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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!

READ STEVE'S BIO

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

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LTC E-ALERT #20-046: 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:

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

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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)

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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)

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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

*** 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. ***

*** 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)

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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)

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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 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. ***

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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

Seattle—

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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)

Seattle—

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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)

Seattle—

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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 pay. Ludvig von Mises warned: “The goal of their policies is to substitute ‘planning’ for the alleged planlessness of the market economy. The term ‘planning’ as they use it means, of course, central planning by the authorities, enforced by the police power. It implies the nullification of each citizen’s right to plan his own life” (Mises, 1953, p. 436). A better course is to reduce states’ dependency on federal funds, target scarce public resources to people who need them most, and let free market incentives and products take care of the rest.

< End >

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

Seattle—

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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.***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 7, THE END

Ramifications

(De Nardi, French and Jones, 2009, pp. 4-5⁸⁰).

Policy Recommendations

Redefine the Problem

The Broken Rhythm of Reform

Conclusion

< End >

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Updated, Monday, April 20, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-016: LTC NEWS AND COMMENT

How Can It Happen Here? The Shocking Deaths in Canada’s Long-Term Care Homes
What to Do About Your Relatives in Long-Term Care During the Coronavirus Pandemic
COVID-19 Issues and Medicaid Policy Options for People Who Need Long-Term Services and Supports
How Much More Than Medicare Do Private Insurers Pay? A Review of the Literature
Virtually Perfect? Telemedicine for Covid-19
Long-term care deaths due to COVID-19 soar to more than 5,500; healthcare workers represent almost 20% of coronavirus cases
Senior living employers get a chance to turn the tables
In Shutting Out Threat, Seniors In Continuing Care Communities Feel Shut In
Pandemic putting pressure on seniors housing: Marcus & Millichap
CMS expected to order COVID-19 reporting; nursing home deaths surpass 3,600

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Updated, Monday, April 13, 2020, 9:00 AM (Pacific)

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LTC E-ALERT #20-015: LTC NEWS AND COMMENT

How Your Stimulus Check Affects Medicaid Eligibility
The Economics of Lockdowns
COVID-19 Stimulus Package to Benefit U.S. Insurers
Hiring frenzy: Brookdale and other senior living operators seek to address labor shortage with displaced workers
Pandemic Delays Federal Probe Into Medicare Advantage Health Plans
China Oceanwide Renews Genworth Deal Financing Arrangement
Feds relax Medicare Advantage regulations amid pandemic
COVID-19 could have $57 billion impact on senior living; Argentum, ASHA request $20 billion from HHS
HHS OIG: Many long-term care facilities requiring negative COVID-19 tests before accepting hospital discharges
Public policy expert: COVID-19 is forcing U.S. to ‘disrupt and upend how we use post-acute care’
The Real Reasons People Decide to Buy Long-Term Care Insurance

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

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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 sixth one, after the ***news.***

*** HAPPY BIRTHDAY, CENTER: Steve Moses and David Rosenfeld co-founded the Center for Long-Term Care Financing [now Reform] on April 1, 1998. Damon Moses joined in 2001. Thank you for 22 years of your attention, support and good wishes. ***

*** THE ECONOMICS OF LOCKDOWNS: What will hurt or kill more people: the virus or a ruined economy? Click through to check out this excellent program broadcast yesterday by the Cato Institute. ***

*** HAS THE TIME COME FOR BETTER MEDICAID LTC POLICY? New York’s Medicaid program is the most generous purveyor of subsidized long-term care benefits in country. Its practically unlimited home health benefit, unencumbered by transfer of assets restrictions, was bankrupting the state. But finally, according to an Empire State Medicaid planning attorney: “Commencing on October 1, 2020, and as part of the New York State Budget enacted on April 3, 2020, there will now be imposed a thirty (30) month look back period for all home care services which is calculated the same way the penalty is calculated for skilled nursing home level Medicaid. Thus, for all home care applications filed on or after October 1, 2020, any transfer of assets (gifts/non-exempt transfers) will disqualify the applicant for Medicaid home care for thirty (30) months.” Good for New York Medicaid. Now if they’d just implement the rest of our recommendations from 2011, recipients and taxpayers would benefit far more. As economic reality reasserts itself all across the United States, every state will need to reassess long-term care financing policy. You’ll find dozens of national and state-level studies focused on how to do that here. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 6

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. In today’s Episode 6, Steve Moses explains and provides many 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.

Here’s the sixth 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.

What is the Evidence that People Dodge Medicaid Asset Spend Down Requirements?

Anecdotal Evidence Abounds

Ask any Medicaid eligibility worker if he or she sees wealthy people taking advantage of Medicaid long-term care benefits and you are likely to hear a rant in reply. Workers are often frustrated by the difficulty they have qualifying really needy people for the program, while the well-to-do provide sanitized applications completed by their lawyers that are indisputable.

New York Medicaid eligibility supervisor Janice Eulau testified before Congress in 2011 that during her 36-year career in the field, she witnessed many individuals diverting significant resources in order to obtain Medicaid. She stated that about 60 percent of applicants do some form of Medicaid planning and added

It is not at all unusual to encounter individuals and couples with resources exceeding a half million dollars, some with over one million. There is no attempt to hide that this money exists; there is no need. There are various legal means to prevent those funds from being used to pay for the applicant’s nursing home care. Wealthy applicants for Medicaid’s nursing home coverage consider that benefit to be their right, regardless of their ability to pay themselves (Eulau, 2011).

In response to a Congressional inquiry,⁷⁷ states provided numerous examples of Medicaid planning practices. For example:

North Dakota

A couple with $700,000 in liquid assets qualified for Medicaid long-term care benefits by purchasing a more expensive house, car, and an additional annuity while receiving $8,000 per month of income from pensions, Social Security, annuity payments and oil lease money. Another couple had more than $528,000 in assets, but qualified when the community spouse bought a new home, a new car, and two annuities worth $240,000, and then applied for Medicaid to pay the institutionalized spouse’s nursing home costs.

Wisconsin

An ill spouse transferred $600,000 to the community spouse who refused to sign the Medicaid application, making the ill spouse eligible for Medicaid because “interspousal transfers are not considered divestment.”

New York

Using promissory notes, immediate annuities and spousal refusal, affluent long-term care Medicaid applicants qualify while retaining unlimited assets. This occurs even when the state has legal recourse, because “Medicaid does not have sufficient resources to pursue all these cases in court.”

Rhode Island

A couple with $400,000 in a bond account became eligible in one month by purchasing “a large single premium immediate annuity.” A single man transferred $100,000 to his son but dodged half of the penalty for transferring assets by using a promissory note to carry out a reverse half-a-loaf strategy.

Virginia

A man bought a $900,000 annuity in his wife’s name, which paid her $89,000 per month, but “the Virginia Medicaid program could not count this income for purposes of determining the husband’s Medicaid LTC eligibility.”

“Spending down” assets to qualify for Medicaid without expending those funds for long-term care or any other health-related expense is far easier and more commonplace than most economists and long-term care policy analysts willingly acknowledge.

But Hard Evidence is Scarce

Unfortunately, hard empirical evidence of Medicaid long-term care asset spend down avoidance is sparse. Most researchers have preferred to scan big data bases looking for evidence to the contrary instead of examining actual Medicaid long-term care cases. In May 2014, however, the Government Accountability Office published results of the only study to date of a sample of such cases for this purpose. They found dramatic results, but for some reason downplayed their own findings.

GAO identified four main methods used by applicants to reduce their countable assets—income or resources—and qualify for Medicaid coverage: 1. spending countable resources on goods and services that are not countable towards financial eligibility, such as prepaid funeral arrangements; 2. converting countable resources into noncountable resources that generate an income stream for the applicant, such as an annuity or promissory note; 3. giving away countable assets as a gift to another individual—such gifts could lead to a penalty period that delays Medicaid nursing home coverage [N.B.: but only if discovered]; and 4. for married applicants, increasing the amount of assets a spouse remaining in the community can retain, such as through the purchase of an annuity (GAO, 2014, unnumbered “GAO Highlights” page).

Those methods of qualifying for Medicaid without spending down resources for care are exactly in line with the techniques and procedures recommended by the popular and professional literature on the topic discussed above.

GAO analyzed a random, but non-generalizable, sample of 294 Medicaid nursing home applications in two counties in each of three states: Florida, New York, and South Carolina. They found “Nearly 75 percent of applicants owned some non-countable resources, such as burial contracts; the median amount of non-countable resources was $12,530” (Ibid.). That seems significant, but GAO does not draw out the implications in its report. A back-of-the-envelope estimate finds that if those results could be projected to the total of all Medicaid nursing home residents nationally—which they cannot, suggesting a study that could provide generalizable results is needed—665,700 Medicaid nursing home residents sheltered over $8.3 billion in non-countable resources or 42.4 percent of the $19.7 billion Medicaid paid for their nursing home care in 2009, the most recent data available at the time of the GAO study’s publication (Houser, Fox-Grage and Ujvari, 2012⁷⁹). That is a lot of money to divert from private long-term care financing liability.

GAO found “Eligibility workers in 10 of the 12 counties interviewed stated that purchasing burial contracts and prepaid funeral arrangements, which are generally noncountable resources, was a common way applicants reduced their countable assets; and eligibility workers from one state said they recommend making such purchases to applicants” (GAO, 2014, 25). In fact, 39 percent of GAO’s sample owned “Burial contracts and prepaid funeral arrangements” with a median value of $9,311. If that proportion holds for the country as a whole, $3.2 billion or 6.3 percent of total Medicaid nursing home expenditures are diverted from funding long-term care to relieving families of the final expenses for their loved ones. This matters because funeral and burial pre-planning to expedite Medicaid eligibility is big business in the United States. Heavy use by Medicaid families of prepaid burial plans to shelter otherwise countable assets has the effect of shifting scarce program resources from purchasing long-term care services for the poor to subsidizing the funeral industry and indemnifying often affluent adult children from the cost of burying their parents.

GAO found “. . . 44 percent of approved applicants—129 applicants—had between $2,501 and $100,000 in total resources, and 14 percent of approved applicants—42 applicants—had over $100,000 in total resources” (Ibid., p. 14). Pretending again that GAO’s findings are representative of all Medicaid nursing facility recipients, how much wealth would that mean Medicaid is sheltering from private long-term care financial liability nationwide? 887,598 nursing home residents receive Medicaid. If 14 percent of them, or 124,264 recipients, possessed $100,000 or more in non-countable resources, that is at least $12.4 billion or 3.4 times the $3.7 billion Medicaid spent for their nursing facility care. Yet, again, GAO does not draw out the implications.

GAO found: “For the 51 applicants for whom we were able to determine the equity interest in the home, the median home equity was $50,000, and ranged from $0 to $700,000” (Ibid., p. 20). Most home equity (equity, not value) is non-countable, up to as much as $893,000 in some states as of 2020. GAO found median home equity to be $50,000 among the 51 applicants (out of 91 total homeowners or 31 percent of the sample) for whom they were able to determine it. Thus 100 percent of their sample’s home equity was non-countable. Keep in mind that $50,000 is a median home equity value, meaning as many exempt homes were higher in home equity value as were lower, and meaning that the average or mean home equity value could be significantly higher. If 31 percent of 887,598 Medicaid nursing home recipients nationwide or 275,155 recipients own homes with a median equity value of $50,000, then 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. Did it not behoove GAO to dig a little deeper? How much money could Medicaid save by making nursing facility care available only after home equity is spent down by means of private or commercial home equity conversion methods?

GAO found: “Among the Medicaid application files that we reviewed in selected states, 16 of the 294 approved applicants (5 percent) had a personal service contract—all of which were determined to be for FMV [fair market value]. The median value of the personal service contracts was $37,000; the value of the contracts ranged from $4,460 to $250,004” (Ibid., p. 26). What if GAO’s findings were valid nationwide? If 5 percent of Medicaid nursing home recipients (44,380 recipients) sheltered a median value of $37,000 each in personal service contracts, the total diverted away from private long-term care financial liability would be $1.6 billion or 3.4 percent of total Medicaid nursing home expenditures nationally in the same year. That’s a very large subsidy to family members for taking care of their loved ones. Personal service contracts are a technique that is available mostly to savvier, more affluent families who seek legal advice on how to shelter assets. Commonly, the poor lose what little wealth they have to long-term care expenses without learning the often technical and complicated legal methods of artificial self-impoverishment.

GAO found: “Of the 70 married approved applicants whose files we reviewed, 13 had applications that contained a claim of spousal refusal. . . . These 13 applicants resided in two states and the community spouse retained a median value of $291,888 in non-housing resources; two of the community spouses were able to retain over $1 million in non-housing resources” (Ibid., p. 31). Spousal refusal is based on a bizarre interpretation of federal law commonplace in only two states (New York and Florida, both of which were included in GAO’s three-state sample for this study) by which spouses of institutionalized Medicaid recipients are allowed to refuse to contribute financially toward the cost of their spouse’s Medicaid-financed care—with impunity and in direct contradiction of the federal statute. The GAO report does not challenge this practice, nor has CMS taken action to curtail or end it. The spousal refusal cases GAO identified had a median value of nearly $292,000 in non-housing resources, but as they also found, some spousal refusal cases involve a million dollars or more. Why exactly is this allowed? Why doesn’t GAO question the practice? Where is CMS? The report makes no comment.

GAO found: “State Medicaid officials, county eligibility workers, and attorneys who provided information on the value of annuities for the community spouse reported average values ranging from $50,000 to $300,000. Officials from one state reported seeing annuities for the community spouse worth more than $1 million. Medicaid officials from one state indicated that they have seen annuities that disbursed all of the payments to the community spouse shortly after the annuity was purchased, while officials from another state said that annuities can have large monthly payments for the community spouse, such as $10,000 per month” (Ibid., p. 32). Spousal annuities are a huge loophole that allows many millions of dollars to be diverted from private long-term care financing into the pockets of affluent Medicaid nursing home recipients’ spouses. Yet GAO does not call for closing the annuity loophole nor has CMS done anything about it.

GAO found: “Among the 294 approved applicants whose files we reviewed, we identified 5 applicants (2 percent) who appeared to have used one of the ‘reverse half-a-loaf’ mechanisms; 4 of the applicants appeared to use the mechanism that involved creating an income stream through a promissory note to pay for nursing home care during the penalty period. These 4 applicants gifted between $20,150 and $227,250 worth of resources, and had penalty periods of between 2 months and 22 months” (Ibid., p. 29). Again, GAO gives only glancing attention to the reverse half-a-loaf technique often employed by Medicaid planners to reduce their affluent clients’ Medicaid spend down liability by half. The incidence of this technique’s use as identified by GAO—only 2 percent—seems small, but keep in mind that it is only used for people with substantial assets. Otherwise, it would hardly be worth the cost in attorneys’ fees to set up the complicated procedure. Public officials should ask about this and all the other techniques downplayed in the GAO report “how much public spending is being wasted?” and “why are such abuses allowed to continue?”

One final point about this study: GAO says “Our analysis was limited to information included in the application files, which states used to make their eligibility determinations. We did not independently verify the accuracy of this information (Ibid., pp. 4-5).” That single admission obviates any value or credibility this report might otherwise have. Federal quality control audits have found that state welfare eligibility determinations are wrong in a third to a half of all cases even after state quality control reviews have confirmed the original determinations by state or county workers. We will never know the true extent of Medicaid asset shelters, transfers and other artificial self-impoverishment techniques until someone reviews a valid random sample of long-term care cases that is generalizable statewide and nationwide and goes beyond the extremely limited information available in case records for purposes of verification.

The Government Accountability Office or the DHHS Inspector General or any serious researcher or organization should review a generalizable sample of Medicaid long-term care cases to establish once and for all how much money is being lost to Medicaid financial eligibility rules that divert the programs scarce resources from the needy to the affluent.

