How does that impact program income and long-term solvency? The pandemic is a monkey wrench further complicating this problem. Washington State revenues have plummeted as have the incomes of the citizens compelled to fund this program’s new tax. It’s probably not a great time to pile on more government at the expense of the productive private sector.

The LTSS Commission has hundreds of little definitional issues to straighten out. Giese talked about several. The issue of opting out by purchasing private LTC insurance, he explained, is “still relatively undefined.” What if top wage earners opt out? What if half of wage earners opt out by getting private coverage? Who gets to opt out? Only those who had private LTCI before? People who buy it later just to escape the government program? What qualifies for the escape hatch: hybrid policies too or just traditional LTCI. How to handle the self-employed? What if you opt out, can you opt back in? What about elimination periods? What about portability and divesting alternatives? There will be additional costs if people want to receive benefits outside Washington State. On and on and on. Repeatedly, the approach to issues like these was to create yet another “work group,” but (no surprise) volunteers were scarce.

People who monitored the meeting through Zoom had the opportunity to comment or ask questions at the end of the program. One very thoughtful auditor, Stephen D. Forman of LTC Associates posed this:

The Commission has referenced the stakeholder community several times, but I'm not seeing any private insurance industry representation, why is that? It's a 300 million dollar per year market that is being broadly remade by the Commission's decisions. The decisions have the potential to discourage responsible planning by those who have the means to do so, thereby protecting Medicaid, which is a point of the Trust Act. In February we proposed a number of blind spots and loopholes in the Act before the Legislature--including the lack of stakeholder representation--and the fact that these remain speaks to the fact that this institutional expertise is needed. Thank you for listening, and for your hard work!

So, that’s what happens when the Keystone Kops design a long-term care insurance program. It would be funny if it weren’t so sad.

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Updated, Monday, October 5, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-039: LTC NEWS AND COMMENT

Genworth and China Oceanwide Push Back Deal Completion Deadline
Elderly and Homeless: America’s Next Housing Crisis
Low Interest Rates Push Prices for New Life-LTC Hybrids Higher: Milliman
Medicaid expansion filled unmet needs for home health, other long-term care: JAMA
More than 50 coronavirus wrongful death suits have been filed against long-term care facilities
Home healthcare outpaces skilled nursing in its post-COVID-19 rebound
Keeping workers will be biggest struggle for nursing homes as pandemic persists, national policy expert predicts
Medicare Advantage plans banking on non-medical home care needs
CMS touts lower premiums and benefits of Medicare Advantage plans
Nursing homes in Washington state struggled with adequate staffing for years. Then coronavirus struck

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Updated, Monday, September 28, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-038: LTC NEWS AND COMMENT

Nation’s first COVID-19 criminal charges against nursing home operators filed in Massachusetts
Americans worry about Alzheimer's disease, survey finds, but most don't know the early signs and symptoms
Virus Cases Surged in Young Adults. The Elderly Were Hit Next
CMS announces $165 million in funding to move people from nursing homes to assisted living and other settings
Medicaid Maintenance of Eligibility (MOE) Requirements: Issues to Watch When They End
The Nation’s Fiscal Health: Effective Use of Fiscal Rules and Targets
Can You Pass the New York State COVID-19 Death Risk Test?
“‘Living wage’ would benefit 75 percent of direct care workforce: LeadingAge report
The work-from-home surge may lead workers to buy retirement homes even before they retire
4 in 5 Americans Lack Retirement Planning Knowledge: Survey
Older adults in Philly turn COVID-19 into musical comedy
Can The Dutch Example Help Us Improve Long-Term Care And Manage Its Costs? Maybe
Davies announces acquisition of TriPlus as it steps-up North American expansion plans
Nursing Homes Oust Unwanted Patients With Claims of Psychosis

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Updated, Friday, September 25, 2020, 9:00 AM (Pacific)

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LTC BULLET: DYING WITH OR OF COVID AND THE DOUBLE WHAMMY OF A SECOND WAVE IN THE COMING FLU SEASON

LTC Comment: For fresh thinking on the pandemic and long-term care, look no further than “60 Seconds with Steve Monroe.” We explain after the ***news.***

*** TAKE THE SURVEY: It’s not too late to participate in the nation’s largest opinion survey of agents and advisors that we announced and described in “LTC Bullet: The Who is Selling What to Whom, Why & How Survey.” Read more about this important study in Ron Hagelman’s Broker World column this month. You have until October 8 to do your part by contributing to our knowledge of this critical subject. Take the survey here. ***

*** ARE YOU A MEMBER? If you’re not receiving an LTC E-Alert every Monday and an LTC Bullet every second Friday like clockwork, then you’re not a member of the Center for Long-Term Care Reform and you’re only receiving our occasional wider distribution to non-members (or a bootleg copy from someone else.) You can fix that today. Check out our “Membership Levels and Benefits” here and join the Center here. Note that premium members hear from us daily with LTC Clippings that keep them current on all kinds of LTC information you need to know. For questions or comments, contact smoss@centerltc.com or 425-891-3640. ***

*** TRUE FREEDOM, 9/14/2020, “True Freedom and GoldenCare USA Partner to Provide Seniors with Innovative Home Care Solutions”

Quote: “True Freedom announces our Preferred Marketer partnership with GoldenCare USA, an Integrity Marketing Group company. True Freedom is the only company that provides nationwide home care plans for seniors as an alternative to traditional insurance. GoldenCare and their western-states counterpart, American Independent Marketing, have been leading subject matter experts in long-term care for more than 40 years. By partnering together, they can now serve more Americans by providing unique options for long-term care.”

LTC Comment: Congratulations to long-time friend and corporate member Golden Care on this exciting new partnership. ***

LTC BULLET: DYING WITH OR OF COVID AND THE DOUBLE WHAMMY OF A SECOND WAVE IN THE COMING FLU SEASON

LTC Comment: Do we face double pandemic jeopardy when flu compounds the Covid crisis this fall? What does it mean to die “of” Covid when the Coronavirus only shortens the life by a week or two of people with multiple co-morbidities?

Those are two of the intriguing questions raised and answered by Irving Levin Associates’ Steve Monroe in his weekly video series “Sixty Seconds with Steve Monroe.” Stephen M. Monroe has been a healthcare and senior care financial expert for over 30 years. In addition to being an often-quoted healthcare finance expert in mainstream media, he has published over 50 bylined articles dealing with various aspects of investing in health care and senior’s housing. He is also called upon to keynote and speak at organizations such as the American Seniors Housing Association, Assisted Living Federation of America, National Investment Center for Seniors Housing and Care, American Health Care Association and the New York State Health Facilities Association, among others.

I’ve followed Steve’s analysis for two decades or more, ever since I became intrigued by the role of finance in shaping the type and availability of seniors housing. When he told me many years ago that he bought private long-term care insurance and it cost him less than the cost of a daily cup of coffee, that sealed it for me. I’ve followed his thoughtful commentaries ever since.

Here are two of them that he and his employer have allowed me to share with you. This material is proprietary so not usually available for free. If you find it helpful, there’s more where this came from and you can subscribe for a 60-day free trial here.

“Beware the Flu Season?,” by Steve Monroe, August 26, 2020

Almost every conversation surrounding the coronavirus and outbreaks in nursing homes or assisted living communities eventually gets around to the double whammy of a “second wave” combined with the upcoming flu season.

Yes, providers will have to be vigilant, but they have never been as well prepared for the flu season as they are today. Think about it. Less than a year ago, do you remember ever walking into any senior care facility where the staff were all wearing masks, where hand sanitizers were everywhere, where your temperature was taken at the entrance, where mobile residents were wearing masks? No, it never happened except if someone had the flu.

My bet is that there will be a record number of people, in and out of senior care, who will get the flu shot this year. And transmission will be lower because most Americans are wearing masks in public, hands are cleaner than ever before, and we are all still coming into contact with fewer people on a daily basis than at the start of any other flu season.

The coronavirus will still be with us, but because of the extra care taken in all senior care communities, its prevalence has declined and the double whammy with the flu season will not be as bad as people fear.

“Death By or With COVID,” by Steve Monroe, August 28, 2020

We are sure every provider is sick and tired of hearing about how many residents have died of COVID-19 in a nursing home or assisted living community. The problem is that the classification may be all wrong.

Unfortunately, there may be a financial reason for such classifications, as in more reimbursement, or more governmental aid. And for those who can profit from making this pandemic seem worse than it is (yes, they do exist), piling up the number of COVID deaths helps to make their case. It has certainly helped the mainstream media and their advertising dollars. But here is the problem, at least as it relates to the deaths in assisted living, memory care and nursing homes. What the statistics don’t differentiate is those residents who died “of” COVID from those who died “with” it.

Let us explain. Most people who are long-term residents in nursing homes, or assisted living and memory care communities, have multiple health issues, commonly referred to as co-morbidities. It is a word often used in the senior care industry, but particularly during this pandemic.

In its most simple definition, a comorbidity is the presence of one or more “additional” health conditions, usually co-occurring with a primary condition. And we are not talking about minor health problems, but major ones, usually chronic and often cardiac or respiratory related, as well as diabetes. To be un-politically correct, these residents today have several health problems, any one of which could result in their death at some point.

In addition, the average length of stay for these residents is relatively short, even in the best of times, especially compared with independent living communities or CCRCs, not to mention active adult communities with their much younger average age. They have moved into nursing homes or AL/MC [assisted living/memory care] communities in a frailer condition than 20 and even 10 years ago. In many cases, they are going to die in six or 12 months even without a pandemic.

So, when a 90-year resident in a memory care wing (true story), on hospice, with maybe three weeks to live gets infected with the coronavirus and dies in two weeks, she is listed as having died “of” COVID. But that is not true. She died “with” COVID. She actually could have died from any of her comorbidities, if not just old age, but that is not how it is recorded. She becomes a statistic as one of the 170,000 and growing deaths from COVID. [The reported U.S. death toll passed 200,000 on September 22, 2020, a little less than a month after this column was published.]

The entire senior care industry has to get this message out and the only way to do so is to track what really is happening inside your buildings. The overall number of deaths “by” COVID will go down, and the industry can make a better case to the consumer for what is really happening to seniors under their care. We would love to receive your statistics, on or off the record.

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Updated, Monday, September 21, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-037: LTC NEWS AND COMMENT

True Freedom and GoldenCare USA Partner to Provide Seniors with Innovative Home Care Solutions
Nursing Homes Given Federal Go-Ahead To Allow More Visitors
Dementia mortality skyrockets since lockdowns; CMS loosens visitor restrictions
Opinion: Long-term care insurance: There’s no good alternative
Federal Nursing Home Commission Calls on CMS to Adopt 27 Recommendations, ‘Reduce Suffering’
When Elder Care Requires Legal Advice
Social Security COLA Estimated at 1.3% for 2021
Lapse In Long-Term Care Insurance Doesn’t Necessarily Ruin Coverage
U.S. health care system on life support, say test results from new study
A win for long-term care: Providers applaud withdrawal of MFAR proposal
Missed Vaccines, Skipped Colonoscopies: Preventive Care Plummets
COVID-19 pushed SNF occupancy below 75% in June: NIC
Ken Dychtwald: 75% of Households Could Face a Big Retirement Shock
COVID-19 and Fast Underwriting Are a Bad Mix: Veteran Underwriter
41% don’t trust assisted living, nursing homes to keep residents safe during pandemic: survey
Recession And Medicaid Budgets: What Are The Options?
How the Aging Immune System Makes Older People Vulnerable to Covid-19
Almost 40% of residential care aides live in low-income households: report
Vitamin D deficiency may nearly double coronavirus risk, study finds

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Updated, Friday, September 11, 2020, 9:00 AM (Pacific)

Seattle—

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LTC Comment: We’ll finally get answers to all those questions if you fill out this brief survey. We explain after the ***news.***

*** HOW AND WHY TO JOIN the Center for Long-Term Care Reform. After you read “LTC Bullet: What Value Do LTCI Producers Get from the Center for Long-Term Care Reform?, I hope and trust you’ll want to get everything the Center has to offer. So check out our “Membership Levels and Benefits” schedule here. That’ll help you decide between the various levels of individual and corporate membership. If you have questions, drop me a note or give me a call at smoses@centerltc.com or 425-891-3640. One of the benefits of all Center memberships is anytime access to me for questions about LTC services and financing policy. As I explained in that Bullet, I like hearing from agents and discussing the challenges you face. It helps keep my policy analysis grounded in your real world of LTCI prospecting, fighting against prospects’ denial, and answering the hard questions people actually ask. So let’s talk. ***

LTC BULLET: THE WHO IS SELLING WHAT TO WHOM, WHY & HOW SURVEY

LTC Comment: There probably aren’t many public policy analysts who have actually sold a long-term care insurance policy, but I’m one. After leaving my government career to become Director of Research for LTC, Inc., I took the sales training, got a license, did some phone prospecting, and hit the road with a pocket full of leads. My mission was to learn what LTCI agents were really up against.

Boy did I find out. After driving to a distant corner of Washington State so as not to burn leads real agents needed, I set to conducting sales interviews. I talked, they listened, and listened. I knew a lot and, by gum, they were going to hear it all. That’s when I learned the wisdom of the adage “You have two ears and one mouth. Use them in that proportion.”

Long story a little shorter, I got skunked. No buyers. I returned to the office with my tail between my legs wondering how in the world successful agents managed. But later that week I got a call from one of my prospects. He decided to buy a policy after all. What was it, I inquired, my expertise, my savvy selling, my personal charm? Nope, he said. He just didn’t like the policy his retired teachers’ association was promoting.

I’m telling this story because that was my earliest introduction to how little we really know about the who, what, when, where, why and how of long-term care insurance sales. Ever since that experience I’ve referred to the heroes who somehow manage to help people protect themselves for long-term care as AMG’s, altruistic, masochistic geniuses. It’s long past time we empowered those AMGs by giving them answers to those crucial questions. Finally someone is setting out to do so.

The Survey

Ron Hagelman and Barry Fisher of Ice Flow Consulting and Vince Bodnar of Oliver Wyman have teamed up to design and offer a survey questionnaire to address these issues:

Best practices in starting the long-term care planning conversation.
Agent/Advisor/Consumer product perceptions and preferences.
Best ways to get prospects and clients to “YES”.
New product insights.
Types of training and education that will improve sales results.
Why many agents/advisors DO NOT discuss long-term care planning with consumers.

The survey’s sponsors say “This agent/advisor-focused sales analysis is designed specifically to help reveal the mysteries of the structure and motivations of buying behavior from those who make the sales happen.” It will define the “new normal in long-term care planning.” The project is advised and supported by NAILBA, NAIFA, numerous traditional and combo carriers and key distribution friends. Learn more in the September issue of Broker World magazine.

The survey only takes about 5-15 minutes to complete. If you provide your email address, they’ll send you the executive summary as soon as the results are compiled. Don’t wait. Take the survey now here.

Don’t sell LTCI? Please take the survey anyway. The sponsors say: “We’d like you to take a few minutes out of your busy day to take the survey. If you do not discuss long-term care planning with consumers the survey will take 5 minutes or less. Knowing why you don’t is vitally important to us. If you do have long-term care planning conversations with prospects and clients, the survey will take about 15 minutes or less. Your insights into the aforementioned survey goals will help us with new product development, expanding the market, improving agent education and increased consumer awareness.”

We look forward to reviewing the results of this survey and we’ll bring them to you in a future LTC Bullet.

Now TAKE THE SURVEY!

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Updated, Monday, September 7, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-036: LTC NEWS AND COMMENT

Ethics Consult: Keep Patient on Feeding Tube After Dementia Diagnosis?— You make the call
COVID-19 shifts mindset of family caregivers about senior living decisions
Grabowski: As Case Counts Rise and PPE Issues Persist, Nursing Homes Face Grim ‘Groundhog Day’
CBO Cuts Forecast for Social Security Fund Life Span, Sees Debt Topping GDP in 2021
COVID-19 Outbreaks in Long-Term Care Facilities Were Most Severe in the Early Months of the Pandemic, but Data Show Cases and Deaths in Such Facilities May Be On the Rise Again
Skilled Nursing Distress Looms as CARES Funding Ebbs: ‘Bills Are Starting to Come Due’
Key Questions About the Impact of Coronavirus on Long-Term Care Facilities Over Time
China Oceanwide Is 'Progressing Well' Toward Getting Deal Funding: Genworth
Why you need to talk to your parents about how they want to die
Does Medicare cover long-term care?
Long, Frequent Naps Predict Alzheimer's Dementia

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Updated, Monday, August 31, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-035: LTC NEWS AND COMMENT

Bonnie Kraham column: 2020 rates for Community Medicaid and Nursing Home Medicaid
Hundreds of Thousands Of Nursing Home Residents Don’t Need To Be There
Longevity Brings Increased Risk of Cognitive Decline
Female chromosomes offer resilience to Alzheimer's
Morningstar gives ‘negative outlook’ rating to skilled care
State Actions to Sustain Medicaid Long-Term Services and Supports During COVID-19
Ending Payroll Tax Would Drain Social Security by Mid-2023
State with First COVID-19 Outbreak Rolls Back Medicaid Boost for Nursing Homes: ‘Needless Deaths Will Rise’
Dementia may be three times more deadly than thought, analysis finds
A Novel Way to Combat Covid-19 in Nursing Homes: Strike Teams
Two or more long-term health conditions linked to positive COVID-19 tests

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Updated, Friday, August 28, 2020, 9:00 AM (Pacific)

Seattle—

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LTC Bullet: What Value Do LTCI Producers Get from the Center for Long-Term Care Reform?

LTC Comment: Why join and support the Center for Long-Term Care Reform? What’s in it for you, after the ***news.***

*** HOW AND WHY TO JOIN the Center for Long-Term Care Reform. After you read today’s LTC Bullet I hope and trust you’ll want to get everything the Center has to offer. So check out our “Membership Levels and Benefits” schedule here. That’ll help you decide between the various levels of individual and corporate membership. If you have questions, drop me a note or give me a call at smoses@centerltc.com or 425-891-3640. One of the benefits of all Center memberships is anytime access to me for questions about LTC services and financing policy. As I explain in the following Bullet, I like hearing from agents and discussing the challenges you face. It helps keep my policy analysis grounded in your real world of LTCI prospecting, fighting against prospects’ denial, and answering the hard questions people actually ask. So let’s talk. ***

LTC BULLET: WHAT VALUE DO LTCI PRODUCERS GET FROM THE CENTER FOR LONG-TERM CARE REFORM?

LTC Comment: I enjoy speaking to agents about the challenges they face finding and convincing clients to protect themselves against long-term care risk and cost. Agents see the battle for better LTC from the foxholes. As a policy analyst, my perspective often feels high altitude by comparison. Hearing the problems and challenges agents face day in and day out helps ground me in practical ideas and proposals.

So that’s why I jumped at the chance when Center-corporate-member Long Term Care Associates (LTCA) invited me to address their next agent conference call. Special thanks to Stephen, Gary, and Robert Forman and their team for the opportunity to answer the following questions. Here’s what they asked and how I responded.

1. From your vantage, what value proposition from the Center do you think agents should be taking advantage of, which they’ve failed to over the years?

The agent’s role is to educate and sell. To do that well agents need to be on the forefront of professional knowledge and expertise. But how can they do that if they’re also doing all their own research? A critical role of the Center for Long-Term Care Reform is to keep agents apprised of important articles, reports, studies and data they need to know. How often have you been blind-sided by a prospect’s question or criticism that they picked up from a news report that you hadn’t seen or heard yet? Follow the Center and that won’t happen again. The best way to follow the Center is to know our website at www.centerltc.com inside out.

The website has two levels: One for the general public and one for Members Only. Check out the links at the top of the website to get started.

Here are the items available to all:

Take our virtual tour of the Center's website. (Be patient, it may take some time to load.) This video webinar explains how to access and navigate the valuable content on the CLTCR website. This is the best way to find everything quickly.

The “Moses LTC Blog” includes LTC Bullets and LTC E-Alerts as they’re posted. (To find it, scroll down from the top of www.centerltc.com)

Links to 1286 LTC Bullets newsletters, archived chronologically and by topic covering every aspect of LTC services and financing since 1998

Links to hundreds of articles, speeches, state-level and national reports on every aspect of LTC services and financing

Video of Steve Moses’s 9/21/11congressional testimony on “Examining Abuses of Medicaid Eligibility Rules” (Steve testifies at 18 minutes, 45 seconds into the hearing)

"Clash of the Titans: Moses vs Gordon on Medicaid and other Dark Matter" at the 12th Annual ILTCI Conference. Listen to this riveting debate. (May load slowly)

See a retrospective of the 2008 National LTC Consciousness Tour: LTC Tour Slide Show, pictures of the Silver Bullet of Long-Term Care; history of the year-long tour to raise consciousness about long-term care

Members only website content (available to all on a trial basis for two weeks; use user name: CLTCR2020 and password: FreeTrial):

NEW: LONG-TERM CARE CLIPPINGS ARCHIVE
MEDICAID AND MEDICARE KEY NUMBERS UPDATED ANNUALLY
LTC ALMANAC: Links to hundreds of articles, reports and data sources on these topics:

Aging Demographics
International
Unfunded Liabilities--Social Security, Medicare, and Budgets
Long-Term Care
Caregiving
Long-Term Care Financing
Long-Term Care Insurance
Reverse Mortgages
Long-Term Care Providers
Medicaid
Medicaid Planning

LTC Graduate Seminar Transcription
Reasons Why Veterans Should Not Depend on VA Benefits for Long-Term Care
Long-Term Care Cost Surveys
Deductibility Limits for Long-Term Care Insurance
LTCI Tax Treatments
Unfunded Entitlement Liabilities -- Various articles and reports including data on unfunded entitlement liabilities.
LTC Embed Reports -- Brief on-site reports from the policy front in Washington, D.C. and elsewhere, wherever the LTC policy battle takes us.
Virtual Visits to LTCI conferences.
One-hour webinar about the CLASS Act with Steve Moses. Details in this E-Alert.
CLASS Act Update -- Quick reference to publications on CLASS.

2. You’ve been instrumental in many major pieces of Medicaid reform legislation: is there anything you or others you know of are currently working towards?

We’ve been on the defense for the past decade. Irresponsible monetary and fiscal policy since the Great Recession have convinced the powers-that-be the country can print and spend unlimited funds without producing new goods and services for people to buy. That’s a recipe for disaster and the catastrophe is baking in the economic oven right now, soon to be served up to the country.

In the meantime, the LTC intelligentsia—analysts and economists who opine about the long-term care problem and what to do about it—have come together in support of a compulsory, public, catastrophic LTC insurance plan based on payroll deductions similar to Social Security and Medicare. Handling LTC in this way won’t work any better than those programs, which are insolvent already and likely to survive only as means-tested welfare programs in the not-very-distant future.

Here’s the good news. Thanks to the dozens of state-level and national studies we’ve conducted and which are available on the Center’s website here, we know what to do and how to do it when policymakers are finally forced by circumstances to do what needs to be done.

What’s that? Redirect Medicaid to the needy and use some of the savings to incentivize responsible LTC planning including private LTCI. Specifically, eliminate Medicaid’s huge home equity exemption, close other eligibility loopholes, and enforce estate recovery. Operate Medicaid as a loan instead of a welfare trap for people with wealth. In time consumers will realize private insurance is a far better option than relying on Medicaid.

3. What’s the single greatest legislative change that could galvanize the private LTCI market?

We need to get the government to stop giving away what you’re trying to sell. Eliminating Medicaid as your primary competition for the business of middle class and affluent people is the one change that could make the biggest difference. Unfortunately, that’s not a very popular idea politically, so it’s not likely to happen until the economy tanks, which it is about to do. When states have to curb Medicaid’s excesses to make budget ends meet, they’ll listen again to what we have to say. That’s how we won in 1993 with the Omnibus Budget Reconciliation Act (OBRA ’93 closed eligibility loopholes and made estate recovery mandatory) and in 2005 with the Deficit Reduction Act (DRA ’05 unleashed LTC Partnerships and placed the first cap ever on Medicaid’s home equity exemption). We’re in a better place now than we have been in over a decade to get the policy changes we need done.

4. In all the state-level reports, data, and studies you read, what have you come across that would surprise our agents—and is there something they could use to advance the importance of LTC planning?

What it’s so hard for agents and everyone else to understand is how easy it is for people to qualify for Medicaid LTC benefits despite having large incomes and assets. I was amazed doing state Medicaid eligibility studies to find that eligibility workers are appalled at how easy it is. They’re angry that lawyers for well-heeled people prepare their perfect applications, sometimes three inches think with documentation. Welfare workers can’t get poor people on Medicaid without devastating the families, but the well-to-do go right on. Adult children have a financial conflict of interest and they’re usually the ones making the decisions once the elders are demented and need care. The system is corrupt and leads to bad consequences as we’re seeing during the pandemic especially, with tragic nursing home deaths and families kept from visiting their institutionalized loved ones.

5. You’ve been even-handed of your criticism of both major parties’ failing to address LTC financing: do you think choice of President or Congress matters much to LTC financing in this country, and if so, does either platform appeal to you more on this basis?

Honestly, no, politics doesn’t matter. Politics is the problem not the solution. Politics is about buying votes by promising people something for nothing. Economics is what matters. Markets fairly distribute goods and services based on merit and hard work instead of political influence and graft. So, no, it makes no difference who controls the government. They’re all prone to irresponsible excess. What matters is what we do when the wages of their irresponsibility come due. Fortunately, we’ve done the prep work to know how to fix long-term care when politics fails and markets matter again.

6. Despite continued efforts to “rebalance” Medicaid towards more home health care, it continues to bias toward nursing homes: how would you communicate this bias—and Medicaid’s other shortcomings—to a client who thinks they can self-insure or “Medicaid Plan”?

The idea that home care costs less than nursing home care is a fallacy. Across society home care delays but does not replace facility care. The two together always end up costing more. Bottom line, Medicaid can’t afford quality institutional care, much less a full continuum of care. Institutional bias is here to stay as the only way Medicaid can keep costs manageable. The public knows nursing homes are undesirable, more so now during the pandemic than ever before. The best way to stay out of a nursing home as long as possible and to access the best ones when necessary is to be able to pay privately for alternative care. The best way to do that is to share the risk and cost through private insurance.

7. Reaction to your message from the carriers sometimes seems tepid: why do you think it’s not been more universally welcomed?

Carriers fear that by exposing the abuse of Medicaid by middle class and affluent people in order to correct it I’m actually disclosing to consumers the secrets of how to dodge private insurance. My dilemma is that I can’t get the problem fixed without exposing and criticizing it. Carriers can be very short-sighted and exceedingly careful. They hear that Medicaid captures most of their potential market and instead of aggressively addressing that problem they too often fear criticism and do nothing. The truth is the only way to fix Medicaid for the poor is to get the non-poor to take responsibility and insure. That’s what I’m advocating.

8. What’s wrong with “selling the Medicaid myth”? (i.e. the notion that you have to spenddown to poverty in order to qualify) The insurance companies, the government, the media, and many agents all repeat this same myth—shouldn’t we?

The Medicaid myth is that you can’t get LTC benefits without spending down into impoverishment. It’s a myth because it isn’t true. If it were true, most people with the financial wherewithal to buy LTCI would own a policy. They’d be scared to death of losing their life’s savings if their life savings really were at risk. You could say the Medicaid myth is a “noble lie.” So if it helps you protect someone with a good policy, so be it. Just know yourself what’s really happening.

What’s really going on is that the public has been anesthetized to LTC risk and cost because Medicaid has picked up most of the catastrophic costs for LTC since 1965. So people don’t worry about LTC until they need it, and once they need it they slip onto Medicaid easily. You’re much better off to acknowledge virtually anyone can get Medicaid to pay for long-term care but to focus on the reasons for not doing that: the problems of access, quality, low reimbursement, institutional bias, discrimination, and loss of independence and control.

Do you say “my clients know about Medicaid’s deficiencies and they don’t want to end up on that welfare program?” If so, you’re missing the point. Nine out of ten potential prospects don’t even contact you or answer your calls. Most people don’t worry about long-term care until it’s too late to plan, save, invest or insure against the risk. That’s true because Medicaid has been the payor of last resort for so long. Undesirable as Medicaid is, it looks pretty tempting when it’s the only thing standing between a family and huge out of pocket costs. Help us remove Medicaid as an easy solution for middle class and affluent people after the insurable event has occurred, and then see how many people are beating down your door to get the LTCI protection they truly need.

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Updated, Monday, August 24, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-034: LTC NEWS AND COMMENT

Short-Term Bailouts Won’t Fix Nursing Homes or Medicaid Home-Based Long-Term Care
Covid-19 Vaccination Costs to Strain State Medicaid Programs
Task force delivers final report for senior living’s transformation post-COVID-19; 6 strategies identified
Seattle life plan community successfully shifts from communal dining to food court model
Assisted Living Communities Facing Similar Financial Hardship as Nursing Homes
Assisted living occupancy declines at highest rate since April: NIC
Nearly 75% of older Americans with dementia given drugs that don’t help them despite serious risks: Study
Game changer for long-term care? More like a game ender
REPORT: COVID Cases in Nursing Homes Surpass Peak Level Back in May
U.S. Treasury task force: Federal government must educate public about LTC costs

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Updated, Monday, August 17, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-033: LTC NEWS AND COMMENT

Nursing Home Families Yearn to Visit Loved Ones Again
Verma ‘Deeply Concerned’ About Rise in Nursing Home COVID Counts, ‘Significant Deficiencies’ in Infection Control
The Trump Administration Thought About Reforming Long-Term Care Insurance. But Decided Not To
SURVEY: Nursing Homes Incurring Significant Costs and Financial Hardship in Response to COVID-19
Coronavirus cases in nursing homes show alarming spike, AHCA warns
LTCG appoints Sharon Reed as SVP of Process Improvement and Enterprise Training
Older Americans Coping Better With Pandemic Than Younger Ones: Age Wave
Job losses continue in the eldercare sector: Labor Department
When Covid-19 Hit, Many Elderly Were Left to Die
Dementia on the Retreat in the U.S. and Europe
Long-term care groups, 490 others, call for enactment of COVID-related legal protections ‘as soon as possible’
1,600 nursing home workers plan strike

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Updated, Friday, August 14, 2020, 7:00 PM (Pacific)

Seattle—

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LTC Comment: Sometimes bad studies happen to good people. We explain after the ***news.***

*** ILTCI CONFERENCE: Why am I getting Denver history lessons from Barry Fisher? Because he’s a former resident, knows the city well and he’s in charge of the 20^th anniversary Intercompany Long-Term Care Insurance Conference to be held March 8-11, 2021 in Denver. This iteration of the event replaces the one canceled due to the pandemic in March of this year. Get all the details here and here. Barry reports “The good news is that almost all our exhibitors and sponsors have committed to attend the 2021 Conference. The Program and Education Committee is hard at work creating sessions designed to instruct, enlighten, and entertain. And, our Keynote Speaker, Futurist Anders Sorman-Nilsson, will share a whole new look into his crystal ball.” I’m reminded there’s a little Denver lore in the Moses family history also. It seems my great grandfather traded 40 acres of prairie waste land for a pair of pearl-handled six-shooters. Those 40 acres are downtown Denver today, but we don’t even have the pistols to show for it. Oh well! At least we have a great reunion with friends and colleagues coming up in the Mile High City next March … Covid-19 permitting, of course. ***

LTC BULLET: UMPTEENTH LONG-TERM CARE STUDY DISAPPOINTS

LTC Comment: Having toiled in the long-term care field for 38 years, I’ve seen a lot of study groups and commissions come and go aimed at finding a better way to provide and pay for long-term services and supports. Besides their universal abject failures, these many endeavors also have this in common. They brought together experts representing various “stakeholders’” interests who talked, talked, talked until they arrived at the lowest common denominator of their wishful thinking. That usually included a long list of wonderful things to do with no mention of how to pay for them. How might we define such a “study?” The Urban Dictionary suggests this: “A group discussion or activity between like-minded individuals that validates mutual biases or goals in a non-confrontational environment.” What got me thinking along those lines?

“Learning from New State Initiatives in Financing Long-Term Services and Supports” is a report published last month jointly by the Center for Consumer Engagement in Health Innovation at Community Catalyst and The LeadingAge LTSS Center @UMass Boston. Its authors include two, Marc Cohen and Eileen Tell, whose previous work deserves praise. The report is the fruit of deliberations by “42 stakeholders and state officials” who shared “their depth of knowledge and insightful observations on the reform efforts occurring in their states.” Their states, which have “adopted or are considering innovative state-based LTSS financing reforms” include California, Hawaii, Maine, Michigan, Minnesota and Washington. As I’ve conducted studies in three of those states (CA, ME and WA) I’ll offer some balancing perspective when relevant.

So let’s dive into this new report and see what we find. I’ll select a quote and then make a comment. I’m omitting the report’s footnotes but you can find them quickly in the original.

LTSS Report: “Most of the LTSS costs that people are projected to pay will be out of their own pockets (53%); this is especially true when it comes to home and community-based care (68%). Yet Americans are woefully unprepared to pay for their own care, should they need it.” (p. 4)

LTC Comment: What those percentages ignore is that the vast majority of all high cost long-term care expenses are paid for by Medicaid and Medicare. If these catastrophic costs were not removed by public financing, people would worry about and save, invest or insure for long-term care. They would be much better prepared for LTC risk and cost than they are now. I’ve explained in Medicaid and Long-Term Care (pp. 64ff) that “some recent research suggests how we might reconceptualize the quandary we are in so that it is not such a huge challenge and may in fact be amenable to a market-based solution.” Check it out.

LTSS Report: “The bottom line is that private LTC insurance is now out of the financial reach of most middle-income Americans and for that reason, it is not likely to play a meaningful role in financing LTSS costs in the coming decades.” (p. 4)

LTC Comment: This statement reflects a misunderstanding about why private LTCI take-up is so low. Many more consumers than now would find a way to afford the product if they believed they needed it. If, for example, their home equity were at risk for potential long-term care expenses, they’d see a real risk far more starkly. But despite decades of the media and insurance agents telling people they’ll lose their life savings if they don’t insure, they still don’t believe it. Ironically, they’re right. They can ignore the risk, avoid the premiums, and, if they ever need expensive long-term care, Medicaid provides while exempting most assets and charging only excess income as a kind of co-insurance. Until those facts change, the market for private LTC insurance will languish. But those facts will change soon when the bottom falls out of the existing welfare-based LTC financing system.

LTSS Report: “Medicaid provides coverage of LTSS only after individuals have depleted their own resources in paying for care.” (p. 4)

LTC Comment: That statement is so blatantly false it is hard to believe serious people still publish it. Medicaid requires excess income to be spent down for care. But that rule does not apply to excess assets. Assets may be spent down for anything of value. As long as the items purchased are exempt, and most large assets are, Medicaid does not care for purposes of determining eligibility. That’s why elder law attorneys keep long lists of exempt resources and encourage their clients to spend any disqualifying countable assets on them. Even Medicaid eligibility workers frequently advise families to do the same. It defies belief that long-term care experts remain so uninformed or naïve as to ignore these facts. You can find scores of examples with citations to the sources in How To Fix Long-Term Care Financing, pp. 34-63.

LTSS Report: “Currently, Medicaid pays roughly 57% of LTSS costs, elders and their families pay an additional 23%, other public sources contribute 16%, while private insurance pays less than 5% of the nation’s bill.” (p. 4)

LTC Comment: Of that 23% of LTSS costs attributed to elders and their families, roughly half is Social Security income received by people already on Medicaid, which they’re required to contribute to offset Medicaid’s cost for their care. In other words, it’s not—or even mostly—life savings being spent down catastrophically into impoverishment as analysts imply. I explain this Social Security “spend-through” and why it’s so critical to understanding LTC risk and cost in Medicaid and Long-Term Care at pp. 7-8. The key point is that nearly 90% of LTSS costs as cited by the LTSS report come from Medicaid (57%), other public sources (16%), LTCI (5%), or Social Security (1/2 of the 23% attributed to out of pocket expenditures). Why should we be surprised that most people fail to plan, save or insure for long-term care when they’re only personally at risk for about 10% of the cost? What’s worse, when the Social Security trust fund runs out, as it is likely to do much sooner than previously anticipated because of current monetary and fiscal policies aimed at providing coronavirus relief, Medicaid and its long-term care providers will have to adapt somehow to the loss of some or all of this substantial “spend-through” revenue. As Medicaid and providers are already vastly underfunded, this loss will be devastating.

LTSS Report: “Median retirement savings for Americans between age 55 and 64 is roughly $107,000, which is far less than the average expected LTSS costs for those who have to purchase care.” (p. 5).

LTC Comment: True, but irrelevant. Medicaid already covers people with median savings and below. The key question is whether Medicaid also covers most people with savings above the median. It can and often does. In Medicaid and Long-Term Care (pp. 44-46), I explain how Medicare beneficiaries up to the 95^th percentile of income and assets qualify financially for Medicaid LTC benefits. As long as this remains true, don’t expect most people to worry about long-term care until it’s too late to save or insure and Medicaid, despite its flaws, becomes preferable to spending privately.

LTSS Report: “All of the data suggests that our current approach – based on Medicaid, savings, and private insurance – is not meeting the needs of families, providers, nor public payers. Currently, there are two primary strategies designed to move the system toward greater insurance coverage: (1) a federal public insurance approach which is designed to add social insurance coverage for LTSS to existing health insurance programs offered at the federal level, and; (2) state-based social insurance programs, which represent the most recent efforts at reform and for which there is growing interest across multiple states. These state-based efforts are the primary subject of this report.” (p. 5)

LTC Comment: This is the switcheroo. Having described the existing LTC system’s many shortcomings, the LTSS Report jumps right into proposing “strategies” based on social insurance, i.e. more government money, regulation and compulsion. Neither this report nor others of its ilk give the slightest attention to why and how America’s long-term care system became so fouled up in the first place. How in the world can we conclude that new federal or state-based social insurance programs are the right strategies to pursue without explaining what went wrong with the existing government dominated system and why? That explanation is what I provided in Medicaid and Long-Term Care (pp. 10-16). I concluded that excessive government funding and regulation is exactly what ruined the long-term care system over the past eight decades. Adding more of what caused long-term care’s problems in the first place is hardly likely to fix them going forward.

LTSS Report: “In light of the fiscal strain brought on by the COVID-19 pandemic, as well as uncertainty regarding the upcoming federal election results, it is highly unlikely that these [federal LTC reform] bills will move forward in the immediate future.” (p. 7)

LTC Comment: This is a neat brush-off of omnipresent but simpleminded proposals to add long-term care to Medicare. But the same facts bear even more heavily against state-level reform plans. States can’t print and borrow unlimited funds like the federal government can. We’ve barely begun to see the devastation unconstrained federal monetary and fiscal profligacy will cause. Will the federal government pay all the states’ bills in the same way as it has taken the place of private payrolls nationwide? How long before the trillions of newly printed dollars, with no new goods and services for them to purchase, lose their value? “Too much money chasing too few goods?” Where have I heard that expression before? Oh yeah, Econ 101.

LTSS Report: “We describe recent LTSS financing reforms in six states, identify motivating factors that are driving policy change, describe how policy design decisions are being made, and document the key players involved in these reform initiatives. ... The fact that a growing number of states are seeing a broad and disparate array of LTSS stakeholders come together to work in concert on this issue represents a real change in the policy landscape; in essence, it highlights an expansion in the potential policy solution-set for this issue.” (p. 7)

LTC Comment: “Growing number of states?” These are the same six referenced in a program titled “State Initiatives for LTC Financing Reform” at the 19^th Annual ILTCI Conference in Chicago on March 25, 2019 minus one planned then for Illinois. We’re not exactly seeing a wave of new enthusiasm for higher payroll taxes to fund more government long-term care.

LTSS Report: “We conducted comparative qualitative case studies across six states in various stages of developing or executing on reform initiatives including Washington State, which recently passed and is currently implementing a new social insurance program for LTSS; Hawaii, which has programs designed to assist family caregivers; and Maine, which put a specific LTSS financing initiative on the ballot in 2018 that failed to pass. The other three study states – Minnesota, California and Michigan – are at various stages of building stakeholder coalitions to work with policymakers to develop new programs, undertaking studies of the issue to inform policy development, or are ready to move to a full-blown legislative agenda.” (p. 8)

LTC Comment: Now we’re getting into the meat of the report. Of the six states reviewed, only one, Washington, actually has “a new social insurance program for LTSS” underway. The rest have either tried and failed, done something very different, or are perennially studying the matter.

LTSS Report: “In total, we completed interviews with 42 stakeholders and state officials across these states, many of whom were referred by state leaders. Key informants included state officials, leaders working in aging services, consumer advocates working on a broad range of health, disability, and LTSS issues, union leaders, and an assortment of individuals from LTSS provider organizations.” (p. 8)

LTC Comment: What every one of these “stakeholders” has at stake is getting more money from the state and federal governments to finance their special interests. There’s a name for this process: “crony socialism.” When you decide before you begin a study that LTC only has two ways to go, federal or state social insurance, and then interview only people who stand to benefit from either of those options, you’ve squandered intellectual and financial resources.