< End >

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Updated, Monday, April 6, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-014: LTC NEWS AND COMMENT

Coronavirus Is Making the Public Pension Crisis Even Worse
U.S. assisted living costs range from $50,892 to $62,976 per year, on average: survey
Here's Why Genworth Financial Is Soaring Today
As Nursing Homes with Cases Reach 400, AHCA Advises Operators to Assume All Untested Patients Positive for COVID-19
Second thoughts: Some opting to remove parents from senior living communities
CMS waives nurse-aide training, certification requirements
She’s Alone, 105 and in a Nursing Home Threatened by the Virus
Coronavirus Lands Another Blow to Senior Housing Operators
Should You Consider Taking a Loved One Out of a Long-Term-Care Facility Now?
Providers: Death total would rise if nursing homes forced to admit COVID-19 patients

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Updated, Monday, March 30, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-013: LTC NEWS AND COMMENT

This Causes Most Falls for Older Adults
When Dementia Meets the Coronavirus Crisis
Older patients stranded in hospitals as nursing homes turn them away over coronavirus
Who cares for those most vulnerable to COVID-19? 4 questions about home care aides answered
Operator survey: Coronavirus hasn’t scared families away from moving loved ones into senior living
Moderate drinkers have lower amyloid-beta levels, study finds
COVID-19 May Delay China Oceanwide-Genworth Deal Closing
Report documents quick spread of new coronavirus through U.S. nursing facilities
How Would Free Market Health Care Respond To The Coronavirus?
LTC providers getting creative to boost seniors’ morale during pandemic
New COVID-19 tip-off may be loss of smell

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Updated, Friday, March 27, 2020, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 5

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 fifth one, after the ***news.***

*** THE TEST: Consensus has been forming among analysts for the past several years about the most politically expedient way to improve long-term care financing policy. The best articulation of the proposal I’ve seen goes like this. We should set up “A public catastrophic insurance program for LTSS costs that takes effect after an income-related waiting period has been met.” (Cohen, Feder, and Favreault, 2018, p. 7) What this means is that the federal and/or state governments should back up catastrophic long-term care expenses by borrowing more money than we have already (nearly $24 trillion), as there is no un-borrowed money to spend. If we’re going to try this, now is the time. The Federal Reserve has just removed all limits on government borrowing. Congress is about to lift all limits on spending. If it is possible to solve problems by printing money and spending it without limits, then now’s the time to throw long-term care into the mix as well. Will it work? What do you think? That’s THE TEST. If you want to know what I think, read the report serialized in today’s LTC Bullet.***

*** PREDICTIONS: We all lament cancellation of the 2020 ILTCI conference that would have begun in a few days. Fill that void vicariously by reading our History of LTC Insurance Conferences (2019). Here’s a little peek back at the Jacksonville, Florida 17^th Annual Inter-Company Long-Term Care Insurance Conference’s closing general session on March 28, 2017, which explored the topic “New President and Congress: Implications for Aging and LTC Finance.” Participants were asked to vote on several questions. One of them follows including my response. See the others in “LTC Bullet: LTC Policy Poll Results,” April 14, 2017.

“Q7. Do you think the next four years will bring an improved economic climate? Or will we see a continuation of low interest rates?

1. Improved economic climate/higher interest rates = 76%
2. Stay pretty much the same = 13%
3. Get worse = 11%

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 with the age wave and entitlement insolvencies looming. 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 in competition with The Fed; carrying costs on our $20 trillion debt 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.)”

LTC Comment: I was a little early with this prediction. It took the current pandemic to prick the asset bubble I described, but here we are. What comes next is the critical TEST for the U.S. economy and for long-term care financing. Stay tuned. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 5

In Episode 5, which follows, Steve Moses explains 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.

Here’s the fifth 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.

Why Do Analysts Ignore this Vast Literature on Medicaid Eligibility Planning?

Long-term care researchers rarely mention, and never delve deeply into, the Medicaid planning literature. They pretend these easier pathways to eligibility are not widely used. Analysts might argue that widely available consumer information and the formal legal literature on Medicaid planning are irrelevant because the fact that people can qualify for Medicaid while preserving most of their wealth does not mean they do it. All that matters is the evidence showing whether people do or do not spend down. Yet, when analysts ignore the evidence of easy financial eligibility and widespread Medicaid planning, they are predisposed to expect more rather than less genuine spend down. If they knew and understood the methods, techniques, and incentives to use them described in this literature, they would be more likely to look for, find and understand evidence that disproves the presumption of widespread asset spend down for care.

Analysts know the official laws and regulations governing Medicaid long-term care eligibility are complicated and pliant. Yet they frequently apply only the ostensibly severe standards to data on seniors’ wealth and then conclude people must be spending down millions before they qualify. If Medicaid denies access to applicants with more than $723 per month of income and $2,000 in assets, then surely, they reason, the vast majority of people on Medicaid have spent down, often catastrophically before qualifying. With that mistaken assumption firmly fixed in their minds, analysts conduct studies and search giant data bases looking for evidence to support it. This confirmation bias skews what they find.

Analysts could avoid such bias by reviewing and taking into account the legal literature on how to qualify for Medicaid without spending down for care. But they do not, which is a peculiar oversight as the evidence adduced and referenced above is inescapable. How and why do scholars discuss Medicaid long-term care financial eligibility while avoiding the facts of easy access to Medicaid?

Evasion of and Equivocation on Critical Concepts and Facts

Long-term care scholarship does include several excellent explanations of the complicated federal and state Medicaid long-term care financial eligibility rules such as Musumeci, Chidambaram and O’Malley Watts, 2019. But these treatments rarely draw out the ramifications of allowing relatively high-income people with substantial wealth to qualify for public benefits. Nor do they discuss how the superficially strict but fundamentally generous income and asset rules can be stretched to expand eligibility to include even the very well-to-do. When analysts do acknowledge that Medicaid long-term care benefits reach more than the poor, they nearly always equivocate on key concepts such as impoverishment, spend down, decumulation, median wealth, Medicaid planning and out-of-pocket expenses. Moreover, they use highly dubious data sources to substantiate their conclusions. These examples will clarify this point.

Impoverishment

Medicaid long-term care eligibility requires inadequate cash flow, i.e. insufficient income, to cover all of an individual’s medical and long-term care costs. But it does not require low income, low assets, or financial destitution. Yet a typical analysis claims “Medicaid only covers the long-term care costs of the indigent” (Friedberg, Hou, Sun, and Webb, 2014, p. 1). Synonyms for the term “indigent” include “poor, impecunious, destitute, penniless, impoverished, poverty-stricken, down and out, pauperized, without a penny to one's name,” and many more (Dictionary definition of indigent). Clearly, if people with substantial income and assets can qualify for Medicaid long-term care benefits, then eligibility does not require impoverishment, much less indigence. The right conclusion to reach about Medicaid’s role in long-term care financing is that it substantially ameliorates the risk and cost of long-term care, not that it impoverishes people.

Spend Down

Medicaid financial eligibility rules allow people to spend down their private income and assets to reach eligibility limits. Income spend down must be done to purchase medical or long-term care services (Medicaid.gov, 2019)⁶⁹. But asset spend down does not have the same requirement (ElderLawAnswers, 2018⁷⁰). Excess assets may be spent on or converted to exempt resources. There is no requirement to spend down assets on medical or long-term care expenses (Schneider and Huber, 1989, p. 142⁷¹). An expensive birthday party or “one last tour of Reno’s finest establishments” (Gilfix and Woolpert, p. 42⁷²) are viable asset spend down options. Yet the presumption that wide swaths of the American public are forced to spend down their life’s savings on long-term care has prevailed in the research literature for decades.

When several “spend down” studies in the late 1980s and early 1990s set out to prove widespread asset spend down, they found it was far less common than previously believed. A 1992 analysis concluded: “Based on the studies conducted to date, it appears thatsomewhere between one in four and one in five persons who originally enter nursing homes as private payers convert to Medicaid before final discharge (Spend-Down I)” (Adams, Meiners and Burwell, 1992). Moreover, neither these early studies nor more recent ones distinguished between real spend down, paying privately for care until eligible, and artificial spend down, qualifying by purchasing exempt assets or otherwise sheltering or divesting wealth. Hence:

Very little is known about what has actually taken place for the individuals whom the foregoing studies have identified as asset spend-downers. Indeed, we cannot actually be sure these individuals have depleted assets; most of the studies can only identify that a change in payor source has taken place (Ibid.).

A well-known, more recent reportfurther exemplifies the point.“Medicaid Spend Down: Implications for Long-Term Services and Supports and Aging Policy” confidently states: “The high cost of long-term services and supports (LTSS) results in catastrophic out-of-pocket costs for many people needing services, some of whom spend down to Medicaid eligibility” (Wiener, et al., 2013, p. 1). Yet what this report calls “spend down” is nothing more than the “transition” from non-Medicaid status to Medicaid eligibility, which as explained above, is achievable without catastrophic financial consequences.

Asset Decumulation

Recent research on asset decumulation in retirement belies the conventional wisdom that widespread long-term-care spend down occurs. In a study sponsored by the Employee Benefits Research Institute, Sudipto Banerjee observed: “One of the assumptions underlying many models used to measure retirement income adequacy is that retirees will spend down their accumulated assets to fund their retirement needs.” Then he asked“While this may make sense in theory, do people actually behave like this?” (Banerjee, 2018, p. 4) What he found was stunning. People with relatively low savings, under $200,000 in non-housing assets, dropped in wealth only 24.4 percent in the first 18 years of retirement, a rate of asset decumulation “definitely much lower than what has been traditionally assumed by most retirement models” (Ibid., p. 5). Those with $200,000 to $500,000 dropped only 27.2 percent (Ibid., p. 7). “So, in this group as well, retirees did not spend down their assets as quickly as retirement models would generally predict” (Ibid.). Finally, the group with over $500,000 dropped only 11.2 percent. “So, the group with the highest level of assets had the lowest rate of asset spend down” (Ibid.).

Banerjee then asks “Why are retirees not spending down their assets?” (Ibid.) He speculates that people are reluctant to expend their savings because they do not know how long they will live or how large their medical or long-term care expenses may be. They may wish to leave a bequest or they are just being cautious or saving is a habit for them. But there could be a much simpler explanation. Once in retirement, consumers who safely ignored the risk and cost of long-term care during their work lives finally become concerned after their employment income has ended. Decades of academic studies and media reports convince them they will lose everything if they succumb to the high risk of needing long-term care. So, as best they can, people preserve their assets and spend only income. But catastrophic spend down for long-term care is a myth because Medicaid pays for most expensive long-term care, exempts most assets, is easy to get after care is needed without spending down wealth significantly and only requires income as the patient’s contribution to the cost of care. Consequently, after decades living in retirement, most people at most levels of wealth spend down very little.

Other research does show that people do spend down very rapidly at the very end of life, especially in the last year. But, again, no one knows for sure how much of this depletion of measurable wealth represents real or artificial spend down. French, et al., found that medical spending before death, combined with burial expenses explained only “about 24 percent of the decline in assets of the soon-to-be deceased and about 37 percent of the decline in assets in the last year of life” (French, De Nardi, Jones, Baker, and Doctor, 2006, p. 2). The bottom line question, however, is how much Medicaid actually helps affluent people defray the cost of late-life chronic illness and the answer is striking. For households at the top of the income distribution, Jones, et al., found

Medicaid covers 21 percent of lifetime costs at age 70, with the fraction rising to nearly 30 percent at age 100. While most high-income households do not receive Medicaid, those that do qualify under the Medically Needy provision, which assists households whose financial resources have been exhausted by medical expenses [N.B.: Or by Medicaid planning, a key point unmentioned in this article]. Such households tend to have high medical expenses and tend to receive large Medicaid benefits (Jones, Bailey, De Nardi, French, McGee, and Kirschner, 2018, p. 24).

The fact that Medicaid offsets upwards of one quarter of the lifetime medical and long-term care expenses of high income households is staggering and belies the common presumption that people must and do spend down into impoverishment to obtain benefits.

Median Wealth

Analysts focus on people with median or less income and assets, but they routinely evade the more interesting questions of whether and how people with much higher wealth qualify for Medicaid. For example, in testimony before the Commission on Long-Term Care, Richard W. Johnson of the Urban Institute summarized his research findings that people who end up in nursing homes on Medicaid tend to have relatively low incomes and assets. Then he concluded

Most older adults who end up on the program would never have been able to earn enough income or accumulate enough wealth to cover their nursing home costs. It seems likely that Medicaid will continue to play an important role in long-term care financing as long as those with long-term care needs are disproportionately those with limited financial resources (Johnson, 2013, p. 12).

It should not evoke surprise that poor people qualify for Medicaid or that most people who qualify for Medicaid are, and many always were, poor. Helping the poor is the program’s statutory purpose. But, what about people who do have income and assets well above the median? Take Medicare beneficiaries for example. The Kaiser Family Foundation states

While a small share of the Medicare population lives on relatively high incomes, most are of modest means, with half of people on Medicare living on less than $26,200 and one quarter living on less than $15,250 in 2016. The typical beneficiary has some savings and home equity, but the range of asset values among beneficiaries is wide and varies greatly across demographic characteristics. . . . As policymakers consider options for decreasing federal Medicare spending andaddressing the federal debt and deficit, these findings raise questions about the extent to which the next generation of Medicare beneficiaries will be able to bear a larger share of costs (Jacobson, Griffin, Neuman, and Smith, 2017, pp. 6-7).

In essence, Kaiser says Medicare beneficiaries are so poor that it behooves policymakers not to consider “decreasing federal Medicare spending” when they are “addressing the federal debt and deficit.” But, what about Medicare beneficiaries who are not so poor? Would they still qualify for Medicaid long-term care benefits?

According to the Kaiser issue brief, half of all Medicare beneficiaries have incomes of $26,200 or less (Ibid.). That is more than double the $12,490 poverty guideline for a single person as of 2017, but poor enough to be sure. These are the people we might hope the Medicaid long-term care safety net protects. In fact, it does. Anyone needing formal long-term care with that level of income would qualify easily anywhere in the United States.

But what about the other half of Medicare beneficiaries? Forty-five percent of them had incomes between $26,200 and $103,450. That is hardly impoverished. Could someone with an annual income of up to $103,450, at the 95^th percentile of all Medicare beneficiaries, qualify for Medicaid LTC benefits? Yes. All it would take is paying the cost of a nursing home out of pocket at a little more than the median national annual rate for a semi-private bed ($89,292), hardly uncommon in high-cost states like California, New York or Massachusetts. Anyone in the $26,200 to $103,450 range would qualify in most states as long as their total uncompensated medical and long-term care expenses exceeded their income, as they likely would for people who need expensive long-term services and supports.

Turning to the savings of Medicare beneficiaries, we find the same upside down policy incentives as for income. The one-half of beneficiaries with the least savings qualify easily for Medicaid LTC benefits, but so do most of the upper half.

Half of Medicare beneficiaries have savings of $74,450 or less, including “retirement account holdings (such as IRAs or 401Ks) and other financial assets, including savings accounts, bonds and stocks” (Ibid., p. 3). Although their savings exceed the usual Medicaid limit of $2,000 in countable assets, these people can easily purchase extra home equity and other exempt assets, in any amount, such as personal belongings, home furnishings, prepaid burial plans, term life insurance, an automobile, etc., in order to reduce their countable resources and reach the asset eligibility limit.

But,what about the 45 percent of Medicare beneficiaries who have savings between $74,450 and $1.4 million? These higher-savings seniors generally have greater access to professional financial advice on how to protect their wealth from long-term care expenditures. They can avail themselves of Medicaid’s $595,000 to $893,000 home equity exemption and purchase other exempt assets as well; they can take advantage of loopholes favoring the affluent such as Medicaid-friendly annuities, irrevocable income-only trusts, spousal refusal and reverse half-a-loaf strategies; or they can simply divest their savings five years or more before applying for Medicaid as most Medicaid planning attorneys recommend.

Because it is easy and financially beneficial to qualify for Medicaid long-term care benefits while sheltering or divesting up to $1.4 million (the 95^th percentile of Medicare beneficiaries’ savings) or more, Medicaid planners do a land-office business often in practices with multiple geographic locations.⁷³

Medicaid Planning

Medicaid planning is the practice of reconfiguring income and assets, with or without professional legal advice, to achieve financial eligibility for Medicaid long-term care benefits while minimizing financial consequences. Analysts seldom cite the extensive legal literature on Medicaid planning nor do they acknowledge the omnipresent information on its many methods and techniques available online and in the popular media. Instead, when they write about decumulating wealth to qualify for Medicaid, they assume and imply that savings are used to purchase long-term care rather than being divested, diverted, or sheltered to achieve eligibility.

In the rare instances when analysts consider the possibility that people might qualify for Medicaid without spending down wealth, they write only about “asset transfers” without considering other far more common and effective Medicaid planning techniques. For example: "[C]ritics contend that . . . Medicaid pays for the care of most nursing home residents because people with the resources to afford their own care—middle-income and wealthier people, even 'millionaires'—transfer their assets to qualify for public subsidies intended for the poor” (O’Brien, 2005, p. 2). First, no one contends that “most nursing home residents” transferred assets. Asset transfers are very expensive for taxpayers, having increased Medicaid spending by as much as “1 percent of total Medicaid spending for long-term care” (Waidmann and Liu, 2006, p. 1) or $1.7 billion as of 2016. But asset transfers are only the tip of the Medicaid planning iceberg, a minor factor compared to the more common methods of artificial self-impoverishment. Yet the O’Brien article makes only this passing reference to “establishing trusts,giving cash gifts to children and grandchildren, or otherwise concealingtheir ability to pay for their own care by converting countable assets toexempt forms (by spending assets on a car or on a home or home renovation,since those assets are not counted in making a Medicaid eligibilitydetermination)”(O’Brien, 2005, p. 2). By focusing exclusively on asset transfers while ignoring the abundant evidence for the more important Medicaid planning techniques, this article and most of its type violate the Strawman logical fallacy.⁷⁴

Furthermore, formal Medicaid planning itself pales in significance compared to the simple reality explained above that most income and assets do not impede access to Medicaid long-term care benefits. Average middle class people qualify fairly easily without using asset transfers or other Medicaid planning techniques that, when employed, enable even the wealthy to qualify by following sophisticated legal advice.

Long-term care researchers sometimes debunk the idea that Medicaid planning is common among the well-to-do by suggesting that Medicaid’s reputation for poor access and quality would discourage people with financial means from seeking eligibility. Two points rebut that argument. First, the principal drivers behind Medicaid planning are not the ailing parents, but rather the adult children who want to protect their inheritances and therefore have a financial conflict of interest. Second, Medicaid planners routinely advise clients and their families not to worry about Medicaid’s poor reputation. By holding back enough “key money” for the parent to pay privately for a few months, they can buy their way into the best facilities which have relatively few Medicaid beds. Nursing homes routinely give admission preference to higher-paying private payers (Gandhi, 2019, p.1⁷⁵). Then when the last of the cash runs out, the attorney files the Medicaid application and the client remains in the preferred facility because state and federal laws prevent expelling residents simply because their source of payment changes from private to Medicaid. Ironically, poor people for whom Medicaid is supposed to be a safety net, lack the key money to ensure access to the best care. They go to the Medicaid facilities with the bad reputations.

Out-of-Pocket Expenditures

Some analysts wrongly insist Medicaid requires impoverishment by claiming out-of-pocket expenditures are higher than they really are. For example, Melissa Favreault and Judith Dey conclude “Families will pay about half of the costs themselves out-of-pocket ….” (Favreault and Dey, 2016, p. 1). They arrive at that figure by including room and board expenses in residential care settings—costs that people would incur whether they need long-term care or not—and by excluding Medicare post-acute care expenditures, which as explained above, are critical to sustain Medicaid’s viability as the dominant long-term care financing source. The truth is that out-of-pocket long-term care costs have been declining for half a century. In 1970, five years after Medicaid began picking up the long-term care tab, nearly half of nursing home expenditures still came from private resources. That share has dropped to almost one quarter as of 2017, including the spend-through of Social Security income, as explained earlier. Bottom line, over 90 percent of the cost of nursing home care in the United States is explained without counting out-of-pocket asset, as opposed to income, spend down (Colello, 2018, p. 1⁷⁶).

The situation with home health care financing is very similar. According to CMS, of the $102.2 billion America spent on home health care in 2018, Medicare covered 39.4 percent and Medicaid 35.1 percent, totaling 74.5 percent.Private insurance paid 11.9 percent. Only 9.9 percent of home health care costs were paid out of pocket, roughly one dollar out of every $10, and some portion of that amount was income spend down that Medicaid requires from recipients. The remainder came from several small public and private financing sources(CMS, 2020, Table 14).

Faulty Data

When economists and health policy analysts claim that older people approaching the need for long-term care retain few assets and spend down rapidly, they generally draw their evidence from survey data provided by the Health and Retirement Study (HRS) and its auxiliary, the Asset and Health Dynamics among the Oldest Old (AHEAD) study. These longitudinal surveys contain information on home values, automobile ownership, liquid assets, farms and other businesses, retirement accounts, and other assets (De Nardi, French and Jones, 2016). Noteworthy is the fact that each of these financial holdings, as explained above,is either expressly exempt under federal law or easily converted into an exempt asset for purposes of achieving Medicaid long-term care eligibility. In other words, it would not matter for purposes of determining Medicaid long-term care eligibility whether such assets were retained or spent down.

Furthermore, the HRS and AHEADdata are highly dubious regarding amounts held in each of these asset classes.One expert describes “measurement errors in the data, particularly those arising from item nonresponse and frominaccurate respondent reports of the ownership and level of assets” (Venti, 2011, p. 3). Another identifies several other problems with the data including

The Health and Retirement Study contains no information on health and long-term services and supports expenditures, including out-of-pocket expenditures. Thus, it is not possible to directly link transition to Medicaid with out-of-pocket expenditures for health and long-term services and supports. … Finally, information on people who are cognitively impaired and who die is derived from proxy respondents, often relatives, who may not know about specific long-term services and supports use or Medicaid eligibility (Wiener, et al., 2013, p. 50).

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 hidden or 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 by putting them on Medicaid 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 affluent 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. Yet analysts routinely accept the HRS/AHEAD data as though it were unchallengeable. They often treat such data as incontrovertible proof of widespread catastrophic long-term care spend down.

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Updated, Monday, March 23, 2020, 10:40 AM (Pacific)

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LTC E-ALERT #20-012: LTC NEWS AND COMMENT

Nursing Home and Assisted Living Breaking News: Revised DHS Guidance for Visitation
FAQs on Medicare Coverage and Costs Related to COVID-19 Testing and Treatment
Senior housing and care facilities could help employ today’s out-of-work restaurant, hotel and retail workers
Post-Acute Bed Capacity Concerns Loom as COVID-19 Cases Grow
U.S. coronavirus death toll surpasses 100
Coronavirus Is Changing The Way We Care For Frail Older Adults
Coronavirus bill provisions would ‘decimate’ senior living workforce, organizations say
CMS waives three-day stay requirement, MDS deadlines as dining struggles emerge amid COVID-19 response
Opportunities To Expand Telehealth Use Amid The Coronavirus Pandemic
McKnight’s 40 for 40: Bill Thomas

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

Seattle—

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LTC E-ALERT #20-011: LTC NEWS AND COMMENT

BREAKING: Feds to ban most nursing home visitors in escalation of coronavirus fight
Denver 2020 ILTCI Conference Cancelled
The Federal Government Is on an Unsustainable Fiscal Path
2020 Alzheimer’s Webinar Series
AHCA’s Parkinson: COVID-19 ‘Almost a Perfect Killing Machine’ for Elderly
Avalanche of Alzheimer's Cases: Are We Ready?
Study links 3 key risk factors to coronavirus deaths among older adults
BREAKING: Feds, providers take ‘unprecedented’ action regarding visitor access at long-term care facilities over COVID-19 fears
COVID-19: What's Cancelled, What Isn't
Nursing Homes Face Unique Challenge With Coronavirus
Senior living communities in Washington, Maryland take precautions after positive COVID-19 test results

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Updated, Friday, March 13, 2020, 10:40 AM (Pacific)

Seattle—

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LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 4

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 fourth one, after the ***news.***

*** DENVER 2020 ILTCI CONFERENCE CANCELLED: “The Executive Committee of the ILTCI has monitored the COVID-19 virus closely. The situation in the host city of Denver, Colorado has worsened, including the governor of Colorado declaring a state of emergency. Unfortunately, we feel that it is impossible to proceed with the 2020 conference given the facts surrounding this pandemic. As likely goes without saying, we put the safety of our members first. Like most conferences, professional sports teams and other organizations whose members planned to meet in any material number this March, we have decided that proceeding with the conference does not justify the risk that our members could become ill. Steps taken by our members to mitigate the risk of infection have already resulted in speaker and attendee cancellations in significant numbers.

As a result, the ILTCI's Board of Directors voted unanimously to cancel the 2020 conference. We are continuing to evaluate whether the meeting can be rescheduled at a later time. As you can surely appreciate, that evaluation will be contingent on the future trajectory of COVID-19, which is presently unknown.

We will soon reach out to attendees, exhibitors, and sponsors under separate cover with communications regarding the implications of this cancellation.

We will have FAQs available soon on our website, www.iltciconf.org.

Sincerely,
The ILTCI Executive Committee”

LTC Comment: This is a sad but sensible decision. The virus pandemic puts older and immune-deficient people at greatest risk, the very people private LTCI aims to protect financially. What a PR fiasco if someone had sickened at the meeting spreading the infection and carrying it home. The ILTCI Conference has a long, proud tradition. We’re confident it will return next year bigger and stronger than ever. In the meantime, check out our history of the long-term care insurance conferences including all 19 ILTCI’s up to now: History of LTC Insurance Conferences (2019). We should all express our appreciation to the ILTCI conference’s organizers, staff, and contributors for their dedication, hard work and consummate professionalism under extremely difficult circumstances.

***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 4

In Episode 4 of this series, which follows, Steve Moses explains how affluent people qualify for Medicaid long-term care benefits and why they ignore the risk and cost of long-term care until they need it. He then describes the vast popular and legal literature on “Medicaid planning”--artificial self-impoverishment to qualify for assistance--providing many quotes as examples. Finally, he recounts each of the statutory measures taken by numerous presidents and congresses to counteract Medicaid eligibility abuse while also explaining how the Medicaid planning bar circumvented each of those corrective action measures.

Here’s the fourth 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.

Are Consumers Planning to Use Medicaid for Long-Term Care?

Do consumers deliberately plan to take advantage of Medicaid if they ever need long-term care? Do they know the rules on how to qualify for Medicaid long-term care benefits while minimizing the financial spend down consequences? Research suggests they do not. Most people believe mistakenly that Medicare or their health insurance will cover long-term care (AP-NORC, 2017, p. 2⁶⁶). They remain blissfully ignorant of long-term care risk despite being inundated with claims like those cited above insisting the government will not help with long-term care costs except after one’s personal resources are exhausted. What seems to happen is that consumers ignore the alarmist information about catastrophic spend down risk until they need expensive long-term care. At that point, they become quickly aware of information on how to avoid serious spend down liability and they use it, with or without the help of professional advisors.

Such consumer behavior is rational and complies precisely with the real, though unintentional incentives in Medicaid eligibility policy. Eventual easy access to Medicaid long-term care benefits enables consumers to ignore warnings of long-term care risk with impunity. Then, if and when they need high-cost long-term care, they focus on how to pay and quickly discover the many ways to qualify for Medicaid. By then, however, the damage is done. It is too late, after someone already needs care, for him or her to save, invest, insure or otherwise prepare to pay privately for care. At that stage, Medicaid is the path of least resistance.

How Do People Qualify for Medicaid Long-Term Care Benefits While Preserving Most Wealth?

Once people are stricken by chronic illness that requires expensive long-term care, they and their families quickly become sensitive to the question of who pays and who does not. At first it sounds like they are on their own and the consequences could be devastating. But then they begin to learn how the system really works. After receiving no help from their Social Security, Medicare, or health insurance, they hear about Medicaid. When they—or more likely their adult children, as the parents themselves are disabled and often demented—go to the local welfare office, they receive a long, complicated Medicaid application form with many items of financial verification to complete, such as bank balances, home ownership and equity, asset transfers and why they made them, and so on. But they will also learn from the local Medicaid eligibility worker that income is not usually an obstacle, that many assets are totally exempt, and that they can and should use countable assets such as cash and liquid investments to purchase non-countable resources, such as prepaid burial plans or home improvements, in order to hasten the process of spend down and quicken eligibility. Some eligibility workers are more forthcoming than others with information on how to facilitate eligibility for benefits, but most are caring people eager to help families negotiate an emotionally and financially difficult transition.

By this point, people discover information everywhere on how to navigate the crisis. Consumer information on painlessly qualifying for Medicaid is universally available. How-to and self-help books abound. An internet search for “Medicaid planning” reveals thousands of articles on how to qualify without spending down significantly. Anyone can search “Medicaid planning in [your state]” to find websites of law firms that specialize in the practice. Many such firms offer online articles explaining in general how Medicaid planning works, but also warning, to attract clients, why it is too complicated for laypersons to attempt without their professional guidance. Such firms routinely obtain, fully document, fill out, and submit the Medicaid application, often inches thick with verifying documents, to the state agency on behalf of their affluent clients’ families. MedicaidPlanning.org encourages advisors “of any kind (e.g., attorney, financial planner, CPA, care planner, etc.)” to provide the service and offers a book and training on how to impoverish people artificially to qualify them for Medicaid. The American Council on Aging, not to be confused with AARP’s National Council on the Aging (NCOA), offers these Asset Planning Strategies covering “Irrevocable Funeral Trusts, Spousal Asset Transfers, Annuities, Spend Down Excess Assets, Lady Bird Deeds, Medicaid Divorces, Medicaid Asset Protection Trusts, ‘Half a Loaf’ Strategies, Income Planning Strategies, Spousal Income Transfers, Qualified Income Trusts/Miller Trusts, and Income Spend Down.”

Access to a Medicaid planner anywhere in the country is facilitated by the National Academy of Elder Law Attorneys (NAELA), the professional association of lawyers who specialize in the practice of Medicaid planning. NAELA has a national membership of 4,500 and an annual budget of $2 million (NAELA, 2019). Although elder law attorneys perform a wide range of beneficial services for their mostly affluent clients, their primary source of billable hours is Medicaid planning. The fee to qualify someone for Medicaid ranges “from $2500 for individuals with relatively simple estates to $10,000 for individuals with significant assets” (Markovic, 2016, footnote 88).

Medicaid planners’ services are most often sought by the adult children of declining elders for the purpose of preserving their inheritances by avoiding private long-term care expenses for the parents. As Medicaid dependency often involves impaired access to and quality of long-term care (Ameriks, 2007, p. 22), Medicaid planners are vulnerable to and sensitive about accusations of financial abuse of the elderly. This self-description and justification is typical:

It is not uncommon for couples and individuals to engage in a practice often referred to as “Medicaid Planning,” which one commentary defines as “the legal fiction of ‘rearranging assets’ to make someone poor on paper so that he or she may qualify for Medicaid.” It is well established that such “Medicaid Planning” is legal and that it is professionally ethical, or acceptable, for attorneys and financial planners to assist clients in such planning. Nonetheless, the Medicaid planning and spend down processes are quite complex, potentially highly financially disruptive, and may lead to inequitable results. Moreover, although legal, Medicaid planning is often perceived as “gaming the system” (Hyer, Hannah, Burkhart, and Toevs, 2012, p. 359).

Clearly, information on how to qualify for Medicaid long-term care benefits while avoiding the seemingly restrictive financial eligibility rules is widely available. The financial incentive to use such information is great. There is every reason to believe families use this information (and no evidence they do not) to minimize personal asset spend down and to hasten access to care financed by Medicaid.

The Legal Literature on Medicaid Planning

Beyond the ubiquitous consumer information on Medicaid planning, there is a large and always expanding professional legal literature on the topic. The first such article appeared within months of President Jimmy Carter’s signing the Omnibus Budget Reconciliation Act of 1980 (OBRA ’80), which imposed the first ever restriction on asset transfers done to qualify for Medicaid. OBRA ’80 became law in December 1980; “Medicaid as an Estate Planning Tool,” by William G. Talis, appeared in the Massachusetts Law Review’s Spring 1981 issue. It stated “Careful planning even under adverse state law will still be able to achieve the goal of excluding an applicant's resources for purposes of determining Medicaid eligibility” (Talis, 1980, p. 94).

The article also describes ways clients might reduce exposure to health costs through (1) creation of various trust devices, (2) conveyance of remainder interests in property, (3) conversion of property into assets exempted from eligibility tests for Medicaid, and (4) outright transfers of property. If a client can be rendered eligible for Medicaid, medical expenses will be paid in full and estate assets will be conserved. Moreover, while the Department of Public Welfare may seek recovery for payments made on behalf of elderly recipients from their estates, careful planning can lawfully defeat the Department’s ability to obtain indemnification (Ibid., p. 90).

Although some of the methods described in this early article have since been proscribed or delimited by federal law, most of them remain viable and widely used. Quotes on how to do Medicaid planning from this first article and a selection of 86 others spanning the next 35 years are compiled in “Appendix I: Supplemental Bibliography” of How to Fix Long-Term Care Financing (Moses, 2017). These include:

After President Ronald Reagan signed the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA ’82) authorizing states voluntarily to (1) restrict asset transfers done within two years of applying for Medicaid, (2) place liens on real property, and (3) recover benefits correctly paid from recipients’ estates, Medicaid planners concluded they could circumvent the new rules and explained how: “With long-range planning, the cooperation of relatives, some good health, and maybe a little luck, couples will be in a position to negotiate between the rock and a hard place that Congress has placed in the Medicaid path” (Deford, 1984, p. 139).