LTSS Report: “In all the study states, the median monthly costs of home care and nursing home care exceed the national average, and in all but two, the median monthly costs for care in an assisted living facility are also in excess of the national average. This indicates a growing payment burden faced largely by families paying out-of-pocket or, on behalf of those who are poor or become poor paying for care, on the state’s Medicaid program.” (p. 11)

LTC Comment: No, what those constantly rising home care and nursing home costs “in excess of the national average” actually show is that these study states have failed miserably to control expenditures by means of the government regulation and interventions they’ve already employed. For example, rebalancing from nursing home care to home care was supposed to save money, but it didn’t. It turned out home care only delayed institutional care and the two combined cost more. Pouring more and more Medicaid money into experimental programs and continuing to allow easy access to Medicaid benefits with generous financial eligibility rules impeded the private markets for home care, home equity conversion, and private long-term care insurance leaving consumers dependent on poor public programs. Social insurance isn’t the solution for the long-term care problem; it is the problem. For full development of this argument, see any or all of the state-level studies here including these three reports covering states addressed in the current study: What We Don't Know About Medicaid and Long-Term Care is Hurting Washington State (2004); Medi-Cal LTC: Safety Net or Hammock? (2011); The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net (2013); and Maximizing NonTax Revenue from MaineCare Estate Recoveries (2013).

LTSS Report: “We compared the amount of taxes paid per capita by the study states to explore two opposing concepts. The first is that a high tax rate per capita could reflect a state’s willingness to invest in social infrastructure, inferring a greater probability that they would be willing to continue to do so for LTSS finance reform. … On the other hand, states with higher than average taxes per capita may be reluctant to put in place new programs requiring additional tax increases, feeling that citizens are already paying enough in taxes. While there is a great deal of variation in the ranking of taxes paid per capita among the case study states, five of the six states are within the top half of the country in terms of overall ‘tax burden,’ and four of them are in the top 11.” (p. 11)

LTC Comment: A more credible interpretation is that lukewarmness toward expensive new social insurance schemes documented in this study simply means overtaxed citizens are increasingly reluctant to take on an even greater tax burden.

LTSS Report: “In Appendix 2, we include state timelines showing key milestones in the move to adopt these financing initiatives. They clearly illustrate that the journey of reform is best described as a ‘long and winding road’ filled with both off-ramps and on-ramps.” (p. 12)

LTC Comment: An objective interpretation of these financing initiatives’ sluggish progress would use different metaphors, such as wild goose chase, cul-de-sac and dead end.

LTSS Report: “The profiles begin with a brief description of the type of initiative, its current status and the nature of the coalition working on it. Also summarized are the primary motivators driving the LTSS reform efforts identified by respondents. These motivators include easing the burden on family caregivers, concern about the growth in Medicaid budgets, financial help for the middle class, improving financial access to LTSS services, improving support for the LTSS workforce, and compensating for the failure of the private market.” (p. 12)

LTC Comment: All those “motivators” are fine goals. But don’t we need to understand first why and how our existing LTC system, dominated by government funding and regulation, came to have these problems? Don’t we risk making the problems worse by adding more of the same? Forging ahead to propose more government interference in the long-term care market without first explaining how (1) the LTC burden became so great on family caregivers, (2) Medicaid budgets exploded, (3) the middle class are financially overburdened, (4) the workforce struggles and (5) private insurance failed, is intellectually negligent.

LTSS Report: “The driving force in California is the need to address what stakeholders cited as ‘a rapidly rising and unsustainable’ Medicaid budget. Additionally, there is concern with providing financial protection for the state’s broad middle class. As one stakeholder stated the problem, ‘I would say it’s primarily related to the fact that people who are above the Medi-Cal eligibility level…I would say, the whole middle-income…of our state, can’t afford the cost of long-term care. They’re having to impoverish themselves…And Medi-Cal is not an ideal system…it has its own challenges.’ Working with an outside actuarial firm, the coalition is presently exploring a wide variety of program design options and the pricing implications of each.” (p. 12)

LTC Comment: This assessment of the long-term care problem in California would be laughable if it weren’t so sadly mistaken. Middle class people in California do not have to impoverish themselves to get long-term care. The state has the most generous Medicaid financial eligibility standards of any in the country and the biggest elder law bar artificially impoverishing more affluent people. California Medicaid has not even implemented some of the mandatory federal standards from OBRA ’93 and DRA ’05 designed to target Medicaid to the needy. Long-term care is a mess in California because the state trapped its population on Medicaid by making public welfare the path of least resistance for citizens who failed to plan, save, invest, or insure for long-term care. For a full development of this analysis, see Medi-Cal LTC: Safety Net or Hammock? (2011).

LTSS Report: “Hawaii does not currently have an LTSS social insurance program. However, of all the case study states, they have the longest history of attempting to pass a social insurance program for LTSS, as we describe below. … Unlike other states reviewed here, current activity in Hawaii is more narrowly focused on improving the caregiver support program rather than on trying to develop a new social insurance program for LTSS. … In 2012, the legislatively appointed State LTC Commission recommended establishing a ‘limited, mandatory public LTSS insurance program.’ It was to be funded by a 0.5% general excise tax on businesses and would provide 365 days of front-end insurance coverage paying up to $70 per day in benefits. The measure failed to pass the legislature …. Social insurance for LTSS has not been taken up since that time. Even so, Hawaii maintained its interest in addressing resident LTSS needs but no longer through a social insurance mechanism.” (p. 14)

LTC Comment: Well, then, it sounds like Hawaii thoroughly explored and decisively rejected the social insurance approach to long-term care. So why is Hawaii featured in a study that limits “primary strategies” on page 5 to two: either federal or state-based social insurance?

LTSS Report: “Maine’s attempt at LTSS financing reform was based on a ballot initiative – rather than the legislative approach in the other five states studied – to establish a social insurance program focusing exclusively on comprehensive in-home care. The ballot measure failed when put to a vote in November 2018.” (p. 15)

LTC Comment: What part of the public’s clear rejection of these tax-based social insurance programs do these researchers not get? If you want to know what’s really wrong with Maine’s long-term care system and what to do about it, read this: The Maine Thing About Long-Term Care Is That Federal Rules Preclude a High-Quality, Cost-Effective Safety Net (2013).

LTSS Report: “Michigan, like California, is in the earlier stages of building a coalition and exploring approaches for a social insurance LTSS finance reform solution. … The Michigan stakeholders are working in coalition, and have hired an outside actuarial firm to model the pricing impacts of a variety of program options. With the support of a state representative, Michigan created the Bipartisan Care Caucus in 2017 to advocate for LTSS care and finance reforms. … Legislation was introduced in the 99th Legislature (2017-2018) to require a feasibility study on a variety of LTSS finance and workforce reform proposals, including an actuarial study of a social insurance model. … Stakeholder listening sessions, the actuarial analysis, and a workforce analysis are in process. … The study is due to be completed before December 1, 2020 and delivered to the legislature within 60 days of the study completion date.” (p. 17)

LTC Comment: More bureaucratic and legislative wheel spinning with no clue why the problems they are trying to fix exist in the first place.

LTSS Report: Minnesota’s “reform approach is unique in focusing on options to enhance affordable private market solutions for middle income families. … For many years, Minnesota has focused on raising consumer awareness of the need to plan for LTSS needs and building better private LTSS financing vehicles to meet the needs of the middle-income market. … The first product is called LifeStage, a term life insurance policy that converts into long-term care insurance coverage when someone reaches the ‘policy conversion age.’ … The second product seeks to add expanded coverage for a package of home and community services to Medicare supplemental health policies sold in Minnesota.” (p. 18)

LTC Comment: Finally, a state that is trying to make personal responsibility and private insurance work. What Minnesota needs to understand is that what has kept them from fully succeeding with that approach are myriad federal Medicaid laws and regulations that prevent them from targeting Medicaid to the needy so that middle class and affluent people have a stronger reason to plan for long-term care before it’s too late for anything but Medicaid to save their wealth. Instead of celebrating Minnesota’s more thoughtful approach, the LTSS Report tells us that …

LTSS Report: “the Governor appointed a Blue Ribbon Commission to study LTSS finance reforms for Minnesota that go beyond these private sector product options. The commission’s work is about to commence and a number of stakeholders are interested in exploring social insurance options including a program to provide catastrophic coverage for individuals with long-duration LTSS needs.” (p. 18)

LTC Comment: So even in a state that gets it, that understands personal responsibility and private markets are the key to solving the long-term care problems government created, the LTSS reporters still think what Minnesota really needs is a Blue Ribbon Commission with stakeholders pushing social insurance programs.

LTSS Report: “With the passage of the Washington State LTC Trust Act in 2019, Washington became the first state in the country to establish a social insurance program for LTSS. … Premium collection for the LTSS program is scheduled to begin in 2022, with full program implementation in January 2025. The LTSS program will be available to all employed state residents (including those who are self-employed); it is funded through a mandatory employee payroll tax of 0.58%. The program reimburses expenses up to $100 per day (with annual adjustments for inflation) for care provided at home, in the community and in care facilities, up to a lifetime dollar maximum of $36,500. All workers who contribute to the program become eligible for benefits after an initial vesting period and once they meet eligibility requirements based on functional or cognitive impairments.” (p. 19)

LTC Comment: Washington’s program is the LTSS Report’s pièce de résistance. It has everything. Government control; mandatory participation; no premiums until 2022; a payroll tax; and a vesting period before outlays begin. CLASS redux? No, CLASS was voluntary. You could escape CLASS; not this program. Unfortunately for its supporters, this program will never pay a dollar in benefits. It will hit a brick wall of fiscal reality probably before any premiums are paid and certainly before anyone vests. Washington’s experiment with state-based LTC social insurance was doomed from the start but the Covid-19 pandemic, the worsening recession, and irresponsible federal monetary and fiscal policies sealed its fate earlier than otherwise.

LTSS Report: “The uniform view was that ‘success’—defined by an ability to form and sustain a coalition, articulate a common goal, and (for states further along in the policy development process) identify and/or implement a specific approach or program—depends on effectively developing, mobilizing and channeling ground-level demand for policy change.” (p. 21)

LTC Comment: Is it any wonder none of these initiatives will succeed when they’re grounded in bureaucratic claptrap like that? What’s really going on here is that these researchers and the stakeholders they interviewed have closed their minds to any facts or analysis that conflict with their social insurance ideology. That ideology embraces the Marxist precept “from each according to his ability to each according to his need.” Its fatal flaw is that ability is scarce and need always devours any available ability. Human nature rebels at self-sacrifice. Sacrificing ability to need, the philosophical foundation of social insurance, destroys ability without satisfying need. Thus good intentions pave hell. Using government force to compel participation in idealistic social insurance schemes is ironically what made long-term care so bad in the first place and why it keeps getting worse.

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Updated, Monday, August 10, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-032: LTC NEWS AND COMMENT

COVID-19 May Fix GE's Long-Term Care Problem
Bullish Investors Still Targeting Investment Returns Above 10%
COVID-19 long-term toll signals billions in healthcare costs ahead
What We Know About Provider Consolidation
Baby boomers show concerning decline in cognitive functioning
68 Million Americans Are Changing Their Retirement Plans
COVID-19 could lead to billions in long-term healthcare costs: experts
Despite PPE, healthcare workers face greater risk of positive COVID-19 test
After COVID-19: A Health Care Forecast for Older Americans
Approximately 95% of Green House homes have reported zero cases COVID-19 among residents or staff: study

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Updated, Monday, August 3, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-031: LTC NEWS AND COMMENT

Building The Long-Term Care System Of The Future: Will The COVID-19 Nursing Home Tragedies Lead To Real Reform?
Genworth Paid $10 Million in Q2 COVID-19 Life Insurance Claims
It’s ‘never too late’ to prevent or delay dementia, international commission claims
Mourning The Many Foibles Of Medicare And Medicaid At 55
COVID-19 Increased LTCI Claimant Mortality 30%: Unum
Scientists get closer to blood test for Alzheimer’s disease
Senior Living Providers Net At Least $252 Million in Small PPP Loans
The COVID-19 Downturn Triggers Jump in Medicaid Enrollment
Flu and pneumonia vaccinations linked to lower Alzheimer’s incidence
New Report: Exploring LTSS Social Insurance Strategies in 6 States
Whole Life Insurance … Love It or Leave It?

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Updated, Friday, July 31, 2020, 9:00 AM (Pacific)

Seattle—

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LTC Comment: Guest author Claude Thau explains how to improve Medicaid LTC after the ***news.***

*** DEBT CLOCK: U.S. national debt is approaching $26.6 trillion. Average debt per citizen is $80,506, $213,277 per taxpayer and $252,788.84 per family. Unfunded liabilities, including $20.6 trillion for Social Security (over 75 years, but $53 trillion over the infinite horizon) and $31.9 trillion for Medicare, total $153.6 trillion. The Federal Reserve has printed trillions of new dollars unsupported by new goods and services. The pandemic removed all stops on federal spending. Inflation hedge gold and silver prices soar. Yet, as we’ll report next time, analysts know nothing to propose for the long-term care problem besides more government spending, borrowing, printing and regulation. ***

*** WHY JOIN THE CENTER?: The Center for Long-Term Care Reform’s mission is to “ensure quality long-term care for all Americans.” We pursue that goal by conducting research, publishing analysis and recommendations, supporting good public policy, opposing bad policy, and helping everyone who works in long-term care stay on the forefront of professional knowledge and expertise. Find hundreds of our articles, speeches, and reports here. Read 1,285 LTC Bullets, archived chronologically and by topic here. Take our virtual tour of the Center's website here. Review our “Membership Levels and Benefits” schedule here. Regular members ($150 per year or $12.50 per month) receive our LTC Bullets and weekly LTC E-Alerts plus access to our Members-Only Website (The Zone), which is full of special resources including the comprehensive “Almanac of Long-Term Care.” Premium members ($250 per year or $21 per month) receive all of the above plus a subscription to LTC Clippings, our daily alerts pointing you to key articles, reports, or data that LTC professionals need to know before they’re barraged by questions and objections from their prospects and customers. Any individual or corporate member of the Center also has access by phone or email to Center president Steve Moses for questions or comments regarding all aspects of long-term care services and financing. ***

LTC BULLET: HOW TO IMPROVE MEDICAID LTC

LTC Comment: What’s right about Medicaid long-term care? What’s wrong? And what should we do about it? Today, we turn over the editorial reins to one of the LTC insurance industry’s leading lights, author, analyst, actuary, and broker general agent Claude Thau. After Claude has his say, I’ll chime back in with an LTC Comment anticipating and answering criticism his proposal is likely to elicit.

The Medicaid long-term care program is complicated. So here’s a brief set up for Claude’s piece:

Medicaid is a means-tested public assistance program; in a word, welfare. To qualify for Medicaid’s long-term care benefits, people must meet defined medical and financial qualifications. The financial qualifications sound very strict—monthly income of $723 or below and no more than $2,000 in countable assets. But in practice, there is no limit on income as long as a Medicaid applicant’s health and LTC expenses are high enough. Most of seniors’ large assets, such as home equity, are exempt, and the rest are easily converted to exempt status. As a rule of thumb, any medically needy senior holding virtually unlimited exempt assets who has income below the cost of a nursing home can qualify anywhere in the country for Medicaid LTC benefits.

That is why Medicaid’s estate recovery requirement is so important. It ensures that affluent people pay back the cost of their care from their estates after they and their last surviving exempt dependent relative pass on. Without estate recovery, Medicaid rewards recipients’ heirs with a taxpayer financed windfall, not for taking care of their parents, but for placing them on public assistance. As Claude points out, the right way to look at generous Medicaid long-term care eligibility tempered by estate recovery—or a private loan program that could serve the same purpose—is to view it as an excellent way to fund long-term care for people who need it, give them the dignity of staying off welfare (it isn’t welfare if you pay it back), and ensure that the public program does not disincentivize early and responsible long-term care planning through private savings, investment and insurance. For a full explanation of Medicaid long-term care benefits and eligibility, see Medicaid and Long-Term Care.

Medicaid Long-Term Care Reform Suggestions
by
Claude Thau

Medicaid is a wonderful program. In particular, it makes commercial long-term care services and support (LTSS) available to indigent people.

It is critical that we take steps to enable Medicaid to continue to provide such service. These steps include:

Encouraging non-indigent people to take personal responsibility for their LTSS costs, including, but not limited to, planning in advance

Using available resources most effectively to reduce the burden on Medicaid

Encouraging states to test ideas to help Medicaid

Aspects of the current Medicaid LTSS system

In addition to serving the indigent, Medicaid supports people who are not indigent. If people had to sell their homes to pay for LTC, and then recovered, they could not go back home. Therefore, we pay their LTSS costs, expecting to recover our expenditure from their estate, as required by OBRA 1993 (i.e., we loan them money).

Not only do we pool our money to provide such a loan, we provide that loan on an interest-free basis! And it is a long-term loan, as it does not require repayment until the care recipient dies. If the recipient’s spouse is living in the house, the loan does not have to be repaid until the spouse dies. If disabled or minor children live in the house or if adult children who were caregivers for a couple of years live in the house, the loan continues until they die or sell the house. If siblings were living in the house for at least a year before the care recipient entered a nursing home, the loan extends until their death.

Medicaid reimbursements pay LTSS providers less than the cost of LTSS. At best, they pay marginal costs without contributions to overhead and profit. When budgets are tight, state legislators and governors may slash such payments even further. Meanwhile government pushes provider costs upward with a variety of mandates, such as quality controls, mandatory staff training, etc.

With low reimbursements, LTSS providers cannot pay a competitive salary. So when they train staff, the newly-trained person often secures a higher-paying job in a hospital or elsewhere. The vacancy reduces the quality of care in the facility, and the facility incurs cost hiring a new employee, who typically is less experienced than the person who left.

LTSS providers may suffer 100% annual turn-over, which means some jobs turn over more than once; others not at all. Their best employees leave as they are most in demand, but providers get stuck with their hiring mistakes. Surely, good managers would fire weak performers, right? Unfortunately, it is not easy to fire anyone when you are understaffed. As time goes on, the labor pool quality, as regards caregivers, likely deteriorates. Even outstanding nursing home managers have an extremely difficult time providing excellent care in such an environment.

Private-pay LTSS recipients in Medicaid-certified facilities get “taxed” in three ways to support this system: 1) they pay income taxes to support Medicaid; 2) they pay higher fees to LTSS providers (subsidizing the costs of Medicaid recipients); 3) they can suffer from inferior care in facilities which have many Medicaid clients.

Therefore, some savvy private payors now avoid Medicaid-certified facilities. Instead of being seen as a badge of honor, Medicaid “certification” may be viewed by some people as a public announcement that cost transfer will occur and that care might be inferior.

When our government seeks loan repayment from the Medicaid beneficiary’s estate so that we will be able to loan the money to another individual who needs LTSS, some people bewail the plight of “poor Sarah” who wanted to leave her house to her children, but whose estate had to sell the house because it was partially encumbered by a government lien.

Of course, recouping payments from indigent welfare recipients sounds harsh. However, Sarah and other home-owners were not indigent. We all gave Sarah a 20-year interest-free loan; all we are trying to do is to recover the principal (no interest) so that we can lend the money to someone else.

Encouraging non-indigent people to take personal responsibility

Providing such loans is marvelous, but such loans should be provided through programs outside Medicaid, some of which already exist but suffer from having to “compete” against Medicaid.

When we provide such loans through Medicaid:

a) Recipients feel uncomfortable being "on welfare." They have scrimped and saved to maintain their independence since their youth. Why should they be placed on a welfare program when they are not indigent?

b) On Medicaid, they are restricted to Medicaid-certified LTSS providers. They cannot select the facility of their choice; nor can they have a private room; nor can they select an assisted living facility, commercial home care or reward relatives or friends for providing care. Eventually, they’ll be paying for the services with their money. Why should their use of their money be restricted?

c) Nursing homes, receive inadequate government reimbursement, so they cannot afford to pay competitive salaries. Shouldn’t providers receive full cost for clients who are not indigent?

d) The government loses revenue and incurs greater expenses.

We can improve this situation by not putting people on Medicaid if their assets could fund their LTSS. Instead, such loans could be financed privately. This simple change would have dramatic impact:

1. Such care recipients would no longer be upset that they are "on welfare."

2. They would have flexibility to purchase the kind of care they want, from whomever they want (instead of being assigned shared rooms in nursing homes perhaps not located conveniently for family visits).

3. Many more care recipients would remain “private payors” rather than being on Medicaid. Providers would benefit from the resultant higher fees.

4. State and federal governments will benefit from lower expenses and more revenue, that is both above-the-line and below-the-line benefits!

5. People’s buying decisions would encourage consumer-driven efficiency in the marketplace. Consumer choice and increased profitability (due to fewer low-margin Medicaid clients) would encourage more private investment in LTSS, creating more jobs and better services.

6. Improved care for LTSS recipients would ease burdens on family members, enabling them to maintain employment and productivity more effectively.

7. The additional provider revenue would lead to reduced cost transfer (less need for private-pay clients to make up for the low revenue generated by Medicaid LTSS recipients) and improved care.

8. As everyone expects to have to repay a loan, we avoid the problems of "repaying Medicaid" and "government liens."

Making such a change to Medicaid would reduce state government expenditures in several ways:

a) There will be many fewer people on Medicaid, so Medicaid payments for LTSS will decrease substantially (benefitting the federal government as well as the state government).

b) Additional savings accrue from not having to determine whether such people are “Medicaid eligible.”

c) The cost of processing their Medicaid payments disappears.

d) The entire administrative effort for recoveries can be dropped.