After President Reagan signed the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA ’85) restricting the use of Medicaid Qualifying Trusts, lawyers reassured their colleagues and clients: “Many people assume that a family’s resources must be virtually exhausted before any help will be available through the Medicaid program. In fact, people in Washington [state] who need nursing home care can benefit from Medicaid without devastating their families” (Greenfield and Isenhour, 1986, p. 29).

After President Reagan signed the Medicare Catastrophic Coverage Act of 1988 (MCCA ’88) making asset transfer penalties mandatory nationwide and expanding the look-back period to 30 months, one especially aggressive Medicaid planner wrote this in his best-selling book Avoiding the Medicaid Trap: How to Beat the Catastrophic Costs of Nursing-Home Care:

So is there any practical way to juggle assets to qualify for Medicaid before losing everything? The answer is yes! By following the tips on these pages, an older person or couple can save most or all of their savings, despite our lawmakers’ best efforts...Here are the best options: Hide money in exempt assets...Transfer assets directly to children tax-free...Pay children for their help...Juggle assets between spouses...Pass assets to children through a spouse...Transfer a home while retaining a life estate...Change wills and title to property...Write a durable power of attorney...Set up a Medicaid Trust... Get a divorce.... (Budish, 1989, p. 34)

After President Bill Clinton signed the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) making estate recovery mandatory, expanding the asset transfer look back period to three years, eliminating the cap on asset transfer penalties, and prohibiting “pyramid divestment,” two experts reassured their colleagues: “Most of the basic planning options that seem to exist today will survive; but many of the more unique, aggressive tactics may or may not survive [p. 1] .... WE STILL BELIEVE THAT ALMOST ANYONE CAN BECOME MEDICAID ELIGIBLE FOR LONG-TERM CARE BENEFITS EVEN IN CRISIS.... [p. 11]” (Brown and Fleming, 1993, emphasis in original).

After President Clinton signed the Health Insurance Portability and Accountability Act of 1996 (HIPAA ’96) making it a crime to transfer assets for less than fair market value for the purpose of qualifying for Medicaid, planners sought ways around the new rules:

By using a LCC [Life Care Contract], the applicant is outside the purview of the disqualifying transfer section of Title 42 because the contract anticipates a transfer for value and not a gift. Therefore, to the extent that the elder’s assets are transferred pursuant to this contract, the elder will incur no period of ineligibility ... Using this one payment method, an elder can transfer a large number of assets and shortly thereafter qualify for Medicaid if the caregiver can prove that the medical condition causing the disability was totally unanticipated ... a one lump sum payment of $540,000 is a transfer for value and outside of the Medicaid rule ... IT DOESN’T MATTER IF MOM HAS A MASSIVE STROKE AND IS A CANDIDATE FOR LONG TERM CARE SIX MONTHS LATER....” (NAELA Conference Proceedings, 1996, pps. 1-2, 4, 11, double emphasis in the original).

After President Clinton signed the Balanced Budget Act of 1997 (BBA ’97) repealing the criminalization of asset transfers to qualify for Medicaid, but making it a crime to recommend asset transfers for the purpose of qualifying for Medicaid in exchange for a fee, mortified planners encouraged community spouses of institutionalized Medicaid recipients simply to dodge their spousal support responsibility.

The law, therefore, allows an institutionalized spouse to qualify for Medicaid benefits even though he or she may have a spouse that chooses to keep assets over the CSRA [Community Spouse Resource Allowance]. The spouse retains the assets, in any amount, and then refuses to make them available for the institutionalized spouse’s costs of long-term care. In turn, the state seeks an assignment of the institutionalized spouse’s support rights (Solkoff, 2001, p. 26).

After President George W. Bush signed the Deficit Reduction Act of 2005 (DRA ’05) placing the first cap ever on Medicaid’s home equity exemption, limiting the half-a-loaf loophole, amending the annuity rules, and unencumbering the Long-Term Care Partnership Program, Medicaid planners reassured their colleagues and clients that artificial self-impoverishment to qualify for Medicaid remained feasible and no less ethical than tax planning:

Due to the high cost of nursing home care, elderly people and their families have increasingly turned to Medicaid-planning strategies to qualify for Medicaid benefits and ease their financial burden. Medicaid planning involves taking measures to preserve one’s assets in order to gain Medicaid eligibility by meeting the program’s financial criteria (Wone, 2006, p. 487).

Many commentators, as well as taxpayers generally, have criticized the practice of ‘Medicaid estate planning, [when] individuals shelter or divest their assets to qualify for Medicaid without first depleting their life savings. … However, Medicaid estate planning is not only rational, but it is also consistent with notions of morality and fairness. Akin to tax planning, Medicaid estate planning is as justifiable as any other legal advice an attorney may give to a client to obtain favorable governmental treatment, despite recent measures taken by Congress that might suggest otherwise. The public perception seems to be that tax planning is perfectly acceptable, whereas Medicaid estate planning is morally questionable (Bothe, 2009-10, pp. 815-6).⁶⁷

No further government action has occurred since 2006 to target Medicaid long-term care benefits to the needy or to discourage their overuse by the affluent. These recent law journal articles show that most methods to qualify for Medicaid without spending down for care have survived and thrived:

Thus, for example, if a person gives away one million dollars six years before applying for Medicaid, that gift will not be considered in determining eligibility. (Miller, 2015-2016, p. 8)

In our earlier work on this topic, my co-authors and I described many Medicaid planning strategies. These include gifts beyond the five-year look-back period, disinheritance of the institutionalized person; the use of special needs trusts for the institutional spouse; annuitization of retirement accounts and savings (often for the benefit of the community spouse); spend down on the home or other exempt assets (called asset repositioning); caregiver agreements with family members; certain transfers of the home to a spouse, child or sibling; use of exempt assets (i.e., the home) to pay for the nursing home during a penalty period arising from gratuitous transfers; and, finally, divorce or marriage avoidance. Some of these are only designed to obtain Medicaid eligibility while preserving wealth during the recipient’s lifetime. Others, most prominently gifts and annuities, are designed to avoid estate recovery as well. The liberal income rules and the restrictive resource rules make the purchase of an annuity for the community spouse with excess resources an important planning tool for middle class couples. Indeed, the annuity purchase option is the chief planning alternative to divorce in many cases (Ibid., p. 14).

Countable assets which are attributable to the institutionalized spouse can be reduced by spending or consuming them for the benefit of either spouse. The applicant or their spouse could pay off a mortgage or other debt, pay attorney's fees or other professional fees, pay for travel for themselves, or pay for home care services. … Countable assets can be transformed into exempt assets, for example, by purchasing an irrevocable burial plan for each spouse and by paying for exempt assets which enhance the quality of life of either spouse, such as clothing, electronics, and repairs or improvements to the residence. … Countable assets may also be transformed into a stream of income by the purchase of an approved annuity, with the community spouse as annuitant (immediate payee) (Gilsinan, 2018, p. 19).

If a married couple who owns no primary residence but has substantial liquid assets engages in Medicaid planning, they could create an irrevocable trust and transfer all of their assets to that trust. … As long as there are no circumstances in which the trustee could pay them any amount of trust principal, and as long as the married couple complies with the five-year look-back rule, the applicant would be eligible for Medicaid benefits because the assets would not be countable as his or her assets. … The inclusion of the primary residence among the assets transferred to the irrevocable trust allows the grantor to avoid the estate recovery claim against his or her primary residence that would occur had the grantor obtained Medicaid long-term care benefits and continued to own the home until it was transferred to his or her heirs as part of the probate estate (Tunney, 2018, p. 23).

There are two main alternatives to the CSRA for protecting assets for the community spouse: spousal refusal and divorce. a. Spousal Refusal. A community spouse can simply refuse to allow his or her assets to be made available for use by the institutionalized spouse and refuse to cooperate in the application for Medicaid. … b. Divorce ... Following the divorce, the institutionalized spouse could quickly qualify for Medicaid, and the couple's assets would be preserved for the community spouse (Beckett, 2016, p. 31).⁶⁸

Clearly the practice of Medicaid planning remains vibrant and very well documented in the popular and professional literature on aging and estate planning.

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

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LTC E-ALERT #20-010: LTC NEWS AND COMMENT

Innovation in the LTC Insurance Market
The number of millennials with early-onset Alzheimer's disease is surging, report finds
An update from the ILTCI Conference regarding COVID-19
CMS to ‘Immediately’ Refocus Nursing Home Inspections on Infection Control Amid Coronavirus
Living The Golden Rule
COVID-19 Webinar & Educational Resources
Genworth reaches deal 'in principle' with New York regulator to clear acquisition by China-based company
Why Are So Many Nursing Homes Shutting Down?
COVID-19 Webinar Tomorrow
House task force introduces Older Americans Bill of Rights
Nursing home the site of first US coronavirus outbreak: 1 dead, 4 hospitalized

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

Seattle—

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LTC E-ALERT #20-009: LTC NEWS AND COMMENT

Debt among oldest Americans skyrockets 543% in two decades
Blue Cross Plans Say Alzheimer’s Has Tripled Among Adults Ages 30 To 64
Long-Term Care Insurance v. a Hybrid: AALTCI Gets the Numbers
One Conversation Can Make All the Difference
Prepare now for coronavirus, association warns
One LTCI Producer’s Take on Nursing Home Closures
550 Nursing Homes Closed from 2015-2019 — With Trend Accelerating Toward End of Decade
Cannabis use rising among older adults, study shows
Empire Center says billions could be saved through Medicaid cost-cutting proposals
Medicare Managers Hope to Lift Agent Referral Fee Cap
McKnight’s 40 for 40: Robert G. Kramer
State considers end to 'spousal refusal' to pay for nursing home care

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

Seattle—

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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 third one, after the ***news.***

*** HAPPY 20TH: This year’s Intercompany Long-Term Care Insurance Conference, which meets in Denver, March 29 to April 1, is the program’s 20^th iteration. To celebrate this memorable achievement, we published a 65-page History of LTC Insurance Conferences. It covers all of the ILTCI events, but also some of the other, earlier, now defunct industry meetings, such as Jesse Slome’s “LTCI Producer Summits” and Greg Luque’s “Forums.” For a quicker read, check out “LTC Bullet: History of LTC Insurance Conferences,” which provides thumbnail summaries of each of the conferences covered in the full report. We offer sincere thanks and congratulations to Jim Glickman and everyone associated with the leading LTC insurance industry conference. May it continue to unite, educate and motivate everyone dedicated to improving long-term care in America for many years to come. ***

*** ILTCI RECOGNITION AWARD nominations are open. The deadline for nominations is March 6 so act now! I just submitted my nomination. Can you guess whom I proposed? The Intercompany Long-Term Care Insurance Conference is sponsoring a third annual award for a person or organization “that has made a significant, long-term contribution towards the attainment of the ILTCI vision. The ILTCI vision is to create an environment for aging in America that includes thoughtful, informed planning that takes into account the most effective and efficient use of resources in addressing the risks and costs of long-term care for all levels of American society. For details and to submit your nomination, go to https://iltciconf.org/recognition-award/. Past recipients of the award were Marc Cohen and Stephen Moses. ***

*** CLTC MASTER CLASS AT ILTCI 2020: Veteran LTCI expert and trainer Bill Comfort will teach the two-day course March 28-29 at the Intercompany Long-Term Care Insurance Conference in Denver. Watch Video on CLTC Master Classes. The class and conference registrations are discounted now. For inquiries, contact: Audrey Sunner, CLTC, CSA at 919-230-8523 or asunner@ltc-cltc.com. The Center for Long-Term Care Reform is proud to acknowledge the Certification for Long-Term Care (CLTC) program as a corporate sponsor. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 3

LTC Comment: Episode 1 of our serialization of the Center’s newest report described the current method of providing and paying for long-term care, explained the long-term care financing problem in detail, and showed how heavily dependent the existing dysfunctional system is on public, especially Medicaid, financing.

Episode 2 explained how Medicaid became the dominant payor for long-term care, described the severe unintended access and quality problems that ensued, and recounted the long series of fruitless interventions policymakers have attempted aimed at correcting symptoms (high cost, nursing home bias, and poor quality) while ignoring their causes (strong financial incentives for states to maximize Medicaid spending and perverse incentives for consumers to rely on the safety net program rather than prepare to pay privately for long-term care.)

In Episode 3, which follows, Steve Moses explains how scholars have made the same mistakes as policymakers. They lament long-term care’s problems without analyzing their causes. Then they propose expanded government funding and regulation without accounting for the damage such interventions have produced in the past. Steve then addresses the key to unraveling the long-term care conundrum, which is to understand and interpret correctly Medicaid’s long-term care eligibility rules and their impact on consumers’ incentives to plan responsibly (or not) for long-term care risks and costs.

Episode 4 in this series, two weeks from now, will explain how Medicaid’s dominance as the principal funder of long-term care inhibited the private market for home care, which consumers prefer over nursing homes, and crippled the potential private sources of financing, such as home equity conversion and long-term care insurance, that could and should solve the system’s access and quality problems—all this transpiring without most consumers even knowing who pays for long-term care!

Here’s the third 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.

Conventional Long-Term Care Scholarship

If government policy on long-term care has consistently addressed the symptoms of high cost and poor quality instead of the cause, excessive public financing, so has and does most scholarship. Building on decades of research and special commission reports, a scholarly consensus has formed regarding the long-term care problem and what to do about it. For example, a December 2015 article in Health Affairs (Favreault, Gleckman, and Johnson, 2015, p. 219048) assessed the problem as high and growing care needs, high and growing cost, inadequate private resources to pay for care exacerbated by the lack of private insurance, resulting in high, growing and unsustainable dependency on Medicaid. Without analyzing how or why these conditions obtain, the article recommends ever more government engagement in the market, specifically mandatory, comprehensive public insurance coverage for the catastrophic back end of the long-term care risk. In other words, we are advised to address the symptoms of the long-term care problem by adding more of the generous funding source that arguably caused them in the first place.

That article spawned three major reports in 2016 promoting its analysis and recommendations. Leading Age, a long-term care provider trade association, reviewed the usual symptoms and concluded “a mandatory, universal insurance approach that covers catastrophic events is the most effective pathway to pursue” (Leading Age, 2016, p. 12). The Bipartisan Policy Center, a Washington, DC think tank, concurred with a now rare nod to cost control, recommending: “Pursue the concepts and elements of a public insurance program to protect Americans from catastrophic LTSS expenses, while assuring that it does not add to the federal deficit” (BPC, 2016, p. 21). The “Long-Term Care Financing Collaborative,” a self-described “diverse group of policy experts and senior-level decision makers representing a wide range of interests and ideological views” proposed “A universal catastrophic insurance program aimed at providing financial support to those with high levels of care needs over a long period of time” (LTC Financing Collaborative, 2016, p. 2).

Nor has this emerging agreement on the problem (symptoms) and its preferred solution (more government) receded. Last year, a respected private long-term care insurance analyst teamed up with a researcher who favors public financing options to produce yet another proposal on the same theme. They recommend

A public catastrophic insurance program for LTSS costs that takes effect after an income-related waiting period has been met. … Eligibility … phased in over ten years, with people eligible for benefits once they work 40 quarters after the law’s enactment …. Benefits would become available once people incur impairments in 2+ ADLs [activities of daily living] and/or severe cognitive impairment … . Up to $110/day cash benefit (2014 dollars) … Paid out either daily or weekly … Unlimited benefit once an income-related waiting period is met … Waiting period of 1 year for people with lifetime incomes in the lowest two quintiles of the distribution and 2, 3, and 4 years for people with incomes in the third, fourth and highest quintiles, respectively. … Annual benefits increase at the rate that hourly costs increase for home health aide workers (Cohen, Feder, and Favreault, 2018, p. 7).

Would consumers choose to participate in this complicated scheme? There is no need to ask. The paper does not contain the terms obligatory, involuntary, or compulsory, but they all apply to this proposal. Like Social Security, Medicare and other plans to fix long-term care mentioned above and below, this one also forces people to pay up, take part and accept whatever the government delivers.

Two influential recent articles home in on special challenges facing the middle market and home care. In May 2019, “The Forgotten Middle: Many Middle-Income Seniors Will Have Insufficient Resources for Housing and Health Care” correctly assessed the plight of middle-income seniors whose resources will be inadequate to fund their senior living and long-term care and suggested “lawmakers could consider a new benefit that explicitly funds long-term care (for example, a Medicare ‘Part E’ that shifts funds from Medicare Part A acute care)” (Pearson, et al., 2019, p. 8). In June 2019, “The Financial Burden of Paid Home Care on Older Adults: Oldest and Sickest Are Least Likely to Have Enough Income” argued that home care is desirable; too few people can afford enough of it; so “Government programs could be launched that cover LTSS expenses for the entire duration of an enrollee’s LTSS” (Johnson and Wang, 2019, p. 1000).

Many similar examples from the past three decades could be adduced. Conventional long-term care scholarship is tediously consistent in these respects. It begins by recounting the dire service delivery and financing challenges consumers face, but without analyzing or commenting on how or why those problems came to be. Then it recommends an expansion of government’s role, usually proposing a new or expanding an existing compulsory public financing program.

The Key: Medicaid Long-Term Care Financial Eligibility

The current paper takes a different approach to analyze the long-term care issue. It described and acknowledged the problems and dysfunctions in long-term care services and financing. But then it traced the history and evolution of those problems linking them causally to the early, substantial and constantly expanding role of government financing and regulation in the long-term care market.

Having shown how and why long-term care problems exist, we can now ask: Why are analysts and policymakers caught in the trap of looking only for government solutions to problems government created? Why do most researchers obsess about the status quo without explaining how it came to be? Why do they despair of financing quality long-term care without vastly expanding government spending? Ideological bias is one explanation, but there may be something more basic and easier to resolve at work. The key to answer these questions lies in understanding how Medicaid long-term care eligibility really works as compared to how it is represented to work by the popular media, by most scholarship, and ostensibly by the federal law and regulations themselves.

The federal rules governing financial eligibility for Medicaid long-term care benefits sound draconian. “Medicaid eligibility depends primarily on income and assets. … In general, aged, blind, and disabled beneficiaries may not have more than $2,000 in countable assets for individuals and $3,000 for couples, a level that has not changed since 1989” (Thach and Wiener, 2018, p. 4). No argument; that is poor. Income eligibility is more complicated than asset eligibility, because states may follow various “alternative or optional eligibility pathways to determine which groups qualify …” (Ibid.). But income eligibility under all those pathways still sounds stringent when represented as allowing only $723 per month of income (LTC Financing Collaborative, 2016, p. 19). These “official” financial eligibility rules seem to say that when it comes to paying for long-term care, you are on your own unless or until you spend down your income and life’s savings into impoverishment.

So quotes like these abound in the mass media:

People who exhaust their savings could wind up on Medicaid, the government health program for the indigent that pays for about half of all nursing home and custodial care (Weston, 2019) .

Essentially, you need to have spent practically all your assets before Medicaid will kick in (Eisenberg, 2017).

People may qualify for Medicaid after they have “spent-down” their assets (Lawrence, 2015).

Well-respected scholars often say the same.

The current program requires people to impoverish themselves (“spend down”) to qualify for coverage (Pearson, et al., 2019, p. 858).

At the same time, public ‘insurance’ – through Medicaid – supports services only after people pay what might be called an ‘infinite deductible’ – that is, only after they expend most, if not all, of their personal liquid financial resources (Cohen, Feder, and Favreault, 2018, p. 2).

Medicaid (the federal-state health care program for the poor) covers long-term care costs for individuals below certain income levels, but the deductible for Medicaid is nearly all of an individual's income and assets. As a result, Medicaid is the long-term care coverage of last resort for those with no assets (Banerjee, 2012, p. 4).

Beneficiaries are subject to strict eligibility rules. While these vary from state to state and differ by care setting, they typically limit beneficiaries to $2,000 in financial assets and $723 per month in income (the monthly benefit level for the Supplemental Security Income program). As a result, millions of middle-income families who face catastrophic LTSS costs must impoverish themselves before receiving public support (LTC Financing Collaborative, 2019, p. 19).

The reality of Medicaid long-term care financial eligibility is far more nuanced, generous, and elastic than these quotes convey. While scholars usually and the media sometimes explain (1) how Medicaid allows people with excess income to qualify by spending down privately for care until they reach the required level and (2) how some assets are non-countable and so do not affect eligibility and are not required to be spent down, generally both the media and scholars leave the strong impression that qualifying for Medicaid long-term care benefits is financially devastating and highly undesirable. Media articles usually point their readers to legal experts who can help families reconfigure their income and assets to qualify without spending down. Scholarly articles rarely take that alternative into account. This latter fact is the key to understanding why expanding government spending is usually the only option considered by analysts for reforming long-term care services and financing.

The Fallacy of Impoverishment

Income Eligibility

How does Medicaid long-term care eligibility really work? Most states use “medically needy” eligibility rules, which means people who have too much income can pay privately for their care until their net income level is reduced to the accepted limit (Thach and Wiener, 2018, p. 5⁴⁹). Other states apply “income caps,” usually 300 percent of the Supplemental Security Income (SSI) limit, currently $2,313 per month (Thach and Wiener, 2018, p. 5⁵⁰). But income cap states may allow people with excess income to qualify by setting up special “Miller income diversion trusts,” into which the recipient transfers excess income until the income eligibility level is reached. Then, the trust pays out the money to offset Medicaid’s cost for the recipient’s care (Musumeci, Chidambaram and O’Malley Watts, 2019, p.14⁵¹). The result is the same as under the medically needy system. The rule of thumb in all states, whether “medically needy” or “income cap” standards apply, is that anyone with income below the cost of a nursing home can qualify for Medicaid long-term care benefits based on income. As nursing home care is very expensive (roughly $7,500 or $8,500 per month on average and much higher in many urban venues) (Genworth, 2019), people with substantial incomes qualify routinely for Medicaid long-term care benefits throughout the United States. For example, someone with income of $7,500 per month or $90,000 per year would fall in the 84^th percentile of income nationally (PK, 2018), but would nevertheless qualify for publicly financed long-term care based on income if that income is expended for medical and/or long-term care expenses including home care, assisted living, or nursing home residency. Medicaid long-term care income eligibility requires a cash flow problem, but not low income.

Asset Eligibility

Similarly, Medicaid’s seemingly harsh asset spend down rules are much less so as applied. Most of the wealth seniors hold is not counted in determining eligibility. Home equity is entirely exempt if a spouse remains in the home. Between $595,000 and $893,000 of home equity, depending on the state (Musumeci, Chidambaram and O’Malley Watts, 2019, p. 15⁵²), continues exempt as of 2020 even if the home is unoccupied as long as the Medicaid recipient expresses a subjective, medically unverified intent to return to the home (Thomson/MEDSTAT, 2005, p. 3⁵³). Additional exempt assets, all without any dollar limits, include

one income-producing business,⁵⁴ including the capital and cash flow (Hales and Shandrick, 1992, p. 15⁵⁵)
individual retirement accounts (IRAs) (CANHR, 2019)⁵⁶ if generating periodic income⁵⁷ as most are required to do by age 70 ½ in compliance with the required minimum distribution rules (IRS, 20195⁸)
term life insurance,⁵⁹
prepaid burial funds for the immediate family,⁶⁰
one automobile,⁶¹
household goods and personal effects including heirlooms.⁶²

Thus federal law and regulations, which state Medicaid agencies are supposed to follow, allow applicants and recipients to possess virtually unlimited assets while receiving benefits. It is true that state Medicaid programs are technically required to recover such sheltered assets from the estates of deceased recipients, but enforcement of that requirement is inconsistent, complicated by regulations severely limiting lien placement, and relatively easy to avoid, especially with legal advice.⁶³

Married applicants receive additional financial eligibility considerations. Community spouses of institutionalized Medicaid recipients may retain a “Minimum Monthly Maintenance Needs Allowance” (MMMNA) of between $2,113.75 and $3,216.00 per month (ACA, 2020, MMMNA⁶⁴) plus a “Community Spouse Resource Allowance” (CSRA) of half the couple’s joint assets not to exceed $128,640 but no less than $25,728 (ACA, 2020, CSRA⁶⁵). These allowances began at $1,500 per month and $60,000, respectively, when the Medicare Catastrophic Coverage Act of 1988 established them. By law, they increase annually with inflation. The MMMNA and CSRA were created to end the “spousal impoverishment” that could occur previously when the institutionalized recipient’s (usually the man’s) income was captured as required by federal law to offset Medicaid’s cost of his or her care.

Although there is considerable variation in state Medicaid eligibility rules, DeNardi, et al. concluded there was “little practical difference in Medicaid eligibility across the different states” due to medical and long-term care expense deductions. They explain that “most individuals in nursing homes incur medical expenses far greater than 300 percent of the SSI level,” thus achieving eligibility (De Nardi, French, Jones and Gooptu, 2011, p. 26).

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

Seattle—

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LTC E-ALERT #20-008: LTC NEWS AND COMMENT

Continental, a Long-Term Care Insurance Block Buyer, Is Up for Sale
Long-Term Care Costs
Mediterranean diet improves gut health in elders; tied to lower frailty
Stalked by the Fear That Dementia Is Stalking You
GE’s Long-Term-Care Insurance Liability Is a Non-Issue in 2020
Medicare Advantage enrollment swells
VA Health Care: Veterans' Use of Long-Term Care Is Increasing, and VA Faces Challenges in Meeting the Demand
The Ballooning Costs Of Long Term Care
A VA Program Can Help War Veterans Pay For Long-Term Care, But Applying For It Can Be An Ordeal
What Every Dementia Caregiver Must Know
By 2060, a quarter of U.S. residents will be over age 65
What’s the best way to manage agitation related to dementia?

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Updated, Monday, February 17, 2020, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #20-007: LTC NEWS AND COMMENT

Combining Life and Long-Term Care Insurance
Long-Term Care Annuities: Pros and Cons
Feds Probing How Personal Medicare Info Gets to Marketers
Seniors on Medicare Advantage less likely to have issues paying medical bills: CDC study
More Than Half Of Americans Disagree With How Their Tax Dollars Are Spent
Task Force: To Save Top Nursing Homes, Government Should Encourage Lower-Performing SNFs to Exit
A whole new world: 15% growth in post-acute care among 30-year nursing home industry changes
Operators treating Medicare Advantage enrollees for depression, dementia and frailty are unfairly penalized: viewpoint
No, the Trump administration is not cutting Medicaid

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Updated, Friday, February 14, 2020, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 2

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 second one, after the ***news.***

*** ILTCI RECOGNITION AWARD nominations are open. The Intercompany Long-Term Care Insurance Conference is sponsoring a third annual award for a person or organization “that has made a significant, long-term contribution towards the attainment of the ILTCI vision. The ILTCI vision is to create an environment for aging in America that includes thoughtful, informed planning that takes into account the most effective and efficient use of resources in addressing the risks and costs of long-term care for all levels of American society. For details and to submit your nomination, go to https://iltciconf.org/recognition-award/. Past recipients of the award were Marc Cohen and Stephen Moses. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 2

LTC Comment: The one thing everyone agrees about long-term care is that our current system of providing and paying for it is a mess. Unfortunately, most researchers observe the existing system, agonize over its problems, and proceed to recommend solutions without first explaining what caused the problems in the first place and why they persist. These analysts put the proposal cart before the analytical horse.

Our new monograph, Medicaid and Long-Term Care, takes a different approach. Steve Moses first explains historically how long-term care’s major problems--such as institutional bias, inadequate funding, caregiver shortages, access and quality problems, etc.--came to be. Only after explaining the cause of the problems does he turn to ways to correct them, arriving at a much more promising solution than the usual proposals.

But at 78 pages Medicaid and Long-Term Care is a lot to take in as a whole. So we’re serializing the report. Today’s offering is Part 2. We’ll bring you the next installment in a couple weeks.

Here’s the second 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.

How Did Medicaid Become the Dominant Long-Term Care Payer?

Social services and benefit programs in the United States evolved gradually in the country’s first two centuries from a system based on British poor laws—“indoor relief” with many poor houses—toward a system based on cash relief payments (Senior Living: 1776-1799). Cash payments from programs like Old Age Assistance and Social Security gave people funds to spend on residential long-term care enabling the nursing home industry to grow rapidly (Senior Living: 1930-1939). In 1960, the Medical Assistance for the Aged (MAA) program made health care available to people sixty-five and older with low or moderate income and required state matching funds (Senior Living: 1960-1969). The same Kerr Mills statute radically changed eligibility for nursing home care by adding people who “were not sufficiently needy to qualify for cash assistance to cover their ordinary expenses, but who were unable to pay their medical expenses” (Ibid.). In 1965, the new Medicaid program dropped strict eligibility criteria, transfer of assets restrictions, and mandatory liens which were commonplace previously. For its first 15 years, Medicaid explicitly permitted asset transfers for the purpose of qualifying for long-term care benefits (Carlucci, 1986-87, p. 372-3³²). Finally, Medicaid paid exclusively for nursing home care, incentivizing its use by covering “housing, food, housekeeping, and laundry, services” which were not covered for in-home services (Senior Living: 1960-1969).

These features of the new Medicaid program—medically needy eligibility exclusively for nursing home care, including normal costs of living as well as health care, funded with virtually unlimited federal and state matching funds and with no limits on asset transfers to qualify—guaranteed Medicaid would explode in cost from the outset, perpetrate a nursing home bias in long-term care services, discourage development of a private home and community-based care market, and crowd out private long-term care financing sources. That is exactly what happened (Bernard and Feingold, 1970, p. 745³³) and policymakers have been trying to reverse the damage ever since. But their efforts to tame Medicaid long-term care funding growth by capping supply and price, controlling financial eligibility, rebalancing services from institutional to home care, promoting private insurance, and enforcing federal rules on state programs have failed.

A Litany of Failed Interventions

From the beginning, efforts to fix the problems Medicaid created have addressed the symptoms—exploding costs, nursing home bias, and poor quality—not the causes—strong financial incentives for states to maximize Medicaid spending and perverse incentives for consumers to rely on the safety net program rather than prepare to pay privately for long-term care. Inevitable, if unintended, consequences followed a long series of policy errors.

In the 1970s, central health planners tried to control skyrocketing Medicaid nursing home costs by capping bed supply, requiring “Certificates of Need” (CONs) (NCSL, 201934) before allowing new construction on the premise “they can’t charge us for a bed that doesn’t exist.” Nursing homes gratefully took advantage of this new government-imposed monopoly which excluded new entrants from their market. But to compensate for their impeded growth, the nursing home industry raised the rates they charged Medicaid. In response, Medicaid capped nursing home reimbursement rates, which remain to this day only about four-fifths of private-pay rates (Liberman, 2018). But low Medicaid rates created a strong incentive for higher paying private-payers to convert to Medicaid. Consumers sought more and more creative ways to qualify for assistance, sometimes relying on the advice of specialized Medicaid planning attorneys to divest or shelter otherwise disqualifying resources.

Consequently, private-pay nursing home revenue declined from 49.2 percent in 1970 to 26.7 percent in 2017 while Medicaid funding increased from 23.3 percent to 30.2 percent in the same period (CMS, 2018, Table 15). The problem of declining private-pay and increasing Medicaid nursing home revenue is much worse than these numbers suggest due to a change in the definition of National Health Expenditure Accounts (NHEA) categories CMS made in 2011. CMS added Continuing Care Retirement Communities (CCRCs) to the category Nursing Care Facilities. Because CCRCs are much more likely than nursing homes to involve private payments, this misleading change had the effect of reducing Medicaid's reported contribution to the cost of nursing home care from over 40 percent in 2008 to under one-third (32.8 percent) in 2009.35

The federal government responded to the growing Medicaid dependency with a long series of laws attempting to restrict asset transfers and close other eligibility “loopholes” while requiring recovery of benefits paid from recipients’ estates. In 1996, President Clinton and the Gingrich Republicans even criminalized asset transfers for the purpose of qualifying for Medicaid.36 But this “throw Granny in jail law” was repealed a year later and replaced with a “throw Granny’s lawyer in jail” alternative, which quickly proved unenforceable.37 These efforts to target Medicaid long-term care resources to people most in need largely failed, though for correctable reasons discussed below. But the main failure was that these measures did not address the larger problem, financial eligibility rules that permit people with median and higher assets and income to qualify even without legal assistance.