In addition to the substantial savings in expenses mentioned above, there is an increase in revenue!

The additional income of LTSS providers will be taxable, directly if they retain the money or through their staff if their staff’s salaries are increased.

More people will opt to purchase long-term care insurance (“LTCi”). To the degree that more people buy LTCi, insurers will pay state premium taxes and federal income taxes.

Insurance brokers will pay state and federal income taxes on their commissions.

Residents who use insurance money (rather than personal income or assets) to pay for LTSS will retain greater invested assets which will generate income taxes.

More people will opt for reverse mortgages. Commercial lenders and reverse mortgage brokers who participate in the resultant increase in reverse mortgages will also pay income taxes.

All of the above, except the investment income, involve an additional circulation of money through our nation’s economy, producing additional government income with no offset. Such revenue is significant.

The State also benefits because there will be more investment in LTSS and more consumer control over selection of their LTSS provider. Because of better quality LTSS, some family members are likely to be able to continue to be gainfully employed, thereby generating additional taxable income. In other cases, there will be more incentive for family care-giving.

The National Council on Aging reported that 48% of households headed by someone age 62 or older could get a reverse mortgage, for an average of $72,128/year.^{^[1]} That would go a long way toward reducing our Medicaid LTSS budget. The Center for Long-Term Care Reform estimates that $30 billion could be saved annually.^{^[2]}

Thus, my #1 suggestion for Medicaid Reform is to discontinue giving loans through Medicaid. Shift such loans to programs established for the purpose of providing loans.

Of course, we could also encourage personal responsibility by making it harder to reposition assets in order to qualify for Medicaid LTSS and by promoting LTCi, reverse mortgages and personal savings. One attractive idea is to permit tax-free and penalty-free withdrawals from retirement savings accounts to purchase LTCi. Another would be to allow reverse mortgages for ages under 62, perhaps with restrictions (such as spousal approval).

Using available resources most effectively to reduce the burden on Medicaid

Currently, life insurance policies with cash value greater than $1500 must be surrendered for their cash value, which must then be spent down, prior to obtaining Medicaid LTSS.

However, those policies are generally worth significantly more than their cash value because the life expectancy of the insured person is relatively short. The greater value can be accessed by creating an irrevocable LTSS account or by selling the policy on the secondary market.

For example, according to “The Treatment of Life Insurance as an Unqualified Asset for Medicaid Eligibility”: “By converting an existing life insurance policy to a long term care Assurance Benefit plan, the owner is spending down the asset towards their cost of care in a Medicaid compliant manner while still preserving a portion of the death benefit. If the insured passes away while spending down via their Assurance Benefit enrollment, any remaining death benefit would pay out to the designated beneficiary without being subject to Medicaid recovery.”

We should attempt to leverage the true value of such insurance policies. In that vein, the National Conference of Insurance Legislators (NCOIL) supports requiring life insurers to inform policy owners about options to consider instead of abandoning an in-force policy. Regardless of whether someone supports such legislation or not, some type of education to help people stay independent and to save Medicaid money is desirable.

This option also allows the owner to preserve a portion of the death benefit throughout the spend-down period, protecting it from Medicaid Recovery legal action against the estate.

Another way to use existing resources more efficiently would be to enact measures that would reduce the cost of liability insurance for LTSS providers. Tort reform could help boost our economy in several respects, well beyond simply the cost of LTSS.

A third way to use available resources more efficiently might be to facilitate use of under-utilized housing for LTSS. For example, many widows took care of their husbands, thereby developing LTSS expertise and now live in an otherwise-empty house with time on their hands and perhaps low income. If neighbors could access these people’s caregiving expertise, we might improve care while reducing expenses.

Encourage states to test ideas to help Medicaid

It may also be a good idea to allow states more freedom to obtain Medicaid waivers to try programs to encourage personal responsibility, reduce costs and leverage resources more effectively. For example, it would be great to find that a package of reform measures stabilizes the system sufficiently to allow Medicaid to pay for more home health care.

Summary

We need to continue to provide LTSS to the indigent and should attempt to improve the quality of that care. Medicaid reform is a topic that deserves a lot of attention. This paper supports the following changes:

Continue to provide loans to people who need LTSS but lack liquid assets, but do so through existing (or new) private lending programs rather than through Medicaid.

Allow withdrawals from qualified retirement accounts to purchase LTCi, without incurring taxes or penalties.

Encourage leveraging the value of life insurance policies rather than having them surrendered for their “cash value.”

Allow reverse mortgages for ages under 62, perhaps with restrictions (such as spousal approval).

Encourage more discussion of ideas to accomplish these goals, such as making it harder to reposition assets in order to qualify for Medicaid LTSS; support and promoting LTCi, reverse mortgages and personal savings; tort reform; and accessing the LTSS skill of people who provided LTSS to a family member until the family member’s death and now have time available to provide care to others.

Grant greater freedom to states to experiment with programs consistent with these goals.

These simple changes would have dramatic impact:

a) Care recipients with assets would no longer perceive themselves as “being on Medicaid.”

b) Care recipients would have greater control and flexibility with respect to the care they receive.

c) More care recipients would remain “private payers” rather than being on Medicaid. Providers would benefit from the resultant higher fees.

d) Providers will flourish, resulting in more investment and innovation in the area of LTSS.

e) Family caregivers may be less-burdened, hence may be more productive, stimulating the economy.

f) Governments will earn more revenue, while also reducing their expenditures.

Republicans should support these ideas because they strongly favor personal responsibility and reducing unnecessary government involvement. Democrats should support these ideas because they focus our limited resources on helping the truly needy.

Claude Thau is National Brokerage Director for USA-BGA (cthau@usa-bga.com) and President of Thau Inc. (consulting; claude.thau@gmail.com). You can call him at 913-707-8863.

LTC Comment: Claude’s ideas are thoughtful and thought-provoking. I share them, but in my mind I can hear the strident objections coming from analysts and advocates who prefer more, not less, government money and regulation in long-term care. So here’s how I’d reply to some of those objections. For a comprehensive response, see Medicaid and Long-Term Care.

Objection: Despite anecdotes about the “wealthy on welfare,” that rarely happens. Most people on Medicaid are poor.

Response: Of course most people on Medicaid are poor. They’re also young women, children or able-bodied adults, not aged, blind or disabled. What matters is that financial eligibility rules for Medicaid long-term care applicants, who are aged, blind or disabled, are extremely generous, a vast literature on how to qualify while preserving assets is readily available, and an army of Medicaid planning attorneys helps even the most affluent fit through Medicaid’s elastic loopholes. In fact, there is plenty of evidence, as summarized in Medicaid and Long-Term Care that people with significant wealth actually do take advantage of these benefits in large numbers. Read it and see.

Objection: As Claude admits, Medicaid has a reputation as a poor program with serious access and quality problems. Why would well-to-do people seek access to a program like that?

Response: Medicaid isn’t such a bad program for people with enough personal wealth to pay privately for a while. Medicaid planning lawyers call that “key money,” because it buys access to the best care. Medicaid planners reassure adult children that it’s OK to take an early inheritance from their parents’ savings in order to qualify them for Medicaid, because they don’t have to worry about the horror stories they hear regarding Medicaid nursing homes’ poor quality. By paying privately for a few months, these affluent clients buy their way into the best facilities. Nursing homes roll out the red carpet for private payers because they charge them half again as much as Medicaid pays. Once in the nice facilities, residents can’t be evicted just because their payment source changes. So the lawyer flips a legal switch, converts the client to Medicaid, and the family gets the dual benefit of avoiding the cost of care and knowing the loved one is in a top quality nursing home. Unfortunately, poor people don’t have key money. They lose everything they’ve saved quickly and they end up in the 100 percent Medicaid hell holes the media write about. For details on “Medicaid estate planning,” including its techniques, availability, and why analysts and advocates ignore or downplay it, see Medicaid and Long-Term Care.

Objection: Home equity is by far the biggest potential source of private financing in Claude’s plan, but most older people receiving Medicaid long-term care benefits don’t own homes. So the potential is very limited.

Response: The key question is not how many people currently on Medicaid own homes. The right question is how many older people on Medicaid owned homes 20 years ago and what happened to that home equity? Was it transferred to heirs five years before applying for Medicaid, making it uncountable in any amount, as all the Medicaid planning lawyers and books urge people to do? It’s a wonder any home equity remains with people after they need long-term care. Yet GAO found that 31 percent of the Medicaid nursing home recipients in its sample owned homes. See Medicaid and Long-Term Care, p. 56 for details and the full citation. If the GAO sample were projectable to the country as a whole, which it is not, it would mean “887,598 Medicaid nursing home recipients nationwide or 275,155 recipients own homes with a median equity value of $50,000, [so] at least $13.8 billion worth of their home equity is non-countable, a figure that is 1.7 times the annual $8.1 billion cost of their care.” If this is true, it shows Claude’s proposal has very substantial savings potential. Granted we cannot depend on this particular study, but why aren’t scholars conducting research that is projectable nationwide? For the answer to that question and for an explanation of why analysts have ignored the larger phenomenon of Medicaid overuse by people with significant wealth, see again Medicaid and Long-Term Care.

Objection: Why in the world would we want to fix Medicaid when a much better approach to funding and providing long-term care is available? Just pass and implement a universal public catastrophic long-term care insurance program as proposed by several study groups.

Response: Government funding and regulation of long-term care caused the problems long-term care faces today. Medicaid and Long-Term Care explains in historical detail how that happened. Compelling Americans to buy government-designed insurance they may or may not need or want will only further desensitize the public to the risk and cost of long-term care. The greater probability we face is that government entitlements like Medicaid, Medicare and Social Security will succumb to financial dissolution rather than a new program appearing to cover long-term care. We need more thinking outside the box like Claude Thau’s and less regurgitating worn out policy themes by ideologically biased researchers.

[1] National Council on the Aging Press Release and Fact Sheet, "Use Your Home to Stay at Home(tm): Program Study Shows That Reverse Mortgages Can Help Many with Long-Term Care Expenses," April 15, 2004.

[2] LTC Bullet: Dual Eligibles and Long-Term Care: How to Save Medicaid LTSS $30 Billion Per Year and Pay for the "Doc Fix"; Friday, March 9, 2012

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Updated, Monday, July 27, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-030: LTC NEWS AND COMMENT

Pandemic-Driven Change: 60 Seconds with Steve Monroe
Temporary Enhanced Federal Medicaid Funding Can Soften the Economic Blow of the COVID-19 Pandemic on States, but is Unlikely to Fully Offset State Revenue Declines or Forestall Budget Shortfalls
New study reveals older adults coped with pandemic best
Biden Makes Big Commitment To Home-Based Medicaid Long-Term Care, But Gaps Remain
Older adults excluded, underrepresented in clinical trials for COVID-19
Take the insurance coverage and risk COVID-19?
Ten Targets for Reducing Alzheimer's Risk
Now Available: 2019 Profile of Older Americans
Another Problem On The Health Horizon: Medicare Is Running Out Of Money
More REM Sleep Needed to Reduce Mortality Rate in Older Adults
Elderly who distinctly smell roses, paint-thinner or lemons 'have half the risk of dementia'
Senior living needs ‘substantial and immediate financial relief’ from COVID-19, leaders tell federal government
Home Health in the Time of COVID-19

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Updated, Monday, July 20, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-029: LTC NEWS AND COMMENT

The case for defunding nursing homes and replacing them with a radically different model
Joe Biden Is Slowly Acknowledging the Nation’s Need To Reform Long-Term Care
Millions of Seniors Live In Households with School-Age Children
Survey: 80% of Older Adults Have Faced Ageism
Nursing facilities in ‘hot spots’ to receive first batch of COVID-19 test equipment
Federal Government Will Send Point-of-Care COVID-19 Testing Units, Kits to All Nursing Homes in U.S. [Updated]
Journal Special Edition Dedicated to COVID-19 and Older Adults: Lessons From the Pandemic
Regulators May Hire LTCI Block Extraction Advisor
Woman gets job at long-term care facility to see her husband amid pandemic restrictions
States Allow In-Person Nursing Home Visits As Families Charge Residents Die ‘Of Broken Hearts’
Medicare Advantage Plans Increase, Improve Quality Over FFS Plans
Andrew Cuomo’s Report on Controversial Nursing Home Policy for COVID Patients Prompts More Controversy

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Updated, Friday, July 17, 2020, 9:00 AM (Pacific)

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LTC BULLET: THE CRISIS ON TOP OF THE CRISES

LTC Comment: What could be worse than the current cataclysm of nursing-home coronavirus deaths? More of the same if we keep doing what caused them. Explanation after the ***news.***

*** THE DEBT CLOCK shows the U.S. national debt exceeds $26.5 trillion, up more than another quarter trillion dollars since our last LTC Bullet nine days ago. Total unfunded liabilities, including $20.6 trillion for Social Security and $31.9 trillion for Medicare, are $153.3 trillion. Every citizen owes $80,387. The federal budget deficit was $2.7 trillion in the first nine months of fiscal year 2020. Where is the federal government getting all this lucre to spend? It’s printing the money, creating it out of thin air, and borrowing it by purchasing its own and private companies’ bonds, even their junk bonds. At some point, maybe not far off, printing more money won’t work because more money will no longer buy the same quantity of goods and services which are not being produced because of the lockdown-induced recession. Borrowing more won’t work because our own people, foreigners and other countries will lose confidence that America will ever be able to repay the loans, which it can’t. They’ll stop lending to us. Higher taxes won’t help because they would only stymie the real economy even further. In the end, inflation—the most grievous tax of all—will wipe out most government and private debt, effectively confiscating most private wealth held in dollars. Borrowers benefit; savers suffer. That is the danger of the course we are on. ***

*** THE TRAGIC IRONY of the Covid-19 crisis is that government responded by locking down the businesses and people least vulnerable to the virus while exposing the most vulnerable of all, residents in nursing homes, to sick and recovering patients from overburdened hospitals. For months, nursing homes begged for more personal protective equipment, testing, and funds to little avail. But as we pointed out in this LTC Clipping, that’s finally beginning to change.

7/16/2020, “Nursing facilities in ‘hot spots’ to receive first batch of COVID-19 test equipment,” by Alicia Lasek, McKnight’s LTC News

Quote: “Nursing homes with three or more COVID-19 cases will be the first to receive on-site diagnostic test equipment from federal health agencies — starting in regions where infections are spiking. The news was announced Wednesday by the Centers for Medicare & Medicaid Services, a day after Administrator Seema Verma revealed a new federal plan to deploy rapid point-of-care COVID-19 testing capabilities to eldercare facilities nationwide.”

LTC Comment: Harvard professor David Grabowski found that nursing home coronavirus deaths were highest in geographic areas with the highest Covid-19 incidence. Other factors, such as Medicaid census or for-profit status, didn’t seem to matter much. Businesses have to prioritize. Governments rarely do. So this new focus on protecting nursing home residents in high virus areas is a promising development. See tomorrow’s LTC Bullet titled “The Crisis on Top of the Crises” for more on this aspect. [Read it today below.]

To receive LTC Clippings in real time, join the Center at the “Premium” level. Steve Moses will become your research assistant. He reads everything related to long-term care services and financing; he culls out what’s most important for you to know; then he emails you with the title, author, a representative quote, a link to the source, and his brief analysis. In this way, you can stay abreast of all the news, reports, articles, data and stories about LTC that you need to know without having to do so much research yourself. Spend your time doing what you do best; let Steve do the time-consuming, painstaking research. Contact him at 425-891-3640 or smoses@centerltc.com or simply join here. ***

LTC BULLET: THE CRISIS ON TOP OF THE CRISES

David Grabowski is everywhere these days describing and explaining the Covid-19 disaster in nursing homes. The Harvard professor aptly documents how an epidemiological crisis on top of a long-term care financing crisis has devastated America’s nursing homes and the people who depend on them. But there is another crisis on top of those two, which poses greater danger than either. That is the risk and likelihood that public policy will make these problems worse instead of better.

Dr. Grabowski observed in a recent presentation that “deaths in long-term care facilities account for a majority of COVID-19 deaths in most states.” The US average is 45%, close to the OECD average of 42%. I note that Canada is even worse with 80% of coronavirus deaths in nursing homes. To stem this viral tide, U.S. nursing homes locked down, allowed no visitors, closed communal dining, and took staff temperatures at the start of each shift. Yet 66,000 staff with very limited personal protective equipment, testing, hazard pay, benefits, and sick leave, contracted the virus. Hundreds have died doing these very dangerous jobs.

What caused this awful situation? Grabowski says it’s a combination of things: low Medicaid reimbursement; poor staffing and infection control; clinicians “missing in action”; ineffective regulations; lack of quality transparency; and fragmented ownership structures. I’d summarize in one word—government—because government is responsible for all of these shortcomings including the “fragmented ownership structures” that private sector firms set up to take advantage of the perverse financial and operational incentives that public policies require.

Now consider Dr. Grabowski’s counter-intuitive research findings. Covid-19 nursing home deaths do not correlate with a higher or lower rating on CMS’s nursing home compare five-star quality rating scheme, nor do they correlate with having a prior infection violation, nor with whether a facility is for-profit or part of a chain. Even a high Medicaid census, despite that program’s notoriously low reimbursement and poor facility staffing levels, doesn’t signal greater nursing home virus risk. Grabowski summarizes that what matters is where you are—in geographic areas with higher Covid incidence—not who you are—such as a Medicaid recipient in a low quality nursing home. Bottom line, residing in a nursing home during the coronavirus contagion is deadly. It’s just more deadly if you live in an area with a higher incidence of Covid-19 in the local population.

So, we can extract two key points from Dr. Grabowski’s analysis. First, government funding and regulation of long-term care are responsible for the problems, such as poor funding, staffing, infection control, and quality, which killed so many people in nursing homes. Second, residing in a nursing home is dangerous during the contagion and much more so if your nursing home happens to be in a geographic area heavily stricken by Covid-19. How can we address both of those problems effectively?

The obvious answer is to divert people away from nursing homes as much as possible in the future. But that just begs the larger question: Why are so many people living in nursing homes in the first place, sharing underfunded “semi-private” rooms with potentially contagious roommates? The answer to that question is that Medicaid started making nursing home care virtually free for the poor, middle class and affluent in 1965 and has continued to do so ever since. Efforts to rebalance Medicaid from institutional to home care have partially succeeded but totally failed to save money as they were intended and expected to do. The only permanent answer is to end the perverse incentive of easy access to Medicaid long-term care after it is too late for people to save, invest or insure for the risk. To do that, save Medicaid money, improve care, and support more people in their own homes requires only clear thinking, objective analysis, and better public policy. I’ve provided those in Medicaid and Long-Term Care.

Thus the “crisis on top of the crises” is that we’ll keep doing what we’ve always done, which has caused the human tragedy in nursing homes that we’re now experiencing, and we’ll get ever more of the same. Instead, stop trapping people in Medicaid nursing homes by luring them away from early and responsible long-term care planning. Eliminate or radically reduce Medicaid’s gargantuan home equity exemption, upwards of $900,000 in some states but no less than $595,000 in any state, so that middle class and affluent people will use the wealth in their homes to fund care leaving more in Medicaid for the actually needy. Enforce estate recoveries, which have been mandatory since 1993, but largely unenforced. Use some of the savings to incentivize the purchase of private long-term care insurance. Legislate, implement and enforce these and the other recommendations in Medicaid and Long-Term Care.

The only good news in this whole tragic mess is that it has been self-inflicted by terribly counterproductive public policy and could be easily reversed with the better, more efficacious policies we’ve identified and recommended in that monograph.

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Updated, Monday, July 13, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-028: LTC NEWS AND COMMENT

BREAKING NEWS: CMS directing ‘immediate’ help to nursing homes in COVID-19 ‘hotspot’ areas
Insurance getting much more expensive, when it’s available
Medi(long-term)care for All: A Look into the Future of Long-Term Care Insurance—Part Two
Nevada lawmakers consider slashing millions in Medicaid services
This Threat Scares Investors More Than the IRS: Lincoln Financial
Why Nursing Homes Are Pandemic Hotbeds (Guest: Stephen Moses)
Milliman Actuary: COVID-19 Adding Fuel to Medicare Advantage’s Home Care Fire
Covid-19: Don’t Mess With My Retirement
Skilled Nursing Occupancy Fell to 78.9% in April as Medicaid Rates Jumped 5%
State Regulators May Form LTCI 'Rate Hike v. Reduced Benefits' Panel
COVID-19 has not changed consumer sentiment toward seniors housing: survey
Employee spread — not controversial admission policy — was driver behind COVID-19 deaths, report finds

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Updated, Monday, July 6, 2020, 8:51 PM (Pacific)

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LTC BULLET: WHAT TOPICS AND SPEAKERS DO YOU WANT FOR THE NEXT ILTCI?