By capping the supply and price of nursing home care without effectively controlling financial eligibility, Medicaid caused demand to skyrocket, filling nursing homes in the 1980s with too many recipients at too low reimbursements resulting in serious quality problems (Hawes and Phillips, 1986, p. 50838). By accepting Medicaid recipients, nursing homes could fill their beds no matter what quality of care they offered. Instead of addressing this problem’s cause, easy access to under-financed nursing home care, the government simply demanded higher quality care, requiring tougher care standards, extra staff and training in the Nursing Home Reform Act of 1987, but without appropriating extra funds to pay for the new mandates (Klauber and Wright, 200139). So this measure failed to improve care quality (Ibid.40). Caught between the rock of inadequate reimbursement and the hard place of mandatory quality, state nursing home trade associations sued for higher reimbursements under the 1980 Boren Amendment and usually won (MacPAC41). Government responded by repealing the Boren Amendment in 1997 leaving no legal floor under Medicaid nursing home reimbursements, thus exacerbating the quality problem and causing nursing homes’ reputation to disintegrate (Wiener and Stevenson, 1998, p. 142).

Trying to save money and give consumers more of the care they prefer, Medicaid encouraged states to rebalance from providing only nursing home care to supplying mostly home care. The premise of that policy was that home care costs less than institutional care. Unfortunately, combined institutional and home and community-based care expenditures usually exceed institutional costs alone. Medicaid long-term care costs for older adults and people with physical disabilities continued to grow from $36 billion in 1995 to $104 billion in 2016 despite, or because of, aggressive rebalancing (Eiken, et al., 2016, p. 1443). The evidence is overwhelming that changing from institutional care to home and community-based care does not save money in the long run. Home care delays but does not reliably replace nursing home care (Holahan and Cohen, 1986, p. 10644) and home care is more desirable than institutional care so more people come out of the woodwork (Ng, Harrington, and Kitchener, 2010, p. 2745) to seek Medicaid eligibility (Grabowski, 2006, p. 346).

Attempting to divert consumers from Medicaid to private insurance, government encouraged the use of “long-term care partnerships” which enabled consumers who purchased qualified policies to protect extra assets from Medicaid’s spend down and estate recovery rules (McCall, 2001). But the real problem was that Medicaid’s spend down and estate recovery rules are ineffectual and often unenforced. Forgiving a liability that does not exist in the first place did not incentivize many people to purchase private long-term care insurance policies. A federal income tax deduction for private insurance introduced in the Health Insurance Portability and Accountability Act of 1996 also helped little as it applied only to people with medical and long-term care expenditures exceeding 7.5 percent of adjusted gross income. Few people healthy enough to qualify medically for private long-term care insurance had medical expenses high enough to qualify for the tax deduction.

Having largely crowded out a market for private insurance by paying for most expensive long-term care, the government added insult to injury by driving interest rates on carrier reserves to near zero, forcing premium rates up to compensate, upsetting policyholders and potential buyers, and effectively suppressing the market. Seeing that nothing they did seemed to work, Congress and President Obama tried to nudge the public into voluntarily buying government long-term care insurance with the unfunded and misbegotten CLASS Act that was quickly repealed (Kane, 201147).

The latest attempt by Medicaid to mitigate the rising cost of long-term care is to modify the reimbursement system. Huge changes in how the government pays for post-acute and long-term care are underway and about to revolutionize long-term care service delivery. The transformation to "managed care," whereby state Medicaid programs turn over responsibility for providing and paying for long-term care to the highest bidders, has long been sweeping the country. Most long-term care will still be provided by nursing homes and home care companies, but now a new middle-man, the managed care company, is coming between the payer (Medicaid) and the provider, which already stand between the patient and access to quality care.

The newest move toward centralized control of the long-term care market is even more significant. The Centers for Medicare and Medicaid Services (CMS) is changing the focus of long-term care financing in both of the programs for which it is responsible from paying for services (volume) to paying for value (as measured by new, vague and complicated "quality" metrics). "Prospective payment," "bundling," and “value-based” reimbursement are the watchwords of the day. Instead of consumers pursuing value by purchasing care from providers they prefer, bureaucrats and politicians will define value, reward providers who deliver it and punish those who do not. The new system will put care managers and providers at far greater financial risk. Experts worry the end result will be a two-tiered system with poor providers getting worse and becoming more dependent than ever on low Medicaid reimbursements.

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

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LTC E-ALERT #20-006: LTC NEWS AND COMMENT

Adverse Childhood Events Tied to Dementia
Pennsylvania Puts LTCI Issuer in Rehabilitation
Social Security: Where Do the 2020 Candidates Stand?
How to Deal With an Aging Advisor Force and Aging Clients
How the Longevity Project Is Reimagining Our Longer Lives
Flu more deadly for U.S. seniors than coronavirus, say doctors
Are Tax Credits The Best Way To Subsidize Long-Term Care Costs?
WHY HOME HEALTH CARE IS SUDDENLY HARDER TO COME BY FOR MEDICARE PATIENTS
New Limited CMS Block Grant Program Draws Attention of LT/PAC [Long-Term and Post-Acute Care] Profession
Strategies for Long-Distance Caregivers

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Updated, Monday, February 3, 2020, 7:06 AM (Pacific)

Seattle—

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LTC E-ALERT #20-005: LTC NEWS AND COMMENT

Many Adults Are Helping Their Parents Financially Despite Strain
2019 Novel Coronavirus (2019-nCoV) Situation Summary
Staffing woes threaten shift standards, OnShift survey says
Rising rates of obesity, diabetes may reverse heart disease gains
FIVE TROUBLING TAKEAWAYS FROM THE LATEST CBO REPORT
A Closer Look At The Democratic Presidential Candidates’ Long-Term Care Plans
Supreme Court OKs rule that could limit immigrants’ access to long-term care services, jobs
Living near major roads linked to risk of dementia, Parkinson's, Alzheimer's and MS
New tool predicts life expectancy of dementia patients

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

Seattle—

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LTC Comment: The full Medicaid and Long-Term Care monograph is 78 pages, so we’re going to bring it to you in bite-sized pieces. Here’s the first one.

LTC BULLET: MEDICAID AND LONG-TERM CARE, THE SERIAL, PART 1

LTC Comment: It is a mystery for many why markets work for autos, groceries, and plastic surgery, but not for health or long-term care. We set out to solve that conundrum in Medicaid and Long-Term Care. But at 78 pages, this monograph is a big chunk for busy professionals to consume at a sitting. So here are the first seven pages. We’ll bring you the next installment in a couple weeks.

In this opening section, Steve explains the long-term care financing problem, describes the current method of providing and paying for long-term care, and shows how heavily dependent the existing dysfunctional system is on public, especially Medicaid financing. In the next installment, he’ll explain how and why its problems of access, quality, low reimbursement, institutional bias, caregiver shortages and welfare dependency developed. Later sections address and correct most analysts’ misconceptions of the long-term care problem concluding with a better market-based solution than the compulsory social insurance options those analysts invariably propose.

Steve Moses challenges any scholar whose work is cited and critiqued in Medicaid and Long-Term Care to discuss and publicly debate this analysis. Contact him at smoses@centerltc.com or 425-891-3640.

Here’s the first episode of Medicaid and Long-Term Care, by Stephen A. Moses, Center for Long-Term Care Reform, Seattle, Washington, 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.

Abstract

How to provide and finance long-term care for a burgeoning elderly population bedevils scholars and policy makers. The existing service delivery and financing system, dominated by public funding, is highly dysfunctional, fraught with problems of access, quality, reimbursement, discrimination and institutional bias. Most long-term care scholarship analyzes these symptoms, without explaining their cause, and recommends expanding government’s role, usually by means of a new or expanded mandatory, tax-funded social insurance program. This paper takes a different tack, first explaining why the long-term care market has the problems it does and then suggesting how to remove their causes. At the root of all long-term care problems is Medicaid, the dominant payer. By providing only nursing home care—including room, board, and medical care—funded with virtually unlimited federal and state matching funds, Medicaid (1) exploded in cost, (2) created institutional bias, (3) caused access and quality problems by paying 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 affluent save and benefit through eligibility loopholes. The key to fixing the problems that plague long-term care is to make Medicaid a better safety net for the poor while diverting the general public to private financing alternatives. This paper explains how to do that while reducing government funding and regulation, which arguably caused the long-term care problems in the first place.

Introduction

Like the drunk seeking car keys only under a streetlight, most scholars narrow their search for long-term care solutions to the funding source they know best, government. Countless special commissions (Pepper Commission, 1990) (Medicaid Commission, 2006) (Commission on Long-Term Care, 2013),¹ studies, reports and articles have explored the same ground. Most made the same recommendation, more obligatory social insurance. Voluntary private sector solutions receive scant consideration. This paper identifies a missing link in conventional scholarly research, draws the logical inferences, and reaches a different conclusion.

Long-term care, also called long-term services and supports (LTSS²), includes health care and social services to help people with physical or cognitive disabilities to perform activities of daily living over an extended period (Thach and Wiener, 2018, p. 1). The probability of needing long-term care is high. Seventy percent of people who reach age 65 “develop severe LTSS needs before they die and 48 percent receive some paid care over their lifetime (Johnson, 2019, p. 3)” incurring average lifetime expenses of $138,100 (Favreault, Gleckman, and Johnson, 2015, p. 2181).Monthly paid care is expensive whether provided in a nursing home ($7,513 for a semi-private room; $8,517 for a private room), assisted living facility ($4,051), or at home ($4,385) (Genworth, 2019). The need for long-term care increases with age. The U.S. 85+ population with the highest need will triple between 2015 and 2050 (Houser, Fox-Grage and Ujvari, 2018, p. 3). The United States spent $366.0 billion on long-term care in 2016 (Colello, 2018, p. 1), not counting half-a-trillion dollars in unpaid caregiving value provided at enormous financial and emotional distress by family and friends (Chari, Engberg, Ray, and Mehrotra, 2015, p. 871). The strain of providing and financing seniors housing and long-term care is huge already, bodes ill for the future, and attracts increasing scholarly and political attention, nearly all leaning toward a larger government role (Pearson, et al., 2019, p. 851³).

Yet, the current structure of long-term care service delivery and financing, dominated by 70.3 percent government funding (Colello, 2018, p. 1), is dysfunctional. Problems include high and rapidly increasing costs (Eiken, et al., 2018, p. 1⁴); persistent nursing home bias (Gleckman, 2013⁵); limited access to the home care consumers prefer (Johnson and Wang, 2019, p. 1000⁶); provider reimbursements too low to ensure quality care (Hansen Hunter, 2018, p. 2⁷); doubtful quality in nursing homes (Wood, 2019⁸)(Ameriks, 2007, p. 22⁹) and home care (Gorges, Sanghavi, and Konetzka, 2019, p. 1110¹⁰) and the tort liability that comes with deficient quality (Aon, 2018¹¹); worsening shortages among both paid (Bryant, 2019¹²) and unpaid caregivers (Schulz and Eden, 2016¹³); and dwindling private financing sources exemplified by declining private payers in nursing homes (NIC, 2019, September¹⁴), the near absence of home equity conversion to fund care (Bell, 2018¹⁵), and poor long-term care insurance take up (Favreault and Dey, 2016, p. 8¹⁶). To understand why this market performs so badly, we can follow the money.

Who Pays for Long-Term Care?

Government financing dominates the long-term care market covering $257.4 billion of total $366.0 billion 2016 expenditures. Medicaid, a means-tested public assistance program jointly funded by the federal and state governments, is the largest contributor at $154.4 billion (Colello, 2018, p. 1). But Medicaid’s contribution of only 42.2 percent of long-term care dollars understates its influence. The program covers 62 percent of all nursing home residents (Harrington, Carrillo, Garfield, and Squires, 2018¹⁷), 19 percent of assisted living residents (AHCA/NCAL¹⁸) and makes a rapidly growing contribution to home and community based care (Landers, et al., p. 265¹⁹).

How can Medicaid pay only two-fifths of long-term care costs, but cover three-fifths of the most expensive, i.e., nursing home, patients? Three factors principally account for this incongruity. First, cost shifting from private patients makes up part of the difference. Medicaid provider reimbursements are notoriously low, roughly 80 percent of private-pay rates (Liberman, 2018²⁰) and often less than the cost of the care (Ibid.²¹ and Hansen Hunter, 2018²²). Second, Medicaid long-term care recipients are required to contribute most of their income to offset the program’s cost for their care (Musumeci, Chidambaram and O’Malley Watts, 2019, p. 15²³). Third, Medicare, which pays far more generously than Medicaid for nursing home and home care (MedPAC, 2018, p. 206²⁴), enables long-term care providers to survive financially while most of their patients’ care is reimbursed at meager Medicaid rates. (Liberman, 2018²⁵).

These facts matter because the impact of public financing on long-term care is substantially greater than the raw numbers suggest in ways almost never acknowledged in the literature. Most of the income Medicaid recipients contribute to offset Medicaid’s cost for their care comes from Social Security. Although Social Security is not usually considered to be a financing source for nursing home care, the fact is that it contributes very significantly, albeit indirectly as “spend-through.” Social Security spend-through refers to income most seniors collect in the form of Social Security benefits which they must contribute toward their cost of care when they receive long-term care services paid for by Medicaid. There is very little in the literature about this source of long-term care financing even though research from 20 to 30 years ago indicated it accounts for nearly half of reported out-of-pocket nursing home costs. The amount is substantial, nearly half of the $57.0 billion (15.6 percent) total otherwise reported as “out-of-pocket” costs in 2016 as inferred based on (Lazenby and Letsch, 1989, p. 8²⁶; McCall, 2001, p. 19²⁷).

Thus, in addition to the 70.3 percent of long-term care financing contributed directly by Medicaid, Medicare and other public sources, the public funding role is enhanced by spend-through of Social Security and other private income and by Medicare’s more generous reimbursement rates offsetting providers’ losses from Medicaid. This added dependency on two financially vulnerable social insurance entitlement programs contributes to the fragility of the long-term care financing system. If Social Security and Medicare trust funds expire as expected in 2035 (Board of Trustees [Social Security], 2019, p. 5²⁸) and 2026, (Board of Trustees [Medicare], 2019, p. 6²⁹) respectively, resulting in substantial cuts to those programs, Medicaid and the long-term care providers dependent upon it will be hard-pressed to make up the loss.

Medicaid Long-Term Care Financing in Perspective

U.S. national health expenditures (NHE) increased 4.6 percent to $3.6 trillion in 2018 or 17.7 percent of Gross Domestic Product (GDP) (Hartman, et al., 2020, p. 8). Medicaid spending grew 3.0 percent to $597.4 billion, 16 percent of total NHE or 2.9 percent of GDP (CMS, 2019). Combined institutional and non-institutional Medicaid long-term care spending was $167 billion in 2016, 30 percent of total Medicaid expenditures (Eiken, et al., 2018, pp. 2, 5). This 4.5 percent increase over the $159 billion spent in 2015 (Ibid., p. 2) was over half again as much as the 2.9 percent increase in GDP for that year (Duffin, 2019).

Medicaid spending is not evenly proportioned among enrollment groups. The program is constantly in the news because of controversy over expanding the program under the Affordable Care Act. But the ACA, or “ObamaCare,” principally addresses acute health care for young mothers, children and working age adults. While these groups comprise 77 percent of Medicaid enrollees (Kaiser Family Foundation [KFF], enrollees), they consume only 38 percent of Medicaid spending (KFF, spending). The aged and disabled who are most likely to use long-term services and supports are 23 percent of enrollees (KFF, enrollees), but they account for 61 percent of Medicaid expenditures (KFF, spending). Likewise, long-term care users, who are 5.9 percent of enrollees, consumed 41.8 percent of total Medicaid benefit spending for both institutional and non-institutional long-term services and supports (Thach and Wiener, 2018, p. 8). Its long-term care tail wags the Medicaid dog.

Medicaid spending on institutional (largely nursing home) care, which most people prefer to avoid (Riley, 2017³⁰), has abated in recent years remaining close to the amount spent in 2010 and actually declining two percent in 2016 (Eiken, 2018, p. i). Spending for home and community based care, which people greatly prefer (Lampkin and Barrett, 2015³¹), has accounted for almost all Medicaid long-term care spending growth in recent years, increasing 10 percent in 2016 alone (Ibid.). In fact, Medicaid home care spending for older adults and people with physical disabilities reached 45.2 percent, up from 40.2 percent in 2013 (Eiken, 2018, p. 13 and Table AS).

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Updated, Monday, January 27, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-004: LTC NEWS AND COMMENT

CMS to Merge Nursing Home Compare into Single, Cross-Continuum Database
Trump says he'd take 'take a look' at changing entitlements such as Medicare
Senior Living Faces Aggressive Litigation, Rising Insurance Costs in 2020
Some LTCI Issuers May Be Too Optimistic About Interest Rates: Fitch
How The Democratic Presidential Candidates Would Address Long-Term Care
Join Us for the Nuts & Bolts of Medicaid Planning Training
Burnout generation gap: Gen X healthcare workers fare worse than millennials, boomers
39% of adults in their 70s view Social Security as ‘a lifeline’
How to Survive as a Caregiver: Six Essential Tips
Long-Term Care Insurance Benefits Payments Rise: AALTCI
Understanding the Nursing Shortage

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Updated, Monday, January 20, 2020, 3:40 PM (Pacific)

Seattle—

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LTC E-ALERT #20-003: LTC NEWS AND COMMENT

What The 2020s Have In Store For Aging Boomers
NAIC Prepares to Collect State-by-State LTCI Rate Data
There are at least 4 different ways of aging, scientists say
Two moments on health care from the Democratic debate
40% of Older Americans Rely Solely on Social Security for Retirement Income
Families sending relatives with dementia to Thailand for care
Growing gap between what insurers and Medicare spend on hospital stays
New 'smart diaper' unveiled at CES 2020 alerts parents when their baby goes to the bathroom, monitors body temperature and urine content - and can even be used for seniors
Plan to Revamp Medicaid-Eligibility Checks Draws Criticism
The Many Ways of Coping With Alzheimer’s

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

Seattle—

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LTC BULLET: MEDICAID AND LONG-TERM CARE

LTC Comment: We publish today the Center for Long-Term Care’s new flagship report titled “Medicaid and Long-Term Care.” Read it here after the ***news.***

*** We are aware of formatting problems in the new report, especially missing spaces. These occurred converting from Word to a .pdf. We’ll fix them, but in the meantime, the report is readable and we want to abide by the previously announced publication schedule. ***

*** ILTCI CONFERENCE NEWS: The 2020 Intercompany Long-Term Care Insurance Conference, scheduled for March 29 to April 1 in Denver, Colorado, has named its keynote speaker: Anders Sörman-Nilsson. He is a “global futurist and innovation strategist who helps leaders decode trends, decipher what’s next and turn provocative questions into proactive strategies.” That definitely sounds like something the private LTCI industry can use. Register for the conference here. Book your hotel before February 22. Early registration discounts ended January 16, but “sponsor applications” are still being accepted. ***

*** ILTCI CONFERENCE BACKGROUND: Organizers expect the highest attendance ever for this year’s conference. They have a new, semi-permanent byline for the annual meeting: “Inspire | Lead | Trust | Collaborate | Innovate.” The ILTCI conference has a long and distinguished history. Read all about it in our History of LTC Insurance Conferences with year-by-year summaries of each meeting, some with pictures and links to the more detailed contemporaneous reports. ***

LTC BULLET: MEDICAID AND LONG-TERM CARE

LTC Comment: So many questions plague the issue of long-term care. Our new report answers them all:

If long-term care is such a big risk and cost, why don’t people worry about it enough to prepare?
How did nursing homes become the main care venue when most people prefer home care?
Why does America fund long-term care through a welfare program?
Does Medicaid long-term care eligibility really require impoverishment?
How much income and how many assets can someone keep and still have Medicaid pay for long-term care?
Why do most analysts completely ignore the vast popular and legal literature on qualifying for Medicaid without spending down?
Is another compulsory government entitlement program our only option as most analysts and their studies insist?
Or could private LTC financing predominate if Medicaid became a better safety net for the poor?
Does anyone care anymore about America’s exploding deficit and debt? If not, why not, and so what?

Steve Moses answers all these questions in “Medicaid and Long-Term Care.” We provide the paper’s “Abstract” below and urge you to read the full paper here: http://www.centerltc.com/pubs/Medicaid_and_Long-Term_Care.pdf.

Abstract

Most long-term care scholarship analyzes these symptoms, without explaining their cause, and recommends expanding government’s role, usually by means of a new or expanded mandatory, tax-funded social insurance program. This paper takes a different tack, first explaining why the long-term care market has the problems it does and then suggesting how to remove their causes.

At the root of all long-term care problems is Medicaid, the dominant payer. By providing only nursing home care—including room, board, and medical care—funded with virtually unlimited federal and state matching funds, Medicaid (1) exploded in cost, (2) created institutional bias, (3) caused access and quality problems by paying 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 affluent save and benefit through eligibility loopholes.

The key to fixing the problems that plague long-term care is to make Medicaid a better safety net for the poor while diverting the general public to private financing alternatives. This paper explains how to do that while reducing government funding and regulation, which arguably caused the long-term care problems in the first place.

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Updated, Monday, January 13, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-002: LTC NEWS AND COMMENT

Losing one night's sleep may increase risk factor for Alzheimer's, study says
Anticholinergic Drug Exposure and the Risk of Dementia
Health Savings Account Balances Show Continued Growth
US cancer death rate sees largest-ever single-year drop, report says
The Longevity Economy® Outlook: How people age 50 and older are fueling economic growth, stimulating jobs, and creating opportunities for all
FLTCIP 3.0: The Federal Long Term Care Insurance Program Benefit Booklet
Long-Term Care Protection Without Additional Cost
Senior living trends: Prepare for historic changes in 2020
Bundles cut spending on joint replacements, but not for other conditions
How Much Do Medicare Beneficiaries Spend Out of Pocket on Health Care?
The Health Care Promises We Cannot Keep
Older People Need Geriatricians. Where Will They Come From?
VA pilot program aims to cut nursing home care costs

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Updated, Monday, January 6, 2020, 9:00 AM (Pacific)

Seattle—

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LTC E-ALERT #20-001: LTC NEWS AND COMMENT

“Traveling the loneliest road,” by Eli Saslow, Washington Post
“7 Rules For Wealth: #3 Long-Term Care End Run,” by William Baldwin, Forbes
“HCBS, caregivers focus of presidential candidate Cory Booker’s long-term care plan,” by Lois A. Bowers, McKnight’s Senior Living
“New York slashing Medicaid payments by 1% as state faces massive $6 billion budget deficit,” by Dennis Slattery, New York Post
“The 2020s Will Be A Tipping Point For Elder Care In The US,” by Howard Gleckman, Forbes
“More Doubt That Plaques in the Brain Cause Alzheimer's,” by E.J. Mundell, HealthDay
“Opinion: Numbers that older workers and retirees need to know in 2020,” by Paul Brandus, MarketWatch
“Americans smoking less, but diabetes and obesity are increasing,” by Scott Wooldridge, BenefitsPRO
“2020 SSI and Spousal Impoverishment Standards,” Centers for Medicare and Medicaid Services
“Medicaid financing scheme endangers federal-state partnership,” by Red Jahncke, The Hill
“Big senior living stories of 2019,” by Lois A. Bowers, McKnight’s Senior Living
“Genworth and Oceanwide Extend Merger Agreement,” Cision PRNewswire
“LTCi: Bringing It All Back Home,” by Gordon Saunders, Advisor Magazine
“Alzheimer’s Tests Soon May Be Common. Should You Get One?,” by Gina Kolata, New York Times

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Updated, Friday, January 3, 2020, 9:00 AM (Pacific)

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LTC Comment: Officials and analysts attack the symptoms of long-term care dysfunction (exploding costs, nursing home bias, and poor quality) without addressing the cause (easy access to Medicaid for consumers and strong incentives for states to maximize federal Medicaid matching funds). Everything follows from that observation after the ***news.***

*** TODAY'S LTC BULLET is sponsored by Claude Thau, whose revolutionary “Range of Exposure” tool projects clients’ likelihood (joint for a couple) of spending $100,000; $250K; $500K or over $1,000,000 on LTC, 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. He also offers other ways to educate and help clients make informed final decisions in 15-20 minutes! Change work-site LTCi from a series of proposal deliveries to an interactive consultation! 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 913-403-5824 or claude.thau@gmail.com. ***

*** MEDICAID AND LONG-TERM CARE: Our monograph of that title will be published later this month. It fully develops and documents the argument I make in the following speech. Stay tuned. Pre-publication copies of the monograph are available now to Center members upon request. Just email smoses@centerltc.com. ***

LTC BULLET: WHERE LONG-TERM CARE WENT WRONG AND HOW TO FIX IT

LTC Comment: I’m in Orlando today speaking at the Cato Institute’s State Health Policy Summit. My topic is “How to Provide Long-Term Care to a Burgeoning Elderly Population.” The first point I make about that subject is that providing long-term care isn’t the problem. Paying for it is. If it were not for our thoroughly dysfunctional long-term care financing system, we’d have plenty of money and willing providers to render top quality care.

So, what’s wrong with long-term care financing? How did it get that way? And what has to change to fix it? That’s the gist of my talk. Here’s the text:

“How to Provide Long-Term Care to a Burgeoning Elderly Population”
by
Stephen A. Moses, Center for Long-Term Care Reform
for
The Cato Institute’s State Health Policy Summit,
in Orlando, Florida, January 3, 2020

First of all, providing long-term care isn’t the problem. Paying for it is.

So, I’m going to define the long-term care financing problem. Then I will explain how and why it exists with some historical background. Finally I will identify and explain the fundamental obstacle to solving the problem, which is: both government and scholars have focused corrective action on symptoms of the problem instead of its causes.

If we change our focus to causes instead of symptoms, the long-term care problem is easily solved. You’ll see what I mean.

When we’re finished today, especially if you go on to read the monograph “Medicaid and Long-Term Care,” you will understand the long-term care financing crisis and what has to change to resolve it.

Long-term care includes a broad range of social, medical and custodial services that caregivers provide for three months or longer to help disabled people of any age perform activities of daily living such as eating, bathing, and toileting. Our focus is long-term care for the aged.

Let’s stipulate to the magnitude of the problem to save time. You know we have an aging baby boom generation. They’re already stressing Medicare and Social Security. They’ll overwhelm Medicaid, the dominant long-term care payer, when they start turning 85 in 2031. The U.S. age 85+ population, the cohort with the highest long-term care need, will triple between 2015 and 2050.

After age 65, people have a 70% probability of needing extended care, a 48% chance of needing paid care at an average lifetime cost of $138,100, but a 2% probability for everyone and a 5% probability for long-term care users of needing ten years or more costing hundreds of thousands, even millions of dollars. This disproportion makes the risk highly insurable, though insurance has been minimal so far, for reasons I’ll explain.

Care is very expensive wherever received: Nursing homes average $7,500 to $8,500 per month; Assisted Living costs $4,000 or more per month; home care runs about $4,195.

The U.S. spent $366.0 billion on long-term care in 2016. Families and friends provided an additional half-a-trillion dollars’ worth of unpaid care, at huge financial and emotional distress.

Clearly the juxtaposition of these risks with the demographic Age Wave makes the future of long-term care financing highly problematical.

So far, the U.S. has limped along with a severely dysfunctional long-term care service delivery and financing system.

Government pays for over 70% of long-term care, mostly through Medicaid, a means-tested public welfare program. Costs are high and rapidly increasing. The system has a strong nursing home bias even though everyone dislikes nursing homes. Access to preferred home care is very limited. Low reimbursements from Medicaid prevail, often below the cost of providing the care. Quality is dubious in all care venues. The resultant tort liability is astronomical. Private payers at market rates have dwindled as Medicaid has expanded to pay for 2/3 of nursing home residents. Neither home equity conversion nor private long-term care insurance pays for much long-term care. It really is a mess!

What went wrong? Here’s some history.

Long ago, we had indoor relief, that is, poor houses, in the U.S. But that system gave way by the 20^th century to cash benefits for the elderly from Old Age Assistance and Social Security. With government cash in hand, seniors had money to purchase residential care. So nursing homes profited and proliferated.

In 1960, the Medical Assistance for the Aged (MAA) program made health care available to people sixty-five and older who had low or moderate incomes. It also required states to match available federal funds. That was a huge new source of funding for long-term care, further subsidizing the nursing home business.

The same Kerr Mills statute radically changed eligibility for nursing home care by adding people who “were not sufficiently needy to qualify for cash assistance to cover their ordinary expenses, but who were unable to pay their medical expenses.” Those are the so-called medically needy recipients.

In 1965, the Medicaid program institutionalized these features but also eliminated strict eligibility criteria, transfer of assets restrictions, and mandatory liens which had been commonplace before. Medicaid had no restrictions on asset transfers to qualify until 1980. Anyone could give away everything and qualify immediately.

These features—to wit, medically needy eligibility exclusively for nursing home care, which included normal costs of living as well as health care, funded with virtually unlimited federal and state matching funds and with no limits on asset transfers to qualify—guaranteed Medicaid would explode in cost from the outset, perpetrate a nursing home bias in long-term care services, discourage development of a private home and community-based care market, and crowd out private long-term care financing sources. That’s exactly what it did.

The government responded by attacking the symptoms (exploding costs, nursing home bias, and poor quality), instead of the causes (i.e., strong financial incentives for states to maximize Medicaid spending and the perverse incentives encouraging consumers to rely on Medicaid rather than pay privately for long-term care.) For example:

State governments capped nursing home supply by requiring Certificates of Need on the principle “they can’t charge us for a bed that doesn’t exist.”

But capping supply, just made nursing homes charge more. So Medicaid capped reimbursement driving the Medicaid rate down to only 70% of the private pay rate on average.

But higher private-pay rates drove private payers to find ways to qualify for Medicaid. Consequently, private-pay nursing home revenue plummeted from 49% in 1970 to 27% in 2017.

Nursing home occupancy skyrocketed to 95% in the 1980s because beds were easy to fill if owners were willing to accept Medicaid’s low reimbursement rates.

But low rates and heavy demand led to poor quality. So Congress passed the Omnibus Budget Reconciliation Act of 1987 demanding better care, more caregivers and added training, but without providing more funding.

Caught between the rock of inadequate reimbursement and the hard place of mandatory quality, nursing homes sued under the 1980 Boren Amendment, which ensured at least minimal reimbursement levels. They usually won. So Congress repealed the Boren Amendment leaving no floor under Medicaid reimbursements.

Several congresses and presidents tried to control exploding Medicaid eligibility by closing eligibility loopholes and requiring estate recoveries. When nothing worked, Speaker Gingrich and President Clinton backed legislation in 1996 making it a crime to transfer assets to qualify for Medicaid. But opposition to this “Throw Granny in Jail” law got it replaced one year later by the “Throw Granny’s Lawyer in Jail” law. Neither approach succeeded; easy access to Medicaid long-term care continued.

Next Medicaid tried to save money by “rebalancing” from expensive nursing home care to presumably cheaper home care but they eventually learned home care tends only to delay institutionalization and ends up costing more in the long run. Government funding for combined institutional and home care continued to increase year after year.

Government policy tried to encourage private long-term care insurance but failed at that too. Long-Term Care Partnerships, designed to forgive spend down liability equal to the amount of insurance purchased and used, didn’t work because there was no real spend down requirement in the first place. A tax deduction for premiums when total medical expenses exceeded 7.5% of adjusted gross income didn’t work because people who qualified financially were too sick to qualify medically for long-term care insurance.

The 2010 ObamaCare law introduced the CLASS Act designed to entice people into voluntary public long-term care insurance, but that turned out to be another unfundable debacle, quickly repealed.

The latest government interference in the long-term care financing market is centrally planned reimbursement reform. They’re trying to convert from traditional fee-for-service to so-called value-based reimbursement. Managed care, prospective payment and bundling are the watch words of the day. They add an extra middleman and more regulations between providers and patients who are already severed by the Medicaid bureaucracy.

Why does this heavy dependency on Medicaid matter? Medicaid is the sine qua non of the long-term care financing problem.

Medicaid spending is not equally proportioned among recipients. Women, children and working age adults comprise 77% of Medicaid enrollees, but consume only 38% of spending while the aged and disabled are 23% of enrollees and consume 61% of expenditures.

Long-term care users, who are only 6% of enrollees, consumed 42% of total Medicaid benefit spending for both institutional and non-institutional long-term care.

Clearly, Medicaid is the tail that wags the long-term care dog.

What do scholars and analysts have to say about Medicaid and the long-term care financing crisis? They’ve approached these topics in the same way government did. They bewail the symptoms of the problem (high cost, nursing home bias and poor care) without analyzing or addressing the causes, which are easy access for consumers to Medicaid and strong incentives for states to maximize federal Medicaid matching payments.

I cite many examples of this analytical irresponsibility in the “Medicaid and Long-Term Care” monograph. These include studies, commission reports, and articles from the Pepper Commission in the 1990s to a barrage of publications by think tanks, advocacy organizations and Health Affairs articles over the past few years.