LTC Comment: Wouldn’t a debate on the merits and potential of private vs. public long-term care financing spice up the next ILTCI conference? Offer your own suggestions to the event’s organizers after the ***news.***

*** THE DEBT CLOCK shows the U.S. national debt will soon exceed $26.5 trillion, up nearly another quarter trillion since our last Bullet ten days ago. Total unfunded liabilities, including $20.6 trillion for Social Security and $31.8 trillion for Medicare, are $153 trillion. Every citizen owes $80,285. At the rate we’re going, this 2024 version of the Debt Clock estimates the debt four years from now will be $45.3 trillion with unfunded liabilities of $199.4 trillion on a debt per citizen of $131,857. So eat, drink and be merry until the bill comes due for this paroxysm of funny money printing and spending by the Federal Reserve and Treasury. ***

LTC BULLET: WHAT TOPICS AND SPEAKERS DO YOU WANT FOR THE NEXT ILTCI?

LTC Comment: The coronavirus curveball ruined all our plans to learn and network at the 2020 Intercompany Long-Term Care Insurance conference. After fighting to save the program, the ILTCI Executive Committee finally had to surrender to hard reality and cancel. But the ILTCI conference is back on for Monday, March 8, 2021 through Thursday, March 11, 2021 at the same Sheraton Downtown venue in Denver, CO where we would have met this year.

The 2021 convocation will be ILTCI’s 20^th, so it is special. To mark the occasion, organizers have appealed to all potential attendees for their suggestions of “topics or content” to present and of speakers to address them. I don’t recall such a general invitation having been made before. It’s a great idea. I hope everyone will rack their brains and pour their recommended ideas in to the organizers. Here’s their appeal:

“Planning for the ILTCI Conference is underway and we can't wait to see you in Denver, Colorado from March 8-11, 2021. But first...

“We need your help with planning!

“What topics or content do you want to hear about? Have you thought of a session topic or speakers you'd want to present at the next ILTCI? This is your opportunity to help shape the 2021 conference! If you want to offer your assistance in producing or speaking at a session, this is also the time to raise your hand and get involved. Session ideas are being generated now and we want to make this a collaborative process with your feedback.

“Please complete this quick 4 question survey and enter one session idea or speaker suggestion at a time through this simple tool. There will be a link to enter additional ideas at the end of the survey for anyone with multiple ideas/speakers to submit. We know you have some good ideas for session content and topics - send them in and let’s collaborate for the 2021 ILTCI.”

Submit your Ideas

At my request organizers agreed to extend the deadline for submitting your content and speaker recommendations from the original deadline of Friday, July 10 until Tuesday, July 14. So, don’t wait—click “Submit your Ideas” now and offer your suggestions.

To spur your creative thinking about possible conference ideas, review the “History of Long-Term Care Conferences” that we published last year. You’ll find summaries of each ILTCI conference including the first, held January 21-23, 2001 in Miami. You’ll also discover some old photos of some LTCI leading lights who are still active in the field today, some with less hair and more heft, but still loaded with institutional memory and savvy. No one concerned about long-term care financing should miss the opportunity to confer with the long-term care insurance industry’s leaders at the 2021 ILTCI conference in Denver.

Now, while you cogitate, decide and submit your ideas for topics and speakers at the forthcoming conference, please consider my hopeful proposal.

I love debates. There is no better way to get a lot of ideas on the table in a hurry with contrasting points of view compellingly revealed. Nothing culls out bad ideas and elevates good ones like two contrasting experts challenging each other’s positions. So let’s debate this question at the next ILTCI conference: “Can and Should Private Financing Become a Bigger Funder of Long-Term Care than Government?” I’ll take the positive and I invite any of the leading advocates of expanding publicly financed long-term care coverage to take the negative. I’d especially like to debate Marc Cohen, Judy Feder, or Howard Gleckman, but there are many others who could bring the case for more government money and regulation thoughtfully.

As format for the debate I recommend the structure used by the distinguished Soho Forum of New York City. For their programs, the audience votes yes or no on the question under consideration both before and after the debate. The discussant who changes the most minds wins. The debate begins with each discussant delivering a 15-minute opening statement. Then each has five minutes for rebuttal followed by questions from the moderator, from each other and from the audience. Five minute closing statements end the debate. After the votes are counted, the winner is announced. (By the way, since the pandemic has shut down in-person events, the Soho Forum has gone virtual. You can follow their debates in Zoom here.)

The ILTCI Conference has a long history of hosting debates. There were probably others, but these are the ones I recall distinctly and fondly:

At the fourth annual Society of Actuaries Long-Term Care Insurance Conference (the meeting’s name before ILTCI) in Houston, Texas on February 10, 2004, I squared off with Dr. Judith Feder, then Professor and Dean of Public Policy at Georgetown University. Winthrop Cashdollar, then the Executive Director for DI & LTCI at AAHP-HIAA, moderated. My assignment was to make the case for more private financing of long-term care. Dr. Feder argued for heavier public funding. My remarks at the time are available here. Judy Feder is a distinguished scholar and more active than ever today researching and promoting her preferred solutions.

In 2011, the CLASS Act was the hot topic at the eleventh annual Intercompany Long Term Care Insurance Conference in Atlanta. Peter Goldstein, then of Univita, now LTCG, moderated a program titled “Panacea or Problem: Point/Counterpoint on CLASS,” in which John Greene of NAHU and I debated Ted Kennedy-protégé Connie Harner and Rhonda Richards of AARP. Eileen Tell enforced time limits on the debaters. I’m not saying John and I won, but CLASS was later repealed. Check out my three-minute opening statement here where I proposed a CLASS-like program called “Steve’s Insurance, LTC for You” or SILY for short. It involved no policies, no underwriting, no set premium levels, benefits, or triggers; you’d pay premiums for five years before you’d qualify for benefits; I’d spend all the proceeds as soon as they come in, but our trust fund would have lots of IOUs, uh bonds. In other words SILY was just like CLASS.

But the pièce de résistance was the “Clash of Titans” at the 2012 ILTCI conference in Las Vegas. Here’s how I described that program at the time in “LTC Bullet: LTC Embed Report from the ILTCI Conference in Las Vegas”:

“Now to recount the most fun that was had at the conference. In the afternoon of DAY ONE, a great debate ensued titled “Clash of the Titans: Moses vs Gordon on Medicaid and Other Dark Matter.” Ably produced and moderated by Federal Long-Term Care Insurance Program [now FedPoint] CEO Paul Forte, the program included a dramatic “fight poster” inviting the audience to attend, slides featuring great debates of the past, e.g. Lincoln vs. Douglas, etc., and a dual-podium presidential-style debate format. Moses and lawyer/author/entrepreneur Harley Gordon each began with 3-minute opening statements. (Find a transcript of the “fable” I began with at the end of today’s Bullet or here.)

After a coin flip to see who would get the first question, Forte pummeled the combatants in turn with six queries ranging from why the LTCI market languishes to what they’d advise presidential candidates to say about LTC financing. Answers were strictly enforced to no more than two minutes, with a one-minute rebuttal, and a final 30-second “re-direct” by the original answerer.

The program moved fast with lots of humor and more than just a little gentlemanly confrontation. In the second phase of the debate, the participants asked each other questions, with the same time limits applying. Neither knew what the other would ask so the questions and responses were totally spontaneous. Finally, the audience submitted written queries pinning down the debaters with new and different viewpoints.

Bruised, bloodied, but upright, Moses and Gordon shook hands at the end and affirmed they remain friends. They look forward to continue pursuing their different paths toward the common goal to improve long-term care for all.

Who won? Just between you, me and the lamppost, here’s how LTCI producer and author Craig McCormick, a former college debater himself, scored the matchup: 13 to 4, for Moses. Now, I acknowledge that Mr. McCormick may have a bias in my favor. So I invite any of you faithful readers out there who may have attended the debate to weigh in with your own scoring of the event. I’d particularly like to hear from anyone who gave the win to Harley instead of me. Well, I want to hear from anyone except you, Harley! I’ll publish any thoughtful comments or analysis of the debate in a future LTC Bullet. Let us hear from you.

“The Elephant, the Blind Men and Long-Term Care: Three-Minute Opening Statement” by Stephen A. Moses for the Debate with Harley Gordon at The 12^th Annual Intercompany Long-Term Care Insurance Conference in Las Vegas, Nevada on Monday, March 19, 2012

Once upon a time, some blind men approached an elephant.

The first blind man grasped the elephant’s tail and exclaimed: “This is a rope.”

The next blind man patted the elephant’s flank and said: “This is the side of a barn.”

A third blind man clutched the elephant’s trunk and stated confidently: “This is a hose.”

The moral of this fable?

You don’t know any complex thing until you comprehend its entirety, including all of its facets and their interrelationships.

Long-term care is like the elephant in this story and LTC interest groups are like the blind men.

Government is a blind man of long-term care. It’s paid for most expensive LTC since 1965, but can no longer afford the cost. The elephant of LTC gobbles budgets.

The public is a blind man of LTC. Most people don’t worry about LTC despite the apparent risk and cost. Somehow the elephant of long-term care provides.

Senior advocates blindly demand more and better long-term care from the government. To them the elephant of LTC is a cornucopia of free benefits.

Home care and nursing home providers obsess over low government reimbursements. They see the elephant as a stingy, but demanding customer.

What do long-term care insurers see when they look at the elephant of LTC? A puzzle. Why don’t consumers buy the product when they obviously need it?

If you want to understand the elephant of long-term care, you’d better be able to explain why those five blind men see the elephant so differently.

How can the government be bankrupt; the public, asleep; senior advocates, naïve; LTC providers, spoiled; and LTC insurers, befuddled? All at the same time.

No new policy designs, nor tax incentives, nor education programs will sell more LTC insurance until we resolve that paradox.

Here’s how I see it:

Government pays for most expensive LTC which desensitizes consumers to LTC risk resulting in a lack of demand for LTC insurance. But senior advocates and LTC providers are hooked on government money and dubious of private LTCI.

Nothing will end this stalemate short of weaning the elephant of long-term care away from the trough of public financing.

That’s what’s about to happen, either on purpose or by default, and that’s why the future of LTC insurance is bright.

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Updated, Monday, July 6, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-027: LTC NEWS AND COMMENT

The Next Pandemic Will Be Caused by the National Debt. It Will Crater the Economy
Coalition forms to oppose potential long-term care budget cuts
OSHA blasted for inaction on COVID-19 pleas
Returning Home To Assisted Living
Genworth Says Would-Be Buyer Is Having Trouble Closing on Financing
Amid pandemic, fears that older Americans are feeling 'expendable'
Strong job growth predicted for aides and other care positions in senior living and other settings
Housing wealth among older homeowners grew by $120 billion in Q1: report
NIC point-in-time survey shows COVID-19 cases, testing higher in settings where residents have greater care needs
Long Term Care Insurance — Act Now!

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Updated, Monday, June 29, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-026: LTC NEWS AND COMMENT

New Data Reveal Just How Deadly Covid-19 Is for the Elderly
LTC Partners Announces Rebrand to FedPoint
Nursing Homes Struggle As Staff Choose Unemployment Checks Over Paychecks
CNA to Offer Some LTCI Insureds Free Concierge Services
‘Sin Taxes’ Could Help States in Pandemic Budget Slump (at Least a Little Bit)
National median age increases 1.2 years as aging baby boomers grow older
Long-term care facilities as a risk factor in death from COVID-19
Younger adults most interested in solutions to pay for chronic care as they age: survey
A third of Medicare enrollees with coronavirus ended up in the hospital. A quarter of them died
Are Your Long-Term Care Plans Putting You in Danger?
Better COVID payments driving Medicaid-resident evictions: report
Senior healthcare workers are the forgotten front line
The Future of Nursing Homes in the Post-COVID-19 Era
Older adults concerned about retirements, look to alternatives to pad portfolios: surveys

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Updated, Friday, June 26, 2020, 9:00 AM (Pacific)

Seattle—

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LTC Comment: The Heartland Institute recorded a podcast with Steve Moses concerning “Covid and Nursing Home Deaths.” A transcript follows after the ***news.***

*** DEBT CLOCK: The U.S. national debt is 26 trillion, 258 billion dollars, fully one quarter of a trillion dollars higher than it was when we published our last LTC Bullet two weeks ago. In that time, total unfunded liabilities jumped nearly $5 trillion. Every citizen owes $79,588 and every taxpayer owes $211, 222. We’re in a financial sinkhole, but the politicians just keep digging. What will happen if we stay on this course? Stay tuned. ***

*** THE MEDICAID TRAP remains where most people end up if they have a big long-term care expense and they’ve failed to prepare to pay privately. What’s changed recently is how serious the outcome of ending up on Medicaid for long-term care really is. That’s the topic of the following podcast and of “Nursing Homes, Coronavirus, and Medicaid,” my June 1^st Wall Street Journal op-ed with Brian Blase. If you’re in the business of helping people prepare for future long-term care liability, you owe it to your prospects and clients to warn them about this added risk of failure to prepare. To overcome their denial and procrastination, you need facts and arguments. You’ll find them in our LTC Bullets, LTC E-Alerts, and LTC Clippings. Join the Center for Long-Term Care Reform and we’ll keep you up to date constantly with the data, reports, and articles you need to wake people up and get them to take action. Join the Center here or contact Steve Moses at 425-891-3640 or smoses@centerltc.com. It’s too late for most people to avoid the Medicaid trap, but it’s not too late for the people you can reach with this information. ***

LTC BULLET: COVID AND NURSING HOME DEATHS

LTC Comment: Following is the transcript of a podcast recorded with Steve Moses on June 23, 2020 regarding the impact of Covid-19 on nursing home deaths. We expect to have a link to the actual recording soon. Heartland’s Health Care News publication will have a related story. We’ll send you a link to that as well in a future LTC Bullet. For now, here’s the transcript.

Date for recording: June 23

Time: 11am ET

Title: Why Nursing Homes Have Failed to Protect the Elderly from COVID

Hello and welcome to the Heartland Daily Podcast. I’m your host today, AnneMarie Schieber, managing editor of Health Care News. We now are learning that the pandemic in the U.S. has been a crisis for nursing homes. The Centers for Medicare and Medicaid Services reports of the 122,289 people who died from COVID-19, nearly 30 thousand lived in nursing homes…about 1 in 4.

My guest today is not surprised. Stephen Moses is president of the Center for Longer-Term Care Reform and author of the new book, “Medicaid and Long Term Care.”

Welcome.

1 . For most people, this is the first glimpse they have had of nursing home care in the U.S. That it is substandard at best… Is that an accurate and fair assessment?

Yes, I’d say that statement is accurate and recognized by most economists and other analysts. Medicaid reimburses nursing homes only about 80 percent of the private-pay rate and often less than the cost of providing the care, according to the American Health Care Association. Consequently, nursing homes heavily dependent on Medicaid have difficulty hiring and retaining enough quality caregivers at the very low salaries they can afford to pay. Having inadequate caregiving staff is closely associated with lower care quality ratings.

2. How many seniors live in nursing homes and how many are covered by Medicaid?

Roughly 1.3 million people reside in America’s 15,600 nursing homes. Medicaid covers 62 percent of them for some or all of their bills. Medicaid residents tend to be long-stayers, so their low reimbursement rates touch a much higher proportion of nursing home patient days than their total numbers alone would imply.

3. How is it that such a large percentage of seniors are covered by Medicaid long term care?

You have to look way back in history to answer that question. As in third world countries, long-term care was provided largely by extended families in the U.S. for most of our history. In the 20^th century, as people started living longer, the state and federal governments began offering cash benefits to the indigent. Old and frail citizens used that cash to pay for residential care as families became less able to provide full time home care. Mom and pop nursing homes flourished. By mid-century, government programs began providing residential care for the “medically needy,” that is people who weren’t poor except because of their high medical or long-term care costs. The commercial nursing home industry took off as a result.

In 1965, as part of the Great Society programs of Lyndon Johnson, Medicaid became the dominant long-term care payer. That’s when the problems plaguing the system today started. From the beginning, Medicaid paid only for nursing home care, but that benefit included room, board, laundry and related services. Anyone who wanted home care had to pay for it and the other services totally out of pocket. Medicaid long-term care eligibility was originally available to almost anyone who applied. Transferring assets to qualify was explicitly permitted until 1980. Since then elastic income and asset eligibility rules have allowed the middle class and affluent to qualify for what was originally intended to be a poverty program. There is literally no limit on income if your medical and long-term care costs are high enough. Assets are also practically unlimited with home equity exempt between $595,000 and $893,000. Many other resources are exempt with no dollar limit, such as a car, term life insurance, individual retirement accounts, one business including the capital and cash flow, personal belongings and home furnishings including heirlooms. Generous matching funds from the federal government encouraged state Medicaid programs to maximize their grants almost without limit. Naturally, Medicaid expenditures exploded.

From 1965 to the present, Medicaid has paid for the vast majority of all expensive long-term care. Few people plan to rely on Medicaid, but most end up there if and when they need high cost care for an extended period. The dynamic works like this. People don’t worry or plan for long-term care because Medicaid has always been there as the safety net for poor, rich and in between. Once they need expensive care, the path of least resistance is to qualify for Medicaid. That’s the only way to preserve wealth and heirs’ inheritances which makes the program’s access and quality downsides more tolerable. Thousands of elder law attorneys across the country use sophisticated legal techniques to qualify affluent clients while preserving enough “key money” to buy their way into the higher quality, lower-Medicaid-census facilities.

4. How much does Medicaid pay for long care and what should it reasonably cost?

According to Genworth’s 2019 cost of care survey, the average private-pay monthly nursing home cost for a semi-private room is $7,513, and $8,517 for a private room. Costs in expensive urban areas can easily be half again as much or even double. As Medicaid pays about 80 percent of the private pay rate, it would pay about $6,010 on average for a semi-private room. Medicaid would rarely if ever pay for a private room.

It is important to understand that most people on Medicaid have some sources of personal income, nearly always Social Security at least. Medicaid requires that all income except for a tiny personal needs allowance must be used to offset the program’s cost for their care. For example, a person with several thousands of dollars’ worth of income from Social Security, a private pension, an exempt business, etc. qualifies for Medicaid nursing home benefits because their income is less that the cost of the nursing home. But once on Medicaid, they must pay most of that income back to the nursing home reducing Medicaid’s liability. There are even cases where the Medicaid recipient’s income covers the entire cost of the care at the Medicaid rate. This is very important because it shows (1) that Medicaid recipients get a substantial discount on the cost of their care, (2) nursing homes end up with more low-pay Medicaid recipients and fewer higher-pay private patients which impairs their ability to provide quality care, and (3) state and federal Medicaid programs subsidize welfare dependency at the expense of nursing home providers’ financial viability.

5. Why do families want to subject their loved ones to long term care under Medicaid?

Medicaid is the only way to get long-term care for free or highly subsidized. People don’t worry about long-term care until it’s too late. At that point, the elder is usually very old, infirm and often demented. Adult children are making the decisions and they have a financial conflict of interest. Their choices: take Medicaid, put Mom or Dad in a nursing home, and preserve the estate for their inheritance. Or use the parents’ wealth to buy high quality home care or assisted living in the private market and end up with less for themselves or nothing. Medicaid planning attorneys assure their well-heeled clients (usually the “kids,” not the elders) not to worry about the horror stories regarding Medicaid nursing homes. They’ll hold back enough money to pay privately for a few months. Nursing homes are so strapped for revenue that they roll out the red carpet for private payers. This key money buys access to the best nursing homes with the fewest Medicaid beds. After a few months, the attorney flips the switch and, voila, Medicaid picks up the tab going forward. Tragically, poor people don’t have key money so they end up in the 100 percent Medicaid hellholes.

6. Tell us about market place for private long-term care and insurance for it,

I’ve often explained it this way: you can’t sell apples on one side of the street when they’re giving them away on the other. Easy access to Medicaid after the insurable event has occurred was the biggest obstacle to private long-term care insurance. But the federal government added insult to injury by artificially forcing interest rates to nearly zero making it impossible for insurance carriers to get adequate returns on their reserves. That forced the carriers to raise premiums which enraged policy holders and repelled future prospects. These government policies nearly destroyed the traditional long-term care insurance market, but the industry has adapted by offering so-called hybrid products that combine life insurance or annuities with a long-term care financing component. Still, private long-term care insurance of any kind will never become a major market until people can no longer ignore the risk, avoid the premiums, wait until they need long-term care and then shunt the liability off onto taxpayers.

7. Let’s talk about solutions we’ve been hearing about. Congress is already talking about investigations. I’d like to go over a few that have been mentioned so far

a. Better oversight

Won’t work. As the saying goes, you can’t make a silk purse out of a sow’s ear. More oversight, regulations, and penalties without enhanced revenue will only tie caregivers in more paperwork knots. If you keep up the beatings, don’t expect morale to improve.

b. increasing Medicaid reimbursement

Won’t work. Low Medicaid reimbursement is a symptom, not the cause of the long-term care market’s malaise. Pump more money into it and all you’ll end up with is a more expensive welfare trap diverting more people and resources from the private sector into dependency on public assistance.

c. home care

Tried and failed. State and federal Medicaid programs have attempted for at least two decades to divert recipients from nursing homes to home care on the theory that home and community-based care saves money. It doesn’t and hasn’t. Total institutional and home care Medicaid costs have continued to increase year after year in every state. On average and across the society, home care delays but does not replace nursing home care. Home care is desirable. It is a worthy goal. But it does not save money.