Besides focusing on symptoms and ignoring causes, this scholarship also has in common a misunderstanding and underestimation of the impact of Medicaid long-term care eligibility. That is the missing link we must understand to crack this issue wide open.

Nearly all scholars, not to mention politicians and bureaucrats, assume Medicaid long-term care eligibility requires impoverishment. They cite rules that seem to say eligibility requires retention of no more than $2,000 in assets and $723 per month of income. That’s literally true, but it almost never applies because of other more generous rules that supersede.

The rule of thumb is that anyone with income below the cost of a nursing home can qualify for Medicaid long-term care benefits based on income. That’s because most states apply “medically needy” rules allowing people to deduct their actual medical and long-term care expenses from their income in order to qualify. As nursing homes are very expensive, most middle class people qualify easily based on income.

On the asset side, retainable wealth is virtually unlimited. Besides the $2,000 everyone can keep, federal Medicaid rules allow recipients to retain home equity of at least $595,000 and up to $893,000 in some states. Also, regardless of value, recipients may retain one income-producing business, their Individual Retirement Accounts, one automobile, personal effects including heirlooms, term life insurance, and prepaid burial plans. Mandatory estate recovery, introduced in 1993, is easy to dodge.

Married couples get special consideration. At-home spouses may retain a Community Spouse Resource Allowance of half the couple's joint assets up to $128,640. The Minimum Monthly Maintenance Needs Allowance allows the community spouse to receive up to $3,216 of the Medicaid spouse’s income. These allowances increase annually with inflation.

Self-help books and articles on how to take advantage of Medicaid’s generous long-term care eligibility rules abound. State Medicaid eligibility workers are often eager to help applicants find ways to qualify while minimizing spend down for their care.

Beyond the ubiquitous consumer information on Medicaid planning, there is a large and always expanding professional legal literature on the topic. I give many examples of the popular and legal literature on qualifying for Medicaid in the “Medicaid and Long-Term Care” monograph and in dozens of national and state-level studies available at www.centerltc.com.

Strangely, however, most long-term care analysts ignore these easy pathways to Medicaid long-term care eligibility. Why?

An easy explanation is ideological bias. As they ignore causes and focus on symptoms, analysts invariably recommend more government funding and regulations to solve problems that, as we’ve shown, were actually caused by excessive government funding and regulations.

How and why they do this is highly nuanced. They evade and equivocate on key concepts and facts. For example:

Impoverishment: They say things like “Medicaid only covers the long-term care costs of the indigent.” Synonyms for “indigent” include “poor, impecunious, destitute, penniless, poverty-stricken, down and out, pauperized, and without a penny to one's name.” Given Medicaid’s generous income and asset eligibility allowances described above, saying Medicaid requires indigence is obviously false.

Spend down: Analysts routinely claim applicants must spend down their assets to qualify for Medicaid. But there is no requirement to spend down assets for care. Applicants can spend down unlimited amounts for any good or service for which they receive market value, including a lavish birthday party or world travel. Applicants can also purchase unlimited exempt assets, like a new car or more expensive home. I give many examples in the monograph. Spend down studies from 30 years ago and more recently purport to document spend down, but they only prove people have transitioned to Medicaid eligibility, not that they spent down for care.

Asset decumulation: Research shows asset decumulation in old age is much less than economic models predict. People hold on to their assets tenaciously until just before death. Medicaid’s generous income and asset rules enable them to do this even if they need long-term care. The fact that Medicaid offsets upwards of one quarter of the lifetime medical and long-term care expenses of high income households is staggering and belies the common presumption that people must spend down into impoverishment to obtain benefits.

Median wealth: Analysts focus on people with median or less income and assets, but they routinely evade the more interesting questions of whether and how people with much higher wealth qualify for Medicaid. I show in the paper how most Medicare beneficiaries with income and assets above the median qualify for Medicaid if they need long-term care without spending down assets significantly.

Medicaid planning: While most analysts ignore the role of sophisticated legal self-impoverishment to qualify for Medicaid, if they do mention this common practice, they focus only on “asset transfers.” Asset transfers are not insignificant as they cost Medicaid as much as $1.7 billion per year. But they are not nearly as common as other Medicaid planning techniques such as purchasing exempt assets like a car or house, setting up a Medicaid Asset Protection Trust, or creating a Medicaid-friendly annuity. Medicaid planning is far more important than most analysts acknowledge but formal Medicaid planning itself pales in significance compared to the basic eligibility rules that allow most middle class people to qualify without employing sophisticated legal machinations.

Out-of-Pocket Expenditures: Many analysts overestimate out-of-pocket expenditures in order to promote the need for more government spending. They claim half the cost of long-term care is paid out of pocket. They make that claim by including room and board expenses in residential care settings—costs that people would incur whether they need long-term care or not—and by excluding Medicare post-acute care expenditures, which are critical to sustain Medicaid’s viability as the dominant long-term care financing source. Actual out-of-pocket expenditures are closer to 25% and half of those are spend-through of Social Security income by people already on Medicaid.

Faulty data: When economists and health policy analysts claim that older people approaching the need for long-term care retain few assets and spend down rapidly, they generally draw their evidence from survey data provided by the Health and Retirement Study (HRS) and its auxiliary, the Asset and Health Dynamics among the Oldest Old (AHEAD) study. But these data sources do not include actual assets spent for care. They are based on self-reported information that people have very strong incentives to misrepresent. I explain in the monograph why the HRS and AHEAD data cannot be trusted.

So what evidence can I adduce that Medicaid long-term care eligibility is routinely achieved without significant spend down of assets either because of Medicaid’s basic eligibility rules or with the help of sophisticated Medicaid planning?

Anecdotal evidence abounds, but hard empirical evidence is very limited, because analysts and think tanks avoid the research that needs to be done to establish the facts.

I recount such anecdotal and empirical evidence as does exist in the monograph. I’ve also personally conducted many national and state-level studies available at www.centerltc.com that estimate the incidence of Medicaid planning. I also quote state Medicaid eligibility workers in these studies about their anger and frustration because it’s hard for them to qualify poor people for care, while the middle class and affluent qualify easily, often with flawless applications and documentation prepared by their law firms.

Only one promising empirical study has been done so far. But GAO downplayed its findings and completely missed their significance.

In 2014, the Government Accountability Office analyzed a random, but non-generalizable, sample of 294 Medicaid nursing home applications in two counties in each of three states: Florida, New York, and South Carolina. The summary results are telling:

“GAO identified four main methods used by applicants to reduce their countable assets—income or resources—and qualify for Medicaid coverage: 1. spending countable resources on goods and services that are not countable towards financial eligibility …; 2. converting countable resources into noncountable resources that generate an income stream for the applicant, such as an annuity or promissory note; 3. giving away countable assets as a gift to another individual …; and 4. for married applicants, increasing the amount of assets a spouse remaining in the community can retain, such as through the purchase of an annuity.” (GAO, 2014, unnumbered “GAO Highlights” page).

This is exactly what we would expect, but when GAO recounts the magnitude of these practices, they largely miss their significance.

For example, nearly 75% of applicants owned non-countable resources; the median amount of which was $12,530. If generalizable nationally, which it’s not, 665,700 Medicaid nursing home residents sheltered over $8.3 billion in non-countable resources or 42.4 percent of the $19.7 billion Medicaid paid for their nursing home care.

39% of GAO’s sample owned burial contracts and prepaid funeral arrangements with a median value of $9,311. If generalizable nationally, $3.2 billion or 6.3% of total Medicaid nursing home expenditures are diverted from funding long-term care to relieving families of the final expenses for their loved ones. This is a bonanza for the funeral industry and for heirs.

GAO found 44% of approved applicants had between $2,501 and $100,000 in total resources, and 14% had over $100,000 in total resources. 887,598 nursing home residents receive Medicaid. If generalizable nationwide and 14% of them, or 124,264 recipients, possessed $100,000 or more in non-countable resources, that is at least $12.4 billion or 3.4 times the $3.7 billion Medicaid spent for their nursing facility care.

GAO found median home equity to be $50,000, ranging from $0 to $700,000, among the 51 applicants (out of 91 total homeowners or 31 percent of the sample) for whom they were able to determine it. Most home equity is non-countable, up to as much as $893,000 in some states as of 2020. Thus 100 percent of their sample’s home equity was non-countable.

If 31% of 887,598 Medicaid nursing home recipients nationwide or 275,155 recipients own homes with a median equity value of $50,000, then 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.

Did it not behoove GAO to dig a little deeper? How much money could Medicaid save by making nursing facility care available only after home equity is spent down by means of private or commercial home equity conversion methods?

GAO also failed to develop the implications of similar findings for other Medicaid planning techniques such as personal care contracts, spousal refusal, annuities, and reverse half-a-loaf strategies.

Finally, GAO acknowledged their analysis was based entirely on case records. No further verification was done. This totally discredits their limited findings because state and federal re-reviews of welfare cases historically have shown substantial error rates in case records when they are verified externally and thoroughly.

Bottom line, this kind of study should be done on a nationally generalizable basis with complete external verification of case records by checking bank records, property ownership, property transfer and IRS records. Until we conduct such a study, the true financial impact of easy access to Medicaid long-term care will remain unknown.

Ramifications: What does all this mean? If it’s not a catastrophic poverty-maker, what is Medicaid?

1.     By making nursing homes virtually free in the mid-1960s, Medicaid locked institutional bias into the long-term care system, crowded out a private market for the home care seniors prefer, and trapped the WW II generation in sterile, welfare-financed nursing facilities.

2.     By reimbursing nursing homes less than the cost of care, Medicaid guaranteed America’s long-term care service delivery system would suffer serious access and quality problems.

3.     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.

4.     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.

5.     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.

6.     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.

Policy recommendations: The cause of long-term care problems is easy and elastic Medicaid financial eligibility combined with generous federal matching funds that induce greater Medicaid spending by states. Corrective action must address those causes if it is to effect improvements in the symptoms of exploding costs, institutional bias and poor quality. The solution is not complicated:

1.     Cap federal Medicaid long-term care matching funds for states.

2.     Allow states more control of Medicaid long-term care financial eligibility so they can target resources to the truly needy and encourage others to save, invest or insure for long-term care

3.     Eliminate or greatly reduce Medicaid’s home equity exemption. Let people keep and live in their homes, but when the last exempt surviving relative dies, recover all costs from estates so Medicaid does not continue giving windfalls to heirs for ignoring long-term care planning. Finally …

4.     We should redefine the problem: 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.

a.     For example, 52% of Americans turning 65 today will develop a disability serious enough to require long-term care, although most will need assistance for less than two years. On average, an American turning 65 today will incur $138,100 in future long-term care costs, which could be financed by setting aside $70,000 today, given the time-value of money. That’s not so daunting. Home equity conversion could cover that cost for many if Medicaid didn’t exempt so much home equity.

b.     In June 2019, Johnson and Wang found that 74% of seniors could fund at least two years of a moderate amount of paid home care if they liquidated all of their assets, and 58% could fund at least two years of an extensive amount of paid home care. Furthermore: “Nearly nine in ten older adults have enough resources, including income and wealth, to cover assisted living expenses for two years.” So, the problem is much more manageable than we thought. All we have to do is persuade people to liquidate all their assets. That obviously won’t happen until we eliminate Medicaid’s perverse incentives that discourage paying privately and encourage denial of long-term care risk and cost.

c.     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% of middle-income seniors to afford the product. Consumers could find that extra $15,000 in very inexpensive private LTCI if public policy didn’t choke the long-term care insurance market.

d.     Finally, a Cato Institute Policy Analysis reports that only about 2% of today’s population lives in poverty, well below the 11% to 15% that has been reported during the past five decades.

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.”

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.”

Broken rhythm of reform: If this is all so obvious, why aren’t the necessary reforms being implemented?

Progress toward improving Medicaid long-term care for the poor while diverting others to private pay options usually occurs when state and federal budgets are tight as in recessions. That’s when we got mandatory estate recovery and closed some eligibility loopholes in the Omnibus Budget Reconciliation Act of 1993. The same happened after the recession of the early 2000s when the Deficit Reduction Act of 2005 passed putting the first cap ever on the home equity exemption.

But we’ve had no further progress since the DRA ’05, despite the Great Recession of 2008. Why?

We’ve experienced much slower, steadier economic recovery this time than before. The Federal Reserve forced interest rates artificially to near zero, which encouraged more deficit spending. Irresponsible fiscal policy sustained excessive Medicaid long-term care spending and promoted private mal-investment. Nowadays, no one cares about burgeoning debt. We’ve blown up a huge economic bubble that could burst at any time.

Simultaneously the Age Wave is cresting and about to crash, making the situation truly ominous as the second third of this century approaches.
a.     Boomers started taking Social Security at age 62 in 2008
b.     At age 65 in 2011 they sent Social Security cash flow negative
c.     Boomers started taking Required Minimum Distributions from their retirement accounts in 2016, depleting private investment capital
d.     Boomers 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.

This whole house of cards is going to come crashing down by 2031.

My Conclusion: The best course is to reduce states’ dependency on federal funds, target scarce public resources to people who need them most, and let free market incentives and products take care of the rest.

The prospects of that happening at present are nil. So the single most important thing we can do for now is conduct generalizable studies of Medicaid long-term care cases at the state and national levels to demonstrate exactly how much damage Medicaid does to the long-term care system and to show how much could be saved by fixing it.

Then, when the current asset bubble bursts and state and federal budgets need relief, we’ll have the data to demonstrate where Medicaid went wrong and how to fix its most expensive component, long-term care.

Thank you.

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Updated, Monday, December 23, 2019, 10:40 AM (Pacific)

Seattle—

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LTC E-ALERT #19-047: LTC NEWS AND COMMENT

A Free Market Solution Within Medicare
Parenting Your Aging Parents When They Don’t Want Help
More payers jump into value-based Medicare Advantage plans in 2020
Continued Uncertainty As Fifth Circuit Strikes Mandate, Remands On Rest Of ACA
Projected U.S. State-Level Prevalence of Adult Obesity and Severe Obesity
Election 2020: How Pete Buttigieg’s Plan Could Help Family Caregivers
MedPAC Commissioner: Underfunding Turns Medicaid-Heavy SNFs into ‘7th Circle of Hell’
Out-of-Pocket Costs for Medicare Recipients Will Rise in New Year
More Americans dying at home, and ‘home’ may include assisted living
The Hidden Drug Epidemic Among Older People
Frail Older Patients Struggle After Even Minor Operations

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Updated, Friday, December 20, 2019, 9:00 AM (Pacific)

Seattle—

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LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2018 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.

LTC BULLET: SO WHAT IF THE GOVERNMENT PAYS FOR MOST LTC, 2018 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 2018 statistics on its website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical. Click on “NHE Tables.” Then click on the data tables of interest, Tables 14 and 15 for our purposes to “unzip” them.

Health Affairs has published a summary and analysis of the new data titled “National Health Care Spending in 2018: Growth Driven by Accelerations in Medicare and Private Insurance Spending." Health Affairs subscribers can access the full text of that article here. Others can purchase it. The “Abstract” is available free.

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 seventeenth 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, 2018 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 $168.5 billion on nursing facilities and continuing care retirement communities in 2018. The percentage of these costs paid by Medicaid and Medicare has gone up over the past 48 years (from 26.8% in 1970 to 52.2% in 2018, up 25.4 % of the total) while out-of-pocket costs have declined (from 49.2% in 1970 to 26.6% in 2018, down 22.6% 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 1970-2018.

So What? Consumers' liability for nursing home and CCRC costs has declined by nearly half, down 45.9% in the past almost five decades while the share paid by Medicaid and Medicare has nearly doubled, up 94.8%.

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 $585,000 and in some states up to $878,000 of home equity (as of 1/1/19). 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 care (29.6% of the dollars in 2018), it covers over two-thirds (67.6%) 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.” Source: A Report on Shortfalls in Medicaid Funding for Nursing Center Care.

Private Health Insurance

Don't be fooled by the 10.1% of nursing home costs that CMS reports as having been paid by "private health insurance" in 2018. 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 nursing homes. 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? ALFs are 81% private pay, 19% Medicaid (Source: AHCA/NCAL Data) and they cost an average of $48,612 per year (Source: Genworth Cost of Care Survey 2019). 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 $585,000 or $878,000 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 $102.2 billion on home health care in 2018. Medicare (39.4%) and Medicaid (35.1%) paid 74.5% of this total and private insurance paid 11.9%. Only 9.9% 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 1970-2018.

So What? Only one out of every ten dollars spent on home health care comes out of the pockets of patients and a large portion