So what would work? Stop discouraging responsible and early long-term care planning. Stop making Medicaid available to virtually everyone after expensive care is needed and when it’s too late to save, invest or insure for future care. Eliminate or vastly reduce Medicaid’s huge home equity exemption so that people who need long-term care but have insufficient income to pay for it can use reverse mortgages to purchase high-quality home care or assisted living of their choice. Enforce Medicaid’s estate recovery mandate and use some of the savings to educate the public about long-term care planning and to incentivize purchasing private LTC insurance.

8. What does Congress need to do? What should individuals do to best prepare for long term care?

Congress should remove the perverse incentives in public policy that discourage responsible long-term care planning as I just described.

Individuals should wake up to the reality that to avoid Medicaid and its nursing home trap, they must plan early, and save, invest or insure so if and when they need extended, expensive long-term care, they can pay privately for it. Money talks and it opens doors to the best long-term care in the most desirable venue, usually one’s own home.

As bad as the long-term care tragedy is in America, the good news is that it would be easy to fix. If we stop doing what we’ve always done, we’ll get a different and better result.

[The interviewer ended the podcast with a couple questions about long-term care problems that occur in government-financed systems. Moses explained that such systems are highly prone to rationing and even euthanasia because they lack the kinds of incentives and moderating controls that are present in free markets.]

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Updated, Monday, June 22, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-025: LTC NEWS AND COMMENT

As Covid-19 Hits Developing Countries, Its Victims Are Younger
Surprise: Unhealthy lifestyle tied to Alzheimer’s risk
So Far, So Good: No COVID-19 Spread From Protests...Yet
Why the coronavirus has taken so many lives in US nursing homes
What to Consider Before Moving a Parent Into Assisted Living During COVID-19
Life plan community model remains stable, viable: report
The Road Map to Maximizing Long Term Medicaid Coverage During the COVID-19 Emergency
Never Retire: Why People Are Still Working in Their 70s and 80s
What Albany did to seniors when we weren't looking
Quit treating the pandemic like a ‘bad apples’ problem, expert warns

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Updated, Monday, June 15, 2020, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #20-024: LTC NEWS AND COMMENT

How did we get here?
Nursing home industry on verge of financial collapse, group claims
Offer Appropriate Coverage for LTCi
Financial Crisis of Nursing Home Industry
HHS to distribute $25B for Medicaid, safety-net providers
COVID-19 pandemic encourages consumers to plan for long-term care: survey
Misconceptions about Paying for Long-term Care Part 2 of 3
Assisted Living Communities Ask HHS for COVID-19 Help, Support
As negative thoughts accumulate, so might Alzheimer’s risk
LTC workforce has declined nearly 5% since February
Long-term care facilities driving up COVID-19 death totals

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Updated, Friday, June 12, 2020, 8:00 PM (Pacific)

Seattle—

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LTC BULLET: HOW NOT TO REDESIGN LONG-TERM CARE

LTC Comment: Do we really need more government money and regulation for long-term care, as this Forbes columnist insists? Analysis and better choices, after the ***news.***

*** THE DEBT CLOCK: We introduced this new feature in last week’s LTC Bullet when the U.S. national debt stood at almost $26 trillion. Now it’s over that mark by $8 billion or so. Unfunded liabilities, including $20.5 trillion for Social Security and $31.8 trillion for Medicare, topped $148 trillion in the meantime. Here’s a little historical perspective. In “LTC Bullet: The Impending Collapse of the Roadblocks to LTC Insurance,” December 1, 2009, we reported “According to the U.S. National Debt Clock, our country is currently in hock nearly $12 trillion and soon Congress will be forced to lift the cap on that debt yet again.” By August 1, 2014 in “LTC Bullet: Entitlement Double Talk,” we lamented “Our national debt stands at $17.6 trillion according to the US Debt Clock.” Less than a year ago, we found in “LTC Bullet: The Post-Medicaid History of Long-Term Care,” August 9, 2019, that “The ‘National Debt Clock’ places U.S. national debt at $22.5 trillion and unfunded liabilities at $125.0 trillion, a little over $1 million per taxpayer.” Our national debt, therefore, has more than doubled since 2009, and it’s accelerating, up 16% in less than a year. Most scary, unfunded liabilities are up 18% in the past year. We’re falling into a monetary and fiscal sink hole. Dramatic consequences are coming. But what will they be and when will they arrive? We’ll keep trying to understand. We’ll tell you want we learn. ***

*** JOIN THE CENTER. We have not made a recent appeal for you to support the Center for Long-Term Care Reform. But now is the time. Our major federal legislative successes came during or after major recessions. OBRA ’93 required Medicaid estate recoveries and closed important eligibility loopholes. DRA ’05 put the first cap ever on Medicaid’s home equity exemption and removed the leash Henry Waxman had put on the Long-Term Care Partnership Program. We’re entering a period when Medicaid, especially its massive long-term care component, will consume more state revenue and crowd out other, critical state and local programs. By retargeting Medicaid to its originally intended recipients, people in need, the states and federal government can reduce expenditures and attract more private financing into the LTC service delivery system benefiting everyone. We’ve explained precisely how to do that in dozens of national and state-level studies available here and most recently in “Medicaid and Long-Term Care.” Help us spread the word and fix long-term care. Check out our “Membership Levels and Benefits” here and join the Center here. Thanks for your consideration. Address inquiries to smoses@centerltc.com or call Steve at 425-891-3640. ***

LTC BULLET: HOW NOT TO REDESIGN LONG-TERM CARE

LTC Comment: They say when the only tool you have is a hammer, every problem looks like a nail. Here’s a corollary: when the only tool you have is government, every problem looks like you need more public money and regulation.

That’s the fundamental problem with Howard Gleckman’s argument in “How To Redesign Long-Term Care For Older Adults After Covid-19,” Forbes, June 9, 2020. Compare these quotes from Gleckman (HG) with Steve Moses’s (SM) replies.

HG: “The way we care for older adults in the US is, self-evidently, not working. In just the past three months, at least 44,000 residents and staff of nursing homes and other long-term care facilities have died from Covid-19. Hundreds of thousands have been sickened. And millions have been isolated from family and friends for months.”

SM: Sadly true. I said as much in the Wall Street Journal recently: “Nursing Homes, Coronavirus and Medicaid,” June 1, 2020.

HG: “Yet, this crisis did not spring from nowhere. The Covid-19 epidemic has amplified and exposed an already deeply-flawed system for long-term supports and services (LTSS) in the US. As tragic as this episode is, it has created an opportunity to rethink our care model from the ground up. But what would it look like?”

SM: True again. We do need to start over with a new long-term care model. But “what would it look like?” is the wrong place to start. You need to ask and answer a more basic question first: how did we get into this mess that we need to fix? If you don’t start there, you run the risk of making the problems worse by doing more of what caused them in the first place. That’s why I started by explaining what caused the dysfunctional long-term care status quo in “Medicaid and Long-Term Care,” a January 2020 monograph. But that’s not where this writer takes us. He jumps right in to ask for more money.

HG: “In short, long-term care in the US needs more money and a new model for delivering care. Our system never will provide adequate care for frail older adults and younger people with disabilities as long as it remains so severely underfunded.”

SM: Hammer is to nail as government is to money. That’s the trap! Let’s see where this leads.

HG: “Imagine no entrenched business or bureaucratic interests struggling to protect an existing system. No legacy regulatory and payment systems. What sort of care system would we create? Not the one we have, for sure.”

SM: Absolutely! Imagine what a free market in long-term care could render. Entrepreneurs would compete to provide the best possible long-term care in the most desirable venues at the least possible cost. No government interference; no Medicaid-induced institutional bias; no lawyer-abetted Medicaid planning lure; no access and quality problems caused my parsimonious Medicaid reimbursements; more private pay at market rates lifting access and quality for all; fewer people drawing down Medicaid funds so the truly needy get better care. But is this what Mr. Gleckman wants? It does sound similar.

HG: “It might look like this: Frail older adults and younger people with disabilities, with support from family and a case manager, would choose the care setting and supports that would help them live the best life possible. Long-term supports and services would be well integrated with medical treatment, with no regulatory or payment barriers, and through a financial model that creates incentives for strong chronic care management.”

SM: Yes! Let’s do it. But, how? There’s the rub.

HG: “This could be delivered through managed care plans, such as Medicare Advantage, fully integrated programs such as the Program for All-Inclusive Care for the Elderly (PACE), or special needs plans (SNPs). It might also be possible in traditional Medicare through Medicare Supplement (Medigap) insurance. … A public program such as Medicaid still would support this care for those with very low incomes. But Medicaid would be far more flexible than today, and the default setting for care would be people’s own homes, not nursing homes.”

SM: Wait a minute! Haven’t we tried all those things already and they wouldn’t scale? What would you do differently that could make these longstanding programs work better and become bigger? Their advocates have claimed for decades that what these programs need is more money. Is that what you’re saying too? More of the same but expect a different result? This is where the article becomes very foggy.

HG: “A public program such as Medicaid still would support this care for those with very low incomes. But Medicaid would be far more flexible than today, and the default setting for care would be people’s own homes, not nursing homes.”

SM: Been there; done that; didn’t work.

HG: “States should better align Medicaid LTSS with other public services, such as low-income housing, transportation, home delivered meals, adult day, and primary medical care.”

SM: But would they? Why now and not before? This is aspirational, not realistic or practical.

HG: “The agencies that deliver these programs need to work with one another to provide flexible, holistic care.”

SM: OK, but why are these agencies going to hop out of their silos all of a sudden and start working cooperatively as never before?

HG: “The vast majority of those receiving long-term care at home are getting their support from relatives. Today, those family members are providing personal assistance with great love—and little or no skill. Like paid caregivers, they need training. Perhaps, they should even be paid.”

SM: Instead of relying on the free care provided by families and friends, which is the main prop sustaining the current Rube Goldberg financing scheme, we’re going to start paying them and provide more paid home caregivers also? How?

HG: “Where will the additional funding for all this come from? The reality is that few Americans have saved sufficiently for the cost of long-term care in old age, few have private long-term care insurance, and Medicaid does not have the resources to fund this care for the fast-growing Baby Boom generation.”

SM: Precisely the question that popped into my mind. So what’s the answer?

HG: “A public long-term care insurance program could supplement out-of-pocket spending, especially for those with true catastrophic costs that few private long-term care insurance policies cover.”

SM: Well, what do you know? The answer is to use the punitive power of government to force people to buy mandatory government insurance. If you liked the CLASS Act, you’ll love this compulsory version with a political bullwhip for enforcement.

HG: “Washington State already has adopted a modest public long-term care insurance plan. A half-dozen other states are exploring the idea. And there is some interest in Congress.”

SM: Have you heard anything about these “promising” ideas from anyone else lately? More likely, you’re hearing the lockdown is bankrupting state governments and the federal government is maxed out printing and borrowing money to support closed businesses and laid off workers.

HG: “The long-term care system in the US was failing long before Covid-19. But now that this terrible disease has exposed the flaws in our system, we have an opportunity to fix them.”

SM: See what happens when you start from the observation that LTC is failing in the U.S. and jump straight into proposing solutions? You end up as HG does proposing more of the government spending and regulation that caused the problems in the first place. So here’s what to do instead.

Analyze what caused long-term care’s problems. You’ll find that easy access to Medicaid nursing home care after care is needed but when it’s too late to preserve wealth otherwise caused excessive dependency on Medicaid. Fifty years of that pernicious public policy created the current system’s major dysfunctions including institutional bias; poor access and quality; stultified private home care and LTC insurance markets; overburdened family caregivers; and many thousands of unnecessary deaths from the virus contagion.

Unfortunately, the challenges facing long-term care are too complicated to explain in a few sentences or to resolve simply by throwing more government money at them. The key is to explain why the problems exist in the first place before trying to solve them with more government interference. Do that and you will find the same answers I did in “Medicaid and Long-Term Care.” Read it and see.

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Updated, Monday, June 8, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-023: LTC NEWS AND COMMENT

Four Ways the Coronavirus Pandemic May Affect Long-Term Care Insurance
CMS releases provider COVID-19 case, death totals to consumers on Nursing Home Compare
Congress’s Medicaid Funding Increase Creates Massive Legal Uncertainty for States During the Covid-19 Crisis
Nursing Homes Already Were Weakened—WSJ op-ed by Blase and Moses
Skilled Nursing Occupancy Hit Record Low in March, ‘Mainly’ Due to Post-Acute Admission Decline
How Covid-19 Will Shape the Future of Senior Living. New Models of Care, More Aging in Place
Nursing Homes, Coronavirus and Medicaid
BULLETIN: CMS ‘ratcheting up’ nursing home penalties in light of 26,000-resident, 450-worker COVID-19 death toll
More Universal Life Comes With Long-Term Care Riders: Milliman
Alzheimer's Gene Linked to Severe COVID-19 Risk
Public Opinion of Nursing Homes Takes COVID-19 Hit, But Most Think Government Didn’t Do Enough

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Updated, Friday, June 5, 2020, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: WSJ COLUMN ON NURSING HOMES, CORONAVIRUS AND MEDICAID

LTC Comment: Steve Moses and Brian Blase published an op-ed in Tuesday’s Wall Street Journal. Here’s the back story and much more on the subject, after the ***news.***

*** THE DEBT CLOCK: New feature. We’re going to start posting a link to the U.S. Debt Clock at the top of each LTC Bullet. U.S. national debt stands now at almost $26 trillion. Worse yet, our country’s unfunded liabilities, including $20.5 trillion for Social Security and $31.7 trillion for Medicare, total $147.9 trillion. Evidently no one cares. The Federal Reserve is printing, the Treasury Department is spending, and together they’re borrowing unlimited funds ostensibly to stimulate the economy but effectively to re-inflate a bubble in stocks, bonds and real estate. This will not end well. The debt is suddenly skyrocketing. In future Bullets, we’ll track where the debt stood as we reported it occasionally in the past. ***

*** WHO KNEW? The coronavirus pandemic lockdown crashed the economy. America is burning, literally, with civil unrest. Government’s monetary and fiscal floodgates are wide open. Public and private debt is spiking. Unemployment is at depression levels. Yet the stock and bond markets are at or approaching new highs. Who knew we could borrow and spend unlimited amounts with no consequences? How great is this? You say: “Don’t waste a crisis.” I say “Why wait for a crisis?” Let the good times roll all the time. Who needs jobs and taxes? Just print enough money for everyone to have everything. Voila! Welcome to economic WallyWorld. ***

*** SOHO FORUM: I find these debates fascinating and now that they’re online, easy to access. The topics are always timely and usually pit a libertarian against a more middle-of-the-roader. Most recent topic paraphrased: did the lockdowns do more harm than good? I love the format. The audience votes on the question before and after the debate. The winner is the discussant who changes the most minds. Here’s how the Forum describes itself: “The Soho Forum is a monthly debate series held in Soho/Noho, Manhattan. A project of the Reason Foundation, the series features topics of special interest to libertarians and aims to enhance social and professional ties within the NYC libertarian community. Moderated by Gene Epstein, former economics editor of Barron's, The Soho Forum features some of the most highly regarded speakers across varied fields. At each event, the audience actively engages with the speakers, votes on the resolution, and there is a social reception that follows.” Enjoy! ***

LTC BULLET: WSJ COLUMN ON NURSING HOMES, CORONAVIRUS AND MEDICAID

LTC Comment: When people started dying in droves at nursing homes all across the country, it raised the question: why are so many frail, infirm elderly people residing in these institutional settings in the first place? My friend, Brian Blase of Blase Policy Strategies and most recently Special Assistant to the President for Health Care Policy, had the same thought.

We conferred and the Wall Street Journal published our op-ed “Nursing Homes, Coronavirus and Medicaid” online Monday evening, June 1 and in the print edition Tuesday, June 2. The WSJ has a pay wall so I can’t link you to the full piece, but here are the first three paragraphs, which I am allowed to share:

“A national tragedy began in March when Covid-19 killed 35 residents of Life Care Center in Kirkland, Wash. Since then, more than 22,000 nursing-home residents have died in Connecticut, Massachusetts, New Jersey, New York and Pennsylvania. Nearly half of all Americans who have fallen victim to the novel coronavirus lived in nursing homes.

“Politicians have made plenty of mistakes. Governors in several states, including New York and Pennsylvania, ordered nursing homes to take coronavirus patients discharged from hospitals and reversed the orders only after weeks of casualties. Families are suffering, forced to stare at their parents and grandparents through windows or talk only by phone. Overworked caregivers are at high risk of exposure.

“Why do so many elderly people live in low-quality nursing homes? Almost no one wants to end up in a nursing home, and most families prefer not to place their loved ones in one. The main answer is the legacy of Medicaid, a Great Society program intended to help the poor.”

Want more? If you don’t have a print or online subscription, maybe you can find someone who does. I can forward a limited number of copies for a limited number of days through the Center’s subscription. If you ask, I’ll try. After 30 days, the article will be in the public domain.

In the meantime, how about reading the “rest of the story” that didn’t make it into the WSJ piece? Here’s my two-part early draft: Part 1 answers the question of why so many people end up in nursing homes vulnerable to the coronavirus contagion. Part II explains what we can do to fix that problem.

“Covid-19 and Long-Term Care, Part 1: Why Are So Many Elderly People Trapped in Nursing Homes?”
by
Stephen A. Moses

News from the nursing home sector is not good.

Thirty-five die at a Life Care Center in Kirkland, WA. Locked out families stare plaintively at quarantined parents and grandparents through nursing home windows across the country. New York demands nursing homes take Coronavirus patients, then prohibits them. Half or more of COVID-19 deaths are nursing home residents.

What’s happening? Why are so many old, frail, often cognitively impaired elders residing in nursing homes? Why aren’t they aging in place at home, safer from contagion with visiting caregivers and telemedicine? Why is nursing home quality such a serious problem?

The answers to all those questions stem from a Great Society program intended to help the elderly poor. In 1965, Medicaid began providing nursing home care—including room, board, and medical care—funded with virtually unlimited federal and state matching funds. It was welfare supposedly, but it allowed unlimited asset transfers to qualify until 1980. Since then, generous financial eligibility rules placed no set limit on income for people with high medical expenses and allowed virtually unlimited exempt assets, including home equity of $595,000 in every state ($893,000 in some states). A program intended for the poor became the fall back payor for middle class and affluent people who didn’t plan for long-term care and slipped through or manipulated Medicaid’s elastic financial eligibility rules.

By making long-term care virtually free when expensive care is needed: Medicaid (1) quickly exploded in cost, (2) created institutional bias by paying only for nursing homes, (3) caused access and quality problems by paying care providers too little, (4) enriched plaintiff’s attorneys with the resulting tort liability cases, (5) crowded out private markets for home care and long-term care insurance, and (6) kept poor people poor with punishing spend down rules, while (7) letting the well-to-do save and benefit through eligibility loopholes.

Medicaid pays the bills of 62 percent of nursing home residents. It pays notoriously low rates, often less than the cost of providing the care. Those low rates drag down nursing homes’ ability to provide quality care for Medicaid recipients and for the few remaining private payers. Very few private payers remain because Medicaid is so easy to obtain, even for the well-to-do. Thousands of elder law attorneys specialize in impoverishing affluent clients artificially to qualify them for Medicaid and to protect their heirs’ inheritances. Search “Medicaid planning” to find these specialists in every state.

Five and a half decades of easy access to Medicaid-subsidized nursing home care anesthetized consumers to the risk and cost of long-term care. Few people know who pays for it and fewer still worry or prepare as a result. Once they need long-term care, the path of least resistance is to qualify for Medicaid, preserve most of their assets for heirs, and take whatever Medicaid has to give. That’s usually nursing home care in facilities too heavily dependent on the impecunious public welfare program to provide high quality care.

That’s why so many frail, elderly people are trapped in poor nursing homes vulnerable to the ravages of Covid-19.

For the solution, read “Covid-19 and Long-Term Care: Part 2, Save Long-Term Care with Medicaid Reform.”

Stephen Moses is co-founder and president of the Center for Long-Term Care Reform and the author of Medicaid and Long-Term Care (2020).

“Covid-19 and Long-Term Care, Part 2: Save Long-Term Care with Medicaid Reform”
by
Stephen A. Moses

Too many infirm elderly people are trapped in beleaguered nursing homes inadequately funded by a public welfare program, Medicaid. They are vulnerable to the ravages of Covid-19, forcibly cut off from friends and family, and dying in droves. Part 1 explained why this is so. Part 2 proposes a solution. As bad as the nursing home problem is, there’s good news. It is easy to fix.

Fifty-five years of easy access to Medicaid financing when expensive extended care becomes necessary desensitized consumers to long-term care risk leaving them with a Hobson’s choice. Do we spend our life’s savings, including home equity, to pay for long-term care privately? Or do we accept welfare-financed nursing home care and preserve most of our wealth for a surviving spouse and heirs? In the end, most people choose the latter course.

That’s how Medicaid became the dominant long-term care payer for the middle class and affluent as well as the poor. Medicaid planners did a land office business artificially impoverishing people to qualify them for the program. Heirs received windfall inheritances, diverted from their parents’ long-term care expenses by a taxpayer-financed public assistance program originally intended only for the poor.

Analysts and policy makers study the serious problems afflicting America’s long-term care system—the poor access and quality, nursing home bias, too little preferred home care, inadequate financing, excessive dependency on unpaid family caregivers causing enormous financial and emotional distress. They propose measures to alleviate these symptoms, usually more government spending and regulation. But they rarely ask what caused the problems in the first place.

What if government interference in long-term care is exactly what caused long-term care’s problems? Wouldn’t that suggest a different approach than more of the same?

How about this? Remove the perverse public policy incentives that trap people on Medicaid. Don’t exempt their biggest asset, home equity, from long-term care risk. Let people who fail to plan, save, invest or insure for long-term care use reverse mortgages or other assets to pay for the home care they prefer. Perhaps losing their inheritances to their parents’ long-term care costs will make adult children more likely to plan responsibly for their own future. In other words, stop using Medicaid to subsidize people for ignoring the risk and cost of long-term care.

Do not delay making these changes. Budget shortfalls from the current recession will impair the states’ ability to fund Medicaid, further devastating nursing home finances and damaging care quality. In past economic downturns, Medicaid imposed asset transfer restrictions, mandated estate recovery, and closed eligibility loopholes to control costs. More of the same will be necessary in the current economic downturn. The poor will suffer most.

Directing Medicaid long-term care benefits only to the genuinely needy would ensure more resources and better care for them, achieving the original intent of the program. With Medicaid long-term care harder to get, consumers will do the right thing. They’ll plan for long-term care, save, invest and insure for it. New waves of private financing will surge through the long-term care market improving quality and choice for everyone. Care will quickly evolve away from nursing homes toward the home and community-based care people vastly prefer.

Stephen Moses is co-founder and president of the Center for Long-Term Care Reform and the author of Medicaid and Long-Term Care (2020).

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Updated, Tuesday, June 2, 2020, 9:00 AM (Pacific)

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LTC Bullet: WSJ Column on Nursing Homes, Coronavirus and Medicaid

Tuesday, June 2, 2020

Seattle—

LTC Comment: Steve Moses and Brian Blase (formerly Special Assistant to the President for Health Care Policy) have an op-ed in today’s Wall Street Journal. It explains why so many elderly Americans are confined to nursing homes where they’re disproportionately vulnerable to the virus contagion. This is just a quick notice so you can pick up a copy if you would like to. We’ll share some quotes and give you the back story in a full-sized LTC Bullet on Friday.

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Updated, Monday, June 1, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-022: LTC NEWS AND COMMENT

Social Security trust funds could run out even faster due to the coronavirus pandemic
The Most Important Coronavirus Statistic: 42% Of U.S. Deaths Are From 0.6% Of The Population
WHO launches digital app to improve care for the elderly
The Bifurcating Seniors Housing Market
Seniors housing municipal bonds under distress due to COVID-19 costs
The COVID Nursing Home Crisis Was 50 Years in the Making
Long-Term Care Policy after Covid-19 — Solving the Nursing Home Crisis
$672 million would be cost of one-time COVID-19 testing for all assisted living and nursing home residents, staff, AHCA / NCAL says
One in five COVID-19 tests fail to detect virus
Simplifying telemedicine use in long-term care facilities
Families still need care, but many are afraid of nursing homes amid the coronavirus pandemic

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Updated, Monday, May 25, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-21: LTC NEWS AND COMMENT

Ideal Nursing Homes: Individual Rooms, Better Staffing, More Accountability
Few Medicare Advantage plans cover social needs for chronically ill patients
FAQs About Coronavirus and Long-Term Care Insurance
COVID-19 and Long-Term Care Insurance
HHS Releases $4.9B in COVID-19 Relief for Skilled Nursing Facilities
Coronavirus or no, why do we have so many people in nursing homes?
Senior Employment Outlook and COVID-19
States using Medicaid to provide ‘lifeline’ for providers, association reports
Skilled nursing occupancy slips as COVID-19 pandemic rages: NIC
Home Health Industry ‘Getting Closer’ to Reimbursement for Telehealth Visits
Medicaid Providers At The End Of The Line For Federal COVID Funding
COVID-19-caused kidney injuries heighten demand for dialysis
Reopening Guidance by CMS Wins Praise for Aggressive Stance on Staff, Resident Testing
Governors eye Medicaid cuts to ease COVID-19 budget pain

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Updated, Friday, May 22, 2020, 9:00 AM (Pacific)

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LTC BULLET: THE REVERSE ROBIN HOOD ECONOMY AND LONG-TERM CARE

LTC Comment: Does government take from the rich to help the poor? Or is it just the opposite? We scrutinize after the ***news.***

*** THE ILTCI EXECUTIVE COMMITTEE reports that the Intercompany Long Term Care Insurance Conference, cancelled for 2020 due to the pandemic, will convene in 2021on Monday, March 8^th through Thursday, March 11^th at the Sheraton Downtown Denver in Denver, CO. They say “In the coming months we will be offering a selection of our 2020 ILTCI break-out sessions/workshops in the form of webinars and podcasts. The first one will take place this month. We are happy to make this content available and wish to thank all session producers and speakers who prepared informational and educational content this year. In the meantime don’t hesitate to visit our updated FAQs on www.iltciconf.org or email info@iltciconf.org if you have any questions. ***

LTC BULLET: THE REVERSE ROBIN HOOD ECONOMY AND LONG-TERM CARE

LTC Comment: The coronavirus pandemic has thrown millions out of work and ruined thousands of companies. But, not to worry, the federal government has taken unprecedented action to alleviate the economic pain until the virus goes away and we get back to normal.

Specifically, the Federal Reserve is printing money with no limit and the Treasury is borrowing and spending “whatever it takes.” Voila! People get paid whether they work or not and companies survive whether they’re open for business or not. Problem solved.

OK, but won’t someone, somehow, someday have to pay for all that printing, borrowing and spending? Yes, of course. TANSTAAFL: There’s No Such Thing As A Free Lunch. So who gets the bill? Presumably, the rich will pay as they have most of the money and they pay most of the taxes. This economy, therefore, is Robin Hood on steroids. Government takes from the rich to give to the poor.

Or does it? What’s really happening? Qui bono? That’s the apt question. Who benefits?

At first blush, it seems like the poor and unemployed receive a bonanza. They get money while remaining idle, sometimes even more income than when they were employed. But look under the economic surface. What happened to all that money the government created out of nothing?

Some of it will find its way into consumer spending, which means there will be much more money chasing fewer goods and services due to the economy’s shutting down. That is the definition of inflation. So the good news is government gave you money, but the bad news is that it won’t buy as much as before.

But the bulk of the new money will find its way into the stock, bond and real estate markets. That’s why equity values skyrocketed after the 2008 financial crisis when the same policies were employed. It’s why it is happening again now. In other words, the new money benefits the already well-to-do substantially, but only allows the unemployed to wait out the crisis less painfully.

So, what happens as we emerge from this pandemic-induced financial cataclysm? The government and the private sector have taken on unprecedented levels of debt. Debt is not free. It must be serviced. Even at artificially low interest rates, that’s difficult. There are only three ways to service debt: borrow more, raise taxes, or let inflation run rampant.

Borrowing more is possible only until lenders, i.e., the rest of the world, realize you’ve put no limits on debt. Sooner or later, they’ll figure out you’re unlikely to pay back what you’ve already borrowed, much less service even bigger liabilities. So, either you can’t borrow more or lenders demand higher interest rates. Either way, it’s harder than ever to service the compounding debt. It’s a vicious downward spiral.

Taxing to pay the interest and/or reduce the debt doesn’t work. People object to higher taxes. Politicians benefit by giving people what they want, specifically free stuff, not by raising taxes. Besides, taxes reduce private capital which is what creates jobs and prosperity which are the source of tax revenue in the first place. Everyone is better off when we leave money in the private sector where it can grow through wise investment.

Finally, inflation makes debt disappear instead of paying it off. Inflation hurts lenders who get their loans paid back in less valuable, or worthless, dollars. Inflation helps borrowers by letting them pay back their loans with cheaper dollars.

Who are the borrowers? Government and overleveraged companies. Who are the lenders? You’re looking at ‘em: the American people and all the suckers around the world who bought our bonds and let us use the proceeds to purchase their goods and services.

In other words, we’re in the middle of a big Ponzi scheme benefiting the rich at the expense of everyone else, especially the poor. As long as there is a bigger sucker willing to buy into the giant government debt bubble, it keeps getting bigger. But the coronavirus may just be the pin that finally pops this monetary balloon. We’re going to find out soon.

Long-Term Care

So where does long-term care come in? It’s similar in a way. Government purports to pay for long-term care for the poor by taxing the prosperous. Robin Hood again, right?

Think again. Medicaid, the government’s long-term care funding program, is readily available to the middle class and affluent as well as the poor. Find the evidence for that statement in Medicaid and Long-Term Care.

So, the poor end up in welfare-financed nursing homes with notoriously low quality care. But so do the affluent Medicaid recipients, right?

No. Prosperous people who take advantage of Medicaid hold back some cash so they can pay privately for a few months. That gets them into the best LTC facilities that have relatively few Medicaid recipients. Then they, or their Medicaid planning attorney, flip the switch and convert their payor to Medicaid.

The poor get the worst Medicaid has to offer. The well-to-do get the best.

Reverse Robin Hood redux.

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Updated, Monday, May 18, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-020: LTC NEWS AND COMMENT

States face looming crisis over Medicaid growth, which could trigger changes for providers and payers
Masks change everything
Seniors turn to reverse mortgages as a cash lifeline during the coronavirus crisis
WSJ: Seniors housing could face big vacancies with telemedicine available to help with care needs at home
The Pandemic and the Politics of Long-Term Care in Canada
Ken Dychtwald: Pandemic Will Force Big Changes in Retirement Planning
Fewer workers confident they can meet long-term care cost demands: survey
White House: Test all nursing home residents, staff for COVID-19 over next 2 weeks
Key Takeaways: The Impact of COVID-19 on Social Security and Highlights from the Trustees' 2020 Report
Algorithm Beats Experts in Alzheimer’s Diagnosis
New task force to develop guidance for reopening senior living and care communities
For Most States, At Least A Third Of COVID-19 Deaths Are In Long-Term Care Facilities

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Updated, Monday, May 11, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-019: LTC NEWS AND COMMENT

Senior living industry bracing for effects state reopening will have on residents, staff
Genworth Aims to Line Up Backup Financing Options
The Grim Post-COVID-19 Future For Nursing Homes
States cut Medicaid as millions of jobless workers look to safety net
How Are States Supporting Medicaid Home and Community-Based Services During the COVID-19 Crisis?
How Quarantine Is Affecting Different Generations: Ken Dychtwald
Medi(long-term)care for all: A look Into the future of long-term care insurance—Part one
Unum to Add $2.1 Billion to Long-Term Care Insurance Reserves Over 7 Years
Financial incentives might tempt facilities to admit infected residents: LA Times
States ordered nursing homes to take COVID-19 residents. Thousands died. How it happened

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Updated, Friday, May 8, 2020, 9:00 AM (Pacific)

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LTC Bullet: The Gold Standard for Long-Term Care Insurance

LTC Comment: We face a brave new world—epidemiologically and economically. What’s really happening and how can long-term care insurance adapt? Analysis and conjecture after the ***news.***

*** LTC BULLETS took some time off to reflect on the sea change impacting long-term care services and financing. We serialized our latest report, published in January, titled Medicaid and Long Term Care. That report presents our analysis and recommendation for long-term care policy as circumstances existed before the pandemic. Today and for the future we turn to the challenge of analyzing, understanding and opining out the radically different circumstances the long-term care profession faces today. We invite you to join the conversation by replying to each LTC Bullet as it is published whenever you agree, disagree, or just have something to say. Next week, we’ll address the question “Why Are So Many People Trapped in Nursing Homes?” It’s never been more important to understand the causes and consequences of Medicaid’s institutional bias than now, with SNF residents confined to quarters and their loved ones locked out. ***

*** ACTIONABLE NEWS about long-term care is more frequent and vital during the pandemic than ever before. The Center for Long-Term Care Reform’s LTC Clippings bring you one or two daily updates about critical information you need to know to stay at the forefront of professional knowledge. Steve Moses scans the news and LTC literature. He chooses reports, articles, stories and data that LTCI agents, financial advisors, and anyone involved in aging issues need to know. He provides the title, author, source, a hyperlink to the original, and a sentence or two of commentary. As a bonus to LTC Clippings subscribers, Steve will answer questions by phone or email usually within 24 hours. Hook yourself into this reliable source and you can safely spend less time scanning for information and more time doing what you do best professionally. Contact Steve at 425-891-3640 or smoses@centerltc.com to subscribe or learn more. Two sample clippings from this week:

5/4/2020, “The Grim Post-COVID-19 Future For Nursing Homes,” by Howard Gleckman, Forbes

Quote: “The deaths of more than 16,000 of their residents from COVID-19 has profoundly disrupted senior living facilities—especially nursing homes— and will drive historic change in the industry. Robert Kramer, president of the consulting firm Nexus Insights and a long-time observer of nursing home finances, told me, ‘There never will come a time when we will return to the old normal.’”

LTC Comment: Rare flawless analysis by this writer. Obvious conclusion based on the evidence adduced: stop trapping people in nursing homes on Medicaid and incentivize responsible LTC planning by means of saving, investment and insurance. But no, this article leaves us only with despair. There is nothing about why this system went so wrong and what needs to happen to fix it. For that, read Medicaid and Long-Term Care.

5/5/2020, “States cut Medicaid as millions of jobless workers look to safety net,” by Rachel Roubein and Dan Goldberg, Politico

Quote: “State Medicaid programs in the previous economic crisis cut everything from dental services to podiatry care — and reduced payments to hospitals and doctors in order to balance out spending on other needs like roads, schools and prisons. Medicaid officials warn the gutting could be far worse this time, because program enrollment has swelled in recent years largely because of Obamacare’s expansion.”

LTC Comment: So, tell me again why it makes sense to exempt up to $893,000 in home equity so that affluent Americans can avoid paying for private insurance and qualify for welfare-subsidized nursing home care, where they’re dying in droves cut off from friends and family. The only silver lining in this pandemic/recession is that maybe we can finally reform this corrupt LTC financing system. We made progress after recessions in the early 1990s and the early 2000s, but the system has stagnated unreformed since the Great Recession. To learn why, read Medicaid and Long-Term Care. ***

LTC BULLET: THE GOLD STANDARD FOR LONG-TERM CARE INSURANCE

“This too will pass”
“After the pandemic, markets will surge back”
“We have nothing to fear but fear itself”

If you believe this HHS (Happy Horse Sh**), you’d better open your eyes.

This crisis is not going to pass any time soon. Markets won’t surge back after the virus passes. There is no viable “back” to go to.

The roaring economy a couple months ago wasn’t real; it was an asset bubble.

The Federal Reserve pumped it up by imposing artificially low interest rates through quantitative easing, buying bonds with printed money.

The federal government, taking advantage of the low interest rates, overspent creating huge extra debt.

The private sector over-borrowed at low interest rates to fund malinvestments, starting uneconomical projects that only seemed to make sense because borrowing was so cheap.

All the extra money printed (created out of thin air) drifted into equities so stocks and bonds surged, diverting the huge money inflation so it didn’t show up significantly in consumer prices.

The wealthy, with real estate and equity investments, prospered while the poor and middle class languished economically.

The good times rolled as affluent Americans partied, buying tons of cheap goods from China.

But where’d they get the money to do buy those cheap goods? America doesn’t produce much to sell internationally anymore. Our trade deficits are huge.

Easy, we sold the treasury bonds created by the Federal Reserve to China and other foreign countries.

In short, they gave us dollars in exchange for paper promises to pay back the principal plus artificially low interest, someday, somehow.

We prospered on the easy money and left foreigners holding the paper-money bag.

That was the wonderful, booming, “best market in American history” according to the President, that we enjoyed until the bottom fell out in March.

In other words, it was all fake, an asset bubble created by, well, Modern Monetary Theory.

How did we get there?

Twenty years ago, back when we still had some semblance of a real economy, it blew apart with the dot-com bust when the Fed tried to cool the economy by raising interest rates.

Instead of letting the economy suffer the hangover of a severe recession that could have squeezed the public and private malinvestment out of the system …

The Fed pushed interest rates down artificially and left them there.

Public and private malinvestment surged with a vengeance, especially in the real estate market, resulting in the 2008 housing bust.

After that bubble burst, the Fed returned to the seemingly tried and true policy of artificially low interest rates.

A Tale of Two Bubbles: How the Fed Crashed the Tech and the Housing Markets

This time they added three rounds of Quantitative Easing (QE) vastly expanding the money supply with the hope of making people spend more because of the “wealth effect” created by all that extra cash going into the equity markets.

So, where are we now?

The Coronavirus pandemic shot through the latest asset-bubble economy like a ballistic missile.

The government closed down the economy to curtail the disease’s spread.

People are suddenly out of work and out of money as are the companies that used to employ them.

Few Americans have any appreciable savings because government programs—from Social Security in 1935 to Medicare/Medicaid in 1965, to the paroxysm of free stuff promised by present-day progressives—have desensitized the public to the need for personal responsibility.

So naturally the people from the government, who are always coming to help us, dove right in.

Did they learn their lesson from the earlier disastrous policies that created the previous asset bubbles?

Well no, they tripled down on those same policies in the hopes of re-inflating the bubble yet again once the pandemic goes away.

The Federal Reserve quickly forced interest rates back to near-zero and implemented not just QE4, but rather QE∞ (Quantitative Easing to Infinity).

The Treasury responded in kind promising to spend whatever it takes.

So the Fed is printing unlimited money and the Treasury is spending it as fast as it appears out of nowhere.

That’s called monetizing the debt and it’s economically fatal sooner or later.

The Trump Administration and Congress have pledged to pay everyone’s wages who isn’t working, to end evictions, to forgive all kinds of late or non-payments, to buy even junk bonds!

Already the money supply is exploding and the checks are still going out.

Inflation Alert: Money Supply Expanding At 26x Rate Of QE1

Next likely steps: (1) the Fed will start buying stocks so government owns the means of production (the definition of socialism) and (2) the Administration and Congress will ask for trillions more for “infrastructure” building jobs.

Moral hazard has become moral catastrophe.

OK, so here we are: the economy is shut down; production and distribution have plummeted; supply chains, including those cheap products from China, are interrupted, and suddenly we have a virtually unlimited supply of money.

At the same time, we’re producing fewer goods and services than ever.

Timid efforts to “restart the economy” will likely prove false starts indefinitely as the virus resurges wherever they’re tried.

“Too much money chasing too few goods?” Where have I heard that phrase before? Oh yeah, a couple decades ago before all this economic craziness got started in earnest.

Inflation? Yes of course. Inflation is nothing more than an increase in the money supply. This is inflation by definition and by orders of magnitude greater than ever before.

Well, then, why aren’t consumer prices going up more?

They didn’t go up commensurately with the increases in money supply during the previous two asset bubbles because most of the new money went into the debt and equity markets instead of consumer prices.

OK, so why won’t that just happen again? We’ll blow up an even bigger bubble and let the good times roll! Isn’t that what the currently resurging V-shaped stock market results are showing?

Nope: too much money this time. Too few goods to buy. Equity markets are unattractive for anyone without the rose-colored glasses of mindless confidence in the Fed.

Too many dollars with no place to go means the dollar loses value. People lose confidence in the dollar. The dollar loses its status as the world’s reserve currency.

Blow a balloon too big and it’ll pop even without a pin like the Coronavirus to puncture it.

So, this is it, the reckoning, the end game. Hyperinflation. The Weimar Republic, Argentina, Zimbabwe, the new USA.

The good news: Social Security and other government pensions and programs will pay in full; the bad news: what they pay won’t buy much.

On the other hand …

We’ll have no more moral hazard as the government will have no more ability to supply it.

Medicaid and Medicare? Maybe some residual safety net will remain, but the smart money will seek protection in the private market: saving, investing and insuring in real money.

Real money? It’ll be gold again as it always was under the surface and behind the scenes. It’s the only money that keeps its value as fiat currencies fluctuate.

Does this have anything to do with long-term care? You bet.

As the economy stabilizes around real money, we’ll have no more inflation, no more moral hazard from government “help.”

If Medicaid survives, it will be vastly attenuated, and certainly not a resource middle class and affluent people can rely on for long-term care as they have in the past.

Private charity will fill the gap left by disappearing entitlement programs, but it won’t be enough.

People will have to rely again on personal responsibility and private means: saving, investment, and insurance, as they did long ago when America was becoming the great economic powerhouse it has frittered away.

Long-term care will remain expensive and people will need it as much as ever.

With no government program to fall back on, private long-term care insurance will resurge, but underwritten by gold.

We’ll pay premiums, receive benefits, and finance stable long-term care expenditures with gold, the once and future objective standard of value.

Instead of “who needs it” private LTCI will become “can’t go without it” protection.

It’s a long, rocky road ahead, but that’s where we’re headed.

Your thoughts?

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Updated, Monday, May 4, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-018: LTC NEWS AND COMMENT

Want to slash coronavirus deaths? Start (really) caring about long term care
Coronavirus: Why so many US nurses are out of work
More than 80% of assisted living facilities report occupancy declines: NIC
White House creates national nursing home safety panel, will deliver 2 weeks’ worth of PPE to every facility in response to COVID-19 crisis
COVID-19 Could Increase Seniors’ Rapid Disenrollment in Medicare Advantage
How Can a Trust Help You Avoid Nursing Home Costs?
Aging in the Time of COVID-19: Reflections on Life, Health, Family, Community and Purpose - A Chat with Ken Dychtwald
MILLENNIALS SURPASS BABY BOOMERS AS LARGEST U.S. GENERATION, ENDING 20-YEAR RUN
Why Are We So Shocked By COVID-19 Nursing Home Deaths? We Have Been Failing Our Frail Older Adults For Decades
Nursing Homes Were a Disaster Waiting to Happen
Medicare Beneficiaries’ Financial Security Before the Coronavirus Pandemic
COVID-19 May Deplete Social Security Trust Funds This Decade

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Updated, Monday, April 27, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-017: LTC NEWS AND COMMENT

The Potential Health Care Costs And Resource Use Associated With COVID-19 In The United States
National Health Expenditure Projections, 2019–28: Expected Rebound In Prices Drives Rising Spending Growth
Coronavirus to accelerate Social Security, Medicare depletion dates, U.S. officials say
Seniors with COVID-19 showing unusual symptoms, plus: blood clotting an issue
A Dozen Facts About Medicare Advantage in 2020
Pandemic may push seniors housing occupancy below 80% for first time
Righteous COVID-19 indignation
Coronavirus Exposes the Dangers of Age Segregation
ACL Announces Nearly $1 Billion in CARES Act Grants to Support Older Adults and People with Disabilities in the Community During the COVID-19 Emergency
Pandemic’s Costs Stagger the Nursing Home Industry
CMS Requires SNFs to Report Confirmed COVID-19 Cases to Residents, Families, CDC
Dementia diagnosis often means death within five years, study finds
White House: Senior Care Facility Visits to Remain Banned Until Final Phase of COVID-19 Reopen Plan
CMS Orders Nursing Homes to Report All COVID-19 Cases to CDC, Plans Public Data Release
Some rules of Medicaid for long-term care are changing

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Updated, Monday, April 24, 2020, 9:00 AM (Pacific)

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LTC Bullet: Medicaid and Long-Term Care, the Serial, Part 7, the End

LTC Comment: The full Medicaid and Long-Term Care monograph is 78 pages, so we’re bringing it to you in bite-sized pieces. Here’s the seventh and last one, after the ***news.***

*** SERIAL ENDS, ACTION BEGINS: Today’s LTC Bullet brings you the exciting conclusion of Medicaid and Long-Term Care. In it, we capitalize on the findings in six earlier episodes to explain why and how Medicaid reform is necessary and sufficient to improve long-term care service delivery and financing in the United States. That’s our marker. Future LTC Bullets will move from analysis and recommendations toward advocacy and implementation. The U.S. government having thrown open the monetary and fiscal floodgates, anything is possible now. Will we slip into hyperinflation, depression, and ever greater government dependency or revive private markets, competition and personal responsibility? We’ll tackle that question in a new series of LTC Bullets. Stay tuned! ***

*** IN THE MEANTIME, there’s never been a better time to renew your support for the Center for Long-Term Care Reform. Our work was instrumental in winning federal level public policy improvements in OBRA ’93 (closed Medicaid loopholes and mandated estate recovery) and DRA ’05 (capped home equity exemption and unleashed LTC Partnerships). For the first time in a decade and a half, the potential for reforming Medicaid at the federal and state levels is great again. That is the key to unbridle private long-term care insurance as well. So, please renew and upgrade your Center memberships; subscribe to LTC Clippings; and urge your companies to join the Center as corporate members (making your personal membership free.) Check out our “Membership Levels and Benefits” schedule for all the details. Contact Steve Moses at 425-891-3640 or smoses@centerltc.com. You can also join or upgrade here: http://www.centerltc.com/support/index.htm. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 7, THE END

LTC Comment: Episode 1 of our serialization of the Center’s newest report described the current defective method of providing and paying for long-term care. Episode 2 explained how Medicaid became the dominant payor for long-term care, the dire consequences that ensued, and central planners’ futile efforts to fix the broken system. Episode 3 showed how scholars made the same mistakes as policymakers, lamenting long-term care’s problems without analyzing their causes, and recommending more of the same interventions that caused the problems in the first place. Episode 4 focused on how affluent people qualify for Medicaid long-term care benefits, why they ignore the risk and cost of long-term care until they need it, and how the government has tried, mostly unsuccessfully, to curtail artificial self-impoverishment to qualify for benefits. Episode 5 explained how and why most long-term care analysts ignore or misrepresent the vast literature on qualifying for Medicaid long-term care benefits while avoiding spend down of wealth. Episode 6 discussed and gave examples of the evidence that Medicaid’s spend down rules do not prevent middle class and affluent people from taking advantage of the welfare program’s long-term care benefits. In today’s seventh and final episode, Steve Moses capitalizes on the preceding evidence and arguments to explain how long-term care financing policy must change to ensure quality long-term care for all Americans.

Due to email formatting challenges, we’ll leave out the content of the report’s extensive footnotes in this serialized version. But the footnotes are important, and you can find them by clicking through to the unabridged version here. Likewise, citations to sources are given in the form (author, year, page number). To find the full citations for those sources, see the “References” section at the end of the full report.

Here’s the seventh and final episode of “Medicaid and Long-Term Care,” by Stephen A. Moses, Center for Long-Term Care Reform, Seattle, Washington, published January 17, 2020. This paper was presented to The Libertarian Scholars Conference on September 28, 2019 in New York City and to The Cato Institute’s State Health Policy Summit on January 3, 2020 in Orlando, Florida.

Ramifications

If Medicaid is not the catastrophic poverty-maker it is commonly made out to be, what is it? Simply put, Medicaid has become a long-term care entitlement for middle-class and affluent families. Individuals can ignore the risk of future long-term care expenses, avoid premiums for private insurance, and then protect home equity and other wealth for heirs if such care is ever needed, shifting the cost of long-term care to taxpayers. The consequences of this reality affect every aspect of the long-term care market.

By making nursing home care virtually free in the mid-1960s, Medicaid locked institutional bias into the long-term care system, crowded out a privately financed market for the home care seniors prefer, and trapped the World War II generation in welfare-financed nursing facilities.

By reimbursing nursing homes less than the cost of providing the care, Medicaid guaranteed that America’s long-term care service delivery system would suffer from serious access and quality problems.

By underfunding most long-term care providers—leading to doubtful quality—Medicaid incentivized plaintiffs’ lawyers to launch giant tort liability lawsuits, extract massive financial penalties, and further undercut providers’ ability to offer quality care.

By making public financing of expensive long-term care available after the insurable event occurred, Medicaid discouraged early and responsible long-term care planning and crowded out the market for private long-term care insurance.

By compelling impoverished citizens to spend down what little income and savings they possessed in order to qualify for long-term care benefits, Medicaid discouraged accumulation and growth of savings among the poor, reducing their incentives to improve their stations in life

(De Nardi, French and Jones, 2009, pp. 4-5⁸⁰).

By allowing affluent people to access subsidized long-term care benefits late in life, Medicaid encouraged accumulation and growth of savings among the rich who could pass their estates to their heirs whether they were stricken by high long-term care expenditures or not, contributing to inequality (Ibid., p. 2⁸¹).

These conditions have prevailed for Medicaid’s 55-year history. They explain why America’s long-term care service delivery and financing system is so dysfunctional. The widespread fallacy of impoverishment sustains this status quo because scholars fail to challenge it. This explains why long-term care dominates Medicaid expenditures but remains impervious to reform.

Policy Recommendations

Everyone agrees that America’s long-term care services and financing system is broken and unsustainable. But most analysis of the problem fails to address its causes rooted in public financing. The usual result is ever more emphasis on expanding government’s role even further. On that path lies more decline and dysfunction.

If the fundamental cause of long-term care problems is easy and elastic Medicaid financial eligibility combined with generous federal matching funds to induce Medicaid spending by states, then corrective action must address those causes if it is ever to effect improvements in the symptoms of exploding costs, dubious access and poor quality.

The best way to eliminate the incentive for states to maximize federal Medicaid matching funds is, for the first time ever, to cap those funds at some reasonable level based on past and anticipated future long-term care expenditures. Without unlimited access to federal funds and with fewer regulatory strings attached to the funds they do receive, states will have an incentive to make the best use of the federal revenue. They will experiment, succeed or fail, and learn from each other, taking full advantage of America’s inimitable federal system.

On the consumer side, the obvious solution is to eliminate incentives in public policy that discourage early and responsible long-term care planning. One way to do that would be to end all pathways that enable people to qualify for Medicaid while protecting income and assets. If individuals and families truly did face impoverishment when catastrophic long-term care expenditures occur, that risk and cost would move to the top of their retirement and estate planning priorities much earlier. But such an approach would be disruptive, disorienting, and cruel, as well as politically infeasible.

A less drastic measure would be to eliminate or greatly reduce Medicaid’s home equity exemption. Home equity is seniors’ largest asset. As of the third quarter of 2019, 78.9 percent of people over the age of 65 own their homes (U.S Census Bureau, 2019), and of these 63.2 percent own free and clear of mortgage debt (Census Bureau, 2017). “Housing wealth for homeowners 62 and older continues to grow at a steady clip, reaching a record $7.05 trillion in the fourth quarter of 2018” (Guerin, 2019). Ownership and transfers are easy to track through public records. Transfers of ownership within 20 years of applying for Medicaid could be deemed disqualifying as all transfers of any assets are now, though with only a five-year look-back. With home equity at risk, more people would save, invest or insure for long-term care. If they failed to do that, they would need to use reverse mortgages or some other method of public or private home equity conversion to pay for their care until they became legitimately eligible for public welfare assistance.

A less politically objectionable approach would be to allow people to receive long-term care help from Medicaid when they need it while retaining even more of their income and assets than is allowed now, but to lien that wealth effectively and recover it after the recipients’ passing, from their estates. Instead of making families run the gauntlet of degrading artificial self-impoverishment methods, let them keep and use what they have saved. As most of elders’ wealth is in their home equity, securing that wealth with a publicly administered and enforced home equity conversion program could reduce the cost of Medicaid and empower far more people to obtain high quality private long-term care in the most appropriate venue. To avoid dependency on Medicaid and the eventual liability of estate recovery, elders and their heirs would have a much stronger incentive to plan early and responsibly for long-term care risk and cost.

Critics may say we tried that approach with OBRA ’93, which discouraged divestment of wealth and required estate recovery. Unfortunately, that strategy did not work because the legislation left too many loopholes and exclusions enabling divestment and impeding estate recovery. The Medicaid planning bar creatively worked around the new restrictions finding ever more ingenious ways to defeat the policy. Furthermore, states failed to implement; the federal government did not enforce; and the media neglected to publicize the new rules that were intended to encourage people to plan ahead to avoid Medicaid dependency (USDHHS Inspector General, 2014⁸²). Consequently, consumer behavior did not change.

Policymakers should try again and this time eliminate the loopholes, enforce implementation, and publicize the methods and benefits of preparing to pay privately for long-term care. But first, we should all …

Redefine the Problem

Albert Einstein said “We can't solve problems by using the same kind of thinking we used when we created them.” The kind of thinking that created the long-term care problem is that markets cannot provide the services people need without massive government regulation and financing. No other way of thinking about the problem has been seriously considered heretofore. But some recent research suggests how we might reconceptualize the quandary we are in so that it is not such a huge challenge and may in fact be amenable to a market-based solution.

Long-term care may not be the titanic crisis it has been assumed to be. For example, in February 2016, the Department of Health and Human Services Assistant Secretary for Planning and Evaluation (ASPE) reported:

Using microsimulation modeling, we estimate that about half (52%) of Americans turning 65 today will develop a disability serious enough to require LTSS, although most will need assistance for less than two years. About one in seven adults, however, will have a disability for more than five years. On average, an American turning 65 today will incur $138,000 in future LTSS costs, which could be financed by setting aside $70,000 today (Favreault and Dey, 2016, p. 1).

That does not sound so daunting, especially if you consider these authors believe half the cost of long-term care will be covered by other payers, including Medicaid. Where would the average person come up with $70,000 today so that it would appreciate from that present discounted value to the $138,000 he or she might need to cover long-term care costs in the future? The extractable home equity of 19.4 million senior households (age 65 plus) at a conservative Combined Loan to Value (CLTV) of 75 percent was $3.1 trillion in 2015, averaging $160,000 per household (Kaul and Goodman, 2017, pp. 2-3 and Tables 1 and 2). If Medicaid did not exempt a minimum of $595,000, more than triple the average extractable home equity amount, a way could be found to earmark enough of it to cover the total cost of most older homeowners’ long-term care. By diverting people with sufficient home equity from Medicaid dependency to financing their own care privately, the fiscal burden on Medicaid could be substantially reduced.

There is more good news. In June 2019, Johnson and Wang “simulated the financial burden of paid home care for a nationally representative sample of non-Medicaid community-dwelling adults ages sixty-five and older.” They “found that 74 percent could fund at least two years of a moderate amount of paid home care if they liquidated all of their assets, and 58 percent could fund at least two years of an extensive amount of paid home care” (Johnson and Wang, 2019, p. 994). Furthermore: “Nearly nine in ten older adults have enough resources, including income and wealth, to cover assisted living expenses for two years” (Ibid., p. 1000). So, the problem is much more manageable than we thought. All we have to do is persuade people to liquidate all their assets.

Obviously, there is no incentive for people to liquidate their wealth as long as Medicaid long-term care financial eligibility works the way it does. But if Medicaid’s perverse incentives were changed to encourage responsible long-term care planning and private payment, how would people respond? Home equity conversion could handle much of the financial burden for the majority of home-owning elders. Reverse mortgages would free up cash flow to cover home care expenses or, for people who plan ahead, the extra revenue could be used to fund long-term care insurance premiums.

Most analysts, however, have written off private long-term care insurance as unlikely ever to penetrate enough of the middle market to become a significant payment source. But they have always assumed that people would need much more coverage at too great a cost to attract enough buyers to make a big difference. That assumption may be wrong. The National Investment Center (NIC) recently reported that reducing the annual cost of seniors housing by $15,000, from $60,000 to $45,000 per year, would expand the middle market for seniors housing by 3.6 million individuals enabling 71 percent of middle-income seniors to afford the product (NIC, 2019, April⁸³).

Where could consumers find that extra $15,000 to bring the cost of seniors housing into reach? The premium for an annual long-term care insurance benefit of $15,000 would only cost a small fraction of the premium required for the full coverage that consumers find so financially daunting now. Unfortunately, insurance regulations forbid carriers from offering coverage with a benefit of less than $18,000 per year. Once again, well-intentioned regulation stands in the way of sensible long-term care policy and planning.

Then there is this. A Cato Institute Policy Analysis reports that “Improved estimates of poverty show that only about 2 percent of today’s population lives in poverty, well below the 11 percent to 15 percent that has been reported during the past five decades” (Early, 2018, p. 1). How can that be? “By design, the official estimates of income inequality and poverty omit significant government transfer payments to low-income households; they also ignore taxes paid by households” (Ibid., p. 2). What is the bottom line? “The net effect is that pretax data overstate the true income of upper-income households by as much as 50 percent, and missing transfers understate the true income of lower-income households by a factor of two or more” (Ibid., p. 4). The rich are poorer and the poor, richer than we thought. “More than 50 years after the United States declared the War on Poverty, poverty is almost entirely gone. … Public policy debate should begin with the realization that only about 2 percent of the population—not 13.5 percent—live in poverty” (Ibid., p. 21).

Former Democratic presidential candidate New York Mayor Bill de Blasio is correct when he says “There's plenty of money in this country.” He’s mistaken when he adds “it’s just in the wrong hands.” It’s in exactly the right hands, those of the people with personal resources or home equity sufficient to fund their own long-term care and stay off Medicaid. All they need is positive public policy incentives to get them to use it. But, unfortunately, the kind of corrective action needed to achieve that outcome is highly unlikely in the current economic environment of profligate fiscal and monetary policy.

The Broken Rhythm of Reform

Historically, progress toward making Medicaid a better long-term care safety for the poor—by diverting the middle class and affluent from dependency on it—tends to occur after major economic downturns when state and federal governments face serious budgetary constraints. After most recessions since 1965, congresses and presidents of widely divergent ideological persuasions backed legislation closing Medicaid long-term care eligibility loopholes and encouraging early and responsible long-term care planning. But as each recession was followed by a rapid economic recovery in which budgetary pressure abated, Medicaid long-term care benefits always reverted to virtually universal availability for all economic classes.

This pattern has changed since the start of the new millennium. After the recession from March 2001 to November 2001 following the internet bubble’s implosion, economic recovery came more slowly than before. Likewise, it took much longer for legislation discouraging the excessive use of Medicaid long-term care benefits to be passed. The Deficit Reduction Act of 2005, which imposed the first cap on home equity and expanded the asset transfer look back period, was not signed into law until February of 2006, nearly five years after the start of the previous recession. Economic recovery came and, true to form, enforcement of DRA 2005 declined.

The new boom ended when the housing bubble burst, causing the Great Recession of December 2007 to June 2009. Again, economic recovery came very slowly. To date, over ten years after the end of the last recession, we have seen no action to spend Medicaid’s scarce resources more wisely by aiming them toward people most in need. In fact, public policy analysts and advocates are moving in the opposite direction, towards proposing yet another compulsory government program funded by taxpayers to expand public financing of long-term care for all.

What might explain slower economic recoveries in recent years and less attention to the cost of Medicaid long-term care benefits? The Federal Reserve forced interest rates to artificially low levels during and since the Great Recession. The consequences of this policy have ramified through the economy in many ways. One way is that government has been able to finance deficit spending and the rapidly increasing national debt at considerably lower carrying costs than before, when interest rates were much higher. By enabling politicians to spend more without facing the normal budgetary consequences, this new economic policy has attracted greater financial resources, including borrowed funds, into public financing of all kinds and simultaneously diverted private wealth into low-interest-rate-induced malinvestment. Consequently, political concern about burgeoning budgets and debt has subsided and no significant effort to preserve Medicaid funds by targeting them to the poor has occurred.

The danger is that just as excessive public spending and private malinvestment in the early 2000s led to the housing bubble and its consequent recession, so the current much larger credit bubble driven by excessive government borrowing and spending could lead to an even greater economic collapse. With the current national debt exceeding $23 trillion and total unfunded entitlement liabilities around $128 trillion, a return to economically realistic market-based interest rates would render the federal government immediately insolvent (The National Debt Clock, 2019).

Further exacerbating the problem of long-term care financing is the fact that the long-anticipated age wave is finally cresting and will soon crash on the U.S. economy. Baby boomers began retiring and taking Social Security benefits at age 62 in 2008. At age 65 in 2011, they turned the Social Security program cash-flow negative (Burtless, 2011). Boomers began taking Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts in 2016, depleting the supply of private investment capital. They will begin to reach the critical age (85 years plus) of rising long-term care needs in 2031, around the time Medicare (2026) and Social Security (2035) are expected to deplete their trust funds, forcing them to reduce benefits.

Of course, Medicaid is the main funder of long-term care, but according to the Centers for Medicare and Medicaid Services Chief Actuary in a statement of consummate denial: “. . . Medicaid outlays and revenues are automatically in financial balance, there is no need to maintain a contingency reserve, and, unlike Medicare, the ‘financial status’ of the program is not in question from an actuarial perspective” (Truffer, Wolfe, and Rennie, 2016, p. 3). In summary, conditions are coalescing for a potential economic cataclysm in or before the second-third of this century and public officials are almost entirely ignoring the risk.

Conclusion

America’s long-term care services and financing system is badly broken. An oncoming demographic age wave guarantees the symptoms of its dysfunctionality will get much worse if something is not done. But to address the symptoms of high cost and low quality without reducing reliance on the public financing which caused them will only make matters worse. Unfortunately, that is the course most scholarship on this subject takes, resulting in ever more urgent calls for even more state and federal financial involvement, with citizens compelled to participate and